Annual Report of Open Joint Stock Company “Oil company “LUKOIL”

TENTATIVELY APPROVED
by the Board of Directors of Open Joint Stock Company
“Oil company “LUKOIL”
Minutes No. 13 of 22 May 2007
Chairman of the Board of Directors
V.I. Grayfer _____________
(signature)
[stamp]
Annual Report
of Open Joint Stock Company
“Oil company “LUKOIL”
for 2006
President V.Yu. Alekperov _________________
(signature)
Chief Accountant L.N. Khoba _________________
(signature)
Contents
Forward-looking statements ............................................................................................................3
OAO “LUKOIL” – the corporate centre of the LUKOIL Group ....................................................4
Events in 2006 .................................................................................................................................6
Exploration & Production..............................................................................................................11
Licensing .......................................................................................................................................15
Geological Exploration..............................................................................................................15
Oil & Gas Reserves ...................................................................................................................21
Field Development and Oil Production.....................................................................................23
Field Development and Gas Production....................................................................................28
Oil Deliveries.............................................................................................................................30
Refining, Petrochemicals and Marketing ......................................................................................32
Oil Refining ...............................................................................................................................32
Gas Processing...........................................................................................................................37
Petrochemicals...........................................................................................................................38
Petroleum Product Marketing....................................................................................................39
Technology and Innovation ...........................................................................................................43
Exploration & Production Technologies ...................................................................................43
Refining Technology .................................................................................................................44
Energy-saving Technologies .....................................................................................................44
Information Technologies .........................................................................................................45
Social Responsibility .....................................................................................................................46
Protecting the Environment .......................................................................................................46
Industrial Safety and Labour Protection....................................................................................48
Personnel and Social Programs .................................................................................................49
Social Policy and Charity Activities..........................................................................................52
Board of Directors and Management Committee..........................................................................56
Report of the Board of Directors of OAO “LUKOIL” on the results of development of OAO
“LUKOIL” in its priority areas of business and the development prospects of OAO “LUKOIL”
.......................................................................................................................................................65
Dividends.......................................................................................................................................70
The Market for Company Securities .............................................................................................71
Description of the main risk factors associated with the operations of OAO “LUKOIL”............74
Information on the Company’s adherence to the Corporate Governance Code............................80
List of transactions recognised as major transactions in accordance with the Federal Law On
Joint Stock Companies performed by OAO “LUKOIL” in 2006, and other transactions covered
by the procedure for approving major transactions in accordance with the Charter of OAO
“LUKOIL”:....................................................................................................................................95
List of transactions recognised as interested-party transactions in accordance with the Federal
Law On Joint Stock Companies performed by OAO “LUKOIL” in 2006....................................95
2
Forward-looking statements
•
Some of the statements made in this report are not statements of fact, but rather
represent statements on the future. These statements include, specifically:
–
plans and forecasts relating to income, profits (losses), profits (losses) per
share, dividends, capital structure, other financial indicators and ratios;
–
our plans, goals and objectives, including those related to products and
services;
–
future economic indicators;
–
the prerequisites on which the statements are based.
•
Such words as “believes”, “expects”, “assumes”, “plans”, “intends”, “anticipates”
and others are used in those cases when we are talking about statements on the
future. However, the proposed options for solving the problems included in the
statements are neither singular nor exclusive.
•
Statements on the future inherently imply certain unavoidable risks and ambiguous
issues, both general and specific. There is a risk that the plans, expectations,
forecasts, and some of the statements on the future will not be realized. Due to a
number of various factors, the actual results may differ materially from the plans,
goals, expectations, assessments and intentions expressed in such statements.
3
OAO “LUKOIL” – the corporate centre of the LUKOIL Group
Founded as an oil company in 1991, OAO “LUKOIL” * is now one of Russia’s largest verticallyintegrated companies.
Open Joint Stock Company “Oil company “LUKOIL” was founded in accordance with
Resolution No. 299 of the Council of Ministers–Government of the Russian Federation of 5
April 1993, and was registered on 22 April 1993.
OAO “LUKOIL” (hereinafter also the “Company”) is the parent company of the LUKOIL
Group, which includes organisations whose operations encompass the entire range of business,
from prospecting and exploration to the sale of oil products and petrochemicals.
The Company is the corporate centre of the LUKOIL Group (hereinafter also the “Group”),
which coordinates the operations of subsidiaries and fosters the further development and
globalisation of the business of the LUKOIL Group.
The management bodies of OAO “LUKOIL” are: the General Shareholders Meeting, the Board
of Directors, the Management Committee, and the President of OAO “LUKOIL”. The Audit
Commission supervises the Company’s financial and business operations.
In 2006 the income of OAO “LUKOIL” from ordinary activities, included within revenues, was
generated by the following activities:
• sale of oil and oil products;
• sale of gas and the products of gas refining;
• lease of property;
• granting of usage rights to intangible assets;
• provision of services under commission contracts, agency agreements, paid service
contracts, etc.
Segments
Indicators
1. Sales revenue,
thousand roubles
Financial result,
thousand roubles
Sale of other
products, Total for the
goods,
Company
services
Sale of oil
Sale
of oil products
Sale of gas and
products of gas
refining
507,564,972
176,128,442
8,131,321
1,207,944
693,032,679
41,181,062
7,943,368
200,103
976,542
50,301,075
The net profits of OAO “LUKOIL” under Russian accounting standards and the value of net
assets of OAO “LUKOIL” in 2006 equalled 55,129,760,000 roubles and 263,953,835,000
roubles, respectively (at year end). Profits before taxes were 71,714,944,000 roubles, versus
89,291,867,000 roubles in 2005.
The total number of shareholders in OAO “LUKOIL” as at 31 December 2006 was 55,805 legal
entities and individuals.
*
Mentions in this Annual Report of ‘LUKOIL’, ‘LUKOIL Group’, ‘the Group’, ‘LUKOIL’, ‘the Company’, ‘we’
and ‘our’ are equivalent and refer to LUKOIL Group of companies, to LUKOIL and/or its subsidiary enterprises,
depending upon the context, in which the terms are used.
4
The charter capital of OAO “LUKOIL” equals 21,264,081.375 roubles, and is divided into
850,563,255 ordinary registered shares with a par value of 0.025 roubles each, equalling 100%
of charter capital.
As at the end of 2006, American depositary receipts (ADRs) had been issued against 63.8% of
the Company’s ordinary shares.
The Company’s shares are on the A1 Quotation Lists (highest level) of the Russian exchanges
RTS and MICEX.
The growth in capitalisation of OAO “LUKOIL” during 2006 was 48%, while the value of other
Russian oil companies increased on average by 40%.
In 2006 the Company continued to lead in volume of trading among foreign companies whose
ADRs are listed on the London Stock Exchange. The average monthly volume of trading in
OAO “LUKOIL” ADRs more than doubled from the previous year, to USD 5.9 billion.
On 14 December 2006, two issues of non-convertible documentary interest-bearing bearer bonds
of OAO “LUKOIL” were offered, to a total of 14 billion roubles. The state registration numbers
of the issues were 4-03-00077-A and 4-04-00077-A of 23 November 2006.
The coupon rate of the series 03 bonds, with a par value of 8 billion roubles and a maturity of
five years, is 7.10% per annum. The coupon rate of the series 04 bonds, with a par value of 6
billion roubles and a maturity of seven years, is 7.40% per annum.
The Company’s main objectives in the near future include:
-
-
-
in the Exploration and Production business segment:
• solutions on intensifying and optimising oil and gas production, including:
• increase in expenses on production drilling to ensure the planned level of oil
production;
• substantial increase in the quantity of horizontal wells;
• the average annual rate of growth in hydrocarbon production during 2007–2008
was set at 8.2%;
in the Refining and Distribution business segment:
• attraction of investments to further increase the volume of refining and improve the
efficiency of the refineries of the LUKOIL Group, and also to develop the Group’s
gas-chemistry facilities;
• increase in the amount of oil refining at the LUKOIL Group’s refining facilities by
12% over two years;
• 10–11% increase in the output of modern Euro-3 and Euro-4 diesel at the LUKOIL
Group’s Russian refineries;
in Investing activity:
• determination of investment expenses of the LUKOIL Group for 2007 and 2008 in
the amount of USD 8.25 billion and USD 8.6 billion, respectively;
• ensuring return on capital employed for the LUKOIL Group at 19.3% in 2007 and
17.0% in 2008 (with a strategic benchmark of 15–17%).
One of the objectives of the Company’s strategic development is to have the LUKOIL Group
enter the ranks of the world’s largest global energy companies. The main goal of the strategic
development programme is to accelerate growth and maximise shareholder value.
5
Events in 2006
JANUARY
LUKOIL Group begins exploration drilling at the Block A contract territory in Saudi Arabia,
aiming to find gas and condensate fields. Production of gas and gas condensate will be organized
at the Block if commercial reserves are found. The first exploration well is at the dome of the
Tukhman structure and will be drilled to a depth of 4,800 meters.
LUKOIL approves a Program for industrial safety, development of labour conditions and labour
protection, and prevention and resolution of emergency situations in the period 2006–2010.
Overall planned financing of the Program is 26.7 billion roubles (about $1 billion). Spending on
the previous program, for the period 2001–2005, was 28.2 billion roubles (about $950 million).
LUKOIL Group begins drilling of a second exploration well at the offshore North-East Geisum
block in the Gulf of Suez (Red Sea, Egypt). Work is being carried out at sea depth of 20 meters.
The well will be drilled to a depth of 1,574 meters. The first exploration well at North-East
Geisum was drilled at the end of 2004 and found hydrocarbons.
LUKOIL approves an R&D program for 2006 worth about $25 million. Economic effect from
R&D applications in 2005 is estimated at $50–60 million.
FEBRUARY
In order to optimize management of LUKOIL subsidiaries and international projects, the
Company decides to transfer 100% of share capital of LUKOIL-Perm from LUKOIL Overseas
Holding to direct ownership by OAO "LUKOIL".
LUKOIL Group begins production of gasoline that meets Euro-3 standard at the Nizhny
Novgorod Refinery. Euro-3 gasoline will rise to 50% of total gasoline output at refineries.
Production of Euro-3 gasoline was made possible by commissioning of an isomerization facility
at the refinery with 440,000 tonnes annual capacity.
LUKOIL and the National Iranian Oil Company sign a contract on joint geological and
geophysical work at Iran’s Mogan and Lali oil & gas blocks. The work will include reprocessing
and interpretation of drilling data, borehole logging measurements, as well as seismic,
gravitational and magnetometric exploration, and geochemical study of rock formations.
MARCH
LUKOIL Group completes calculation and independent audit of its hydrocarbon reserves as of 1
January, 2006. According to data, confirmed by Miller and Lents (USA), the Company’s proved
reserves as of 1 January, 2006 are 20.330 billion boe, including 16.114 billion barrels of oil and
25.298 trillion cubic feet of gas. The Company remains a world leader in terms of proved
hydrocarbon reserves, taking first place among Russian oil companies and second place among
privately owned international oil & gas companies. LUKOIL achieved more than 100% reserve
replacement for the sixth consecutive year.
APRIL
Fitch international rating agency awards a credit rating to LUKOIL for the first time. The agency
rates the Company at BBB- (investment grade) for foreign currency and rouble liabilities, and
assigns an F3 short-term rating.
6
LLK International and the company Naftan set up a 50-50 joint venture, LLK-Naftan, for
production and sale of modern, economically efficient additives for motor oils under the
LUKOIL brand and for R&D relating to motor oils. LUKOIL has paid $11.46 million in cash
into the new company and Naftan contributed various production facilities. The JV will meet up
to 80% of LUKOIL’s additive needs.
LUKOIL Group begins sales in Russia of new gasolines under the EKTO brand
(environmentally friendly fuels). The new gasolines have improved performance and
environmental characteristics, which meet Euro-3 standards and surpass Russian legal
requirements.
MAY
The US magazine Global Finance names LUKOIL the best oil & gas company in Russia.
Respondents of a survey by the magazine appraised Russian companies by a number of criteria,
including: corporate governance standards; accounting transparency; quality of acquired assets;
and environmental responsibility.
JUNE
LUKOIL Group acquires 41.81% of shares in Udmurtnefteprodukt, which controls over 60% of
the petroleum product market in the Republic of Udmurtia (the company has a network of 100
filling stations and 9 tank farms). Value of the transaction is $25 million.
Shareholders at the LUKOIL AGM approve the Annual Report and financial accounts for 2005.
Shareholders also approve dividends for 2005 at 33 roubles per ordinary share (up from 28
roubles for 2004). Vagit Alekperov is elected as Company President for a period of five years.
The international rating agency, Moody’s Investors Service, raises LUKOIL’s corporate credit
rating by two notches, from Ba1 to Baa2, which is the second investment grade. Moody’s also
raises the Company’s unsecured issuer rating from Ba2 to Baa2.
LUKOIL Group acquires 100% of the charter capital of Khanty-Mansiysk Oil Corporation from
Marathon Oil Corporation for $847 million (including $249 million repayment of KhantyMansiysk Oil Corporation debt). The deal price is subject to adjustment to reflect alterations in
working capital and other indicators in accordance with the purchase agreement. KhantyMansiysk Oil Corporation owns about 95% of shares in Khantymansiyskneftegazgeologiya as
well as 100% of shares in Paitykh oil and Nazymgeodobycha. These companies operate at nine
license areas on both banks of the Ob River in Khanty-Mansiysk Autonomous District (Russia).
LUKOIL and the Norwegian company, Norsk Hydro, win exclusive negotiating rights on further
development of the Azar field (at the Anaran block in western Iran). A declaration on
commercialization of the field is signed by the National Iranian Oil Company after completion of
reserve appraisal. (The field has estimated geological reserves of 2 billion barrels of oil.)
LUKOIL Group and PDVSA complete the first stage of joint work to assess hydrocarbon
reserves at the Junin-3 block, located in the heavy oil belt of the Orinoco River (Venezuela). The
work provides detailed grounds for viewing Junin-3 as one of the main blocks in the extensive
oil province, located in the east of Venezuela.
LUKOIL Group begins production drilling at the Khauzak contract territory in the Dengizkulsky
gas field as part of the Kandym – Khauzak – Shady project in south-western Uzbekistan. A total
of 37 new production wells will be drilled at this territory. Industrial production of natural gas
should begin in the fourth quarter of 2007. Peak annual production will exceed 10 billion cubic
meters of gas.
7
JULY
Standard & Poor's international rating agency raises LUKOIL’s long-term credit rating from ВВ
to ВВ+, which is the highest speculative grade. The rating outlook is positive. S&P also raised
the Company’s rating on its Russian scale from ruAA to ruAA+.
InfoTEK-Consult, one of the leading Russian oil & gas consulting agencies, judges LUKOIL to
be the leading oil company on the Russian retail market in 2005.
LUKOIL Group acquires 63% of a PSA for exploration, development and production of
hydrocarbons at the CI-205 ultra-deep-water block in Cote d’Ivoire from the Nigerian company,
Oranto Petroleum International. Value of the deal is $50 million. The block covers 2,600 km2
adjacent to the recently discovered Baobab oil field, which is the biggest field in Cote d’Ivoire.
The project is being implemented jointly with the national oil & gas company, PETROCI
Holding.
AUGUST
LUKOIL and the Algerian state oil company Sonatrach sign a memorandum of understanding on
cooperation in prospecting, exploration and hydrocarbon production projects in Algeria, Russia
and third countries. The document also envisages cooperation in refining and marketing as well
as exchange of know-how.
LUKOIL Group completes in full its commitments to the Iraqi Oil Ministry for technical aspects
of a humanitarian aid program. The program was stipulated in a memorandum signed in March
2004 in Baghdad by the Iraqi Oil Minister and the President of LUKOIL.
LUKOIL and the Slovenian company, Petrol, reach a framework agreement on creation of a joint
venture for sale of petroleum products in Balkan countries. Petrol’s contribution to JV share
capital will consist of four companies owning filling stations in Slovenia, Croatia, Bosnia and
Serbia. LUKOIL will contribute shares of its subsidiaries, LUKOIL-Beopetrol (Serbia) and
LUKOIL-Macedonia. Petrol will own 51% of the new venture and LUKOIL will take 49%.
Management roles will be equal.
The government of Uzbekistan and a Consortium of investors including LUKOIL Group (with a
20% stake) sign a PSA for geological exploration work and subsequent development of
discovered hydrocarbon fields in the Uzbek sector of the Aral Sea.
SEPTEMBER
LUKOIL takes 6th place among European companies and 15th place among world companies in
Platt’s rating of the Top 250 Global Energy Companies in 2006. The Company is appraised
using four main criteria: assets, sales, profit and return on capital employed. LUKOIL took 9th
and 16th places respectively in Platt’s rating for 2005.
LUKOIL Group opens its first filling station in the city of Skopje (Republic of Macedonia). The
Company plans to open 40 stations in Macedonia in the next four years.
The Mayor of Moscow, Yury Luzhkov, awards LUKOIL official recognition for environmental
quality of fuel sold at the Company’s filling stations in Moscow. The recognition is accorded
under a city government resolution, which set up an expert council for promotion of motor fuels,
additives and oils with improved environmental characteristics. The decision by the Moscow
government offers further proof that LUKOIL’s fuel and filling station facilities meet modern
environmental standards.
LUKOIL Group completes construction of the third stage of its trans-shipping complex at
Vysotsk. The first stage of the terminal was commissioned in June 2004 and the second stage in
8
April 2005. Design capacity of the terminal is nearly 15 million tonnes of petroleum products per
year.
A majority of shareholders of the company Chaparral Resources vote at an EGM for merger with
LUKOIL Group. Chaparral Resources owns a 60% stake in the company KarakudukMunai,
which has a license for development of the Karakuduk field in Kazakhstan. LUKOIL Group
acquired 40% of KarakudukMunai and 60% of Chaparral Resources at the end of 2005 as part of
assets of Nelson Resources.
OCTOBER
LUKOIL Group and the Angolan oil & gas company Sonangol sign a memorandum of mutual
understanding. The document gives LUKOIL the opportunity to take part in geological
exploration projects on the Angolan continental shelf.
LUKOIL completes upgrading of production facilities at the Lokosovsky Gas-processing Plant.
The reconstruction increases annual processing capacity at the Plant from 1.0 to 1.9 billion cubic
meters of associated gas. Completion of the work means that a full system is now in place for
processing of associated gas produced by LUKOIL-Western Siberia.
The Arbitration institute of the Stockholm Chamber of Commerce gives LUKOIL Group priority
rights to acquire a 50% stake in Turgai Petroleum (Kazakhstan), which is a joint venture between
LUKOIL and PetroKazakhstan developing the large Kumkol oil field in Kazakhstan.
A catalytic reforming facility with annual capacity of 1.0 million tonnes is commissioned at the
Volgograd Refinery. It replaces an old reformer with 0.7 million tonnes annual capacity.
Commissioning of the new reformer increases gasoline output by more than 30% (thanks to
lower output of straight-run gasoline) and raises the share of high-octane gasolines from 60% to
83%.
The Perm Refinery opens a new automated terminal, which is the first stage of a new complex
for production, packaging, storage and delivery of lubricants. The terminal includes storage
facilities for 3,000 tonnes of packaged lubricants with a system for computerized management of
product flows.
Basic principles of LUKOIL Group’s strategic development in 2007–2016 are presented to the
business community. The strategy plan aims to make LUKOIL one of the leading global energy
companies and places chief emphasis on accelerating business growth and maximizing
shareholder value.
NOVEMBER
LUKOIL takes first place among Russian oil companies in a corporate responsibility rating,
compiled by the Institute for Social and Ethical Accountability (AccountAbility, UK), the British
consulting group CSRnetwork and the international project bureau Business Culture (Russia),
supported by the international auditor, PricewaterhouseCoopers. The rating measures a number
of parameters, which reflect the level of understanding by the Company of its social
responsibility and the balance between business strategy and the interests of society.
LUKOIL signs an agreement with KazMunaiGaz and Repsol Exlporacion Kazakhstan on
transfer to the Group of a 25% stake in the company Zhambai, which is the PSA contractor for
the South Zhambai and South Zaburunye offshore territories (total area in excess of 2,000 km2),
located in the Kazakh sector of the Caspian Sea. 2D seismic work indicates presence of three
promising structures at these territories.
9
An automated petroleum product loading facility is commissioned at the Ukhta Refinery. The
new complex enables high efficiency in loading of petroleum products into tanker trucks,
accurate tracking and records of product deliveries, and reduction of discharges into the
environment.
A new employee incentive program for LUKOIL and its subsidiaries is approved following
completion of the Group’s option program. The program applies to management of the Group as
well as a number of other key employees, as decided by the LUKOIL BoD. 600 people stand to
benefit from the program, which is over five times more than beneficiaries of the previous
scheme. Program participants gain entitlement to annual dividends from 15.5 million ‘phantom
shares’ in LUKOIL as well as entitlement to the growth in value of those shares by the end of the
three-year period.
DECEMBER
LUKOIL Group sells 100% of shares in LUKOIL Shelf Limited and LUKOIL Overseas Orient
Limited (owners and operators of the Astra jack-up rig) to the BKE group of companies. The
value of the deal is about $40 million.
LUKOIL signs an agreement to acquire retail business of ConocoPhilips, consisting of 376
filling stations in Belgium, Finland, the Czech Republic, Hungary, Poland and Slovakia. The
acquired stations are highly efficient: their average daily fuel sales are 9.9 tonnes, which is 40%
more than the Group average.
LUKOIL holds a third audit check of its systems for management of industrial safety, labour and
environmental protection to attest compliance with requirements of the ISO 14001:2004 and
OHSAS 18001:1999 standards. The certifying organization Bureau Veritas Certification
confirmed receipt by LUKOIL of attestation that the Company’s systems are maintained in
working order, are effective and meet the audit criteria.
LUKOIL places two issues of non-convertible, interest-bearing documentary bearer bonds, series
03 and 04, on the MICEX. Total face value of the bonds is 14 billion roubles (about $530
million). The 03 bonds have a five-year maturity, and offer 7.1% annual coupon. The 04 bonds
have a seven-year maturity, and offer 7.4% annual coupon. LUKOIL thus becomes the first
Russian non-state company to place bonds with seven-year maturity.
LUKOIL Group signs an agreement with Mittal Investments on sale of a 50% stake in Caspian
Investments Resources (former Nelson Resources), which is 100% owned by LUKOIL Group.
Value of the deal is $980 million. Mittal Investments also assumes commitments to pay 50% of
outstanding debt of Caspian Investments Resources to the Group, totalling about $175 million at
the time of the deal.
The Company begins drilling of a first stratigraphic well at the Junin-3 block in Venezuela.
Commencement of drilling marks the start of the second stage of assessment and certification of
reserves at the block.
The consortium for development of the Shakh Deniz gas condensate field, which includes
LUKOIL Group, starts commercial production of hydrocarbons from the first production well.
Planned production at Shakh Deniz in 2007 is about 5 billion cubic meters of gas and 1.5 million
tonnes of condensate.
10
Exploration & Production
Strategy
-
Creating the potential for long-term Company growth by reserve replacement in traditional
production regions and faster development in new production regions both in Russia and
abroad.
Improving efficiency of geological exploration work through careful selection of projects and
application of the latest technologies.
Achieving compound annual growth rates of hydrocarbon production no lower than 6% in
the medium term.
Improving production indicators and lowering lifting costs by application of modern
technologies, and by optimization of the well stock and of field development systems.
Applying financial criteria for assessment of projects and business results and for
optimization of the asset portfolio.
LUKOIL Group achieved record operating and financial results in the E&P segment during 2006
thanks both to the favourable price environment and to successful realization of Company
strategy for accelerated growth of hydrocarbon production, particularly production of gas.
Business results were also helped by pursuit of restructuring and increased production efficiency
through withdrawal of non-core assets, optimization of the well stock, application of modern
technologies, optimization of corporate structure and logistics, and acquisition of new assets.
There was negative impact on results from increase of the tax burden in Russia and strengthening
of the rouble in real terms, which led to growth of lifting costs.
Daily production of marketable hydrocarbons grew by 12.2% in 2006, to 2.145 million boe,
thanks to 5.8% increase in output of oil and 141.6% increase in output of marketable gas. Rapid
growth of gas production was the main achievement in 2006. Net income in the E&P segment
during 2006 was $3.578 billion, which is 6.4% more than in 2005. Capital expenditures were
$5.120 billion. The results show that the Company is continuing to advance successfully towards
achievement of its strategic and tactical goals.
Price and Tax Environment
Growth of Company revenues from higher oil prices was levelled off by increase of the tax
burden. This is due to specifics of the tax system in Russia, where 93.6% of the Company’s
production of marketable hydrocarbons is concentrated.
The average 2006 price for Urals crude oil (Russian export blend) was 21.1% higher than in
2005, while the average rate of mineral extraction tax rose by 25.7% and crude oil export tariffs
rose by 50.8%. As a result mineral extraction tax and export tariffs took $38.3 of the $61.3
average price per barrel of Urals crude in 2006. Net revenue per barrel of Russian oil exporters
was thus $23.0, which is 3% less than in 2005.
The Group significantly increased production of natural gas in Russia in 2006, leading to
increase of tax payments on natural gas production. The tax rate in 2006 was 147 roubles/1,000
cubic meters, which is 8.9% more than in 2005. Relatively modest growth of tax rates in the gas
sector correlates with growth of government-regulated domestic prices for gas. In 2006 LUKOIL
sold gas from the Nakhodkinskoye field, which accounts for 94% of the Company’s natural gas
production in Russia, to Gazprom under an agreement between the two companies for $22.5 per
/1,000 cubic meters (not including VAT) and at a higher price to other companies.
In international projects LUKOIL pays taxes under PSAs and concession agreements. The only
significant tax paid by the Company in Egypt is income tax, which is paid as a share of
11
production. The tax rate is progressive and depends on oil prices. In Kazakhstan the Company
pays income tax at a fixed rate in cash form. But Kazakh PSAs also require payment of a share
of profit production (the size of the share depends on a project’s internal rate of return), while
other Kazakh projects require payment of royalties and tax on super profits. So taxation for all
the Company’s projects in Kazakhstan is progressive.
The facts above demonstrate that growth of profit in the E&P segment was mainly due to growth
of production volumes and improvement of production efficiency.
The new law on differentiation of mineral extraction tax rates, which came into force on 1
January 2007, entails a zero tax rate for fields with high-viscosity oil and a diminishing rate for
fields with exhaustion rates higher than 80%. However, the latter tax relief will only be fully
applied after development of application practice.
70
60
50
40
30
20
10
Structure of Revenues from Exports of Russian
Crude Oil, $/barrel
Urals oil price
Export tariffs
Mineral extraction tax
Net revenue
34.3
7.6
5.0
61.3
50.5
26.9
17.8
9.0
11.4
21.7
23.7
23.0
2004
2005
2006
36.7%
62.5%
53.1%
0
Inflation and Exchange Rates
Since LUKOIL produces most of its hydrocarbons in Russia, real strengthening of the rouble
against the US dollar (taking account of rouble inflation) leads to growth of Company costs in
dollar terms. Real strengthening of the rouble to the dollar was 14.3% y-o-y in 2006. This led to
a rise in hydrocarbon lifting costs in Russia from $2.60 to $3.01 per barrel, or by 15.8%.
However, growth of lifting costs in real terms was only 1.3%, which shows success of the
Company in controlling such costs through optimization of production and use of modern
technologies. From 2002 to 2006 LUKOIL’s hydrocarbon lifting costs in Russia decreased by
more than 40% in real terms.
Average lifting costs for the Group increased by 15.8% in 2006, from $2.66 to $3.08 per boe.
The increase in real terms was 1.3%.
12
Real Rouble Appreciation against Dollar and Change of LUKOIL Nominal
Hydrocarbon Lifting Costs in Russia
25%
Real rouble appreciation
20%
Change of nominal hydrocarbon lifting costs in
Russia
15%
10%
5%
0%
2002
2003
2004
2005
2006
-5%
Acquisitions and Asset Consolidation
The Company continued to increase its reserves and production capacities in 2006 through
acquisition of highly efficient assets. LUKOIL spent $1.560 billion in 2006 on investment in
new assets in the E&P segment and consolidation of companies that were already in Group
ownership.
The main acquisition in 2006 was of production assets owned by Marathon Oil Corporation in
Khanty-Mansiysk Autonomous District - Yugra. These include about 95% of shares in
Khantymansiyskneftegazgeologiya and 100% of the companies Paitykh oil and
Nazymgeodobycha. The deal price was $847 million (including $249 million repayment of
Khanty-Mansiysk Oil Corporation debt). That implies $3.7 per barrel of proved reserves, which
is below the industry average. The acquired companies produce oil at nine license areas on both
sides of the Ob river. Their daily production in 2006 exceeded 30,000 barrels of crude. Proved
oil reserves at the end of 2006 were 219 million barrels. Joint development of the acquired fields
and adjacent fields of LUKOIL-Western Siberia will give a synergy effect estimated at more
than $100 million. LUKOIL Group plans to increase oil production at the acquired fields to 4.4
million tonnes (88,000 barrels per day) by 2016. Studies of the areas where the acquired
companies carry out production have been limited to date and the outlook for new discoveries is
good.
In 2006 LUKOIL Group consolidated the remaining 24% of KarakudukMunai, which owns the
license for development of the Karakuduk field in Kazakhstan, through acquisition of the
company Chaparral Resources. A 76% stake in KarakudukMunai was acquired in 2005 as part of
Nelson Resources. Production of oil at the Karakuduk field was over 700,000 tonnes in 2006.
Proved reserves at the end of 2006 were 50 million barrels of oil.
The joint venture in Western Siberia (was accounted in Group financials as an associate)
between LUKOIL-Western Siberia and the company Brazos Petroleum Overseas Limited, a
Group associate, was dismantled in 2006 (it was accounted in Group financials as an associate).
License areas of the joint venture were transferred to LUKOIL-Western Siberia. Production by
the venture in 2006 was 770,000 tonnes of oil and its reserves at the end of 2006 were 47 million
barrels.
In November 2006 LUKOIL signed an agreement to exercise an option to acquire 25% of
Zhambai, a sub-contractor to the PSA, which is developing the offshore South Zhambai and
13
South Zaburunye license areas (covering more than 2,000 km2). The areas are located in the
shallow and transitional zones of the Kazakh sector of the Caspian Sea. Detailed 2D seismic
exploration has already been carried out and has found three promising structures. The project
will be implemented jointly with KazMunaiGaz and Repsol.
In July 2006 the Company signed an agreement with the Nigerian company, Oranto Petroleum
International, to acquire a 63% stake in the PSA for geological exploration, development and
hydrocarbon production at the offshore CI-205 block, with 2,600 km2 area. The block is located
on the deep-water shelf of the Gulf of Guinea, 100 km from the shoreline of Cote d’Ivoire, and is
part of the Tano Basin, where the Baobab field – the largest Cote d’Ivoire field – was previously
discovered. 2D and 3D seismic exploration has already been carried out at the block. The next
phase is drilling of an exploration well. The project is being implemented jointly with the
national oil company PETROCI Holding. Reinterpretation of 3D seismic data and analysis and
interpretation of all available geological and geophysical information was carried out in 2006.
Major Discoveries
Drilling of a second exploration well at the V. Filanovsky field in the Northern Caspian
(discovered at the end of 2005) brought excellent results in 2006. Proved, probable and possible
reserves of hydrocarbons at the field doubled to 1.5 billion boe, of which 1.3 billion barrels of
oil. About 320 million boe (including 268 million barrels of oil) were transferred to proved
category. The V. Filanovsky discovery has significantly improved economics of reserve
development in the Northern Caspian. Peak annual production at the V. Filanovsky field is
estimated at 10 million tonnes of oil (210,000 barrels daily).
Testing of an exploration well as part of the Condor project in Columbia gave commercial oil
flow in excess of 1,200 barrels per day. A new field was thus discovered, commercial reserves of
which will be assessed after analysis of information obtained from initial drilling and from
drilling of further wells.
Optimizing Corporate Structure
LUKOIL Group continued to optimize its corporate structure in 2006 in order to raise
management efficiency of subsidiaries and reduce administrative expenses. As part of this
process 100% of share capital of LUKOIL-Perm was transferred from LUKOIL Overseas
Holding (a 100% LUKOIL subsidiary) to direct ownership by LUKOIL. This will allow
LUKOIL Overseas Holding to focus its business exclusively on the Group’s international
projects. LUKOIL-Perm will now be managed together with the Group’s other production
projects in Russia.
For the same reason it was decided to transfer 54% of shares in LUKARCO B.V., which were
directly owned by LUKOIL, to LUKOIL Overseas Holding. LUKARCO B.V. has a 5% stake in
the project for development of the Tengiz field in Kazakhstan and a 12.5% interest in the
Caspian Pipeline Consortium.
Shareholders of RITEK (a LUKOIL Group company) approved incorporation to RITEK of
Nazymgeodobycha. The transaction is justified, since RITEK has the experience and
technologies needed to successfully continue exploration at six fields of Nazymgeodobycha,
located on the right bank of the Ob river, which have particularly complex geological structures,
and to begin intensive production at these fields.
Asset consolidation and optimization of corporate structure in Timan-Pechora neared completion
in 2006. Over a period of five years more than 15 companies with activities in that region have
been united into three companies: Naryanmarneftegaz, LUKOIL-Sever and the group LUKOILKomi (consisting of LUKOIL-Komi, YaNTK, Sever-TEK and Bitran).
