CONTENTS

2 About the Report 6 Message from the Chairman of the Management Board 8 Neft today

12 FINANCIAL EFFICIENCY 70 PERSONNEL DEVELOPMENT 86 HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING

12 Performance highlights 72 Management approaches 88 Management approaches 20 Innovations 75 Personnel profiling 92 Contractor management responsibility 23 Import substitution 76 Remuneration and social benefits 94 Health, safety and environment 25 Product quality assurance 79 Collaboration with trade unions 101 Environmental safety 28 Supply chain 80 Personnel training and development 115 Energy consumption and efficiency 84 Talent pool development

30 SUSTAINABILITY STRATEGY 120 REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES

32 Creating value for stakeholders 122 Management approaches 34 Strategy-2030 125 Regional development initiatives 38 Integrating UN Sustainable Development Goals 127 Home Towns programme into the strategy 136 Social initiatives abroad 137 Interaction with indigenous northern minorities 138 Public recognition

40 SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT 140 APPENDICES

42 Corporate governance 55 Internal control 140 Appendix 1. Additional information and sustainable 159 Appendix 4. Independent assurance report 48 Approaches to sustainability management 57 Risk management development metrics 161 Appendix 5. Terms and abbreviations 50 Operations management system 60 Stakeholder engagement 142 Appendix 2. Map of material topics 164 Contacts and feedback 52 Disclosure of information 66 Corporate culture 146 Appendix 3. GRI indicators 53 Respect of human rights 67 Corporate communications 54 Ethics and anti-corruption practices ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES DEVELOPMENT REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

ABOUT THE REPORT

Dear readers, The Report discloses the details Identification of the Report’s key topics of management approaches, activities and progress towards achieving economic We are delighted to present Gazprom Neft’s Sustainability efficiency, ensuring occupational In this Sustainability Report, Gazprom Neft In the process of its interaction Report1 for 2018. This is the Company’s 11th non-financial and environmental safety, supporting makes a point of addressing the matters that with stakeholders and identification and developing personnel, and aiding social hold the most significance for its stakeholders. of the Report’s material topics, the Company public report, in which it describes its approaches and economic development across Gazprom analysed the following: to complying with the principles of corporate social Neft’s geographies, as well as upholding In the course of the non-financial reporting, >> the results of surveying internal human rights. the Company is guided by the principles and external stakeholders for the purpose responsibility, its contribution to sustainable social and of stakeholder engagement, completeness, of defining the key topics of the Report; economic development, and its environmental initiatives. In preparing the report, the Company materiality, balanced approach, clarity, >> interviews with the Company's management relied on the GRI Standards (Core option) sustainable development framework, accuracy, and employees; and ISO 26000:2010 (Guidance on social timeliness, and reliability. >> materials relating to Gazprom Neft’s responsibility), as well as the Reference regular interaction with the key group The Report discloses information Performance Indicators of the Russian Union The Report’s disclosures cover business of stakeholders; about PJSC Gazprom Neft as well of Industrialists and Entrepreneurs (RSPP). obligations, including those set out in Russian >> recommendations that the Company as its subsidiaries and controlled entities and international documents (the UN Global received from the RSPP's Council on Non- (referred to in this Report as Gazprom The Report underwent external assurance Compact and the Social Charter of the Russian Financial Reporting in the process of public Neft or the Company) for the calendar by PricewaterhouseCoopers Audit. Business). Starting 2017, the Company verification of the 2017 Sustainable year of 20182. The Company’s financial includes the information on its contribution Development Report; and operating performance is presented All of the Company’s The Report contains forward-looking to the achievement of the UN Sustainable >> mass media coverage on the Company. sustainability reports can based on PJSC Gazprom Neft's consolidated statements on the Company's mid- Development Goals into the report. be found on its website data. Unless otherwise specified, the data and long-term plans, and their feasibility Based on the identification process, on the Company’s labour relations, social depends, among other things, on a number In order to determine the most material topics the Company mapped out the topics that initiatives and environmental performance of economic, social and legal factors beyond and respective indicators to be disclosed, it and at least one key stakeholder group find relates to PJSC Gazprom Neft as well as its the Company's control. Consequently, actual the Company analyses: the most significant3. There were no significant subsidiaries and controlled entities in results may differ from those plans. >> the results of monitoring the scope changes in the list and scope of the Report’s and the CIS. and scale of its impact on the economy, material topics compared to last year. The Report has been approved by Gazprom society and environment; Information provided herein was obtained Neft’s Management Board and Board >> stakeholder engagement themes from corporate reports, information requests of Directors. and the information requests; in line with the guidelines contained in the non- >> research on Russian and international financial reporting standards, and corporate industry management practices media. in respect of sustainable development and sustainability reporting.

1 Hereinafter the “Report”. 2 The data on changes in the Company’s structure that occurred in 2018 are presented in in the Corporate Governance section of Gazprom Neft’s 2018 Annual Report. 3 The map containing the full list of material topics and their scope can be found in Appendix 3 of the Report.

2 3 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES DEVELOPMENT REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Prioritisation matrix for the Report’s material topics List of topics that were identified to be the most significant for the Company and its key stakeholders1

6 1 1 Strategy

2 2 Investment programme

30 30 Occupational safety and emergency preparedness

3 3 Financial stability

31 Health and safety

4 4 Operational efficiency 5 6 6 Product safety and quality

32 32 Reduction in injury and severity rates

14 14 Compliance

36 36 Personnel training and development

7 7 Innovations

19 19 Anti-corruption 4 21 31 21 Wastewater discharges

13 13 Corporate governance quality

35 35 Fair remuneration and social benefits

39 39 Contribution to social and economic development of regions

16 16 Human rights 3 22 22 Emissions

29 Environmental properties of products Impact on stakeholders' opinions and decisions Impact on stakeholders'

8 Energy efficiency and conservation

23 8 23 Waste generation and management

26 26 Land and vegetation protection 2 43 43 Efficiency of social investments

37 5 37 Labour relations and employment

25 25 Environmental impact of the Company's Arctic operations

40 40 Local community development programmes

17 17 Respect for the rights of indigenous peoples

9 9 The Company’s strategy on climate; greenhouse gas emissions. 1

1 2 3 4 5 6

Materiality of the Company’s impact on sustainable development aspects

1 The numbers assigned to the topics correlate with their numbers in the Material Topics Map (Appendix 3 to the Report).

4 5 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES DEVELOPMENT REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

DEAR FRIENDS! of refinery upgrades, we keep implementing our major environmental initiatives, MESSAGE FROM At Gazprom Neft, we remain committed including the construction of Biosfera innovative bio-treatment facilities at to sustainable development principles. Refinery. We also expand our biodiversity preservation, water management, land Financial and operating results and vegetation protection programmes. Special attention is paid to preserving THE CHAIRMAN OF are not the only measure of our success. the unique nature of the Arctic where we are running several large-scale investment We place a key emphasis on environmental projects. Our initiatives in the Arctic revolve around the zero-waste principle, which THE MANAGEMENT BOARD protection and the responsible use of natural helps fully eliminate the risk of industrial and domestic waste contaminating resources, safety, technological innovation, the environment. To construct buildings at fields beyond the Arctic Circle, and consistent improvement of living we leverage technologies that prevent the thawing of unique permafrost soils. We standards across our footprint. A special also arrange for deer crossings when routing pipelines. focus area for us is employee engagement in the sustainable development of Gazprom A major employer, investor and taxpayer in the regions of its operation, Gazprom Neft. We want all our people to understand Neft contributes a lot to local development. We supply quality products, and share the Company’s values and feel including bitumen and lubricants, under regional import substitution programmes. involved in achieving common goals. On the other side, we support local manufacturers, universities and technology companies by providing solid and sustainable demand for their products The reporting year saw Gazprom Neft’s Board and services. Our social investment programme called Home Towns plays a key role of Directors approve the new 2030 development in improving living standards across our footprint. Overall, it saw the implementation strategy seeking to transform the Company of over 250 projects to develop urban environment, social infrastructure, sports, into an industry champion in safety, education, culture and creative potential across many Russian regions. Gazprom efficiency, and technology-driven production. Neft's corporate volunteer movement is gaining traction, with over 4,700 employees Underpinned by sustainability, corporate social having joined its ranks. These are social enthusiasts seeking to make the world responsibility and environmental protection a better place to live in. principles, our new strategy sets ambitious goals for the Company. We are prepared Our people are truly the key asset to the Company as they drive its future growth to respond to the key challenge faced by every and sustainable development. Today, we can say with confidence that Gazprom oil producer, which is to meet growing energy Neft has one of the best teams in the industry and in Russia. We deservedly won demand in the safest, most eco-friendly the international Randstad Award 2018 as the most attractive employer among and efficient way possible using cutting-edge Russian fuel and energy companies and were named No. 2 Employer of Choice technologies. in Russia. We make sure all our employees enjoy their job, while also encouraging their proactive behaviour and desire to develop themselves and the Company. We keep moving towards our Goal Zero: no To this effect, we have put in place a system of financial and non-financial harm to people, environment and property incentives, social support and employee training. Our Corporate University offers in working process. In 2018, we embarked over 2,500 courses, and we plan to expand its curriculum going forward. on the transformation of our HSE system based on a risk-focused approach. As We view sustainable development as the backbone of our business that will help part of it, we identify key HSE risks, set up create long-term value for the Company and its shareholders. Always striving relevant barriers, verify them and take steps for new achievements, we will keep working hard to make a significant contribution to ensure their reliability. Another focus to environmental protection and social improvement. area is the promotion of corporate safety culture. Last year, our HSE training programme covered 26,000 Gazprom Neft's and over 13,000 contractors’ employees.

All these measures contribute to a continuous reduction in injury rates, which fell 21% in the reporting year.

We made considerable progress in ensuring environmental safety of our operations. Gazprom Neft supports the Paris Agreement on Climate Change and the Russian Government’s concept Alexander Dyukov for creating a greenhouse gas emissions Chairman of the Management Board, monitoring and measurement system. As part CEO at Gazprom Neft

6 7 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

GAZPROM NEFT TODAY

Gazprom Neft is a vertically integrated company engaged in oil Core business and natural gas exploration, production and sales, oil refining, and production and sales of petroleum products. We lead the oil Gazprom Neft’s operating model is built on vertical integration. By operating SALES OF OIL AND PETROLEUM PRODUCTS sector in terms of efficiency. across the value chain, including exploration, oil field development, production, Gazprom Neft sells oil and petroleum products refining, and sales of oil and petroleum products, the Company remains resilient across Russia and in over 70 other countries. and is well-positioned to increase efficiency going forward. Its filling stations constitute one of the largest and most geographically diverse distribution In order to keep up with the ever-changing market trends, achieve an even higher networks on Russia's retail motor fuel market. Gaprom Neft comprises over 70 oil production, Neft leverages the best available solutions return on average capital employed, and meet its social obligations, Gazprom Neft refining and sales companies in Russia, CIS to achieve its strategic goals. is continuously improving on the strong points of each segment: Gazprom Neft improves the efficiency of its and non-CIS countries. The Company boasts >> enhances hydrocarbon and petroleum replacement to meet long-term energy sales by splitting the relevant processes into one of the industry's best crude refining-to- Gazprom Neft’s ordinary shares are listed demand; different business lines: retail sales and small production ratios and ranks among Russia’s on the Exchange in Russia. The >> implements and production projects on oil and oil wholesale of motor fuels, Top 3 major hydrocarbon producers by volume. Company’s shares are also traded overseas and gas fields in Russia and abroad, both onshore and offshore; sales to industrial customers, including aviation Our exploration, production and refining in the form of American depositary receipts >> develops the existing and builds new facilities for processing hydrocarbons and marine fuel sales, as well as production operations seek to introduce cutting-edge (ADRs), mainly in the UK’s OTC market via and producing premium petroleum products that comply with the current and distribution of lubricants and bitumen technologies, which propels the country’s oil the LSE IOB system. technological, environmental and economic standards; products. The Company has set up dedicated industry. >> makes each stage of the production chain more efficient subsidiaries to perform these functions. and environmentally safe; In 2018, we delivered record financial results, >> expands the products and services offering for clients; Gazprom Neft is among the top suppliers posting the highest profit in our history. >> fosters direct contacts with its retail and wholesale customers in Russia of motor fuel to the domestic market An innovation-driven company, Gazprom and beyond via a vast own sales network; and a leader in the Russian retail aviation fuel >> maintains direct contacts with retail and wholesale buyers in Russia and beyond market. By growing its distribution network via its vast own sales network. and expanding its product range, the Company is able to win ever-larger shares in the Russian Geography of operations OIL&GAS EXPLORATION AND PRODUCTION lubricant and bitumen markets. Gazprom Neft’s portfolio includes conventional and offshore oil and gas fields 1 Russia in a variety of development stages (from exploration to mature fields) in Russia

2 and abroad, serving as the platform to increase output and maximise profit in line with the market environment. With 2,841 mtoe of aggregate proven and probable 3 reserves (including the Company’s share in subsidiaries’ reserves accounted 4 Bulgaria for by the equity method and excluding NIS reserves), Gazprom Neft ranks side 5 Bosnia and Herzegovina by side with the world’s largest oil companies.

6 OIL REFINING 7 Gazprom Neft is among Russia's leaders in oil refining, consistently working 8 to improve the efficiency of the production processes in this area. The Company operates three own refineries in Omsk, Moscow and Pančevo () and has 9 access to the refining capacities of the Slavneft-YANOS joint venture in Yaroslavl 10 and Mozyr Refinery in the Republic of Belarus. The Company is implementing 11 Latvia massive technology and environmental compliance upgrades at its refineries in order 12 Romania to improve their efficiency and safety.

13 Serbia

14

15 Estonia

8 9 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Sustainable development

TALENT POOL DEVELOPMENT CONTRACTOR MANAGEMENT RESPONSIBILITY

The Company takes steps to attract, Average Turnover rate (%) Compliance with corporate safety standards is a key criterion in selecting Gazprom engage and retain the best available monthly salary (₽ ‘000) Neft's contractors. Ensuring conformity with legislative and corporate industrial employees, while also working safety requirements is far from being the only focus area in the Company's contractor hard to develop its employer brand. 122.6 16.6 relations policies. At Gazprom Neft, we seek to create an environment that would 112.9 16.2 Thanks to this, Gazprom Neft has 104.9 15.2 15.1 promote workplace safety and encourage suppliers to build long-term partnerships 100.2 12.9 been recognised as a top employer 84.8 with the Company. in Russia.

For more details on supply chain For more details on talent pool responsibility, see p. 92 development, see p. 72 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

HEALTH AND SAFETY SOCIAL INVESTMENTS

Ongoing introduction of global best practices in health and safety helped Lost Time Injury Frequency Rate the Company cut its injury rates. The Home Towns social investment programme 0.520 0.472 is one of the most successful business initiatives 0.402 for the development of local communities in Russia. 0.326 In 2012, Gazprom Neft chose to combine all its social 0.258 6.8 > 250 investment initiatives into a single programme, 12 –21% shifting focus from targeted support towards a social ₽ BN SOCIAL PROJECTS ₽ BN LTIF REDUCTION investment approach ensuring consistent improvement in social completed of living standards across the Company’s footprint. investments investments in health y-o-y and safety improvements 2014 2015 2016 2017 2018 For more details on health and safety, see p. 94 For more details on social investments, see p. 127

ENVIRONMENT ENERGY CONSUMPTION AND EFFICIENCY

The Company strictly complies Environmental impact fees (₽ m) To improve energy efficiency, the Company upgrades equipment at its with Russian environmental laws key production facilities and conducts regular energy audits, which serve and puts in every effort to reduce as a basis for action plans to lower specific power consumption. the negative impact of its operations, 19 837.1 462 investing heavily in environmental ₽ BN protection. Minimising its 545.6 M KWH investments in environmental footprint is a key energy savings priority for the Company. environmental protection 270.8 210.9 in the Upstream 143.4 For more details on energy efficiency, Division in 2018 For more details on environmental see p. 115 protection, see p. 101 2014 2015 2016 2017 2018

10 11 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

PERFORMANCE HIGHLIGHTS

Exploration and production

The Company relies on state-of-the-art were 2,841 mtoe, excluding NIS reserves. In 3.5% y-o-y to 92.88 mtoe. The average daily Gazprom Neft’s hydrocarbon 3,639 3,875 3,908 4,022 4,045 technologies and a balanced investment 2018, reserves increased 2.2% y-o-y. Gazprom production across the Group amounted reserves (PRMS classification),1 policy to effectively replace its resource Neft’s ratio of proven reserves to production to 254.45 ktoe (up 3.5%). (mtoe) base. This is key to further growth despite (PRMS classification) is 17 years. The ratio the volatile oil prices, changing tax of hydrocarbons produced in 2018 to new The strongest drivers behind production environment and the deteriorating structure reserves (including new acquisitions) is 165%. growth were the Company’s largest of remaining commercial reserves across Gazprom Neft’s largest discovery of the year projects: Prirazlomnoye, Novoportovskoye Gazprom Neft banks Source: Company data on the Arctic and “tight” its conventional oil production clusters. was a new field in the Sea of Okhotsk (off and Vostochno-Messoyakhskoye fields. oil productio Expansion of the Group’s resource base the shore of the Sakhalin Island). Named in 2018 was supported by the improved Triton, the new deposit has geological reserves The Company continues forming a strong 2014 2015 2016 2017 2018 exploration and production drilling technology of more than 137 mtoe. Gazprom Neft cluster in the Arctic to secure its oil and gas and introduction of advanced non-seismic continues exploration of offshore Sakhalin, potential for the future. The plan for 2019 In development 639 680 726 719 734 exploration techniques. and reserves in the region may increase. The is to start development in the northern part Undeveloped 804 838 788 803 830 Company tapped into four new exploration of the Novoportovskoye field. Proven 1,443 1,518 1,514 1,522 1,564 Reserves of the Company areas (Yamal, Orenburg Region, Khanty-Mansi Probable 1,112 1,181 1,205 1,259 1,277 are audited in line with PRMS standards Autonomous Area – Yugra, and north-eastern 2P 2,555 2,699 2,719 2,781 2,841 and more conservative SEC5 standards. Gydan) while also gaining access to 21 licence Possible 1,084 1,176 1,189 1,240 1,204 Based on the Independent Reserves blocks. Assessment Report prepared by DeGolyer and MacNaughton, as at 31 December 2018, The Company strengthens its leadership Oil production at Including shares in subsidiaries and joint ventures, total Novoportovskoye field its aggregate proven and probable reserves in hydrocarbon production both in Russia (special coverage (including the Company’s share in subsidiaries’ and globally focusing on high-impact Hydrocarbon production (mtoe) 66.25 79.70 86.20 89.75 92.88 by Russia 24 TV Channel) reserves accounted for by the equity method) technologies and rational development estimated in accordance with PRMS standards of the Russian Arctic resources. Its total output (including shares in joint ventures) increased “We are a different company today, whether measured by reserves and production or by the complexity of the projects we deliver. To make Leading deposits by oil production in 2018 another step forward, our business Source: Company data processes should evolve. 2014 2015 2016 2017 2018 We want to become a global leader in technology, efficiency and safety, and Gazprom Neft2 53.81 55.36 59.90 63.28 65.36 a model for others to follow. To make Slavneft3 8.44 8.11 7.88 7.52 7.28 1 Novoportovskoye Prirazlomnoye Messoyakhneftegaz assets it happen, we need to change too.” Arcticgas3 3.54 12.13 13.47 13.50 14.58 Northgas3 0.46 4.10 4.59 3.83 3.36 Vadim Yakovlev First Deputy CEO Messoyakhaneftegaz3 0.00 0.00 0.36 1.62 2.30 +20% +21% +41% Gazprom Neft Evrotek-Yugra3 – – – – 0.00  7.1 3.2 2.2 Average daily production 181.51 218.35 235.52 245.89 254.45 mt mt mt by Gazprom Neft Group, ktoepd

1 Including consolidated companies. 2 Share in production.

2 Excluding NIS reserves. 1 The Company’s share of production. 3 Share of the Company in production.

12 13 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Production breakdown 41.64 41.10 39.95 38.63 41.40 by oil product Triton: new Sakhalin field (mt)

In November 2018, Gazprom Neft before has 415.8 mt of oil reserves according to discovered a new field in the Sea of an updated estimate. Gazprom Neft continues Okhotsk off the shore of Sakhalin. It was exploration offshore Sakhalin, with the Source: Company data

named Triton after the ancient sea god, possibility of increasing reserves in the region. 2014 2015 2016 2017 2018 Neptune’s son. Triton contains ultralight oil The Triton discovery was a major expected with no impurities located at low depths. development both for Gazprom Neft and other Motor gasoline 8.84 9.08 9.18 8.60 8.86 The field was discovered in the Bautinsky companies operating in the region. Triton is Naphtha 1.36 1.45 1.56 1.38 1.95 formation at the Ayashsky licence block. located in an area where no prospecting has Gazprom Neft opens Diesel fuel 12.15 11.87 12.02 11.45 12.32 First production is expected in 2028–2030. been done before. Gazprom Neft’s success may second field in Jet fuel 2.99 3.00 3.04 3.04 3.47 The Neptune field discovered there a year mean that new discoveries are possible. Ayashsky block Bunker fuel 4.08 3.67 2.41 2.67 2.58 Fuel oil 7.39 7.20 6.72 5.70 6.20 Bitumen and coke 2.03 2.02 2.19 2.73 3.07 Other 2.80 2.81 2.83 3.06 2.95

Oil refining

Following the completion of upgrades Refining volume 43.48 43.07 41.89 40.11 42.91 and capital repairs at the Russian refineries “The ongoing operational efficiency improvement at refineries is (mt) of the Group in 2017, the volume of oil a meaningful effect of the programme to upgrade refining capacities. refined in 2018 increased by 7.0%. In 2018, When the second stage of the programme is completed, Omsk and the Company continued implementing Moscow refineries will additionally enhance the conversion rate and the second phase of its environmental increase the yield of light petroleum products while reducing their Source: Company data compliance and technology upgrade environmental footprint.” programme. It pursues strategic goals in oil 2014 2015 2016 2017 2018 refining and aims to increase oil conversion Anatoly Cherner Deputy CEO for Logistics, Refining and Sales Omsk Refinery 21.28 20.90 20.48 19.58 21.00 to 99% by 2025. Gazprom Neft Moscow Refinery 10.76 11.00 10.71 9.37 10.50 1 The year 2018 saw a sizeable growth NIS 2.61 2.94 3.10 3.34 3.55 2 in the output of light petroleum products Slavneft – YANOS 7.65 7.63 7.47 7.74 7.86 2 (gasolines, diesel fuel, jet fuel and naphta). Mozyr Refinery 1.17 0.60 0.13 0.08 0.00

1 Gazprom Neft holds a 56.15% stake in NIS (Serbia), which operates two refineries – in Pančevo and Novy Sad. A 14% increase in bitumen production was 2 Gazprom Neft's equity share. associated with rising domestic demand and export growth.

Omsk Refinery: Plant for the city: Made in Russia: Gazprom Neft’s Omsk Made in Russia: Gazprom one step ahead Moscow Refinery construction of Euro+ Refinery makes production Neft’s high-tech bitumen of the industry (coverage by Russia refining unit at Moscow of Euro-5 gasolines more (coverage by RBC TV) (interview) 24 TV Channel) Refinery efficient (coverage by RBC TV)

14 15 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Sales of oil and petroleum products Technology

Gazprom Neft is a wholesaler In 2018, Gazprom Neft's own fleet received of oil and petroleum products both in Russia enough vessels to ensure uninterrupted High-tech icebreakers and abroad. Small wholesale and retail sales, service of the Company's fields in the Arctic including sales at filling stations, are managed region. With the fully-fledged own Arctic fleet, by dedicated subsidiaries. Gazprom Neft ensures year-round oil delivery to global markets with maximum cost efficiency Exports of Arctic oil will OIL SALES and minimal risk of interruptions caused continue to grow In 2018, crude oil sales decreased 8.6% year- by external negative factors. 22 Up to 30 40 –50 (interview) on-year to 24.26 mt as production increased MW km/h days °C at Russian refineries of the Company. PETROLEUM PRODUCT SALES diesel electric speed autonomous operation under The growth of sales in 2018 was mostly propulsion capacity operation extreme temperatures Domestic sales dropped 22.6% to 4.31 mt, associated with demand in the domestic and total oil exports decreased 6% to 18.70 market where petroleum product sales mt. By contrast, oil sales to global markets increased 6.1%. rose 17.9% to 1.25 mt on the back of increased Arctic fleet is essential for the Company's projects in The two icebreakers are some of the most advanced production in Iraq. Cumulative exports of petroleum products the Arctic region. Efficient logistics is key to continuous year- vessels in their class. They are highly maneuverable and and international sales grew 4.6% to 16.24 mt round transportation of crude oil from the Arctic fields. need just 60 seconds to make a 360-degree turn. Capacity in 2018. The biggest driver of exports was In 2018, Gazprom Neft's own Arctic fleet was joined by of their propulsion units is comparable to those of nuclear growing sales of naphtha, fuel oil and jet fuel Alexander Sannikov, a high-tech icebreaker built at the icebreakers and allows them to move through up to 2 m Crude oil sales (mt) 13.72 16.61 22.71 26.53 24.26 to non-CIS countries. In 2018, actual sales (Leningrad Region). The vessel is named thick ice. of fuel oil on the domestic and international after Alexander Sannikov, an ex-head of Gazprom Neft Oil The icebreakers are equipped with state-of-the-art markets were driven by cost considerations Refining Division, who supervised large-scale projects of automatic power supply and navigation systems. Their and deemed optimal given the existing demand the Company. electronic equipment can be controlled remotely. and price levels. In August, Alexander Sannikov started escorting tankers in The vessels are designed around the zero-waste principle: the Gulf of from the Arctic Gates terminal to the storage all ship-generated waste is either recycled or stored until Source: Company data tanker moored in the Kola Bay. In December, the fleet the ship returns to the port.

2014 2015 2016 2017 2018 was joined by the second icebreaker named after Russian hydrographer, geodesist and polar explorer Andrey Domestic sales 3.96 6.14 7.43 5.57 4.31 Vilkitsky. Non-CIS exports 8.47 8.11 12.89 18.19 17.05 CIS exports 1.16 1.88 1.66 1.71 1.65 Global sales 0.13 0.48 0.73 1.06 1.25

Domestic Bulk CIS buyers Non-CIS buyers Wholesale and retail sales to customers Non-CIS buyers buyers and small in Russia, CIS and non-CIS countries wholesale are managed by distribution subsidiaries and retail of the Group sales

Domestic and CIS Gazprom Neft buyers, including exchange trades

Small wholesale

Gazprom Neft Group petroleum product Gazprom Neft Group trading company suppliers Gazprom Neft's filling stations Crude oil sales Petroleum product wholesale

16 17 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Premium sales1 in the reporting period 48.30 44.84 43.59 43.48 45.91 Petroleum product sales increased 3.7% to 27.10 mt. Sustained growth Technology (mt) of premium sales was a result of the product range expansion, production capacity upgrade Premium fuel and implementation of innovative solutions 2.236 >30% mt in customer segments. share of G-Drive branded In 2018, Gazprom Neft launched G-Drive 100 premium fuel, sales of branded fuel fuel in 95+ RON gasoline a new product in its mix of G-Drive premium gasolines. This in Russia and CIS Focus on aviation fuel, premium bitumen sales is a high-octane fuel for modern engines requiring at least in 2018 Source: Company data and lubricant sales allowed the Company a 95 RON gasoline. It boasts great efficiency and very low to increase its share in relevant retail 2014 2015 2016 2017 2018 environmental impact. segments in the reporting year. Aviation fuel The new branded gasoline has successfully passed Domestic sales 27.54 27.50 27.11 27.96 29.67 and bitumen sales in the premium channels qualification tests at the Russian Research Institute for a large-scale upgrade project at Omsk Refinery where Non-CIS exports 15.64 11.81 10.77 9.54 10.00 were up 10.6% and 22.9%, respectively. Higher Oil Refining (VNII NP) and was found to comply with the an automated gasoline mixing station was built. All major CIS exports 2.09 2.28 2.41 2.50 2.49 demand in Russia's north-western and Black Technical Regulations of the Customs Union for K5 fuel class components of the new fuel are also produced at Omsk Global sales 3.03 3.25 3.30 3.48 3.75 Sea ports drove a 7.7% year-on-year increase (an analogue of Euro-5). Compliance with the European fuel Refinery. in bunkering volumes in 2018. Premium quality requirements was also confirmed by SGS, the largest In 2018, G-Drive 100 replaced G-Drive 98 across the entire sales of oils and motor fuels increased 6.9% international laboratory. and 1.9%, respectively. network of Gazprom Neft's filling stations. The new fuel Premium sales 25.79 25.70 25.16 26.13 27.10 Production of a 100 RON gasoline without octane- successfully passed the toughest test in the engines of (mt) increasing additives was made possible through the G-Drive Racing team. Development of small wholesale and retail sales of petroleum products is one of the Company's priorities. Having a nationwide brand with strong recognition and customer confidence helps the Company Source: Company data to deliver on one of its strategic goals

2014 2015 2016 2017 2018 of becoming a leader in Russia and the CIS in terms of retail sales and Financial results Filling stations 9.91 10.16 10.45 11.04 11.34 network performance by 2025. Small wholesale (tank farms) 8.60 8.42 8.81 8.97 9.05 In 2018, Gazprom Neft showed sustainable As at the end of 2018, the total retail sales growth in key financial indicators. Key financial indicators Aviation 2.84 2.80 2.62 2.83 3.12 of motor fuels via filling stations grew 2.7% The Company's revenue went up by 28.7% (₽ bn) Bunkering 4.20 3.92 2.77 2.71 2.93 year-on-year to 11.34 mt, including 9.12 mt to ₽ 2.49 tn on the back of a favourable Oils 0.19 0.23 0.27 0.29 0.31 in Russia. The Company confirmed its status price environment, greater operational Bitumens 0.04 0.18 0.23 0.29 0.35 as a Russian market leader in terms of average efficiency, and continuing production growth daily sales per filling station, which grew 3.3% at the Novoportovskoye, Prirazlomnoye Source: Company data year-on-year reaching 20.7 tpd. and Vostochno-Messoyakhskoye fields. 2014 2015 2016 2017 2018 In 2018, adjusted EBITDA increased by 45%. The growth was driven by favourable oil Sales revenue 1,408 1,468 1,546 1,934 2,489 prices globally and domestically, successful Adjusted EBITDA 343 405 456 551 800 development of new upstream projects, Net profit 127 116 210 270 401 and increased operating efficiency. Capital expenditures 271 349 385 357 375 Taxes other than income tax 344 353 381 492 653 In 2018, the Company’s net profit grew by almost 49%, driven by stronger oil and petroleum product prices as per unit upstream and refining expenses went down. Cost cutting was made possible by an upgrade of refineries and introduction of innovations 1 Premium sales are: in the upstream segment. >> sales of petroleum products via premium marketing channels, both retail and small wholesale. This group includes all product sales at filling stations and tank farms, as well as into-plane and direct-to-vessel fuelling, small wholesale at refuelling terminals at airports and seaports; >> sales of premium petroleum products with a higher added value due to advantages over other products in the same category. This group includes sales of packaged products (oils in barrels and cans, polymer modified asphalt cements (PMAC) in clovertainers, etc.), premium-branded liquid lubricants (Gazpromneft, G-Family, ), premium-branded bituminous materials (PMAC, polymer modified bitumens, bitumen emulsions, etc.), all brands of bitumen-based products, and potential wholesale of premium motor fuels (G-Drive, etc.).

18 19 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

KEY COMPONENTS OF THE COMPANY’S INNOVATIONS INFRASTRUCTURE: INNOVATIONS >> Scientific and Research Centre provides analytical, methodological and R&D support to the Upstream Division’s key production and technical functions. ENHANCED >> Bazhen Technology Centre is a subsidiary that serves as an open industry platform and aims to bring together the efforts of all stakeholders in order OIL RECOVERY The Company develops “From strategic goals to engineering projects” is the principle that underpins to create a viable technology to develop the Bazhenov Formation. Gazprom Neft’s approach to innovations. Our Company develops and implements >> Centre for Offshore Competencies is planned to be utilised by the Company technologies that help address technologies to tackle challenges on the way to achieving its strategic goals. to integrate its key competencies in developing and operating offshore challenges as we move towards projects. Gazprom Neft develops chemical In 2018, the portfolio of the Upstream Division’s Technology Strategy included >> Technopark of Industrial Automation, established in Omsk as part solutions for our strategic objectives. over 100 projects across all priority areas, such as exploration technologies of the Company’s import substitution strategy, acts as a unique platform at depleted fields in Western focused on resource base development, well drilling and completion, oil recovery for research and development, pilot testing and high-tech solutions Siberia. This becomes especially important as mature fields dominate enhancement, capital construction, etc. for the automation of refineries. the Company’s asset portfolio. A pilot >> Technopark of Corporate Information Technologies, based in St Petersburg, project for alkaline-surfactantpolymer In 2018, the Company approved the Offshore Technology Strategy aims to establish direct interaction between developers and manufacturers (ASP) flooding was completed with the following priority areas: of IT solutions for the oil and gas industry. Gazprom Neft provides its at the Zapadno-Salymskoye field in 2018. >> prospecting and exploration; participants with a platform to evaluate and test prospective solutions >> accident monitoring, prevention and management in ice conditions; and innovations. The oil recovery factor added 17 pp, which evidences the technology is >> logistics in Arctic conditions; >> House of Innovations, launched in St Petersburg in 2018, is a cross-functional highly effective. Our primary task is >> Arctic APG utilisation; space for project work using end-to-end technologies and data. The House to reduce chemicals costs to improve >> offshore field development; of Innovations brings together leading experts in neural networks, digital economics of chemical flooding >> safe offshore development; platforms, industrial Internet of things, blockchain technologies, augmented projects. >> introduction of digital technologies. and virtual realities and other Industry 4.0 innovations.

The technologies being developed in partnership with leading Russian R&D centres and educational institutions enable the Company to increase the yield of high-margin products best suited to each specific refinery while also lowering its operating costs.

