SU STAINABILITY REPORT RUS S IAN FEDERATION Our third Sustainability Report covers particularly the corporate Ecological Safety Program (2004 – 2008) outputs; activities related to global energy security issues; new projects addressed to our customers, and performance results of our enterprises in each federal okrug (district) where they operate. GRI Application level С С+ В В+ А А+ Self Declared Third Party Checked GRI Checked Forward-looking statements The forward-looking data in this report is based on the projections. The words ‘believe’, ‘assume’, ‘suppose ’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’ and related expressions indicate that the information is a projection. The specific feature of all the projections is that they imply risk and uncertainty. Actual results may vary significantly from the planning figures and the targets, expectations, estimates and intentions contained in the projection statements. Projection statements are only valid as of the date they are made. OAO LUKOIL does not represent, warrant or predict that the expected results of their activities contained in the projections will actually ever be achieved. Each time such statements are made they represent only one of the many possible development scenarios, thus, are not to be treated as the most likely or typical scenario. Contents ADDRESS TO READERS 2 ABOUT THE COMPANY 5 SUSTAINABLE DEVELOPMENT: KEY FOCUS AREAS 8 Energy and Society ........................................................................................................................................................... 12 Energy Security ................................................................................................................................................................. 12 Supplies of Resources ...................................................................................................................................................... 15 Upgrading and Innovations ............................................................................................................................................... 17 Diversification of Energy Sources ..................................................................................................................................... 19 Rational Use of Resources ............................................................................................................................................... 19 Clean Energy ..................................................................................................................................................................... 21 ENVIRONMENTAL WELLBEING 24 Environmental Management System ............................................................................................................................... 26 2004-2008 Environmental Safety Program ..................................................................................................................... 30 2009-2013 Environmental Safety Program ..................................................................................................................... 36 Measures to Combat Climate Change ............................................................................................................................. 37 Other Environmental Impacts ........................................................................................................................................... 39 CONSUMERS 40 High-quality Fuels and Materials ...................................................................................................................................... 42 Pricing Policy ..................................................................................................................................................................... 45 Quality of Services ............................................................................................................................................................ 46 SOCIAL POLICY 48 Employer Profile ................................................................................................................................................................ 51 Health and Safety .............................................................................................................................................................. 51 Human Resources Management ..................................................................................................................................... 56 Corporate Retirement System .......................................................................................................................................... 59 Personnel Training and Development System ................................................................................................................ 61 Cooperation with Trade Unions ........................................................................................................................................ 63 OAO LUKOIL’s Museum ................................................................................................................................................... 66 SUSTAINABLE DEVELOPMENT OF RUSSIAN REGIONS 68 Company and Society ....................................................................................................................................................... 70 North-Western Federal Okrug .......................................................................................................................................... 71 Urals Federal Okrug .......................................................................................................................................................... 83 Volga Federal Okrug ......................................................................................................................................................... 88 Southern Federal Okrug ................................................................................................................................................. 100 Federal Projects and Programs ...................................................................................................................................... 105 VERIFICATION STATEMENT 110 ATTACHMENTS 116 About the Report ............................................................................................................................................................. 118 GRI, Global Compact, and Social Charter Compliance Table ...................................................................................... 124 Sustainability Report Russian Federation 2007–2008 1 Speech by the OAO LUKOIL President OIL FOR PEOPLE, RATHER THAN PEOPLE FOR OIL Since our second sustainable development report two years of our employees. What we did was simply postpone several ago, the world we live and work in has seen crucial changes. promising projects. As soon as the conditions improve, we The energy sector has experienced a number of constraints will be able to proceed with them as we will still continue that the oil industry is facing for the first time ever in its modern our preparations to their implementation phase. Meanwhile, history. The reasons for, and the progress of, such crisis projects that already have had some success will be financed processes have already been analyzed a number of times. Our in full during the next two years. company’s standpoint is that the crisis does not only create risks, but also new opportunities. Our goal is to see them at the There is no doubt that we depend on global oil prices. right time, and be ready to grasp them. Our direction towards However, what we consider our top priority is not the price, evolutionary development helps us a lot in this: we set realistic but the existing infrastructure, contractors, suppliers and the targets and weigh them against actual risks. We believe that it prevalent taxation framework. We therefore have made an is this approach that can help LUKOIL develop in a sustainable effort in this third report to structure the focus areas of our way while bringing value to people, thus, helping achieve our activities, wherein the interests of the energy company and sustainable development targets. those of society are obviously interconnected in the long term. Eventually, energy security refers to our common desire to live The Russian market is integrated into the global economy, in a safe, illuminated, warm and comfortable world. The threat and the oil industry is therefore directly connected with the of depletion and the rise in the cost of conventional sources of conditions on the global market. In spite of the unfavourable fuel of utilities, the ageing of traditional hydrocarbon production economic situation at present, the Company continues to regions and huge upstream investment requirements are actively implement its sustainable development strategy urgent issues that increase the value of the flexible innovation relying on its accumulated production and investment development strategies of the Company and its partnerships potential. The crisis phenomena are most strongly felt in the with all stakeholders. virtual economy, rather than in the real sector, where actual products are produced. LUKOIL has never interrupted its Due to a decrease in oil production in the Company’s traditional regular investment cycle and continues to launch new projects region of Western Siberia, we are becoming increasingly