14
Divestment of Non-core and Inefficient Assets
In December 2006 LUKOIL Group sold its 100% stakes in the companies LUKOIL Shelf Ltd.
and LUKOIL Overseas Orient Ltd., which are owners and operators of the Astra jack-up drilling
rig. The assets were sold for about $40 million.
In March 2006 LUKOIL sold its 51% stake in First National Drilling Company, which
specializes in drilling and workover services, to Integra group. The sale price was about $17
million.
In May 2006 the companies Verkhneomrinskaya neft, Voivozhneft and Nizhneomrinskaya neft
were sold to Urals Energy. The companies own licenses for development of the Voivozhskoye,
Nizhne-Omrinskoye and Verkhne-Omrinskoye fields in Komi Republic. The deal value was
about $1.5 million.
Licensing
The main tasks for the Company as regards licensing are: to obtain new licenses for mineral
resource exploitation; to extend the term of licenses up to total field exhaustion; and to recast
licenses to reflect reorganization of subsidiaries.
In 2006 LUKOIL obtained one license for hydrocarbon production through a competition and six
production licenses based on certificates of field discovery. The Company also obtained two
licenses to carry out geological studies. A total of 11 licenses were obtained through acquisition
of new assets, including the companies Khantymansiyskneftegazgeologiya, Paitykh oil and
Nazymgeodobycha. In addition, 23 licenses were extended until the end of field life and four
were extended until completion of geological studies. LUKOIL recast 16 licenses in connection
with restructuring and changes in corporate structure.
LUKOIL surrendered 11 licenses due to expiry of the period, in which the licenses gave rights to
carry out geological studies. Four licenses were sold together with companies, which owned
them, as part of the Group program to divest inefficient assets.
LUKOIL Group had 403 licenses on its balance for use of mineral resources at the end of 2006,
of which 362 give production rights and 41 give rights to carry out geological exploration,
including prospecting and field assessment.
Geological Exploration
The focus of LUKOIL’s geological exploration work is to replace production with new
commercial reserves of hydrocarbons and to rapidly prepare reserves for launch and expansion
of production in promising regions (Timan-Pechora, Northern Caspian and the Bolshekhetskaya
Depression). The Company maximizes efficiency of its geological exploration work by use of
the latest technologies.
The biggest volumes of geological exploration by LUKOIL in 2006 were concentrated in the
Timan-Pechora oil province, Western Siberia, Perm Territory, Volgograd Region and the
offshore Caspian.
LUKOIL Group companies carried out 10,573 km of 2D seismic exploration and 3,118 km2 of
3D seismic in 2006 in order to locate and detail structures, and to prepare for drilling of
prospecting and exploration wells at promising structures. In recent years the quality of seismic
has improved and the speed of data processing and interpretation, has increased. This is mainly
thanks to application of new IT solutions. For example, high-quality seismic exploration has
enabled a 100% success rate for exploration drilling in the Russian sector of the Northern
Caspian, and the average success rate for the Group as a whole during the last five years has
been over 70%.
15
Geoelectric exploration in 2006 totalled 4,030 km. Vertical seismic profiling, which details the
geological structure around a drilled well, was carried out at 33 wells in 2006. Total exploration
drilling in 2006 was 162,000 meters with efficiency level of 1,003 tonnes of reference fuel per
meter. That is much higher than a figure of 385 tonnes of reference fuel per meter of exploration
drilling, shown by the Company five years ago.
Most growth of liquid hydrocarbon reserves due to geological exploration work was achieved in
the offshore Caspian, Western Siberia and Timan-Pechora. Oil discoveries were also made as
part of the Condor project in Columbia and additional reserves were discovered in the Anaran
project in Iran.
Geological exploration work led to discovery of 10 new fields in 2006, of which one was an oil
& gas field (Shiryaevskoye in Perm Territory) and 9 were oil fields: Polyemskoye, North
Pokamasovskoye, West Novomostovskoye and South Valovoye in Western Siberia; Verkhneye
Volminskoye in Komi Republic; Stepnoye, Nemirovskoye in Volgograd Region; Olginskoye in
Nenets-Autonomous District; and Condor in Columbia. There were 15 new oil strata finds at
existing fields.
Commercial reserves under Russian classification discovered by LUKOIL Group in 2006
through geological exploration work totalled 139.6 million tonnes of reference fuel (including
shares in international projects). Extensions and discoveries of proved reserves under SPE
classification totalled 617 million boe (551 million barrels of oil and 399 billion cubic feet of
gas). Spending by LUKOIL Group on geological exploration in 2006 was $479 million.
Russia
Exploration drilling in Russia in 2006 totalled 139,000 meters, 2D seismic exploration was 9,240
km and 3D seismic was 2,848 km2. Geological exploration spending in Russia was $286 million.
Most of the positive results from geological exploration work were obtained in the offshore
Caspian, Western Siberia and Timan-Pechora.
Northern Caspian
The Northern Caspian is one of the most promising regions for increase of oil & gas production
by LUKOIL Group in the medium term and the Company is focusing on development of
resource potential in the region. LUKOIL made yet another major discovery in the offshore
Caspian in 2006, when a second exploration well at the V. Filanovsky field confirmed oilbearing capacity of a previously discovered stratum and detected another oil stratum. Daily flow
rate at the new well was 5,000 barrels (compared with average 75 barrels per day for oil wells in
Russia).
Proved, probable and possible reserves of the V. Filanovsky field doubled in 2006 to 1.5 billion
boe, with oil representing 86% of the total. That makes the V. Filanovsky field the biggest oil
discovery in Russia for the last 20 years and significantly improves the economics of reserve
development in the Northern Caspian.
Seismic exploration work and preparation for drilling of new wells in the Northern Caspian has
continued. Work on the plan for drilling of a prospecting well at the Tsentralnaya structure is
close to completion. Seismic exploration work continued at the West Rakushechnaya structure in
preparation for drilling.
Khanty-Mansiysk Autonomous District - Yugra
The Khanty-Mansiysk Autonomous District is LUKOIL Group’s main oil production base. The
chief aim of geological exploration work there is replacement of reserves in order to maintain the
Group’s current production levels in the region.
16
Total 2D seismic in the region during 2006 was 3,066 km, 3D work totalled 1,384 km2 and
exploration drilling was 60,100 meters. A total of 16 wells were drilled, of which 14 were
productive, so the success rate of exploration drilling was 88%. Four oil fields were discovered
in the region in 2006 and 11 new oil strata were detected at existing fields. The Group’s proved
oil reserves in the Khanty-Mansiysk Autonomous District (taking account of production)
increased by 445 million barrels, or by 5.2% in 2006.
Testing of a prospecting well at the North Pokamasovsky license area gave daily oil flow of 470
barrels and led to discovery of the North Pokamasovskoye field with proved reserves of 1
million barrels.
Testing of a prospecting well at the Dorozhny license area gave daily oil flow of 150 barrels and
led to discovery of the Polyemskoye field with proved and probable reserves of 2.3 million
barrels.
The West Novomostovskoye field was discovered at the Shaimsky license area. Testing of the
well gave maximum daily flow of 680 barrels. Field reserves under Russian categories C1 and
C2 are estimated at 20 million barrels of oil.
The South Valovoye field was discovered at the Semividovo-Tolumsky license area following
testing of a prospecting well. Russian C1 and C2 reserves are estimated at 2.5 million barrels of
oil.
Drilling of three exploration wells was completed at the Talnikovoye field, which is currently
under development. Well testing gave daily oil flows between 280 and 990 barrels. Proved
reserves at the end of 2006 were over 70 million barrels of oil. Growth of proved reserves in
2006, including production, was 15.9%.
Testing of an exploration well at the South Yagunskoye field, which is also under development,
gave daily oil flows up to 660 barrels. Drilling of the well detected two new oil strata. Proved
reserves at the South Yagunskoye field at the end of 2006 were over 800 million barrels of oil.
They grew by 2.4% in 2006, including production, which was 27 million barrels of oil.
Timan-Pechora
The Timan-Pechora oil province (the Nenets Autonomous District and the Komi Republic) is a
promising region for oil production by the Company. The region is little studied and has high
potential for new discoveries. The Company carried out extensive geological exploration work in
Timan-Pechora during 2006, including 468 km of 2D seismic and 146 km2 of 3D seismic.
Exploration drilling totalled 27,100 meters.
In the Nenets Autonomous Region LUKOIL completed drilling of a prospecting well at the
Olginskaya structure. Drilling and testing of the well led to discovery of the Olginskoye field
with proved, probable and possible reserves of about 7 million barrels of oil.
Drilling of an exploration well at the East-Sarutayuskoye field, discovered in 2004, gave a daily
oil flow of 1,000 barrels. Proved, possible and probable reserves at the field were estimated at
134 million barrels of oil at the end of 2006. Drilling of one more well was begun at the field in
2006.
Drilling of three wells was completed at the Tedinskoye field, which is already under
development. Growth of proved reserves of oil at the field in 2006, including production, was
over 11 million barrels, or more than 11%.
Naryanmarneftegaz, the joint venture between LUKOIL Group and ConocoPhillips, completed
3D seismic exploration at the West Khancharginsky license area in the Nenets Autonomous
District. The exploration results justified preparations for drilling at the West Khancharginskaya
structure.
17
Drilling was completed and well testing was begun at the North Saremboiskoye field. Testing of
productive deposits during drilling gave daily oil flow of 400–600 barrels.
Drilling of a prospecting well was completed at the Verkhnevolminskaya structure in the Komi
Republic. Well testing gave daily oil flow of 1,100 barrels. The new field is small-scale and
initial estimates suggest reserves of about 2 million barrels of oil. Drilling of a well also
continued at the Bayandyskaya area of the Denisovskaya Depression. Testing of strata confirmed
oil-bearing capacity.
Yamal-Nenets Autonomous District (Bolshekhetskaya Depression)
LUKOIL Group is developing gas reserves in the Bolshekhetskaya Depression as part of its
program for accelerated production of gas. Proved reserves of gas at LUKOIL Group fields in
the region totalled 12.8 trillion cubic feet at the end of 2006, representing 48.1% of LUKOIL’s
total proved gas reserves. Probable and possible reserves were 7.1 trillion cubic feet, which is
17.6% more than at the end of 2005.
More than 800 km of 2D seismic was carried out in the region during 2006 and exploration
drilling totalled 3,700 meters.
Drilling of a prospecting well at the Pyakyakhinskoye field was completed in 2006 and two gas
condensate strata were discovered. Drilling of a further well at the field has begun. Drilling of a
well at the Khalmerpayutinskoye field was continued and gas saturated strata were found.
Completion of the well and evaluation of results are planned in 2007.
Urals
The Urals is a traditional production area for the Company and fields there have already been
extensively explored. LUKOIL carried out 100 km of 2D seismic and 231 km2 of 3D seismic in
the region in 2006. Exploration drilling was 9,000 meters. Seven exploration wells were drilled
in 2006.
The work led to discovery of the Shiryaevskoye oil & gas field at the Kolvinskaya area. Testing
of a prospecting well gave flows of oil and gas. Field reserves under Russian categories C1 and
C2 are estimated at 2.6 million boe.
Volga
The Volga is also a traditional production region for LUKOIL Group and its geology has also
been extensively explored. LUKOIL carried out 2,496 km of 2D seismic in the region during
2006, and exploration drilling totalled 27,000 meters. Three fields were discovered as a result.
Drilling of a well at the Kudinovsko-Romanovsky license area gave daily oil flow of 530 barrels
and marked discovery of the Stepnoye field with Russian C1 and C2 reserves of about 7 million
barrels of oil. Reserves at the newly discovered Nemirovskoye field are estimated at 4.6 million
barrels under Russian category C1.
Kaliningrad Region
LUKOIL Group’s resource base in the Kaliningrad Region consists of a number of small onshore fields and the large Kravtsovskoye field on the shelf of the Baltic Sea.
LUKOIL Group carried out geological exploration work on land in Kaliningrad Region during
2006. Five new structures were discovered as a result, preparations were made for drilling at five
previously discovered structures and two new oil strata were found at existing fields.
As part of its strategy for increasing reserves and speeding up production growth, the Company
began geological exploration work in 2006 on the shelf of the Baltic Sea, where probability of
new reserve discoveries is high.
18
International Projects
Total 2D seismic exploration work in 2006 as part of international projects was 1,333 km, 3D
seismic work totalled 270 km2 and exploration drilling was 23,000 meters. Spending on
geological exploration outside Russia was $193 million. As part of LUKOIL Group’s strategy
for transformation into a global energy company, the priority in geological exploration abroad is
to bring reserves into production as quickly as possible.
LUKOIL Group companies took part in nine geological exploration projects outside Russia in
2006: D-222 (Azerbaijan), Condor (Columbia), Anaran (Iran), West Geisum and North-East
Geisum (Egypt) Tyub-Karagan and Atashsky (Kazakhstan), Block A (Saudi Arabia) and
Kandym – Khauzak – Shady (Uzbekistan).
The LUKOIL Group added five new projects to its geological exploration portfolio outside
Russia in 2006 and signed an agreement to exercise an option to acquire a 25% stake in the
Kazakh offshore geological exploration projects, South Zhambai and South Zaburunye. It also
acquired a 63% interest in a deep-water exploration project in Cote d’Ivoire. LUKOIL signed a
PSA for geological exploration and development of hydrocarbon fields in the Uzbek sector of
the Aral Sea in August 2006. The PSA will be implemented by a consortium of investors
consisting of Uzbekneftegaz, LUKOIL Overseas, Petronas Carigali Overseas (Indonesia), CNPC
International (China) and KNOC (Korea). The participants have equal stakes in the project.
Agreements on joint business and on a single operator for the project were signed in December
2006, and a tender was announced to select a seismic exploration sub-contractor. The three-year
geological exploration programme includes 2D seismic work and drilling of two exploration
wells. In February 2006 LUKOIL Group and the National Iranian Oil Company signed a contract
for joint geological and geophysical studies at Iran’s Mogan and Lali oil & gas blocks (located in
the South Caspian and Zagrossky Basins, respectively). The joint work includes reprocessing
and interpretation of drilling data, well-logging, seismic, gravitational and magnetometric
exploration as well as geochemical studies of strata.
An outstanding achievement in 2006 was successful drilling of a prospecting well at the Condor
block in the Llanos oil basin in Columbia. The well was drilled to a depth of 4,500 meters in the
dome of the Medina structure. Testing gave a flow of high-quality Columbian oil (Vasconia) at a
daily rate of 1,200 barrels. Presence of a field with commercial reserves was thus confirmed.
Reserves of the field will be specified following analysis of information obtained during drilling
and testing and by further exploration drilling.
LUKOIL Group together with Norsk Hydro made successful progress in implementation of the
Anaran project in Iran. Analysis of results of deep exploration drilling led to discovery of the
Azar field with geological reserves of oil in excess of 2 billion barrels. This is one of the world’s
biggest discoveries of oil in the last decade. In June 2006 the National Iranian Oil Company
signed a declaration on commercialization of the Azar field, giving the project participants
exclusive rights to negotiate on further development. The negotiations and preparation of a
general field development plan are to be completed in the first half of 2007. The project
participants have also completed drilling of a second exploration well, where testing gave daily
oil flow of 4,500 barrels. The drilling has increased recoverable reserves at the field by 60%.
As part of the Kadym – Khauzak – Shady project in Uzbekistan the Company completed 500
km2 of 3D seismic at the Khauzak – Shady field and began interpretation of data. A total 882 km
of 2D seismic was completed at the Kungrad block and interpretation of data began.
In Saudi Arabia drilling of a first exploration well was successfully completed at the Tukhman
structure, part of the Block A gas area in the Rub Al-Khali desert. The well was drilled to a
depth of 4,800 meters and a hydrocarbon accumulation was found. Analysis of the geological
19
information obtained is now in progress. Exploration drilling at the Muleikha structure was also
carried out in 2006, and the East Tukhman and West Faidakh structures were prepared for
drilling. The project is being implemented by LUKOIL together with the national oil & gas
company, Saudi Aramco.
LUKOIL Group and the Venezuelan company, PDVSA, completed the first stage of joint studies
to assess hydrocarbon reserves at the Junin-3 block, which extends over 640 km2 in the heavy
oil belt of the Orinoco river in Venezeula. The work has provided complex proof of high
potential of Junin-3. Drilling of stratigraphic wells was begun as part of the second stage of work
at the block. The aim of the second stage is to complete a geological model using new seismic
and drilling data, and to compare these data with the results of work at neighbouring blocks. A
total of 17 stratigraphic wells will be drilled at Junin-3.
Drilling of two prospecting wells was completed as part of the North-East Geisum and West
Geisum projects in Egypt. The drilling failed to detect commercial hydrocarbon reserves, and
LUKOIL Group has now quit the projects.
Total 452 km of 2D seismic was carried out as part of the Atashsky project in Kazakhstan and
data were processed. Electrical exploration work totalling 200 km was carried out in the TyubKaragan project and analysis of data obtained from a prospecting well was continued.
An exploration well was drilled as part of the Tengiz project in Kazakhstan, and a hydrocarbon
accumulation was found. Assessment of the new reserves is now underway.
Exploration Drilling, thousand
meters
162
2006
131
2005
118
2004
0
60
120
180
2D Seismic, km
2006
2005
2004
10,573
9,787
9,752
9,200 9,400 9,600 9,800 10,000 10,200 10,400 10,600 10,800
20
3D Seismic, km2
2006
Geoelectrics, km
3,118
2006
2005
5,686
2004
2005
2,000
2,381
2004
2,153
0
4,030
4,000
6,000
2,488
0
8,000 10,000
900
Hydrocarbon Reserve Extensions
and Discoveries (SPE standards),
million boe
1,800
2,700
3,600
Spending on Geological
Exploration, $ million
2006
2006
4,500
479
617
2005
2005
676
2004
2004
640
0
200
400
600
426
800
309
0
200
400
600
Exploration Drilling by Regions (2006)
Western Siberia
13.9%
Timan-Pechora
6.5%
37.2%
2.3%
Volga
Urals
5.4%
Bolshekhetskaya Depression
17.9%
16.8%
Other
International projects
Oil & Gas Reserves
Proved hydrocarbon reserves of LUKOIL Group under international classification 1 as of 1
January 2007, were 20.360 billion boe, consisting of 15.927 billion barrels of oil and 26.597
trillion cubic feet of gas.
The ratio of hydrocarbon reserves to production is 26 years (23 years for oil and 47 years for
gas).
Proved hydrocarbon reserves of LUKOIL Group increased by 4.1% in 2006 including
production. Group reserves not including production remained almost unchanged from 2005.
Growth of reserves including production was 3.2% for oil and 7.4% for gas.
The reserve replacement rate was 104% (73% for oil and 330% for gas).
Reserve calculation took account of changes in Russian legislation regarding the mineral
extraction tax. Legislation which was previously in force called for lowering of the mineral
1
Miller and Lents (USA) carried out its twelfth annual technical and economic audit of reserves of LUKOIL Group
in 2006, using standards of the US Society of Petroleum Engineers (US SPE).
21
extraction tax rate from 2007. However, this stipulation was changed in 2006, and the formula
for calculation of mineral extraction tax rates, which was applied in 2006, was maintained.
Estimated reserves at some fields were revised downwards as a result. Reserve calculations also
take account of tax relief for fields with high-viscosity oil. Tax relief envisaged for fields with
high exhaustion was not taken into account due to lack of application in practice. The application
of these relieves will have a positive effect on LUKOIL Group reserve estimates.
Extension and discovery of new proved hydrocarbon reserves in 2006 totalled 617 million boe
(551 million barrels of oil and 399 billion cubic feet of gas). The Company thus replaced more
than 77% of hydrocarbon production in 2006 through geological exploration and drilling at fields
already under development.
The biggest addition to proved reserves was from the V. Filanovsky field, discovered in 2005.
Proved reserves at the field rose by 322 million boe thanks to drilling of a second exploration
well and transfer of a part of reserves from ‘probable’ to ‘proved’. Increase of proved reserves of
other LUKOIL Group assets through exploration and drilling was 295 million boe.
Positive results were obtained from further drilling, modelling and optimization of development
systems at large fields in Western Siberia. For example, drilling and optimization gave a 7.5%
increase of proved oil reserves (taking account of production) at the Vatyeganskoye field, to 1.46
billion barrels by the end of 2006. Proved oil reserves at the Kogalymskoye field grew by 9.1%
in 2006 (taking account of production), to 0.23 billion barrels. Analysis of data from newly
drilled production wells at the Kochevskoye field led to revision of oil stratum geometry and
increase of the oil-bearing area. As a result, proved reserves of oil at the field rose by 13.9% in
2006 (taking account of production) to 84 million barrels.
Increase of proved reserves in 2006 was also achieved by acquisitions and consolidation of
assets. Proved reserves of the assets of Marathon Oil Corporation, which LUKOIL acquired in
2006, were 219 million barrels of oil at the end of the year. Reserves of KarakudukMunai at the
end of 2006 were 50 million barrels of oil, so acquisition of the remaining 24% stake in that
company added 12 million barrels to reserves of LUKOIL Group.
22
Proved Hydrocarbon Reserves,
billion boe
Proved Oil Reserves, billion
barrels
2005
2005
20.330
19.9
20.0
20.1
16.114
15.972
2004
20.072
2004
15.927
2006
20.360
2006
20.2
20.3
20.4
12
13
14
15
16
17
Proved Gas Reserves, trillion cubic feet
2006
26.597
2005
25.298
2004
24.598
23
24
25
26
Oil & Gas Reserves of LUKOIL Group
As of 1 January 2007
Oil, million barrels
Proved reserves
of which:
developed
undeveloped
Probable reserves
Possible reserves
27
Gas, billion cubic feet
15,927
26,597
Hydrocarbons,
million boe
20,360
10,176
5,751
8,767
4,275
7,480
19,117
21,436
10,479
11,423
8,937
12,340
6,022
Field Development and Oil Production
LUKOIL Group produced 95.235 million tonnes of oil in 2006 (1.926 million barrels per day), 2 of which
91.537 million tonnes were produced by subsidiaries. Average daily oil production by LUKOIL Group
was 5.8% higher than in 2005. Organic growth of production was 2.0%.
The Company worked hard in 2006 to prepare and launch production at fields in Russia and abroad as
part of its strategy of accelerated production growth. Particular attention was paid to fields in TimanPechora and the Northern Caspian.
LUKOIL subsidiaries and associates produced oil at 349 fields in 2006. In the course of the year 10 new
oil fields were brought into production: Ulyanovskoye, Stepnoye and Nemirovskoye (Volga region);
West Pokamasovskoye and West Kotukhtinskoye (Western Siberia); Gabyshevskoye (Urals); South
Sedmesskoye, Verkhnegrubeshorskoye and West Lekkeyaginskoye (Timan Pechora); Menzelinskoye
(Tatarstan); and 1 gas and condensate field – Shakh Deniz (Azerbaijan). Proved, probable and possible
reserves at fields, which were brought into production in 2006, are over 680 million boe. The newly
commissioned reserves compensated more than 85% of hydrocarbon production by LUKOIL Group in
2006.
Work continued in 2006 to improve efficiency of field development and reduce operating expenses as
part of LUKOIL’s program for optimization of development and production of oil in the period 2006–
2008. LUKOIL production companies took systematic measures in 2006 for increasing well productivity
2
Production by subsidiaries and share of production by associates under US GAAP.
23
and oil recovery rates in order to achieve oil production targets. Development costs totalled $4.652
billion.
By the end of 2006 a total of 196 fields were included in a multi-level system of field development
monitoring by use of geological-hydrodynamic models. Modelling of 47 fields was carried out in the
course of the year. Geological-hydrodynamic models are helpful in selecting optimal technical solutions
for field development, matching solutions to specific geology and structure of reserves. Modelling raises
the oil recovery ratio and lowers field development costs. The Company makes intensive use of models
for drilling over fields and for application of enhanced recovery techniques. LUKOIL plans to inсrease
the number of geological-hydrodynamic field models to 261 by 2009, so that 75% of Company fields will
have such models (compared with 55% of fields at present). Geological-hydrodynamic modelling will be
extended to all fields in such regions as Western Siberia, Timan-Pechora and Kaliningrad Region.
The Company carried out 2,341 thousand meters of production drilling in 2006, which is 61% more than
in 2005. A total of 945 new production wells were commissioned, of which 56 were horizontal wells.
Average daily flow from new wells was 39.9 tonnes (110.4 tonnes from horizontal wells). Production
from new wells (Group share) was 4.91 million tonnes.
The Company continued to make extensive use of sidetracks in 2006. A total of 146 sidetracks were
drilled in 2006, giving extra daily flow of 25.9 tonnes on average. By comparison 102 sidetracks were
drilled in 2005 and gave extra flow of 25.0 tonnes per day.
The Company put 636 new injection wells under pressure in 2006 as part of efforts to optimize field
development and maintain pressure in strata. That compares with 376 injection wells put into operation
during 2005.
The Company had 27,830 production wells at the end of 2006 of which 23,490 were actually in
production. The number of injection wells was 8,660, of which 6,340 thousand were under pressure. The
number of production wells was 1.8% greater than in 2005, mainly due to acquisition of new production
assets. The share of idle production wells in the total decreased from 16.8% to 15.6%.
The Company decommissioned 332 wells with high water cut (average 98.8%) and marginal wells in
2006 in order to increase efficiency and reduce energy consumption. This saved extraction of 1.9 million
tonnes of water, reducing energy expenses and preventing rapid growth of average water cut at wells. A
total of 3,165 operations were carried out to optimize production at mechanized wells and 144 wells were
transferred to mechanized operation.
LUKOIL Group compensates natural decline of oil production levels due to field exhaustion and
worsening reserve structure by intensive application of enhanced oil recovery techniques. A total of 5,274
physical, chemical, hydrodynamic and heat operations were carried out in 2006 to increase the recovery
ratio from productive strata. Additional production from wells due to these operations totalled 24.2
million tonnes, or 27.0% of total production by the Group in Russia.
All of the efforts described above led to increase of average daily production per well to 11.8 tonnes,
which helped to limit growth of lifting costs. Average daily production at the Company’s wells in Russia
has grown from 8.6 to 11.2 tonnes in the period from 2001 to 2006.
Russia
LUKOIL Group produced 89.561 million tonnes of oil inside Russia during 2006, of which 87.930
million tonnes were produced by subsidiaries. Production in Russia grew by 3.8% compared with 2005.
Organic growth of production was 1.6%.
Subsidiaries and associates of LUKOIL Group produced oil at 327 fields in Russia during 2006.
Production drilling was 2,122 meters, which is 59.7% more than in 2005. Production wells numbered
26,970 at the end of 2006, of which 22,800 were in use. A total of 782 new wells were commissioned in
2006 and they produced 4.47 million tonnes of oil.
Western Siberia accounted for 66.7% of oil production by the Group inside Russia during 2006. Fields
in Western Siberia provided most of the growth in LUKOIL Group’s Russian production (39.5%, or 1.30
million tonnes). A significant part of the production increase in Western Siberia was due to acquisition of
24
assets of Marathon Oil Corporation, which produced 0.9 million tonnes of oil in the period after their
acquisition by the Group. Work to optimize field development systems in the region continued in 2006,
leading to increase of reserves and forecast production levels at major fields. The Company
commissioned new fields in Western Siberia as well as optimized production at old fields. Major new
commissionings included the West Pokamasovskoye and West Kotukhtinskoye fields with proved,
probable and possible oil reserves in excess of 280 million barrels.
There was also a significant increase in output (by 1.12 million tonnes) in Timan-Pechora, contributing
34.3% of production growth by the Company in Russia. Consolidation of Sever-TEK at the end of 2005
accounted for 55% of the production growth in Timan-Pechora in 2006. Remaining growth was organic
and came mainly from the Tedinskoye, Makarelskoye, Inzyreiskoye and Kharyaginskoye fields.
LUKOIL Group is making every effort to prepare new reserves in Timan-Pechora for development as
quickly as possible. Three fields were commissioned in 2006: West Lekeyaginskoye (commissioned by
Naryanmarneftegaz, the joint venture between LUKOIL and ConocoPhillips), Verkhnegrubeshorskoye
and South Sedmesskoye, with overall proved, probable and possible reserves of about 230 million barrels
of oil.
Naryanmarneftegaz produced 500,000 tonnes of oil in 2006 (about 10,000 barrels daily) and continued
preparations to start production at the South Khylchuyuskoye field, which is the Company’s largest field
in the north of Timan-Pechora. Proved reserves at the field are over 500 million barrels. The quality of oil
is higher than that of Urals export blend: density is 35.5 API (32.0 API for Urals) and sulphur content is
0.71% (1.30% for Urals). Oil from the field will thus have a price premium to Urals blend on
international markets. Production at South Khylchuyuskoye will be from 78 wells and commissioning is
scheduled for the end of 2007. Planned annual production at the field, to be achieved in 2009, is 7.5
million tonnes (over 150,000 barrels daily).
LUKOIL Group increased production in the Urals region by 616,000 tonnes in 2006 (or by 6.0% y-o-y).
The region accounted for 18.7% of overall production increase by the Group in Russia. All of the increase
in the Urals was organic, and a significant role was played by new technologies, such as radial drilling
and acid hydrofracturing.
Nearly 300,000 tonnes of additional production was obtained at the Kravtsovskoye field in the Baltic
Sea. Production there in 2006 was 861,000 tonnes, which is 53% more than in 2005 and 77% more than
was forecast in the initial field development plan. The field is being developed with use of horizontal
drilling. Four new wells were drilled in 2006 giving daily flows between 790 and 2,830 barrels of oil.
Production in the Volga region in 2006 was 3.2 million tonnes, which is the same as in 2005.
Improvements in field development efficiency enabled increase of oil recovery rates in the region and
maintenance of production at previous levels, despite a high level of reserve exhaustion.
Work at fields on the shelf of the Caspian Sea continued in 2006. Russian government supervisory
agencies approved a feasibility study for construction of facilities at the Yu. Korchagin field. Enterprises
in Astrakhan carried out work on construction of the ice-resistant stationary platform, which will be used
for development of the field. The first tug-and-transport vessel for work at Caspian fields was completed
and building of a second vessel was continued. Documentation was developed for design and
construction of a jetty and floating oil reservoir. Production at the Yu. Korchagin field should begin in
2009. A zero-discharge principle will be used in order to minimize impact on the natural environment of
the Caspian Sea.
Supervisory agencies also approved a technical scheme for development of the V. Filanovsky field in
2006. Production at the largest field in the Northern Caspian is scheduled to begin in 2012. Forecast daily
production, based on current data, will be 210,000 barrels of high-quality crude oil. Oil at the field is
light, with low sulphur content (density is 44 API and sulfphur content is only 0.1%) and will merit a
premium to Brent crude on international markets.
The Yu. Korchagin and V. Filanovsky fields will be the mainstay of oil production by LUKOIL in the
Northern Caspian. Production at these fields should exceed 12 million tonnes of oil per year (250,000
barrels per day) by 2016.
25
International Projects
LUKOIL Group’s share of production in international projects was 5.674 million tonnes in 2006.
Production grew by 46.2% vs. 2005. Most of the growth (about 80%) was from acquisition at the end of
2005 of Nelson Resources, which has stakes in four production projects in Kazakhstan. LUKOIL’s share
of oil from these projects in 2006 was about 2.0 million tonnes. Organic growth of production from
international projects in 2006 was 9.7%, mainly due to Kumkol, where oil production accruing to
LUKOIL increased by more than 200,000 tonnes compared with 2005.
Production drilling in the Company’s international projects was 219,000 meters and the total number of
production wells was 868, of which 691 were in use. A total of 163 new wells were commissioned.
Average daily production per new well was 53.3 tonnes. Commissioning of new wells gave an extra 0.44
million tonnes of oil (as per LUKOIL’s share).
A key achievement in 2006 was launch of gas condensate production as part of the Shakh Deniz project
in Azerbaijan. The first production well came into operation in December 2006. LUKOIL Group has a
10% stake in the project. Forecast peak overall production of gas condensate at Shakh Deniz is about 5
million tonnes per year (over 100,000 barrels daily).
LUKOIL’s share of production in 2006 from the Karachaganak project was 1.45 million tonnes of oil
and gas condensate. Production levels were unchanged from 2005. A new efficient oil export route was
developed, carrying oil from Karachaganak to Samara, from where they can be delivered through the
Transneft pipeline system either to Black Sea and Baltic Sea ports or directly to Central Europe via the
Druzhba pipeline. The Karachaganak consortium plans to carry out preparatory work for expansion of
production capacities in 2007.
Development of the Kumkol field proceeded at a brisk pace in 2006 with drilling of 20 new production
wells and use of polymer solutions to penetrate productive strata. Average daily production from the new
wells in 2006 was 56.7 tonnes. Eight injection wells were also commissioned. A new facility was
installed at Kumkol for preparation and pumping of oil with annual capacity of 4 million tonnes of oil and
8 million tonnes of water (for injection into strata). The new facility helped to increase production at the
field by 13.7% compared with 2005, to 1.7 million tonnes (LUKOIL’s share).