More details on the Technology Strategy

Technological development Technologies for developing the Bazhenov Formation

Technological development is a focus of Gazprom Neft’s Strategy 2030. The Company intends to develop hard-to-recover Russian R&D institutions. The Company set up the Bazhen Technology advancements will enable the Company to efficiently deliver and unconventional reserves, including the Bazhenov Technology Centre to operate the national project. It its large-scale upstream projects and consolidate leadership in strategic Formation, in order to offset naturally declining production serves as a platform uniting efforts of the government, areas. at conventional fields. This strategic project aims researchers, industry players and businesses to create Key exploration to create a technology stack to develop the Bazhenov innovations enabling the development of unconventional technologies Our priorities include: Formation. It is considered to be of national importance reserves of the Bazhenov Formation. Technology >> higher recovery rate at multiphase fields; for the Russian Government and the industry. In 2018, developers and equipment manufacturers will be able >> development of multiphase fields; Gazprom Neft put into operation high-tech wells producing to leverage the pilot platform to test and fine-tune their >> development of low-permeability reservoirs; at high initial rates. This testifies that multi-frac can solutions for further implementation at the Company’s >> efficient and safe offshore development in ice conditions; make a real difference for the Bazhenov Formation. Frac fields. More importantly, the technologies in the making >> catalyst development and production to support oil refining. modelling for the Bazhenov Formation was performed and new competencies will be applicable to other In each and every priority area, projects are ongoing or planned to develop, using a unique simulator developed in cooperation with hard-to-recover reserves across Russia. test and implement necessary technologies.

Innovative drilling

20 21 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Technologies for APG treatment IMPORT

One of the Company’s promising innovations are mobile modular units for APG treatment, SUBSTITUTION which help separate and recycle heavy APG components, addressing the issue of crude oil being taken away with gas and wet hydrocarbons being flared, as well as gas transportation complications. New units are five times smaller than conventional ones. A larger procurement share of Russia-made products is on the list The solution is set to offer multiple benefits in terms of better environmental protection, of Gazprom Neft’s priorities. To deliver on this goal, the Company considerably lower costs related to infrastructure construction and maintenance, and higher efficiency of gas-consuming equipment. is making use of existing solutions while also supporting the drive to innovate.

Import substitution Gazprom Neft’s Department of Technological Gazprom Neft partners with leading R&D in the oil industry DIGITAL TRANSFORMATION Partnerships and Import Substitution institutions to develop and productionise (interview) Digital transformation is one of the Company’s As part of digital transformation, the Company is specifically tasked to monitor the Russian import-substituting products on an ongoing priorities. Across all segments of our created centres for competencies in machine market of goods and materials for import basis. Some of these products include: operations, we are building next generation learning, AI, augmented and virtual substitution on a regular basis. The Company’s >> low-viscosity base oils for drilling muds systems of process management. These realities, product design, agile software import substitution programme translates (branded as Gazpromneft Drilline); ensure: development, etc. The Upstream Division into industrial strategies and roadmaps >> new ultrahard materials for drill bit blades Digital transformation >> end-to-end integrated management is running the Cognitive Geology and Cognitive for alternative substitution. We also created in collaboration with the Skolkovo at Gazprom Neft: for maximum value creation; Engineering projects and operates the Centre promote import substitution when it comes Institute of Science and Technology; 1 New technologies help >> digital twins to optimise operating modes for Capital Construction Management, while to our regional development programmes . >> new version of a cracking catalyst and maintenance plans; the Downstream Division now includes with an active matrix, which provides customise approach Interview to Sibirskaya >> cognitive systems to support decision making the Efficiency Control Centre and the Omsk In the past five years, the Company has benefits compared to Western catalysts to industrial assets Neft online newspaper by operators. and Moscow Refinery Production Control conducted more than 120 tests on the newest based on an inert matrix. This was Centre. Also, Gazprom Neft started developing Russia-made equipment and created some a joint development with the Institute Projects involve all stages of the value chain EvOil, a digital platform for production 50 unique products to replace imported for Hydrocarbon Processing Technologies from upstream to downstream. processes, and the Corporate Platform ones, along with another 170 products being of the RAS Siberian branch. for Analytics and Data Management. developed. In addition, Gazprom Neft supported In 2018, Gazprom Neft established the Digital Russian development companies’ applications Going forward, the import substitution Transformation Directorate, a new unit for external financing amounting to more than programme will help the Company and its responsible for effectively implementing IT ₽ 6 bn, including subsidies from the Industrial partners create in Russia more than 100 new projects and unlocking synergies in order Development Fund. high-tech products. These will include drilling to bring the Company’s key competencies units, equipment and reagents for hydraulic 50 to a new level. In 2018, Gazprom Neft expanded its fracturing, power generation, compression UNIQUE PRODUCTS procurements with more than 15 new products and downhole equipment, marine engineering CREATED IN 5 YEARS never before made in Russia. The Company solutions, equipment for offshore projects, entered into strategic partnership agreements personal protective equipment, and much with , Severstal, Geoenergomash more. and Becema, Neftegazavtomatika, and signed an agreement with and Tatneft for the cooperation in developing oilfield services based on import-substituting equipment and technologies with a focus Digital model of the Achimov Formation on high-tech drilling services. Joint working groups with and HMS Group 170 In 2018, Gazprom Neft developed the industry’s first digital for innovative exploration and production techniques. New keep working. PRODUCTS model of the Achimov Formation, a set of oil-bearing strata algorithms for big data analytics were used to process a vast IN THE PIPELINE located above the Bazhenov Formation in the central part array of geological data. The digital twin of the Achimov of the West Siberian basin. The complex structure calls Formation will form the basis for the development strategy.

1 For more details, see the Regional Policy and Development of Local Communities section of this Report.

22 23 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

CASE STUDY: IMPORT SUBSTITUTION In 2018, the Skolkovo Institute Gazprom Neft partners with leading R&D of Science and Technology digitally PRODUCT institutions to develop and productionise modelled the existence of new ultrahard import-substituting products on an ongoing materials, following which the RAS Institute basis. for High-Pressure Physics confirmed QUALITY ASSURANCE their feasibility. Physical and mechanical The Gazpromneft Catalytic Systems subsidiary tests proved the predicted specifications. Import substitution is set up as part of the Gazprom Neft Group The Scientific and Research Centre filed in the oil industry to develop an import-substituting catalyst patent applications for Russian certification The Company is continuously working to maintain and improve product quality and business. Its key objective is to construct with the Federal Institute for Industrial a plant in Omsk to produce cutting-edge oil Property and for international PCT control reliability. The major document defining Gazprom Neft’s principles in this area is refining catalysts and develop the catalytic certification. In 2019, the Company started the Quality Policy aimed at driving efficiency in production and sales of high quality products business. developing a technology to manufacture drill bit blades based on new materials and looking compliant with Russian and international standards and regulations, and meeting customer In 2018, the Omsk-based Institute for industrial partners to produce the same. requirements. for Hydrocarbon Processing Technologies These materials are likely to have other of the RAS Siberian branch joined efforts industrial applications, too. with Omsk Refinery to develop a new cracking catalyst modification1. What makes it unique The catalyst plant project is its matrix2. The new catalyst based received government on an active matrix is superior to Western support catalysts based on an inert matrix. Heads of production and sales subsidiaries The system is subject to assessment using High value-added products: are responsible for implementing the policy internal and external independent audits, share of branded fuel in total During 2018, Omsk Refinery was migrating and fulfilling quality-related obligations. comprehensive customer satisfaction surveys, retail sales (%) its catalytic crackers from the prior catalyst review of customer and counterparty feedback, to the new one, which proved to be highly To meet the policy goals, the Company runs and industry benchmarking. effective. It will be a first choice catalyst programmes focused on: 30 to produce high-quality motor fuels. It >> product quality improvement; Internal and external audits held in 2018 also won Gazprom’s award in research >> operational excellence; deemed the quality management system to be 24 and development. >> comprehensive automation of production effective and efficient. processes; This cracking catalyst modification >> improvement of technologies and process QUALITY CONTROL 12 Made in Russia: Gazprom 8 Neft’s catalyst production is supposed to be competing with imported flows; The Company exercises an ongoing control 5 project catalysts, being on a par with them but much >> enhancement of environmental of feedstock and petroleum product quality cheaper in production due to lower pressure and industrial safety; at all stages of production and sales. (coverage by RBC TV) 2014 2015 2016 2017 2018 and temperature. >> development of production and sales infrastructure; The Company’s refineries have testing >> professional training of personnel. laboratories to monitor quality throughout the production cycle, from analysing feedstock The Company introduced quality management and materials to end-product shipment. at all corporate levels, with an integrated ISO 9001-compliant quality management system in place at Gazprom Neft’s production and sales subsidiaries. 2018 saw the system surveillance audits at Moscow and Omsk refineries, and ISO recertification at Gazpromneft Marine Bunker, Gazpromneft- Shipping, all Gazprom Neft's major polymer modified bitumen facilities, including bitumen units of Moscow and Omsk refineries, production site of Slavneft-YANOS, and Ryazan 1 Catalytic cracking is a technique to process petroleum fractions with a catalytic converter (a compound that accelerates chemical reactions) into high-octane gasoline and other products. 2 Matrix is a porous carrier with an active agent which helps maintain catalyst performance in a high-temperature environment. The matrix can be either inert, which allows entry for Bitumen Binders Plant. feedstock molecules and removal of cracking products, or active. The latter is used to precrack larger feedstock molecules.

24 25 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Share of products with enhanced environmental features in total production, (%) Corporate and wholesale customer relations the required improvements. In addition, Показатели 2014 2015 2016 2017 2018 the Company regularly assesses end consumer Euro-5 motor fuels 90 95 100 100 100 The Company communicates product quality information to corporate and wholesale satisfaction at all stages of servicing. Engine oils compliant with Euro-4 and later standards 17 23 25 26 27 customers through: >> information and technical support of supplies; The key indicator of Gazprom Neft customers' Low-viscosity marine fuel, ULSFO – – – 9 25 >> direct dialogue between the Company’s management and customers at training loyalty, the NPS index, remained flat in 2018 (ultra-low sulphur fuel oil) 0.1 courses and workshops for business partners and consumers, meetings vs 2017 (adjusted for the price) and stood and awareness sessions with representatives of regions’ industry ministries; at 59 points. This speaks to high customer loyalty >> disclosures on corporate websites and external online resources; and their willingness to recommend Gazprom At filling stations, mobile or stationary laboratories run additional tests technical regulations. Standardisation >> marketing and promotion events; Neft’s filling stations. In order to expand its of the fuel's physical and chemical parameters at least once a month. At documents or amendments thereto are subject >> loyalty programmes; customer base and increase loyalty, the Company Gazpromneft-Aero's warehouses, aviation fuel goes through several levels to mandatory approval by the customer. >> package branding. organised seven nationwide and regional of quality control as part of its reception, storage, preparation and feeding advertising campaigns in 2018. Marketing events for aircraft fuelling. The R&D centre of Gazpromneft Bitumen Materials performs Exported products come with REACH- To foster relations with corporate and wholesale customers and assess quality organised by the Company covered 5.3 million additional tests of bitumen product quality, while an integrated optimised planning compliant safety data sheets (SDS), while satisfaction, the Company uses various feedback tools and engages in polling, retail customers. In 2018, the Company also held system helps ensure reliable and smooth deliveries. those sold domestically have an SDS collecting and analysing queries, conducting surveys and focus groups, creating joint 10 dedicated marketing campaigns covering conforming to the applicable Russian laws. working groups, and running joint tests of petroleum products’ quality. over 2.6 million customers. The Company's products are assessed for their safety for people and the environment and recognised as compliant with Russian and international standards and regulations Products that are sold domestically At Moscow Refinery, the quality of saleable products met the expectations of end In the reporting year, Gazprom Neft launched (including the requirements of the Eurasian Economic Union (EAEU) and Russian have safety data sheets conforming users, with no grounded complaints filed. At Gazpromneft Bitumen Materials, AZS.GO, a mobile application designed ). Their qualitative characteristics meet international standards like API, ACEA, to the applicable Russian laws. All the customer loyalty review measured the respective index at 78.2, up 1.6 points to facilitate fuel sales and payments at its filling ILSAC, DIN, and ISO 8217. of the Company’s petroleum products compared to 2016, when the first measurement was carried out. In the reporting year, stations. Developed in-house, the mobile app are categorised by hazard class specified the customer satisfaction index at Gazpromneft-Lubricants went up to 3.23 points vs helps customers to make an order by entering All regulated products (motor gasoline, jet, diesel and bunker fuel, fuel oil, in shipping documents (standardisation 3.08 in 2017. the number of litres or an amount of money asphalt cement) have declarations of conformity to the EAEU's technical documents and safety data sheets compliant and pay for fuel without leaving the car regulations. Each product batch is checked for compliance with environmental with the Globally Harmonised System Retail customer relations with a linked bank card or via ApplePay. It also safety requirements, with bunker fuels also regulated by in-house standards of Classification and Labelling of Chemicals To ensure a prompt response to customer queries, the Company put in place searches for gas stations by location and fuel of the organisation (STO) and deemed compliant with ISO 8217. (GHS)). a single support centre operating 24/7 and leveraging various traditional and digital price. Using the app reduces the fuelling time communication tools. 1.5–2 times. Today, 400 Gazprom Neft stations CUSTOMER RELATIONS For lubricants, the Company developed are already connected to this mobile service. Gazprom Neft builds direct and long-term relations with its customers by fostering 88 safety data sheets and revised All queries are sorted by type and subject, registered and processed in a shared Another application, Gazprom Neft Filling Station an open and mutually respectful dialogue, providing timely and reliable some 125 in line with Regulation (EC) system. Throughout the month, the Company monitors the quality of customer Network, offers a number of other services, information about products and services, and streamlining query and claim No. 1907/2006 of the European Parliament consultancy across all communication channels, taking action to introduce such as insurance, vehicle inspection, repair, management. The Company continuously monitors customer satisfaction and of the Council of 18 December 2006 and motor mechanic's advice. Over 160 thousand with product and service quality, studies key needs and offers tailored service. concerning the registration, evaluation, users visit the Services section of the app every authorisation and restriction of chemicals month. In 2018, the number of Gazprom Neft The Company uses a wide range of communication channels to educate various (REACH). In 2018, the Company also drafted Gazprom Neft filling stations enjoy mobile app users reached 1.85 million. customer groups (retail, corporate and wholesale). and registered GOST R 52056-2003-compliant safety data sheets for polymer modified the strongest demand Each product batch is furnished with quality and safety data sheets asphalt cements and an SDS for a soil Gazprom Neft retail network was the most popular among Russian drivers, and a certificate of compliance with standardisation procedures or the EAEU's reinforcement admixture. according to Romir’s 2018 survey in 21 regions. 40% of the respondents named Gazprom Neft filling stations as the most frequently visited due to the availability of petroleum products, fuel price Russia's 100 Best Goods and quality, serviceable equipment, convenient location and working hours, as well as a wide offering of non-oil products and services. For 93% of the interviewed, the key factor was the fuel quality, with G-Drive cited as the Gazprom Neft’s motor fuels and oils won a quality seal at the Russia's best known and the most frequently purchased branded motor fuel by 37% 100 Best Products nationwide contest. The gold winners included of car owners. The Company's retail network ranked first in terms of brand G-Drive 100 high-octane gasoline, RMD-80, bunker fuel with enhanced recognition (39% of respondents). environmental features and automotive propane produced at Omsk Refinery, as well as Gazprom Neft oil for gasoline engines produced at Gazpromneft-Lubricants.

26 27 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

SUPPLY CHAIN

In its cooperation with counterparties, Gazprom Neft focuses on being open to the market, offering fair prices, and building long-term structured relationships.

Materials and equipment The Company is committed to promoting Division to verify the compliance The Company continuously vets prospective regions and 11 neighbouring and remote procured from suppliers long-term contracts, developing incentives of its integrated management system suppliers for compliance with its requirements. countries. Local (domestic) suppliers based in the Company’s for counterparties, and exploring flexible with ISO 9001:2015, STO Gazprom 9001-2012, The counterparty due diligence includes accounted for over 95% of total supplies. significant locations of pricing mechanisms. To strengthen its and the Company’s standards and regulations. technical review along with the annual In exploration and production regions, operation1 counterparty relationships, Gazprom Neft assessment of reliability, solvency and financial the payments totalled ₽ 120 bn. (₽ m) seeks to improve its supply chain management Gazprom Neft runs a supplier management standing. practices and ensure transparent selection system to make sure that materials For more details, see 7,936 of candidates for procurement procedures. and equipment suppliers meet eligibility In 2018, our materials and equipment supply the Procurement section criteria prior to admitting them to the bidding chain did not change materially. Supplier relationship priorities: process. Certain disclosed procedures within >> transparency and openness this framework include checks to verify In 2018, the Company received bids >> competition compliance with corporate requirements from over 5,400 prospective suppliers. >> equality in respect of HSE, employment conditions We entered into contracts with more than 2,851 >> mutual guarantees and social activities. 2,100 companies representing 62 Russian 2,335 2,154 >> confidentiality >> awareness Baseline eligibility criteria are work/service/ 967 product pricing, quality, manufacturing 334 537 The Company has adopted standards and delivery timeline, availability for supplier engagement and screening, of the required technical and human Tyumen Region as well as further counterparty relationships, resources and relevant expertise. Materials and equipment supply chain St Petersburg including production inspections Omsk Region and performance assessment. The criteria The full list of requirements, information Tomsk Region for screening suppliers and assessing about open tendering procedures and detailed Khanty-Mansi Autonomous Area MANUFACTURER / WAREHOUSE WAREHOUSE OF FACILITY OF TARGET Orenburg Region their performance are defined by a group selection criteria are available in the Tenders AUTHORISED DEALER OF LOGISTICS TARGET SUBSIDIARY SUBSIDIARY Yamal-Nenets Autonomous Area of units that ensure they meet independence section of Gazprom Neft's corporate OPERATOR (GAZPROM and impartiality requirements. Counterparty website. This is a multi-purpose tool that NEFT PROCUREMENT) selection and cooperation management helps, among other things, to make bidding is underpinned by an ISO 9001:2015-compliant and procurement processes fully transparent integrated management system. In 2018, for suppliers, as well as to identify an annual audit was performed at Gazprom and prevent cases of corruption. Neft Procurement’s Materials and Equipment

SME participation in tenders

In 2018, Gazprom Neft continued championing SME engagement in its procurement processes, with more than 20% of all materials and equipment sourced from these suppliers.

1 Based on the results of competitive bidding procedures initiated by the Company’s Materials and Equipment Department and Gazprom Neft Procurement’s Materials and Equipment Division.

28 29

ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

CREATING VALUE The Company believes its sustainable growth is contingent on the well-being of communities across its footprint. In pursuance of its strategic goals, Gazprom Neft seeks to create value for all stakeholders FOR STAKEHOLDERS at each stage of its operations.

Shareholders and investors Consumers and customers Personnel Society and local communities Government

VALUES >> Sustainable increase in the Company’s >> Stable supply of eco-friendly petroleum >> A reliable and attractive employer brand >> Support of local manufacturers and suppliers >> Energy security market value products with a high consumer appeal >> A wide range of professional growth >> Tax payments to local budgets >> Taxes >> High dividend yield opportunities >> Creating jobs >> Technological advance of the Russian oil >> Competitive remuneration package >> Environment and gas industry >> Social support of employees >> Improving quality of life in the regions >> Opportunities for self-fulfilment and of operation participation in interesting projects >> Enhancement of the social commitment and entrepreneurship of local communities MEASURES >> Ongoing communications with investors, >> Developing and manufacturing products with >> Evolving recruitment and retention >> Massively contributing to tax revenues >> Stable production growth and efficient oil shareholders and analysts to support a fair price enhanced consumer and environmental features framework and a distinctive employer value for local budgets refining with a broad petroleum product of the Company’s securities >> Expanding direct sales to corporate customers proposition >> Facilitating the development of social sales network >> Strengthening of the corporate governance and risk through the Company’s own distribution network >> Talent pool, competency and training infrastructure >> Russia’s first major offshore project management frameworks >> Expanding Gazprom Neft’s retail network development >> Creating highly efficient jobs ongoing at the Prirazlomnaya platform >> Equitable dividend policy and developing the loyalty programme >> Continuously improving incentive system and the comprehensive development >> Boosting environmental safety and of the country’s Arctic Shelf >> Information transparency in covering the progress >> Partnerships with leading petroleum product >> Employee engagement and teamwork preserving biodiversity through dedicated of the Company’s development strategy consumers programmes >> Developing a centre of technology >> Robust performance excellence to promote substitution of foreign >> Respect for minority shareholder rights >> Increasing the efficiency of sales channels >> Stronger HR effectiveness >> Strengthening the HSE system technologies through business process digitalisation >> Improving energy efficiency of operations and enhanced communications with customers and counterparties >> Implementing social initiatives 2018 HIGHLIGHTS >> Fair price of stock: price per share >> All gasolines compliant with Euro-5 >> Winner of the international Randstad Award >> Gazprom Neft – one of the largest taxpayers >> 18.7 mt of oil exports as at 29 December 2018 at ₽ 346.7 (up 43% vs emission standards 2018 as the most attractive employer across its footprint >> Over ₽ 800 bn of tax payments the beginning of the year), with rouble-denominated >> Best in Russia sales per filling station in the fuel and energy sector and No. 1 >> Russian companies making up 98% price reaching an all-time high by the year-end Employer of Choice according to HeadHunter >> Launch of the Bazhen Technology Centre, at 20.7 tonnes per day of the Company’s suppliers a platform to test technologies to develop >> Dividend payout at 35% of Gazprom Neft’s >> NPS index at 59 points >> Staff turnover at 12.9%, down 2.2 pp y-o-y >> Home Towns social investment programme the Bazhenov Formation 9M 2018 consolidated IFRS financial result >> 11.1 million participants of the filling station >> Average monthly salary at ₽ 122,600, winning two Leaders of Corporate Charity >> Total shareholder return of 53% loyalty programme up 8% y-o-y awards >> LTIF down by 21% y-o-y >> Water consumption down by 14%

32 33 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

STRATEGY 2030 In 2018, Gazprom Neft’s Board of Directors approved a new Strategy through 2030 for the Company to become a global in efficiency, ON TRACK WITH NEW LEVEL safety and technology-driven production. THE 2025 STRATEGY OF CORPORATE EVOLUTION

100 mtoe of production STRATEGY Strong technology competencies More than a decade of strong progress has earned Gazprom Neft a spot among major players in the global oil and gas industry. We are firmly on track to deliver THROUGH on targets set out in our 2025 Strategy as we complete the key projects that 40 mt of refining in Russia are mostly underway. 2030 Extensive portfolio of additional opportunities At the same time, high volatility in energy markets, fiercer and ever changing competition, and transformation in the energy industry at large all create new challenges to oil and gas businesses. Combined with the new scale of business Sales through internal and role of Gazprom Neft in the industry, this brought about the need to revise channels: – 100% and update our strategy.

Что главное в новой стратегии? “We want to be a next generation company that sets the standards for Russian and global players. To deliver on this goal, we need to drastically transform our entire management system: by reviewing its digital model, operations, organisation, and corporate culture. We are aware of our aims, the changes we need to go through, and the tools we need to employ.”

Alexander Dyukov CEO and Chairman Changes in the energy Market volatility New rules of the Management Board at Gazprom Neft industry of the game

Our aim Our mission To evolve into one of the world’s To evolve and keep the world evolving. best industrial companies that To create and feel proud of the result. shapes the industry’s progressive We help build resources for the future transformation, makes the impossible and make a sustainable difference possible, and provides inspiration in by providing energy, knowledge, Russia and abroad. and technologies.

34 35 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

The new strategy – Strategy 2030 LEADING THE MARKET BY ROACE The new Strategy until 2030 succeeds the 2025 Strategy Effective management of the Company’s asset and project to maximise profit but focuses more on the Company’s market positioning, improving its flexibility when it comes to external changes and GAZPROM NEFT – MAINTAINING MAXIMISING ADDED TRANSFORMATION transforming key business processes. Gazprom Neft’s targets until 2030: INDUSTRY BENCHMARK A POSITION AMONG VALUE FROM EVERY OF THE COMPANY >> build a next generation company; THE TOP 10 PUBLIC BARREL >> set the standards for other industry businesses in terms LIQUID-HYDROCARBON of efficiency, use of technology, and responsibility to shareholders and the community; PRODUCERS BY VOLUME >> rely on the Sustainable Development Goals approved by the UN General Assembly on 25 September 2015. Assuring annual production Increased efficiency Better and faster growth in line with industry of value chain decision making

Leadership areas In upstream, the Company continues In downstream, the Company To embrace new opportunities effective development of its mature continues to modernise refining and meet new challenges in line HSE reserve base. Growth projects form assets, increase operating with the updated 2030 Strategy, (HEALTH, SAFETY AND ENVIRONMENT) a number of strategic areas. efficiency, and grow the scale and the Company engages in four areas Goal Zero: no harm to people, environment performance of the sales network. of transformation, all of them and property in working process. Strategic bets crosslinked and relying on one EFFICIENCY Strategic areas another. DEVELOPING YAMAL for long-term development Maximising added value from every barrel Pipeline construction from Transformation in any development scenario of the oil Novoportovskoye to the unified INCREASING THE CONVERSION market. gas-supply system, further RATE AND LIGHT PRODUCT YIELD OPERATIONAL Initiatives in upstream: development of the Yamal Peninsula Increasing the value of the product Etalon Operations Management >> efficiency improvements in exploration resource base via newly created slate by increasing technological System (OMS) to ensure ongoing activities; infrastructure. flexibility and adaptability to market safety and efficiency of day-to-day >> efficiency improvements in the new conditions. operations. project delivery; NADYM-PUR-TAZ AREA >> efficiency improvements Development and monetisation IMPROVED EFFICIENCY ORGANISATIONAL in the exploitation of currently of worldwide liquid hydrocarbon AND TECHNOLOGICAL Transition to a flexible organisation productive fields. reserves in a strategically important PERFORMANCE and a simplified and agile working Alexander Dyukov: “We want region for the Company. Optimising resources, cutting costs, environment. to become a benchmark Initiatives in downstream: transforming value-chain processes >> optimising the product range SAKHALIN Development of competent in technology and efficiency” to secure leading positions in existing ecosystem around the Company. of refining facilities and operational Creation of a new offshore and new markets. improvements; production hub on the Sakhalin CULTURAL >> efficiency improvements in sales. Island shelf. PETROCHEMICAL Transition from hierarchical INDUSTRY DEVELOPMENT UNCONVENTIONAL RESOURCES management to facilitative TECHNOLOGY Business diversification in the new Development of unconventional leadership as a new relationship Creating technologies for the future links of hydrocarbons value chain. development: reserves at the Bazhenov Formation, ideology. >> growth of oil recovery factor Domanic and Paleozoic deposits. FURTHER DEVELOPMENT DIGITAL in brownfields; OF MARKETING AND SALES Better and faster decision making >> development of multiphase fields BUSINESSES The art of leadership by introducing digital technologies. and low-permeability reservoirs; Increasing market leadership in new TECHNOLOGICAL DEVELOPMENT >> production in the challenging Arctic and existing retail markets. Commercialising residual reserves environment; >> safe and effective offshore operations. in existing company assets by using new technologies.

NEW EXPLORATION AREAS Developing a resource base Gazprom Neft has developed to ensure production beyond 2025. a strategic plan to 2030

36 37 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

INTEGRATING UN SUSTAINABLE DEVELOPMENT GOALS INTO THE STRATEGY

Gazprom Neft is strategically guided by sustainable development and corporate social responsibility principles and goals integrated into its business strategy, decision-making processes, and operations. Our sustainable development approaches and commitments hinge on the Sustainable Development Goals (SDGs) adopted by the UN in 2015.1‌

Sustainable development goals Key environmental programmes of Gazprom Neft

Our focus areas UN Our objectives Our focus areas UN Our objectives FINANCIAL AND ECONOMIC >> Generating shareholder value, ROI, maximising PERSONNEL DEVELOPMENT >> Recruiting highly skilled talent for the Company's STABILITY, PRODUCTION value creation per barrel AND SUPPORT ongoing and future operations EFFICIENCY >> Improving efficiency of value chain management >> Providing employees with competitive >> Digitalisation and an ongoing focus on remuneration and benefits innovations >> Ensuring safe working conditions >> Enhancing training and professional HEALTH AND SAFETY >> Goal Zero: no harm to people, environment development systems and property in working process CONTRIBUTING >> Supporting social infrastructure across our >> Lower workplace injury, accident TO THE DEVELOPMENT footprint and occupational disease rates, reduced OF LOCAL COMMUNITIES >> Nurturing local talent and promoting social environmental impact commitment >> Safe production >> Import substitution, stronger ties with local suppliers and technology partnerships ENVIRONMENT >> Reducing human impact and preserving >> Ongoing dialogue with the stakeholders the environment to achieve sustainability goals of local >> Environmental safety of assets communities and society as a whole >> Sustainable use, protection and restoration CORPORATE GOVERNANCE >> Developing a corporate governance framework of natural resources, biodiversity conservation compliant with best global practices to boost >> Energy efficiency the Company’s efficiency and competitiveness RESPECT FOR HUMAN RIGHTS >> No violations of labour or human rights AND COMBATING CORRUPTION >> Anti-corruption initiatives >> Efficient management of risks related to corruption and violation of human rights

1 For the Company's objectives aligned with sustainable development goals and their achievement, see Appendix 2 hereto Map of material topics.

38 39

ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

CORPORATE GOVERNANCE

Gazprom Neft’s corporate governance1 is underpinned by sustainability and the mission Governance efficiency to enhance the Company’s shareholder value in the long term. To achieve that, the Company

works to build responsible and trustful relationships with key stakeholders. The Company is committed to bettering its >> the Board of Directors approved amendments to increase transaction corporate governance framework with a focus thresholds under by-laws governing the transaction handling procedure on greater efficiency. The Board of Directors and interaction with investee entities; reviews performance in this area on an annual >> the Human Resources and Compensation Committee approved new basis. criteria to assess performance of the Board of Directors and deemed it advisable to engage a qualified independent service provider (consultant) Gazprom Neft’s corporate governance framework encompasses all As of 31 December 2018, Gazprom Neft 2018 HIGHLIGHTS: for the Board's review at least once in three years; the key elements typical of public companies with established governance comprised 134 Russian and foreign legal >> the Extraordinary General Meeting >> the Company enabled its shareholders to use the Online Shareholder Account structures and is aligned with the applicable Russian statutory requirements, entities. Regardless of the authorised capital of Shareholders approved amendments and the e-voting system to participate in general meetings of shareholders; the Company’s Charter and by-laws. The framework also hinges on global best structure, PJSC Gazprom Neft is the core to the Company's Charter to reflect >> the Company started automating its corporate governance processes. practices and techniques. Company with respect to the Gazprom Neft changes in the Federal Law On Joint- Group's entities. One of the means used Stock Companies pertaining to major The key targets, goals and principles underpinning Gazprom Neft’s corporate The governance rules and principles are set out in the Corporate Code to ensure effective corporate governance and interested-party transactions; governance framework include preserving and growing the Company's asset of Conduct and the Corporate Governance Code. Gazprom Neft’s corporate and monitoring of subsidiary operations >> the Extraordinary General Meeting base, increasing its market value, maintaining financial stability and profitability governance framework is designed to ensure the highest level of internal is the review of subsidiaries' key operational of Shareholders approved new versions of the Company, and respecting the rights and interests of its shareholders, and external controls. The Corporate Centre of the Gazprom Neft Group matters by the PJSC Gazprom Neft governance of the Regulation on the General investors and other stakeholders. A highly professional management team is PJSC Gazprom Neft, which ensures effective control over all processes. bodies. Meeting of Shareholders, Regulation and an effective system of corporate governance and control are a prerequisite on the Board of Directors, Regulation for the successful management of a complex multi-tiered vertically on the Management Board, and Regulation integrated oil company such as Gazprom Neft with domestic and foreign on the Chief Executive Officer. The upstream and downstream assets. The Company currently has a well- updated documents take into account defined organisational structure encouraging seamless interaction between the recommendations of the Corporate its governance bodies and clear distribution of governance and control roles Focus on the protection of shareholder rights includes efforts to: >> launch the Single Disclosure Window interface for mandatory Governance Code and best practices to guarantee progressive growth of the shareholder value in the long term. >> improve disclosure transparency; notices and corporate news. followed in Russia; >> update the shareholder register and upgrade the Online Shareholder Account. Focus on corporate governance improvements and adoption of best practices includes efforts to: Focus on greater efficiency of the Company's governance >> enhance corporate governance framework in subsidiaries; bodies includes efforts to: >> update Group-wide corporate governance by-laws >> improve operating procedures; and procedures. >> enhance controls over corporate procedures.

Focus on information disclosures includes efforts to: >> improve the procedure for information transfer and approval all the way through from any given event actually taking place “2018 was the first year Gazprom Neft’s shareholders could use new to its disclosure in the securities market; e-voting solutions. The implementation of remote voting systems confirms >> update the Company's by-laws and processes to align them the Company’s commitment to introducing advanced digital technologies with the latest inside information statutory requirements; in both production processes and business communications, as the new solutions make corporate governance more transparent and accessible, while also facilitating the exercise of shareholder rights.” For the list of material companies within Gazprom Neft Group, Elena Ilyukhina see Appendix 4 in the Company’s annual report. Deputy CEO for Legal and Corporate Affairs

1 For more details on corporate governance, activities of supreme governance bodies, their composition and remuneration, as well as prevention of conflicts of interest, see the Corporate Governance section in the Company's annual report for 2018. 2 For the structure of the Gazprom Neft Group and key changes therein, see the corporate governance section in the Company's annual report for 2018.

42 43 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Gazprom Neft's governance and control bodies Activities of the Board of Directors

MEETING OF SHAREHOLDERS Board of Directors composition by age The General Meeting of Shareholders AUDIT COMMITTEE is the supreme governance body responsible Name Age for dealing with the most significant aspects 56 The Audit Committee exercises oversight over the Company's of the Company’s activities. Valery Golubev 66 financial and business operations Andrey Kruglov 50 The Board of Directors is responsible for the Company’s strategic management, Kirill Seleznev 44 13 defining key principles and approaches Vsevolod Cherepanov 52 DIRECTORS INTERNAL AUDIT of risk management and internal controls, Igor Fedorov 53 DEPARTMENT and exercising control over Gazprom Neft’s Elena Mikhailova 41 As part of the Internal Audit and Risk executive bodies. The Company’s executive Alexander Dyukov 51 Management Directorate, the Internal bodies – the Management Board and the CEO – Audit Department is responsible Andrey Dmitriev 44 3 45 or younger MANAGEMENT for offering the Board of Directors are held accountable to the General Meeting 5 46–55 BOARD (through the Audit Committee) and of Shareholders and the Board of Directors. Vladimir Alisov 58 3 56–65 the Company’s management (the Out of 13 Board members, ten are non- EXECUTIVE BODIES Mikhail Sereda 48 2 66 or older CEO and the Management Board) executive directors (representing the majority Executive bodies manage independent, unbiased, reasonable Valery Serdyukov 73 and substantiated guarantees and shareholder), two are independent directors the Company’s ongoing Sergey Fursenko 64 operations and are held consultations aiming to improve and one is the Company's executive director. accountable to the General the Company’s performance and achieve The independence criteria used by Gazprom the Company’s goals by advocating Meeting of Shareholders Neft are based on recommendations and the Board of Directors CEO a systematic and consistent BOARD OF DIRECTORS approach to assessing and enhancing of the Corporate Governance Code in distribution of powers between those the efficiency of corporate governance, of the Central Bank of the Russian Federation involved in corporate relations. Given The Board of Directors is risk management and internal control (Bank of Russia). the structure of the Company's share capital, responsible for the general processes management of the Company the vast majority of Gazprom Neft’s directors and its strategy, policies and core All directors have a balanced set are elected upon the recommendation operating principles. The Board is of qualifications required for their roles. They of PJSC Gazprom, the owner of the controlling accountable to the General Meeting EXTERNAL AUDITOR of Shareholders and must act in possess skills in strategic management, stake. External auditor is a professional audit organisation approved the interest of all shareholders corporate governance, corporate finance GENERAL MEETING by the General Meeting of Shareholders based on recommendations from the Board of Directors issued following an assessment and risk management and have industry Directors are elected in a transparent manner OF SHAREHOLDERS by the Audit Committee. External auditor is charged with conducting experience and expertise. providing shareholders with sufficient This is the supreme governance an independent review of the Company's financial and business information on candidates to get a clear body responsible for dealing operations The directors perform their duties in close idea of their personal and professional with the most significant collaboration with the Company’s management skills. Shareholders can use a range aspects of the Company’s activities team, business units, registrar and auditors. of communication channels, including hotline AUDIT COMMISSION The current composition of the Board and email, to communicate their opinions The Audit Commission is an elected body that exercises control over of Directors ensures sufficient independence and questions to the Board of Directors. On the financial and business operations of the Company from the Company’s management and enables top of that, they have an opportunity to put effective control over its performance. questions to the Company’s executive bodies and directors before and during the Annual The Company’s majority shareholder General Meeting. HUMAN RESOURCES SECRETARY is PJSC Gazprom, which owns 95.68% AND COMPENSATION OF THE BOARD of its capital. The remaining ordinary COMMITTEE OF DIRECTORS shares are held by minority shareholders represented by both individuals and legal The Human Resources The Secretary ensures effective communication entities, which helps strike the right balance and Compensation Committee Election, setup evaluates the effectiveness with shareholders, makes of the Company's HR policy and necessary arrangements Reporting Appointment remuneration system, determines to protect rights and interests, by resolution the criteria for selecting nominees and provides operating Administrative reporting of the Board to the Board of Directors, and support to boost the efficiency of Directors assesses performance of of the Board of Directors Functional reporting the Board of Directors

44 45 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

In 2018, the Board of Directors reviewed >> assessment of performance of Gazprom Gazprom Neft has established the Corporate on identification and prevention of conflicts the following sustainability-related matters: Neft’s external auditor for 2017; To raise the directors’ Culture and Ethics Working Committee of interest on the Board of Directors >> the Company’s Development Strategy until >> results of assessing and reviewing the main awareness of to ensure compliance with the Company’s specifying procedures to avoid the same, 2030 and advancing certain lines of business; risks after 2017; the Company’s Code. This committee is made up including: >> international expansion plans; >> implementation of key environmental sustainable of Management Board members. >> Gazprom Neft’s programme for the Russian protection initiatives in 2017 and plans development >> mandatory notification of such conflicts; offshore projects; for 2018; activities, Gazprom The Corporate Governance Code requires >> the inclusion of information on a conflict Corporate Code >> performance against the investment >> programme for APG utilisation the directors to: in the materials provided at a meeting; programme in 2018; and its improved use in 2018 and plans Neft now adds >> refrain from any actions that may result >> the right to suggest that the director >> further innovations at the Company; for 2019–2021; responsible in a conflict of interest; involved in the conflict not be present >> the Company’s efforts to embrace domestic >> changes in APG utilisation levels investment matters >> abstain from voting on matters where they at the discussion; products and solutions and increase in the Orenburg Region in 2015–2018. to the Board have a personal interest; >> prohibited use of any direct or indirect their share in its purchases; of Directors’ annual >> refrain from disclosing or using benefits offered by persons promoting >> KPIs and their impact on the Company’s agenda. for personal or third-party gain any their interests in the decision making. efficiency; confidential and/or insider information about the Company. Information on directors’ involvement with other companies is verified on a quarterly In 2018, an Extraordinary General Meeting basis. In 2018, members of Gazprom Neft’s of Shareholders approved a new version Board of Directors and Management Board Assessment of the Board of Directors' of the Regulation on the Board of Directors had no conflicts of interest. performance of Gazprom Neft. Now, it has a section

The Board's annual performance assessment an independent service provider for the Board's Remuneration of the Board of Directors is held in the form of survey (polling). review at least once in three years. The questionnaire contains around 30 questions and the Management Board covering the main areas of activity. The results The reporting year’s assessment revealed reflect the status quo of the key processes, improvements in setting strategic The Company has put in place a remuneration and 10% of remuneration payable to directors, such as strategy, business practices, priorities and interactions with top scheme for the Management Board respectively). efficiency management, support of the Board executives, as well as better performance and senior management that is used and its committees, and personal contributions and a more balanced composition to calculate bonuses for meeting short- Total remuneration paid to the Board of directors, including the Chairman of the Board's committees. At the same term targets and a long-term incentive of Directors in 2018 amounted to ₽ 366.39 and the Secretary. time, more efforts are needed to enhance programme that rewards the Company's m, inclusive of personal income tax. The the quality and timeliness of information managers for increased stock prices in each Company did not reimburse directors In 2018, the Human Resources provided to the Board and develop of its three-year periods. Remuneration for expenses related to discharging and Compensation Committee approved new channels for improving communication payable to the Board of Directors their duties. criteria to assess performance of the Board with the management team and other is linked to the Company's financial of Directors and deemed it advisable to engage stakeholders. results and is subject to annual approval The members of the Management Board by the shareholders. The discretionary control are entitled to the base remuneration by shareholders is necessary to prevent as specified in their respective employment potential abuse of the remuneration process. contracts, as well as annual bonuses Measures to prevent conflicts of interest and LTIP payments. In 2018, the General Meeting of Shareholders resolved to allocate and pay 0.005% of EBITDA The Company maintains the balance between risks related to governance where most to the non-executive directors. shareholders’ and managers’ interests. of the share capital is held by a single Its majority shareholder has enough shareholder. In addition to the base remuneration, votes to appoint the Board of Directors the directors received additional payments and resolve on a variety of matters falling In resolving conflicts of interest, we rely for chairing the Board of Directors within the remit of the General Meeting on our by-laws – the Corporate Code and its committees and membership of Shareholders. Nonetheless, the Company of Conduct and the Corporate Governance in the Board's committees (50%, 50% implements a range of measures to decrease Code.

46 47 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

APPROACHES Sustainability management structure TO SUSTAINABILITY BOARD OF DIRECTORS HUMAN RESOURCES AND COMPENSATION COMMITTEE MANAGEMENT AND AUDIT COMMITTEE OF THE BOARD OF DIRECTORS >> Overseeing the implementation of the sustainability strategy >> Approval of sustainability policies and programmes

CEO AND MANAGEMENT BOARD Sustainability management OPERATING MANAGEMENT SYSTEM COMMITTEE OF THE MANAGEMENT BOARD

KEY DOCUMENTS: >> Developing the sustainability strategy >> Managing the implementation of sustainability strategy >> Corporate Code of Conduct; and programmes >> Corporate Governance Code; >> Reviewing performance against the strategy >> Policies and other by-laws for each of the priority sustainable development areas1.

KEY PRINCIPLES: RELEVANT DEPARTMENTS IN THE CORPORATE CENTRE AND DIVISIONS >> Planning and implementing the Company’s strategy with due regard to stakeholders’ interests as well as the principles and priorities of present and future generations; Strategic planning, setting goals, overseeing >> Creating value for stakeholders at each stage of the Company’s operations; and managing relevant activities >> Balancing economic, environmental and social management.

TOP EXECUTIVE RESPONSIBLE FOR THE SUSTAINABILITY MANAGEMENT: RELEVANT DIVISIONAL DEPARTMENTS Alexander Dyukov, Chairman of the Management Board and CEO >> Determining sustainability priorities in their respective fields KEY STAKEHOLDERS: >> Overseeing relevant sustainable development activities of subsidiaries

>> shareholders, investors; >> the Company’s employees; >> federal and regional authorities in Russia; >> local communities; >> contractors, business partners; RELEVANT SUBSIDIARY DEPARTMENTS >> the industry community in Russia and globally; >> non-profit and public organisations. Implementing sustainability programmes in their respective fields

The Company’s management systems encompass all activities in this field and comply with international standards. Sustainability indicators are included in manager and employee KPIs. 1 Information on key by-laws for each of the areas is available in the corresponding sections of this report.

48 49 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

OPERATIONS MANAGEMENT Etalon OMS milestones 2018 RESULTS 2019–2020 DELIVERABLES 2020-2030 DELIVERABLES >> Maturity assessment criteria >> Focus on priority areas: >> Ensure the highest level of employee SYSTEM developed and adopted –– leadership and culture; involvement in the transformation >> Assets diagnostics completed –– operating efficiency >> Roll out the results of pilot projects >> Development targets and potential across the Group and achieve systemic defined by priority area management; and active OMS maturity levels >> Training in regular management –– contractors and suppliers >> Tighten the responsibility The Company's Strategy 2030 views the development of the Etalon Operations Management practices launched across the Group management; of the management for ensuring >> Pilot projects completed –– equipment reliability safe and reliable operations System (OMS) as a key element of the Company’s transformation. Etalon’s roll-out kicked off >> Efforts initiated to align the Company’s and integrity management. of the Company and its contractors in 2016. The system prototype is now being pilot tested at a number of our assets and is ready internal documents with the OMS Code >> Roll out regular management practices and suppliers across all of the Company’s assets >> Maintain and promote the culture to be scaled across the Company. >> Embed an operational reliability of continuous improvement. management model based on the equipment criticality analysis for production divisions >> Maximise the scope of the development potential assessment to cover all The OMS is a structured set of interlinked safety, reliability and integrity, process flow of the Company’s assets practices, procedures and processes used efficiency and staff expertise. by managers and employees at each level of the Company as part of its operations. The OMS comprises 12 functional elements Compliance with the OMS requirements grouped into three major blocks: operational is a must at all levels and across all units, culture, operational reliability and safety, from offices and laboratories to drilling rigs and operational efficiency. Etalon OMS structure Operating and factories. efficiency: pilot case at the Omsk 1. Facilitative leadership is at the core Operational Operational Lubricants Plant The key objective of the roll-out is to ensure of the first block, i.e. operational culture. It Operational reliability and safety continuous improvement of the Company’s is a style of leadership effective in creating culture efficiency operational efficiency. a supportive environment for employees to work towards the Company’s strategic 1 2 3 12 This will be achieved by introducing universally goals. Equipment reliability Process flow management standardised practices and having all 2. The second block covers operational management employees embrace the culture of continuous reliability and is based on uniform asset improvement based on: reliability criteria and requirements, 4 5 >> uniform management processes across uniform safety management processes Organisational development Operational risks management the Company; and measures to minimise the number and competency management >> uniform safety and reliability standards; of faults and failures. >> employee involvement into decision making 3. The third block is built around 6 7 and generating ideas; operational efficiency with a focus Performance >> clearing all sources of losses; on the operating assets’ ability to know Leadership Contractor management Project management management >> implementing regular management and see their potential, leverage the tools and culture and continuous “The most difficult practices and lean production. necessary to cut all and any losses, improvement part is to learn and support a culture of continuous 8 9 to speak a shared The system’s framework is described improvement. Information and document Environmental and social impact language” in the OMS Code, which brings together management management Company-wide requirements to equipment 10 11 Stakeholder expectations Change management management

50 51 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

DISCLOSURE OF INFORMATION RESPECT OF HUMAN RIGHTS

A key principle of Gazprom Neft’s corporate governance is information The Company prohibits any discrimination The Company has: transparency. Gazprom Neft accurately and promptly informs its based on ethnicity, gender, origin, age >> the Corporate Culture and Ethics Working or other grounds, recognises the right of its Committee comprised of members stakeholders about significant events and aspects of its operations. employees to establish public associations of the Management Board and chaired and organisations to protect their rights by the Company's CEO; and interests, and guarantees respect >> the hotline to report corruption, fraud, for the rights of indigenous minorities and violations of laws and Corporate Code By-laws in the regions where it operates. of Conduct; on the Company’s Accountability and financial transparency Competition organised by the Moscow >> an office for the investigation of reports website (with adjustments made for the Company’s Exchange and the RCB Media Group The Company complies with the human rights received through the hotline of the Internal concerns about the protection of trade awarded Gazprom Neft first prize in four principles set out in: Audit Department (part of the Internal Audit secrets and other confidential data) play nominations. Gazprom Neft’s annual report >> the UN Global Compact in the areas and Risk Management Directorate). a pivotal role in Gazprom Neft's corporate for 2017 received the highest ranking of human rights, labour, anti-corruption governance system. among ₽ 200+ bn capitalisation companies and environment; The hotline is open for anyone to report and among oil and gas companies. It was >> the Universal Declaration of Human Rights; violations, including anonymously. Every Information Policy The Company’s website offers access also recognised for its communication >> the International Labour Organisation report is processed on a case-by-case basis, Regulation on the Company’s website to the latest news, financial and operating effectiveness. Additionally, the Company was Declaration on Fundamental Principles with comprehensive and unbiased investigations results, reports and other useful named best by information transparency and Rights at Work; launched to take effective decisions and provide information, while also making available on the corporate website and second >> the Social Charter of the Russian feedback. the documents on Gazprom Neft’s by corporate governance disclosures. Business adopted by the Russian Union governance and control bodies, including of Industrialists and Entrepreneurs (RSPP). To investigate every message, the Company the Charter, Regulation on the General engages experts from various units, including Meeting of Shareholders, Regulation The Company defined human rights principles HR, legal, health and safety. The Company on the Board of Directors, Regulation in the following fundamental by-laws: encourages its employees and partners on the Management Board, Regulation >> Corporate Code of Conduct; to use the hotline and makes sure they know on the Chief Executive Officer, and Regulation >> Anti-Fraud and Anti-Corruption Policy; about various communication channels. At on the Audit Commission. >> Health, Safety, Environment and Civil the moment, these channels include an online Defence Policy; form on the corporate website, email, phone, To ensure equitable access to information >> Regional Policy Concept; and suggestion boxes. The Board of Directors for all stakeholders, the materials >> Charity Policy; reviews the results of hotline operation, at Gazprom Neft’s official website >> Information Policy Regulation. including the statistics on messages received are available in both Russian and English. and processed, and violations subsequently To implement these principles, the Company identified, on an ongoing basis. KEY COMMUNICATION CHANNELS The main document governing information takes the following steps: AVAILABLE TO A WIDE RANGE disclosure and exchange between >> assumes obligations to observe human OF STAKEHOLDERS the Company and its stakeholders rights and includes relevant provisions in its is the Information Policy Regulation. by-laws; –– The company’s official website: Its key principles include impartiality, https://www.gazprom-neft.com/ >> assesses risks associated with observance reliability, completeness and comparability of human rights and develops preventive of information, neutrality, regularity, –– Annual Report and Sustainability Report: measures; consistency and timeliness of its disclosure, https://ar2018.gazprom-neft.com/ >> maintains dialogue with the stakeholders along with equal, unrestricted and easy on human rights issues; accessibility of data for all stakeholders. –– IR section of the website: >> develops feedback channels http://ir.gazprom-neft.com/ for the stakeholders to express relevant The Company is a regular winner opinions or grievances; of Russian and international disclosure >> monitors observance of human rights by its contests. The Russian XXI Annual Report employees and contractors.

52 53 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

ETHICS AND ANTI-CORRUPTION INTERNAL CONTROL

PRACTICES To improve the efficiency of internal controls and corporate governance, Gazprom Neft developed an Internal Control Policy, the principal document Gazprom Neft has zero tolerance for potential corruption specifying the aims, objectives, components, organisational and functional and fraud risks. With this in mind, the Company joined principles of internal controls. The Policy is published as part of other the Anti-Corruption Charter of the Russian Business Company's by-laws. adopted by the RSPP.

The Company’s framework regulation >> checking new and old employees It was pre-approved by the Audit Committee INTERNAL CONTROL FUNCTIONS in this area is the Anti-Fraud and Anti- for affiliation with third-party businesses of the Board of Directors and approved The composition of the Company’s internal Corruption Policy, which contains the main and for any conflict of interest; by the Board of Directors in 2017. The control units and the allocation of functions requirements to business processes in order >> running a hotline to combat fraud, Company’s executive bodies, senior aimed at establishing and maintaining to mitigate corruption risks, and sets forth anti- corruption and other violations management, heads of business units effective internal controls within the Company corruption rules and standards for employees. of the Corporate Code of Conduct. The line and employees are actively engaged are as follows. Knowing the policy and complying with its allows any violation to be anonymously in establishing and maintaining internal Anti-Fraud and Anti- Internal Corruption Policy on key principles are mandatory for all Gazprom reported at the Corporate Centre controls, which helps the Company achieve The Board of Directors establishes Control Policy the Company’s website Neft’s employees. or subsidiaries; its goals in the most efficient manner. a proper control environment, fosters >> carrying out internal investigations the internal control culture and maintains The Company runs an anti-fraud and anti- of identified cases of fraud and taking action THE INTERNAL CONTROL high ethical standards at all business levels corruption training programme compulsory against those at fault. FRAMEWORK SEEKS TO: as part of the coordination and supervision for all employees, both new and old. To >> mitigate risks that may prevent of the Company's management. It also control corruption risks when cooperating Following the investigation of hotline reports, the Company from achieving its goals; determines the principles and approaches with external counterparties, Gazprom Neft’s no cases of corruption were confirmed >> develop, implement, duly execute, monitor to the organisation and functioning CEO approved standard anti-corruption clauses in 20181. and improve the control procedures at any of the Company's internal control system to be included in agreements with third parties business or management level; and carries out a top level analysis (both Russian and foreign ones). >> inform the relevant governance bodies and assessment of internal control of control weaknesses and suggest effectiveness, among other things, At Gazprom Neft, Deputy CEO for Security remedial actions; through annual reviews and improvement is in charge of anti-corruption activities. >> ensure business continuity, operational recommendations where necessary. efficiency, sustainability and growth The Company's anti-corruption measures at all potential, including timely adaptation The relevant information is provided internal control levels include: to internal and external changes; to shareholders in the Company’s annual >> reviewing and updating fraud and corruption >> provide a consistent and systematic report and the Internal Audit and Risk risks classified as key corporate risks; methodological approach as well Management Directorate’s performance >> applying the due diligence principle as quality information and analytical report. to potential counterparties, and including support for managerial decision making; relevant obligations (anti-corruption >> facilitate due allocation of responsibilities, clauses) in agreements; powers and functions among internal control units, with no overlapping; >> timely settle conflicts of interest emerging in the course of business.

1 The applicable legislation puts law enforcement authorities in charge of verifying the cases of corruption. This means they must be notified in the event of suspected corruption. The Company’s review of hotline reports identified no need to involve law enforcement authorities in 2018.

54 55 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

RISK MANAGEMENT

The Audit Committee’s role is to provide Heads of units and employees of the Company Gazprom Neft has a Risk Management Policy in place, which sets out the objectives recommendations to the Board of Directors act so as to develop, document, implement, on the establishment, maintenance, execute, monitor (carry out self-assessment) and principles of risk management to enhance stability of the Company's operations assessment and improvement and improve control procedures within in the short and long term. of the Company’s internal controls, risk their competence and remit, as well as timely management and corporate governance inform their immediate superiors of instances frameworks; analyse the Company’s where control procedures become impossible Regulation statements and external audit results to execute and/or need to be amended Our risk management strategy seeks to improve managerial decision principles. The timing and objectives for risk on the Audit to ensure their compliance with the Russian due to changes in the Company’s internal making by analysing the related risks, and to maximise the effectiveness analysis depend on the particular circumstances Commission laws, International Financial Reporting and external operating environment. of the management initiatives when these decisions are brought to life. and requirements of each business process Standards, Russian Accounting Standards with respect to which risk management and other regulations; and review the identified The Company’s Audit Commission ensures To this end, the Company has a unified approach to the risk management is implemented. or potential misconduct of the Company’s the accuracy of financial statements and other process. Along with uniform analysis and risk management tools, it forms employees. information on the Company’s financial an integrated risk management framework (IRMF). This approach helps define areas and business operations and financial position. of responsibility for risk management Executive bodies and senior management As part of this framework, risk management tools are integrated into all and monitor risks at all management levels are tasked with responsibilities to facilitate key corporate processes. Responsibility for risk management and reporting across the Company. It also allows Gazprom the development and ensure the effectiveness is determined by the linear and functional management framework. For each risk, Neft to develop target plans to respond of internal controls; establish a proper control an owner responsible for managing it is assigned. Each function and key business to material risks for each subsidiary environment, foster the internal control culture process has a risk coordinator among the management staff. They are responsible and the Company at large. and maintain high ethical standards at all for promoting and supporting the application of corporate risk management business levels; allocate powers and duties among and assign responsibilities to the heads of business units with respect to effective development, implementation, maintenance, monitoring and improvement of the Company’s internal controls; and regularly assess staff performance and training as regards IRMF process at the Gazprom Neft Group internal controls taking into account changes in the Company’s internal and external operating environment.

IDENTIFICATION QUALITATIVE DEVELOPMENT MONITORING (REVIEW) OF RISKS AND QUANTITATIVE OF MITIGANTS OF MITIGANTS RISK ASSESSMENT

(at least once a year) (at least once a year) (at least once a year) (at least once a quarter)

56 57 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

1 Distribution of powers and responsibilities in risk management Social and environmental risk management METHODOLOGY ROLL-OUTMETHODOLOGY Risk description Risk mitigants KEY RISKS 1.1. HR risks Key decisions and assessment of performance results are made at the Board of Directors meetings. Divisions are responsible for Highly qualified personnel is key to effective operation The Company offers a safe workplace environment, competitive salaries, the immediate management of this type of risks of the Company's business. A lack of qualified employees, especially and professional training programmes to its personnel. We work engineering and technology experts, can result in risks associated continuously to improve our recruitment procedures, limit staff turnover, with personnel shortages. The Company's success largely depends and provide self-development opportunities for our employees. on the efforts and expertise of key employees, including qualified engineering staff, and on its ability to attract and retain such personnel. Competition for the best talent in Russia and world- wide may intensify due to the shortage of qualified specialists AUDIT in the labour market. Failure to attract qualified employees and/or COMMITTEE retain the existing talent pool could have an adverse effect on the Company's reputation as an employer. Demand for qualified personnel and the associated costs are expected to grow further given BOARD OF DIRECTORS the significant need for such employees in other industries.

MANAGEMENT BOARD

1.2. HSE risks

Risks associated with occupational industrial, fire and environmental In the field of industrial safety, the Company strives to achieve safety legislation that may entail a temporary shutdown of facilities the strategic Goal Zero: no harm to people, environment and property and licence revocation, along with the risks of accidents (fatalities in working process. The main focus areas reflected in the corporate and workplace injuries, fires/explosions/accidents, accidents with HSE Policy Statement include: environmental consequences of nationwide scale). >> safe production based on risk analysis, mitigation and management; >> reduction of workplace injury and occupational disease rates, accident hazards and environmental impact; >> consistent implementation of best global HSE practices. DIVISION RISKS The risk-based approach and the principle of integrating HSE risks into all key business processes of the Company underlie the occupational DIVISION Risk monitoring and DIVISION risk management ideology. management at Division level As part of the implementation of a risk-based approach, the Company focuses on the following parameters. >> Fundamental barrier

RISK DATA CONSOLIDATION DATA RISK Setting obstacles for priority risks across the Company’s assets and ensuring their reliability. >> Competency barrier SUBSIDIARY RISKS Granting access to processes to competent employees only SUBSIDIARY SUBSIDIARY SUBSIDIARY SUBSIDIARY >> Digital barrier management Risk monitoring Eliminating the human factor where possible. and management The Company is fully aware of its responsibility to preserve at Subsidiary level the environment. We keep monitoring our activities for compliance with relevant environmental requirements and run environmental protection programmes.

1 Other key risks are described in the Internal Control and Risk Management section of the Company’s Annual Report for 2018.

58 59 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

STAKEHOLDER Highlights of 2018 >> The Company held the Annual General Meeting of Shareholders >> Annual General Meeting of Shareholders held on 9 June 2018 and an Extraordinary General Meeting of Shareholders: >> The Company's annual report and accounting statements ENGAGEMENT –– In 2018, at its Extraordinary General Meeting of Shareholders for 2017 were approved. Gazprom Neft’s shareholders supported (held on 14 December 2018), the Company resolved to pay the recommendation of the Board of Directors to pay dividends ₽ 104.55 bn (₽ 22.05 per ordinary share) in interim dividends in the total amount of ₽ 71.12 bn (₽ 15 per ordinary share, for 9M 2018, approved amendments to the Charter, 28% of the Company’s IFRS consolidated net profit for 2017). and approved new versions of the Company’s internal PricewaterhouseCoopers Audit (PwC) was approved as the auditor documents: Regulation on the Board of Directors, of Gazprom Neft for 2018. Gazprom Neft’s stakeholder engagement framework focuses Regulation on the General Meeting of Shareholders, The shareholders also discussed several other items on the agenda Regulation on the Chief Executive Officer, and Regulation of the Annual General Meeting: on sustainable development goals and aims to balance the interests on the Management Board. –– new members of the Board of Directors and the Audit of all stakeholders. >> The Company held its annual Investor Day attended by senior Commission were elected; management. –– remuneration for the Board of Directors and the Audit >> A total of 159 meetings with investors were held in 2018. Commission was approved. The Company has identified key stakeholder groups whose interests are most PRINCIPLES >> More than 300 people joined the Company’s quarterly conference closely linked to those of Gazprom Neft and who are capable of having the most OF STAKEHOLDER ENGAGEMENT: calls. considerable impact on the Company’s ability to achieve its strategic goals. >> respect for everyone's interests The Company also honours commitments arising out of laws and regulations. >> constructive cooperation >> transparency of the Company’s operations KEY STAKEHOLDERS: >> ongoing interaction Employees and trade unions >> shareholders and investors >> fulfilment of commitments >> employees Ways to engage Key matters >> consumers Gazprom Neft is always in touch >> government agencies in Russia and the Company’s regions of operations with stakeholders, viewing it as a key driver >> internal communications >> remuneration and social benefits >> suppliers and partners of its sustainable development strategy. >> communication sessions involving managers and employees >> labour relations >> local communities across Gazprom Neft’s geography Matters to be discussed are defined >> meetings between teams and managers at Gazprom Neft’s >> safe working environment >> industry community in Russia and globally based on the Company’s ongoing analysis facilities >> personnel training and development >> non-profit and non-governmental organisations of internal and external social environments, >> joint committees for health protection >> the Company’s involvement in local communities with attention paid to Gazprom Neft’s >> meetings attended by trade union representatives Key principles of stakeholder engagement are set forth by the Corporate Code strategic agenda, stakeholders’ priorities, >> analysis of staff morale at the Company’s facilities of Conduct, Corporate Governance Code, and the Information Policy Regulation. and interests of society at large. >> corporate activities: forums, conferences >> cultural and sports events

Shareholders and investors Highlights of 2018

Ways to engage Key matters >> An annual study of the Company’s staff morale covered 27,000 of Social and Labour Relations under the Russian Government, employees. The resulting reports for each site will serve participated in consultation meetings of the Russian Oil, Gas >> general meetings of shareholders >> strategy implementation as a platform to further enhance corporate culture and improve and Construction Workers’ Union, and took part in activities >> corporate reports >> financial strength staff morale in teams. of the Industrial Commission on Social and Labour Relations. >> meetings with the Company’s management >> corporate governance >> To support corporate culture transformation, the Company >> In 2018, the Company also worked towards building relations >> conference calls for investors >> shareholder rights protection launched a communications campaign promoting its updated between the Gazpromneft- trade union and Gazprom Neft >> quarterly Analyst Databooks and monthly datafeeds >> production efficiency and industrial safety enhancement model of corporate values. A special focus was on communications based on the principles of social partnership. >> participation in investment and broker conferences >> product quality between Gazprom Neft’s senior management and rank-and-file >> Due to changes in Gazpromneft-NNG’s production structure, >> site visits for investors to take a look at the Company’s production >> the Company’s involvement in efforts against climate change employees. A strategic session of the Company’s management, the trade union went through a reorganisation in order to align and upstream facilities attended by CEO Alexander Dyukov, was broadcast live, and there the trade union structure accordingly, which resulted in a merger >> updates in the Investors section of www.gazprom-neft.com. was also an extended meeting of the Management Board involving of the two primary trade unions. The new primary trade union 150 senior executives of Gazprom Neft. of Gazpromneft-NNG now represents the interests of all employees >> As per the work plan, the Company remained part of working of Gazpromneft-NNG, including its branch. groups of the Russian Trilateral Commission on the Regulation

60 61 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Federal and regional government agencies and municipal authorities Highlights of 2018

>> Four import substitution projects received funding from the Fund >> Two seminars on the Quick Access programme were held with Russian Key matters Ways to engage for the Promotion of R&D Startups. producers, foreign licensors and EPC contractors in order to have >> Strategic partnership agreements were signed with Roscosmos, Russian producers approved on the vendor list of foreign companies. >> agreements on social and economic partnership >> legislative changes and fostering growth of the oil and gas industry Severstal, Geoenergomash and Becema, Neftegazavtomatika. >> Tyumen hosted an extended HSE forum attended by contractors >> joint working groups, roundtables, and meetings >> the Company’s strategic development >> An agreement was signed with Lukoil and Tatneft for the cooperation involved in the development of the Novoportovskoye and Vostochno- >> corporate reports >> resource base growth and development of fields in developing oilfield services based on import-substituting equipment Messoyakhskoye Arctic fields. >> participation in commissions and conferences >> compliance with Russian laws and regulations and technologies with a focus on high-tech drilling services. >> St Petersburg hosted the 4th extended meeting of Gazprom Neft >> the Company’s role in helping its regions of operation >> Joint working groups with Gazprombank and HMS Group continued up and its key operational contractors, attended by the management >> industrial safety and response to incidents and running. of the Company and its subsidiaries. >> the Company’s impact on the environment >> product quality and products with enhanced environmental features

Highlights of 2018 Consumers

Ways to engage Key matters

>> The Company signed social and economic agreements participated in the working group for energy management >> contracts >> product quality with governments across 26 Russian regions and 20 municipalities. and energy audit of the section for legislative regulation of energy >> feedback and customer service systems >> improved customer experience >> Gazprom Neft, the Ministry of Industry and Trade efficiency and energy saving of the State Duma’s Committee >> complaint management system >> transparent pricing and the Government of the Khanty-Mansi Autonomous Area on Energy. >> the Company’s assessment by consumers >> ethical business practices signed a memorandum of understanding to address matters >> The Tyumen-based Gazpromneft – Yamal hosted Gazprom >> mass media related to the Bazhenov Formation development. The partners Neft’s 8th Environmental Conference, bringing together experts >> external corporate communications will join efforts to sign special investment contracts to implement of the Company, Gazprom, Tomsk State University, TomskNIPIneft, >> Gazprom Neft’s loyalty programme a national project to set up a centre for developing the Bazhenov Federal Agency for Technical Regulation and Metrology >> business meetings, including those held off-site Formation based on domestically produced advanced equipment (), Office of the Federal Service for Supervision >> conferences and forums and technology. of Natural Resources for the Tyumen Region and the Yamal-Nenets >> corporate reports >> Alexander Dyukov, CEO of Gazprom Neft, and Aleksandar Vucic, Autonomous Area, etc. President of the Republic of Serbia, held a meeting to review >> As part of its regional policy, the Company took part in integrated a report on the 2017 performance of the Serbia-based NIS. meetings chaired by heads of Russian regions and focused Highlights of 2018 >> The Company signed an agreement with the Government on business development and social cooperation in key regions >> In 2018, Gazpromneft – Bitumen Materials once again analysed >> Gazprom Neft launched AZS.GO, a mobile app to pay of the Yamal-Nenets Autonomous Area to expand its programme of operation and also in the Stavropol and Krasnodar areas, Rostov its consumer loyalty. Based on the results, the loyalty index came for fuel at Gazprom Neft’s filling stations. An in-house development aimed at preserving aquatic biological resources and their habitat and Kurgan regions, etc. in at 78.2, which is 1.6 points above the 2016 level. of the Company, in the Area. >> Omsk Refinery hosted an offsite meeting of the Federal >> Gazprom Neft’s motor fuels and oils received the seal of excellence >> AZS.GO was downloaded by more than 1 m customers in App Store >> The Company was involved in the Ministry of Energy’s Inter-Agency Environmental, Industrial and Nuclear Supervision Service award at the 100 Best Products of Russia national contest. The and Google Play. Coordination Council responsible for implementing the Energy (), etc. Company’s pool of winners included G-Drive 100, high-octane >> St Petersburg hosted the first ever quality control exercise for Gazprom Efficiency and Energy Sector Development programme, and also gasoline, RMD-80, bunker fuel with enhanced environmental features, Neft's fuel initiated by social media users. To have their gasoline and automotive propane, all produced at Omsk Refinery, as well and diesel fuel tested at the Company’s mobile laboratory, users as Gazpromneft oil for gasoline engines produced at Gazpromneft- needed to simply press the Check my Fuel button in the retail Lubricants. network’s official Vkontakte group and leave their contact details. >> In St Petersburg and Yekaterinburg, the Company’s retail network >> According to the Romir market research group, Gazprom Neft’s retail Suppliers, contractors, partners helped an environmental campaign for drivers to collect and safely network has the strongest popularity and brand awareness among recycle tires. Russian drivers. Ways to engage Key matters

>> competitive tenders and procedures >> honouring mutual obligations >> contracts and agreements >> import substitution and support for local producers >> the Company’s assessment of its contractors >> transparency, openness, competitive procedure and bidding >> business meetings and forums of the Company to select contractors >> external conferences and exhibitions >> business ethics and anti-corruption >> corporate website, including dedicated section at http://zakupki.gazprom-neft.com/

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Local communities across Gazprom Neft’s geography NGOs and non-profit organisations

Ways to engage Key matters Ways to engage Key matters

>> social projects as part of the Home Towns social investment >> the Company’s contribution to the social and economic development >> conferences and exhibitions >> industrial safety of the Company’s operations, environmental programme of local communities and quality of living >> roundtables protection measures >> public hearings, roundtables, dialogues >> development of human capital, fostering involvement >> joint implementation of social initiatives >> the Company’s contribution to the development of regions >> corporate and external media and competencies of local residents in addressing social >> reporting and the industry >> corporate reporting and economic challenges of their regions >> openness and transparency >> transparency of the Company’s operations and decisions >> the Company’s financial sustainability >> industrial and environmental safety of the Company’s operations, environmental protection measures Highlights of 2018 >> The Company continued taking an active part in the Russian >> Gazprom Neft’s Scientific and Research Centre, Novosibirsk State Union of Industrialists and Entrepreneurs (RSPP). CEO Alexander University, and the Novosibirsk “Akademgorodok” TechnoPark signed Highlights of 2018 Dyukov and Advisor to the CEO Oleg Nikolaenko are Chairman a strategic partnership agreement on R&D activities and educational >> More than 250 projects were completed as part of the Home Towns >> 84 initiatives received support as part of the Company’s volunteering and Deputy Chairman of the RSPP’s Industrial Safety Committee. projects. social investment programme. contest. On 5 December, Alexander Dyukov received a special award >> Together with the Russian Geographical Society, the Company >> As part of the sixth contest to award grants to social initiatives, >> In St Petersburg, the Company held a two-day training programme from the Union for his contribution to developing and improving launched a major research programme to get insights into the life 118 local proposals were supported. The contest was held at six on urban space planning and designing for government officials Russia’s legislation on industrial safety, enhancing the investment of narwhals, a rate Arctic species included in the IUCN Red List. regions across the Company’s geography. of the Yamal-Nenets Autonomous Area. climate and facilitating effective interaction between the business The Narhwhal – Legend of the Arctic project was presented >> Home Towns, an annual social investment forum bringing together community and the government. by Alexander Dyukov at a meeting of the Board of Trustees Russian and international experts, partners, grant winners >> The Company partnered with RADOR, the Russian Association of the Russian Geographical Society chaired by Russian President and volunteers, was held for the fifth time. For the first time ever, of Regional Road Administrations. Vladimir Putin. the forum provided a training programme for volunteers and grant >> Gazprom Neft and one of the world’s largest R&D centres winners. in the oil and gas industry, IFP Energies nouvelles (France), signed a memorandum of understanding. At their new stage of cooperation, the companies will be innovating in the areas of geology, field development and digitalisation while also providing joint cross-functional training programmes at an international Industry community in Russia and globally level.