A decision by the Arbitration Institute of the Stockholm Chamber of Trade confirmed LUKOIL’s priority
right to acquire a 50% stake in Turgai Petroleum, a joint venture between LUKOIL Group and
PetroKazakhstan developing the Kumkol field. The right arose from a shareholders’ agreement governing
LUKOIL’s joint ownership of Turgai Petroleum, and was activated following acquisition of 100% of
PetroKazakhstan by the Chinese state oil company, CNPC.
In Egypt nine new wells were brought into operation as part of the Meleiha project, and drilling and
construction of facilities for the WEEM project was continued. Two new production wells were brought
into operation at WEEM, with average daily production of 85.5 tonnes. A system for maintaining strata
pressure was designed.
Four new wells with average daily oil flow of nearly 1,000 tonnes were commissioned at the end of the
year as part of the Tengiz project in Kazakhstan. Production at Tengiz matched the level in 2005 and
LUKOIL’s share was 360,000 tonnes. Work continued in 2006 to expand production capacity.
Construction of an oil loading facility and terminal was completed as part of the Karakuduk project in
Kazakhstan. A project for utilization of associated gas was agreed with supervisory agencies in the
Kazakh government. Three new production wells, with average daily production of 41.1 tonnes, were
commissioned. Oil production at the field grew by 39.3% compared with 2005, or by nearly 200,000
tonnes.
A total of 11 wells, with average daily production of 67.6 tonnes, were brought into operation as part of
the Alibekmola and Kozhasai projects. Work continued on implementation of a project for utilization of
26
associated gas from the fields. A new well design was applied at the Alibekmola field and polymers were
used to help maintain collector qualities of productive strata.
The North Buzachi project in Kazakhstan commissioned 113 new production wells, with average daily
output of 31.0 tonnes. A new export pipeline was brought into operation for delivery of oil from the field
to the KazTransOil transport system. Total oil production at the field rose by 78.1%, or by nearly 600,000
tonnes.
Oil Production Drilling, thousand
meters
Commissioning of New Fields,
fields
2006
2005
2005
9
2004
1,453
1,345
2004
7
0
2,341
2006
11
5
10
15
0
Production Oil Well Launches,
wells
500
1,000
1,500
2,000
Oil Production Wells, thousand
wells
2006
2006
2,500
27.8
945
2005
2005
558
2004
200
400
26.9
2004
514
0
27.4
600
800
1,000
26.5
Producing Oil Wells, thousand
wells
27
27.5
Oil Production, million tonnes
95.2
2006
2006
28
23.5
2005
2004
22
86.2
2004
22.1
21
90.2
2005
22.8
23
24
80
85
90
95
100
27
Drilling of Sidetracks, sidetracks
2006
146
2005
102
2004
63
0
40
80
120
160
Drilling of Horizontal Wells, wells
2006
56
2005
41
2004
29
0
20
40
60
Production Drilling by Regions (2006)
1.8%
0.3%
0.5%
4.2%
9.3%
Western Siberia
Timan-Pechora
Urals
10.6%
Bolshekhetskaya Depression
Volga
73.3%
Other
International
Field Development and Gas Production
The objectives of LUKOIL Group’s gas programme are to accelerate growth of gas production in Russia
and abroad and to increase the share of gas to a third of total hydrocarbon production by the Group. The
main point of the strategy is to commercialize gas reserves and lower Company dependence on the highly
volatile international oil market.
Gas production by LUKOIL Group in 2006 totalled 15.967 billion cubic meters (1,545 million cubic feet
per day). Production of marketable gas (net of own use, reinjection and transport losses) was 13.612
billion cubic meters (1,317 million cubic feet per day), of which 13.396 billion cubic meters were
produced by Group subsidiaries. Average daily production of marketable gas rose by 141.6% in 2006
compared with 2005.
Production of associated gas in 2006 totalled 5.258 billion cubic meters, of which 3.791 billion cubic
meters was marketable. Associated gas is reinjected in order to maintain strata pressure at Company
fields, as well as being used to generate electricity from gas-powered generating stations and for other
industrial uses. Marketable associated gas is supplied to gas processing plants and to local consumers.
28
The utilization rate 3 of associated gas in 2006 was 72.2%, representing a decline from 2005. This was
due to acquisition in 2005–2006 of new production assets, which lack systems for gas utilization. The
Company is building gas-powered generating stations at fields in order to increase utilization rate of
associated gas. This reduces flaring of gas and lowers spending on electricity, decreasing oil lifting costs.
Also in 2006 the Company completed expansion of capacities at the Lokosovsky Gas-processing Plant to
1.9 billion cubic meters of associated gas, thus creating a complete system for processing of associated
gas produced at Company fields in Western Siberia. LUKOIL is on track to implement the programme of
measures adopted in 2003, which aimed to raise utilization rate of associated gas at LUKOIL Group
fields to 95%.
Production of natural gas in 2006 was 10.709 billion cubic meters, of which 9.821 billion cubic meters
was marketable gas. The Company’s main natural gas production achievement during 2006 was increase
of output at the Nakhodkinsoye field to a level close to maximum planned capacity.
The Group had 367 gas production wells at the end of 2006, of which 285 were in use.
Russia
Production of marketable gas in Russia in 2006 was 12.424 billion cubic meters, which is 180.6% more
than in 2005. The share of natural gas in the total rose from 20 to 71%. The Group had 295 gas
production wells at the end of 2006, of which 239 were in use.
The largest share of natural gas production in Russia in 2006 came from the Nakhodkinskoye field in the
Bolshekhetskaya Depression. The Company commissioned 12 new production wells at the field in 2006.
Gazprom agreed that natural gas from the field could be fed into its gas transport network during the
summer period. These breakthroughs made it possible to raise production at Nakhodkinskoye to a level
close to maximum planned capacity: a total of 8.486 billion cubic meters of gas were produced at the
field in the course of the year. Natural gas from the field has been supplied to Gazprom since May 2006
under an agreement with the gas monopolist at a minimum price of $22.5 per 1,000 cubic meters
(excluding VAT). Gas from Nakhodkinskoye has been also sold to other buyers at higher prices. An
additional agreement was signed with Gazprom in the course of the year, by which prices for gas from
fields in the Bolshekhetskaya Depression were increased to 1,059 roubles (about $40) per 1,000 cubic
meters from 1 January 2007, and minimum annual sales volume was set at 8 billion cubic meters. The
price in the additional agreement is 280 roubles (nearly $11) higher than the price set by the Russian
Federal Tariff Service for industrial gas consumers in the Yamal-Nenets Autonomous District.
LUKOIL Group also pursued its gas projects on the shelf of the Northern Caspian during 2006. In
January 2006 Russia and Kazakhstan signed a protocol, by which authorized organizations of Russia and
Kazakhstan obtain rights for development of the Khvalynskoye field and Tsnetralnaya structure without
any competitions or auctions. The authorized organizations on the Russian and Kazakh sides are,
respectively, LUKOIL and KazMunaiGaz. A PSA for the Khvalynskoye field should be signed in 2007.
International Projects
Production of marketable gas in 2006 as part of international projects was 1.188 billion cubic meters,
which is 1.7% less than in 2005. The share of natural gas was 85%. At the end of 2006 the Company had
72 gas production wells as part of foreign projects, of which 46 were in use.
The largest volume of marketable gas produced outside Russia was at the Karachaganak field in
Kazakhstan (LUKOIL’s share was 1.005 billion cubic meters), where output was 2.6% more than in
2005. Preparations were completed in 2006 for construction of the Karachaganak – Uralsk pipeline,
which will supply up to 500 million cubic meters of gas each year to consumers in West Kazakhstan
Region. An agreement was also signed on increase of gas supplies to the Orenburg Gas-processing Plant,
3
Share of produced gas in total gas extracted from strata (the remainder is flared).
29
where a joint Russian–Kazakh gas enterprise is now operating. The Karachaganak consortium plans to
carry out preparatory works in 2007 for expansion of production capacity at the field.
Work continued in 2006 on the Kandym – Khauzak – Shady project in Uzbekistan. Production drilling
and construction of an initial gas treatment facility advanced rapidly at the Khauzak area, and there was
also rapid progress with construction of gas collection points, a settlement for field personnel, an
approach road and electricity transmission cables. The first commercial gas should be produced at the end
of 2007 and forecast peak annual production is more than 10 billion cubic meters.
An important achievement in 2006 was launch of natural gas production by the Shakh Deniz project in
Azerbaijan. The first well, drilled to 6,500 meters from a stationary platform at sea depth of 105 meters,
was put into operation in December 2006. LUKOIL Group’s share in the project is 10%. Peak production
in the project as a whole should be over 20 billion cubic meters. Gas produced at Shakh Deniz will be
supplied to the domestic market in Azerbaijan and also to Turkey and Georgia.
Gas Production Wells, wells
2006
Gas Production Wells in Use, wells
367
2005
365
2004
317
275
295
315
2006
285
239
2005
231
2004
335
355
375
0
100
200
300
Production of Marketable Gas, billion
cubic meters
2006
13.61
2005
5.64
2004
4.92
0
5
10
15
Oil Deliveries
Total oil deliveries by the Company in 2006 were 96.7 million tonnes, which is the same as in 2005.
Higher export tariffs and growth of refining margin created a generally favourable market environment on
the Russian market in 2006. LUKOIL Group maximized its profit by quickly redirecting crude volumes
from less efficient exports to the internal market and to refining at the Company’s own and third-party
refineries inside Russia.
A total 1.82 million tonnes of crude oil were sold inside Russia in 2006, which is 171.3% more than in
2005. The Company also processed 42.79 million tonnes of crude (9.9% more than in 2005) at its own
and third-party refineries inside the country. LUKOIL purchased 1.85 million tonnes of oil on the
domestic market in 2006, compared with 1.47 million tonnes in 2005. Economic effect from seizing the
opportunities offered by much improved efficiency of supplies to the domestic market exceeded $150
million in 2006.
The Group continued to optimize oil supply routes in Russia during 2006. For example, economic effect
due to optimization of pipeline supply routes from fields in Western Siberia was over $10 million.
Oil exports by LUKOIL subsidiaries from Russia (including oil acquired from other producers) decreased
by 3.7% in 2006 compared with 2005, to 44.13 million tonnes. Exports to the far-abroad countries were
39.79 million tonnes, and exports to the near-abroad countries were 4.34 million tonnes. The Company
30
carefully managed its export routes in 2006, giving preference to the most profitable. Main export routes
were via the ports of Primorsk and Novorossiysk, which accounted for 46% of exports by the Company
(31% in 2005). A further 21% of exports (19% in 2005) were to Germany and Poland through the
Druzhba pipeline. Due to changes in the economic environment exports via the CPC system (Caspian
Pipeline Consortium) were completely halted in 2006. LUKOIL made no crude exports in 2006 via the
ports of Vysotsk, Butinge and Vitino or by rail to China.
The biggest share of exports in 2006 was through the Transneft transport system. Exports via Transneft
were 41.48 million tonnes in 2006 (7.7% more than in 2005) and their shares in total export grew to 94.0
from 84.1% in 2005. Due to lower attractiveness of export deliveries LUKOIL did not use its own
refinery infrastructure since more efficient routes were sufficient for all export volumes. For the same
reason the volume of export bypassing the Transneft system decreased by 63.6% in 2006, to 2.66 million
tonnes.
Work continued in 2006 to increase efficiency of pipeline exports. These efforts increased the relative
contract price by up to 30 cents per barrel on some export routes, giving extra $20 million revenues.
The Company continued to develop its own export capacities, which help to reduce transport expenses
and to make transport arrangements more flexible. The Company exported 2.2 million tonnes of oil
through its own transport terminals in 2006.
The Company continued expansion of capacities at the Varandey terminal on the Barents Sea through
construction of a unique ice-resistant module, suitable for year-round use. The module will have 12
million tonnes annual capacity and it is an essential asset in view of growing production levels in northern
Timan-Pechora and lack of developed transport infrastructure in the region. The project includes
construction of a stationary ice-resistant jetty, an underwater oil pipeline, an on-shore reservoir complex,
and a maritime trans-shipping base near Murmansk. Ice-class tankers with deadweight up to 70,000
tonnes will operate a shuttle service, delivering oil to a floating oil reservoir in the ice-free waters near
Murmansk, from where ocean-going tankers with deadweight up to 150,000 tonnes will transport the oil
to Western Europe and the USA. Engineering and geological studies were completed in 2006 at the site of
the jetty and along the route of the underwater pipeline, work on the underwater pipeline was begun and
work continued on documentation for construction of the stationary ice-resistant jetty. Half a million
tonnes of oil were shipped through the terminal in 2006. Enlargement of the terminal should be
completed in 2008.
Deliveries of oil to LUKOIL Group’s foreign refineries totalled 9.38 million tonnes in 2006, down by
6.0% from their level in 2005. The reduction in deliveries is due to temporary closure of the Odessa
refinery for reconstruction. However, deliveries to the Petrotel and Burgas refineries grew by 9.3% in
2006 compared with 2005. As well as making deliveries to its own refineries, the Company delivered oil
for processing at third-party refineries (Naftan and the Mozyr Refinery in Belarus and the Panchevo
Refinery in Serbia). The volume of such deliveries in 2006 was 1.70 million tonnes of crude. In addition
41.02 million tonnes of oil were sold on the international market, of which 2.96 million tonnes in nearabroad countries and 38.06 million tonnes in far-abroad countries.
Oil Exports, million tonnes
44.1
2006
45.8
2005
46.3
2004
43
44
45
46
47
31
Refining, Petrochemicals and Marketing
Strategy
•
Production of high-quality, environmentally friendly petroleum products with high added
value
•
Increase of light-products yield
•
Control over production expenses
•
Optimizing logistics: reduction of transport expenses
•
Increasing efficiency of trade operations
•
Increasing retail sales volume of petroleum products and related products and services
Oil Refining
Refining Margin in Russia (for average refinery in European Russia without
catalytic cracking), $/barrel
15
2004
10
2005
2006
5
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
-5
-10
LUKOIL Group refined 53.87 million tonnes of oil in 2006 (including processing at third-party
refineries), which is 7.5% more than in 2005. LUKOIL’s own facilities refined 48.88 million tonnes
(3.4% more than in 2005). The Company’s program for modernization and reconstruction of its refineries
was continued in 2006, with capital expenditures of $696 million. Consolidation of the Group’s refining
assets was also continued in 2006 with investments in the segment of $2 million.
The intensive growth strategy for 2007–2016, which the Company presented in 2006, includes increase of
oil refining capacities from 58 to 100 million tonnes. This will be achieved by modernization of existing
refineries, as well as by acquisition and construction of new refineries in various parts of the world
(Europe, America and Asia).
Net profit in the Refining & Marketing segment was $3,652 million, which is 19.4% more than in 2005.
The impressive results were achieved through increase of refinery throughputs and retail sales, favourable
macroeconomic climate and improvement of business efficiency in the segment.
The price environment on the petroleum product market was favourable in 2006. Wholesale prices in
Russia for gasoline (excluding excises and VAT) were 22.9% higher than in 2005. The tax environment
was also favourable in the refining segment: petroleum product excises in Russia were unchanged and
significant growth of Russian export tariffs on crude oil led to refining margins in Russia being almost
32
twice higher than in 2005. LUKOIL Group drew maximum benefit from this situation, redirecting part of
its crude export volumes to load capacities at its own and third-party refineries inside Russia.
The price environment outside Russia was also favourable. For example, growth of gasoline prices in
Europe was 17.9% from their average level in 2005. Refining margins in Europe were more than 50%
higher than their average level in the previous five years.
Russian Refineries
Refinery throughputs at the Group’s own refineries in Russia increased by 5.9%, to 39.50 million tonnes,
and capacity load was 94.7%, which is the highest level in the Company’s history. The Company also
obtained refining quotas at refineries in Ufa in order to maximize additional profit from the favourable
environment: LUKOIL delivered 3.29 million tonnes of oil for refining at facilities in Ufa, which is twice
more than in 2005.
The Company reached an important milestone in its refinery modernization program when it launched
production of gasoline that meets Euro-3 standards thanks to commissioning of a gasoline isomerization
unit at the Nizhny Novgorod Refinery. The share of high-octane gasolines in total gasoline output at the
Company’s Russian refineries (not including mini-refineries) rose to 76.6% in 2006 from 69.0% in 2005.
Refining depth was 76.2% and light-product yield was 50.2%.
LUKOIL’s Russian refineries took steps in 2006 to reduce operating expenses and raise production and
business efficiency. Irretrievable losses during the refining process were reduced from 0.74 to 0.70% and
the average workforce at Russian refineries declined by 8.1% compared with 2005. Savings from cost
reduction measures were more than $35 million.
Capital expenditures on modernization of the Company’s Russian refineries were $533 million in 2006
and investments were $2 million.
Installation of a catalytic reforming unit with one million tonnes annual capacity was completed at the
Volgograd Refinery in 2006. Launch of the new unit reduces output of straight-run gasoline and
increases output of gasoline with a higher octane number. The share of high-octane gasolines should rise
from 60% to 83% of total gasoline production at the Refinery. Economic effect from the new unit is
estimated at $115 million.
Preparations for commissioning of an isomerization unit at the Refinery with annual capacity of 385,000
tonnes continued in 2006. The unit should be ready by the end of 2007. The new unit will allow the
Refinery to start production of gasoline meeting Euro-3 standards.
Large-scale reconstruction and modernization of the Nizhny Novgorod Refinery, begun in 2005, was
continued in 2006. A gasoline isomerization unit with 440,000 tonnes annual feed capacity was
commissioned. The unit produces isomerizate, which is the high-octane component in gasoline. Its use
enables production of gasoline with aromatic content no higher than 42% and benzene content below 1%
(meeting Euro-3 standards). Euro-3 gasoline will now account for 50% of total gasoline production at the
Nizhny Novgorod Refinery. Economic effect of the isomerization unit is estimated at $75 million.
Modernization of AVDU-6 was completed, increasing its annual capacity to 9 million tonnes. A
pneumatic control system on the unit was replaced with an electronic distribution control system.
Economic effect is estimated at $100 million.
The hydrotreatment unit at Nizhny Novgorod was also rebuilt, reducing sulphur content in diesel fuel to
below 50 ppm (meeting the Euro-4 standard) and making it possible to start production of diesel fuel with
sulphur content below 10 ppm (the Euro-5 standard).
Measures were designed and implemented at the Perm Refinery to raise efficiency and reduce energy
expenses. Economic effect is estimated at $13 million.
A program for reconstruction and renewal of fixed assets and technologies at the Perm Refinery has been
prepared, involving large-scale, systematic development of oil refining and secondary capacities in the
period up to 2016, and adhering closely to strategic goals of LUKOIL Group. Main tasks of the program
33
are increase of refining depth and attainment of product quality matching Euro-3 standards by 2009 and
Euro-4 by 2012.
Construction of the second stage of a rail loading facility for oil and petroleum products was completed at
the Ukhta Refinery. The facility has 4 million tonnes annual capacity.
Re-equipment of the catalytic reforming unit was also completed at Ukhta, increasing its annual capacity
from 300,000 to 380,000 tonnes and lowering gasoline production costs. Economic effect from overhaul
of the unit is in excess of $16 million.
International Refineries
LUKOIL Group refined 11.08 million tonnes of oil outside Russia in 2006 (including processing at thirdparty refineries), which is 1.0% less than in 2005. Refinery throughputs at the Company’s own foreign
refineries were 9.38 million tonnes of crude, which is 6.0% less than in 2005. The reduction was due to
closure of the Odessa Refinery for reconstruction in July 2005. Not taking account of the Odessa Refinery
the Company would show growth of 9.3% in throughputs at its own foreign facilities. Average capacity
load in 2006 at the Petrotel Refinery (Romania) and Burgas Refinery (Bulgaria) was 84.1%.
Average refining depth at the Group’s foreign refineries increased to 80.4% in 2006 from 77.5% in 2005.
Light product yield rose to 66.1% from 60.9%, and irretrievable losses declined from 1.07% in 2005 to
0.99% in 2006, saving about $3.5 million. The share of high-octane gasoline in total gasoline production
rose from 98.6% in 2005 to 100.0% in 2006. This was due to temporary closure of the Odessa Refinery,
indicators of which were inferior to those of the LUKOIL Group’s other foreign refineries.
Capital expenditure on modernization of LUKOIL’s foreign refineries totalled $163 million in 2006.
Most of the work needed for installation of a n-butane isomerization unit at the Burgas Refinery in
Bulgaria was carried out in 2006 and the unit should be commissioned in 2007. It will produce more
feedstock for the Refinery’s sulphuric acid alkylation unit, enabling greater production of alkylate, the
high-octane gasoline component.
Measures were taken to reduce emissions of sulphur compounds, benefiting the environment around the
Refinery.
A unit for production of MTBE/TAME high-octane additives14 was installed at the Petrotel-LUKOIL
Refinery in Romania. The unit significantly reduces spending on purchases of high-octane additives for
gasoline production. Economic effect from commissioning of the unit is estimated at $40 million.
Refinery development plans include a number of projects for improving efficiency of industrial processes.
Since Romania has become a member of the EU, the refinery needs to produce biofuels, so the MTBE
units will be modified to enable production of ETBE1.
Work on reconstruction of the Odessa Refinery (Ukraine) continued in 2006. The Refinery has been
closed since August 2005 for the duration of the work, which is due for completion at the end of 2007.
The Refinery will then be reopened. The reconstruction includes installation of a visbreaker, overhaul of
the atmospheric and vacuum distillation unit and of the hydrotreatment unit. The visbreaker will reduce
the share of fuel oil in overall production from 44 to 17% and increase the share of vacuum gasoil from 5
to 29% (previously a large share of the Refinery’s vacuum gasoil output was mixed with bitumen to make
fuel oil; bitumen is a feedstock for the new visbreaking unit). As a result of these improvements annual
crude refining capacity at Odessa will be 2.8 million tonnes, refining depth will increase from 56 to 78%,
the share of high-octane products in total gasoline output will increase from 82 to 97%, and the
Refinery’s Nelson index will rise from 3.3 to 4.7.
1
MTBE (methyl tert-butyl ether), TAME (tert-amyl methyl ether) and ETBE, (ethyl tert-butyl ether) are oxygen-rich high-octane additives to
gasoline. They are used worldwide as substitutes for tetraethyl lead and for reducing the amount of unsaturated and aromatic hydrocarbons in gasoline (all of
these are harmful to the environment). Their use also ensures more complete combustion of motor fuel. ETBE is the most environmentally friendly additive. It
is produced from ethyl spirit, obtained by fermentation of natural cane sugars and other plants, and is used for production of biofuels.
34
Oils and Lubricants
LUKOIL motor oils match international requirements of the Society of Automotive Engineers (SAE), the
American Petroleum Institute (API), the European Automobile Manufacturers Association (ACEA) and
the Russian Association of Automobile Engineers (AAE). Company oils are produced using the latest
technologies and contain efficient additives supplied by Shell Additives, Exxon, Lubrizol and Ethyl.
High performance qualities of LUKOIL lubricants are acknowledged by major automotive manufacturers
in Russia and abroad. Company lubricants have passed tests at western certification centers on engines
made by DaimlerChrysler, BMW, Volkswagen, MAN and Porsche, and have been approved for use in
these engines.
Production and sales of oils and lubricants is an important direction of LUKOIL Group’s business. They
are produced at the Group’s Russian refineries in Perm, Volgograd and Nizhny Novgorod, and the Group
accounts for over 40% of total Russian production of lubricants. The Company also mixes lubricants from
ready-made components (both produced by the Company and bought from third parties) at plants of
Beloil in Russia, Petrotel in Romania and Teboil in Finland. LUKOIL produces more than 85 lubricant
types to international standards. They include base oils (used as inputs for production of ready-to-use oils,
lubricants, and additives), industrial oils for use in factory equipment, as well as motor and transmission
oils for all types of transport.
Production of oils and lubricants at the Group’s refineries totalled 1.17 million tonnes in 2006, which is
5.3% more than in 2005. Mixing and packaging of oils (including those produced at Group refineries) at
other Company plants totalled about 90,000 tonnes. LUKOIL began production of base oils with
improved quality in 2006, developed a range of new oils, standardized the ingredients of oils produced at
all the Company’s Russian refineries, and reduced use of additives supplied by other companies.
LUKOIL launched production of 78 reformulated and completely new oils and lubricants during 2006.
LUKOIL set up a 50/50 joint venture in 2006 with the Naftan Refinery in Belarus for production of
additives. LUKOIL Group contributed $11.46 million in cash to charter capital, while Naftan paid its
share with production assets (buildings, constructions, equipment, reservoirs, etc.). The purpose of the
venture is to produce and sell modern economically efficient additives for oils produced under the
LUKOIL brand and to carry out relevant R&D work. Launch of work by the joint venture in the third
quarter of 2006 reduced dependence of LUKOIL Group on additive supplies from other companies. The
venture should provide up to 80% of additive needs of LUKOIL Group in the medium term.
Consistent improvement in quality of Company oils has led to them being more widely used. For
example, the automotive plants VAZ, KAMAZ and MAZ have started to use LUKOIL oils in their newly
assembled vehicles. And growth in demand for packaged oils led to 15% increase in their production
compared with 2005, to 206,000 tonnes (sales of LUKOIL packaged oils rose by 2.5 times in Belarus and
by 65% in Ukraine during 2006).
The Company has created a system for managing customer relations in its oil and lubricant business.
LUKOIL is one of the first sector companies to offer complete back-up and tracking of the process of
lubricant sales, from receipt of the customer request to delivery of the product and disposal of used
lubricants. This support enables LUKOIL to sell over 80% of its oil and lubricant production direct to the
end-user.
Lubricants produced at the Group’s refineries are sold in more than 20 countries worldwide, and the
Company plans to significantly extend its network for sales of packaged oils in the near-abroad countries,
the Baltic states and South-East Asia. New markets for LUKOIL lubricants in 2006 included China,
Vietnam, Mongolia, Turkey, Armenia, and Pridnestroviye.
In June 2005 LUKOIL launched motor oils under the Teboil brand on the Russian market, adding to the
range of Group products represented in Russia. LUKOIL thus acquired presence in a new, more
expensive market segment and broadened the product choice, which it offers to consumers. Unique
ingredients and preparation techniques in manufacture of Teboil lubricants make them ideally suited for
winter conditions, ensuring high demand from Russian motorists. Supplies of Teboil lubricants to the
Russian market were 8,500 tonnes in 2006.
35
Oil Refining by LUKOIL, million tonnes
60
53.9
50.1
44.9
40
20
0
2004
2005
2006
At third-party
refineries
1.3
2.8
5.0
At the Company's
foreign refineries
8.1
10.0
9.4
At the Company's
refineries in Russia
35.5
37.3
39.5
Share of High-octane Gasoline in Total Gasoline
Production, %1
100
80
72.2
79.5
84.5
60
40
20
0
2004
2005
2006
Share of Diesel Fuel with Sulphur Content below 0.05% in
Total Diesel Production, %1
80
61.8
67.8
60
42.0
40
20
0
1
2004
2005
2006
Not including mini-refineries.
36
Structure of Petroleum Product Exports
100%
80%
60%
13.0
8.4
9.7
28.0
29.2
28.6
14.2
19.2
19.3
40%
Other
Fuel oil
Vacuum gasoil
Diesel
20%
40.1
39.2
37.4
0%
4.7
4.0
5.0
2004
2005
2006
Straight-run gasoline
Oils and Lubricants Production at Company
Refineries, thousand tonnes
1,400
1,200
1,000
800
600
400
200
0
1,199
2004
240
180
1,115
1,174
2005
2006
Production of Packaged Oils, thousand
tonnes
206
180
142
120
60
0
2004
2005
2006
Gas Processing
LUKOIL Group’s gas-processing plants process associated gas produced in Russia, turn it into
marketable gas (fed into the Gazprom gas pipeline system) and into liquid hydrocarbons.
LUKOIL gas-processing plants processed 2.647 billion cubic meters of gas feedstock and 628,000 tonnes
of natural gas liquids in 2006. Gas processing increased by 11% from 2005 and processing of natural gas
liquids was 31% higher. The plants produced 2.038 billion cubic meters of stripped gas. They also
produced 705,000 tonnes of LPG, which is 23% more than in 2005, and 631,000 tonnes of liquid
hydrocarbons (stable gas naphta, isopentane, hexane- heptane fractions and natural gas liquids), which is
22% more than in 2005.
Reconstruction work was carried out at the Permneftegazpererabotka in 2006, increasing annual capacity
for refining of natural gas liquids to 700,000 tonnes. LUKOIL also completed reconstruction of the
Lokosovsky Plant, increasing its annual capacity from 1.0 to 1.9 billion cubic meters of associated gas.
The new capacities will be loaded through reduction in sales of associated gas to SIBUR Holding. The
work included connection of the plant to the Urengoi – Surgut – Chelyabinsk trunk gas pipeline, helping
to diversify sales of dry stripped gas. This is particularly important in the summer period, when need for
37
gas at Surgut Power Station declines. LUKOIL has thus created a complete system for processing of
associated gas, produced at fields in Western Siberia.
Petrochemicals
LUKOIL Group's petrochemical business is the biggest in Russia and Eastern Europe. Company plants in
Russia, Ukraine and Bulgaria make pyrolysis products, organic synthesis products, fuel fractions and
polymer materials. LUKOIL meets a major share of Russian domestic demand for various chemicals as
well as exporting chemicals to more than 50 countries.
LUKOIL has been steadily increasing production of chemicals with high added value (polymers,
monomers and organic synthesis products) over the last five years, in line with the Company’s strategy
for development of its petrochemical business. At the same time production of chemicals with low added
value (pyrolysis products and fuel fractions) has been reduced. Output of polymers, monomers, and
organic synthesis products grew by 11% from 2002 to 2006, while output of pyrolysis products and fuel
fractions declined by 11%.
LUKOIL petrochemical plants produced 2.038 million tonnes of marketable chemicals in 2006, including
798,000 tonnes of polymers and monomers, 648,000 tonnes of organic synthesis products, and 584,000
tonnes of pyrolysis products and fuel fractions. Output included 447,300 tonnes of polyethylene (4.8%
less than in 2005), 232,500 tonnes of propylene (2.7% less than in 2005) and 70,200 tonnes of
polypropylene (3.3% more than in 2005). Overall reduction of petrochemical production volumes in 2006
was due to scheduled repair and upgrading work at the Group’s petrochemical plants.
Price environment on petrochemical markets was favourable in 2006. Polyethylene prices increased by
17% in Russia and by 22% in Europe, and sale prices for polypropylene in Russia and Europe rose by 16
and 13% respectively. The market price for benzene rose by 21% in Russia and 12% in Europe. Net profit
in the petrochemical sector was $96 million.
LUKOIL Group pursued its strategy for development of petrochemical business in 2006 with a number of
measures for modernization of existing production and creation of new facilities. Capital expenditures in
the petrochemical sector were $172 million.
LUKOIL continued work in 2006 to set up polypropylene production at the Stavrolen Plant. A
polypropylene unit with 120,000 tonnes annual capacity was commissioned in the first quarter of 2007. It
is the first such unit among the Group’s petrochemical assets. Propylene feedstock is produced in the
Stavrolen complex and supplied to the unit through a pipeline. The Unipol process, which the unit uses,
was designed by the US company, DOW Chemicals, and has fewer environmental risks than other
production methods, since sources of harmful atmospheric emissions are avoided. The technology enables
production of shockproof and frost-resistant polypropylene as well as various modifications for use in
medicine and agriculture. General-purpose polypropylene from Stavrolen will be supplied to Russian
factories for production of fibres and threads, pipes, technical items, and consumer goods. Capacity of the
new unit is sufficient to meet all Russian demand for modern polypropylene grades.
Saratovorgsintez carried out installation of a unit capable of producing 15,000 tonnes of sodium cyanide
per year. Commissioning is scheduled for the second quarter of 2007. The production process is based on
DuPont technology which is highly reliable and safe. Sodium cyanide is used in gold mining for
separation of the metal from ore rock. Until now needs of the Russian gold mining industry, estimated at
20,000 tonnes per year, have been mostly met by import supplies. In 2006 Saratovorgsintez also carried
out reconstruction of a phenol-acetone production column in order to improve quality and efficiency of
phenol production.
Karpatneftkhim plans to install chlorine and caustic soda production using membrane technology in 2007,
enabling annual production of up to 200,000 tonnes of caustic soda. Karpatneftkhim also intends to build
a suspended polyvinyl chloride facility with 300,000 tonnes annual capacity. Integration of the new
facility with production of vinylchloride monomer will significantly increase overall production
efficiency.
38
A key project for implementation in the next few years is construction of the Caspian Gas-chemical
Complex, which will process natural gas and gas condensate, produced by LUKOIL Group in the Caspian
region. The purpose of the project is to increase added value by deeper processing of gas feedstock and to
ensure efficient chemical processing of ethane, natural gas liquids and condensate. The Caspian Complex
will refine natural gas and its components to produce basic organic synthesis products, polyethylene,
polypropylene and other petrochemicals. Work on a feasibility study for the complex proceeded in 2006
and should be completed in the second quarter of 2007.
3,000
2,500
Production of Petrochemicals,
thousand tonnes
2,242
2,179
2004
2005
2,038
2,000
1,500
1,000
500
0
2006
Petroleum Product Marketing
Wholesale Trading in Petroleum Products
Wholesale trading in petroleum products is carried out in Russia by the Group’s refineries and eight
petroleum product organizations, which work in 60 regions countrywide. Volume of petroleum product
wholesale inside Russia in 2006 was 15.16 million tonnes, which is 7.7% less than in 2005.