Ways to engage Key matters

>> cooperation agreements >> involvement in the industry’s development >> participation in industry and cross-industry events >> doing business responsibly >> membership in industry committees >> observing human rights and HSE standards >> joint projects >> information sharing

Highlights of 2018

>> Gazprom Neft’s employees participated in the Council of Chief >> In 2018, Gazprom Neft was strongly involved in the activities of ATIEL, Power Engineers of Oil Refining and Petrochemical Facilities the technical association of the European lubricants industry. The of Russia and the CIS, established by the Association of Oil Refining Company also joined new working groups of the Coordinating and Petrochemical Companies. European Council to develop methodologies that will form part of the next generation industry-wide standard of the European Automobile Manufacturers Association. The standard will cover oils for Euro-5 and Euro-6 diesel engines.

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CORPORATE CULTURE CORPORATE

The backbone of Gazprom Neft’s corporate culture is its values. COMMUNICATIONS The aims and growth areas of the corporate culture are shaped by the Company’s strategy and challenges in the oil industry. Internal corporate communications

In 2018, as part of the Company’s overall transformation towards the 2030 Continuous improvement that underpins In 2018, Gazprom Neft held a major Following the communications campaign, Strategy, Gazprom Neft launched a major programme to overhaul its corporate leadership competencies will be the basis communications campaign to promote its 53% of employees of the Corporate Centre culture. The key aim is transition from hierarchical management to facilitative for developing new and updating existing new mission and reviewed model of corporate identified the new corporate values leadership as a new relationship ideology. The Company’s Management Board corporate training programmes. values among employees. The focus was correctly. The level of employee awareness 27,000 approved the updated corporate values. on communications between Gazprom Neft’s with respect to corporate values was EMPLOYEES Cultural transformation is supported top executives and rank-and-file employees. 21 pp higher compared to 2017. A new took part in a study This cultural transformation is designed to foster behaviour conducive by a large-scale communications campaign A strategic session of the Company’s stage in the communications campaign of the Company’s staff to the Company’s strategic objectives. A crucial part of the project is creating and a programme for in-person and online management, attended by CEO Alexander will be promoting employee behaviour aligned morale a new incentive system that covers a variety of corporate aspects: management training that targets different audiences. Dyukov, was broadcast live to announce with the new values. by objectives, promotion, salary review, personnel rotation and development. The training programme is developed the start of the programme to develop corporate by leaders as change agents (heads culture and identify the role of all levels In 2018, the Company held an annual study The key role in the new corporate culture is played by a leader relying of subsidiaries) and ambassadors for change of managers in building the target behaviour. of its staff morale among employees on corporate values. To this end, Gazprom Neft has developed a new profile (heads of HR) depending on the current of the Corporate Centre, 58 subsidiaries, of leadership competencies. Under this model, a leader: situation and corporate culture on site. The campaign involved all existing channels and seven contractors, covering a total >> thinks big, reviews challenges and issues from a variety of angles; This enables building training programmes of internal communications and also relied of ca. 27,000 people. The study involved >> manages priorities and time effectively and has the ability to focus on what that are tailored to each specific facility. on new marketing forms and channels, a survey followed by randomised focus matters most; including interior design of office spaces groups. The resulting reports for each site >> motivates others, fosters an environment where they want to excel, and production facilities, branding for office will serve as a platform to further foster 53% recognises the importance of every team member, and appreciates stationery, etc. A major part of the campaign corporate culture and improve staff morale EMPLOYEES their contribution; was a contest of stories told directly in teams. Action plans focusing on employee >> keeps on learning, and acts as a role model for continuous improvement. by employees, who shared their insights engagement are the basis of all internal of the Corporate Centre correctly identified on how corporate values help in their everyday communications. the updated corporate work and enable them to make the right values decisions, especially tough ones. Evolution of Gazprom Neft’s corporate values

FROM 2011 TO AUGUST 2018 AFTER AUGUST 2018

Mutual respect and trust Innovative thinking

Leadership Gazprom Neft’s Collaborating style Winning mentality internal communications tools

>> unified system of intranet portals Business owner mentality Dedication as a personal trait >> corporate media (Sibirskaya Neft corporate newspaper, Neftegazeta newsletter, corporate radio) Efficiencyas the basis to achieve our goals >> management meetings with teams >> digital displays Integrity >> discussion platforms (conferences and roundtables) Responsibility as our approach to business >> feedback system Safety and environmental protection Safety as our priority

66 67 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

External communications

Media relations are governed by the Company’s and Eastern Economic Forum (Vladivostok, >> Establishment of the Bazhen Technology >> Board of Directors’ approval MORE THAN Information Policy and the corporate standard September 2018). Centre, a Gazprom Neft subsidiary, of the Development Strategy up to 2030; Procedure for Mass Media Interaction in the Khanty-Mansi Autonomous Area; >> Completion of the deal between Gazprom and Distribution of Information. In 2018, In 2018, Gazprom Neft implemented major >> Proven efficacy of the new chemical Neft, Mubadala Petroleum and the Russian 175 Gazprom Neft approved its communications digital and media projects with leading technique for oil recovery enhancement Direct Investment Fund to jointly develop strategy, defining the key focuses of its Russian and international media, including in Western Siberia together with Shell fields in Western Siberia. THOUSAND USERS positioning in the media. TASS, RIA Novosti, RBC TV, Russia-24, and Salym Petroleum Development N.V.; total audience Popular Mechanics, Discovery, and National >> Discovery of an oil reservoir the size of Gazprom Neft’s The Company’s main communication tools Geographic. Columns by the Company’s of a freestanding oil field at the Zapadno- social media pages are leading business and industry media, top management appeared in business Messoyakhskoye field; official websites of Gazprom Neft and its and industry publications. Dedicated >> Creation of the industry’s first digital model subsidiaries integrated into a single system, presentations for the media were held for the Achimov Formation; and pages on Facebook, VKontakte, YouTube, for some of the most important developments >> Construction of a Euro+ refining unit and Instagram. of the year, such as commissioning at Moscow Refinery; of the Alexander Sannikov and Andrey >> First-ever blockchain-based aviation Gazprom Neft’s press office quickly responds Vilkitsky icebreakers and “wing-tip” refuelling refuelling; +4% to media enquiries, provides extensive of aircraft based on the blockchain technology. >> Gazprom Neft’s construction by 2017 220 information about the Company’s projects, In 2018, journalists visited the Company’s of an innovative research centre in Tyumen; and is ready to comment on any pertinent sites in Moscow, St Petersburg, Khanty- NEWS industry-wide matters. Mansiysk, Orenburg, Omsk, and other regions published on of operation, and took part in press events the corporate website On an annual basis, Gazprom Neft organised by the Company in Serbia, United holds a traditional press conference Arab Emirates, and the UK. for the key Russian and international mass media following the Annual General CORPORATE NEWS THAT RECEIVED THE Meeting of Shareholders, along with other STRONGEST INTEREST FROM EXTERNAL Operations in the Arctic press conferences and briefings, including AUDIENCES IN 2018: those that are part of the Company’s >> Commissioning of the Alexander Sannikov In 2018, the Company held an image-building awareness raising campaign to involvement in leading industry forums and Andrey Vilkitsky icebreakers; highlight the leading role of Gazprom Neft in commercial development of the Arctic. in Russia and globally. The Company took >> Increase of the Neptune field reserves The campaign’s special focus was on environmental protection as part of Gazprom Neft’s part in the Russian Investment Forum (Sochi, and discovery of the Triton field off operations in the Far North. The campaign ran across Russia’s major business and The Company’s February 2018), St Petersburg International the shore of Sakhalin; industry media and also in airports. website Economic Forum (St Petersburg, May 2018),

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MANAGEMENT APPROACHES

HR management structure Gazprom Neft guarantees equal rights Gazprom Neft’s HR Management Strategy for the period until 2020 covers for all of its employees and prohibits any all business units and supports the overall corporate strategy by recruiting discrimination based on ethnicity, gender, origin, age, beliefs, or any other reasons. The highly skilled and motivated employees for the Company's ongoing and future ORGANISATIONAL DEVELOPMENT Company does not use child or forced labour. operations. AND HR MANAGEMENT DIRECTORATE, CORPORATE CENTRE Gazprom Neft recognises the lawful right of its employees to establish, on a voluntary >> general management of the HR function and strategic management basis, associations to protect their rights of labour relations; and interests, including the right to form trade >> development of the HR management strategy, key HR programmes unions and join them. In line with the above objectives, the HR and projects, and oversight over their implementation; strategy focuses on: >> development of the corporate HR management guidelines. The Company has a hotline to report >> ongoing personnel recruitment and rotation; Personnel management corruption, fraud, and law violations. >> talent pool management, competency Any employee may access that hotline, development, and training; including for anonymous reports. Every >> development of an incentive system KEY DOCUMENTS: report is processed on a stand-alone basis. and engagement culture; >> Corporate Code of Conduct; In 2018, investigations identified instances >> increasing labour productivity >> HR Management Strategy; of unacceptable employee behaviour, and organisational efficiency. >> General Agreement between the national associations of trade with remedial actions taken to address unions and employers and the Russian Government; the issue. There were no labour disputes To meet the Company’s demand for highly >> collective bargaining agreements and by-laws. HR MANAGEMENT UNITS with the employees. skilled specialists in the regions of operation, IN BUSINESS DIVISIONS AND HR BUSINESS PARTNERS Gazprom Neft deploys a variety of incentive and social support programmes for its KEY HR POLICY PRINCIPLES: >> implementation of strategic HR management programmes and projects personnel, provides its employees with training >> Safety. For the Company, occupational and environmental safety at the Company's subsidiaries; and development opportunities, and maintains and the safety of local communities have priority over any kind >> development of HR management methodologies and guidelines; a talent pool. of economic, technical or other considerations. Hence, Gazprom >> ongoing operations to deliver on the HR and social policies; Neft seeks to provide a safe working environment for its employees >> identification and implementation of best practices in the relevant Gazprom Neft’s HR policy is fully aligned and urges its partners to do the same. business area. with the Constitution and Labour Code >> Respect and non-discrimination. In the Company, all relations of the Russian Federation, while also taking are based on mutual trust and respect. Gazprom Neft views each due account of the international labour employee as a unique asset and appreciates all their opinions, law principles set forth in conventions as the diversity of talents, cultures, views, and experiences united of the International Labour Organisation. This by a common vision enable the Company to achieve ambitious goals; policy is reflected in a wide range of corporate >> Fair play. The Company is committed to high ethical standards documents of different levels and fair treatment of its employees; (see the Personnel Management insert). >> Efficiency. In an attempt to maximise efficiency, the Company seeks Gazprom Neft to employ best-in-class professionals with a strong motivation Corporate Code and a clear sense of purpose. HR MANAGEMENT UNITS IN SUBSIDIARIES

TOP EXECUTIVE RESPONSIBLE FOR THE HR POLICY AND CONTROL OVER RESPECT OF EMPLOYEE AND HUMAN RIGHTS: Alexander Dyukov, Gazprom Neft's CEO. >> operations related to HR management in the Company's subsidiaries (personnel records, remuneration administration, compensation KEY STAKEHOLDERS: and social benefits, headcount and costs planning) as required the Company's employees and their families, shareholders. by the Company’s strategy.

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Employer brand PERSONNEL PROFILING

The Company seeks to attract, engage, confirmed by the high scores in Russian In the reporting year, Gazprom Neft had and retain the best available employees. and international rankings. Gazprom 70,600 employees1, with blue-collar Average headcount 61.5 66.5 66.5 67.8 70.6 Gazprom Neft has developed a distinctive Neft came out on top of the international and white-collar workers making up 47% by gender employer value proposition that Randstad Award ranking leading the charge and 53% of the total headcount, respectively. (‘000 employees)2 is based on the demands and expectations in the energy sector. Moreover, the Company 16,808 employees joined the Company of the target audience and takes into was named No. 2 Best Employer and No. 1 and 15,205 people left. The average headcount account the Company's strategic objectives Employer of Choice by HeadHunter in 2018, was up 4.1% y-o-y driven by stronger labour Gazprom Neft and competitive position in the industry. while also taking second place as the Most demand caused by changes in the production confirms its status Source: Company data as one of the most The value proposition is integrated into Attractive Employer for students majoring assets’ operational programmes, growing the management recruitment, onboarding in engineering and natural sciences and third output, and the expanding operating range attractive 2014 2015 2016 2017 2018 employers and training processes. According to a survey place as the Most Attractive Employer of the subsidiary service providers. for young conducted in 2018, over 75% of employees for students pursuing degrees in business Men 36.9 37.2 40.8 40.2 42.9 professionals approve and support Gazprom Neft's value and commerce in the Universum Top 100 In 2018, the turnover rate was 12.9%, down Women 24.5 29.3 25.7 27.6 27.7 proposition and would readily recommend Russia 2018 rating. To top it off, Gazprom 2.2 pp y-o-y. To get a better understanding the Company as a good employer. Neft was the only oil company in the Top 15 of the causes of attrition at subsidiaries, employers most sought by IT students. the Company is introducing a new tool – 2018 headcount Headcount In 2018, Gazprom Neft’s status as one Robot Vera, an automated interview service by age (%) by staff category (people) Source: Company data of the country’s leading employers was for the outgoing staff. The service allows Source: Company data making calls to virtually all employees leaving the Company. Monthly analysis of the actual reasons behind resignations and ensuing remedial actions helped reduce the turnover Gazprom Neft rate in the regions with the highest personnel confirms its status loss ratios by 5% y-o-y. as a responsible "Gazprom Neft's leading position among Russian employers demonstrates not only employer with jobseekers’ traditional interest in the oil and gas industry, but also the Company’s ability Gazprom Neft has a job placement programme accreditation from 70,648 to provide its employees with more than just decent working conditions and compensation. for employees of the projects/facilities that the ACCA PEOPLE We offer exciting jobs and a wide range of opportunities to grow professionally while working are scheduled for shutdown. Some 6–8 months on promising projects, and expect a strong talent pool to boost our technological leadership prior to the shutdown of a facility, project, in the industry.” or a development site, the Company forms a cross-functional team and develops a job Kirill Kravchenko placement plan to be implemented by the Head Deputy CEO for Organisational Affairs at Gazprom Neft 20 below 30 years 37,646 White-collar employees of Organisational Development and HR 64 31–50 years 33,002 Blue-collar employees Management. Under this plan, the Company 16 over 50 years makes up a list of potential vacancies within the corporate structure, informs employees about such vacancies, and arranges personal Turnover rate (%) The Company’s sessions for employees to talk to the managers career page of business units offering the potential job 16.6 16.2 15.2 15.1 placement. 12.9

2014 2015 2016 2017 2018

1 Full-time employees only (no records of part-time employees are kept). 2 For more details on HR management, including personnel costs, professional training figures by category, etc., see Appendix 1 (Additional information and sustainable development metrics).

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REMUNERATION AND SOCIAL BENEFITS

The Company has a unified employee incentive system designed to recruit, retain +8% 2018 saw the Company transform the employee are highly competitive. The Company analyses Average monthly salary and develop talented professionals, while also supporting employees’ career 122,587 y-o-y remuneration package on the basis labour markets in the regions of operation (RUB ‘000)3 and professional growth. of a cumulative compensation approach, and regularly adjusts salaries and wages in line ₽ AVERAGE SALARY including base fee, performance-based with the market trends. There is no difference The objectives and principles of financial and non-financial employee incentives remuneration, growth opportunities, recognition between the base salaries of men and women. at the Company in 2018 122.6 are set forth in the single Corporate Standard. of achievements, and workplace environment In 2018, the average monthly salary at Gazprom 112.9 104.9 (including social guarantees and benefits, Neft was ₽ 122,587. 100.2 84.8 The incentive system is based on the following principles: working conditions, and corporate culture). >> external competitiveness; In 2018, Gazprom Neft approved a new bonus >> internal equity; Specific remuneration components calculation approach based on comprehensive >> performance-based remuneration; +13% and their balance in the wider compensation assessment of the business unit and employee >> impartiality, transparency, and availability of information to employees y-o-y model are defined taking into account performance. The new system is expected through a variety of convenient channels; 101.5 the motivation profiles of different to be piloted at three subsidiaries in 2019. 2014 2015 2016 2017 2018 >> comprehensive approach to assessment and development; ₽ BN personnel groups. The model will help align >> sharing of training and professional development responsibilities among personnel costs the Company’s objectives and personal The Company makes sure to offer its employees, managers and the Company; employee needs, while also setting the stage employees a balanced benefits package >> additional training available to every employee. for flexible HR and business strategies. and competitive social security guarantees. A single social benefits system effective at all Gazprom Neft seeks to make sure that all subsidiaries comprises compulsory (base) components of its remuneration system and potential (extra) compensations2.

Cumulative employee compensation model

WORK ENVIRONMENT PERFORMANCE-BASED 60,607 76,832 82,576 89,777 101,461 REMUNERATION Personnel expenses >> Workspace (₽ m) >> Work-life balance >> Short-term remuneration >> Relations and culture >> Long-term remuneration >> Guarantees and benefits

Source: Company data RECOGNITION BASE FEE GROWTH POTENTIAL 2014 2015 2016 2017 2018 >> Feedback >> Base salary >> Training and development Payroll 58,510 74,400 79,316 86,600 97,865 >> Recognition of personal >> Remuneration for professional skills >> Mentoring and expertise development Social benefits 2,097 2,432 3,260 3,177 3,596 achievements >> Compensation >> Employee participation >> Recognition of team for labour conditions >> Career management achievements >> Compensation for new functions >> Volunteering and charity >> Professional contests assigned >> Sporting and cultural events 1 Salaries in the regions are shown in accordance with the data for 2018 provided by the Federal State Statistics Service http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/wages/. 2 For a list of benefits, see Appendix 1 Additional information and sustainable development metrics. 3 Excluding joint ventures.

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COLLABORATION WITH TRADE UNIONS

Cost of social guarantees The Company runs non-financial incentive the competition in the Chemistry Lab The Company maintains long-standing partnerships with trade union organisations1. and benefits 2,961 programmes, updating their contents Technician category was held under the rules (₽ m) and formats in line with its strategic goals. of WorldSkills, an international championship Trade unions take an active part in promoting safety culture and negotiating 2,515 of vocational skills. changes in Gazprom Neft's social benefits, attending meetings of HR executives 2,135 One of the key programmes involves individual 1,875.5 and contributing to HSE initiatives. 1,719.6 and team competitions of professional skills, When selecting candidates for participation held across the Company's divisions. in the 10th anniversary edition of the Contest, the Regional Sales Directorate reviewed The competition programme is updated not only contestants’ expertise, but also on an ongoing basis to cover new areas their performance indicators and managerial The Company has put in place youth union and PJSC Gazprom Neft based

2014 2015 2016 2017 2018 of expertise and most relevant competencies, skills. This year, the Contest tried out a new committees responsible for protecting on the principles of social partnership, with the number of participants, regions, format, with the second day dedicated the interests of young employees collective bargaining, equitable treatment and countries involved constantly growing. to socialisation, experience exchanges and onboarding of young professionals. and mutual respect. and introduction to the latest technologies 250 employees from 13 subsidiaries, including implemented or developed by the Company. Gazprom Neft cooperates with the Gazprom The Company has a collective bargaining foreign operations, participated in the 10th Workers’ Union and trade unions operating framework in place. Collective bargaining International Best in Profession Contest The Company's key non-financial incentive within the Gazprom Neft Group. The latter agreements and internal regulations of the Upstream Division, with winners programmes also include target programmes include trade unions of Gazpromneft Omsk serve to formalise the Company's social invited to take part in the nationwide stage of business units intended to recognise Refinery, Gazpromneft Moscow Refinery, commitments, including those regarding of the Best in Profession Contest. strong performance. These programmes offer Slavneft – YANOS, Gazpromneft-Noyabrsk, health, safety, environment and social contests for corporate teams, performance- Gazpromneft-NNG, NEN, Gazprom Neft guarantees in the event of facilities closure/ In 2018, the Best in Profession Contest based bonuses for production facilities, Orenburg, and Omsk Lubricants Plant, reorganisation. No significant amendments of the Downstream Division underwent employees and teams, including contractors, a branch of Gazpromneft – Lubricants. were introduced into collective bargaining transformation from an in-house corporate Summer and Winter sports games agreements in 2018. The corporate trade union event to an industry-wide competition for employees, and other leisure activities. Over the last year, the Company built coordination board took a favourable view attracting participants from all subsidiaries an effective relationship between of the social and labour relations with trade of the Division, NIS ( the Gazpromneft-Noyabrsk trade unions. А.D., ), , TANECO, SIBUR, SLAVNEFT, and Gazprom neftekhim Salavat. For the first time in the Contest's history,

“The Company aims to set a global benchmark against which other businesses will assess their performance and technical efficiency. We have made a clear step forward by joining the WorldSkills movement, holding corporate championships, and introducing our employees to international professional standards.”

Alexander Panov Head of Engineering and Technology Policy Department, Downstream Division

1 See also the Stakeholder Engagement section of the Sustainability Management chapter.

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Training hours per employee (h)1 PERSONNEL TRAINING Key highlights AND DEVELOPMENT 45.9 35.7 35.7 36.3 >> Several thousand managers and experts from Gazprom Neft are involved 32.6 in the University activities. >> The in-house mentorship and public speaking training are on the upswing. Gazprom Neft's training and development and factor in the results of managerial skills >> Every employee has opportunities for continuous professional development. system covers all of the Company's and professional expertise assessment. >> The University portal provides employees and contractors with seamless access employees and contractors, as well to the knowledge pool of Gazprom Neft. 1,100 as target groups of potential employees The Company has its own Corporate University, >> All training is practice oriented. 2014 2015 2016 2017 2018 such as school and university students. an integrated knowledge management centre ₽ M The training programmes are aligned embracing the entire range of corporate invested with the strategic goals of Gazprom Neft training and development practices. in development and training Key focus areas Corporate University model of the Corporate University

VOCATIONAL TRAINING Gazprom Neft deploys >> Upstream Faculty; immersive training DEVELOPMENT A UNIFORM EDUCATIONAL IDENTIFICATION OF BUSINESS >> Downstream Faculty; technologies PROGRAMMES COVERING ENVIRONMENT TO MEET NEEDS AND DEVELOPMENT >> Faculty of Corporate Functions; ALL KEY FOCUS AREAS THE COMPANY’S DEVELOPMENT OF A PROFESSIONAL CLUSTER >> Faculty of Health, Safety, Environment and Operational Excellence; AND TRAINING NEEDS WITHIN SPECIALISED >> Regional Sales Directorate. IN A FLEXIBLE AND EFFICIENT DEPARTMENTS MANNER EXECUTIVE TRAINING >> Faculty of Managerial and Cross-Corporate Competencies.

DIGITAL TRAINING

Digital Learning community

“Today, a person’s way of thinking, mindset and awareness of his/her responsibilities matter more than professional skills. The person learns from the experience and changes behaviour accordingly. We leverage these trends in our corporate development programmes by creating a unique educational environment.”

SINGLE PLATFORM FOR THOSE A COMPETENCY-BASED APPROACH A CORPORATE Ilya Dementiev WHO HAVE THE REQUIRED TO TRAINING PROGRAMMES; KNOWLEDGE POOL Corporate University President EXPERTISE AND THOSE WHO NEED TARGET PROGRAMMES FOR ACCESSIBLE TRAINING EMPLOYEES TO ALL EMPLOYEES

1 The number of training hours per employee decreased due to the optimisation of personnel development programmes and enhancement of hands-on site (on-the-job) training initiatives.

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MOST NOTABLE PROJECTS covering 109 competencies. The updated OF THE CORPORATE UNIVERSITY test base found application in the annual IN 2018 INCLUDED: assessment of competencies to be further Training for the future > Study of turbidites, a dedicated programme used for preparing personal development developed as part of the Bolshaya programmes; Since 2017, the Company has been operating a Corporate retrain employees in high-potential jobs associated with Achimovka project designed to explore > designing (Digital) Coach, an online Talent Training Centre created from the Muravlenko the development of the North and the Arctic. The new hard-to-recover oil reserves; resource intended to help employees Multidisciplinary College. The Centre has a functional training centre and operation of the Muravlenko college- > SciencEngineering, a cross-functional in managing their development by building simulator helping gain online “full immersion” experience based Well Development and Operation laboratory enable programme addressing complex a customised track; in operating equipment and processes under various a proactive approach to training as required by the region's engineering solutions and decision- > rolling out the Agile Learning Space, geological and technical conditions, in standard situations innovative economy. making. The programme promotes an educational project created and in emergency. The simulator can also train and a multi-disciplinary approach to training by the Regional Sales Directorate together that enables a more profound and efficient with the Corporate University. The learning analysis of comprehensive engineering space has turned into a unique platform solutions and establishment of local for experience and idea sharing both centres of excellence, which may function within the Company and in the industry as in-house sources of expertise; as a whole. During the reporting year, > Industry 4.0 technologies course of lectures over 1,500 employees and guests Corporate University on business digitalisation developed attended eight lectures on topics selected in collaboration with the Skolkovo Institute by the audience such as competencies Through its innovative training model, Gazprom Neft has put in place a universal Company-wide educational of Science and Technology; of the future, new thinking paradigms, environment, where every employee may be both a student and an expert. > Listen, Future!, Company digitalisation, project an open science and technology management analytics, etc.; conference of the Downstream Faculty > training the participants of the Leaders with 150 participants, including Gazprom of Russia competition – an open nationwide Neft's professionals, employees of Russia's competition for the new generation major industry players, and partner of managers designed to build the country’s universities; talent pool and provide gifted managers > Hearts & Minds, a dedicated offshore with a social mobility mechanism. 2,500 26 5 safety programme and additional training In 2018, 1,200 mid-level managers COURSES DEPARTMENTS FACULTIES course for the members of a Professional submitted applications for participation, emergency and rescue team with 37 of them were through to the semi-final, available on the University portal the participation of Andrey Legoshin, 11 reached the final and 6 became winners. advisor to the Deputy Minister of Defence Alexander Dyukov, Chairman of Gazprom of the Russian Federation; Neft’s Management Board, was among > the first contest of test questions the finalists’ mentors. preparation for assessing professional competencies in the Downstream Division. The contestants reviewed over 2,300 tasks

82 83 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES DEVELOPMENT REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

TALENT POOL DEVELOPMENT Results of the Step

How we build Gazprom Neft's talent pool into the Future programme in 2018:

About the Developing VOCATIONAL SCHOOL AND UNIVERSITY STUDENTS: Talent tournament 24.6 >> establishing departments, designing master's and bachelor's programmes 47 5 185 in 2018 THOUSAND jointly with universities; AGREEMENTS SPECIALISED SPONSORED EMPLOYEES >> supporting sponsored education programmes for promising students with universities DEPARTMENTS UNIVERSITY STUDENTS covered by annual (grants and scholarships). performance at universities assessment 1.2 144 296 YOUNG PROFESSIONALS: thousand STUDENTS GRADUATES GPN Intelligence Cup 296 >> Three Milestones onboarding programme; STUDENTS receive scholarship of universities / vocational >> Fast & Furious onboarding programme of the Downstream Division; completed internship from the Company schools hired by Gazprom GRADUATES >> young professional development programmes; in the Company Neft joined Gazprom Neft >> science and technology conference for young professionals.

HIGHLIGHTS OF TALENT POOL launched its proprietary educational PROGRAMME 2018: programme in the procurement 47 HIGH SCHOOL STUDENTS: >> the Developing Talent case tournament and logistics for offshore projects in oil Cooperation of >> career guidance for school children; attracted 2,366 8th to 11th class students and gas industry. The Ryazan Institute the Company with AGREEMENTS >> Gazprom Neft's specialised class; from regions where Gazprom Neft of Moscow Polytech launched a course Russian R&D centres made as part >> Developing Talent case tournament for high school students; operates. All competition tasks were in motorway construction; in 2018 of the university >> supporting other science and technology skills competitions and championships. prepared by experts of the corporate >> joint Gazpromneft – NSU Research cooperation programme Science and Technology Centre and Educational Centre was and focused on putting into practice inaugurated as a partnership the knowledge obtained at school. of the Company, Novosibirsk State The winners become eligible for employer- University, and Academpark; sponsored degrees in partner universities >> 148 people took part the science COMPANY EMPLOYEES: and additional points for admission to St and technology conference for young >> selecting high-potential employees to be added to the talent pool; Petersburg University; professionals. >> individual career planning, professional and managerial skills development >> preliminaries of GPN Intelligence programmes. Cup for graduate bachelor's degree The Company promotes a system to build St Petersburg students and masters in Engineering a talent pool around the current employees. mathematicians teach and Economics were completed. The Talent Committee selects candidates neural networks The winners will be awarded with paid to the talent pool based on an annual to produce crude oil internship at Gazprom Neft's Regional personnel performance and potential (TASS’ special project) Sales Directorate in St Petersburg assessment. 24,574 employees were The corporate talent pool programme embracing the School – and Yekaterinburg, as well as a chance assessed in 2018. Tailor-made development Vocational School/University – Enterprise stages offers career to join the Company; programmes are prepared for talent pool guidance for high school students, sponsored education at universities >> St Petersburg University introduced members with different training formats a master’s programme in geological available, including the Growth career planning and vocational schools, work with high-potential employees support of hydrocarbon field development; portal. and planning of their career. The Company cooperates with schools Murmansk State Technical University and universities as part of its corporate programme Step into the Future corporate programme.

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MANAGEMENT APPROACHES HSE management structure MANAGEMENT BOARD. OPERATING MANAGEMENT SYSTEM COMMITTEE >> Decision-making on strategic issues related to the implementation of the HSE Policy Statement; Gazprom Neft remains committed to ensuring the health and safety of its employees. >> Approving the HSE strategy; In the field of health, safety and environment, the Company strives to achieve the strategic >> Reviewing accident investigation reports. Goal Zero: no harm to people, environment and property in working process.

HSE DIRECTORATE The main focus areas for achieving >> reduction of workplace injury >> Defining workplace safety strategy and objectives; this objective are reflected in the corporate and occupational disease rates, accident >> Developing the corporate HSE management framework; HSE Policy Statement, including: hazards and environmental impact; >> Interacting with the stakeholders on HSE issues. >> safe production based on risk analysis, >> consistent implementation of best global mitigation and management; HSE practices. HSE PROFESSIONAL BOARD AS PART OF THE WORKPLACE SAFETY FUNCTION HSE Policy Statement >> Making key decisions which affect the structure and tasks of the function, including strategy and long-term investment and target programmes; >> Approving initiatives, roadmaps and projects as part of the workplace safety programme.

HSE management WORKPLACE SAFETY SUBDIVISIONS HSE requirements include, but are not limited to, industrial, fire and environmental safety >> Implementing workplace safety management system across the Divisions; standards, occupational health and electrical safety regulations, and emergency response >> Supervising the subsidiary operations with regard to workplace safety. provisions.

KEY DOCUMENTS >> HSE Policy Statement

KEY POLICY PRINCIPLES >> The Company’s management is fully aware of its responsibility to protect health WORKPLACE SAFETY IN THE SUBSIDIARIES of Gazprom Neft’s employees and people residing across the Company’s footprint, >> Workplace safety operations. as well as to create safe working conditions for productive work and prevent any adverse environmental impact. >> No economic, technical, or other considerations may be taken into account if they contradict the interests of ensuring occupational health and safety, as well as safety of local communities and the environment. >> The Company’s executives consider the HSE management system essential and declare their responsibility for the successful management of production risks impacting employee To this end, all of Gazprom Neft’s facilities In 2018, the Company’s workplace safety health and safety, equipment, property, and the environment. have a corporate safety management system function set up an HSE Professional Board in place. In 2017, the Company established comprising senior management of the HSE KEY STAKEHOLDERS a single Operating Management System Directorate and representatives of workplace The Company’s shareholders, executives and employees, local communities, contractors, Committee, a high-level collegial body headed safety functions across the Divisions. business partners, non-profit and public organisations by CEO Alexander Dyukov. The Committee The Board is designed to prepare consolidated is responsible for the HSE strategy. resolutions on key matters for Gazprom Neft’s workplace function.

88 89 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

TRANSFORMATION OF WORKPLACE SAFETY In 2018, Gazprom Neft embarked The Company views safety culture of workplace safety, asset reliability, risk on the transformation of its HSE system as part Priority areas as an important tool in achieving the Goal Zero assessment, interaction with contractors, of a wider business transformation exercise, and seeks to make sure that its employees transport safety, and development with the Company seeking to join the ranks of the HSE transformation have no concerns about their safety when they of the workplace safety function. In 2018, of global workplace safety champions by 2030 programme start working on a new assignment. Gazprom over 29,000 employees and 13,000 contractors in line with its Development Strategy. The Neft’s safety training system plays a pivotal completed dedicated training2. system transformation relied on a risk-based FUNDAMENTAL TECHNOLOGICAL BARRIER role in the Company’s corporate safety culture. approach, with a series of PDCA (Plan-Do- Technical condition of equipment and operational setup The training process is all-encompassing In-house coaching is another key driver behind Check-Act) projects developed by Gazprom and highly standardised while also being the Goal Zero mission. Corporate coaches Neft for its implementation. COMPETENCY BARRIER closely related to other elements of the safety are the Company’s employees who combine >> Targets: to establish priority HSE risks. Ensuring that only competent employees have access to work management system. their main job responsibilities with mentorship >> Safety framework: to set obstacles for risks assignments. This format has proved its including those associated with contractors. DIGITAL BARRIER MANAGEMENT In 2018, the Company continued efficiency over the years, with Gazprom Neft >> Certification, inspection, investigation: Eliminating human factor where applicable implementing its three-year targeted training now focusing closely on the organisation to ensure reliability of the obstacles set. programme launched back in 2016. As of training sessions and coach meetings part of the programme, training courses along with the assessment of mentorship More than 80 internal experts from across are developed and run in the areas identified competencies. the Company’s units, Divisions and hierarchy by the Company as priority ones for achieving levels were mobilised to help draft the Goal Zero, including leadership in the field the HSE transformation programme. Projects to introduce a cyclical risk-focused approach are to be launched in 2019. “We remain committed to the Goal Zero mission as the HSE transformation Staff training in workplace safety programme is being implemented. To further reinforce the progress (people)1 achieved, we are launching a series of security projects that will allow us to systematically build obstacles for unacceptable events and ensure that such events will not happen in the future. It is obvious that qualitative changes in security can only occur with developing new digital technologies, as well as increasing competences of the Company’s Source: Company data employees.”

2014 2015 2016 2017 2018 Anton Gladchenko Director of HSE Directorate Training in occupational health 3,901 3,852 6,610 5,839 5,324 Training in workplace safety 8,807 6,620 6,231 6,092 6,072 Training in environmental safety 1,306 1,195 1,132 1,477 800

Key safety rules Control technologies

In 2017–2018, Gazprom Neft ran a large-scale information safe behaviour of the employees, significantly reducing In 2018, the Upstream Division implemented a project that In the long term, the project provides for the integration with campaign for the employees of its subsidiaries injury risks and, coupled with the best practices, bringing won the Division’s corporate security competition award. the video surveillance system, larger scope of documents and contractors focusing on the implementation of the key the Company closer to achieving its strategic Goal Zero Gazprom Neft Orenburg has introduced an electronic control to be included into a single electronic pass, etc. As a result, workplace safety rules. They are mandatory for all Gazprom mission. The rules were implemented not only through system that evaluates contractors’ compliance with safety Gazprom Neft Orenburg will have a unified database of Neft’s employees and contractors across the Company’s training, organising and motivation campaigns, but also requirements and provides information on their training, contractors’ employees and vehicles. The project is planned footprint and include 11 basic rules aimed at creating target through taking disciplinary actions against rule breakers. certification, medical check-ups and the admission of to be rolled out to other subsidiaries of the Upstream personnel and vehicles to work by technical control stations. Division.

1 Mandatory training in line with statutory requirements. 2 Number of employees trained in line with statutory requirements for educational and additional corporate programmes focusing on workplace safety.

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Contractors are included in the corporate Gazprom Neft organises dedicated forums, CONTRACTOR HSE training system. A dedicated programme sessions and meetings with contractors “The first step towards has been developed which is mandatory on a regular basis to share experience creating an integrated for managers to manage operations at Gazprom and improve performance. They are attended team is close cooperation MANAGEMENT RESPONSIBILITY Neft’s facilities. Contractors’ representatives by senior executives of the Company with contractors, take part in training courses and video briefings, and its Divisions, function leaders and heads which is important and actively participate in the School of HSE of facilities. Forums and sessions empower for all production Compliance with corporate safety standards is a key criterion in selecting Gazprom Neft’s Supervisors. The main goal of the School the Company to deliver on its strategic objective assets of the Company. is for supervisors to start proactive work set of liaising with contractors, i.e. building Involvement to develop a culture of safe behaviour. In 2018, partnerships, encouraging the proactive position contractors. Interaction with contractors is determined by the corporate standard Procedure of contractors’ the training in the Upstream Division covered of contractors, and involving them in HSE for Management and Organisation of Interaction with Contractors on HSE Issues, which was engineering and technical over 1,000 supervisors, with contractors’ staff improvement. employees not only updated in 2017 and sets out Gazprom Neft’s requirements applicable to contractors during accounting for 70%. in the construction their selection, management and performance assessment. process, but also in the discussion Contract Performance Management system and development of joint Contractors’ obligation to comply with legislative and corporate With this in mind, the Company runs a corporate approaches and initiatives HSE requirements is formalised in contracts. Ensuring conformity contractor engagement programme called The Upstream Division employs the Contract to act proactively, and eliminates the risk designed to improve with the requirements is far from being the only focus area in the Company’s Steps, which embraces every stage of supplier Performance Management System, which of biased attitude towards contractors. Joint the production culture, contractor relations policies. Gazprom Neft builds partnerships and seeks relationships, from selection to the assignment is a new model for monitoring contractors’ teams contribute to more transparent is already starting to create an environment that would promote workplace safety and encourage of final ratings, and a new initiative called fulfilment of contractual obligations related and structured communication in performing to reduce the number suppliers to cooperate with the Company on a long-term basis. the Contract Performance Management System. to the workplace safety. Performance contractual obligations. of violations.” of obligations is monitored by the dedicated Maksim Ovsyannikov teams of the customer’s and contractor’s The introduction of Steps and the Contracts Head of Capital Construction representatives who control the compliance Performance Management System helps Programmes of the Oil and Gas Steps programme with safety requirements, solve arising issues prevent and mitigate possible risks during Production Department and ensure transparency on the site. This the contract performance management. The model facilitates ongoing and quick cooperation two programmes enable Gazprom Neft to take 1. Review and selection of candidates, drafting and signing of contracts 3. Contract closure and final rating between the Company and the contractor. It another step towards building a partnership At this preparatory stage, the contractor should assess its resources required At this stage, the Company evaluates shifts focus from the violations of requirements model of interaction with contractors. to ensure health and safety, and make a binding commitment on its responsibility contractors’ performance. Assigning ratings and ability to meet legislative and corporate HSE requirements. helps to compare contractors and take a proactive approach in dealing with those The Company’s long-term goal in this area is to make a clear but rigorous who fail to show improvements. The screening of contractors and to ensure transparency of the resources planned long-term goal in this area is to integrate to deliver the required level of health and safety. performance indicators, including those associated with HSE, into the corporate Contractor safety 2. Work delivery. Contractor performance management information system, ensure transparency During his stage, the contractor is engaged, contract performance and bonus payments for contractors’ Introduction of the Etalon OMS by Gazprom Neft’s performance. Experience shows that the mere inclusion of is monitored, and equipment, machinery and employee qualifications staff based on positive results Upstream Division started with component 6 (Supplier and safety provisions into the agreement does not guarantee Contractor Management) since contractors do most of that they will be met by contractors. It was decided to set are checked. At this stage, Gazprom Neft’s long-term goal is to ensure that of their performance. the upstream work, including well drilling, construction, up joint customer and contractor teams to monitor how no contractors are allowed to start working until they meet the requirements repairs, prospecting surveys, power supply, and logistics. they meet contractual obligations. These teams control the under the contract. Steps is a set of comprehensive initiatives New developments might involve up to several thousands compliance with safety requirements, solve arising issues designed to improve safety culture, of contractor employees, so the key task is to ensure and make the on-site conditions transparent. The Company is developing various tools to control the contractors’ activities. motivation and training of contractors’ staff contractor safety on the site with no compromise on Along with the Contract Performance Management System and Owners as well as enhance their social and working of Contracts With Contractors in place, subsidiaries arrange mobilisation audits conditions. for contractors.

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The observation map for monitoring Lost Time Injury Frequency HEALTH, SAFETY dangerous actions and hazardous conditions (LTIF)4 enables us to involve personnel in the process 0.520 of revealing dangerous actions and conditions, 0.472 AND ENVIRONMENT and promptly eliminate problems and mitigate 0.402 the risk of incidents or emergencies while 0.326 interacting with line managers on an ongoing 0.258 basis. The Company’s key HSE priorities comprise on highly critical facilities, to implement a failure continuous improvement of workplace safety analysis system that identifies and classifies its THE COMPANY’S KEY SAFETY and reduction of accident and injury rates causes, and to effectively manage the process IMPROVEMENT PROGRAMMES INCLUDE 2014 2015 2016 2017 2018 12 and occupational diseases. The Company’s using the statistics collected. >> equipment safety reviews and alignment ₽ BN main professional and technology-related HSE of production facility characteristics risks include equipment failures and breach The assessment methods of occupational with workplace safety regulations; Investments 5 in HSE improvements1 of organisation rules for high-hazard risks in workplace safety are designed >> upgrade of accident prevention systems; Fatal accident rate (FAR) operations, as well as violation of regulatory to make sure that employees have no concerns >> emergency prevention and response plans; requirements and safety rules by contractors. about their safety when they start working >> control of compliance with HSE rules; 3.17 on a new assignment. To mitigate this group >> maintenance of safe working conditions To mitigate these and other safety risks, of risks, the Company is developing various and workplaces that fully meet statutory 2.34 2.19 the Company manages them in accordance occupational controls and improving its safety and corporate safety requirements; with the corporate standard based culture. >> provision of personal protective equipment; on qualitative risk assessment. The Company >> occupational health initiatives. 0.90 0.89 236 uses advanced international methods such The main programmes set to foster safety as HAZID/ENVID (hazard identification), HAZOP culture and leadership in this area include In the reporting year, the Company registered DRILLS (hazard and operability study) and PHSER rating to subsidiaries based on HSE criteria, one accident and 1,068 incidents at hazardous 2014 2015 2016 2017 2018 AND TRAINING (HSE risk review) to assess technology-related monitoring dangerous actions and hazardous production facilities3. sessions conducted risks during design, construction, operation conditions on a dedicated observation map, and liquidation processes. Technology-related and conducting leadership safety behaviour We are profoundly saddened to report that one HSE risks are managed by the equipment audit. employee died while working at the Company’s Number of workplace injuries 43 41 38 36 29 reliability improvement programme. Due production facility. After the death of a filling (persons) to the importance of this production area As part of rating process, the Company’s station operator as a result of a pulmonary and HSE, it has been singled out as a separate subsidiaries are assessed based on proactive heart failure caused by hydrocarbon poisoning, –21% OMS component. (initiatives seeking to prevent accidents) a detailed investigation was launched and reactive (rates of injuries, accidents, road to develop an action plan minimising the risk LTIF REDUCTION Reliability management is based on risk traffic accidents, etc.) criteria and are ranked of similar accidents going forward. In line y-o-y assessment at all stages of the production according to the achievement of HSE targets. with this plan, all of the Company’s designated cycle, from design to dismantling and disposal. subsidiaries have put in place relevant Source: Company data At the operational stage, the Company needs Leadership safety behaviour audit prevention initiatives. 2014 2015 2016 2017 2018 to ensure smooth and reliable operation is one of the key tools for line managers of equipment throughout its life time to control safety behaviour at the production In 2018, FAR across the Company’s production Injuries 41 39 35 35 28 and reduce the number of its repairs. facilities. This is a regular documented and service subsidiaries in Russia stood Fatalities 2 2 3 1 1 process of monitoring an employee’s work at 0.89. Number of fatalities involving To this end, the Company uses advanced on an assignment and his/her work areas/ contractors’ personnel on the Company’s sites approach and assessment tools such as RCM, places, followed by a conversation with him/ decreased from 10 in 2017 to 4 in 2018. RBI and RCA2 enabling us to rank equipment her to correct dangerous or encourage safe Asset Reliability based on its criticality for production, focusing behaviour. Management System on the Company’s website 3 To calculate the number of accidents in 2018, the Company used a new methodology as prescribed by Order of the Federal Environmental, Industrial and Nuclear Supervision Service (Rostechnadzor) No. 29 On Approval of Methodological Guidelines for Classification of Technogenic Events in the Realm of HSE Taking Place at Hazardous Oil and Gas Production Facilities dated 24 January 2018. In line with these new guidelines, some of the incidents previously classified as first grade technogenic events or incidents, are classified as second grade technogenic events and no longer regarded as incidents starting from 2018. 1 Excluding joint and overseas assets. Including investments in occupational, fire and transport safety, civil defence, HSE; excluding environmental investments. 4 LTIF (Lost Time Injury Frequency) is the number of lost time injuries occurring in a workplace / total hours worked by all employees * 1 million. LTIF is shown for the Company’s 2 The RCM (Reliability Centred Maintenance) methodology helps to identify and select maintenance focused on reliability. The RBI (Risk Based Inspections) methodology provides production and service subsidiaries in Russia. technical condition controls based on the risk analysis of technical devices. The RCA (Root Cause Analysis) methodology analyses losses that account for most of the damage in order 5 Fatal accident rate (FAR) is calculated as the number of fatalities/ total number of hours worked by all employees * 100 million. FAR is shown for the Company’s production and service to prevent them. subsidiaries in Russia.

94 95 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Responding to emergencies Emergency response drills and training sessions

Item 2014 2015 2016 2017 2018 To ensure civil defence, the Company enhances the emergency resilience of its The Company runs an annual drill and training Drills and training sessions 854 643 322 371 236 production facilities and trains its employees to respond effectively, including programme for employees and managers in harsh weather conditions. to practise: >> emergency alerts; The reporting year’s major initiatives included the following: >> The Company was the first member The Company has an Emergency Prevention and Response System. >> officer assembly and notification >> A unique training facility opened at the Omsk Refinery to provide opportunities of Gazprom Group to implement It is focused on: of the municipality’s and facility’s emergency for acquiring and practising work at height skills. The nine-metre-high initiatives focused on quenching >> planning and implementing emergency prevention initiatives; teams acting as part of the National three-tier complex is one of a kind in the Russian oil refining industry. It has blowouts at subsea wellheads: a relief >> protecting employees and production facilities; Emergency Management System (NEMS); 12 functional zones for all types of work at height, including those involving well drilling programme was developed >> enhancing the resilience of production facilities; >> mobilisation of emergency and rescue units; the use of ladders or moving across or along horizontal or vertical metal that allows for the use of a jack-up rig, >> mitigating the risk of industrial emergencies; >> safe shutdowns of industrial equipment; structures, slopes or piperacks. and a quadrilateral agreement on quenching >> minimising property damage from emergencies; >> emergency localisation; blowouts at subsea wellheads was signed. >> using relevant action plans to recover from natural and industrial >> using personal protective and basic fire- emergencies. fighting equipment; >> providing assistance and aid to affected people.

Prirazlomnaya – an island of safety

The Prirazlomnaya offshore ice-resistant stationary platform is an inert gas (freon), and robust evacuation systems (lifeboats, Under the exercise plan, a leak from a storage tank would The exercise confirmed the Company’s high emergency a hazard class 1 production facility, which puts it in the highest rescue rafts, and bridge-like structures to facilitate the cause an oil spill into the . Operating personnel, preparedness, with Gazprom Neft’s emergency and risk category. The area occupied by this highly sophisticated boarding process). icebreaker fleet, and emergency equipment, both on-site and rescue divisions joining forces with other participants and cooperating organisations to deliver effective response. complex is very small and risks arise when different types of All wells are equipped with safety valves activated onshore, were mobilised for emergency and rescue operations, work are performed there simultaneously. This makes the by the emergency shutdown system, to prevent with the Pechora Sea monitored constantly using aircraft above Company pay special attention to the platform’s safety. To this of formation fluids. An abnormal decrease or an increase Prirazlomnaya, Varandey and remote islands. Booms were effect, Gazprom Neft leverages the most advanced solutions in pressure detected by sensors will trigger an alarm. If available. Prirazlomnaya’s safety system monitors industrial the pressure reaches a critical level, the well pump will shut towed to protect the coastlands. A rescue team, site camp, and processes, as well as fire and gas alarm and emergency down and the valves, which can resist very strong pressure, equipment were flown to Dolgy Island. It was also the first time shutdown systems, and, in case of an incident, ensures safety will close to shut off the well. when the operations included rescuing wild birds that nest in with no need for human involvement (fail-safe mode). All The Company organises emergency response training for coastlands. processes are automated and backed up. its staff. Exercises and drills take place in the Prirazlomnaya In 2013, the Company put into effect an action plan for area on a regular basis to ensure maximum alignment of oil and petrochemical spill prevention and response in the response team in case of any emergency. Exercises are the Prirazlomnaya platform area, which describes the most held both offshore, including in ice conditions, and onshore, probable oil spill scenarios, indicates resources and to protect the coastlands of the Varandey settlement and manpower required for response, and sets forth procedures remote islands. for interaction with professional emergency and rescue In June 2018, after this plan was updated, the Company held teams and government agencies. Following the update a large-scale oil spill response exercise at the Prirazlomnaya in 2018, the plan passed the state environmental review as platform and drills to protect the coastlands of the Varandey required by the applicable Russian laws. settlement and Dolgy Island from oil contamination. “While the risk of emergencies is minimal thanks The engineering solutions to ensure safety, also include The event featured the Company’s own personnel and to technologies at Prirazlomnaya, we must always walls able to withstand temperatures above 1,000°C for resources, including Ecoshelf-Baltika’s professional emergency be prepared for any incident. Our key priority here is to two hours, a gas and fire alarm system, a fire and explosion and rescue teams and Gazprom Avia’s aircraft, as well as oil safeguard the platform’s personnel and ensure that we do not suppression system1, capable of tackling gas explosions with spill response personnel and resources of Varandey Terminal. cause any harm to the Arctic ecosystem.”

Andrey Patrushev Read more about ensuring Deputy CEO for Offshore Development safety in the Prirazlomnaya platform area

1 Lower mechanical sensitivity of explosives through addition of inert gases.

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Transport safety Health and safety

Gazprom Neft’s transport safety programmes include workplace control The Company’s health protection >> promote healthy lifestyles (including vaccination, healthy living awareness initiatives, defensive driving courses, safety briefings and training sessions, The specific rate of road traffic and disease prevention system is campaigns, alcohol and drug abuse prevention initiatives, insurance and monthly HSE meetings (stand-ups). accidents in 2018 went down designed to: activities); by 20% compared to the average >> ensure health and well-being >> investigate health-related incidents and analyse disease (disability) The Company’s project teams seek to improve safety across Gazprom Neft’s per specific rate in 2015–2017. of the Company’s employees; incidence. priority areas, which include air, water, and road transport, with dedicated >> align an employee’s health condition roadmaps through 2019 in place. The project teams are responsible for drafting and physical abilities with the job These activities are governed by the legislation and the Occupation internal regulations, which set operating standards for all assets. In 2018, characteristics and requirements; Health Programme corporate standard. To increase responsibility across the Company drafted and approved a document that regulates workplace >> identify and eliminate workplace health the supply chain, the Company introduced health protection into contractor safety issues at the railway facilities and is aimed at mitigating possible risks hazards; management. Among other things, Gazprom Neft controls medical check- and bringing the number of accidents to zero. Gazprom Neft was the first >> raise employees’ awareness ups of contractor employees and makes sure that contractors have among oil and gas companies to develop such a document. about occupational health. an effective emergency medical response system in place.

Training is an important part of transport safety programmes. To achieve these goals, the Company In 2018, the Company launched a three-year project to create a health undertakes to: protection system designed to prevent or mitigate accidents. The project The updated road traffic safety management system launched in 2017 focuses to analyse and control driver behaviour. >> assess and minimise occupational focuses on identifying employee health risks and bottlenecks on developing the ability of drivers to predict and avoid emergency situations. Artificial intelligence recognises violation disease risks; for implementing key medical and rehabilitation initiatives. In 2018, the dedicated training sessions covered some 49,000 drivers working of safe transportation rules by drivers, such >> ensure safe and hygienic working for Gazprom Neft and its contracting companies. as using a mobile phone, smoking in the car, and living conditions across its field being unbelted, or driving with third persons. sites; In the reporting year, the Upstream Division introduced 38 mobile road safety The new system is self-learning. As soon >> implement comprehensive prevention teams to prevent road traffic accidents, monitor drivers, oversee compliance as it accumulates sufficient data, it becomes initiatives to reduce disease incidence with the operating rules pertaining to the road transport and special capable of not only registering standard among employees; Protective clothing for the Arctic equipment, and examine the condition of roads and access roads. incidents, but also identifying the new ones. >> arrange for medical examinations; >> identify and monitor cardiovascular Providing employees with protective clothing and personal protective In 2018, the Downstream Division began piloting a vehicle tracking system Data from the vehicle trackers disease risk groups; equipment is an important component of the Company’s care about their featuring an online control system and an AVL hardware to monitor driving are transferred online to the operator who >> prevent contagious and non-contagious health and safety. The reporting year saw the Company complete a major behaviour. The pilot project involves assets transporting hazardous goods. responds to dangerous actions of drivers diseases (vaccination / therapeutic project of creating a new uniform for Prirazlomnaya employees. The new or hazardous situations in real time as well and preventive nutrition); hi-tech clothing for offshore operations will ensure protection from extreme cold, wind, rain, sea salt, and open fire. It also comes in bright In 2018, Gazprom Neft’s IT team completed an R&D project focusing on using as generates reports on the driving quality >> develop an emergency medical colours to enhance the safety of personnel working in the harsh Arctic the video analysis to improve road transport safety at the Company’s sites. for the management of the subsidiaries. response framework (first medical aid environment. The researchers developed a tool based on a neural network algorithm and evacuation capabilities, first aid training for employees);

Road transport monitoring system

Since 2017, Gazprom Neft’s production assets have style similar to those used by large transportation been implementing an IT-based vehicle tracking companies, monitoring speed, sudden acceleration system to monitor the implementation of obligations or braking. In 2018, the Company continued developing relating to the safety of the Company’s road transport the tracking system, with over 7,000 contractor vehicles contractors. The system analyses information about being connected to the system and additional barriers drivers, vehicles, permits and licenses, reviews data from introduced to control the access of vehicles and drivers vehicle tracking devices and makes reports on the driving to the Company’s facilities.

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ENVIRONMENTAL SAFETY

MAIN FOCUS AREAS 2. Building barriers to reduce injury severity Environmental responsibility is one of the key values included in Gazprom Neft’s Corporate 1. Building barriers to prevent exposed and provide an effective emergency Code of Conduct. Gazprom Neft takes a consistent approach to minimising its environmental employees from accessing production medical response. The Company facilities. The Company has established consistently improves its resource impact, implementing cutting-edge environmental technologies, employing rational use uniform requirements and qualification allocation and trains its employees of resources and best management practices, and developing the best-in-class safety culture standards for clinics conducting medical to provide better aid at each phase examinations to screen out dishonest of response – from early identification and environmental training system for employees. counterparties. Gazprom Neft also started to post-resuscitation care. developing a local system of automated 3. Building barriers to reduce the likelihood pre-tour/pre-shift medical check-ups of incidents (occupational hygiene, disease which integrates medical equipment prevention, and promotion of healthy and software. The system allows lifestyle). This project focuses on turning THE COMPANY HAS THE FOLLOWING The Company has an ISO 14001 compliant Environmental impact fees for an early identification of many diseases healthy living from a formal initiative into ENVIRONMENTAL SAFETY OBJECTIVES environmental management system in place. (₽ m) and online monitoring of the employee’s employee’s primary need. >> reducing environmental footprint In 2018, an independent auditor confirmed condition to detect fatigue, sudden and preserving the quality of nature that Gazprom Neft’s system fully meets 837.1 health impairment, or stress. Based and living environment; the ISO 14001:2015 requirements. Certificates on the results, the system can notify >> prevention of environmental damage caused of compliance were also issued to Gazpromneft- 545.6 the relevant employee, dispatcher, by business activities; Sakhalin, Gazpromneft Moscow Refinery, 270.8 and the doctor. >> implementation of best global HSE Gazpromneft Omsk Refinery, Gazpromneft – 210.9 practices; Ryazan Bitumen Binders Plant, Omsk Lubricants 143.4 >> restoration, protection and sustainable use Plant, Gazpromneft Moscow Lubricants Plant, of natural resources, as well as biodiversity Gazpromneft Shipping, and Gazprom Neft 2014 2015 2016 2017 2018 conservation. Procurement.

The reporting year saw Gazpromneft-Khantos implement an automated pre-trip check- up system. It takes the system 90 seconds to evaluate both Award of the Russian Health standard health indicators Environmental impact assessment (EIA) and Safety Week (heart rate and blood pressure) and psychophysiological state The 2018 EIA involving stakeholders covered documentation for the exploration within the Prirazlomonye of employees to minimise the risks the construction of a waste collection, accumulation and field in the Barents (Pechora) Sea and the Kheysovsky The Company’s Occupational Health System Programme for 2018–2020 of employees reporting for duty comprehensive treatment facility at Gazpromneft-Angara’s licence block in the north of the . won the top prize in the nomination for Advanced Occupational Disease Ignyalinsky licence block. The EIA also reviewed project Prevention and Employee Rehabilitation Solutions of the Health and Safety in dangerous states (ill health competition held as part of the Russian Health and Safety Week 2018. or intoxication).

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Cost of environmental Gazprom Neft uses a risk-focused approach The Company is running a range In 2018, the Company continued >> construction of a new automatic on-spot Gross emissions (kt) services, environment safety embedded in all of its business processes of key strategic environmental initiatives with the second phase of the technology loading unit for light products at Omsk and protection1 to ensure environmental safety. The and a number of programmes and projects and environmental upgrades of its refineries, Refinery; (₽ m) Company ensures continuous environmental dealing with current environmental issues. introducing equipment and technologies >> overhaul of the first process chain facilities 470.1 427.9 monitoring and industrial environmental In 2018, investments in environmental with lower environmental impact. at Omsk Refinery; 393.4 control. Environmental impacts are measured protection totalled ₽ 19 bn.2 >> overhaul of large processing ring facilities 348.9 372.6 at all stages of production activities and used The key projects to reduce gross emissions at Moscow Refinery. 6,875.6 6,908.1 as a mandatory input to buttress management In 2018, excess emissions charges accounted include: 6,159.7 6,377.6 5,753.2 and investment decision-making. for 57.9% of the total environmental impact >> construction of Gazpromneft Omsk fees and resulted primarily from APG flaring, Refinery’s regeneration gas treatment unit Gazprom Neft carefully assesses its current with 78.4% APG utilised in 2018. for the catalytic cracker; and expected environmental impact taking >> piloting of Chlorosorb, a new technology 2014 2015 2016 2017 2018 into account all factors that affect ecosystems, that will enable domestic refineries and specific features of such ecosystems. to recycle chloride and eliminate the use

2014 2015 2016 2017 2018 Based on this assessment, the Company of caustic spent on gas scrubbing; implements the best available technologies to mitigate the adverse impact of its operations.

Air protection Breakdown of gross emissions 348.9 393.4 470.1 372.6 427.9 (kt) Reduction of air pollutant emissions is one development of Gazpromneft-Vostok’s group of the Company’s top environmental priorities, of fields, new downhole logging and pilot with Gazprom Neft putting in place a large- operation projects at GPN-Development 19 scale programme to upgrade and retrofit and Gazpromneft-Angara. ₽ BN its refining facilities, a programme Source: Company data to cut greenhouse emissions, and other That said, specific emissions remained flat investments in 2014 2015 2016 2017 2018 environmental environmental initiatives covering the entire y-o-y. protection production chain. Solids 13.5 13.8 18.4 10.5 18.0  By upgrading the existing facilities, Gazprom Hydrocarbons (excluding volatile organic compounds) 57.6 55.8 46.2 49.4 56.7 In 2018, gross emissions totalled 427.9 kt. Neft is able to maintain specific emissions Carbon monoxide (CO) 125.9 143.7 173.6 147.8 175.3 The y-o-y growth was due to the extensive work at the 2017 level. Nitrogen oxides (NO ) 13.2 10.5 18.0 17.4 21.8 as part of new upstream projects, including x Sulphur dioxide (SO ) 46.8 96.0 124.8 64.4 71.1 launch of new oil wells at Gazpromneft-Yamal, 2 Volatile organic compounds (VOC) 91.5 72.6 88.4 81.3 84.6 Other gases and liquids 0.4 1.0 0.7 1.8 0.3

1 Capital environmental investments were down due to the completion of large-scale projects at the Company’s refineries in 2017. 2 Net of the cost of capital construction, renovation and repair of fixed assets with a positive environmental impact.

102 103 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

GHG emissions

Moscow Refinery continued building Advanced Biosphere treatment facilities Gazprom Neft supports implementation recommendations of the IPIECA, API and OGP the Euro+ oil refining unit that will enable under construction at Omsk Refinery will of the Paris Agreement on Climate guidelines for reporting it to decommission five small processing greatly improve wastewater treatment Change1 and the Russian Government’s greenhouse gas emissions and the G4 ring facilities launched back in 1960s and cut emissions and discharges. Among concept for putting in place Sustainability Reporting Guidelines. 11,284 and cut pollution emissions. 2018 saw other things, the project provides for off-gas a greenhouse gas emissions monitoring MCM the Company complete the construction treatment in cutting-edge gas convection and measurement system. The Company Gazprom Neft is building a dedicated system OF APG UTILISED More details on Omsk of a closed cycle high-temperature gas chambers, reusability of recovered petroleum fully complies with the national laws to manage hydrocarbon regulation risks, 2 Refinery’s environmental disposal system for Euro+. The technology products, and the use of nitrogen pads on reduction of greenhouse gas emissions with GHG emissions assessment as its key upgrade helps eliminate excessive process gas, if any, in tanks to prevent evaporations. and the guidelines on measurement element. The Company measures: in a safe and reliable manner through its full of such emissions3. Gazprom Neft has >> direct GHG emissions from burning incineration in a closed protected fireproof in place a corporate standard on GHG of hydrocarbon fuels and substances, chamber, with a zero impact on atmosphere. emissions control, which was drafted based facilities operation, and technological on the principles contained in applicable losses; Omsk Refinery completed the construction Russian laws and international guidelines. >> indirect emissions from consumption of a new automatic on-spot loading of electricity, heat, steam or cooling. unit for light products started The standard is fully in line with the GHG in 2016. The new unit virtually eliminates Protocol Corporate Accounting and Reporting Made in Russia: the risk of hydrocarbon vapours getting Standard developed by the World Business construction of Euro+ into atmosphere from loaded products Council for Sustainable Development refining unit and increases process safety. The facility (WBCSD) and the World Resources Institute at Moscow Refinery replaced the open tank-car loading gallery (WRI), as well as GOST R ISO 14064-1-2007, (coverage by RBC TV) with a leak-proof loading rack using vapour which are recognised worldwide condensation technology. The project brought and do not contradict Russian laws. to a close the transformation of the loading The standard also incorporates additional system at Omsk Refinery that ships around 70% of petroleum products by rail.