In 2006 LUKOIL exported 20.5 million tonnes of petroleum products from Russia to near- and far-abroad
countries (23.5% more than in 2005), of which 37.4% was diesel fuel, 28.6% was fuel oil, 19.3% was
vacuum gasoil, 5.0% was straight-run gasoline, 3.3% was oils and lubricants and 6.4% consisted of other
products.
Most petroleum products (82.9% in 2006) are delivered to export by railway. LUKOIL optimized its
system for rail delivery of petroleum products in 2006. Measures and achievements include use of the
Company’s own tank cars and tank cars of other private companies, lowering transport tariff rates, and
obtaining discounts on main export routes. Economic effect from these steps was more than $30 million.
Petroleum products are also exported by river/sea and pipeline. LUKOIL Group companies continued to
develop its own export terminals in 2006, enabling significant reduction of transport expenses and
making export schemes more flexible. The third stage of a terminal at Vysotsk in north-west Russia was
completed. The terminal has been used exclusively for export of petroleum products since 2005, making
deliveries to Western Europe, the USA and South-East Asia. Trans-shipment of petroleum products at the
terminal in 2006 was 9.2 million tonnes. An agreement was signed with Russian Railways in April 2007
for increase of annual capacity on the line to Vysotsk to 12 million tonnes. The terminal project capacity
is nearly 15 million tonnes. The Vysotsk terminal saved the Company about $300 million in 2006 alone
due to avoidance of more expensive export routes through ports in the Baltic republics.
LUKOIL is working hard to develop its international trade in petroleum products, increasing the scale and
geographical diversification of this business. The Company trades its own products and products of third
parties. LUKOIL Group has trading offices in 15 countries, and the Company’s foreign refineries and
marketing subsidiaries also carry out wholesale operations. A key objective in this business is to increase
direct deliveries of petroleum products to end-users, without use of trade intermediaries. Volume of
39
petroleum product wholesale sales on the international market in 2006 was 57.56 million tonnes, which is
16.2% more than in 2005.
In 2006 LUKOIL made deliveries of petroleum products (including arbitrage arrangements) to Europe,
the USA and the Asia-Pacific region, as well as was increasing its sales in new regions – Africa, Latin
America and the Middle East. The Company also carried out blending of petroleum products on its main
markets in order to achieve the closest possible match with customer needs and quality requirements.
Retail Sales of Petroleum Products
LUKOIL Group’s marketing network encompasses 19 countries, including Russia, near-abroad and
European countries (Azerbaijan, Belarus, Georgia, Moldova, Ukraine, Bulgaria, Hungary, Finland,
Estonia, Latvia, Lithuania, Poland, Serbia, Romania, Macedonia, Cyprus and Turkey), and the United
States. The network consists of 200 tank farm facilities, with total reservoir capacity of 3.12 million cubic
meters, and 5,793 filling stations (including franchises).
Retail sales continued to grow in 2006. The Company sold 11.17 million tonnes of fuel through its own
filling stations, which is 4.7% more than in 2005. The growth was mainly due to increased sales per
station, supported by the good macroeconomic environment and optimization of the filling station
network.
Efforts at optimization, which continued in 2006, were focused on withdrawal of stations and tank farms
with low efficiency levels. In Russia the Group sold 41 relatively inefficient filling stations and closed 11.
In the USA 122 low-efficiency filling stations were removed from the Group. In Europe the Group
reduced the number of stations with daily sales below one tonne, while the number of stations with daily
sales over five tonnes rose by 24%.
The Company also continued to build and acquire new, highly efficient filling stations and to upgrade
existing ones. A total of 155 new stations were built, 148 were upgraded, and 114 were acquired. Capital
expenditures and investments in the retail sector in 2006 were $553 million. LUKOIL Group’s average
daily sales per station (owned and leased) increased to 7.2 tonnes as a result.
Volume of retail sales will continue to grow in the medium term thanks to further optimization and
development of the station network and to major new acquisitions.
In 2006 LUKOIL acquired 41.81% of shares in Udmurtnefteprodukt, which owns over 100 filling stations
and nine tank farms in Udmurtia. The deal price was $25 million. LUKOIL thus entered a new and
promising market estimated at 350,000 tonnes of light petroleum products per year.
At the end of 2006 LUKOIL Group signed an agreement to acquire the European retail business of
ConocoPhillips, consisting of 376 filling stations in six European countries. The acquired assets include
156 stations in Belgium, 49 in Finland, 44 in the Czech Republic, 30 in Hungary, 83 in Poland and 14 in
Slovakia. The acquired stations are leaders by efficiency on their markets. The stations currently operate
under the Jet brand, but will be transferred to the LUKOIL brand in the space of a year in Finland and two
years in other countries. The deal should be finalized in the second quarter of 2007, including anti-trust
approval from the EU Commission.
Russia
The Group’s retail network in Russia consists of 1,658 filling stations (including franchises) and 125 tank
farm facilities with 1.71 million cubic meters of reservoir capacity. The filling stations and tank farms are
operated by eight petroleum product organizations in 60 Russian administrative regions.
The Company sold 4.00 million tonnes of petroleum products through filling stations on the domestic
market in 2006, which is 12.6% more than in 2005. Capital expenditures and investments in the Russian
retail sector were $234 million, including construction of 42 new filling stations, upgrading of 73 stations
and acquisition of 45. The Company also carried out reconstruction and modernization of its tank farm
assets.
40
LUKOIL withdrew (sold, closed or mothballed) 24 tank farm facilities and 52 filling stations with low
efficiency in 2006 as part of its program for optimization of the retail network. LUKOIL Group’s average
daily sales per station (owned and leased) increased to 7.2 tonnes as a result.
The Group’s Russian retail business took an important step forward in 2006 when sales began of
LUKOIL’s own gasoline under the EKTO brand (the name is an acronym from the Russian words for
‘ecological fuel’). EKTO fuels fully meet Euro-3 standards and exceed Russian legislative requirements.
Performance qualities of EKTO fuels are enhanced by addition at tank farms of a multifunctional
combination of additives, which help to keep engines clean, prevent corrosion, etc. Our new gasolines
have found strong demand from consumers. Monthly volumes of EKTO sales grew by nearly 20 times
from April to December 2006, when they reached 30,300 tonnes. By the end of 2006 EKTO gasolines
were sold in Russia’s Central, Volga and North-West federal districts. The Company has also been selling
diesel fuel under the EKTO brand since November 2006.
Environmental Features of EKTO Gasoline and Legislative Requirements (Euro-3,
City of Moscow, Russian Federation)
Indicators
Maximum sulphur
content, ppm
Maximum aromatics
content, %
Benzene content, %
Olefin content, %
EKTO
EN
228:1999
Euro-3
City of
Moscow
150
150
150
500
42
42
42
Not regulated
1.0
1.0
18
18
3.0
Not
regulated
Russian Federation
GOST R 51105-97
5.0
Not regulated
The Company’s efforts in ecology, product quality and service have earned special recognition from the
Moscow City Government, which awarded the Company an ‘Ecology Stamp’ in 2006, in accordance with
a City Government resolution on introduction of motor fuel, fuel additives and oils with improved
environmental features. The Ecology Stamp is further proof that LUKOIL’s fuels and filling station
equipment meet the highest environmental standards.
LUKOIL continued to increase the number of filling stations using the LICard fuel card system in 2006.
The LICard network increased by 10.8%, to 2,179 stations by the end of the year. The number of cards in
circulation doubled to 1.17 million. A total of 1.55 million tonnes of petroleum products were sold using
the cards, which is 45% more than in 2005.
LUKOIL approved a program in 2006 for development of non-fuel retail sales at the Company’s Russian
filling stations in the period up to 2014. The program calls for increase in turnover of non-fuel goods and
services by almost five times by 2014, and increase of their share in operating profit of filling stations to
about 20%. In order to achieve these objectives, LUKOIL plans to introduce new efficient filling-station
formats in cities, on highways and in the countryside, as well as developing the range of goods available
in filling-station shops and cafeterias and optimizing additional services offered at Company stations.
Sales of non-fuel goods at the Group’s Russian filling stations grew by nearly 25% in 2006, to about $90
million. Development of non-fuel business is important for positioning LUKOIL as a customer-oriented
company with European standards of service.
International
The Group’s network in Europe, near-abroad countries and the USA consists of 4,135 filling stations
(including franchises) and 75 tank farm facilities with reservoir capacity of 1.41 million cubic meters.
41
LUKOIL built 113 filling stations outside Russia, acquired 69 and upgraded 75 during 2006. Capital
expenditures in the international retail sector in 2006 were $319 million.
Retail petroleum product sales on international markets were 7.17 million tonnes in 2006, which is 0.8%
more than in 2005. Optimization of the filling station network helped to increase average daily sales per
station in Europe and near-abroad countries by 12%, to 5.5 tonnes. Average daily sales at US stations in
2006 were 8.1 tonnes.
LUKOIL Group opened its first filling station in Macedonia in 2006. Average daily sales at the station
were more than 16 tonnes. The Company plans to open 40 stations in Macedonia over the next four years,
supplying them with petroleum products from LUKOIL refineries in Bulgaria and Romania.
LUKOIL Group and the Slovenian company Petrol reached a framework agreement in 2006 on creation
of a joint venture for sale of petroleum products in Balkan countries. Petrol will take 51% of the new
venture and LUKOIL will have 49%. Petrol’s contribution to capital will consist of four companies with
filling stations in Slovenia, Croatia, Bosnia and Serbia. LUKOIL will contribute shares of its subsidiaries,
LUKOIL-Beopetrol (Serbia) and LUKOIL-Macedonia.
Structure of Petroleum Product Sales in 2006 (wholesale and retail)
Russia 41.0%
Near-abroad countries 8.7%
Baltics 3.9%
Europe 22.4%
Turkey 2.0%
USA 22.0%
7.2
Average Daily Sales of Petroleum Products per Filling
Station, tonnes per day
7.2
7.0
6.7
6.3
6.2
5.7
2004
2005
2006
42
Technology and Innovation
Commitment to innovative technologies is one of LUKOIL’s competitive advantages. We improve
existing technologies and design new and promising solutions, ensuring that technology contributes
everything it can to every segment of our business, supporting steady growth of the business and raising
its efficiency.
LUKOIL is a leader among Russian and international companies by rate of commercial use of intellectual
property (over 40%).
LUKOIL Group uses innovative technologies to achieve major breakthroughs in protection of the
environment and sustainable use of natural resources.
R&D financing by the Company in 2006 was about $20 million, of which 92% was spent on the
Exploration & Production segment, 4% on Refining & Marketing and 4% on other objectives (protecting
the environment, industrial safety, finance and investment). Economic effect from R&D spending in 2006
is estimated at $35 million.
Exploration & Production Technologies
Most R&D spending in the E&P segment was on development of geological and geophysical study
techniques, improvement of reserve assessment methods (including work on methods to assess
hydrocarbon reserves in reservoirs with complex structure), as well as design and improvement of
methods for increasing oil recovery and optimizing the technology used for development of new license
areas and hydrocarbon strata. Special attention was given to technologies for ensuring environmental
safety during field development, particularly development of offshore fields.
One of the most important results of our R&D activity is efficient application of oil production
intensification and enhanced oil recovery (EOR) technologies. EOR offers significant increase of
recoverable reserves and oil production levels. In particular, it allows commercial development of highviscosity oil reserves, reserves in almost impenetrable collectors and hard-to-recover reserves at late
stages of field development. In recent years the share of oil produced at LUKOIL fields using various
EOR techniques has been over 20% of total oil production.
The Company carried out 5,274 EOR operations in 2006 (4.4% more than in 2005), using physical,
chemical, hydrodynamic and heat techniques. Additional production in 2006 thanks to EOR totalled 24.2
million tonnes, which is 9.5% more than in 2005. Additional production using EOR was more than 25%
of total oil production by LUKOIL Group in 2006.
Most of the additional production (14.7 million tonnes, or 60.7%) was obtained using physical methods,
particularly hydrofracturing. LUKOIL improved its hydrofracturing technology at fields in Western
Siberia using deep-penetration hydrofracturing of strata (one such operation was carried out in October
2006 with 150 tonnes of proppant), selective hydrofracturing with use of water shut-off compositions at
varied rates of injection, as well as hydrofracturing in horizontal wells and sidetracks with horizontal
bottoms. First results suggest that increase of daily production is 2–2.7 times greater than can be achieved
using standard technology.
The Company obtained positive results from use of acid hydrofracturing and hydrofracturing with
injection of proppant in quantities over 30 tonnes at fields in the Urals region, where average growth of
daily flow rates due to such operations was 15 and 17 tonnes respectively.
Other forms of EOR (hydrodynamic, heat, chemical methods and oil production intensification) gave 9.5
million tonnes of production. Analysis of results showed high efficiency of chemical methods in
preventing growth of water cut at wells. The Company therefore increased chemical EOR operations by
almost two times (from 276 to 494). Further increase of chemical EOR to 1,000 operations is scheduled
for 2007.
43
Drilling of sidetracks at existing wells has also proved a highly efficient form of EOR and the Company
increased drilling of sidetracks in 2006. A total of 146 sidetracks were brought into operation in 2006,
compared with 102 in 2005, and gave average daily production increase of 25.9 tonnes. Total additional
production due to sidetracks was 494,000 tonnes in 2006, which is 15.7% more than in 2005.
The Company carried out radial drilling (drilling of small-diameter sidetracks) on an experimental basis
in the Urals region. Drilling of radial channels was found to be an inexpensive way of increasing
production and reaching hard-to-recover reserves. Results showed the technology to be particularly well
suited for carbonate collectors: growth of daily production was between 6 and 25 tonnes. LUKOIL plans
to proceed from experimental to industrial use of radial drilling in 2007.
Horizontal drilling also improves efficiency of production, offering productivity increases of 1.5–2 times
per well. Production per horizontal well in 2006 was 110.4 tonnes and best results were achieved at the
Kravtsovskoye field on the Baltic Sea shelf, where daily flows were as high as 196.7 tonnes.
Refining Technology
In the Refining, Gas Processing & Petrochemicals segments LUKOIL carried out work to design and
test new fuels and lubricants. The Company is increasing its profits by greater output of products with
higher added value, and modern high-tech equipment reduces refining costs. New technologies enable
steady improvement of product quality, benefiting our customers and the environment.
LUKOIL Group started production of gasoline that meets Euro-3 standards in 2006 thanks to
commissioning of an isomerization unit at the Nizhny Novgorod Refinery.
Following careful analysis of existing isomerization technologies, Company specialists chose the ParIsom process, designed by the US company, UOP Ltd., which provided the technology, catalyser and
general plan for reconstruction of the unit. The unit produces the high-octane gasoline component,
isomerizate, which enables production of gasoline with aromatic content under 42%, benzene content
under 1% and less than 150 ppm of sulphur.
New types of gasoline are sold under the specially developed EKTO (‘Ecological Fuel’) brand. Company
tank farms put a multi-functional combination of additives into the fuel in order to improve its
performance qualities (cleansing, anti-corrosion, etc.). The Company has also been selling diesel fuel
under the EKTO brand since November 2006. Creation of branded fuel by blending with additives at tank
farms is common practice in Western Europe (it is done, for example, by Shell, BP, Neste and Teboil
among others), but sale of branded fuel is a novelty in Russia.
LUKOIL works hard on developing new technologies for production of oils, lubricants and additives. A
special science and technology section has been set up within the Company for this purpose, concerned
particularly with design and market launch of new high-quality products that meet the needs of modern
engines, as well as development of new technologies and mixtures. Company specialists in the new
section work in close association with Russian scientific centres. In 2006 the Company began production
of 78 completely new and reformulated products, 13 new products are at the testing stage and 35 are at
the design stage.
Energy-saving Technologies
LUKOIL designed and implemented an energy-saving program in 2006 in order to make Company
operations less energy-intensive. Thanks to this programme the Company was able to save about $14
million (10% more than economies due to energy-saving measures in 2005).
LUKOIL also completed installation of an automated system for metering of electricity use at all of the
Company’s subsidiaries. The system takes advantage of three different levels of tariffs, in force at
different times of the day, and increases accuracy in measurement of electricity consumption, reducing
spending on electric power and keeping track of the Company’s power supply arrangements. LUKOIL
44
has thus achieved its key objectives of accurate metering of electricity use and changeover to variable
tariffs. Installation of the system has also put the necessary technical conditions in place for LUKOIL
subsidiaries to start using Russia’s wholesale electricity market.
LUKOIL Group is also working hard to develop in-house electricity generating facilities, which offer
significant savings on energy costs as well as increasing rates of utilization of associated gas, which is
used as fuel at gas power stations. LUKOIL’s Russian subsidiaries (LUKOIL-Western Siberia, LUKOILNizhnevolzhskneft, LUKOIL-Komi, RITEK, Permneftegazpererabotka and LUKOIL-Sever) operate 36
power generating stations, which provided 356.6 million kilowatt-hours, or 3.4% of the Company’s
electricity needs in Russia in 2006. International projects, in which LUKOIL is a participant, also use gasturbine power stations. Their overall capacity is 238.0 megawatts.
Information Technologies
As well as developing industrial technologies, we are also keen to develop technologies, which improve
efficiency of business management. LUKOIL has been working since 2001 on installation of an
integrated management system based on SAP R/3, which will help to optimize decision-making processes
and automate management accounting. By the beginning of 2006 four production and refining
subsidiaries operated the system. In 2006 the system was installed at another four production subsidiaries
(LUKOIL-Western Siberia, LUKOIL Nizhnevolzhskneft, LUKOIL-Kaliningradmorneft and LUKOILSever) and at three refining subsidiaries (the Nizhny Novgord, Ukhta and Volgograd refineries). The
system was also used in test regime by LLK-International, which runs the Group’s oils and lubricants
business. Further work was carried out on design and implementation of the integrated management
system at marketing and trading companies, including LITASCO. Work to install the system at the parent
Company was also continued. Elements of the system, at various stages of design and implementation,
are thus encompassing all spheres of LUKOIL Group business.
Preparations continued in 2006 for changeover from IT projects by distinct business segments to a global
integrated management system and a system for monitoring of IT infrastructure. This will help to ensure
that business management in the Group as a whole is more balanced and functional.
EOR Techniques, used by LUKOIL in 2006
30%
19%
3%
3%
2%
9%
34%
Hydrofracturing
Other physical techniques
Hydrodynamic techniques
Intensification of oil production
Drilling of sidetracks
Chemical techniques
Heat techniques
45
Shares of Various Techniques in Overall EOR Production in
2006
4%
13%
51%
19%
3%
2%
Hydrofracturing
Other physical techniques
Hydrodynamic techniques
Intensification of oil production
8%
Drilling of sidetracks
Chemical techniques
Heat techniques
Social Responsibility
Protecting the Environment
LUKOIL Group observes the highest standards as regards protection of the environment and industrial
safety. The Company is fully aware of its responsibility to society for maintaining the environment and
for rational use of resources. We make every effort to raise the level of environmental safety at our
production facilities, to reduce burden on the environment due to our industrial activities, and to ensure
that natural resources (both those directly employed in production and those adjacent to our production
sites) are used in the most rational way possible. Protection of the environment is a prime consideration at
all stages of project implementation, from investment idea to disposal of production assets and
equipment.
LUKOIL carried out scheduled work in 2006 to ensure ecological security as required by national
legislation and international environmental standards. The Company also worked hard to raise quality of
its products, increasing the share of products, which meet the latest ecological standards.
The Company's environmental activities are guided by the LUKOIL environmental management system,
which has been certified as compliant with the ISO 14001 international standard. LUKOIL underwent its
regular external audit of Company systems for management of environmental protection in 2006.
The Company continued to implement its program to ensure ecological security of organizations in
LUKOIL Group during the period 2004–2008. The program consists of more than 400 measures to
protect the environment with overall cost of about $1.2 billion. The Group spent about $380 million in
2006 on measures to ensure ecological security (up from $320 million in 2005), including about $150
million of capital expenditures on environmental facilities. Thanks to these efforts many of the
Company’s environmental impact indicators were lower than the average for the Russian oil sector and
LUKOIL was the best in Russia on several environmental counts.
An ecological rating prepared by a non-government organization, the International Social-Ecological
Union, and by the Independent Ecological Rating Agency found LUKOIL Group to be one of the three
Russian leaders by reduction of environmental impact since 2000. The rating was based on study of the
business of 75 large Russian companies and about 500 of their subsidiaries.
Work proceeded in 2006 to install a single standard of environmental control at LUKOIL organizations in
order to raise efficiency of the Group’s environmental efforts. The single standard will enable to create a
unified, vertically integrated system of environmental control over industrial activities by the Group.
Work also continued on drafting of a corporate strategy for creation of an innovative mechanism to attract
46
investments to LUKOIL enterprises through environmental and economic means outlined in the Kyoto
Protocol. The strategy involves reduction of greenhouse gas emissions by the Company as a whole and
sale of emission quotas on the market by Group subsidiaries (or transfer of the quotas to Group
organizations outside Russia).
The Company is extremely careful to minimize negative impact on the environment from its production
activities, to maximize utilization of associated gas, to purify waste water, to reduce production of
dangerous waste, and to carry out recultivation of land, which has been used for hydrocarbon extraction.
New technologies are being applied by the Company, which combine efficiency with environmental
safety in production of oil & gas. These include permanent satellite monitoring of the environmental
situation in the Baltic Sea, where LUKOIL is developing the Kravtsovskoye field.
LUKOIL understands the importance of high-quality products for reducing environmental impact, and
works hard to increase their share in overall output by the Company. More than 20% of all capital
expenditures by the Company are directed to the Refining & Marketing segment and a large part of these
investments are in production of fuels with improved environmental features.
At the start of 2006 LUKOIL began production of gasoline, which meets Euro-3 standards, thanks to
commissioning of an isomerization unit at the Company’s refinery in Nizhny Novgorod. The new
gasoline, sold under the ‘EKTO’ (‘Ecological Fuel’) brand, significantly reduces emission of
carcinogenic substances, sulphur compounds, nitrogen and other harmful substances.
The Company’s refineries in Romania and Bulgaria fully converted to production of Euro-4 fuels as of 1
January 2006, in compliance with EU requirements.
The Company is also taking steps to protect the environment in its transportation and distribution
business. In 2006 the Company completed construction of the third stage of the terminal at Vysotsk.
Petroleum product reservoirs and rail loading facilities have been built using the latest technologies,
which rules out any leakage of products into water or soil. These provisions make Vysotsk one of the
most environmentally safe oil terminals in the world.
The Group’s newly built filling stations use systems, which return gasoline fumes from the reservoir to
the tanker truck when fuels are being unloaded, as well as systems for prevention of fuel spillages from
reservoirs and equipment for waste water purification.
In September 2006 LUKOIL filling stations in Moscow were awarded an ‘Ecology Stamp’ by the City
Government (in accordance with a Moscow Government resolution ‘On the Expert Committee for
introduction of motor fuel additives and oils with improved environmental features’). The award is visible
proof that LUKOIL’s fuels and filling station equipment meet the highest environmental standards.
Work by LUKOIL Group to protect the environment has been acclaimed by social organizations over a
number of years. In 2006 LUKOIL, LUKOIL-Western Siberia, LUKOIL-Nizhnevolzhskneft, LUKOILNizhegorodnefteorgsintez (the Nizhny Novgorod Refinery), and LUKOIL-Volganefteprodukt were all
winners of the ‘Environmental Leader’ competition held as part of a conference entitled ‘New Priorities
for National Environmental Policy in the Real Sector’.
The Company operates in conditions of strict state and social control over environmental protection, as
well as ongoing reform of natural resource and environmental legislation in Russia and other countries.
Relevant developments in 2006 were as follows:
•
•
•
the G-8 Summit decided on strengthening of environmental control over facilities in the
fuel and energy industry. Checks on compliance with legal requirements have been carried
out at all LUKOIL organizations;
fines under Russian legislation for violation of laws relating to use of animal and plant life,
failure to observe rules protecting nature reserves, etc., have been increased;
new Russian legislative acts have come into force concerning protection of forests,
monitoring of social hygiene, accounting and arrangements for payment of compensation
for environmental pollution, and exercise of state control over land use;
47
•
the Russian Parliament has debated drafts of the Environment Code, of the laws ‘On
environmental control’, ‘On compensation payments for negative environmental impact’,
and ‘On mineral resources’, of documents to ensure fulfilment of Russia’s obligations
under the Kyoto Protocol, as well as drafts of technical regulations on environmental
protection, etc.;
activity by national and international environmental NGOs has intensified in all regions
where the Company has operations, and influence of such organizations on economic
decision-making has increased.
•
Polluted Land, hectares
Waste Water Discharge, million
cubic meters
20
300
15
200
10
100
0
5
2004
2005
2006
Environmental Spending, $ million
0
2004
2006
Number of Accidents with Acknowledged
Environmental Impact
400
50
300
40
30
200
20
100
0
2005
10
2004
2005
2006
0
2004
2005
2006
Industrial Safety and Labour Protection
The company recognizes its duty to ensure safe working conditions and to care for the health of its
employees. LUKOIL Group enterprises have therefore set up systems for managing industrial and labour
safety, which meet international standards. In 2001 LUKOIL became the first Russian oil company to
obtain certification under the international standard ISO 14001 and the OHSAS 18001 specification. All
of LUKOIL’s main subsidiaries confirmed their compliance with these standards in 2006.
LUKOIL implemented all planned measures in 2006 as part of its program for industrial and labour
safety, improvement of working conditions, and prevention and resolution of emergency situations at
Group enterprises. This program, which covers the period from 2006 to 2010, includes steps to improve
corporate culture among Group employees, to make work places comply with legal requirements, and to
ensure that employees are provided with protective clothing and equipment, as well as hygiene and
medical facilities, and adequate health care. Total spending for these purposes was about $200 million.
Efforts by LUKOIL to ensure high standards of industrial safety were rewarded in 2006, when the total
number of accidents at the Group’s enterprises decreased by 10% compared with 2005.
Good working conditions and low accident levels throughout the workforce mean that many LUKOIL
subsidiaries can obtain discounts on standard rates for obligatory insurance covering industrial accidents
and job-related illness.
The ISO 14001 standard confirms that the Company has a specific environmental policy, which it follows
for business purposes, as well as constantly improving standards of environmental management and
taking all necessary measures for prevention of negative impact on the environment.
48
The OHSAS 18001 specification is intended as guidance for organizations in management of their project
risks associated with protecting health and safety of employees and members of the public. Key elements
of the specification are identifying, assessing and controlling risk factors, as well as observance of legal
requirements and consistent improvement of safety in the work place.
Lost Time Injury Rate
Number of Fatal Accidents
52
50
25
20
48
20
10
45.5
46
14
15
49.7
44
42.8
42
8
40
5
38
0
2004
2005
2006
2004
2005
2006
Total Injury Rate
0.8
0.7
0.6
0.5
0.4
0.4
0.2
0
2004
2005
2006
Personnel and Social Programs
LUKOIL recognizes the prime importance and value of its employees, who must take a large part of the
credit for increase of business efficiency and shareholder value of the Company. LUKOIL therefore
places a high value on contribution of each employee to Company achievements. The Company’s social
policy aims both to help employees work more efficiently and to ensure that they have social guarantees.
We also take motivation of our employees seriously and try to ensure that each of them is personally
interested in achievement of best possible results by the Company.
We are constantly improving standards of personnel management in order to help the Company to
develop steadily and successfully. Systematization of processes and preparation of guidelines in the
sphere of personnel management developed further in 2006. In particular, we began work on design of a
functional recruitment strategy as part of the Strategy for intensive growth by LUKOIL Group in the
period 2007–2016. The objective of the recruitment strategy is to ensure that the Company has the human
resources, which it needs in order to achieve its strategic goals. We also continued work on adoption
within the Group of modern methods for work with personnel, including preparation for automation of
employee assessment and training procedures.
Work on restructuring of LUKOIL Group continued in 2006 with the basic aims of reducing costs and
improving business efficiency. One aspect of the work is standardizing organizational structure of
subsidiaries, which will make it possible to eliminate functions that duplicate one another. Withdrawal of
non-core and inefficient assets from the Group also continued in 2006. These processes led to reduction in
the number of employees in geological exploration, production and oil refining. However, overall
numbers of Group employees increased in 2006 by 2.2%, mainly due to growth in the number of
employees at the Company’s fast-growing network of filling stations.
49
LUKOIL pays careful attention to its system of employee compensation as an essential tool for
maintaining motivation and ensuring commitment of employees to growth of shareholder value. Regular
monitoring of wage levels in the industry ensures that LUKOIL acts quickly to correct wage levels,
making them competitive and adequate for attracting highly qualified specialists to the Company.
LUKOIL’s payroll has increased by almost a third during 2004–2006, from $1.5 billion to $1.9 billion.
The employee share program carried out by LUKOIL and its subsidiaries in 2003–2006 was concluded
last year. Program participants became owners of 9 million Company shares. A new program has now
been put in place for the period 2007–2009, ensuring maintenance of employee incentives. The program
extends to about 600 people, including both senior managers and other key employees who contribute
much to development of LUKOIL. The participants derive benefits from 15.5 million ‘phantom shares’:
at the end of each of the three years the beneficiaries receive dividends on the shares and at the end of
2009 they are paid the difference between price of the shares in December 2006 and December 2009.
In addition to material incentives, LUKOIL employees who achieve outstanding results at work are
rewarded by various marks of distinction. High levels of professionalism, and conscientious and
productive work led to 108 Company employees receiving national awards in 2006, while 803 were
awarded sectoral marks of distinction, and 784 employees and 63 employee groups were awarded marks
of distinction within the Company. Also in 2006 the Company organized and held a competition entitled
‘Best Employees and Organizations of LUKOIL Group’.
As well as material and non-material incentives, LUKOIL offers its employees a social package
consisting of a system of programs and special measures, as follows:
•
•
•
•
•
•
health care and medical treatment, including voluntary health insurance;
rest and recreation for employees and their families, organization of sport and fitness events;
help to employees in buying their own homes;
social support to women and families with children;
social support for young specialists;
non-state pension provision for employees on the basis of shared funding, consisting of
contributions by the Company ($19.5 million in 2006) and the employees ($11.4 million in
2006) to the non-state pension fund, LUKOIL-GARANT. This system has been in operation
since 2004. It enables participants to raise their pension to over 60% of salary levels. Over
63,000 people had subscribed to this scheme by the end of 2006.
The Group ensured tighter control over social spending in 2006 in accordance with the LUKOIL Social
Code, and the Group’s social package was made more efficient and consistent.
An efficient system of social guarantees helps to attract qualified specialists to the Company, reduces
employee churn, strengthens Company morale and provides the best basis for successful conduct of
business.
We devote much attention to employee qualifications. The Company has a system of non-stop training,
helping employees to obtain the knowledge and professional know-how, which they need in their jobs.
We also encourage rapid progress in the Company by talented employees. LUKOIL uses the whole range
of modern educational techniques: seminars away from the work-place, training days, distance learning,
learning on the job, individual study programs, as well as MBA programs. In 2006 LUKOIL developed a
personnel training association with the US company UOP and the French Oil Institute, as well as with
Moscow University, the Higher School of Economics and the Gubkin State Oil & Gas University.
LUKOIL Group and ConocoPhillips have carried out exchanges of personnel as part of their strategic
partnership. A second group of 18 people were selected and dispatched for a period of work at
ConocoPhillips in 2006, and preparations were made for choice of candidates to join the third group,
which will work at the US company in 2007–2008.
We take a responsible attitude to professional training of ordinary employees as well as of employees in
senior positions. In 2006 the Company created an institute of corporate training specialists as part of
50
efforts to systematize training of personnel in LUKOIL marketing enterprises. The institute is already
giving positive results in the form of improved levels of qualification among filling-station employees.
LUKOIL works particularly hard to encourage young specialists. In 2006 LUKOIL held its first Forum
for Youth and Young Specialists as well as a competition to find the best young specialist in the
Company. A special program is in place for work with young employees and specialists in Group
organizations, and LUKOIL is continuing its cooperation with several higher-education institutions, in
order to ensure a steady supply of young and well-qualified employees for the Group. These institutions
include Moscow State University, the Gubkin State Oil & Gas University, the Higher School of
Economics, the Financial Academy, as well as other institutions in Russia and the near-abroad countries.
LUKOIL Group has hired more than 3,000 young specialists during the last three years.
Production per Employee,
thousand boe
6
Oil Refining per Employee, tonnes
350
5
280
4
210
3
140
2
70
1
0
0
2004
2005
2006
2004
Sales per Employee, $ thousand
500
60
400
50
2005
2006
Net Profit per Employee, $
thousand
40
300
30
200
20
100
10
0
0
2004
2005
2006
2004
2005
2006
51
Employee Structure by Business Segments (1 January, 2007)
Corporate center
15%
1%
Oil & gas production
Oil refining
8%
45%
Petrochemicals
Petroleum product
markting
16%
Other
8%
7%
LUKOIL international
organizations
Social Policy and Charity Activities
Social and charity programs are an integral part of the Company’s corporate strategy and help to ensure
constructive partnership with the state, business and society. Such programs have a targeted character and
are based on the specific professional experience and human potential of the regions, where they are
implemented.