Gazprom Neft’s refineries to implement automated eco-friendly petroleum Greenhouse gas emissions 12.4 12.7 16.2 19.2 19.3 product loading systems (mt of СО2 equivalent)

Ecoinformer Source: Company data The main webpages of Omsk and Moscow refineries will serve as a basis for government regulations on display real-time air and environmental data from the implementing automated air monitoring systems at all 2014 2015 2016 2017 2018 facilities’ sanitary protection zone. At Moscow Refinery, refineries. Direct emissions 11.1 10.7 13.8 13.9 14.9 this information is also displayed on an outdoor LED screen In March 2018, the Company donated a mobile Indirect emissions 1.3 2.0 2.4 5.3 4.4 installed at the request of local residents. environmental laboratory to the Omsk Region Government. In 2018, Moscow and Omsk refineries became pilot The laboratory promptly analyses air quality data collected platforms for developing nationwide requirements for at industrial facilities and throughout a city and transmits it industry-specific monitoring systems. The testing results to supervisory bodies. 1 An agreement signed on 22 April 2016 as part of the United Nations Framework Convention on Climate Change (UNFCCC) to regulate carbon dioxide emissions starting from 2020. 2 Orders of the Russian Ministry of Natural Resources and Environment No. 300 dated 30 June 2015 and No. 330 dated 29 June 2017. 3 Guidelines on Indirect Greenhouse Gas Emissions Volume Measurements approved by Decree of the Russian Ministry of Natural Resources and Environment No. 20-r dated 30 June 2017.

104 105 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

The growth of direct GHG emissions in 2018 The rise in APG flaring volumes since In total, in 2018 the APG utilisation rate across the Company’s subsidiaries APG production 7,604 8,134 9,435 11,434 14,396 was due to an increase in APG flaring 2016 was attributable to new projects operating in Russia increased by 29.6% y-o-y, which was achieved thanks to: and utilisation and oil refining volumes. The increase in APG where the utilisation infrastructure >> Ensuring high utilisation of gas processing equipment; (mcm) volumes came as a result of growing intensity is at the construction stage, which is almost >> Maintaining high APG utilisation at the fields with developed gas infrastructure; of oil exploration and production. completed at the Archniskaya group of fields, >> Launching commercial operation of stage 2 of the comprehensive gas as well as the Southern block of the Priobskoye treatment unit (CGTU) at the Novoportovskoye field run by Gazpromneft- Gazprom Neft is implementing a programme field and the Novoportovskoye field. The Yamal and of the compressor station of the 4th production train at the Eastern to increase APG utilisation rates across all production growth at these fields was the main block of the Orenburgskoye oil and gas condensate field run by Gazrpomneft- of its production assets. The Board of Directors driver of the increase in APG flaring in 2018. Orenburg. Source: Company data set a goal to reach a 95% APG utilisation rate

2014 2015 2016 2017 2018 at the fields with developed gas infrastructure by 2020, and across all of the Company’s Utilisation 6,128 6,496 7,583 8,708 11,284 assets (including the newly acquired ones) – Flaring 1,476 1,636 1,853 2,726 3,112 by 2022.

In 2018, the APG utilisation rate across the Company’s subsidiaries operating in Russia stood at 78.4%, while for mature fields with developed gas infrastructure 92–99% this indicator was at 92–99% since 2016. APG UTILISATION RATE SINCE 2016 at mature fields with developed gas infrastructure Climate projects of NIS

NIS is a Serbia-based company that took active part change on NIS a.d. Novi Sad’s operations, determining in implementing the European Union’s initiative to the GHG management procedures in accordance with

incorporate an EU directive on climate into the country’s the EU directives and regulations and the volumes of CO2 Underground storage for APG utilisation legislation. emissions. The next scheduled step is for NIS to work out In particular, NIS participated in the meetings held between the arrangements necessary for the free allocation of CO2 the Serbian government and the European Commission on emission allowances for the company’s installations that will be participating in the EU ETS1. The company made At Messoyakhaneftegaz, the Company is going to set up used for process needs as fuel for oil heating furnaces and monitoring and reporting GHG emissions. The company has a preliminary assessment of direct CO emissions as well APG storage in the gas cap of a neighbouring oil and gas boilers. Transportation of the APG from the Vostochno- a department responsible for monitoring the EU’s policies 2 as drafts of monitoring plans for these installations. condensate field. This is an unprecedented project for the Messoyakhskoye field and its injection into the gas cap of and regulations, including those in the area of climate oil and gas industry, and to carry it out the Company will the Zapadno-Messoyakhskoye field will make it possible change and energy efficiency. NIS runs projects on APG utilisation and renewable energy 2 3 build a compressor station with a capacity of 1.5 bcm of gas to use the stored gas in the future. This project cannot be The company’s low carbon strategy will be defined in line development . The company constructed amine drive for per annum at the Vostochno-Messoyakhskoye field and two implemented at the Vostochno-Messoyakhskoye field, where with the National Climate Strategy of Serbia, which is gas refinement in Elemir, which removes CO2 from natural multi-well pads with nine reinjection wells at the Zapadno- active oil production takes place, because of its geological currently under development. Still, NIS is already taking gas. This CO2 is then transported to the Rusanda field and Messoyakhskoye field. The fields will be connected through structure: the field does not have deposits with properties a number of steps to monitor and reduce emissions based used to raise reservoir pressure and enhance oil yield. NIS an interfield pipeline for transporting compressed gas. and space suitable for mass storage. The Company on the corporate environmental standards and goals. has 17 cogeneration power stations that produce electricity and heat using APG. This initiative will maximise the efficiency of APG utilisation is planning to build the infrastructure using Russian First, the company plans to assess the impact of climate at Messoyakhaneftegaz. Currently, the APG accumulated equipment. The construction is scheduled to complete in as part of crude oil production at Messoyakha fields is 2.5 years.

1 EU Emissions Trading System. 2 For more information on renewable energy projects, see the Energy Efficiency and Conservation section. 3 Amine gas treatment is used to prepare natural gas and APG for removing liquid components from hydrocarbons. During processing, they are absorbed by solutions of amines (ammonia derivatives), followed by regeneration of the solution and production of a stream of concentrated hydrogen sulphide.

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Water resources management

The key areas of the Company’s activities treatment, including mechanical, physical “Treatment using a membrane bioreactor is more expensive than other options, but only on water resources management include and chemical, biological, filtration, sustainable use, effective wastewater treatment, and ultrafiltration stages. Closed loop water this technology is really effective for domestic and industrial wastewater, especially in cities, and prevention of natural water bodies treatment enables us to reuse in production because it helps significantly increase the performance of treatment facilities and make contamination with oil and petroleum products. up to 70% of the treated water. In 2018, as part them smaller. There are only a few applications of this technology in Russia, with none Gazprom Neft monitors water protection zones, of the project the Omsk Refinery prepared of them in the refining industry.”

surface and ground waters and evaluates a construction site for treatment facilities Alexander Kuznetsov the condition of bed sediments of the surface and purchased equipment. Associate Professor at the Biotechnology Department of Mendeleev University of Chemical Technology of Russia water bodies in the regions of its operation. In 2018, the Moscow Refinery water treatment At the refineries, which are active water facilities reached their design capacity. consumers, the quality of wastewater As a result, the refinery cut river water is monitored twice a day. The condition consumption and significantly lowered OFFSHORE PROJECTS out additional safety requirements to operate and level of groundwater at the borders the load at municipal treatment facilities. In developing the first upstream project Prirazlomnaya. In order to avoid leakage of sanitary protection zones are assessed. The launch of Biosphere biological treatment on Russia’s Arctic Shelf, the Company of gaseous light hydrocarbons, the “wet” The Company’s key projects in this area facilities at the Omsk Refinery is slated introduces the most advanced technological method of storage is used in oil storage tanks. include the completion of construction for 2020, with the project’s capex totalling solutions to protect the environment, namely, of Biosphere biological treatment facilities ₽ 18.6 bn. marine resources. There is no direct contact In the reporting year, the Company at its Moscow Refinery and building similar of the well with water at the Prirazlomnaya eliminated contaminant discharges into treatment facilities at the Omsk Refinery. platform, as the construction is installed surface water bodies through upgrading Featuring a reverse osmosis unit, the facility on the bottom of the Pechora Sea. The wells the storm drain at Novorosnefteservis provides for multi-stage system of wastewater that are drilled in the field are located inside and treating its wastewater the platform, with its foundation serving at the treatment facilities. as a buffer between the well and the sea. Moreover, the equipment installed on the wells Total water consumption1 (mcm) is designed to prevent uncontrolled gas or oil blowouts and, if necessary, to block the oil rise 256.3 262.5 252.5 230.2 198.1 in 7 seconds. The oil storage facility is located at the base of the platform, below all other 110 facilities and systems. This design solution sets KCM DISCHARGES INTO

Source: Company data SURFACE WATER BODIES 2014 2015 2016 2017 2018 Biosphere biological treatment facilities of the Moscow Refinery

From underground sources 44.0 41.3 32.9 26.2 36.6 were named the best infrastructure project by the Eco Best Award Produced water 171.0 180.8 175.1 157.1 123.5 From surface sources 33.7 32.7 36.4 40.2 32.8 From public water supply systems 1.7 1.6 2.2 2.1 1.7 In 2018, the project was recognised for its environmental, From other water supply systems 5.9 6.1 5.9 4.6 3.5 energy and resource saving efforts and became one of the winners of the Eco Best Award 2018. The jury awarded the prize of the Best Infrastructure Project to the new biological treatment facilities. It has become the only environmental project to be shortlisted for the Platts Global Energy Awards 2018 as the Technology Project of the Year. Biosphere biological Plant for the city: treatment facilities Moscow Refinery on the Company’s (coverage website by Russia 24 TV Channel)

1In line with the revised methodology of recording the volumes of produced water.

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Waste management Land and vegetation protection

Most of waste is drilling sludge of the Soviet time. During the five years Oil production and refining are potentially exploration technology preserving forested resulting from the production process. of work, the Moscow Refinery has eliminated hazardous industrial operations. However, areas. The traditional approach requires GREEN SEISMIC 2.0: Improving the efficiency of its processing the waste accumulated before 1991, along ongoing monitoring of equipment reliability building wide forest clearings to allow seismic exploration 903.4 is one of the Company’s top environmental with over 180 kt of oil-containing waste, and new technologies help the Company the passage of heavy all-terrain vehicles, technology saving trees priorities. The corporate concept of drilling while releasing and rehabilitating 15 ha minimise the risk of soil contamination with the width of the receiver lines of 4 m from cutting KT waste management seeks to reduce of land. Slavneft-YANOS disposed of 19 kt with oil or petroleum products. and the source lines of 4–5 m. of waste recycled the environmental risks and unify waste of hazardous industrial waste during nine and decontaminated management requirements. The concept years of the programme (7.6 kt in 2018) which The Company is running a targeted Green seismic survey is carried out using 1.8 takes into account the infrastructure is scheduled for completion by 2024. programme to ensure pipeline reliability wireless recording equipment, which can of the fields under development, existing and the Clean Territory project, which also be installed with the help of lightweight MILLION TREES technologies for drilling waste disposal, The Company cleans areas seeks to reclaim disturbed lands. Under machinery. This enables us to significantly SAVED technical and economic indicators, methods not only under the corporate environmental the programme, 400 km of pipes is replaced narrow down clearings or not to create them for well construction, and waste injection into programmes. Gazprom Neft’s employees every year. at all. The Green Seismic method introduced the formation. initiate and carry out volunteer projects. by the Company in 2016 reduced the width The Company continued cleaning out Novy The Company is developing diagnostic of the receiver lines1 to one metre. At the end The Company uses advanced drilling rigs Port and Mys Kamenny villages. Gazpromneft- technologies that reduce the number of 2017, Gazprom Neft launched a new stage equipped with a system for liquid treatment Yamal’s volunteers lifted six sunken barges of failures and improve the economic of the Green Seismic 2.0 project to narrow of drilling waste, which maximises and collected 150 tonnes of scrap metal using efficiency of programmes. The innovative the width of the source lines to 1–3 m. Each the reuse of drilling mud and process bulldozers and excavators. methods in use include non-contact such project saves 450,000 trees2. water in production. The remaining drilling magnetometric diagnostics which detects waste, which includes used drilling mud, In St Petersburg, Gazprom Neft retail localised corrosion by registering magnetic The Green Seismic 2.0 project will not only drilling sludge and wastewater, is classified network jointly with the Municipal Council fields, as well as UAV monitoring the technical contribute to preserving forested areas, Waste generation as hazard class 4, or low-hazard waste. Waste of Pesochny village and the Petrov National condition of oil pipelines. but will also reduce the number of heavy (kt) is collected in mud pits reliably protecting Medical Research Centre of Oncology set up all-terrain tracked vehicles, fuel consumption The Clean 1,104 1,132 the soil and groundwater from possible the environmental quest called The Clean Gazprom Neft reclaims disturbed and emissions into the atmosphere, while Territory project 1,040 contamination due to its waterproofing Games, which facilitated the collection and contaminated land and mud pits improving industrial safety. In 2016–2018, on the Company’s 907 properties. of over 2.5 t of garbage in St Petersburg’s by implementing cutting-edge pipeline the technology was rolled out at Gazpromneft- website 657 Kurortny District. technologies and land rehabilitation Noyabrskneftegaz, Gazpromneft-Khantos,

The Company spares no effort solutions based on prevalent soil properties Slavneft-Megionneftegaz, and Gazpromneft- 1 The receiver and source lines are to reduce waste generated by oil refining In 2018, the volumes of waste sent and climatic conditions. Vostok. It saved 1,800,000 trees. transverse and longitudinal lines featuring receiver points to record and transportation. Gazprom Neft disposes for disposal and neutralisation reached waves. of legacy production waste accumulated 903,430 t, accounting for 86.8% of total waste In 2018, the Company launched the Green 2 The average area of 330 sq km was used for calculation, with 2014 2015 2016 2017 2018 at the facilities during the decades generated throughout the year. Seismic 2.0 – project based on seismic the length of receiving lines of 1,175 linear km and forest coverage of 80%.

Green is new black Clean Territory results in 2018

In November 2018, Gazpromneft retail network launched over 7 t of tyres was collected and transferred for The Green is New Black environmental project to develop recycling into crumb rubber for coatings of playgrounds a culture for proper disposal of old car tyres. The project and athletic facilities. The crumb rubber will also be used 5,000 5,300 3,700 175 8.6 tackles the problem of unauthorised landfills of old tyres, for building a recreational area in the village of Pesochny KM KM KM KM KM which is pressing for many regions. In St Petersburg in St Petersburg’s Kurortny District and to improve one of and Yekaterinburg, drivers could bring used tyres the social facilities in Yekaterinburg. diagnosed monitored in terms protected upgraded overhauled to the Company’s filling stations. Within the project, of corrosion rate with corrosion inhibitors

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Biodiversity preservation

Biodiversity preservation programmes In 2018, Gazprom Neft launched a large- are rolled out across all of the Company’s scale programme to get insights into Russian assets. Ensuring environmental the life of narwhals, a rare Arctic species Arctic Biodiversity safety in offshore and onshore projects featuring on the IUCN Red List. Up to now, Preservation Programme is the Company’s absolute priority. Its there has been no comprehensive research 9 8 environmental initiatives aim to maintain on this animal. This unique project will help MARINE YEARS Gazprom Neft launches the natural balance of fragile Arctic study the condition of the narwhal population ecosystems and preserve the region’s in the western sector of Russia’s Arctic Zone, MONITORING STATIONS OF RESEARCH a narwhal study As a pioneer of Arctic Shelf development and a responsible biodiversity. determine the number and distribution programme subsurface user, Gazprom Neft considers preservation of the species, and develop a conservation (report by of the unique Arctic nature for future generations to be one To evaluate its impact on various ecosystems, programme for narwhals and their habitat. ) of its main environmental priorities. Extensive research the Company maintains an ongoing shows that, given constant control, oil and gas infrastructure environmental monitoring within its footprint. In the Sakhalin island area, the Company 600 6 and nature can coexist in a safe way. Some of the territories that the Company monitors the Sea of Okhotsk ecosystem. macrozoobenthos zooplankton monitors in the Prirazlomnaya platform area Since 2017, Gazprom Neft takes part SPECIES SPECIES include the coasts of Dolgy, Matveyev, Golets, in an industry-wide project aimed at monitoring Bolshoy Zelenets, Maly Zelenets and Vaygach and conserving the gray whale population. islands. The monitoring covers surface The population of gray whales migrating seawater and sea ice, biological resources, between the Sea of Okhotsk and southern bottom sediments and atmospheric air. Korea is one of the smallest on our planet. In The results of Arctic 18,500 19 The 2018 research proved that the monitored the early 1980s, these animals nearly went mammal inhabit 30 Biodiversity Preservation KM2 – THE COMPANY’S AREA Programme sea area was in normal condition, with no extinct and have since been closely watched the Pechora Sea fish OF RESPONSIBILITY deviations identified in coastal ecosystems. by environmentalists. Oil and gas companies SPECIES SPECIES take measures to reduce the negative impact Pechora Sea within the Prirazlomnaya platform footprint In Russia’s Arctic, Gazprom Neft runs an open- on the gray whale population and ensure its Environmental ended biodiversity preservation programme conservation and replenishment. Atlas using some of the animal and plant species that are endemic to the Arctic marine ecosystems as indicators of their sustainability. Developed jointly with the leading Russian The research conducted by the companies in the industry Gazprom Neft subsidiaries operating in the Arctic and global experts, this programme seeks underlies the measures aimed at protecting gray whales, contribute to breeding and reproduction of rare fish to meet the requirements of major national which include the use of ships with lower noise levels, species in the northern seas and rivers. Millions of muksun and international biodiversity preservation vessel speed limits, and routes that are removed from whale fingerlings are released into the Ob, Konda and Severnaya regulations, agreements and conventions. feeding grounds. The action plan is subject to an independent Sosva rivers. Hundreds of thousands of captive-bred Atlantic evaluation by the Western Gray Whale Advisory Panel salmon inhabit the waters of the Northern Fishery Basin (the (WGWAP) established by IUCN. WGWAP consists of American, Vyg, Suma and Keret rivers). In 2018, the Company’s facilities Canadian and Russian scientists specialising in marine released 20 million fingerlings of commercially valuable mammals and hydroacoustics. fish species into the water bodies. During the same year, the Company signed an agreement with the Government According to the 2018 preliminary monitoring results, of the Yamal-Nenets Autonomous Area to expand its the Company’s operations do not affect the population of gray programme aimed at preserving aquatic biological resources Environmental support of offshore projects whales. and their habitat in the region. During 2018, Gazprom Neft also released 25,000 of young Atlantic salmon into the Keret The reproduction of aquatic bioresources programme River (the Republic of Karelia) that flows into the White Sea. is a significant element of field development projects. Environmental Biodiversity Research on walrus, Reproduction monitoring and study preservation across gray whale, of aquatic of marine and coastal the Company’s bird and fish faunas bioresources ecosystems footprint

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“We run an extremely complex crude oil extraction project, and we fully recognise our responsibility to maintain the ecological balance. Therefore, the Company takes action in several areas: we deploy state-of-the-art technology that reduces ENERGY CONSUMPTION the environmental impact of our operations, arrange continuous environmental monitoring, and implement the biodiversity preservation programme both in the Company’s area of responsibility and in other Russian regions.” AND EFFICIENCY Shaukat Bakiyev Head of HSE, Offshore Development Division Gazprom Neft’s Energy Policy lies at the heart Noyabrskneftegaz, Gazpromneft-Muravlenko, Gazpromneft- of the ISO 50001:2011 compliant energy management Khantos, Gazpromneft-Vostok and Gazprom Neft Orenburg. system implemented at the Company’s facilities in stages Slavneft-Megionneftegaz successfully passed the first since 2012. In 2018, the Company continued to certify its inspection audit. The energy management system is running facilities for compliance with ISO 50001, with certificates at the Downstream Division’s facilities, such as NIS (the issued to Gazpromneft-Yamal and Messoyakhaneftegaz, Refining Division), Gazpromneft Omsk Refinery, Gazpromneft Pechora Sea Environmental Atlas and recertification completed at Gazprom Neft’s Moscow Refinery, Slavneft – YANOS and Omsk Lubricants Plant, Upstream Division and five subsidiaries – Gazpromneft- a branch of Gazpromneft – Lubricants. Based on its broad research into the Pechora Sea flora hydrochemical research and data on the distribution of aquatic and fauna, Gazprom Neft developed an Environmental organisms, sea mammals and birds in the Pechora Sea and Atlas of the area. The 140-page document contains seven its coastlands. Most of these data are unique and have never Energy saving and energy efficiency years’ worth of hydrometeorological, oceanographic and been published before. management structure

MANAGING ENERGY CONSUMPTION MANAGEMENT BOARD AND EFFICIENCY >> Approval of Gazprom Neft’s Energy Policy; >> Approval of the corporate Energy Saving and Energy KEY DOCUMENTS Efficiency Improvement Programme and review of its >> Gazprom Neft’s Energy Policy; performance; >> Downstream Division’s Technical Policy >> General management of energy saving and energy on Energy Efficiency; efficiency improvement initiatives; >> Energy Policy Related to Field Development >> Approval of the target model for the energy and Oil and Gas Production. management system, general management of its development and assessment of its performance. PRIMARY ENERGY SAVING GOALS >> to boost operational efficiency while maintaining or improving reliability, safety and productivity; DIVISION’S ENERGY DEPARTMENTS >> to mitigate environmental impacts; >> Development and update of the energy saving >> to reduce consumption of non-renewable energy. programme, its KPI, goals and objectives; >> Management of the energy saving programme; KEY STAKEHOLDERS >> Control over the energy management system; The Company’s shareholders, investors, executives >> Management of the Power Competence Centre and employees. (Downstream Division).

FACILITIES’ ENERGY MANAGERS AND WORKING GROUPS >> Implementing the energy saving programme; >> Looking around for innovations; >> Monitoring the implementation of the programme’s technical and organisational measures.

114 115 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Upstream Division Downstream Division

The Upstream Division’s energy efficiency The Company achieved significant energy Key activities under the Downstream Under the Programme, the Company programme covers technical and organisational savings through well interventions Division’s Energy Saving and Energy Efficiency builds new modern units, implements measures. to reduce the amount of produced water Improvement Programme in the reporting automated control systems and replaces 462 and use water injection techniques. The key period include: outdated production units at the refineries. 790 M KWH When it comes to technical measures, organisational measures include energy audits >> revamp of process furnaces and technical In 2018, economic benefits from energy the key driver for improving energy efficiency and the implementation of an energy efficiency upgrade of boilers (enhancement of flue saving initiatives at Omsk and Moscow ₽ M energy savings in the Upstream is the production equipment upgrade. Of all monitoring system and IT projects to support gas heat utilisation); refineries amounted to₽ 447.4 m, exceeding economic effect Division in 2018 production operations, mechanical liquid energy saving and energy efficiency processes. >> optimisation of compressor equipment the initial targets by 50%. At Omsk Refinery, lifting consumes the biggest portion of energy. operations and upgrade of lighting impressive results came on the back of a new The Company optimises well performance Power consumption per tonne of produced systems; automated system for cleaning the heating by switching to short-term or intermittent liquid, the key energy efficiency metric, was >> optimisation of heat supply layouts, surfaces of furnaces at the facility for deep operation and introducing energy efficient 28.39 kWh/t. recovery of heat from production processes conversion of fuel oil, optimisation of process 3,347 downhole equipment. Other technical (use of thermal power from product flows furnaces, and installation of higher- 1,504 improvement measures are the upgrade In addition to implementing its Energy Efficiency for heating up feedstock and other process performance insulation in the main steam TJ of pumps, use of energy efficient rotors Improvement Programme, the Company flows). pipelines. At the same time, Moscow electricity, heat ₽ M and installation of variable-frequency drives shut down low-margin wells and optimised Refinery saw systemic optimisation and fuel savings economic effect in the reservoir pressure maintenance, oil the operation of oil pumping equipment Energy savings under the energy saving of furnace operation modes at the facilities preparation and pumping systems. at central gathering facilities to cut specific and energy efficiency programme amounted for hydrotreatment of cat cracking gasoline, power consumption. to 3.3 PJ (petajoules) or 3,347 TJ. bitumen and hydrogen production, and oil distillation. On top of that, compressed air Implemented as part of a large-scale supply schemes at production facilities were refinery upgrade exercise launched optimised and the upgrade of heat and steam Power consumption per tonne of produced liquid by Gazprom Neft back in 2008, the Energy condensate equipment was completed. In (kWh/t) Saving and Energy Efficiency Improvement 2018, the Company implemented a total of 25 Programme made a significant contribution energy saving initiatives at Omsk and Moscow Source: Company data Equipment optimisation to the Downstream Division’s performance. refineries. 28.94 28.66 28.91 28.98 28.39 2018 saw the overhaul of high-pressure multistage centrifugal ring-section pumps with a performance improvement of 3%. Slavneft-Megionneftegaz successfully tested electric units with high-performance EC motors, with energy consumption at pilot wells falling by 25–30%. In 2019, the Company plans to install 25 similar units across the Division. Energy savings in the Downstream Division

2014 2015 2016 2017 2018 in 2018

Power consumption in Upstream Division1

Metric 2014 2015 2016 2017 2018 170,400 50,900 9.3 Power consumption (purchase + generation), MWh 6,177,164 6,419,919 6,298,276 10,121,321 9,002,159 GCAL T M KWH Y-o-y change, % 2.4 4.0 –1.9 61.0 –11.0 of heat of natural fuel electric power Heat consumption (self-generated and purchased from third-party suppliers), GJ 1,064,758 982,015 996,644 1,500,839 1,730,723 Y-o-y change, % 13.0 8.0 1.0 51.0 15.0

1 Starting from 2018, the perimeter of consolidated data includes Gazpromneft-Yamal, Messoyakhaneftegaz, Upstream Division of Gazprom Neft, Gazpromneft-Noyabrskneftegaz, Gazpromneft-Khantos, Gazpromneft-Vostok, Gazpromneft-Orenburg and Slavneft-Megionneftegaz. The 2017 and 2018 data include power consumption indicators of these companies. At Upstream Division of Gazprom Neft, power consumption in 2017 (excluding Gazpromneft-Yamal, Messoyakhaneftegaz and Slavneft-Megionneftegaz) stood at 6,064,268 MWh, while heat consumption amounted to 1,124,180 GJ.

116 117 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Targets for 2019

Power purchased1 by the Downstream Division HEALTH AND SAFETY Indicators 2014 2015 2016 2017 2018 Purchased power, MWh 3,262,669 3,340,550 3,400,210 3,236,805 3,395,831 >> reduction of the specific fatal accident frequency rate by 18% as compared to the 2016–2018 average; Purchased heat, GJ 16,581,709 16,081,895 15,186,997 15,531,129 16,779,175 >> reduction of the specific accident rate by 5% as compared to the 2016–2018 average; >> reduction of the specific rate of road traffic accidents by 10% as compared to the 2016-2018 average.

ENVIRONMENT

Energy intensity index at the Company’s refineries2 >> meeting the specific air pollutant emissions targets;

Refinery 2014 2015 2016 2017 2018 >> meeting the specific GHG emissions targets; >> increasing the percentage of waste sent for disposal and neutralisation; Omsk Refinery 117 114 110 107 106 >> reducing the share of excess emissions charges in the total amount of environmental impact fees; Moscow Refinery 122 114 113 111 111 >> continuous work on the medium term target of increasing the APG utilisation rate to 95%; YANOS 108 108 107 105 103 >> further implementation of corporate environmental initiatives. Pančevo Refinery (Serbia) 126 122 118 113 111 ENERGY EFFICIENCY AND SAVING

KEY ENERGY SAVING MANAGEMENT IMPROVEMENT OBJECTIVES: >> external inspection audits of the energy management system in all subsidiaries of the Upstream Division to confirm compliance with ISO 50001; >> personnel training as part of the competency enhancement initiatives; >> improvement of the Company’s by-laws on energy saving and energy efficiency; CLEAN ENERGY Specific energy consumption Gazprom Neft promotes renewable energy based in the geothermally active areas Upstream Division (kg of fuel equivalent / t)3 generation. In 2018, Omsk Refinery launched in the northern part of Serbia. >> implementation of energy saving and energy efficiency improvement initiatives in 2019–2021; a pilot project to build the Downstream >> planned energy savings of 619 m kWh; 145.0 Division’s first solar power plant NIS also takes part in a joint venture aimed >> meeting the specific power consumption targets set for the Upstream Division in 2019 (24.57 kWh/t of liquid); 137.2 143.0 134.6 132.4 with an installed capacity of 1 MW. Subject at the construction of Plandiste wind park to the satisfactory performance of the pilot comprising 34 wind generators with a total Downstream Division plant, the Company will consider an increase capacity of 102 MW and expected annual >> implementation of energy saving and energy efficiency improvement initiatives in 2019–2021; in its capacity to 20 MW in 2022. output of 212 GWh of electrical power. The >> economic benefits of ₽ 1,635.9 m. wind park operation will reduce emissions

NIS runs projects on the use of geothermal by 332 kt of CO2 equivalent per year. energy, planning to build power plants 2014 2015 2016 2017 2018

1 Excluding volumes transferred to third parties. 2 Calculated in line with the methodology provided by Solomon Associates. Energy Intensity Index (EII) compares actual energy efficiency for a refinery with the “standard” energy efficiency for a refinery of similar size and configuration, showing the ratio of a facility’s actual energy consumption to the standard energy consumption. The lower the EII is, the higher the facility sits on the energy efficiency scale. 3 Specific energy consumption growth came on the back of greater conversion rate.

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ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

MANAGEMENT APPROACHES

Gazprom Neft’s personnel Gazprom Neft operates in 30 regions of quality petroleum products, buyer allocation by region, of Russia1, six CIS and six non-CIS countries. of import-substituting and high-tech products (headcount as at the end As one of the largest Russian employers manufactured locally, initiator of and participant KEY DOCUMENTS of 2018) and taxpayers, Gazprom Neft contributes in environmental activities. In partnership greatly to the development of regions across with stakeholders, the Company implements Regional Policy Concept, Policy for Charity Work its geographies as an investor, supplier a social investment programme called Home KEY PRINCIPLES OF THE REGIONAL POLICY Towns. Policy for Charity Work

>> Ensuring environmental safety and minimising environmental impact; >> cooperating with regional and municipal governments to encourage sustainable development of local communities and to improve the quality of life; >> creating a competitive environment in regional labour markets; 70,648 98% 20 46 >> facilitating a favourable financial, economic and legal climate PEOPLE SHARE REGIONS SOCIAL for the Company’s operations; OF THE COMPANY’S supplied AND ECONOMIC >> fostering cooperation with stakeholders; DOMESTIC SUPPLIERS by the Company’s road PARTNERSHIP >> promoting information transparency for all stakeholders. construction materials AGREEMENTS KEY OBJECTIVE OF SOCIAL ACTIVITIES

14,161 St Petersburg and Leningrad Region Improving the quality of life across the Company’s regions of operation 10,365 Yamal-Nenets Autonomous Area 10,047 Moscow and Moscow Region 800 6.8 TOP EXECUTIVE RESPONSIBLE FOR THE REGIONAL POLICY 9,151 Omsk Region 6,141 Serbia ₽ BN ₽ BN Alexander Dybal, Member of the Management Board, 4,445 Novosibirsk Region of tax payments of social Deputy CEO for Corporate Communications 3,776 CIS and customs duties investments 2,807 Sverdlovsk Region in 2018 in 2018 2,565 Tyumen Region KEY STAKEHOLDERS 1,817 Khanty-Mansi Autonomous Area 1,414 Russia’s other regions Regional government agencies and municipal authorities, the Company’s employees 1,210 Ivanovo Region and their families, local communities, shareholders and investors, non-profit and public 1,079 Orenburg Region organisations, suppliers, customers 767 Tomsk Region 591 Iraq 312 Other non-CIS countries

1 Excluding the regions where the Company only sells its products.

122 123 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Implementation structure of the regional policy REGIONAL MANAGEMENT BOARD DEVELOPMENT INITIATIVES >> Developing the regional policy strategy >> Managing the policy implementation and results assessment Road quality improvement

CORPORATE COMMUNICATIONS DIVISION >> Auditing relations with regional authorities Gazprom Neft introduces efficient solutions conditions of every region. In 2018, seven >> Drafting standards and organising activities >> Providing administrative support for social and economic for transport infrastructure to construct new regions joined the programme, namely for the regional policy implementation agreements high-quality and long-lasting roads. Under St Petersburg, the Amur, Leningrad, Moscow >> Providing support for investment projects at the regional >> Coordinating the Regional Policy Commission agreements with regional governments, and Rostov regions, and the Krasnodar authorities’ level >> Managing the social investment programme, developing the Company produces and supplies bitumens and Primorye territories. The programme >> Collecting and processing regional information affecting the programme’s projects and assessing its effectiveness tailored to specific climatic and operational now encompasses 20 regions. the regional policy implementation, drafting relevant >> Auditing subsidiaries’ social investment programmes reports, overviews and summaries >> Providing communication support

2018 FIFA World Cup CORPORATE CENTRE’S REGIONAL DEVELOPMENT SUBSIDIARIES DEPARTMENT >> Generating proposals for the regional policy implementation >> Generating proposals for the regional policy and regional business development Gazprom Neft supplied bitumens to upgrade the roads in transport facilities of St Petersburg, including Nevsky Prospect, St Petersburg in the run-up to the 2018 FIFA World Cup. roads leading to Stadium, Betancourt Bridge implementation >> Implementing resolutions of the Regional Policy Commission The Company produced polymer modified asphalt cement near Serny Island, etc. The cement is designed to fit the climate >> Generating proposals for the Company’s regional >> Fostering relations with regional and municipal authorities and docking tapes that were used in the overhaul of the key conditions of the North-Western region and the traffic. business development and social projects’ scope >> Developing, implementing, monitoring and assessing >> Implementing the social investment programme the subsidiaries’ social investment programmes >> Implementing resolutions of the Regional Policy Commission

Science and industry development

REGIONAL POLICY COMMISSION >> Collecting and considering proposals on the regional policy The Company promotes scientific and industrial and industrial automation. Through and the social investment programme submitted by the Company’s development of the regions by supporting the Technopark, the largest one east business units and subsidiaries the industrial clusters. As part of the regional of the Urals, the Company contributes >> Approving the subsidiaries’ annual social investment programmes development strategy and a project to set up to the implementation of the Digital Economy >> Generating recommendations with respect to proposed initiatives a petrochemical cluster, the Company continued in Russia government programme in Omsk. the construction of the oil refining catalyst Using the Technopark establishment, and needle coke production plant in the Omsk Gazprom Neft awards grants to support Construction of a needle Region in 2018. This will be the first Russian promising initiatives and provides the young coke production plant plant to produce needle coke, a strategic developers with computer workstations material for the steel-making, nuclear, chemical and expert assistance. The field tests of new and space industries. solutions are performed at Omsk Refinery and other facilities of the Company. In 2018, The Company plans and implements the regional policy local residents and our own employees. This helps us go The Company’s Technopark in the Omsk the Company introduced a co-working in conjunction with the regional development objectives beyond mere sponsorship to spearhead positive changes Region is a unique platform that focuses space for the developers where they can and programmes. We build Home Towns social project and channel our resources for tackling the most pressing on the development and testing of digital join their efforts using the Technopark portfolio in collaboration with regional authorities, NGOs, issues. solutions for software import substitution infrastructure.