The Company continues to deliver on commitments, which it undertook voluntarily and on its own
initiative under the LUKOIL Social Code. This Code is obligatory for all LUKOIL Group organizations
and represents a set of principles and norms of socially responsible behaviour towards all parties, whose
interests are affected by Company business. Commitments under the Code are additional to commitments
arising from collective negotiations with employees. Points in the Code regulate Company dealings with
its employees, pensioners and shareholders as well as business partners, the state and society as a whole.
As well as traditional forms of charity, LUKOIL carries out strategic charity programs and social
investment programs, which connect solution of social problems with the Company’s own strategic goals.
Total spending by the Company in 2006 on charity and social partnership was about $62 million.
Support for Children’s Homes and Schools
Help to children has priority for LUKOIL, and the Company designs all of its social programs (charity,
sponsorship, support for culture and sport) with this priority in mind. The Company tries to achieve a
balanced approach, providing assistance both to children who are relatively disadvantaged due to family
circumstances or for health reasons and to children from secure family backgrounds in order to encourage
their natural abilities and talents.
LUKOIL Group companies help children in more than 50 children’s homes and boarding schools all over
Russia. The Company’s support enables the homes to provide comfortable conditions for their children,
helps children to obtain education, ensures good health care and assists them in finding a profession and a
place in life. Since 2006 LUKOIL has provided grants to students who continue their education in higher
or vocational colleges after leaving children’s homes which the Company sponsors.
Children with disabilities are in special need of help. LUKOIL’s charity project ‘A book for each blind
child’ has been in operation for several years. In 2006 such books were provided to institutions in the
Komi Republic and St. Petersburg which specialize in caring for children with sight disabilities.
52
Education Programs
LUKOIL pays much attention to preparation of qualified young specialists for the Russian oil & gas
industry, since they are essential for the Company’s future success and prosperity.
LUKOIL Group companies provide financial support to a number of higher education institutions which
train oil & gas specialists. These include specialized institutions in Moscow, St. Petersburg, Perm, Ukhta,
Tyumen, Volgograd, Arkhangelsk and Ufa. Sector training institutes in the near-abroad countries, such as
the State Oil Academy of Azerbaijan, also receive support from LUKOIL. As well as supporting oil &
gas institutes, LUKOIL also helps the Russian Civil Service Academy, the Khrulev Military and
Transport Academy, and secondary schools, including a college in Kstovo that trains technicians for the
Nizhny Novgorod Refinery.
In 2000 the Company inaugurated grants to particularly talented students at oil industry and technical
institutes. Such corporate grants are currently paid to 170 students in various towns and cities across
Russia. LUKOIL plans to extend this scheme in order to provide incentives to young people when they
are still at school.
The Company is also concerned to maintain quality of teaching staff and pays special grants to 45
talented young lecturers at leading Russian oil & gas institutes.
Support for Medical Institutions
Another integral part of LUKOIL’s social effort is support to the medical care system in regions where
the Company has operations, as well as support to a number of major specialized medical research
centers. These include the Scientific Center for Obstetrics, Gynaecology and Perinatal Care, the Center
for Haematology Research, the Russian Cardiovascular Scientific and Industrial Complex, the Research
Center for Children’s Surgery and others. As part of an agreement with the Russian Ministry of Defence,
the Company provided assistance in 2006 for rebuilding of a ward at the Seventh Central Military
Clinical Hospital.
Social Projects Competition
In 2006 LUKOIL-Perm held its fifth social projects competition, which drew 600 entries. The
competition committee selected 192 projects as worthy of financing. These are the most interesting,
innovative and socially useful among the entries – those best designed to address specific social
problems.
Geography of LUKOIL’s social project competitions is expanding year by year. Since 2004 competitions
have been held in Volgograd and Astrakhan Regions as well as in Komi and Western Siberia in 2005. In
2006 40 projects were selected for financing in these regions.
Over a period of five years more than 3,000 social projects have applied for financing through the
competitions and over 500 have received financing.
Preserving Cultural and Spiritual Heritage
LUKOIL provides support to a number of leading Russian museums, theatres and performance groups
including the Pushkin Museum of Fine Art, Museums of the Moscow Kremlin, the Bolshoi Theatre and
the Tchaikovsky Symphony Orchestra. In 2006 the Company sponsored restoration of a gallery at the
Pushkin Museum displaying European and American art of the 19th and 20th centuries, helped to finance
an exhibition of work by Alexey Savrasov at the Russian Museum, and was an organizer of exhibitions in
London and Nizhny Novgorod of items from the Moscow Kremlin Museums. LUKOIL presented a basrelief by the eminent Russian artist and sculptor Mikhail Kozlovsky to the Tretyakov Gallery in Moscow
in honour of the Gallery’s 150th birthday.
Tours by the Tchaikovsky Symphony Orchestra, conducted by Vladimir Fedoseyev, were organized to
Bulgaria, Serbia and Montenegro, Finland and the USA in connection with LUKOIL’s fifteenth
anniversary. The Company also helped to finance a tour by the Bolshoi Theatre to London and
construction of a new concert hall for the Mariynsky Theatre.
53
LUKOIL makes significant contributions to restoration and preservation of religious traditions and
spiritual heritage. Churches were built in 2006 with the Company’s support in Sochi and Izhevsk, and a
cathedral was rebuilt in Bobruisk. LUKOIL continues to fund restoration work at the Optina Pustyn
Monastery in Kozelsk.
Help to War Veterans and the Disabled
Assistance to oil workers who fought in the Great Patriotic War (World War II), to other war veterans and
to veterans of the labour front has a special place in Company social initiatives. Oil worker veterans, other
war veterans and labour veterans who live in regions where the Company has operations receive special
payments to coincide with
Victory Day. LUKOIL also provides financial assistance to disabled people and helps them to earn a
living and thus to feel a part of society. In particular, LUKOIL provided the rehabilitation equipment for
an association of the disabled in the town of Langepas. The Company has also refurbished a boarding
house in Usinsk for elderly people living alone and provided the necessary technical equipment.
Support for Northern Peoples
Operations by Group companies in Siberia and the Far North of Russia can have significant impact on the
living conditions of small indigenous peoples, creating various social problems. LUKOIL respects the
traditions and customs of these peoples and understands the importance of preserving their age-old way of
life. That is why the Company is implementing special programs to help such indigenous groups, and
LUKOIL’s policy is to shift gradually from charity provision to economic partnership.
In the Komi Republic, Nenets Autonomous District and Western Siberia LUKOIL has signed agreements
with local administrations, with heads of lands that are traditionally inhabited and exploited by
indigenous groups, and with social organizations. The agreements guarantee money compensation to
indigenous families for use of their traditional lands, provision of tools and equipment for reindeer
herding and household purposes, construction of housing and communications, medical care and air
transportation. The Company organizes traditional celebrations and sports events, as well as holding
competitions which offer financing for projects to support spiritual, historical and cultural values of
indigenous peoples. LUKOIL understands that material support alone is not enough, and that northern
peoples also need help to improve education levels and find employment. The Company therefore works
hard to provide various special training to local people and to find them subsequent employment at
LUKOIL enterprises.
Sport
Company priorities in the sphere of physical education and sport are encouragement of health and fitness
activities among employees and their families, development of mass sport, support to Russian sports
professionals who compete under flags of the Company, assistance to national federations and the
Olympic Movement, as well as supporting children’s sport in Russia.
The Company holds large-scale international amateur sports competitions to help encourage involvement
in sport and fitness. The first two such competitions were held in 2001 in Astrakhan and 2003 in Perm.
The third such event was held in Kaliningrad in June 2005.
The Company continued its cooperation with the Foundation for Support of Russian Olympic Sport in
2006. The Foundation was set up to support members of Russian national teams which compete in
Olympic sports, as well as young sportsmen and sport veterans. LUKOIL is general sponsor of the
Russian Federation of Ski-Racing.
The Company continues its support to leading Russian sports teams, including Spartak football club,
LUKOIL-Spartak water polo team (Volgograd) and LUKOIL-Dynamo handball team (Astrakhan).
Sport means more to LUKOIL than support for selected teams – it is also a way of testing the Company’s
own products in extreme conditions. Victories and outstanding performances by LUKOIL Racing Team
(Moscow), LUKOIL-Bashkiria speedway team and Sura motorcross team (Penza) are proof of the
excellence of LUKOIL’s fuels and motor oils.
54
LUKOIL is a partner of one of the biggest children’s sport organizations, the Children’s Football League,
which enables 150 teams from nearly all regions of Russia to participate annually in regional
championships and international competitions.
55
Board of Directors and Management Committee
Board of Directors
Valery Isaakovich Grayfer
Chairman of the Board of Directors of OAO “LUKOIL”
General Director, OAO RITEK
Born: 1929
Graduated from the I.M. Gubkin Moscow Oil Institute in 1952. Candidate of Technical Sciences
(PhD). Recipient of five orders, four medals, and a Certificate of Honour of the Supreme Soviet
of the Tatar ASSR. 1985: USSR Deputy Minister of Oil and Gas in charge of the Chief Tyumen
Production Division for the oil and gas industry. Since 1992: General Director of OAO Russian
Innovation, Fuel and Energy Company (OAO RITEK). Since 2000: Chairman of the Board of
Directors of OAO “LUKOIL”.
Professor of the I.M. Gubkin Russian State Oil and Gas University, Lenin Prize winner and the
Government of the Russian Federation Prize winner.
Vagit Yusufovich Alekperov
Chairman of the Management Committee of OAO “LUKOIL”
President of OAO “LUKOIL”
Born: 1950
Graduated from the M. Azizbekov Azerbaijan Oil and Chemistry Institute in 1974. Doctor of
Economics. Full member of the Russian Academy of Natural Sciences. Recipient of four orders
and eight medals. Two times winner of the RF Government Prize. Employed since 1968; worked
at oil fields in Azerbaijan and Western Siberia. 1987-1990: General Director of the Production
Association Kogalymneftegaz of Glavtyumenneftegaz of the Ministry of the Oil Industry of the
USSR.1990–1991: Deputy Minister; First Deputy Minister of the USSR Ministry of Oil and Gas.
1992-1993: President of the Oil Concern Langepasuraikogalymneft. 1993–2000: Chairman of the
Board of Directors of OAO “LUKOIL”. Since 1993: President of OAO “LUKOIL”.
Mikhail Pavlovich Berezhnoi
President, Non-State Pension Fund (NPF) LUKOIL-GARANT
Member of the Audit Committee of the Board of Directors of OAO “LUKOIL”
Born: 1945
Graduated from Saratov Law Institute in 1974. Candidate of Philosophical Sciences (PhD).
Recipient of two medals. Since 1994: General Director of the Non-State Pension Fund LUKOILGarant.
Oleg Emelyanovich Kutafin
Independent member of the Board of Directors
Rector (President) of the Moscow State Academy of Law
Chairman of the Audit Committee of the Board of Directors of OAO “LUKOIL”
Born: 1937
56
Graduated from the M.V. Lomonosov Moscow State University in 1959. Professor, Doctor of
Legal Sciences, Academician of the Russian Academy of Sciences, Distinguished Scientist of the
Russian Federation. Since 1987: Rector (President) of the Moscow State Academy of Law.
Chairman of the Citizenship Commission of the President of the Russian Federation. Recipient of
the order “For the Achievements for Motherland”of the IInd, IIIrd and IVth degree, and ten
medals.
Ravil Ulfatovich Maganov
First Executive Vice President of OAO “LUKOIL” (Oil and Gas Exploration and
Production)
Member of the Strategy and Investment Committee of the Board of Directors of OAO
“LUKOIL”
Born: 1954
Graduated from the I.M. Gubkin Moscow Institute of the Petrochemical and Gas Industry in
1977. Distinguished Oil and Gas Specialist of the Russian Federation. Recipient of two orders
and three medals. Three times winner of the RF Government Prize in Science and Engineering.
1988–1993: Chief Engineer, Deputy General Director, General Director of PO Langepasneftegaz.
1993–1994: Vice-President of OAO “LUKOIL”. Since 1994: First Vice-President of OAO
“LUKOIL”. Since 2006: First Executive Vice-President of OAO “LUKOIL”.
Richard Herman Matzke
Independent member of the Board of Directors
Chairman of the Strategy and Investment Committee of the Board of Directors of OAO
“LUKOIL”
Born: 1937
Graduated from Iowa State University in 1959, Pennsylvania State University in 1961, and St.
Mary’s College of California in 1977. MA in Geology, Master of Business Administration. 1989–
1999: President of Chevron Overseas Petroleum, member of the Board of Directors of Chevron
Corporation. 2000–2002: Vice-Chairman of Chevron, Chevron-Texaco Corporation. 2006:
Awarded a public non-governmental medal "For the Development of the Oil and Gas Complex of
Russia" and the "Director of the Year 2006" National Award, Russia, in the "Independent
Director of the Year" nomination category, inspired by the Independent Directors Association
(IDA) and PricewaterhouseCoopers.
Kevin Omar Meyers
President of ConocoPhillips Canada
Member of the Strategy and Investment Committee of the Board of Directors of OAO
“LUKOIL”
Born: 1953
Graduated from Capital University in 1975, BA in Chemistry and Mathematics; MIT in 1980,
PhD in Chemical Engineering. 1998: President of Arco Alaska, Inc. 2000: President of
ConocoPhillips Alaska, Inc. November 2004: President of Russia/Caspian Region,
ConocoPhillips. Since December 2006: President of ConocoPhillips Canada.
57
Sergei Anatolievich Mikhailov
Independent member of the Board of Directors
General Director of OOO Management-Consulting
Member of the Audit Committee of the Board of Directors of OAO “LUKOIL”
Member of the Human Resources and Compensation Committee of the Board of Directors
of OAO “LUKOIL”
Born: 1957
Graduated from the F.E. Dzerzhinsky Military Academy in 1979, Moscow Aviation Institute
(Refresher Training Course) in 1981, the Plekhanov Russian Economics Academy in 1998.
Candidate of Technical Sciences (PhD), Doctor of Economics, professor. Recipient of four
medals. 1974–1992: service in the armed forces. 1992-1996: head of department, Deputy
Chairman of the Russian Federal Property Fund. 1996–1997: head of the department of
restructuring and investment of the Ministry of Industry of the Russian Federation. 1997-2003:
General Director of ZAO Upravlyayushchaya Kompaniya Menedzhment-Tsentr. Since 2001:
General Director of OOO Menedzhment-Konsalting [Management Consulting limited liability
company].Since 2003: Chairman of the Board of Directors of ZAO Upravlyayushchaya
Kompaniya Menedzhment-Tsentr.
Nikolai Alexandrovich Tsvetkov
President of URALSIB Financial Corporation
Chairman of the Management Committee of URALSIB BANK
Member of the Human Resources and Compensation Committee of the Board of Directors
of OAO “LUKOIL”
Born: 1960
Graduated from the F.E. Dzerzhinsky Tambov Higher Military Aviation Engineering School in
1980, the N.E. Zhukovsky Air Force Academy in 1988, and the G.V. Plekhanov Russian
Economics Academy in 1996. Candidate of Economics (PhD). 1994–1997: President of AOZT
Oil Investment Company NIKOIL, executive director of the Department of Securities of OAO
“LUKOIL”, Vice-President of OAO “LUKOIL”. 1998-2003: Chairman of the Management
Committee of AB IBG NIKoil. 2003-2005: Chairman of OAO AKB AVTOBANK-NIKOIL.
Since 2005: Chairman of the Management Committee of URALSIB BANK.
Igor Vladimirovich Sherkunov
Chairman of the Board of Directors of ZAO Investitsionnaya Gruppa Kapital [Capital
Investment Group]
Member of the Strategy and Investment Committee of the Board of Directors of OAO
“LUKOIL”
Born: 1963
Graduated from Moscow Finance Institute in 1985, and the All-Russian Foreign Trade Academy
in 1993. 1993–1996: Vice-President of OAO Strakhovaya Kompaniya "LUKOIL" [LUKOIL
Insurance Company]. 1996–2002: General Director of OOO LUKOIL-Reserve-Invest. Since
2003: Chairman of the Board of Directors of ZAO Investitsionnaya Gruppa Kapital [Capital
Investment Group]
58
Alexander Nikolaevich Shokhin
Independent member of the Board of Directors
President of the Russian Union of Industrialists and Entrepreneurs (Employers)
President of the State University – Higher School of Economics
Chairman of the Human Resources and Compensation Committee of OAO “LUKOIL”
Born: 1951
Graduated from the Economics Department of the Lomonosov Moscow State University in 1974.
Doctor of Economics, professor, academician of the Russian Academy of Natural Sciences.
Recipient of an order and a medal. Employed since 1969. 1991–1994: Deputy Chairman of the
Government of the Russian Federation, Minister of Economy of the Russian Federation, Minister
of Labor and Employment of the Russian Federation. 1994–2002: Deputy of the State Duma
(Parliament) of the Russian Federation of three convocations. 1996–1997: First Deputy Chairman
of the State Duma of the Russian Federation, 1997 – 1998: Chairman of 'Our Home is Russia'
Duma faction. 1998: Deputy Chairman of the Government of the Russian Federation. 2002–2005:
Chairman of the Supervisory Board of Renaissance Capital Group. Since 2005: President of the
Russian Union of Industrialists and Entrepreneurs (Employers). Member of the RF Public
Chamber, Member of the Inter-sectoral Commission of the RF Security Council, Member of the
Business Competition and Enterprenership Board under the Government of the Russian
Federation, Member of the Governmental Commission for Administrative Reform.
Management Committee of OAO "LUKOIL"
Vagit Yusufovich Alekperov
Chairman of the Management Committee of OAO “LUKOIL”
President of OAO “LUKOIL”
Born: 1950
Graduated from the M. Azizbekov Azerbaijan Oil and Chemistry Institute in 1974. Doctor of
Economics. Full member of the Russian Academy of Natural Sciences. Recipient of four orders
and eight medals. Two times winner of the RF Government Prize. Employed since 1968; worked
at oil fields in Azerbaijan and Western Siberia. 1987-1990: General Director of the Production
Association Kogalymneftegaz of Glavtyumenneftegaz of the Ministry of the Oil Industry of the
USSR.1990–1991: Deputy Minister; First Deputy Minister of the USSR Ministry of Oil and Gas.
1992-1993: President of the Oil Concern Langepasuraikogalymneft. 1993–2000: Chairman of the
Board of Directors of OAO “LUKOIL”. Since 1993: President of OAO “LUKOIL”.
Anatoly Alexandrovich Barkov
Vice-President of OAO “LUKOIL”, Head of the Main Division for General Affairs,
Corporate Security and Communications
Born: 1948
Graduated from Ufa Oil Institute in 1992. Candidate of Economics (PhD). Distinguished Oil and
Gas Specialist of the Russian Federation. Recipient of an order and ten medals. 1987–1992:
Director of the Central Headquarters of Production Services, Director of the Oil and Gas
Production Department, Chief Engineer of PO Kogalymneftegaz. 1992–1993: Executive
59
Director,
Director
of
the
Foreign
Projects
Department
of
the
Oil
Concern Langepasuraikogalmneft. Since 1993: Vice-President of OAO “LUKOIL”, Head of the
Main Division for General Affairs, Corporate Security and Communications.
Sergei Petrovich Kukura
First Vice-President of OAO “LUKOIL” (Economics and Finance)
Born: 1953
Graduated from the Ivano-Frankovsk Oil and Gas Institute in 1979. Doctor of Economics.
Distinguished Economist of the Russian Federation. Recipient of an order and five medals. 1992–
1993: Vice-President, First Vice-President of the Oil Concern Langepasuraikogalymneft. Since
1993: First Vice-President of OAO “LUKOIL”.
Ravil Ulfatovich Maganov
First Executive Vice President of OAO “LUKOIL” (Oil and Gas Exploration and
Production)
Member of the Strategy and Investment Committee of the Board of Directors of OAO
“LUKOIL”
Born: 1954
Graduated from the I.M. Gubkin Moscow Institute of the Petrochemical and Gas Industry in
1977. Distinguished Oil and Gas Specialist of the Russian Federation. Recipient of two orders
and three medals. Three times winner of the RF Government Prize in Science and Engineering.
1988–1993: Chief Engineer, Deputy General Director, General Director of PO Langepasneftegaz.
1993–1994: Vice-President of OAO “LUKOIL”. Since 1994: First Vice-President of OAO
“LUKOIL”. Since 2006: First Executive Vice-President of OAO “LUKOIL”.
Ivan Alexeevich Maslyaev
Head of the Main Division of Legal Support of OAO “LUKOIL”
Born: 1958
Graduated from Lomonosov Moscow State University in 1980. Candidate of Legal Sciences
(PhD). Recipient of three medals. 1992–1993: Head of the Legal Department of the Oil Concern
Langepasuraikogalymneft; 1994–1999: Head of the Legal Division of OAO “LUKOIL”, since
2000: Head of the Main Division of Legal Support of OAO “LUKOIL”.
Alexander Kuzmich Matytsyn
Vice-President of OAO “LUKOIL” – Head of the Main Division of Treasury and Corporate
Finance
Born: 1961
Graduated from Lomonosov Moscow State University in 1984. Candidate of Economics (PhD).
Master of Business Administration (Bristol University, 1997). Recipient of a medal of the order
“For the Achievements for Motherland” of the IInd degree. 1994-1997: Director, General
Director of KPMG international auditors. Since 1997: Vice-President – Head of the Main
Division of Treasury and Corporate Finance of OAO “LUKOIL”.
60
Anatoly Alexeevich Moskalenko
Head of the Main Division of Human Resources of OAO “LUKOIL”
Born: 1959
Graduated from the Supreme Soviet of the RSFSR Moscow Higher Combined Arms Academy in
1980, Military Diplomatic Academy in 1987, Russian Academy of Government Service under the
President of the Russian Federation in 2005. Candidate of Economics (PhD). Recipient of four
orders and twenty medals. 1976-2001: service in the armed forces. 2001–2003: Head of the
Human Resources Division, Head of the Human Resources Department of OAO “LUKOIL”.
Since 2003: Head of the Main Division of Human Resources of OAO “LUKOIL”.
Vladimir Ivanovich Nekrasov
First Vice-President of OAO “LUKOIL” (refining, marketing and distribution)
Born: 1957
Graduated from Tyumen Industrial Institute in 1978. Candidate of Technical Sciences (PhD), full
member of the Academy of Mining Sciences. Recipient of an order and three medals. RF
Government Prize Winner. 1992–1999: Chief Engineer, General Director of TPP
Kogalymneftegaz of OOO LUKOIL-Western Siberia. Since 1999 - 2005: Vice-President of OAO
“LUKOIL”, General Director of OOO LUKOIL-Western Siberia. Since 2005 - First VicePresident of OAO “LUKOIL”.
Leonid Arnoldovich Fedun
Vice-President of OAO “LUKOIL”, Head of the Main Division of Strategic Development
and Investment Analysis
Born: 1956
Graduated from the M.I. Nedelin Higher Military Command School in Rostov in 1977. Candidate
of Philosophical Sciences (PhD). Recipient of an order and seven medals. 1993–1994: General
Director of AO LUKOIL Consulting. Since 1994: Vice-President of OAO “LUKOIL”, Head of
the Main Division of Strategic Development and Investment Analysis.
Evgeny Leonidovich Khavkin
Secretary of the Board of Directors, Head of the Office of the Board of Directors of OAO
“LUKOIL”
Born: 1964
Graduated from the Moscow Institute of Economics, Management and Law in 2003. Recipient of
two medals. 1988: employed at entities in Western Siberia. 1997–2003: Deputy Head of the
Office of the Board of Directors, First Deputy Head of the Office of the Board of Directors of
OAO “LUKOIL”. Since 2003: Secretary of the Board of Directors, Head of the Office of the
Board of Directors of OAO “LUKOIL”.
61
Lyubov Nikolaevna Khoba
Chief Accountant of OAO “LUKOIL”
Born: 1957
Graduated from Sverdlovsk Institute of the National Economy in 1992. Candidate of Economics
(PhD). Distinguished Economist of the Russian Federation. Recipient of an order and two
medals. 1991–1993: Chief Accountant of PO Kogalymneftegaz. 1993–2000: Chief Accountant of
OAO “LUKOIL”. 2000–2003: Vice-President of OAO “LUKOIL”, Head of the Main Division of
Financial Accounting. 2003–2004: Chief Accountant, Vice-President of OAO “LUKOIL”. Since
2004: Chief Accountant of OAO “LUKOIL”.
Dzhevan Krikorovich Cheloyants
Vice-President of OAO “LUKOIL”, Head of the Main Technical Division
Born: 1959
Graduated from Grozny Oil Institute in 1981. Distinguished Oil and Gas Specialist of the Russian
Federation. Recipient of five medals. RF Government Prize winner. 1990–1993: Departmental
Head, Deputy General Director for foreign economic relations of PO Langepasneftegaz. 1993–
1995: Vice President of commerce on foreign markets of AO “LUKoil”. 1995–2001: VicePresident of OAO "LUKOIL", Head of the Main Division of Sea and Foreign Projects. 2001–
2007: Vice-President of OAO “LUKOIL”, Head of the Main Division of Oil and Gas Production
and Infrastructure. Since 2007: Vice-President of OAO “LUKOIL”, Head of the Main Technical
Division.
Vagit Sadievich Sharifov
Vice-President of OAO “LUKOIL”, Head of the Main Division of Control and Internal
Audit
Born: 1945
Graduated from the M. Azizbekov Oil and Chemistry Institute (Azerbaijan) in 1968. Doctor of
Economics. Distinguished Oil and Gas Specialist of the Russian Federation. Recipient of two
orders and six medals. 1985–1994: Chief Engineer, General Director of Association
Volgogradnefteprodukt, AOOT LUKoil-Volgogradnefteprodukt. 1994–1995: General Director of
a branch of AO LUKoil Financial Company. 1995–1996: General Director of the Volgograd
Territorial Division of OAO “LUKOIL”. Since 1996: Vice-President of OAO “LUKOIL” for
petroleum product sale, marketing and distribution. Since 2002: Vice-President of OAO
“LUKOIL”, Head of the Main Division of Control and Internal Audit.
BoD Committees
Strategy and Investment Committee
The purpose of this Committee is to make proposals to the Board concerning:
• long-term strategic development goals,
• the analysis of strategic development concepts, programmes and plans,
• the amount of dividends and the dividend payment procedure,
• the distribution of profit and losses for the financial year.
62
The Committee consists of Richard Matzke (Chairman), Kevin Meyers, Ravil Maganov and Igor
Sherkunov.
Audit Committee
The purpose of this Committee is to make proposals to the Board concerning:
• the professional skills and quality of services provided by the auditors and their compliance
with auditor independence requirements,
• the selection and performance evaluation of the auditors.
The Committee consists of Oleg Kutafin (Chairman), Mikhail Berezhnoi and Sergei Mikhailov.
HR and Compensation Committee
The purpose of this Committee is to make proposals to the Board concerning:
•
HR policies and procedures,
•
executive selection policies and standards in order to attract and retain talent of the highest
quality.
The Committee consists of Alexander Shokhin (Chairman), Sergei Mikhailov and Nikolai Tsvetkov.
Shares of Board of Directors and Management Committee members in Charter Capital,
as of 31 December 2006
BoD and Management Committee members
Stake, %
V.Yu. Alekperov
1.6
M.P. Berezhnoi
0.005
V.I. Grayfer
0.005
O.E. Kutafin
0.0002
R.U. Maganov
0.5
R.H. Matzke
K.O. Meyers
S.A. Mikhailov
0.003
N.A. Tsvetkov
0.32
I.V. Sherkunov
0.04
A.N. Shokhin
A.A. Barkov
0.08
S.P. Kukura
0.39
I.A. Maslyaev
0.02
A.K. Matytsyn
0.3
A.A. Moskalenko
0.01
V.I. Nekrasov
0.04
L.A. Fedun
0.93
E.L. Khavkin
0.01
L.N. Khoba
0.34
D.K. Cheloyants
0.1
V.S. Sharifov
0.02
Share stakes of BoD and Management Committee members are shown in accordance with Russian
legislative requirements for disclosure of such information, including shares held directly by
Board/Management Committee members, and those held by nominee investors in their names. It should
be noted that stakes in share capital may be calculated differently under the laws of other countries. In
particular the stakes shown in the table above do not correspond to the stakes which were shown under
listing rules of the UK Listing Authority when the Company obtained a listing on the London Stock
Exchange.
63
Information on transactions with the shares of OAO “LUKOIL” performed by the
members of the Board of Directors and Management Committee of OAO “LUKOIL”
during 2006
Full name
Number of shares
Type of
transaction
Date of
transaction
O.E. Kutafin
2,000
purchase
19.10.2006
I.V. Sherkunov
742
purchase
19.10.2006
Remuneration of members of the Board of Directors and the Management Committee:
Management
bodies
Paid in 2006, thousand roubles
Remuneration
Wages
Bonuses
Other
payments
Total
Board of
Directors
45,092
-
-
4,675 *
49,767
Management
Board
19,036
314,990
166,804
15,278
516,108
In accordance with the decision of the Annual General Shareholders Meeting of OAO “LUKOIL” of 24
June 2004, remuneration to the newly elected members of the Board of Directors was established in the
amount of USD 125,000 ** . In addition, members of the Board of Directors receive remuneration for
performance of the functions of the Chairman of the Board of Directors, for performance of the functions
of Chairman of a Committee, and some other types of compensations.
The amounts of remuneration and the types of expenses to be reimbursed to the members of the Board of
Directors of OAO “LUKOIL”, as established by the aforementioned decision of the annual General
Shareholders Meeting on 24 June 2004, remain in effect until they are either abolished or changed by the
General Shareholders Meeting of OAO “LUKOIL”.
In accordance with the decision of the Annual General Shareholders Meeting of OAO “LUKOIL” of 28
June 2006, it was recognized as advisable to retain the amounts of remuneration of members of the Board
of Directors of OAO “LUKOIL” established by decision of the Annual General Shareholders Meeting of
OAO “LUKOIL” of 24 June 2004.
By its decision of 19 July 2005 (Minutes No.22) the Board of Directors established the principal terms
and conditions of contracts signed with members of the Management Committee, whereby Committee
Members are paid remuneration in the amount of their monthly salary for their primary employment. The
remuneration payment depends on the achievement of corporate-wide key performance indicators for the
reporting period.
*
Reimbursement of expenses
In order to calculate the amount of remuneration, a conditional monetary unit is used, corresponding to the rouble equivalent
of one US dollar at the exchange rate of the Central Bank of Russia on the date of the General Shareholders Meeting at which
the decision to pay remuneration is passed.
**
64
Report of the Board of Directors of OAO “LUKOIL” on the results of
development of OAO “LUKOIL” in its priority areas of business and the
development prospects of OAO “LUKOIL”
In accordance with the Work Plan of the Board of Directors for 2005–2006 and the Work Plan of the
Board of Directors for 2006–2007, approved at meetings of 19 July 2005 (Minutes No. 22) and 20 July
2006 (Minutes No. 18), in the reporting year the Board of Directors held 8 meetings with joint attendance
and 24 distance/absentee votes.
The Board of Directors of the Company performed its activity in accordance with the authorities
stipulated by the Company Charter and the Federal Law On Joint Stock Companies.
In carrying out the overall management of the Company, the Board of Directors pay special attention to
the development, planning and monitoring of the execution of the OAO “LUKOIL” investment
programme, implementation of the budget, and oversight of the Company’s performance indicators.
At its first meeting in 2006 (Minutes No.1 of 13 January 2006), the Board of Directors Совет resolved to
consider the fulfilment of tasks set by the LUKOIL Group Strategic Development Programme for
2005–2014, approved by the Board of Directors on 22 October 2004 (Minutes No. 39), and of the
main targets of the plan, budget and investment programme of the LUKOIL Group for 2006,
approved by decision of the Board of Directors of 26 October 2005 (Minutes No. 29), to be the main
objective of the Company and its subsidiaries in 2006 and in the near term.
The Management Committee of the Company was instructed to focus its efforts on ensuring the further
growth in the Company’s value and an increase in profits based on improved efficiency of operations in
all lines of business.
In order to achieve these goals, the Board of Directors proposed continued work on expanding
hydrocarbon production and replenishing hydrocarbon raw materials reserves, stabilising costs,
improving the quality of the investment process, optimising the asset structure, and improving the quality
of management and effectiveness of capital use.
The meeting of the Board of Directors of OAO “LUKOIL” on 4 September 2006 in St. Petersburg
(Minutes No. 20) was dedicated to the question of adopting a strategy of intensive growth of the
Company in 2007–2016, and also the Company’s performance results in the first half of 2006.
At this meeting the Board of Directors passed a decision to approve the Basic Principles of the Strategy
for Intensive Growth of the LUKOIL Group for 2007–2016, to prepare the Strategic Development
Programme of the LUKOIL Group for ten years, the sectoral and functional development programmes,
the long-term forecast for the next decade, and also the medium-term plan for 2008–2009.
As was noted, the prospects for the development of the LUKOIL Group are inseparably linked to the
implementation of the intensive growth strategy, ensuring the achievement of volume and unit indicators
of development at the level of the world’s seven leading oil companies.
The Company’s growing solvency and investment appeal was reflected in the growth of its credit ratings
from all three leading rating agencies – Fitch Ratings (awarded an investment-grade rating of BBB–),
Moody’s (raised its rating to an investment-grade Baa2), and Standard & Poor’s (raised its rating to
BB+).
65
In order to imlement the above decisions, at its meeting on 31 October 2006 (Minutes No.25) the Board
of Directors of OAO "LUKOIL" specified a number of issues related to the Company’s future
development.
For example, the Board of Directors considered and approved the Key indicators of the Medium-Term
Plan of the LUKOIL Group for 2007–2008 and the Budget and Investment Programme for 2007,
previously examined by the Strategy and Investment Committee, including:
ƒ in the Exploration and Production business segment:
- solutions on intensifying and optimising oil and gas production, including:
- increase in expenses on production drilling to ensure the planned level of oil
production;
- substantial increase in the quantity of horizontal wells;
- geological–hydrodynamic modelling of all deposits of the main Group subsidiaries;
- transition to a system of continuous refinement of geological–hydrodynamic
models;
- the average annual rate of growth in hydrocarbon production during 2007–2008
was set at 8.2% (with a strategic benchmark of 6.7%).
ƒ in the Refining, Marketing and Distribution business segment:
- attraction of investments to further increase the volume of refining and improve the
efficiency of the refineries of the LUKOIL Group, and also to develop the Group’s
gas-chemistry facilities;
- increase in the amount of oil refining at the Company’s refining facilities by 12%
over two years;
- 10–11% increase in the output of modern Euro-3 and Euro-4 diesel at the LUKOIL
Group’s Russian refineries;
ƒ investing activity:
- determination of investment expenses of the LUKOIL Group for 2007 and 2008 in
the amount of USD 8.25 billion and USD 8.6 billion, respectively;
- concentration of resources on high-return investment projects;
- ensuring return on capital employed for the LUKOIL Group at 19.3% in 2007 and
17.0% in 2008 (with a strategic benchmark of 15–17%).
The medium-term plan was drafted assuming a surplus of internal sources of financing. It foresees that
the high financial stability of the LUKOIL Group will be maintained (the debt to equity ratio is forecast to
be on the order of 10% by the end of 2008).
At this same meeting the Board of Directors approved the main areas of the LUKOIL Group’s R&D work
for 2007–2008. More extensive use of modern technologies is planned to enhance reservoir recovery and
intensify production, and also improvement of fraccing technology by implementing it through smalldiameter lateral boreholes, which is a fundamentally new area in increasing deposit development
efficiency.
A number of projects will be implemented in 2007–2008, ensuring an increase in depth of oil refining and
improvement in the quality of automotive fuels. The necessary conditions are being created to achieve
product quality according to Euro-3 specifications in 2009 and Euro-4 in 2012.
The funds for the implementation of the Annual Coordination Programme of Scientific and Technical
Work of the LUKOIL Group for 2007 are estimated at 2.5-2.7 billion roubles.
It was noted that the existing R&D capacity is sufficient to meet the current and prospective development
challenges faced by the Company. The total amount of research and development work, as well as design
and exploration work, in 2005 was 3.1 billion roubles, i.e. it almost doubled over the past five years. The
number of technical solutions to which LUKOIL Group organisations have exclusive rights rose by a
66
factor of 2.8. LUKOIL is a leader among Russian and foreign companies in the degree of
commercialisation of intellectual property (more than 40%).
At this meeting the Board of Directors also took under consideration information on progress in
implementing the Shareholder Agreement of 29 September 2004 between OAO “LUKOIL” and
ConocoPhillips. It was noted that the partnership with ConocoPhillips established by the Agreement is
becoming constantly broader and stronger. The joint venture Naryanmarneftegaz is developing; in 2007 it
plans to begin production at the key deposit of Yuzhnoe Khylchuyu. Construction on the transportation
infrastructure is under way, with a terminal on the shore of the Barents Sea. LUKOIL and ConocoPhillips
are constantly considering opportunities for joint investment in international projects. A framework
agreement is in place on staff exchange, which will allow the companies to exchange their experience in
managing oil and gas projects.
Since decisions on bond issues pertain to the Board's authority, at its meeting on 16 October 2006
(Minutes No.24) the Board of Directors of OAO “LUKOIL” approved the following decisions:
• on the placement of non-convertible interest-bearing documentary bearer bonds series 03,
in the number of 8,000,000 bonds with a nominal value of 1,000 roubles each, maturing in
five years;
• on the placement and issue of non-convertible interest-bearing documentary bearer bonds
series 04, in the number of 6,000,000 bonds with a nominal value of 1,000 roubles each,
maturing in five years;
• on the approval of decisions on the issue of these securities,
• on the determination of the offering commencement date and the interest rate on the first
coupon of bonds of series 03 and series 04.
With a special focus on the Company's key areas of operations, the Board of Directors held two field
meetings: on 25 April 2006 (Minutes No.10) in Astana, Kazakstan, and on 4 September 2006 (Minutes
No.20) in St. Petersburg, Russia.
At the meeting in the Republic of Kazakhstan, the Board of Directors considered the Company’s
operating results and plans in Kazakhstan and in the Caspian region. It was noted that the Company began
its first project in Kazakhstan and the Caspian region. Since then the number of production projects has
risen to seven, and the number of exploration projects, to four. In addition, OAO “LUKOIL” is a
participant in the Caspian Pipeline Consortium.
The Board of Directors passed a decision to ensure the unconditional implementation of the development
strategy for projects in Kazakhstan and the Caspian region, with production to reach 8–10 million TOE
by 2010.
On 4 September 2006 the Board of Directors held an expanded session in St. Petersburg. The meeting
was attended by Ilya Klebanov, Plenipotentiary Representative of the RF President in the North-West
Federal District , St. Petersburg Governor Valentina Matvienko, Leningrad Oblast Governor Valery
Serdyukov, Kaliningrad Oblast Governor Georgy Boos, Arkhangelsk Oblast Governor Nikolai Kiselyov,
Pskov Oblast Governor Mikhail Kuznetsov, Komi Republic head Vladimir Torlopov, and Valery
Potapenko, Head of the Nenets Autonomous Okrug.
It was noted that the organisations of the LUKOIL Group have performed significant work on the
preparation and development of oil-and-gas resources in the North-West Federal District.
Measures have also been taken to significantly expand the raw materials base and prepare new deposits in
the region for development. Over the period 1999–2005, 16 new deposits have been opened up, the
production capacity of the oil and gas facilities at OOO LUKOIL-Komi in Usinsk and Ukhta has been
restored and reconstructed, a new centre for increasing oil and gas production in Naryan-Mar has been
created, and an oil terminal with a capacity of 1.5 million tonnes/year has been put into commercial
67
operation near the village of Varandei on the shores of the Pechora Sea. The joint venture OOO
Naryanmarneftegaz, created in 2005 as part of the strategic partnership with ConocoPhillips, has begun
the drilling and preparation of the largest deposit in the Nenets Autonomous Okrug – the Yuzhnoe
Khylchuyu deposit. On the shelf of the Baltic Sea, the Kravtsovskoe deposit (D-6) has been put into
commercial operation and brought to its designed production level in a very short time, and the LUKOILI oil terminal in Kaliningrad Oblast has been constructed and put into operation.
The Board of Directors approved the decision on the priority development of the Company’s business in
the North-West Federal District, with the main areas of the implementation of the Intensive Growth
Strategy being:
•
modernisation and increase in the throughput of port terminals;
•
priority development of the sales network in St. Petersburg and Leningrad oblast: expansion of
the network of filling stations and supply tank farms;
•
determination and implementation of an optimal configuration for OAO LUKOILUkhtaneftepererabotka.
The Code of Corporate Governance, approved at the meeting of the Government of the Russian
Federation on 28 November 2001 and recommended by the Federal Commission on the Securities Market
of the Russian Federation, assigns the Board of Directors of a joint stock company a special role in
improving the system of corporate governance of the company.
In this field, in 2006 the Board of Directors:
•
the newly elected Board of Directors, at its first meeting on 28 June 2006 (Minutes No. 16), in
accordance with the Regulations on the Board of Directors of OAO “LUKOIL” elected V.I.
Grayfer as Chairman of the Board of Directors, and also extended the authority of E.L.
Khavkin as Secretary of the Board of Directors, on the recommendation of the Chairman;
•
appointed the members of committees (Minutes No. 16 of 28 June 2006);
•
heard reports on the performance of the Board of Directors and the committees of the Board of
Directors of OAO “LUKOIL” in 2005–2006 and passed decisions on positive assessments of
this activity (Minutes No. 13 of 29 May 2006);
•
revised the competencies of the Audit Committee and the Human Resources and
Compensation Committee of the Board of Directors of OAO “LUKOIL”, making the relevant
amendments and addenda to the Regulations on the given Committees (Minutes No. 30 of 12
December 2006).
Issues concerning preparations for the General Shareholders Meeting were decided by the Board of
Directors of the Company in strict compliance with the requirements of the Federal Law On Joint Stock
Companies and the Company Charter.
The Board of Directors meeting of 4 February 2006 (Minutes No. 3) passed decisions on the list of
candidates for election to the Board of Directors and Audit Commission of the Company, as well as the
list of candidates for voting to elect the President of OAO “LUKOIL”.
At its meeting on 25 April 2006 (Minutes No. 10), the Board of Directors approved the date for preparing
the list of parties entitled to participate in the Meeting, the agenda of the annual Meeting, the text and
form of ballots, and also a number of other issues on preparations for and conduct of the General
Shareholders Meeting.
At the meeting on 29 May 2006 (Minutes No. 13), the Board of Directors tentatively approved the OAO
“LUKOIL” Annual Report for 2005, to submit it to the General Shareholders meeting.
The competence of the Board of Directors includes the formation of the executive body of the Company
(the Management Committee) and the early termination of its authorities.
68
The Board meeting on 20 July 2006 (Minutes No.18) approved the size and composition of the
Management Committee of OAO "LUKOIL" consisting of 13 members (this decision was updated on 31
October 2006 (Minutes No.25) in connection with introduction of a position of the First Executive VicePresident), and also established the principal terms and conditions of contracts signed with members of
the Management Committee (Minutes No.18 of 20 July 2006 and No.30 of 12 December 2006).
The main terms of the contract with the President of the Company were established by the Board of
Directors on 28 June 2006 (Minutes No. 16).
In accordance with the requirements of the Federal Law On Joint Stock Companies, on 20 July 2006
(Minutes No. 18) the Board of Directors established the maximum amount of payment for the services of
the Auditor of OAO “LUKOIL”.
On 25 April 2006 (Minutes No. 10) the Board of Directors of OAO “LUKOIL” passed a decision to
purchase floated shares in OAO "LUKOIL" by one or several LUKOIL Group organisations (including
on the open market) during 2006-2008, for the total amount not exceeding USD 3 billion using the funds
received through an increment in the actual selling price for oil versus the target selling price as adopted
in the budget and investment programme, with the oil price of USD 46 per barrel.
In connection with the completion of the Employee Restricted Share Plan of OAO “LUKOIL” and its
subsidiaries, begun by the Company in 2003, on 29 November 2006 (Minutes no. 29) the Board of
Directors passed a decision on long-term incentives for employees of OAO “LUKOIL” and its
subsidiaries.
The Company Charter and the Federal Law On Joint Stock Companies assign the prior approval of
interested-party transactions to the competence of the Board of Directors.
In addition, the Charter stipulates the approval by the Board of Directors of transactions related to the
acquisition, alienation or possible alienation of property with a value of 10 to 25 percent of the book value
of the Company’s assets. In 2006 the Board of Directors approved two such transactions.
69
Dividends
The dividend policy of OAO "LUKOIL" is based on balancing the interests of the Company and its
shareholders, on raising the Company’s investment appeal and its capitalisation, and on respecting and
strictly complying with shareholders’ rights as stipulated by the laws of the Russian Federation, the
Company Charter and its internal bylaws.
In determining the size of dividends per share to be recommended to the General Shareholders Meeting
for payment, the Board of Directors assumes that the funds earmarked for dividends may not be less than
15% of the net profits determined based on US GAAP consolidated financial statements of OAO
"LUKOIL".
Year
Amount of
dividends (RUR)
Accrued,
Paid*,
million RUR
million RUR
Share of net profits of
OAO “LUKOIL” used for
dividend payments, %
for 2002
19.50
16,586
16,552
35
for 2003
24.00
20,414
20,351
42
for 2004
28.00
23,816
23,745
31
for 2005
33.00
28,069
27,823
42
for 2006 On 25 April 2007 the Board of Directors of OAO “LUKOIL” recommended to the
General Shareholders Meeting of 28 June 2007 that it approve the payment of dividends
based on the Company’s 2006 performance in the amount of 38 roubles per ordinary
share.
* Dividends were not paid in full due to shareholders’ failure to provide accurate and complete
information necessary to receive dividends (incorrect or missing mailing addresses and banking details)
70
The Market for Company Securities
The Company’s capitalisation continued to grow in 2006. This composite indicator, one of the most
important for any public company, has shown a positive trend for six consecutive years. Over the past
year, the change in the share price of OAO “LUKOIL” was +48.1%, which allowed the Company to
become one of the sectoral leaders in growth in shareholder value in 2006 among Russian and foreign
organisations. At the end of December 2006, the Company’s capitalisation stood at USD 74.8 billion.
In the reporting period, growing interest in OAO “LUKOIL” shares was seen among professional
participants on the Russian and international stock markets. Both individuals and professional market
participants showed increased trust in the Company’s shares. Over the entire year, market participants
preferred to perform transactions with the Company’s securities in Russia. On the MICEX exchange in
2006, the average daily trading volume in Company shares was 3,086,000 shares, which is 36.7% higher
than in 2005. The volume of re-registration of shares in the shareholder registry rose by 2.41% to
24,926,369 shares.
In 2006 the Company continued to lead in volume of trading among foreign companies whose ADRs are
listed on the London Stock Exchange (LSE) in the IOB system. The average monthly trading volume in
the IOB system more than doubled year-on-year to USD 5.9 billion, while the Company’s share in the
average monthly trading in the securities of foreign companies in this system reached 24.5%.
The program of American Depositary Receipts and Global Depositary Receipts (ADRs and GDRs) for
Company shares continued during 2006. Depositary receipts for Company shares were traded on the overthe-counter market in the USA and on the London, Berlin, Frankfurt, Munich and Stuttgart exchanges. At
2006 year end the total number of ADRs issued against ordinary shares in OAO “LUKOIL” was
equivalent to 543 million shares (63.8% of the Company’s charter capital).
Over 2006 ConocoPhillips, a strategic partner of OAO “LUKOIL”, increased its shareholding in the
Company from 16.1% to 20.0%.
In December, two issues of non-convertible interest-bearing documentary bearer bonds of OAO
“LUKOIL”, series 03 and 04, were made on the MICEX exchange to a total amount of 14 billion roubles.
The coupon rate of the series 3 bonds, with a nominal value of 8 billion roubles and a maturity of five
years, is 7.10% per annum. The coupon rate of the series 04 bonds, with a nominal value of 6 billion
roubles and a maturity of seven years, is 7.40% per annum. Demand for the bonds exceeded supply by
50%, confirming the strong interest of Russian and foreign investors in the Company’s debt instruments.
As a result, OAO "LUKOIL" became the first private Russian corporation to successfully place bonds
with a seven-year maturity. This issue set a record for a one-off offering in such a large amount in a single
trading day for a private corporate issuer.
The existence of a broad range of investors in the Company’s debt instruments attests to the
irreproachable credit quality and investment appeal of OAO “LUKOIL”.
71
Figure No. 1
Changes in the OAO “LUKOIL” share price in 2006 against indexes
Динамика изменения цены аои ОАО "ЛУКОЙЛ" в 2006 г. по сравнению с индексами.
165%
140%
115%
90%
10.01.2006
10.02.2006 10.03.2006
10.04.2006
10.05.2006
10.06.2006
ЛУКОЙЛ
РТС
LUKOIL
RTS
10.07.2006
10.08.2006
10.09.2006
10.10.2006
ММВБ
10.11.2006
10.12.2006
BW OILP Index
MICEX
BWOILP index
* BWOILP – Bloomberg World Oil and Gas Producers INDEX
Figure No. 2
CHANGES IN THE PRICE OF OAO “LUKOIL” ORDINARY SHARES
in 2006
ДИНАМИКА ЦЕНЫ ОБЫКНОВЕННЫХ АКЦИЙ ОАО "ЛУКОЙЛ"
в 2006 году
10 000 000
9 000 000
8 000 000
7 000 000
6 000 000
5 000 000
4 000 000
3 000 000
2 000 000
Объем торгов на ММВБ, шт.
Volume of trading on MICEX, shares
Объем торгов в РТС, шт.
Volume of trading on RTS, shares
21.12.2006
07.12.2006
23.11.2006
09.11.2006
25.10.2006
11.10.2006
27.09.2006
13.09.2006
30.08.2006
16.08.2006
02.08.2006
19.07.2006
05.07.2006
21.06.2006
06.06.2006
23.05.2006
06.05.2006
21.04.2006
06.04.2006
23.03.2006
09.03.2006
21.02.2006
07.02.2006
24.01.2006
1 000 000
10.01.2006
100
98
96
94
92
90
88
86
84
82
80
78
76
74
72
70
68
66
64
62
60
0
Средневзвешенная цена на ММВБ в долл, США
Weighted-average price on MICEX, USD
72
Figure No. 3
Monthly volume of trading in shares (ADRs) of OAO “LUKOIL”,
million USD
Ежемесячные объемы торгов акциями (АДР) ОАО "ЛУКОЙЛ,
млн.долл.
12000
10000
8000
6000
4000
2000
0
Январь
Ф евраль
Март
ММВБ
January
February
Май
РТС
March
MICEX
Апрель
April
Июнь
Июль
ЛФБ
May
RTS
June
LSE
Август
Сентябрь Октябрь
ФФБ
July
August
Ноябрь
Декабрь
Внебиржевой рынок США
September
FSE
October November
December
US OTC market
Equity structure of OAO “LUKOIL” as at 31 December 2006
Number of
holders of
registered
ordinary shares
Foreign legal entities
Number of shares
% of total number of
shares
13
99,791
0.01%
171
823,093,130
96.77%
548,189,159
64.45%
SDK Garant*
74,002,498
8.70%
ZAO DK URALSIB*
60,529,689
7.12%
ZAO DKK*
39,104,964
4.60%
ZAO NDTs*
29,692,658
3.49%
ZAO KB Citibank*
67,149,334
7.89%
Russian legal entities,
including:
ZAO ING Bank
(Eurasia)*
Individuals
55,621
27,370,334
3.22%
TOTAL
55,805
850,563,255
100.00%
* Nominal shareholder
73
Description of the main risk factors associated with the operations of OAO
“LUKOIL”
The operations of OAO “LUKOIL” are associated with a number of risks, which under certain
circumstances may affect the results of the Company’s activity and the value of its securities. These risks
can be divided into the following main groups:
- sectoral risks,
- country and regional risks,
- financial risks,
- legal risks,
- other risks.
Sectoral risks
OAO “LUKOIL” has active operations on the domestic and international markets as a seller of crude oil,
oil products, and natural gas.
The Company’s activity depends significantly on world energy prices.
World prices for oil, oil products and gas have historically been subject to significant fluctuations, which
depend on a large number of factors:
•
•
•
•
•
•
the state of the global economy and also the economic and political situation in oilproducing regions;
global supply and demand, as well as forecasts of future supply and demand for oil and gas
(to a lesser degree);
the capabilities of OPEC and other exporting countries to control the level of world prices;
the cost and availability of alternative energy sources;
the actions and resolutions of Russian and foreign state authorities, including in respect of
taxation and export regulations;
climatic conditions in countries that are the largest oil and gas consumers.
OAO “LUKOIL” cannot affect the factors that determine oil and gas prices. Despite the fact that energy
prices have remained at a high level over the past several years, there is a risk that they may fall in the
medium and long term. In the event of an unfavourable price climate, OAO “LUKOIL” will be forced to
reduce current costs, reconsider its investment projects, and accelerate the sale of non-core assets and also
some of its marginal deposits.
Despite the development of alternative capabilities for bringing oil to consumers (for example, by rail and
through the construction of the Company’s own pipelines), OAO “LUKOIL” depends mainly on the
mainline system of pipelines of OAO AK Transneft to transport oil; tariffs and access to this system are
regulated by the state. As a result, there are risks associated with the possible restriction of the Company’s
access to the pipeline system. The state regulates access to export capacities and sets the principles for
access, which has a direct effect on the Company’s ability to export oil.
The proven gas reserves of the LUKOIL Group constitute about 22% of its total hydrocarbon reserves in
oil equivalent, but this gas can only be delivered to consumers through the gas pipeline system of OAO
Gazprom. A refusal by the Russian government to grant independent gas producing companies access to
Gazprom’s natural gas export transport system could have a considerable negative effect on the
Company’s operations.
74
The sale of gas on the domestic market is a very low-margin activity, because domestic market prices are
significantly lower than world prices, and is associated with the risk of a change in existing contractual
relations with OAO Gazprom, as well as the risk of a change in OAO Gazprom’s tariff policy.
The increasing pressure on the sales and distribution structures of the LUKOIL Group on the part of the
Federal Anti-Monopoly Service and the Company’s policy of restraining retail prices may have a
negative effect on the operating results of the LUKOIL Group. However, this restraint on retail prices
improves the Company’s image as a socially responsible corporation.
The oil industry is distinguished by a high level of competition. OAO “LUKOIL” constantly competes
with other Russian and international oil companies for the right to obtain licenses for specific deposits,
access to export terminals, refining capacity, and sales markets for oil products. The Company may also
encounter competition from suppliers of alternative energy sources, due to the continuing high prices on
hydrocarbon raw materials and the possible future exhaustion of its reserves. Risks related to the
competitive struggle may demand additional financial expenditures and in certain circumstances may
have a negative effect on the image of the Company.
There are potential environmental risks associated with the production of oil and gas. The elimination of
oil spills and other production accidents may have a substantial negative effect on the financial
performance of OAO “LUKOIL”.
The invention of new oil-refining technologies may require major investments in re-equipping facilities or
the construction of new facilities.
Country and regional risks
OAO “LUKOIL” operates throughout Russia, as well as in a number of foreign countries.
The Group’s main oil production and refining operations are located in Russia. Despite the fact that
positive changes have occurred in Russia over the past several years in all social spheres – steady
economic growth, political stability, successful economic reforms – Russia remains a state with a
developing political, economic and financial system. Oil production and refining in Russia is associated
with a whole array of risks.
Risks associated with the operations of OAO “LUKOIL” in the Russian Federation:
Political risks
Russia’s political system is in the formative stage and is constantly being reformed, and for this reason it
is still insufficiently stable, which entails the following risks for the Company:
•
•
•
•
•
The possibility of a change in the foreign or domestic policies of the country’s leadership,
which may negatively affect the investment appeal of the country as a whole and OAO
“LUKOIL” in particular, and may limit the Company’s ability to attract financing;
The probability of a negative change to legislation, including tax legislation, aimed at
maximising government revenues from the raw-materials sectors of the economy;
The process of government reforms may dissolve various ministries and agencies and create
new ones with regulatory authority over the Company’s operations, which may lead to a lack
or delay in approval of regulatory documents affecting the Company’s operations;
The possibility of conflicts between federal and regional authorities;
Terrorist and criminal risks.
75
Economic risks
The Russian operations of OAO “LUKOIL” entail material economic risks associated with the particular
circumstances of the Russian economy:
•
•
•
The immaturity and weakness of the Russian financial system may hinder the Company’s
access to investment resources (financial risks are discussed in more detail below);
The Russian economy is poorly diversified and depends to a substantial degree on world
commodity prices. A significant extended downturn in world commodity prices may lead to
a fall in the profits of raw materials producers, and subsequently to the contraction of the
entire Russian economy;
The obsolete infrastructure of the Russian economy, which does not meet modern standards,
has a substantial negative effect on the Company’s ability to develop its oil-production and
oil-refining businesses.
In order to minimise economic and financial risks, OAO “LUKOIL” strives to diversify the sources of
finance for its operations, attracting funds on both the Russian and international financial markets, and is
expanding the geographic reach of its operations and the range of its products.
Risks associated with production and refining operations in foreign countries:
The risks associated with the operations of the LUKOIL Group in foreign countries vary materially from
country to country. The following main risk groups by country can be identified:
Countries formerly part of the USSR: Ukraine, Kazakhstan, Azerbaijan, and Uzbekistan
The Company’s risks in these countries are currently comparable to the risks associated with Russian
operations.
Bulgaria and Romania
Due to the entry of these countries into the EU, the transition process carries with it substantial risks
related to changes to the legislation of these countries and to changes in the terms of trade between Russia
and these countries. There is also a risk of increased operating costs due to the introduction of an EUmandated minimum wage. In Romania there is also a risk of government intervention in the formation of
prices on oil products.
Egypt, Iran, Iraq, Saudi Arabia, Columbia, and Venezuela
Operations in these countries carry the following risks:
• possibility of political instability, as well as the reconsideration of contractual obligations by
the leadership of these countries;
• possibility of the suspension or termination of the Group’s operations in these countries due
to the introduction of international sanctions, and in the event of military action;
• existence of a terrorist threat against both the Group’s assets and its employees.
Financial risks
The Russian banking system remains immature and crisis-prone. The majority of Russian banks do not
meet international banking standards, while the transparency of the Russian banking sector lags far
behind international norms. The Company is forced to conduct banking operations with a limited number
of solvent Russian banks. The possibilities of a banking crisis or the bankruptcy of individual banks may
76
have a negative effect on the Company’s ability to work with Russian banks, and may also negatively
affect the Company’s business, financial position, and business performance.
The Company faces inflation and currency risks, as well as interest-rate and credit risks, all of which may
have a negative effect on its performance.
Inflation risks
Despite steadily declining inflation rates over the past several years and the favourable outlook for lower
inflation in the future, the Company faces inflation risks that may have a negative effect on its operating
results. Some of the Company’s expenses, including wage costs, depend to a significant degree on the
overall level of prices in Russia, while most of its income is expressed in or tied to US dollars and is
determined primarily by world oil prices. Higher rates of inflation, if not matched with corresponding
devaluation of the Russian rouble vis-à-vis the US dollar or an increase in oil prices, may have a negative
effect on the Company’s financial performance.
Currency risks
The Company is exposed to risks of unfavourable changes in exchange rates; this relates mainly to the
strengthening of the Russian rouble against the US dollar. This results from the fact that the bulk of the
Company’s revenues come from export operations and are denominated in US dollars and various
European currencies, while part of the Company’s expenses are denominated in roubles.
At the same time, the Company’s revenues from the sale of oil and oil products on the domestic market
are denominated in roubles, which mitigates the negative effect from the possible strengthening of the
rouble. In addition, the currency structure of the Company’s debt broadly reflects the structure of its
income, which also reduces its sensitivity to exchange-rate fluctuations.
The Company monitors the potential effect of unfavourable changes in exchange rates on the Company’s
operating performance, and currency risks may be subject to hedging in the event of an unfavourable
market situation.
Interest-rate risks
The Company is a major borrower on both the international and domestic capital markets. The Company
requires these borrowings to finance its current operations and its investment projects.
The international debt markets are the main source of borrowings. For this reason the Company is
sensitive to changes in interest rates, especially those of the US Federal Reserve System. An increase in
the discount rate of the Federal Reserve may lead to an increase in the Company’s cost of borrowing. On
the other hand, the rising creditworthiness of OAO “LUKOIL”, which is reflected in the improvement in
its credit ratings, and the rise in the creditworthiness of Russia are important factors in decreasing the
Company’s future borrowing costs.
Credit risks
The Company is subject to risks that counterparties will not discharge their obligations to pay for goods
delivered. The bulk of credit risks arises on the sale of Company products. In order to reduce credit risks,
the Company is oriented to working with counterparties that have a high credit rating; in addition,
restrictions are in place on the maximum risk per counterparty. To reduce credit risks, letters of
credit/guarantees from first-class banks and sureties are used, and in a number of cases the Company
requires advance payment for products to be delivered.
77
Legal risks
Risks associated with changes in currency regulation
Possible changes in currency regulations, which may affect the mandatory repatriation of part of foreigncurrency proceeds, and restrictions on investments by Russian companies outside Russia may lead to
losses for the Company.
Risks associated with changes in the rules on customs control and duties
There are risks associated with changes in the rules on customs control and duties. A possible increase in
export customs duties on oil and oil products could have a negative effect on the Company’s financial
performance.
Risks associated with legislation on the subsoil
In the event of a possible change to requirements on licensing subsoil use, there is a risk that possible
restrictions will be introduced on participation in tenders and auctions to obtain subsoil usage rights, as
well as an expansion of the list of cases of the termination and suspension of licenses. This may have a
negative effect on the Company’s operations and the value of its assets.
Risks associated with changes in tax legislation
Russian tax legislation has not existed as long as that of countries with a more developed economy, and
therefore it is not uncommon that the state’s application of tax legislation is unclear or contradictory. This
leads to the existence of more substantial tax risks in Russia than in any country with a more mature tax
system.
The Russian tax system is currently undergoing reforms. If new types of taxes are introduced, or if
changes are made to the procedures for paying existing taxes, the Company may be forced to pay higher
taxes, which may have a negative effect on its operations.
Labour legislation risks
Labour legislation risks involve potential failure by OAO "LUKOIL" to comply with legal requirements
associated with providing employment quotas to disabled persons. This may happen due to lack of
established and durable practice of applying the relevant legal norms.
Other risks
If Group organisations are unable to discover and develop additional hydrocarbon reserves, the level of
reserves and volume of production may fall from current indicators, which would have a negative effect
on the Company’s operating performance and financial position.
Information on the Group’s reserves consists of calculated data and depends on a number of variables and
assumptions. The actual output of deposits, the profitability of production, and development costs may
differ from estimates, and these differences may be material.
The licenses held by the Company and its subsidiaries could be suspended or recalled prior to their
expiration date in connection with a violation of licensing terms, late payment or for other reasons.
A number of the Group’s international projects involving reserves, production and refining are being
carried out in politically and economically unstable regions.
78
If the Company is unable to successfully integrate newly acquired organisations, this may slow rates of
growth and cause harm to its operations and financial position.
In certain cases, the provisions of Russian law may hold the Company liable for the obligations of its
subsidiaries.
There are risks of direct or indirect losses from improper or erroneous internal processes, employee
actions and organisational systems (operating risks).
LUKOIL Group organisations are involved in a number of court cases that relate to the Company’s
operations. Despite the fact that these court cases have the potential to cause significant losses for the
Company, there are currently no grounds to believe that their end result will have a material effect on the
Company’s performance results.
Risk management procedures at OAO “LUKOIL”
For the purposes of risk management, OAO “LUKOIL” has created coordinating groups on risks and a
expert group on risk management for each of the Company’s lines of business: “Geology and
development”, “Production”, “Industrial safety”, “Human resources management”, “Economics: planning
and investments”, and others. Advanced training has been organised for the Company’s experts. Internal
regulatory documents are being drafted on the further development of the corporate risk management
system.
In the Exploration and Production business segment, the Company systematically monitors possible risk
events while carrying out foreign projects. Various means of reacting to risks are used:
•
•
•
•
risk avoidance – rejection of a risky project;
risk mitigation – preventative measures to either fully eliminate risk or to reduce potential
losses and reduce the likelihood of their occurrence;
risk transfer – hedging, insurance, surety, guarantee, involvement of partners in the project,
reduction of the Company’s share in the project;
risk retention – creation of a financial reserve to cover insignificant losses from equity.
The purpose of these measures is to prevent/reduce the possible harm from identified risks in order
to increase the capitalisation and raise the shareholder value of the Company.
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Note
Compliance
Point 8.7 of the Charter of OAO
“LUKOIL”
Compliance
Point 4.4 of the Regulations on the
Procedure for Preparing and
Holding the General Shareholders
Meeting of OAO “LUKOIL”.
Shareholders have the opportunity to study the information
(materials) to be provided during the preparations for
holding the general shareholders meeting, using electronic
means of communication, including over the Internet.
Compliance
Point 5.5 of the Regulations on the
Procedure for Preparing and
Holding the General Shareholders
Meeting of OAO “LUKOIL”
Shareholders have the opportunity to submit an item to the
agenda of the general shareholders meeting or demand the
convocation of a general shareholders meeting without
submitting a statement from the shareholder registry, if
their rights to shares are accounted for in a shareholder
registry system, or if rights to shares are accounted on a
deposit account, then a statement from the deposit account
is sufficient to exercise the given rights.
Compliance
Point 3.3 of the Regulations on the
Procedure for Preparing and
Holding the General Shareholders
Meeting of OAO “LUKOIL”.
The charter or internal documents of the joint stock
company contains a requirement on the mandatory
attendance at the general shareholders meeting of the
General Director, members of the Management Committee,
members of the Board of Directors, members of the Audit
Commission, and the auditor of the joint stock company.
De facto
compliance
In accordance with point 6.2 of the
Regulations on the Procedure for
Preparing and Holding the General
Shareholders Meeting of OAO
“LUKOIL”, the Board of Directors
sends an invitation to attend the
general shareholders meeting to the
President of the Company, members
of the Board of Directors, the
Management Committee and the
Audit Commission of the Company
and the Auditor of the Company.