124 125 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Import substitution HOME TOWNS PROGRAMME

In accordance with its Innovative import substitutes) produced by the regional In 2012, Gazprom Neft chose to combine all Social projects’ yearly lifecycle Development Programme, Gazprom Neft companies. By the end of the year, more its social investment initiatives into a single is committed to teaming up with partners than 85 companies from the Tyumen Region umbrella programme called Home Towns, that provide innovative solutions in the areas and over 30 companies from the Tomsk Region shifting focus from targeted support towards of the Company’s strategic interest. The joined the Company’s supplier pool. a social investment approach ensuring CONTEXT PROJECT SELECTION Company steadily increases procurement consistent improvement of living standards 1 REVIEW 2 FOR THE REPORTING PERIOD share of Russia-made products, thus The Company implements the initiative across the Company’s footprint. Today, Share your supporting the drive to create new products. to supply lubricants and technical fluids this is one of the most successful and popular innovative solution The Company’s goals and targets in this area to regional utilities and industrial companies. business initiatives for the development of local >> regional development SELECTION CRITERIA with Gazprom Neft monitoring; >> alignment with the Company’s are in line with regions’ and the industry’s Gazprom Neft produces import substitutes communities in Russia. >> identification of pressing social strategic priorities; import substitution plans. Gazprom Neft that both are better priced and meet issues; >> social relevance for the region and the governments of Tomsk and Tyumen the requirements of the world’s leading OBJECTIVES: >> consideration of potential and alignment with stakeholder regions signed a Roadmap on the Expanded equipment manufacturers. The regional >> building basic social infrastructure projects to address these issues; interests/needs; Use of the Hi-Tech Products (including companies are also provided with technical in the regions of operation; >> assessment of the Company’s >> potential for systemic and service assistance. With the Moscow >> making comprehensive urban current initiatives for efficiency transformation; and Amur regions and the Primorye improvements; and relevance; >> stakeholder involvement Territory having joined in 2018, the regional >> developing education, culture and sports; >> stakeholder engagement in the development 1 “Import substitution of key digital transformation tools is only one step. governments participating in the programme >> supporting creative industries ; opportunities. and implementation; We aim to get ahead of imports.” totalled 17. >> promoting science amongst the youth. >> expected effect; >> uniqueness. Rustem Mufteev General Director of Avtomatika-Servis, the operating company of the TechnoPark TOOLS: >> social and economic partnership agreements with authorities; BUILDING A REGION-SPECIFIC >> the Company’s own initiatives; 3 PROJECT PORTFOLIO >> targeted corporate charity; >> volunteering support; Development and approval >> grant competitions. of region-specific social investment programmes. ASSESSMENT OF SOCIAL INVESTMENTS Social projects are subject to review at each stage of a yearly cycle. PROGRAMME MONITORING AND ADJUSTMENT PERFORMANCE 4 AS NECESSARY 5 ASSESSMENT

MONITORING TOOLS Following the assessment, the top- >> opinion polls and expert surveys; performing projects are included >> public hearings and meetings in the best practice library with a view with residents; to adapting and rolling them out to other >> feedback collection regions. at rodnyegoroda.ru; The assessment results are discussed >> online votings / open contests with stakeholders and factored into for residents. the social investment plan for the next calendar year.

1 Creative industries refer to activities that have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property.

126 127 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Home Towns outcomes Social and economic agreements

HOME TOWNS ABOUT THE FUTURE As part of its social and economic agreements In 2018, the Company put into effect social “Today, Home Towns is IN QUESTIONS AND ANSWERS In 2019, Home Towns will focus on digital with regional governments, Gazprom Neft invests and economic agreements with governments a community communication formats. We will increasingly in building and upgrading local infrastructure, across 26 Russian regions and 20 municipalities. Deputy CEO for Corporate Communications, speaks of those who care.” about the Home Towns outcomes rely on two-way communications and cutting- while also providing charitable assistance In furtherance of these agreements, we made 4.3 Alexander Dybal. edge tools to engage people in social life, and supporting indigenous northern minorities. ₽ 4.3 bn worth of investments in social projects. Alexander Dybal ₽ BN Deputy CEO and place a stronger emphasis on online education, exchange of hands-on knowledge investments in for Corporate Communications social projects made and building horizontal ties. A good ORENBURG REGION YAMAL-NENETS AUTONOMOUS AREA by the Gazprom Neft example of such interactions is the social Group in furtherance ABOUT THE PROGRAMME investment forum where volunteers, grantees >> repairing and landscaping kindergartens >> constructing the Yamal-Arena multi- of social and economic We believe that support of projects spanning and programme partners can meet and share in Samorodovo town and Berdyanka, purpose sports facility in Salekhard; agreements in 2018 The Company’s social a broad spectrum of public interests can their experience and best practices. Today, Kuvay and Ivanovka villages; >> creating a public garden in Krasnoselkup investments (₽ m) 6,787.0 improve the quality of life. This is why Home Towns is truly a community of those >> repairing schools in Perevolotsky, village; our efforts target such areas as access who care. Samorodovo, Chkalov towns >> constructing residential houses to culture and sports, urban infrastructure, and Sudbodarovka, Kuvay and Platovka in Novy Port village. 4,543.9 3,966.0 4,107.3 4,312.9 aid to young talent, and support of social ABOUT LEADERS villages; enthusiasts’ improvement initiatives. Home Towns is also a massive volunteer >> repairing community centres in Karavanny movement driven by local activists, town and Pretoriya village. ABOUT PROJECTS programme partners and by now over 4,700 In 2018, the Home Town’s portfolio combined Gazprom Neft employees. All of them

2014 2015 2016 2017 2018 some large-scale national and international make personal contributions to improving TOMSK REGION projects run annually and a variety of smaller the towns where they were born and raised, local volunteer campaigns, all of which or where they moved to work and live >> repairing the central stadium in Parabel are vital for regional development. with their families. village; HOME TOWNS >> repairing a school in Kargasok village. Gas supplies IN 2018 ABOUT THE APPROACH In 2018, active volunteers, winners Our investments in creative and socially of Gazprom Neft grants, and the Company’s to Novy Port KHANTY-MANSI important projects set stage for a sustainable partners in key projects became the first AUTONOMOUS AREA – YUGRA and comprehensive development across ambassadors of Home Towns. Programme our footprint, and their positive outcomes ambassadors are people with a proven social >> constructing a 120-apartment house In 2018, Gazprom Neft entered into a supplementary agreement 6.8 encourage people to take part in new projects track record, leaders capable of building in Khanty-Mansiysk; to the social and economic partnership agreement with the government running independently of Home Towns. a creative and engaging environment >> constructing a covered ice hockey pavilion of the Yamal-Nenets Autonomous Area to build an 8.7 km gas pipeline ₽ BN with a capacity of about 2,000 m³/h in Novy Port. The boiler house, to support further transformation. This goal in Novoagansk settlement; spent on social boarding school, fish factory, hospital and kindergarten are to be When we were launching Home is similar to the one that we set ourselves >> creating a public garden investments connected first. The transition of diesel-powered utilities to gas will Towns in 2012, we sought to transition in corporate development as we seek in Elizarovo village; significantly cut costs for generating electricity and heat, and reduce from conventional sponsorship and charity to establish new leadership in business. >> establishing playgrounds in Repolovo, tariffs for consumers. to a social investment format. Our experience Unlocking your own potential is only half Sibirsky and Batovo villages; >250 shows that was the right choice. We would the battle. You cannot fully succeed without >> repairing schools in Sibirsky not have been able to make changes helping others fulfil themselves to the best and Krasnoleninsky villages. SOCIAL PROJECTS we see in our regions of operation without of their ability. completed a massive support and engagement of local communities.

128 129 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Corporate volunteering

Corporate volunteers Volunteering is the backbone of the Company’s souvenirs together with the centre’s Home Towns programme. Overall, students over the year. These are sold 4,567 4,773 the Company saw some 4,773 employees come at the Christmas charity auction and fairs Gazprom Neft’s corporate volunteering programme up with their own ideas, team up with other in Gazprom Neft’s offices; 2,633 2,856 volunteers or launch their own projects >> cooperation with the Raoul charity as part of the dedicated corporate contest. foundation. Together with the foundation 1,794 In 2018, the volunteering contest received Gazprom Neft’s volunteers provide 157 applications, with 84 of them put into alumni of St Petersburg and Leningrad 4,773 1,494 >350 84 action and supported by the Company. Its grant Region orphanages and boarding schools

2014 2015 2016 2017 2018 fund totalled ₽ 4.4 m. with career and welfare guidance and help EMPLOYEES EMPLOYEES VOLUNTEERING EMPLOYEE them adapt to the new social environment. VOLUNTEERED donated blood initiatives organised initiatives In addition to implementing their initiatives, In 2018, 181 alumni received support in 2018 in 2018 implemented as part Volunteering initiatives corporate volunteers can develop teamwork and more than 80 found a permanent of the volunteering and project management skills. or temporary job; contest in 2018 350 Our volunteers are enthusiastic and caring people who make significant contributions >> Blood Donor Day. In 2018, 1,494 people took to sustainable development of regions where they live and work. 287 KEY VOLUNTEERING PROJECTS IN 2018: part in Gazprom Neft’s corporate blood 265 282 >> partnership with the Anton’s Right Here donation initiatives; 188 social habilitation1 centre for adult >> mutual aid fund. Since 2010, the fund autists. The Company’s employees offer has been providing aid to Gazprom Neft’s comprehensive support, including crafting employees in hardship. Grant competition of social projects

2014 2015 2016 2017 2018 602 118 26 Home Towns forum APPLICATIONS PROJECTS ₽ M submitted for implemented as part provided In 2014, Gazprom Neft kicked off a Home Towns social investment forum, The 5th social the Company’s grant of the grant competition in grant funding Arctic beach cleanup the Company’s central annual social investment forum competition in 2018 in 2018 in 2018 volunteering initiative event attended by Russian and foreign (coverage) experts, partners, grantees and volunteers. Over the five years, the Grant competitions are the key vehicle Gazprom Neft’s financial, methodological forum has evolved into an international harnessed to aid local activists, non-profit and expert support. platform to share experience and and non-governmental organisations discuss hot trends in regional the first two-day training programme for and public institutions across the Company’s In 2018, the competition ran in six regions – development and social projects. The the best volunteers and grant winners. footprint. Our efforts in this area go beyond Yamal-Nenets and Khanty-Mansi – Yugra 2018 forum focused on the role of Its key themes were community building one-off support, as Gazprom Neft seeks autonomous areas, Tyumen, Tomsk, Omsk business in social transformation. In the and the role of communications in Music and drawing to make sure that most projects could flourish and Orenburg regions, with 118 initiatives run-up to the event, the Company staged promoting social projects. Interview with Gazprom teacher changes life after the grant expires. The winners receive supported and the grant fund totalling ₽ 26 m. Neft’s volunteer Ruslan around her (coverage Gaidarov by AIF Orenburg)

1 Habilitation is a set of medical and/or social initiatives to help the disabled adapt to social environment or a specific activity.

130 131 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Key social projects in 2018 MAKERS OF RUSSIA

GAZPROM NEFT CUP Together with the Creative Practices Fund, competencies and present their products Gazprom Neft runs the Makers of Russia to a wider audience. The portal’s most active project to support young entrepreneurs. users can benefit from the support of mentors Gazprom Neft Cup is an international kids hockey arenas, with opening ceremonies and superfinals The project offers a series of research and internships to develop their business. established in 2007 as the Company’s key project being by no means inferior to the world’s best tasks, forums and intensive workshops 26 promoting children’s sports. It also the world’s hockey shows. The games are covered by major bringing into focus the Mastera.Academy In 2018, over 7,000 people took online courses More details on Makers teams largest non-for-profit hockey competition sports channels, radio stations and online portals online media portal, which serves as a free at Mastera.Academy, with 13 entrepreneurs of Russia for children under 11 years old. and streamed live with professional commentary. platform for young entrepreneurs to share from across Russia completing internships The 2018 tournament brought together their experiences, develop professional in Finland and St Petersburg. PARTNER The Cup boasts organisational support 26 clubs from six countries (Belarus, Germany, 6 unmatched by any other kids tournament. Kazakhstan, Latvia, Russia and Finland). countries The competition takes place at Olympic ice

PARTNER CREATIVE PRACTICES 7,000 13 BECOMING INCREASINGLY INTERNATIONAL programme participants in 2018 entrepreneurs to take internships In 2019, Gazprom Neft Cup will get a lot and Finland. As a result, the tournament will bigger, with teams from Austria, China, see 31 teams from ten countries competing Slovakia and the Czech Republic joining for the cup, which makes it the largest the current participants from Russia, non-for-profit international kids hockey ARITHMETIC PROGRESSION Belarus, Germany, Kazakhstan, Latvia competition.

Since 2013, Gazprom Neft has been a partner fundamental research projects of professional KUSTENDORF CLASSIC MUSIC FESTIVAL of the Chebyshev Laboratory at St Petersburg teams. State University led by the Fields1 medal winner Stanislav Smirnov. Our joint project, Arithmetic In 2018, the Company offered scholarships Every year, Serbia hosts a festival of Russian with its programme featuring a contest Progression, provides support to young and prizes to 60 students and four young classical music with the globally renowned of aspiring musicians, various workshops mathematicians at every stage of learning, which scientists as part of the project. In 2019, film director Emir Kusturica as its founder and performances by the world’s classical St Petersburg to host includes enrolling schoolchildren at universities, the project will reach out across the border, and key mastermind. Gazprom Neft has music stars such as conductor Valery Gergiev International Congress allocating dedicated scholarships to students, with Gazprom Neft to sponsor the launch been sponsoring the festival since its and classical pianist Denis Matsuev. The of Mathematicians 2022 offering grants and internships (both in Russia a Modern Mathematics international master’s inception in 2013. The event primarily seeks 6th festival welcomed 27 young Russian and overseas) to young scientists, and funding programme. Golden Matryoshkas from this year’s Bolshoy Festival to support young musicians and foster musicians from across the Company’s regions on their way to Russia and cultural ties between Russia and Serbia, of operation. Serbia PARTNER 60 dedicated scholarships

DEVELOPING TALENT

Since 2015, Gazprom Neft has been annually with 106 best oil and gas research projects running the Developing Talent case-solving selected by the jury for in-person presentation tournament for gifted high school students at regional rounds, and 24 winning teams making from across the Company’s regions of operation. it to the finals in St Petersburg. In 2018, the tournament saw 2,600 applications, Developing Talent: grand prix goes to Khanty-Mansiysk PARTNER and St Petersburg 559 2,600 teams participants

1 The top award in the field of mathematics. The Fields Medal is awarded to two to four mathematicians under 40years of age at the International Congress of the International Mathematical Union, a meeting that takes place every four years. 132 133 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

STENOGRAFFIA STREET ART AND GRAFFITI FESTIVAL STORM MIXED MARTIAL ARTS (MMA) SCHOOL

Gazprom Neft supports Stenograffia, Russia’s The 2018 festival helped create new landmarks Since 2015, Gazprom Neft has been supporting free of charge as part of Gazprom Neft’s major street art and graffiti festival which invites across the Company’s “home” towns, with 38 the Storm school opened in Omsk by Alexander scholarship programme. the participants to transform inconspicuous major art pieces appearing in Yekaterinburg, Shlemenko, one of the most successful town buildings into works of art. Khanty-Mansiysk and Omsk. Yekaterinburg Russian mixed martial artists. Storm facilities In 2018, the school held the third annual mixed also received a unique graffiti mural created are equipped on par with the world’s leading martial arts tournament that brought together The large-scale paintings take into account by a neural network and drawn by a robotic MMA schools, with over 400 children training more than 300 kids from 11 Russian regions. Street artists add colour Mixed martial arts to Noyabrsk and Muravlenko the area’s specifics along with its cultural printer with no human involvement. In tournament and historical heritage, incorporating themes Orenburg, a nine-storey building displays (coverage by Vesti-Omsk) and images familiar and dear to locals. a mural called Einstein-Rosen Bridge – a tunnel Outdoor sports grounds Stenograffia works feature in prestigious connecting different universes. international street art catalogues such As part of the joint work to effectively transform workout equipment. Since 2014, the city has as Google Arts & Culture. Omsk social and sports infrastructure, received five new sports facilities where Storm the Omsk Region Government, Storm School coaches regularly hold free training sessions, and Gazprom Neft helped build outdoor with three more to be opened each year starting sports grounds equipped with state-of-the-art from 2019. PARTNER 10 7 40 cities thousand art pieces sq m of graffiti SPIRIT OF FIRE INTERNATIONAL FESTIVAL

STRELKA EDUCATIONAL EVENTS In 2007, Gazprom Neft became a general partner of Spirit of Fire, Russia’s one and only debut film event hosted by Khanty-Mansiysk.

Together with Strelka Institute for Media, In 2018, more than 4,000 St Petersburg The international festival is led and inspired by the famous Russian film director Sergei Solovyov Architecture and Design, Gazprom Neft residents attended In the City, a conference (Assa, One Hundred Days after Childhood). His fame along with the event’s unique venue organises educational events for enthusiasts on technologies shaping the future of our cities. and special vibe serve to attract the world’s celebrities such as Catherine Deneuve, Fanny Ardant, living in St Petersburg and Omsk. The lecturers In Omsk, the Your Town in Your Own Hands Spirit of Fire Pierre Richard and Vincent Pérez. are partners from architectural firms, museum project brought together over 1,000 locals, international festival curators, national and international design, with another 54,000 watching the online Spirit of Fire saw the debut of Boomer, The Heat, The Italian, How Victor ‘The Garlic’ Took Alexey Omsk hosts outdoor urban technology and digital innovation experts. broadcast. ‘The Stud’ to the Nursing Home and other successful and much talked-about films in Russia. development lectures

PARTNER OMSK ST PETERSBURG >1,000 >4,000 project lab students participants

In the City: how technologies change urban life 54,000 Experts from online conference attendees 5 countries

134 135 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

SOCIAL INITIATIVES ABROAD INTERACTION Serbia WITH INDIGENOUS

One of the major long-term investors KUSTENDORF CLASSIC MUSIC FESTIVAL NORTHERN MINORITIES in Serbian economy, Gazprom Neft runs Every year, Serbia hosts a festival of Russian large-scale social projects seeking to support classical music with the globally renowned national culture and preserve the country’s film director Emir Kusturica as its founder Gazprom Neft operates in the settlement The Company ensures strict observance historical heritage. and key mastermind. Gazprom Neft has been areas of indigenous northern minorities of indigenous peoples’ rights in the course sponsoring the festival since its inception in the Khanty-Mansi Autonomous Area – of field development. When working Opening ceremony for THE CHURCH OF SAINT SAVA MOSAIC in 2013. For more details on the Kustendorf Yugra and Yamal-Nenets Autonomous Area. on relevant projects, the Company and local the mosaic decoration on DECORATION festival, see p. 132. Bearing in mind the rapid growth of its authorities stage public hearings attended the cupola of St Sava’s The Company initiated and supported the mosaic assets, the Company strives to do business by indigenous minority representatives Cathedral takes place in decoration of the dome of the Church of Saint SUPPORT OF THE RUSSIAN HOUSE – in a responsible way to keep local ecosystems so as to take their interests into account Belgrade Policy on Sava in Belgrade. This is an architectural RUSSIAN CENTRE OF SCIENCE AND and culture alive. It runs environmental in the facility construction process. The Interactions monument of Serbia and one of the largest CULTURE protection activities using advanced technology Company also holds regular informational with Indigenous Eastern Orthodox church buildings in the world. The Russian House established in Belgrade and provides support to local communities meetings with heads of indigenous Northern, Siberian After three years of decoration work, the church back in 1933 is the oldest Russian culture centre to facilitate their integration into the modern families and representatives of municipal and Far Eastern was inaugurated in Belgrade in 2018. The abroad. The centre seeks to build tight cultural social and economic environment while also governments. Minorities opening ceremony was attended by Aleksandar and international relations between Russia preserving their customs and traditions. Vučić, President of the Republic of Serbia, Sergey and Serbia and promote the , The Group’s companies sign agreements Lavrov, Minister of Foreign Affairs of the Russian science and culture. In 2019, the Company The Group’s companies that operate in the areas with the heads of indigenous families Federation, Patriarch Irinej of Serbia, donated a Steinway & Sons concert grand piano inhabited by the indigenous northern minorities or the representatives of municipal and Alexander Dyukov, Gazprom Neft’s CEO. to the Russian House in Belgrade to mark its are Gazpromneft-NNG, Gazpromneft-Yamal, governments in order to support the northern 85th anniversary. Gazpromneft-Zapolyarye and Gazpromneft- communities. Gazprom Neft provides financial Khantos. They rely on the Company’s Policy aid to indigenous households and communities on Interactions with Indigenous Northern, and implements initiatives to preserve Siberian and Far Eastern Minorities their ethnic identity, develop cultural ties Kurdistan Region of Iraq as the underlying document defining between them and revive their traditional the common approach, main principles and key crafts. As part of that, the Company Gazpromneft - Yamal In the region, Gazprom Neft runs a large-scale the number of locals employed by the Company areas of the Company’s interaction with local supports local festivals – the Reindeer acts for preserving social programme focused on providing jobs and its contractors in the region exceeded 400. communities. Herder’s Day and the Fisherman’s Day. In the traditional Yamal to local residents at the facilities of Gazprom 2018, the Reindeer Herder’s Day was held handicraft Neft and its contractors and professional Other social projects in 2018 include The Policy provides for the Company’s business in the city of Muravlenko, Khanymey, Novy training in the oil and gas sector. As part electrification of Khasira and Mil Qasim villages, strategy to be implemented with due regard Port, Yar Sale, Tazovsky, Khalyasaway, of the programme, 16 students and three upgrade of the football ground and playground, to the need to sustain the culture and traditional Tolka and Russkinskaya villages, while PhD students from Kurdistan study at leading purchase of equipment and medications way of life of the northern communities. the Fisherman’s Day took place in Novy Russian oil and gas universities. In 2018, for the hospital in Sarqala. To this effect, Gazprom Neft makes sure Port village. Every year, Gazprom Neft its employees and contractors are aware donates money to put into action the projects of the rules of conduct in the settlement areas of indigenous northern minorities – the grant of indigenous minorities and gives support winners. Among the 2018 initiatives were to social initiatives. The basic interaction a puppet theatre, organisation of a boat race principles include respect of their rights, featuring oblases, traditional rowing boats, transparency and constructive cooperation. and training in local crafts.

136 137 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Target Result PUBLIC RECOGNITION Enter into agreements on the supply of innovative bitumens The programme for supplying Gazprom Neft's innovative bitumens manufactured by Gazprom Neft with at least five Russian regions expanded its scope to include seven more regions: St Petersburg, the Amur, Leningrad, Moscow and Rostov regions, and the Krasnodar and Primorye territories. Implement the Company’s policy with respect to the indigenous The policy was implemented. For details on the plan for interaction ethnic minorities of the North in the Khanty-Mansi and Yamal-Nenets with the indigenous northern minorities, see the Regional Policy and In 2018, the Home Towns social investment and the National Corporate Volunteering autonomous areas, deliver on the plan for interaction with the Development of Local Communities chapter. programme won two prestigious Leaders Council. indigenous northern minorities of Corporate Charity awards in the Best Grant Keep on holding meetings chaired by the heads of key regions within The Company took part in integrated meetings focused on business Competition and Method of Evaluating Social The Company also came top in the Leaders the Company’s footprint to discuss a number of bilateral cooperation development and social cooperation in key regions of operation and Impact of Charitable Projects categories. of Corporate Charity in the Northwest matters, expand the geography of such meetings also in the Stavropol and Krasnodar territories, Rostov and Kurgan Leaders of Corporate Charity is the largest regional competition. Its Strelka Week regions, etc. competition of charity practices and social project was recognised as the best project Continue developing the Avangard Ice Hockey Academy, including 2018 saw the opening of an ice palace in Muravlenko, Yamal-Nenets investment among Russian companies for local community development. The the launch of the first Academy branch in Labytnangi, Yamal-Nenets Autonomous Area, with the new facility set to become the base for a organised by the Donors Forum (the Arithmetic Progression project run together Autonomous Area branch of the Avangard children’s ice hockey academy and serve as Association of Sponsoring Organisations), with the Chebyshev Laboratory at St premises for year-round training in hockey, figure skating and short PricewaterhouseCoopers audit company Petersburg State University was ranked track speed skating. The commissioning of the Academy's branch in and the Vedomosti newspaper. second best educational initiative for North- Labytnangi, Yamal-Nenets Autonomous Area, was rescheduled for 2019. Western Federal District. Continue the implementation of key projects under the Home Towns 2018 saw the continued implementation of all key projects as part of the The Company’s grant competition social investment programme Home Towns social investment programme. For more details, see the received high accolade at the Champions Gazpromneft-Khantos, Gazprom Neft’s Regional Policy and Development of Local Communities chapter. of Goodness corporate volunteering subsidiary, earned the Black Gold of Yugra Hold grant competitions of social initiatives in six regions of New scheduled grant competitions were held in six regions of operation. contest, winning the second place prize. In 2017, the сompany came second operation: the Omsk, Tomsk, Orenburg and Tyumen regions, and The framework for initiative group competitions was implemented in all the Yamal-Nenets and Khanty-Mansi autonomous areas. Support at regions. A total of 118 projects were supported based on the outcome of in the Contribution to Corporate Volunteering in the Social and Economic Partnership least 100 initiatives, including at least 20 projects from local initiative such competitions, including 38 projects of local initiative groups, with category. This nationwide competition among the Companies with Annual Production groups, put in place a competition-based framework for local some ₽ 26 m provided in grant funding in 2018. is organised by the Association of Managers of over 5 Mt of Oil category. initiative groups across the regions Continue to promote the Company's volunteering initiatives, including The fourth volunteering contest was held in 2018. 157 applications were distance learning for volunteers; stage the fourth volunteering submitted for the contest, up by a third y-o-y. The number of winners contest and support at least 50 employee initiatives as part of such hit a new record, too: the Company supported 84 initiatives from contest 30 regions of operation.

Meeting targets for 2018

Target Result Targets for 2019 Pursue initiatives outlined in social and economic partnership The Company took part in assessing the regulatory impact of 30 laws agreements signed with Russian regions, hold at least one meeting and regulations adopted in the Tyumen, Omsk, Tomsk, Orenburg >> Perform an assessment of the Company’s relations >> Continue holding grant competitions of social projects with regional authorities to discuss the agreement implementation regions, Yamal-Nenets and Khanty-Mansi – Yugra autonomous areas, with regional governments and the ways of informing in the six regions of operation: Omsk, Tomsk, Orenburg and adjust the action plan accordingly. Audit 100% of published and Moscow and St Petersburg. them on the Company’s operations in key regions. and Tyumen regions, Yamal-Nenets and Khanty-Mansi – effective local regulations or law-making initiatives that may affect For details on the results of the efforts made as part of the social >> Sign and enforce the implementation of social Yugra autonomous areas. Support at least 100 contestant the Company’s operations and economic partnership agreements, see the Regional Policy and and economic agreements and roadmaps in Russian initiatives. Development of Local Communities chapter. regions. >> Ensure the development of corporate volunteering Increase the number of Russian regions cooperating with In 2018, the lubricant import substitution programme covered three >> Arrange for an internal assessment of the Home Towns projects and maximise the effect of the volunteering the Company in the substitution of lubricant and process fluid more areas – the Moscow and Amur regions and the Primorye imports to 17 Territory. As a result, the total number of effective agreements project portfolio. initiatives. reached 17. >> Carry on supporting the culture and historical heritage of Serbia.

138 139 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

Social package and benefits(₽ '000) APPENDIX 1. ADDITIONAL Benefit 2014 2015 2016 2017 2018 Free and subsidised meals 526,988 711,380 764,480 793,176 933,000 Voluntary health insurance 719,561 698,542 847,477 1,100,348 1,513,748 INFORMATION AND SUSTAINABLE Compensation of travel packages 166,522 121,041 183,817 239,280 212,350 Housing programme 181,038 215,405 142,069 133,119 194,021 DEVELOPMENT METRICS Sporting and cultural events 125,537 129,136 197,154 249,102 312,284

Personnel training

Metric 2014 2015 2016 2017 2018 TOTAL TRAINING DURATION, HOURS 2,054,092 1,927,478 2,289,437 2,930,760 2,166,150 including: >> white-collar employees 876,192 1,052,928 1,145,836 1,404,960 1,082,549 >> blue-collar employees 1,177,900 874,550 1,143,601 1,525,800 1,083,601 >> men 1,252,996 1,175,762 1,396,557 1,729,148 1,278,029 Personnel development >> women 801,096 751,716 892,881 1,201,612 888,122

Headcount and employee mix

Metric 2014 2015 2016 2017 2018 Safe development TOTAL HEADCOUNT AS AT THE END OF THE PERIOD, PEOPLE 61,465 66,497 66,561 67,882 70,648 TOTAL WATER CONSUMPTION, MCM 2014 2015 2016 2017 2018 including: TOTAL WATER CONSUMPTION 177.20 174.40 177.50 169.50 198.1 >> men 36,968 37,216 40,835 40,254 42,917 (61%) >> women 24,497 29,281 25,726 27,628 27,731 (39%) Metric 2014 2015 2016 2017 2018 including: COST OF ENVIRONMENTAL SERVICES, ENVIRONMENT SAFETY 6,159.7 6,377.6 6,875.6 6,908.1 5,753.9 >> blue-collar employees 36,181 36,881 34,232 33,873 33,002 (47%) AND PROTECTION (⃀ M1) >> white-collar employees 25,284 29,616 32,329 34,009 37,646 (53%)

including: Changes in key waste management metrics (kt) >> below 30 years – – – 14,647 14,422 (20.4%) Metric 2014 2015 2016 2017 2018 >> 30–50 years – – – 42,736 45,361 (64.2%) Total waste generation 657.2 1,104.5 906.7 1,132.2 1,040.1 >> over 50 years – – – 10,499 10,865 (15.4%) Waste disposal (including waste transferred to third parties for disposal) 324.8 689.6 415.4 739.9 616.8 TOTAL NUMBER OF EMPLOYEES HIRED, PEOPLE 17,457 17,694 14,841 17,184 16,808 including: >> Russian regions 15,244 15,492 12,912 15,708 14,945 >> CIS countries 1,705 1,727 1,104 881 1,116 Economic efficiency >> non-CIS countries 508 475 825 595 747 Direct economic value generated and distributed (₽ m) TOTAL NUMBER OF EMPLOYEES LEAVING, PEOPLE 15,133 16,684 14,335 16,093 15,205

including as a result of: Metric 2015 2016 2017 2018 >> downsizing/redundancy Direct economic value generated, including: 1,507,631 1,590,796 1,990,191 2,587,503 >> resignations 9,006 10,047 9,600 9,674 8,566 Revenues 1,467,943 1,545,608 1,934,589 2,489,292 >> dismissals Economic value distributed, including: 1,391,433 1,381,069 1,720,514 2,186,561 including: Operating costs, including 908,677 926,160 1,063,140 1,284,850 >> Russian regions 12,864 13,811 11,960 14,548 13,117 Employee wages and benefits 76,713 77,467 86,510 97,557 >> CIS countries 1,549 2,000 1,902 1,056 1,131 Payments to government 382,397 430,945 624,449 826,828 >> non-CIS countries 720 873 473 489 957 Payments to providers of capital 33,943 34,282 25,127 21,476 Economic value retained 116,197.9 209,726.2 269,676.5 400,942.0

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APPENDIX 2. MAP OF MATERIAL TOPICS

Boundaries of material topics: within the Company ENVIRONMENTAL SAFETY

– direct impact Wastewater discharges Safe Development – indirect impact Emissions Safe Development Blank field – no material impact Waste generation and management Safe Development

Environmental impact of the Company's Arctic Safe Development operations Topics and aspects Upstream Oil refining Sales Dedicated report chapter Land and vegetation protection Safe Development ECONOMIC PERFORMANCE Environmental properties of products Safe Development, About the Company Strategy Financial Efficiency OCCUPATIONAL SAFETY Investment programme Financial Efficiency Occupational safety and emergency preparedness Safe Development Financial stability Financial Efficiency Health and safety Safe Development Operational efficiency Financial Efficiency Reduction in injury and severity rates Safe Development Product safety and quality Financial Efficiency HUMAN CAPITAL Innovations Financial Efficiency Fair remuneration and social benefits Personnel Development Energy efficiency and conservation Safe Development Personnel training and development Personnel Development Climate change Labour relations and employment Personnel Development The Company’s strategy on climate Safe Development IMPACT ON THE COMPANY’S REGIONS OF OPERATION ETHICS AND GOVERNANCE Contribution to the social and economic development Regional Policy and Development Corporate governance quality Sustainability Management of local communities: Gazprom Neft's role as of Local Communities, Financial Compliance Sustainability Management an employer, taxpayer, and purchaser of local services Efficiency Human rights Sustainability Management Local community development programmes Regional Policy and Development of Local Communities Respect for the rights Sustainability Management, Regional of indigenous peoples Policy and Development of Local Efficiency of social investments Regional Policy and Development Communities of Local Communities Anti-corruption Sustainability Management