Pursuant to this point, the Board of
Directors also sends invitations to
candidates in cases where the general
shareholders meeting will consider
issues of the election of the President
of the Company, members of the
Board of Directors, members of the
Management Committee, and also
the issue of the approval of the
№
General meeting of shareholders
1.
Notification of shareholders of general meetings of
shareholders at least 30 days before the date of the meeting,
regardless of the items on the agenda, unless the law
stipulates a longer term.
2.
Shareholders have the opportunity to study the list of
parties entitled to participate in the general meeting, starting
from the date of the notification of the general shareholders
meeting up to the closing of the meeting (if held in the form
of joint attendance) or to the deadline for receipt of voting
ballots (if held through absentee voting).
3.
4.
5.
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noncompliance
Note
Auditor of the Company.
6.
Mandatory attendance of candidates in cases where the
general shareholders meeting will consider issues of the
election of the members of the Board of Directors, of the
General Director, members of the Management Committee,
and also the issue of the approval of the Auditor of the
Company.
De facto
compliance
See note to item 5
The internal documents of the joint stock company contain
the procedure for registering the participants in the general
shareholders meeting.
Compliance
Point 10.1 of the Regulations on the
Procedure for Preparing and
Holding the General Shareholders
Meeting of OAO “LUKOIL”.
The charter of the joint stock company contains the
authorities of the Board of Directors regarding the annual
approval of the financial business plan of the joint stock
company.
_
In accordance with point 10.6.3 of
the Charter of OAO “LUKOIL”, the
development and approval of annual
and future plans, the budget and the
investment programme are assigned
to the authority of the Management
Committee.
The Board of Directors has approved a procedure for risk
management at the joint stock company.
Compliance
Point 3.1.9 of the Regulations on the
Audit Committee of the Board of
Directors of OAO “LUKOIL”.
7.
Board of Directors
8.
9.
In accordance with this point, the
authorities of the Audit Committee
include an evaluation of the risk
management system at the Company
and the preparation of the relevant
recommendations to the Board of
Directors of the Company.
Points 1.5, 1.7, 3.2, and 4.8 of the
Regulations on Internal Control and
Internal Audit at OAO “LUKOIL”,
approved by the Board of Directors
of OAO “LUKOIL”.
The Management Committee of
OAO “LUKOIL” has also approved
Recommendations
on
the
organisation of the system of internal
controls, risk management and
internal audit of the LUKOIL Group
(Appendix No. 2 to the Regulations
on Internal Audit in the LUKOIL
Group).
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Note
The charter of the joint stock company defines the rights of
the Board of Directors to take a decision on terminating the
authority of the General Director appointed by the general
shareholders meeting.
_
The Charter of OAO “LUKOIL”
assigns the appointment of the
President and the early termination of
the authorities of the President to the
competence of the shareholders’
meeting.
№
10.
The President is appointed by the
shareholders meeting for a term of
five years.
11.
The charter of the joint stock company defines the right of
the Board of Directors to establish requirements on the
qualifications and amount of remuneration of the General
Director, members of the Management Committee, and
heads of the main structural units of the joint stock
company.
Compliance
Point 9.7.10 of the Charter of OAO
“LUKOIL”
The authorities of the Board of
Directors include the establishment
of the main terms of contracts to be
concluded with the President and
members of the Management
Committee.
Points 2 and 3 of the Regulations on
the
Human
Resources
and
Compensation Committee of the
Board of Directors of OAO
“LUKOIL”.
One of the purposes of the
Committee is to develop and submit
to
the
Board
of
Directors
recommendations on issues of human
resources and Company standards on
recruiting
candidates
to
the
management bodies. The committee
performs the preliminary evaluation
of candidacies for positions in the
management bodies and makes the
relevant recommendations to the
Board of Directors. The Committee
also provides recommendations to
the Board of Directors on the
material terms and conditions of
contracts to be concluded with
members of the executive bodies.
12.
The charter of the joint stock company defines the right of
the Board of Directors to approve the terms of contracts
with the General Director and members of the Management
Committee.
Compliance
Point 9.7.10 of the Charter of OAO
“LUKOIL”
The authorities of the Board of
Directors include the establishment
of the main terms of contracts to be
concluded with the President and
members of the Management
Committee.
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№
13.
Compliance/
noncompliance
Note
Compliance
Point 9.8.4 of the Charter of OAO
“LUKOIL”
The Board of Directors of the joint stock company includes
at least three independent directors that meet the
requirements of the Code of Corporate Governance.
De facto
compliance
Point 9.2 of the Charter of OAO
“LUKOIL” contains a provision that
shareholders will seek to nominate
and elect to the Board of Directors at
least three independent directors.
The Board of Directors of the company does not contain
persons who have been found guilty of crimes in the area of
business activity or crimes against the state authorities, the
interests of state service or service in local government, or
who have been subjected to administrative penalties for
offences in the area of business activity or in the area of
finance, taxes and duties, or the securities market.
De facto
compliance
The Board of Directors of the company does not contain
persons who are a participant, General Director (manager),
member of management bodies, or employee of a legal
entity that competes with the company.
De facto
compliance
The Company has no information to
the effect that any person on the
Board of Directors has been found
guilty of crimes in the area of
business activity or crimes against
the state authorities, the interests of
state service or service in local
government, or who has been
subjected to administrative penalties
for offences in the area of business
activity or in the area of finance,
taxes and duties, or the securities
market.
The Board of Directors of OAO
“LUKOIL” does not contain persons
who are the General Director
(manager), member of management
bodies, or employee of any legal
entity that is a competitor of OAO
“LUKOIL”.
The charter or the internal documents of the joint stock
company contain a requirement that when approving the
terms of the contract with the General Director
(management organisation, manager) and the members of
the Management Committee, the votes of members of the
Board of Directors who hold such positions are not counted
in the voting.
14.
15.
16.
Certain members of the Board of
Directors
have
minority
shareholdings in other oil companies
(Russian and foreign), but these
shareholdings are strictly for
financial purposes, and due to their
insignificant size do not provide the
ability to affect the operations of
these companies.
17.
The charter of the company contains a requirement that the
Board of Directors be elected by cumulative voting.
Compliance
Point 9.2 of the Charter of OAO
“LUKOIL”.
The company’s internal documents specify the obligation of
members of the Board of Directors to refrain from actions
that will or potentially could lead to a conflict between their
interests and the interests of the company, and the
De facto
compliance
Point 1.2 of the Regulations on the
Board of Directors of OAO
“LUKOIL” indicates that the Board
of Directors performs the overall
18.
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noncompliance
obligation, in the event of the appearance of such conflict,
to immediately disclose information on this conflict to the
Board of Directors.
Note
management of the operations of the
Company in the interests of the
Company, its shareholders and
investors.
Point 1.5 of the Regulations on the
Board of Directors of OAO
“LUKOIL” stipulates obligations the
members of the Board of Directors of
the Company neither to disclose nor
use confidential information on the
Company and insider information in
their own interests.
Pursuant to point 11.1 of the Charter
of OAO “LUKOIL”, in exercising
their rights and performing their
duties, Company officials shall act in
the interests of the Company, and
exercise their rights and perform
their duties in respect of the
Company reasonably and in good
faith.
In accordance with point 3.1.10 of
the Regulations on the Human
Resources
and
Compensation
Committee of the Board of Directors
of OAO “LUKOIL”, the Human
Resources
and
Compensation
Committee performs an analysis of
information provided by members of
the Board of Directors regarding
changes to personal data, which
members of the Board of Directors
are obligated to disclose by effective
legislation, the Company Charter and
the Code of Corporate Governance
approved by the Government of the
Russian Federation on 28 November
2001:
in
respect
of
the
presence/absence of interest in
transactions to be performed by the
Company, when the relevant
decisions are being taken by the
Board of Directors; the onset and
termination of status as an affiliated
person in respect of the Company;
the appearance of circumstances
hindering effective work as a
member of the Board of Directors;
loss of independent status of an
independent director.
19.
The company’s internal documents specify the obligation of
members of the Board of Directors to notify the Board of
Directors of their intention to complete a transaction with
the securities of a company on whose board they serve, or
Compliance
Point 3.9 of the Regulations on the
Information
Policy
of
OAO
“LUKOIL”.
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Provision of the Corporate Governance Code
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Note
The company’s internal documents contain a requirement
that meetings of the Board of Directors be held at least once
every six weeks.
Compliance
Point 2.1 of the Regulations on the
Board of Directors of OAO
“LUKOIL”.
During the year for which the annual report of the company
is being prepared, meetings of the Board of Directors are
held with a frequency of at least once every six weeks.
De facto
compliance
_
The company’s internal documents specify the procedure
for holding meetings of the Board of Directors.
Compliance
Section 3 of the Regulations on the
Board of Directors of OAO
“LUKOIL”
The company’s internal documents contain a provision on
the mandatory approval by the Board of Directors of the
company’s transactions involving 10 percent or more the
value of the assets of the company, except for transactions
carried out in the normal course of business.
Compliance
Point 9.7.19 of the Charter of OAO
“LUKOIL”
The company’s internal documents specify the right of the
Board of Directors to receive the information necessary to
perform their functions from the executive bodies and heads
of the main structural units of the company, and also
liability for the failure to provide such information.
Compliance
Point 5.2 of the Regulations on the
Information
Policy
of
OAO
“LUKOIL”.
The Board of Directors has a strategic planning committee,
or the functions of this committee are entrusted to another
committee (except the audit committee or the human
resources and compensation committee).
Compliance
Regulations on the Strategy and
Investment Committee of the Board
of Directors of OAO “LUKOIL”
The Board of Directors has a committee (the audit
committee) that recommends the company’s auditor to the
Board of Directors and interacts with the auditor and the
company’s audit commission.
Compliance
Regulations on the Audit Committee
of the Board of Directors of OAO
“LUKOIL”.
The audit committee consists only of independent and nonexecutive directors.
Compliance
Point 4.1 of the Regulations on the
Audit Committee of the Board of
Directors of OAO “LUKOIL”.
№
the securities of the subsidiaries (associates) of such
company, and also to disclose information on transactions
they have performed with such securities.
20.
21.
22.
23.
24.
25.
26.
27.
The audit committee is elected from
the non-executive directors of the
Company. In addition, at least one
member of the committee must be
an independent director, if any have
been elected to the Board of
Directors of OAO “LUKOIL”.
28.
Chairmanship of the audit committee is entrusted to an
independent director.
Compliance
Point 5.2 of the Regulations on the
Audit Committee of the Board of
Directors of OAO “LUKOIL”.
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Provision of the Corporate Governance Code
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Note
The company’s internal documents specify the right of all
members of the audit committee to have access to any
documents and information of the company, provided they
do not disclose confidential information.
Compliance
Point 14.1 of the Regulations on the
Audit Committee of the Board of
Directors of OAO “LUKOIL”.
A committee of the Board of Directors has been created
(human resources and compensation committee) whose
functions are to determine criteria for the recruitment of
candidates to the Board of Directors and the development
of the company’s compensation policy.
Compliance
Regulations on the Human Resources
and Compensation Committee of the
Board of Directors of OAO
“LUKOIL”.
Chairmanship of the human resources and compensation
committee is entrusted to an independent director.
Compliance
Point 5.2 of the Regulations on the
Human Resources and Compensation
Committee of the Board of Directors
of OAO “LUKOIL”.
The human resources and compensation committee does
not contain company officers.
Compliance
Point 4.1 of the Regulations on the
Human Resources and Compensation
Committee of the Board of Directors
of OAO “LUKOIL”.
The Board of Directors has a risk committee, or the
functions of this committee are entrusted to another
committee (except the audit committee or the human
resources and compensation committee).
_
Possibility of creating this committee
is under consideration
The Board of Directors has a corporate conflicts committee,
or the functions of this committee are entrusted to another
committee (except the audit committee or the human
resources and compensation committee).
_
Possibility of creating this committee
is under consideration
The corporate conflicts committee does not contain
company officers.
_
See point 34.
Chairmanship of the corporate conflicts committee is
entrusted to an independent director.
_
See point 34.
The company has internal documents approved by the
Board of Directors that stipulate the procedure for the
creation and operation of board committees.
Compliance
№
29.
30.
31.
32.
33.
34.
35.
36.
37.
The Regulations on the Human
Resources
and
Compensation
Committee of the Board of Directors
of OAO “LUKOIL”, the Regulations
on the Audit Committee of the Board
of Directors of OAO “LUKOIL”, and
the Regulations on the Strategy and
Investment Committee of the Board
of Directors of OAO “LUKOIL”.
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Provision of the Corporate Governance Code
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noncompliance
Note
The company’s charter stipulates the procedure for
determining quorum for meetings of the Board of Directors,
such that the attendance of independent directors is
mandatory for meetings of the Board of Directors.
Compliance
Point 9.10 of the Charter of OAO
“LUKOIL”
Compliance
Point 10.4 of the Charter of OAO
“LUKOIL”.
№
38.
Executive bodies
39. The company has a collegial executive body (management
committee).
Regulations on the Management
Committee of OAO “LUKOIL”
40.
The company’s charter or internal documents contain a
provision on the mandatory approval by the management
committee of transactions with real estate or the receipt of a
loan by the company, if the given transactions do not
constitute major transactions or their performance is not
part of the normal course of business of the company.
_
_
The company’s internal documents specify the procedure
for the coordination of operations that fall outside the
normal course of business of the company.
_
The Board of Directors’ decision of
31 October 2006 (Minutes No.25)
established that the Management
Committee of the Company, in the
event of substantial changes to the
macroeconomic operating conditions
of the organisations of the LUKOIL
Group, and in coordination with the
Strategy and Investment Committee
of the Board of Directors of OAO
“LUKOIL”, shall make revisions to
the Investment Programme, provided
that these revisions are in accord with
the strategic goals of the Company.
The executive bodies of the company do not contain
persons who are a participant, General Director (manager),
member of management bodies, or employee of a legal
entity that competes with the company.
De facto
compliance
The executive bodies of OAO
“LUKOIL” do not contain persons
who are a participant, General
Director (manager), member of
management bodies, or employee of
any legal entity that is a competitor
of OAO “LUKOIL”.
The executive bodies of the company do not contain
persons who have been found guilty of crimes in the area of
business activity or crimes against the state authorities, the
interests of state service or service in local government, or
who have been subjected to administrative penalties for
De facto
compliance
The Company has no information to
the effect that any person on the
Management Committee has been
found guilty of crimes in the area of
business activity or crimes against
41.
42.
43.
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Provision of the Corporate Governance Code
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noncompliance
offences in the area of business activity or in the area of
finance, taxes and duties, or the securities market. If the
functions of the individual executive body are performed by
a management organisation or a manager, the general
director and members of the management committee of the
management organisation or the manager meet the
requirements made on general director or members of the
management committee of the company.
Note
the state authorities, the interests of
state service or service in local
government, or who has been
subjected to administrative penalties
for offences in the area of business
activity or in the area of finance,
taxes and duties, or the securities
market.
44.
The company’s charter or internal documents prohibit the
management organisation (manager) from performing
similar functions in a competing company, and also from
having a property relationship with the company, other than
providing services as a management organisation
(manager).
_
The Charter of OAO “LUKOIL” and
internal documents do not stipulate
the possibility of transferring
functions
to
a
management
organisation (manager).
The company’s internal documents specify the obligation of
the executive bodies to refrain from actions that will or
potentially could lead to a conflict between their interests
and the interests of the company, and the obligation, in the
event of the appearance of such conflict, to inform the
Board of Directors of this.
De facto
compliance
Pursuant to point 11.1 of the Charter
of OAO “LUKOIL”, in exercising
their rights and performing their
duties, Company officials shall act in
the interests of the Company, and
exercise their rights and perform
their duties in respect of the
Company reasonably and in good
faith.
The company’s charter or internal documents contain
criteria for selecting the management organisation
(manager).
_
See point 44.
Provision by the executive bodies of monthly reports on
their work to the board of directors
_
In accordance with Article 69 of the
Federal Law On Joint Stock
Companies, executive bodies of a
joint stock company are subordinate
to the board of directors. Therefore,
the right of members of the Board of
Directors to receive information is an
inalienable right and does not need to
be specially stipulated.
Establishment of liability in the contracts concluded by the
company with the general director (management company,
manager) and the members of Management Committee for
violation of the provisions on use of confidential and
official information
Compliance
_
Compliance
By decision of the Board of Directors
of 29 August 2003, the duties of the
corporate secretary were placed on
the Secretary of the Board of
Directors and Head of the Office of
45.
46.
47.
48.
Company secretary
49.
The company has a designated official (i.e. the company
secretary) who is responsible for ensuring compliance by
the company’s bodies and officials with procedural
requirements guaranteeing the observance of rights and
legal interests of the company’s shareholders
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noncompliance
Note
the Board of Directors
50.
The company has a procedure in its charter or internal
documents for appointing (electing) the company secretary
and defining his/her responsibilities
_
This issue is in the discussion stage
at the moment.
The company charter contains requirements on the
candidates for the position of company secretary
_
_
De facto
compliance
Pursuant to point 9.7.17 of the
Charter of OAO “LUKOIL”, the
competence of the Board of Directors
includes
approval
of
major
transactions, the subject of which is
property with a value equal to
between 25 percent and 50 percent of
the book value of the assets of the
Company, determined according to
the data of its financial statements on
the latest reporting date, except for
transactions carried out in the normal
course of business of the Company,
transactions related to the placement
by subscription (sale) of ordinary
shares of the Company, and
transactions related to the placement
of issuable securities convertible to
ordinary shares of the Company.
51.
Material corporate actions
52.
The company charter or internal documents contain
requirements on approving major transactions prior to their
conclusion
In the reporting year OAO
“LUKOIL”
performed
no
transactions that are considered
major transactions in accordance
with the Federal Law On Joint Stock
Companies.
53.
Mandatory hiring of an independent appraiser to assess the
market value of property that is the subject of a major
transaction
De facto
compliance
Pursuant to point 9.7.7 of the Charter
of OAO “LUKOIL”, the competence
of the Board of Directors includes the
determination of the price (monetary
valuation) of property, and the price
of placement and buyback of issuable
securities pursuant to the laws of
Russia.
Article 77 of the Federal Law On
Joint Stock Companies stipulates that
an independent appraiser may be
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Provision of the Corporate Governance Code
№
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noncompliance
Note
engaged to determine the market
value of property.
54.
The company charter contains a ban on taking any actions
during the acquisition of major shareholdings in the
company (takeover) aimed at protecting the interests of the
executive bodies (members thereof) and the members of the
Board of Directors or worsening the position of
shareholders in comparison with the current situation
(specifically, prior to the end of the scheduled period for
acquisition of shares the Board of Directors is prohibited
from passing a decision on issue of additional shares, on the
issue of securities convertible into shares, or securities
conferring the right to purchase shares of the company,
even if the right to adopt such a decision is granted thereto
by the charter)
Starting from 1
July 2006,
article 84.6 of
the Federal
Law On Joint
Stock
Companies
establishes a
ban on actions
of such nature
by the
management
bodies of a
company,
which obviates
the need to
include such
provisions in
the Charter.
In accordance with article 84.6, after
an open joint stock company has
received a voluntary or mandatory
offer, decisions on the following
issues shall be taken only by the
General Shareholders Meeting of the
open joint stock company:
increase in the charter capital of the
open joint stock company through
the placement of additional shares
within the limits of the quantity and
categories (classes) of declared
shares;
placement by the open joint stock
company of convertible securities,
including options of the open joint
stock company;
approval of transactions or several
related transactions associated with
the acquisition, alienation or possible
alienation by the open joint stock
company,
either
directly
or
indirectly, of property with a value of
10 or more percent of the book value
of the assets of the open joint stock
company, determined according to
the data of its financial statements as
at the latest reporting date, except for
transactions carried out in the normal
course of business of the open joint
stock company or those carried out
before the receipt by the open joint
stock company of the voluntary or
mandatory offer, and if the open joint
stock company receives a voluntary
or mandatory offer to acquire
publicly traded securities – up to the
moment
of
discovery
that
information on such an offer has
been sent to the open joint stock
company;
approval
of
transactions;
interested-party
acquisition by the open joint stock
company of placed shares, in cases
stipulated by this Federal Law;
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Note
increase in the remuneration of
persons holding positions in the
management bodies of the open joint
stock company, or establishment of
the terms for the termination of their
authorities,
including
the
establishment of or an increase in
compensation payable to such
persons in the event of the
termination of their authorities.
55.
The company charter contains requirements on mandatory
hiring of an independent appraiser to assess the current
market value of shares and possible changes in their market
value as a result of a takeover
_
_
The company charter does not release the buyer from the
obligation to propose that shareholders sell the ordinary
shares in the company belonging thereto (issuable securities
convertible into ordinary shares) during a takeover
Compliance
Point 5.8 of the Charter of OAO
“LUKOIL”
The company charter or internal documents contain
requirements on the mandatory hiring of an independent
appraiser to determine the share conversion ratio during
reorganisation
_
_
An internal document has been approved by the board of
directors that determines the company’s rules and
approaches to the disclosure of information (Regulations on
Information Policy)
Compliance
The Regulations on the Information
Policy of OAO “LUKOIL”
The company’s internal documents contain requirements on
disclosing information on the objective of placement of
shares, on the parties that plan to purchase the placed shares
(including a major shareholding), and whether the
company’s top officials will participate in the purchase of
the company’s placed shares
Compliance
Point 3.11 of the Regulations on the
Information
Policy
of
OAO
“LUKOIL”.
The company’s internal documents contain a list of
information, documents and materials which should be
provided to shareholders for resolution of the issues on the
agenda of the general shareholders meeting
Compliance
Point 5.6 of the Regulations on the
Procedure for Preparing and
Holding the General Shareholders
Meeting of OAO “LUKOIL”
The company has an Internet website and regularly
discloses information on the company on this website
Compliance
Regulations on maintenance of the
Internet portals of OAO “LUKOIL”
and the websites of LUKOIL Group
companies
56.
57.
Disclosure of information
58.
59.
60.
61.
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Provision of the Corporate Governance Code
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noncompliance
Note
The company’s internal documents contain requirements on
the disclosure of information on transactions with parties
designated by the charter as top officials of the company
and on transactions with organisations in which top
company officials own directly or indirectly an equity
shareholding of 20 or more percent or in which such parties
can exert significant influence through other means
De facto
compliance
Appendix No. 2 to the Regulations on
the activity of the structural divisions
of OAO “LUKOIL” and the
LUKOIL Group companies on
ensuring
the
performance
of
obligations associated with the listing
of the securities of OAO “LUKOIL”
on the London Stock Exchange.
№
62.
Information on one-time transactions
or a series of transactions with
related parties, if the amount of such
transactions exceeds USD 50 million
or if they are concluded outside the
normal course of business, must be
disclosed if this information could
have a material effect on the
exchange rate of the securities.
Information on operations with
related parties is also regularly
disclosed in the notes to the financial
statements of the LUKOIL Group
prepared according to US GAAP
63.
The company’s internal documents contain requirements on
disclosing information on all transactions which could have
an effect on the market value of the company’s shares
Compliance
Point 4.1 of the Regulations on the
activity of the structural divisions of
OAO “LUKOIL” and the LUKOIL
Group companies on ensuring the
performance
of
obligations
associated with the listing of the
securities of OAO “LUKOIL” on the
London Stock Exchange
There is an internal document approved by the board of
directors on the use of material information on the
company’s operations, shares and other securities and
transactions therewith, where such information is not
publicly available and its disclosure may have a material
effect on the market value of the shares of the company.
Compliance
Point 7 of the Regulations on the
Information
Policy
of
OAO
“LUKOIL”
There are internal procedures approved by the board of
directors for control over the company’s financial and
business activity
Compliance
Regulations on Internal Audit in the
LUKOIL Group, Regulations on
Internal Control and Internal Audit
at OAO “LUKOIL”
The company has a special division responsible for
Compliance
The Main Division of Control and
64.
Control over the financing and operating activity of an enterprise
65.
66.
92
Provision of the Corporate Governance Code
№
Compliance/
noncompliance
ensuring compliance with the internal control procedures
(the control and audit service)
Note
Internal Audit
67.
The company’s internal documents contain requirements on
determination by the board of directors of the structure and
composition of the company’s control and audit service
_
The Main Division of Control and
Internal Audit reports to the
Company President. In this regard,
the authorities of the Audit
Committee of the Board of Directors
of OAO “LUKOIL” include study of
the system of internal controls at the
Company and analysis of the
effectiveness of the work of the Main
Division of Control and Internal
Audit, in order to report to the Board
of Directors of the Company on the
financial and business operations of
the Company
The control and audit service does not contain persons who
have been found guilty of crimes in the area of business
activity or crimes against the state authorities, the interests
of state service or service in local government, or who have
been subjected to administrative penalties for offences in
the area of business activity or in the area of finance, taxes
and duties, or the securities market
De facto
compliance
The Company has no information to
the effect that any person on the
Main Division of Control and
Internal Audit has been found guilty
of crimes in the area of business
activity or crimes against the state
authorities, the interests of state
service or service in local
government, or who has been
subjected to administrative penalties
for offences in the area of business
activity or in the area of finance,
taxes and duties, or the securities
market.
The control and audit service does not contain persons who
are members of the company’s executive bodies or persons
who are participants, the general director (manager),
members of the management bodies or employees of a legal
entity that competes with the company
_
The Head of the Main Division of
Control and Internal Audit is a
member
of
the
Management
Committee of OAO “LUKOIL”
68.
69.
70.
Section 3 of the Instructions on
Documentary
Support
for
Management Activity at OAO
“LUKOIL”.
The company’s internal documents contain a deadline for
submitting documents and materials to the control and audit
service for assessment of the financial and business
operations performed, and also the liability of company
officials and employees for the late submission of such
documents and materials
De facto
compliance
The company’s internal documents contain the obligation
of the control and audit service to report on any violations
discovered to the audit committee, and in the absence of
such committee, to the board of directors of the company
Compliance
Point 4.9 of the Regulations on
Internal Control and Internal Audit
at OAO “LUKOIL”
The company charter contains requirements on preliminary
assessment by the control and audit service of the
_
This issue is in the discussion stage
at the moment.
Documents and materials
provided to the control
service in accordance
general procedure for
flow.
are to be
and audit
with the
document
71.
72.
93
Provision of the Corporate Governance Code
Compliance/
noncompliance
Note
The company’s internal documents contain the procedure
for agreeing unusual operations with the board of directors
Compliance
Point 9.7.20 of the Charter of OAO
“LUKOIL”
There is an internal document approved by the board of
directors that determines the procedure for the audit
commission to conduct audits of the company’s financial
and operating activities
Compliance
Point 2 of the Regulations on the
Audit
Commission
of
OAO
“LUKOIL”
The audit committee evaluates the audit opinion prior to its
submission to the shareholders at the general shareholders
meeting
Compliance
Point 3.1 of the Regulations on the
Audit Committee of the Board of
Directors of OAO “LUKOIL”.
There is an internal document approved by the board of
directors that is used by the board of directors when making
recommendations on the size of dividends (Regulations on
dividend policy)
Compliance
Regulations on the Dividend Policy
of OAO “LUKOIL”
The Regulations on the Dividend Policy contain a
procedure for determining the minimum share of net profit
of the company to be used to pay dividends and the
conditions under which dividends are not paid or are not
paid in full on preferred shares, the size of dividends on
which was determined by the company charter
Compliance
Point 3.2 of the Regulations on the
Dividend Policy of OAO “LUKOIL”
Information on the company’s dividend policy and the
amendments thereto are published in the periodical
stipulated by the company charter for publishing notices on
the holding of general shareholders meetings, and the given
information is placed on the company’s Internet website
De facto
compliance
_
№
expedience of performing operations that are not stipulated
by the company’s financial and business plan (unusual
operations)
73.
74.
75.
Dividends
76.
77.
78.
94
List of transactions recognised as major transactions in accordance with the Federal Law On Joint
Stock Companies performed by OAO “LUKOIL” in 2006, and other transactions covered by the
procedure for approving major transactions in accordance with the Charter of OAO “LUKOIL”:
In 2006 OAO “LUKOIL” did not carry out any transactions that in accordance with the Federal Law On Joint Stock
Companies are recognised as major transactions, or any other transactions covered by the procedure for approving major
transactions in accordance with the Charter of OAO “LUKOIL” as amended on 12 August 2002, 26 June 2003, 24 June
2004, 24 January 2005, 28 June 2005 and 28 June 2006.
List of transactions recognised as interested-party transactions in accordance with the Federal Law
On Joint Stock Companies performed by OAO “LUKOIL” in 2006
Interested-party transactions approved by the Annual General Shareholders Meeting of OAO “LUKOIL” of 28 June 2006 and concluded in 2006
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
1
The approximate value of the transaction is USD 3,330,914,368.70, including VAT.
The approximate value of the transaction is 91,800,000,000.00 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
The Supplier undertakes to supply the Buyer with crude oil during the period from 1 July 2006 to 30 June 2007 in
the amount of up to 900,000 tonnes per month.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan
Vagitovich Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The value and amount of oil to be supplied each month will be agreed by the parties in a protocol. The supply of
oil by the mainline oil pipelines of OAO AK Transneft shall be made at the transfer point of the Buyer at the time
it passes through the system for measuring the quantity and quality of the oil.
The Contract enters into force from the date of its signing and shall remain in effect until 30 June 2007, and as
regards mutual settlements – until they have been completed in full.
2
The approximate amount of interest to be accrued on the loan by the end of the effective term of the Agreement
will equal USD 2,571,985,604.10.
95
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
The approximate amount of interest to be accrued on the loan by the end of the effective term of the Agreement
will equal 70,883,923,249 roubles.
OAO “LUKOIL” (Lender)
OOO Naryanmarneftegaz (Borrower)
Supplemental Agreement to Shareholder Loan Agreement No. 0510225 of 29 March 2005 between OAO
“LUKOIL” and OOO Naryanmarneftegaz (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the
amount of 32,200,000,000 roubles for a term of 30 years from the date of signing of the Agreement, and the
Borrower undertakes to repay the loan amount received and pay interest thereon at a rate of 0.1% per annum.
Pursuant to the Supplemental Agreement the interest rate under the Agreement was changed from 0.1% per
annum to 8% per annum starting from 1 January 2006.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is
simultaneously a member of the Board of Directors of OOO Naryanmarneftegaz.
The Supplemental Agreement extends to relations between the parties arising from 1 January 2006.
3
The approximate amount of interest to be accrued on the loan by the end of the effective term of the Agreement
will equal USD 446,788,824.40.
The approximate amount of interest to be accrued on the loan by the end of the effective term of the Agreement
will equal 12,313,500,000 roubles.
OAO “LUKOIL” (Lender)
OOO Naryanmarneftegaz (Borrower)
Supplemental Agreement to Shareholder Loan Agreement No. 0610114 of 3 March 2006 between OAO
“LUKOIL” and OOO Naryanmarneftegaz (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the
amount of 6,356,099,620.30 roubles for a term of 30 years from the date of signing of the Agreement, and the
Borrower undertakes to repay the loan amount received and pay interest thereon at a rate of 0.1% per annum.
Pursuant to the Supplemental Agreement the interest rate under the Agreement was changed from 0.1 % per
annum to 6.8% per annum starting from 1 April 2006.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is
simultaneously a member of the Board of Directors of OOO Naryanmarneftegaz.
The Supplemental Agreement extends to relations between the parties arising from 1 April 2006.
4
The approximate amount of the loan is up to USD 562,409,288.80.
The approximate amount of the loan is up to 15,500,000,000 roubles.
96
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
OAO “LUKOIL” (Lender)
OOO Naryanmarneftegaz (Borrower)
Loan agreement (hereinafter the “Agreement”).
The Lender is providing the Borrower with a special-purpose loan in the amount of up to 15,500,000,000 roubles.
The Borrower undertakes to repay the loan amount received and to pay interest thereon by the dates and
according to the procedure determined by the Agreement.
The loan is provided for a term of 30 years from the date of signing of the Agreement, and may be extended for
another 30 years. Early repayment is possible on agreement with the Lender.
The Borrower will pay the Lender interest at the Applicable interest rate established by the Lender relying on
market interest rates, as determined based on the fixed interest rates on Russian rouble loans offered to companies
by the leading international commercial creditors on the Russian market on similar loans for the relevant term.
The Lender will provide the Borrower with a written notice on the amount of the Applicable interest rate, which
will be used from the date of signing of the Agreement.
The interest rate may be changed by the Lender.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is
simultaneously a member of the Board of Directors of OOO Naryanmarneftegaz.
Any repayment of principal debt, interest or other amounts due and payable under the Agreement shall be made
exclusively using the income and other funds of the Borrower received from operations other than Sole Risk
Operations.
Sole Risk Operations shall be understood to mean all oil and gas operations performed and financed by any party
to the agreement at its own risk and expense.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
5
The approximate amount of the loan is up to USD 544,267,053.70.
The approximate amount of the loan is up to 15,000,000,000 roubles.
OAO “LUKOIL” (Lender)
OOO Naryanmarneftegaz (Borrower)
Loan agreement (hereinafter the “Agreement”).
The Lender is providing the Borrower with a special-purpose loan in the amount of up to 15,000,000,000 roubles.
The Borrower undertakes to repay the loan amount received and to pay interest thereon by the dates and
according to the procedure determined by the Agreement.