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Boundaries of material topics beyond the Company: key stakeholders Boundaries of material topics beyond the Company: key stakeholders

Shareholders Employees Consumers Federal Suppliers, Trade unions Local Non-profit Shareholders Employees Consumers Federal Suppliers, Trade unions Local Non-profit and investors and local contractors, communities and non- and investors and local contractors, communities and non- government partners across the governmental government partners across the governmental authorities Company's organisations authorities Company's organisations footprint footprint ECONOMIC PERFORMANCE OCCUPATIONAL SAFETY Strategy Occupational safety and emergency / Investment programme preparedness Financial stability Health and safety /

Operational efficiency Reduction in injury and severity rates /

Product safety and quality HUMAN CAPITAL Fair remuneration and social benefits Innovations Personnel training and development Energy efficiency and conservation CLIMATE CHANGE Labour relations and employment

The Company’s strategy on climate IMPACT ON THE COMPANY’S REGIONS OF OPERATION ETHICS AND GOVERNANCE Contribution to the social and economic development of local Corporate governance quality communities: Gazprom Neft's role as Compliance an employer, taxpayer, and purchaser of local services Human rights Local community development Respect for the rights of indigenous programmes peoples Efficiency of social investments Anti-corruption

ENVIRONMENTAL SAFETY Wastewater discharges

Emissions

Waste generation and management

Environmental impact of the Company's Arctic operations Land and vegetation protection

Environmental properties of products

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GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other APPENDIX 3. documents GRI 102–12 External initiatives GRI Indicators 147 PJSC Gazprom Neft The Company adheres to the UN Global Compact GRI INDICATORS principles. The Company's sustainability goals and focus areas are closely linked to the UN Sustainable Development Goals. In managing sustainable The Report focuses on the topics that are defined as most material for development and corporate the Company and its stakeholders. In preparing the report, the Company social responsibility, relied on the GRI Reporting Standards (Core Option) and the RSPP Reference the Company is also guided Performance Indicators. by the principles set out in ISO 26000 (Guidance on Social Responsibility). Also, Gazprom Neft joined the Anti-Corruption Charter of the Russian Business. GRI 102–13 Membership of Sustainability Management, 64, 65 PJSC Gazprom Neft GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other associations Stakeholder Engagement documents Strategy GENERAL DISCLOSURES GRI 102–14 Statement from senior Message from Alexander 7 PJSC Gazprom Neft Organisational profile decision-maker Dyukov, Chairman of GRI 102–1 Name of the organisation About the Company 10 PJSC Gazprom Neft the Management Board and CEO at Gazprom Neft GRI 102–2 Activities, brands, About the Company, Financial 9, 12–19 PJSC Gazprom Neft products, and services Efficiency Ethics and integrity GRI 102–3 Location of headquarters GRI Indicators 146 PJSC Gazprom Neft 3–5 Pochtamtskaya St., GRI 102–16 Values, principles, Sustainability Management, 48, 53–54, 66 PJSC Gazprom Neft St Petersburg, 190000, standards, and norms Stakeholder Engagement Russian Federation. of behaviour GRI 102–17 Mechanisms for advice Sustainability Management, 54 PJSC Gazprom Neft GRI 102–4 Location of operations About the Company 8 PJSC Gazprom Neft and concerns about ethics Stakeholder Engagement GRI 102–5 Ownership and legal form About the Company 10 PJSC Gazprom Neft Corporate governance GRI 102–6 Markets served About the Company, 9, 12-19 PJSC Gazprom Neft GRI 102–18 Governance structure Sustainability Management, 42–47, 54 PJSC Gazprom Neft Financial Efficiency, Stakeholder Engagement Personnel Development GRI 102–19 Delegating authority Sustainability Management, 44, 48–49, 72, PJSC Gazprom Neft GRI 102–7 Scale of the organisation About the Company, Personnel 10, 18, 75, 146 PJSC Gazprom Neft Capitalisation (total liabilities Stakeholder Engagement, 89, 122 Development, Financial and equity) = ₽ 3,520,926 m, incl. Health, Safety and Efficiency, GRI Indicators current liabilities = ₽ 562,322 m, Environment, Energy Efficiency non-current and Saving, Personnel liabilities = ₽ 966,785 m, and Development, Regional Policy equity ₽ 1,991,819 m. and Development of Local GRI 102–8 Information on employees Personnel Development, GRI 75, 146 Gazprom Neft Group No records of part-time Communities and other workers Indicators employees are kept. GRI 102–20 Executive-level Sustainability Management, 48–49 PJSC Gazprom Neft GRI 102–9 Supply chain Financial Efficiency 28–29 PJSC Gazprom Neft responsibility for Stakeholder Engagement GRI 102–10 Significant changes GRI Indicators 146 PJSC Gazprom Neft In the reporting period, economic, environmental, to the organisation and its the supply chain did not change and social topics supply chain materially. GRI 102–22 Composition of the Sustainability Management, 45 PJSC Gazprom Neft GRI 102–11 Precautionary principle or GRI Indicators 147 PJSC Gazprom Neft Precautionary principle or highest governance body Stakeholder Engagement approach approach is fundamental for and its committees planning and implementing GRI 102–23 Chair of the highest Sustainability Management, 45, 148 PJSC Gazprom Neft Chair of the highest governance the Company's activities. governance body Stakeholder Engagement, GRI body does not serve as an For the detailed explanation, Indicators executive officer. Alexander see p. 99 of the Company's Dyukov, Chairman of Sustainability Report 2010. the Management Board and CEO.

146 147 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other reference to other documents documents GRI 102–24 Nomination and selection Sustainability Management, 45 PJSC Gazprom Neft GRI 102–35 Remuneration policies for Sustainability Management, 47, 149 PJSC Gazprom Neft Disclosed except for clawbacks. processes for the highest Stakeholder Engagement the highest governance Stakeholder Engagement, The Corporate governance body and its body and senior GRI indicators, the Corporate Governance committees executives Governance section in section in GRI 102–25 Conflicts of interest Sustainability Management, 45, 148 PJSC Gazprom Neft Information on affiliated entities the Company's the Company's Stakeholder Engagement, GRI is available on the Company’s Annual Report 2018 Annual Report Indicators website at: http://ir.gazprom- 2018 neft.ru/ru/disclosure- GRI 102–36 Process for determining Sustainability Management, 47, 149 PJSC Gazprom Neft Disclosed except for information information-according- remuneration Stakeholder Engagement, The Corporate on involvement of remuneration to-russian-legislation/ GRI indicators, the Corporate Governance consultants in determining list-of-affiliates/2018. Governance section in section in remuneration. Disclosed except for cross- the Company's the Company's shareholding with suppliers and Annual Report 2018 Annual Report other stakeholders. 2018 GRI 102–26 Role of highest Sustainability Management, 36, 42–47, 53, PJSC Gazprom Neft Stakeholder engagement governance body in Stakeholder Engagement, 72–73, 88–89, GRI 102–40 List of stakeholder groups Sustainability Management, 60–65 PJSC Gazprom Neft setting purpose, values, Sustainability Strategy, Health, 122-123 Stakeholder Engagement and strategy Safety and Environment, GRI 102–41 Collective bargaining Sustainability Management, 79, 150 PJSC Gazprom Neft Disclosed except for share of Energy Efficiency and Saving, agreements Stakeholder Engagement, GRI employees covered by collective Personnel Development, indicators bargaining agreements. Regional Policy and GRI 102–42 Identifying and selecting GRI Indicators 150 PJSC Gazprom Neft The Company’s key stakeholders Development of Local stakeholders include those groups whose Communities interests are most closely linked GRI 102–28 The competencies and Sustainability Management, 46, 49 PJSC Gazprom Neft to those of Gazprom Neft and performance evaluation Stakeholder Engagement who in turn are capable of having of the highest governance the most considerable impact on body the Company’s ability to achieve GRI 102–29 Identifying and managing Sustainability Management, 36, 42–47, 53, PJSC Gazprom Neft its strategic goals. economic, environmental, Stakeholder Engagement, 72–73, 88–89, GRI 102–43 Approach to stakeholder Sustainability Management, 60–65 PJSC Gazprom Neft and social impacts Sustainability Strategy, Health, 122–123 engagement Stakeholder Engagement Safety and Environment, GRI 102–44 Key topics and concerns Sustainability Management, 60–65 PJSC Gazprom Neft Energy Efficiency and Saving, raised Stakeholder Engagement Personnel Development, Reporting practice Regional Policy and Development of Local GRI 102–45 Entities included in Appendix 2, Appendix 4 Appendix 2, Gazprom Neft Group Communities the consolidated financial to the Company's Appendix 4 to statements Annual Report 2018 the Company's GRI 102–30 Effectiveness of risk Sustainability Management, 57–59 PJSC Gazprom Neft Annual Report management processes Stakeholder Engagement 2018 GRI 102–32 Highest governance GRI indicators 149 PJSC Gazprom Neft Alexander Dyukov, Chairman GRI 102–46 Defining report content About the Report 2 PJSC Gazprom Neft body’s role in of the Management Board at and topic boundaries sustainability reporting Gazprom Neft. GRI 102–47 List of material topics About the Report 3–5 PJSC Gazprom Neft GRI 102–33 Communicating critical The Corporate Governance The Corporate PJSC Gazprom Neft concerns section in the Company's Governance GRI 102–48 Restatements GRI Indicators 150 PJSC Gazprom Neft The Report does not contain Annual Report 2018 section in of information any restatements of information the Company's provided in previous reports. Annual Report GRI 102–49 Changes in reporting GRI Indicators 150 PJSC Gazprom Neft The changes concern report 2018 boundary and calculation GRI 102–34 Nature and total number The Corporate Governance The Corporate PJSC Gazprom Neft methods. The relevant of critical concerns section in the Company's Governance comments are provided in Annual Report 2018 section in the notes to the Report. the Company's GRI 102–50 Reporting period GRI Indicators 150 PJSC Gazprom Neft 2018. Annual Report GRI 102–51 Date of most recent GRI Indicators 150 PJSC Gazprom Neft May 2018. 2018 report

148 149 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other reference to other documents documents GRI 102–52 Reporting cycle GRI Indicators 150 PJSC Gazprom Neft A calendar year. Material topic: Contribution to the social and economic development of local communities GRI 102–53 Contact point for Contacts and Feedback 168 PJSC Gazprom Neft GRI 103 Management approach Financial Efficiency, Sustainability 23–29, 48–49, PJSC Gazprom Neft questions regarding Management, Stakeholder 88–89, 122–124 the report Engagement, Health, Safety and GRI 102–54 Claims of reporting GRI Indicators 150 PJSC Gazprom Neft The report was prepared Environment, Energy Efficiency in accordance with in accordance with and Saving, Regional Policy the GRI Standards the GRI Standards Core option. and Development of Local GRI 102–55 GRI indicators GRI Indicators 146–160 PJSC Gazprom Neft Communities GRI 102–56 External Assurance About the Report 2 PJSC Gazprom Neft GRI 204–1 Proportion of spending Financial Efficiency, 28–29 PJSC Gazprom Neft Significant locations of operation TOPIC-SPECIFIC STANDARD DISCLOSURES on local suppliers GRI Indicators are the exploration and Material topic: Strategy production regions. GRI 103 Management approach Sustainability Strategy, 34–37, 151 PJSC Gazprom Neft Due to the information Material topic: Efficiency of social investments GRI Indicators disclosure in GRI 102-14, this GRI 103 Management approach Financial Efficiency, 26–29, 72–73, PJSC Gazprom Neft material topic covers only Personnel Development, 130–137 management approaches. Regional Policy and Material topic: Corporate governance quality Development of Local GRI 103 Management approach Sustainability Management, 42–47, 151 PJSC Gazprom Neft Due to the information Communities Stakeholder Engagement, disclosure in GRI 102-18 – GRI 203–2 Significant indirect Financial Efficiency, 26–29, 72–73, PJSC Gazprom Neft GRI Indicators GRI 102-36, this material topic economic impacts Personnel Development, 130–137 covers only management Regional Policy and approaches. Development of ECONOMIC ASPECT Local Communities Material topic: Investment programme ENVIRONMENTAL ASPECT GRI 103 Management approach Regional Policy and 127–129 PJSC Gazprom Neft Material topic: Compliance Development of Local GRI 103 Management approach Environmental Safety 101, 102, 105 PJSC Gazprom Neft Communities GRI 307–1 Non-compliance with GRI Indicators 152 PJSC Gazprom Neft Timely remedial actions GRI 203–1 Infrastructure Regional Policy and 128–129 PJSC Gazprom Neft environmental laws were taken to address all investments and services Development of Local and regulations cases of non-compliance supported Communities with environmental laws Material topics: Financial stability and operational efficiency and regulations identified in GRI 103 Management approach Financial Efficiency, 12–19, 48–51 Gazprom Neft Group the reporting year. Sustainability Management, Material topic: Wastewater discharges Stakeholder Engagement GRI 103 Management approach Health, Safety and 108–109 PJSC Gazprom Neft GRI 201–1 Direct economic value Appendix 1. Additional 141 Gazprom Neft Group Environment, generated and distributed Information and Sustainable Energy Efficiency and Saving Development Metrics GRI 306-1 Total water discharge by Health, Safety and 108–109, 152 Gazprom Neft’s Disclosed except for indicating GRI 201–4 Financial assistance GRI Indicators, Appendix 1 141, 151 PJSC Gazprom Neft The Company and its quality and destination Environment, Energy Efficiency subsidiaries that have the quality and destination (excl. received from government Additional Information and subsidiaries take advantage and Saving, GRI Indicators a substantial impact discharges into surface water Sustainable Development of tax benefits as allowed by in terms of water bodies). Metrics the applicable tax law. discharges (the full list GRI 206–1 Number of legal GRI Indicators, 54–55 PJSC Gazprom Neft The Company does not thwart of such subsidiaries is actions regarding anti- Sustainability Management, competition. available at competitive behaviour Stakeholder Engagement http://ir.gazprom-neft.ru/ Gazprom Neft has approved an fileadmin/user_upload/ and violations of anti-trust Anti-Monopoly Policy and has and monopoly legislation documents/corp-gov/ been consistently working to ecology_energy_gpn. in which the organisation prevent and minimise anti-trust has been identified as xlsx) and monopoly risks. In 2018, Material topic: Emissions a participant, and their Russia’s Federal Antimonopoly GRI 103 Management approach Health, Safety and 102–107 PJSC Gazprom Neft main outcomes Service did not initiate any anti- Environment, monopoly proceedings against Energy Efficiency and Saving Gazprom Neft. GRI 305–6 Emissions of ozone- GRI Indicators 152 PJSC Gazprom Neft The Company does not emit any depleting substances ozone-depleting substances on (ODS) an industrial scale.

150 151 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other reference to other documents documents

GRI 305–7 Nitrogen oxides (NOX), Health, Safety and 103 Gazprom Neft’s GRI 302–4 Reduction of energy Health, Safety and 118, 154 Subsidiaries of Gazprom Disclosed except for indicating

sulphur oxides (SOX), Environment, subsidiaries that have consumption Environment, Energy Efficiency Neft’s Downstream and the amount of reductions in and other significant air Energy Efficiency and Saving a substantial impact and Saving, GRI Indicators Upstream Divisions heating, cooling, and steam pollutants in terms of NOx, SOx, that have a substantial consumption. and other significant effect in terms of air emissions (the full reduction of energy list of such subsidiaries consumption (the full is available at list of such subsidiaries http://ir.gazprom-neft.ru/ is available at fileadmin/user_upload/ http://ir.gazprom-neft.ru/ documents/corp-gov/ fileadmin/user_upload/ ecology_energy_gpn. documents/corp-gov/ xlsx) ecology_energy_gpn.xlsx) Material topic: Environmental properties of products Material topic: Waste generation and management GRI 103 Management approach Financial Efficiency 25–26 PJSC Gazprom Neft Due to the absence of GRI 103 Management approach Health, Safety and 101, 110, 141 PJSC Gazprom Neft the relevant specific standard in Environment, Energy Efficiency the GRI Standards, this material and Saving, Appendix 1. topic covers only management Additional Information and approaches. Sustainable Development Material topics: Energy efficiency and conservation, innovations Metrics GRI 103 Management approach Health, Safety and 115–119 PJSC Gazprom Neft GRI 306–2 Waste by type and Health, Safety and 110, 141, 154 Gazprom Neft’s Disclosed except for Environment, disposal method Environment, Energy Efficiency subsidiaries that a breakdown by hazardous and Energy Efficiency and Saving and Saving, Appendix 1. have a substantial non-hazardous waste and by GRI 302–1 Energy consumption Health, Safety and 116–119, 153 Subsidiaries of Gazprom Disclosed except for indicating Additional Information and effect in terms of disposal methods (excluding within the organisation Environment, Neft’s Upstream the following: Sustainable Development waste generation, disposal and neutralisation). Metrics, GRI Indicators neutralisation and Energy Efficiency and Saving, Division that have 1) heating, cooling, and steam disposal (the full list GRI Indicators a substantial impact consumption; in terms of energy of such subsidiaries 2) electricity, heating, cooling, consumption within is available at and steam sold. the organisation (the full http://ir.gazprom-neft.ru/ list of such subsidiaries fileadmin/user_upload/ is available at documents/corp-gov/ http://ir.gazprom-neft.ru/ ecology_energy_gpn.xlsx) fileadmin/user_upload/ GRI 306–4 Total weight for GRI Indicators 154 PJSC Gazprom Neft The Company does not documents/corp-gov/ transported, imported, transport, import, export ecology_energy_gpn.xlsx) exported or treated or process waste deemed GRI 302–2 Energy consumption GRI Indicators 153 PJSC Gazprom Neft Reporting not required by law hazardous waste hazardous under the terms outside of of the Basel Convention the organisation Annex I, II, III and VIII. GRI 302–3 Energy intensity Health, Safety and 118, 153 Subsidiaries of Gazprom Disclosed except for indicating Material topic: Land and vegetation protection Environment, Neft’s Downstream whether the ratio uses GRI 103 Management approach Health, Safety and 111, 112 PJSC Gazprom Neft Energy Efficiency and Saving, Division that have energy consumption within Environment, GRI Indicators a substantial impact the organisation, outside of it, Energy Efficiency and Saving in terms of energy or both. GRI 304–3 Habitats protected or Health, Safety and 112, 113 PJSC Gazprom Neft intensity within restored Environment, the organisation (the full Energy Efficiency and Saving list of such subsidiaries GRI 304–4 Total number of IUCN Red GRI Indicators 155 PJSC Gazprom Neft No rare or endangered is available at List species and national species of animals, plants or http://ir.gazprom-neft.ru/ conservation list species mushrooms were identified in fileadmin/user_upload/ with habitats in areas the areas where the Company's documents/corp-gov/ affected by operations production assets are located. ecology_energy_gpn.xlsx) Material topic: Environmental impact of the Company's Arctic operations GRI 103 Management approach Health, Safety and 112–114 PJSC Gazprom Neft Environment, Energy Efficiency and Saving

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GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other reference to other documents documents GRI 304–1 Operational sites owned, Health, Safety and 112-114, 155 PJSC Gazprom Neft The Company has no production SOCIAL ASPECT leased, managed in, or Environment, assets within the boundaries Material topic: Product safety and quality adjacent to, protected Energy Efficiency and Saving, of specially protected natural GRI 103 Management approach Health, Safety and 88–89 PJSC Gazprom Neft areas and areas of high GRI Indicators areas of federal or regional Environment, biodiversity value outside significance. No rare or Energy Efficiency and Saving protected areas endangered species of animals, GRI 416–2 Incidents of non- GRI Indicators 156 PJSC Gazprom Neft In 2018, no cases of GRI 304–2 Significant impacts of plants or mushrooms were compliance concerning non-compliance with activities, products, and identified. the health and safety the international and Russian services on biodiversity in However, when planning impacts oаf products quality assurance and protected areas and areas its economic activities, and services authenticity laws were identified. of high biodiversity value the Company thoroughly Material topic: Personnel training and development outside protected areas assesses potential GRI 103 Management approach Personnel Development 80, 82, 85 Gazprom Neft Group environmental risks and seeks GRI 404–1 Average hours of training Personnel Development, 80, 156 Gazprom Neft Group Disclosed except for to avoid serious or irreversible per year per employee GRI Indicators a breakdown by gender and environmental violations. employee categories. Material topic: The Company’s strategy on climate; greenhouse gas emissions GRI 404–2 Programmes for Personnel Development, 80, 85, 156 PJSC Gazprom Neft Disclosed except for GRI 103 Management approach Health, Safety and 105 PJSC Gazprom Neft upgrading employee skills GRI Indicators a description of assistance Environment, and transition assistance programmes to support Energy Efficiency and Saving programmes employees after retirement or GRI 305–1 Direct (Scope 1) Health, Safety and 105, 155 Gazprom Neft’s Disclosed except for termination of employment.

GHG emissions Environment, subsidiaries that have a breakdown by CO2 emissions GRI 404–3 Percentage of employees Personnel Development, 84, 157 Gazprom Neft Group Disclosed except for Energy Efficiency and Saving, a substantial impact in from the combustion or receiving regular GRI Indicators a breakdown by gender and GRI Indicators terms of direct (Scope 1) biodegradation of biomass performance and career employee categories. GHG emissions (the full separately from the gross direct development reviews Percentage of employees having list of such subsidiaries GHG emissions. received regular performance is available at reviews totals 37%. http://ir.gazprom-neft.ru/ Material topic: Anti-corruption fileadmin/user_upload/ documents/corp-gov/ GRI 103 Management approach Sustainability management 54 PJSC Gazprom Neft ecology_energy_gpn.xlsx) GRI 205–1 Total number and Sustainability Management, 55–59, 157 PJSC Gazprom Neft The Company has a corporate GRI 305–2 Energy indirect (Scope 2) Health, Safety and 105 Gazprom Neft’s percentage of operations GRI Indicators risk management framework GHG emissions Environment, subsidiaries that assessed for risks in place that covers all business Energy Efficiency and Saving have a substantial related to corruption, and units and operations of impact in terms of identified significant risks the Company. indirect (Scope 2) GRI 205–2 Communication and Sustainability Management, 54, 73, 157 PJSC Gazprom Neft The Company runs an anti-fraud GHG emissions (the full training about anti- Personnel Development, GRI and anti-corruption training list of such subsidiaries corruption policies and Indicators programme mandatory for all is available at procedures employees, both new and old. http://ir.gazprom-neft.ru/ GRI 205–3 Confirmed incidents of Sustainability Management, 54, 73, 157 PJSC Gazprom Neft Following the investigation of fileadmin/user_upload/ corruption and actions Personnel Development, hotline reports, no cases of documents/corp-gov/ taken GRI Indicators corruption were confirmed in ecology_energy_gpn.xlsx) 2018. GRI 305–5 Reduction of Health, Safety and 105 Gazprom Neft’s Material topic: Fair remuneration and social benefits GHG emissions Environment, subsidiaries that have GRI 103 Management approach Personnel Development 76, 77, 78 Gazprom Neft Group Energy Efficiency and Saving a substantial effect in GRI 405–2 Ratio of basic salary Personnel Development, 77, 157 Gazprom Neft Group The Company sets the same terms of reduction of and remuneration of GRI Indicators basic salary for men and GHG emissions (the full women to men for each women. list of such subsidiaries employee category and is available at http:// by significant locations of ir.gazprom-neft.ru/ operation fileadmin/user_upload/ documents/corp-gov/ ecology_energy_gpn.xlsx)

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GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other reference to other documents documents Material topic: Human rights GRI 413–1 Percentage of operations GRI Indicators 159 PJSC Gazprom Neft Local community engagement GRI 103 Management approach Sustainability Management 53 PJSC Gazprom Neft with implemented local programmes are implemented GRI 410–1 Security personnel Sustainability Management, 53, 157 PJSC Gazprom Neft Human rights are part of community engagement, by all key operations of trained in human rights GRI Indicators the mandatory training impact assessments, the Company. policies or procedures programmes that cover 100% and development employees from the security programmes function. GRI 413–2 Operations with GRI Indicators 159 PJSC Gazprom Neft There is a risk that production Material topic: Labour relations and employment significant actual and operations may have a negative GRI 103 Management approach Personnel Development 72, 73 Gazprom Neft Group potential negative impacts impact on the environment GRI 405–1 Diversity of governance Sustainability Management, 44–45, 140, 157 PJSC Gazprom Neft Among the members of on local communities and health of local residents. bodies and employees Personnel Development, the Board of Directors, women The Company has been running Appendix 1. Additional account for 8%, directors aged programmes to mitigate this Information and Sustainable 30 to 50 – 31%, and over 50 years risk (for more details, see Development Metrics, old – 69%. the Sustainability Management GRI Indicators and Safe Development sections). GRI 401–1 New employee hires and Personnel Development, 75, 158 Gazprom Neft Group New employee hires disclosed Potential negative impacts on employee turnover Appendix 1. Additional except for a breakdown by the local communities may Information and Sustainable gender and age group, employee be caused by the termination Development Metrics, turnover disclosed except for or optimisation of production GRI Indicators a breakdown by age group, projects leading to the headcount gender and region. reduction or employee relocation GRI 401–2 Benefits provided to full- Personnel Development, 77, 141, 158 PJSC Gazprom Neft Basic social benefits are to other regions. To minimise time employees that are Appendix 1. Additional provided to employees these risks, the Company runs not provided to temporary Information and Sustainable regardless of the employment employment and personnel or part-time employees Development Metrics, type. development programmes at GRI Indicators such production facilities. For more details, see the Personnel GRI 407–1 Operations and suppliers GRI Indicators 158 PJSC Gazprom Neft No such operations or Development section. in which workers’ rights suppliers were identified during to exercise freedom of the reporting period. Disclosed except for the location association or collective of the operations with significant bargaining may be actual and potential negative violated or at significant impacts on local communities. risk, and measures taken Material topic: Respect for the rights of indigenous peoples to support such rights GRI 103 Management approach Regional Policy and 137 PJSC Gazprom Neft GRI 402–1 Minimum notice periods GRI Indicators 158 PJSC Gazprom Neft The Company complies with Development of Local regarding significant the Russian Labour Code Communities operational changes which sets forth a minimum GRI 411–1 Number of incidents of GRI indicators 159 PJSC Gazprom Neft No such incidents were and their specification notice period prior to violations involving rights identified during the reporting in collective bargaining the implementation of significant of indigenous peoples and period. agreements operational changes (not later actions taken than two months before the start of relevant changes in general case and not later than three months before the start of relevant changes if the decision to reduce the headcount may lead to major layoffs). Material topic: Local community development programmes GRI 103 Management approach Sustainability Management, 64, 112–114, PJSC Gazprom Neft Stakeholder Engagement, 125–126, Health, Safety and 133–135 Environment, Energy Efficiency and Saving, Regional Policy and Development of Local Communities

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GRI Standard GRI indicator Report section Page number(s) / Disclosure boundaries Comments reference to other documents APPENDIX 4. Material topics: Health and safety, occupational safety and emergency preparedness GRI 103 Management approach Personnel Development, 79, 91, 94–95, PJSC Gazprom Neft Health, Safety and 98–100 INDEPENDENT ASSURANCE Environment, Energy Efficiency and Saving GRI 403–4 Worker participation Personnel Development 79 PJSC Gazprom Neft REPORT in the development of the occupational health and safety management system as well as consultation and communication on occupational health and safety GRI 403–6 Promotion of worker Health, Safety and 99 PJSC Gazprom Neft health Environment, Energy Efficiency and Saving Material topic: Reduction in injury and severity rates GRI 103 Management approach Health, Safety and 88–90, 97–98 PJSC Gazprom Neft Environment, Energy Efficiency and Saving GRI 403–9 Types of injury and rates Health, Safety and 94–95, 160 Gazprom Neft's Disclosed except for the types of injury, occupational Environment, Energy Efficiency production and service and rates of work-related diseases, lost days, and and Saving, GRI Indicators subsidiaries in Russia injuries as well as number of absenteeism, and number hours worked. of work-related fatalities Injuries disclosed only with respect to the Company's employees. Fatalities disclosed both in terms of the Company and contractors’ employees.

158 159 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

APPENDIX 5. TERMS AND ABBREVIATIONS

А E

APG EBITDA means associated (petroleum) gas, a mixture of gaseous means earnings before interest, tax, depreciation and hydrocarbons dissolved in oil and released during oil production amortisation

ASP (ALKALINE-SURFACTANT-POLYMER FLOODING) ENMS means chemical technique for oil recovery enhancement where means an energy management system a mixture of anionic surfactants, sodium carbonate and polymer is injected into the reservoir G ASSETS, FACILITIES OR OPERATIONS herein means PJSC Gazprom Neft’s subsidiaries and controlled GRANT COMPETITION OF SOCIAL PROJECTS entities means the social investment tool used by the Company to select, on a competitive basis, and support projects addressing BBAZHENOV FORMATION, RESERVES OF THE BAZHENOV the key social issues in its regions of operation. Grant FORMATION competitions are part of the Home Towns social investment means a stratum in the West Siberian basin programme

GRI (GLOBAL REPORTING INITIATIVE) C means an international organisation developing and promoting a recognised and credible sustainability reporting framework CNG that can be applied by all organisations regardless of their size, means compressed natural gas sector or location

CO2 GRI STANDARDS means carbon dioxide means the latest version of the internationally accepted sustainability reporting framework developed by the Global CORPORATE COMMUNICATIONS Reporting Initiative (GRI) means communications, including the exchange of information, between the Company and its stakeholders

160 161 ABOUT THE REPORT PERSONNEL DEVELOPMENT MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD HEALTH, SAFETY AND ENVIRONMENT, ENERGY EFFICIENCY AND SAVING SUSTAINABLE DEVELOPMENT GAZPROM NEFT GAZPROM NEFT TODAY REGIONAL POLICY AND DEVELOPMENT OF LOCAL COMMUNITIES REPORT FINANCIAL EFFICIENCY APPENDICES 2018 SUSTAINABILITY STRATEGY SUSTAINABILITY MANAGEMENT AND STAKEHOLDER ENGAGEMENT

H L O SUSTAINABILITY (NON-FINANCIAL) REPORTING means a framework (processes) to collect, consolidate, analyse HEADQUARTERS / CORPORATE CENTRE LPG OE and present information on the balance between the financial, means the management company PJSC Gazprom Neft means liquefied petroleum gas means oil equivalent industrial, social and environmental aspects of the Company's performance. It sets out the principles and ways of embracing HOME TOWNS LTIF (LOST TIME INJURY FREQUENCY) OILFIELD SERVICES interests of numerous stakeholders and managing stakeholder means Gazprom Neft’s social investment programme seeking means the number of lost time injuries occurring in means oil and gas field services, including drilling of wells, relations when tackling issues important for the Company and to tackle the most pressing social and economic development a workplace per 1 million hours worked installation of drilling rigs and multi-well pads, well workover, society as a whole issues across its footprint, among other things, through and repairs of drilling equipment cooperation with local communities. The programme focuses on SUSTAINABLE DEVELOPMENT urban development (housing construction and improvement of M OMS means development that meets the needs of the present public areas), creation and development of mass and children's means operations management system without compromising the ability of future generations to meet sports infrastructure, support of sports organisation and MOTOR FUEL CLASS their own needs. The definition was introduced by the UN’s events, backing and promotion of education, preservation and means an emission standard introduced by Russia's Technical World Commission on Environment and Development in the Our development of local cultural potential, and cooperation with Regulations On Requirements to Motor and Aviation Gasoline, P Common Future report. Quoted after Sustainability Reporting indigenous northern minorities Diesel and Bunker Fuel, Jet Fuel and Fuel Oil similar to Guidelines Version 3.0. Translated from English. GRI, 2006 European standards. For example, class 5 is equivalent to PETROLEUM SLUDGE HSE Euro-5 as per the Technical Regulations means a physical combination of several compounds, such means health, safety, environment and civil defence as water, petroleum products and mineral matter (clay, metal T MUD PIT oxides, sand, etc.) means facilities designed for the storage of drilling waste TFE I PRMS (PETROLEUM RESOURCES MANAGEMENT SYSTEM OF means a tonne of fuel equivalent THE SOCIETY OF PETROLEUM ENGINEERS) IFRS N means an international framework developed for the estimation means International Financial Reporting Standards and management of hydrocarbon resources. It focuses U NON-FINANCIAL REPORTING – on whether the resources are potentially available and IRMF see Sustainability Reporting economically recoverable UN SDGS means an integrated risk management framework. Risk means the Sustainable Development Goals adopted

management is a continuous streamlined process to identify, NOX by the UN member states in 2015 assess, monitor and respond to risks at all corporate levels means nitrogen oxides R

ISO 26000 NPO R&D V means an international social responsibility standard published means a non-profit organisation means research and development in 2010 and aimed at all companies and sectors. It is a set of VOC guidelines defining the general terms and principles of socially RSPP means volatile organic compounds responsible activities means the Russian Union of Industrialists and Entrepreneurs

S

SO2 means sulphur dioxide

STAKEHOLDERS means an entirety of individuals and legal entities that have interest in the Company's operations. They can affect or be affected by the Company's actions and performance

162 163 SUSTAINABLE DEVELOPMENT GAZPROM NEFT REPORT 2018

CONTACTS AND FEEDBACK

Dear readers,

We would be genuinely grateful if you could take the time to provide feedback on this Report. Your disclosure assessments and recommendations help us improve both the quality of our non-financial reporting Contact details on Feedback form on and the efficiency of our operations. the Company’s website the Company’s website

To express your opinion or ask any questions, feel free to get in touch with us INVESTOR RELATIONS by using any of the below contacts. Phone: +7 (812) 385-95-48 Email: [email protected] All the questions and opinions will be taken into consideration by officers POSTAL ADDRESS responsible for drafting Gazprom Neft's PJSC Gazprom Neft next sustainability report. 3–5 Pochtamtskaya St., St Petersburg, Russia, 190000

Phone: +7 (812) 363-31-52, 8 (800) 700-31-52 Fax: +7 (812) 363-31-51, 8 (800) 700-31-51

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