The loan is provided for a term of 30 years from the date of signing of the Agreement, and may be extended for
another 30 years. Early repayment is possible on agreement with the Lender.
The Borrower will pay the Lender interest at the Applicable interest rate established by the Lender relying on
market interest rates, as determined based on the fixed interest rates on Russian rouble loans offered to companies
by the leading international commercial creditors on the Russian market on similar loans for the relevant term.
The Lender will provide the Borrower with a written notice on the amount of the Applicable interest rate, which
97
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by the
Annual General Shareholders Meeting
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
will be used from the date of signing of the Agreement.
The interest rate may be changed by the Lender.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is
simultaneously a member of the Board of Directors of OOO Naryanmarneftegaz.
Any repayment of principal debt, interest or other amounts due and payable under the Agreement shall be made
exclusively using the income and other funds of the Borrower received from operations other than Sole Risk
Operations.
Sole Risk Operations shall be understood to mean all oil and gas operations performed and financed by any party
to the agreement at its own risk and expense.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
6
up to USD 20,000 – premium for coverage A; up to USD 2,080,000 – premium for coverage B.
up to 570,000 roubles – premium for coverage A; up to 59,280,000 roubles – premium for coverage B.
OAO Kapital Strakhovanie (Insurer)
OAO “LUKOIL” (Policyholder)
Under coverage A – the President, members of the Board of Directors, members of the Management Committee
of OAO “LUKOIL”, pursuant to the list given in the appendix to the policy, and also any individual who
occupied in the past or occupies in the future the aforementioned positions in OAO “LUKOIL”.
Under coverage B – OAO “LUKOIL”.
Policy (contract) on insuring the liability of directors, officers and corporations.
The Policyholder undertakes to pay the insurance premium by the date established by the contract and to comply
with the terms of the contract, and the Insurer undertakes to pay insurance compensation in accordance with the
contractual terms in the event of the occurrence of an insured event.
Coverage A “Insurance of Directors and Officers” insures the losses of each and every Director and Officer of
OAO “LUKOIL” arising from suits initially filed against these persons during the insurance period (effective
term of the policy) or the discovery period (a period beginning after the end of the insurance period), for any real
or alleged improper actions in their performance of the relevant functions of the Directors and Officers of OAO
“LUKOIL”.
Coverage B “Insurance of Corporate Liability” insures the losses of OAO “LUKOIL” arising from suits on
compensation of losses on securities initially filed against OAO “LUKOIL” and/or suits initially filed against the
Directors and Officers.
7. Grounds for status as an interested party
8. Other material terms of the transaction
Persons performing the functions of the President, members of the Board of Directors and Management
Committee of OAO “LUKOIL” are simultaneously beneficiaries under the transaction.
The policy is effective from 19 July 2006 to 19 July 2007.
The premium under coverage A applies in equal measure to each of the Directors and Officers indicated in the list
98
shown in the appendix to the policy.
The liability limit is at least USD 30,000,000 (total limit for coverage A and B in aggregate, including legal
defence costs).
All settlements are made in roubles at the exchange rate of the Bank of Russia as at the date of payment.
Interested-party transactions of OAO “LUKOIL” approved by the Board of Directors of OAO “LUKOIL” and concluded in 2006
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
1
The approximate value of the transaction is USD 97,697,138.87.
The approximate value of the transaction is 2,800,000,000 roubles.
OAO “LUKOIL” (Lender)
OOO LUKOIL-Volgogradneftepererabotka (Borrower)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
2,800,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure indicated in the Agreement.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The loan will be a revolving loan provided in instalments (tranches) up to a limit of 2,800,000,000 roubles, for a term to 29
December 2006.
The Borrower will pay the Lender interest at a rate to be established on a monthly basis in accordance with the Temporary
marketing policy for determining interest rates on loans between OAO “LUKOIL” and the Russian organisations of the
LUKOIL Group, approved by decision of the Management Committee of OAO “LUKOIL” on 28 November 2005 (minutes
No. 34) for loans “on demand”.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
2
The approximate value of the transaction is USD 220,832,089.65.
The approximate value of the transaction is 6,356,099,620.30 roubles.
OAO “LUKOIL” (Lender)
OOO Naryanmarneftegaz (Borrower)
Shareholder loan agreement (hereinafter the “Agreement”).
99
6. Subject of the transaction
In accordance with the Agreement the Lender will provide a special-purpose loan to the Borrower. The Borrower undertakes to
repay the loan amount received and to pay interest thereon by the dates and according to the procedure determined by the
Agreement.
7. Grounds for status as an interested party
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OOO Naryanmarneftegaz.
The loan is provided for a term of 30 years from the date of signing of the Agreement, and may be extended for another 30
years. Early repayment is possible on agreement with the Lender.
The Borrower will pay interest to the Lender on the loan amount received at 0.1% per annum.
The interest rate may be changed by the Lender.
Any repayment of principal debt, interest or other amounts due and payable under the Agreement shall be made exclusively
using the income and other funds of the Borrower received from operations other than Sole Risk Operations. Sole Risk
Operations shall be understood to mean all oil and gas operations performed and financed by any party to the Agreement at its
own risk and expense.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
3
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
The value of the transaction is USD 144,462.78, including VAT.
The value of the transaction is 4,158,000 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Contract on the supply of oil (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer by rail with crude oil in an amount up to 550
tonnes in the period from 1 January 2006 to 31 January 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The Contract enters into force from the date of its signing and extends to legal relations between the parties arising
from 1 January 2006.
4
The lease payment equals USD 24,785.46 per month, plus VAT of USD 4,461.38.
The lease payment is 713,387.64 roubles per month, plus VAT of 128,409.78 roubles.
OAO “LUKOIL” (Lessor)
OAO Futbolny Klub SPARTAK-MOSKVA [Spartak Moscow Football Club] (Lessee)
Supplemental Agreement to Lease Agreement No. 0411156 of 1 October 2004 on the lease of non-residential premises
(hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides to the Lessee for temporary use non-residential premises with a total area of
100
7. Grounds for status as an interested party
640.5 m2, located on the 3rd floor of the building at the address: Pokrovsky bulvar 3, bldg. 1, Moscow.
In accordance with the Supplemental Agreement of 1 February 2006, the Lessor will additionally provide for the use of the
Lessee non-residential premises with a total floor area of 99 m2, specifically rooms 123 and 124 located in premises No. I on
the third floor of the building at the address: Pokrovsky bulvar 3, building 1, Moscow.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Futbolny Klub SPARTAK-MOSKVA.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Futbolny Klub SPARTAK-MOSKVA.
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Futbolny Klub SPARTAK-MOSKVA.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Futbolny Klub SPARTAK-MOSKVA.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO Futbolny Klub SPARTAK-MOSKVA.
The lease payment for the use of the additional premises equals 95,504.23 roubles per month, plus VAT of 17,190.76 roubles.
From 1 February 2006 the amount of the lease payment for use of all premises leased under the Agreement will equal
713,387.64 roubles per month, plus VAT of 128,409.78 roubles.
5
No financial terms stipulated.
No financial terms stipulated.
OAO “LUKOIL” (Guarantor)
Citibank N.A. (Bank)
SLB Commercial Bank (Principal)
Agreement on corrections.
Introduction of amendments concerning the extension of the effective term of the Corporate guarantee signed on 21 January
2005 between the Guarantor and the Bank from two to three years.
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of SLB Commercial Bank.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the President
of the Board of Directors of SLB Commercial Bank.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
No other material terms stipulated.
6
101
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
The approximate value of the transaction is USD 600,000.
The approximate value of the transaction is 17,084,400 roubles.
OAO “LUKOIL” (Commission Agent)
OAO RITEK (Principal)
Commission contract (hereinafter the “Contract”).
In accordance with the Contract, the Commission Agent undertakes, on the instructions of the Principal and for a fee, to
perform transactions on the export sale of the oil of the Principal produced at the Sredne-Khulymskoe deposit in its own name
but at the expense and in the interests of the Principal.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
Remuneration for the performance of the transaction will be withheld by the Commission Agent in foreign currency on the
receipt from the buyer of payment for the goods, but not before the report is approved by the Principal.
7
The approximate value of the transaction is USD 21,199,690.48.
The approximate value of the transaction is 600,000,000 roubles.
OAO RITEK (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
600,000,000 roubles, and the Borrower undertakes to repay the funds received and pay interest thereon by the dates and
pursuant to the procedure determined by the Agreement.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors, is
simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors, is simultaneously the General Director, a member of the
Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee, is simultaneously a member of the Board of
Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee, is simultaneously a member of the Board of
102
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Directors of OAO RITEK.
The loan is provided with a maturity of 28 December 2007.
The Borrower will pay the Lender interest at a rate to be established on a monthly basis in accordance with the Temporary
marketing policy for determining interest rates on loans between OAO “LUKOIL” and the Russian organisations of the
LUKOIL Group, approved by decision of the Management Committee of OAO “LUKOIL” on 28 November 2005 (minutes
No. 34).
The Agreement will remain in effect until performance by the Parties of their obligations in full.
8
The approximate value of the transaction is USD 9,186,532.54.
The approximate value of the transaction is 260,000,000 roubles.
OAO RITEK (Borrower)
OAO “LUKOIL” (Lender)
Supplemental Agreement to Loan Agreement No. 0210034 of 30 January 2002 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan totalling 260,000,000
roubles, and the Borrower undertakes to repay the funds received and pay interest thereon by the dates and pursuant to the
procedure indicated in the Agreement. Interest rate under the Agreement – 0.1% per annum.
In accordance with the Supplemental Agreement:
- the deadline for repayment of the loan is extended from 31 December 2005 to 28 December 2007;
- from 1 January 2006 interest on the loan amount received will be calculated at a rate to be established in accordance with the
Temporary marketing policy for determining interest rates on loans between OAO “LUKOIL” and the Russian organisations
of the LUKOIL Group, approved by decision of the Management Committee of OAO “LUKOIL” on 28 November 2005
(minutes No. 34);
- the procedure for accruing interest is changed: instead of accruing interest on a quarterly basis, a monthly accrual at the time
of payment is established; payment of interest will be made on a quarterly basis.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors, is
simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors, is simultaneously the General Director, a member of the
Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee, is simultaneously a member of the Board of
Directors of OAO RITEK.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
Vladimir Ivanovich Nekrasov, a member of the Management Committee, is simultaneously a member of the Board of
Directors of OAO RITEK.
The Supplemental Agreement applies to relations between the parties arising from 1 January 2006.
9
103
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
EUR 51,402,900
1,765,175,586 roubles
OAO “LUKOIL” (Guarantor)
ABN AMRO Bank N.V. (ABN AMRO)
LUKOIL Chemical B.V. (Borrower)
Corporate guarantee (hereinafter the “Guarantee”)
Granting of a guarantee by OAO “LUKOIL” to ABN AMRO on the obligations of LUKOIL Chemical B.V. under the loan
agreement worth EUR 51,402,900 concluded between ABN AMRO and the Borrower, in accordance with which the loan was
granted at a rate of EURIBOR + 0.175% per annum for a term of 12 years and 8 months.
The Guarantor unconditionally and irrevocably agrees to pay ABN AMRO any amount or amounts, but not more than the
maximum amount of EUR 51,402,900, at the first written request of ABN AMRO in the currency indicated in the request.
The maximum amount which can be recovered under the Guarantee equals the principal amount of EUR 51,402,900, to which
are added the interest, costs, fees and commissions due to ABN AMRO from the Borrower under the loan agreement,
including the insurance premium of the Export Lending Agency HERMES which equals approximately 9.7%, and any and all
costs and expenses which may be incurred by ABN AMRO when recovering the funds due thereto.
7. Grounds for status as an interested party
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of LUKOIL Chemical B.V.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
No other material terms stipulated.
10
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
EUR 51,402,900
1,765,175,586 roubles
OAO “LUKOIL” (Guarantor)
LUKOIL Chemical B.V. (Debtor)
Indemnification contract (hereinafter the “Contract”).
Pursuant to the Contract, the Debtor will refund cash funds to the Guarantor in connection with the acceptance by the
Guarantor of obligations under the Guarantee of OAO “LUKOIL”, issued in favour of ABN AMRO Bank N.V. (the Creditor),
in order to secure the obligations of the LUKOIL Chemical B.V. under the loan agreement concluded between the Creditor
and the Debtor in the amount of EUR 51,402,900, plus interest, forfeits, penalty interest and fines and other guaranteed
payments.
The Debtor will refund cash funds to the Guarantor in the amount in which the Guarantor executed its obligations under the
Guarantee, with the payment of interest at a rate of three-month LIBOR + 3% for their use.
7. Grounds for status as an interested party
8. Other material terms of the transaction
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of LUKOIL Chemical B.V.
The funds shall be refunded by the Debtor to the Guarantor in a foreign currency (EUR) within 10 (ten) working days after the
104
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
execution in full of obligations under the loan agreement, unless agreed otherwise by the Guarantor and the Creditor.
The Indemnification contract will remain in effect until performance by the parties of their obligations in full.
11
The remaining amount of the loan is USD 10,786,159.74.
The remaining amount of the loan is 303,846,120 roubles.
OAO “LUKOIL” (Lender)
OOO LUKOIL-Volgogradneftepererabotka (Borrower)
Supplemental Agreement to Loan Agreement No. 0410242 of 23 March 2004 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
735,803,120 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
Pursuant to the Supplemental Agreement, the interest rate under the Agreement will change (increase) from 1 January 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
To 31 December 2005 the interest rate was established in the amount of 0.1% per annum, and after 1 January 2006 the interest
on the loan amount will be calculated at a rate to be established in accordance with the Temporary marketing policy for
determining interest rates on loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved
by decision of the Management Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34); the interest rate for
this loan agreement was established in the amount of 8% per annum.
The Borrower will be notified in writing of any changes to interest rates.
To 31 December 2005 interest was accrued on a quarterly basis. From 1 January 2006 – on a monthly basis.
12
The approximate amount of the Agent’s expenses under the contract equals USD 50,384.46, plus VAT of USD 9,069.20.
The approximate amount of the agency fee is USD 75.58, plus VAT of USD 13.60.
The approximate amount of the Agent’s expenses under the contract is 1,419,491.52 roubles, plus VAT of 255,508.48 roubles.
The approximate amount of the agency fee is 2,129.24 roubles, plus VAT of 383.26 roubles.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Agency Contract (hereinafter the “Contract”).
Pursuant to the Contract the Agent undertakes to perform legal and other actions in its own name, but at the request and
expense of the Principal, aimed at assessing the market value of the Principal’s oil products in 2005 broken down by the month
of their shipment.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The Agent’s fee shall be 0.15% of the amount of the Agent’s expenses not including VAT, plus VAT (18%).
The Agent shall be required to provide a report on the performance of the agency assignment within 5 days after the date of
105
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
performance of final payment to the appraiser for the relevant stage of services of the appraiser.
13
The approximate value of the oil to be supplied in March 2006 equals USD 255,562,023.48 (with VAT).
The approximate value of the oil to be supplied in March 2006 equals 7,200,000,000.00 roubles (with VAT).
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil in an amount up to 900,000 (nine
hundred thousand) tonnes in the period from 1 March 2006 to 31 March 2006. The Buyer undertakes to accept and pay for the
oil in accordance with the terms of the Contract.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The value and amount of oil to be supplied will be agreed by the parties in a protocol.
14
The value of the transaction is USD 4,357,500.
The approximate value of the transaction is 122,750,775 roubles.
OAO “LUKOIL” (Buyer)
A.A. Barkov (Seller)
Share purchase contract (hereinafter the “Contract”).
In accordance with the Contract, the Seller undertakes to transfer, and the Buyer undertakes to accept and pay for, the title to
400 ordinary and 181 preferred shares in ZAO LUKOIL-Trans.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a party to
the transaction.
Par value of one ordinary share – 10 roubles.
Par value of one preferred share – 10 roubles.
The Seller shall send the transfer order to the authorised representative of the Buyer within 3 business days after the date when
the Contract is signed.
The Buyer undertakes to pay the Seller the total cost of the Shares within 5 business days after it receives the title to the shares.
15
The approximate value of the transaction is USD 200,000.
The approximate value of the transaction is 5,634,000 roubles.
OAO “LUKOIL” (Commission Agent)
OAO RITEK (Principal)
-
106
5. Name of transaction
6. Subject of the transaction
Commission contract (hereinafter the “Contract”).
Pursuant to the Contract, the Commission Agent undertakes to perform a transaction involving the sale of oil of the Principal
for export to the Republic of Belarus in its own name, but on the instructions, at the expense and in the interests of the
Principal.
7. Grounds for status as an interested party
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, a member of the Management Committee of OAO RITEK.
The shipments of oil will equal around 120,000 tonnes per year.
16
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
The approximate value of the transaction is USD 850,000.
The approximate value of the transaction is 23,944,500 roubles.
OAO “LUKOIL” (Commission Agent)
OAO RITEK (Principal)
Commission contract (hereinafter the “Contract”).
Pursuant to the Contract, the Commission Agent undertakes to perform a transaction involving the sale of oil of the Principal
on the foreign market in its own name, but on the instructions, at the expense and in the interests of the Principal.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, a member of the Management Committee of OAO RITEK.
The shipments of oil will equal around 500,000 tonnes per year.
17
107
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
The approximate value of the transaction is USD 14,159,292.04.
The approximate value of the transaction is 400,000,000 roubles.
OAO RITEK (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
400,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure determined by the Agreement.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, a member of the Management Committee of OAO RITEK.
The loan is provided for a term to 28 December 2007.
The interest rate on the loan is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
18
The approximate value of the transaction is USD 7,079,646.02.
The approximate value of the transaction is 200,000,000 roubles.
OAO RITEK (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
200,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure determined by the Agreement.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
108
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, a member of the Management Committee of OAO RITEK.
The loan is provided for a term to 28 December 2006.
The interest rate on the loan is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
19
The debt equals USD 573,387.15, including VAT of USD 87,465.84.
The debt equals 16,152,315.97 roubles, including VAT of 2,463,912.60 roubles.
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 994-265 of 1 July 1994 (hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement, the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 16,152,315.97 roubles, including VAT of 2,463,912.60 roubles, pursuant to
the schedule attached to the Supplemental Agreement.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
20
The debt equals USD 832,163.79, including VAT of USD 126,940.24.
The debt equals 23,467,019.01 roubles, including VAT of 3,579,714.74 roubles.
109
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 996-644 of 16 October 1996 (hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement, the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 23,467,019.01 roubles, including VAT of 3,579,714.74 roubles, pursuant to
the schedule attached to this Supplemental Agreement.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
21
The debt equals USD 231,676.28, including VAT of USD 41,701.73.
The debt equals 6,533,271.04 roubles, including VAT of 1,175,988.84 roubles.
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 996-642 of 16 October 1996 (hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 6,533,271.04 roubles, including VAT of 1,175,988.84 roubles, pursuant to
the schedule attached to this Supplemental Agreement.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
1. Number of the transaction approved by
the Board of Directors
22
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
The debt equals USD 425,661.03, including VAT of USD 64,931.34.
The debt equals 12,003,641.02 roubles, including VAT of 1,831,063.89 roubles.
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 996-643 of 1 July 1996 (hereinafter the “Agreement”).
4. Names of beneficiaries
5. Name of transaction
110
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 12,003,641.02 roubles, including VAT of 1,831,063.89 roubles, pursuant to
the schedule attached to this Supplemental Agreement.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
23
The debt equals USD 342,648.94, including VAT of USD 52,268.48.
The debt equals 9,662,699.97 roubles, including VAT of 1,473,971.18 roubles.
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 997-1934 of 5 May 1997 (hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 9,662,699.97 roubles, including VAT of 1,473,971.18 roubles, pursuant to
the schedule attached to this Supplemental Agreement.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
24
The debt equals USD 320,966.06, including VAT of USD 48,960.92.
The debt equals 9,051,242.98 roubles, including VAT of 1,380,698.05 roubles.
OAO “LUKOIL” (Lessor)
ZAO LUKoil-Trans (Lessee)
Supplemental Agreement to Agreement No. 998-1077 of 1 April 1998 (hereinafter the “Agreement”).
Pursuant to the Agreement, the Lessor provides the Lessee for a fee with vehicles for temporary use for the transportation of
oil products.
According to the Supplemental Agreement the Lessee undertakes to repay to the Lessor the debt on lease payments that has
formed as at 31 December 2005 in the amount of 9,051,242.98 roubles, including VAT of 1,380,698.05 roubles, pursuant to
the schedule attached to this Supplemental Agreement.
111
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
The Lessee is released from the liability stipulated by the agreement for late payment of the debt on lease payments that had
formed as at 31 December 2005.
25
EUR 35,000,000
1,176,000,000 roubles.
OAO “LUKOIL” (Guarantor)
AO Hansabankas (Bank)
ZAO LUKOIL BALTIYA (Borrower)
Suretyship contract (hereinafter the “Contract”)
Pursuant to the Contract the Guarantor will ensure the performance of the obligations of the Borrower under the Loan
Agreement in an amount of up to EUR 35,000,000 (thirty-five million euro) (in this regard, the amount of simultaneous debt
on loan principal, overdrafts, letters of credit and bank guarantees may not exceed EUR 35,000,000) concluded between the
Borrower and the Bank for a term of 364 days, under which a multicurrency credit line is provided for the use of monetary
funds in the form of a loan and/or overdraft at a rate of EURIBOR/LIBOR/VILIBOR 1М, 3М, 6М, 12М + 0.43% per annum,
and for the receipt of a bank guarantee and/or opening of a letter of credit with the payment of a commission fee to the Bank in
the amount of 0.43% per annum.
The Guarantor shall bear joint and several liability with the Borrower to the Bank for the timely, full and due performance of
all obligations of the Borrower under the Loan Agreement, in particular the repayment of all specified obligations of the
Borrower on the return of the principal amount of debt under the Loan Agreement and the payment of interest for the use of
the Loan, the amounts of commission fees, penalty interest, and reimbursement of expenses and losses incurred under the
Loan Agreement.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL BALTIYA.
1. The Guarantor gives representations and warranties that it has taken all necessary corporate and other actions for the
approval, conclusion and execution of the Agreement, and that the Agreement constitutes a legal, valid and unconditional
obligation of the Guarantor, the execution of which may be enforced in accordance with the conditions thereof.
2. If the Borrower violates any of the Secured Obligations, the Bank shall have the right to file a written claim on execution of
the obligation to the Guarantor. The Guarantor undertakes to pay the Bank the amount indicated in the claim of the Bank
within 10 (ten) business days after the receipt of the claim. The Guarantor shall not have the right to forward the objections
which could be forwarded by the Borrower to the claims of the Bank.
3. The Guarantor shall be liable to the Bank to the same extent as the Borrower, including for the payment of interest,
reimbursement of court costs on recovery of the debt and other losses of the Bank caused by the non-performance or undue
performance by the Borrower of its obligations under the Loan Agreement.
4. The Guarantor shall reimburse the Bank for all documented losses and expenses incurred by the Bank in connection with
the exercise thereby of its rights under the Agreement (including expenses and losses associated with filing of claims against
the Guarantor through court proceedings, expenses on payment of the state duty for the issue of a statement of claim, expenses
on a legal representative (representatives) in full, expenses associated with enforcement of the relevant court orders, including
112
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
expenses related to the performance of the search for the Guarantor during the performance of enforcement procedures, and
other expenses).
26
EUR 35,000,000.
1,176,000,000 roubles.
OAO “LUKOIL” (Guarantor)
ZAO LUKOIL BALTIYA (Debtor)
Indemnity contract (Contract).
According to the Contract, the Debtor shall indemnify the Guarantor in cash for the performance by the Guarantor of
obligations under the Suretyship Contract concluded between OAO “LUKOIL” and AO Hansabankas (Creditor) in order to
secure the obligations of ZAO LUKOIL BALTIYA under the Loan Agreement concluded between the Creditor and the
Debtor in an amount equivalent to up to EUR 35,000,000 plus interest, forfeits, penalty interest, fines and other guaranteed
payments.
The Debtor will refund monetary funds to the Guarantor in the amount in which the Guarantor executed its obligations under
the Suretyship Contract, with the payment of interest for their use at a rate of LIBOR 3M + 3% per annum.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL BALTIYA.
The funds in the amount of the obligations performed shall be indemnified by the Debtor to the Guarantor in a foreign
currency (EUR) within 10 business days after the receipt by the Debtor of a written notice from the Guarantor on the
performance thereby on behalf of the Debtor of the obligations of the latter under the Suretyship Contract.
27
EUR 17,400,000.
584,118,000 roubles.
OAO “LUKOIL” (Guarantor)
ZAO Trading House Mazeikių Nafta (Agent), acting on behalf, at the expense and in the interests of OAO Mazeikių Nafta
(Seller)
ZAO LUKOIL BALTIYA (Buyer)
Guarantee agreement (hereinafter the “Agreement”)
According to the Agreement, the Guarantor guarantees to the Seller the timely execution by the Buyer of its payment
obligations arising from the contracts on the sale of oil products concluded and signed or to be concluded and signed between
the Agent (acting on behalf, at the expense and in the interests of the Seller) and the Buyer during 2006, including obligations
on the payment and execution of other payments.
The liability of the Guarantor is limited to a total amount of EUR 17,400,000, plus all reasonable and documented expenses
associated with the performance of the Guarantee.
113
7. Grounds for status as an interested party
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL BALTIYA.
8. Other material terms of the transaction
1. The parties confirm that none of the terms and obligations of this Guarantee conflict with the laws of the countries in which
they operate. The parties have agreed that all the terms and obligations of this Guarantee are understood, and that their
execution is not limited by any factors.
2. If the Buyer (ZAO LUKOIL BALTIYA) does not fulfil its obligations, the Guarantor shall be required to pay the Seller the
debt of the Buyer within 14 days after the receipt of the first written notice of the Seller on the fact that the Buyer did not
perform its payment obligations.
3. The Guarantee is valid until 31 January 2007, inclusive.
4. The Guarantor shall indemnify the Seller for all reasonable and documented expenses associated with the performance of
the Guarantee (legal expenses, court costs, and administrative expenses on receiving a court order, if necessary).
28
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
EUR 17,400,000.
584,118,000 roubles.
OAO “LUKOIL” (Guarantor)
ZAO LUKOIL BALTIYA (Debtor)
–
Indemnity contract (Contract).
According to the Contract, the Debtor shall indemnify the Guarantor in cash the performance by the Guarantor of obligations
under the Guarantee Agreement concluded between OAO “LUKOIL” and ZAO Trading House Mažeikių Nafta (Agent),
acting on behalf, at the expense and in the interests of OAO Mažeikių Nafta (Seller). The Guarantee Agreement was
concluded to secure the obligations of ZAO LUKOIL BALTIYA under the contracts on the purchase of oil products
concluded or to be concluded during 2006 between the Agent and the Debtor in an amount of up to EUR 17,400,000
(seventeen million four hundred thousand).
The Debtor will indemnify the Guarantor in cash in the amount in which the Guarantor executed its obligations under the
Guarantee Agreement, with the payment of interest for their use at a rate of LIBOR 3M + 3% per annum.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL BALTIYA.
The funds should be repaid by the Debtor in a foreign currency (EUR) within 10 (ten) business days after the receipt by the
Debtor from the Guarantor of a written notice on the performance thereby of its obligations under the Guarantee Agreement,
in the amount of such obligations.
29
The approximate value of the transaction is USD 365,974,282.89.
The approximate value of the transaction is 7,400,000,000 roubles.
114
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
OAO “LUKOIL” (Borrower)
OOO LUKOIL-Volgogradneftepererabotka (Lender)
Supplemental Agreement to Loan Agreement No. 0610016 of 10 January 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 3,000,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, point 1.1 of the Agreement is amended in that part regarding an increase in the
special-purpose loan to be provided to the Borrower by the Lender from 3,000,000,000 roubles to 7,400,000,000 roubles.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The loan amount has been increased by 4,400,000,000 roubles.
30
The approximate value of the transaction is USD 7,973,068.75.
The approximate value of the transaction is 225,000,000 roubles.
OAO “LUKOIL” (Lender)
OOO TsentrKaspneftegaz (Borrower)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
225,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure indicated in the Agreement.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a
member of the Board of Directors of OOO TsentrKaspneftegaz.
The loan is provided for a term to 25 December 2006 at 2 % per annum.
31
The value of the transaction is USD 519,287.83.
The value of the transaction is 10,500,000 roubles.
OAO “LUKOIL” (Depositor)
Non-Profit Organisation LUKOIL-GARANT Non-State Pension Fund (Fund)
Individuals appointed by the Depositor (Participants).
Supplemental Agreement to Decretal Pension Contract No. 994-515 of 14 August 2000 (hereinafter the “Contract”).
Pursuant to the Contract, non-state pension coverage is provided to the individuals designated by the Depositor (Participants)
according to the procedure and on the terms and conditions set forth by the legislation of the Russian Federation on non-state
115
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
pension coverage and the Pension Rules of the Fund.
Under the terms of the Contract, the Depositor undertakes to make pension contributions to the Fund, and the Fund in turn
undertakes to pay a non-state pension to the Participants.
In accordance with the Supplemental Agreement to the Contract, the Depositor undertakes to remit the contribution for the
Participants for the fourth quarter of 2006 to the Fund’s settlement account by 30 March 2006.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Fund Board of NO NPF LUKOIL-GARANT.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously the President and a
member of the Fund Board of NO NPF LUKOIL-GARANT.
The date funds are remitted is the day they are debited from the settlement account of the Depositor.
32
The actual amount owed is USD 4,301,186.93.
The actual amount owed is 86,970,000 roubles.
OAO “LUKOIL” (Lender)
ZAO LUKoil-Trans (Borrower)
Addenda to loan agreement No. 0310307 of 28 March 2003 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
900,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
In accordance with the Supplemental Agreement the interest rate under the Agreement and the procedure for accruing interest
are changed.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of ZAO LUKoil-Trans.
Up to 31 December 2005 the interest rate on the loan equalled 0.1% per annum.
From 1 January 2006 interest is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Borrower will be notified in writing of any changes to interest rates.
Up to 31 December 2005 interest was accrued on a quarterly basis; from 1 January 2006 – on a monthly basis.
116
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
33
USD 3,016,677.18, plus VAT of USD 543,001.89. Total with VAT – USD 3,559,679.08.
60,997,212.64 roubles, plus VAT of 10,979,498.27 roubles. Total with VAT – 71,976,710.91 roubles.
OAO “LUKOIL” (Seller)
OOO TsentrKaspneftegaz (Buyer)
Purchase contract on a package of geophysical information obtained by the Seller when studying the Tsentralny license block
of the Caspian Sea shelf (hereinafter the “Contract”).
The Buyer will obtain from the Seller title to a package of geophysical information obtained by the Seller through its own
efforts as part of geological exploration work on the Tsentralny license block of the Caspian Sea shelf (license ShKS 10841
NP).
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OOO TsentrKaspneftegaz.
The Buyer shall make payment under the Contract not later than 15 (fifteen) days from the date of receipt of the invoice from
the Seller by remitting funds to the Seller’s settlement account.
34
The amount of the agency fee is USD 106.85, plus VAT of USD 19.23. The amount of the Agent’s expenses is USD
12,571.02.
The amount of the agency fee is 3,009 roubles, plus VAT of 541.62 roubles. The amount of the Agent’s expenses is 354,000
roubles.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Contract on the provision of agency services (hereinafter the “Contract”).
Under this Contract the Agent undertakes for a fee to organize and pay for the training through correspondence classes of one
employee of the Principal in the MBA Finance programme at the Financial Academy of the RF Government, in its own name
but at the expense of the Principal.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The amount of remuneration is 0.85% of the amount of the Agent’s expenses, including VAT.
The Contract enters into force from the time of its signing and extends to legal relations between the parties arising from 21
November 2005.
35
No financial terms are stipulated by the Supplemental Agreement.
No financial terms are stipulated by the Supplemental Agreement.
OAO “LUKOIL” (Company)
117
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
International Association of Trade-Union Organisations of OAO “LUKOIL” (Association)
Supplemental Agreement to Contract No. 0310992 of 27 July 2003 on gratuitous use of property (hereinafter the “Contract”).
Pursuant to the Contract the Company will provide property for the gratuitous use of the Association.
According to the Supplemental Agreement, the Company will also provide an on-board computer for the gratuitous use of the
Association. The on-board computer (inventory No. 50816) was installed by the Company in a Mercedes Benz S 500 4M,
license plate No. c010yt97, which is also in the gratuitous use of the Association.
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
The Supplemental Agreement extends to the relations between the parties arising from 1 January 2006.
36
USD 257,234,726.69, including VAT.
7,200,000,000.00 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil in an amount up to 900,000 (nine
hundred thousand) tonnes in the period from 1 April 2006 to 30 April 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
8. Other material terms of the transaction
The value and amount of oil to be supplied will be agreed by the parties in a protocol. The supply of oil by the mainline oil
pipelines of OAO AK Transneft shall be made at the transfer point of the Buyer at the time it passes through the system for
measuring the quantity and quality of the oil. The Contract enters into force from the date of its signing and shall remain in
effect until 30 April 2006, and as regards mutual settlements – until they have been completed in full.
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
37
The approximate value of the transaction is USD 22,960.29, not including VAT.
The approximate value of the transaction is 636,000 roubles, not including VAT.
OAO “LUKOIL” (Company)
ZAO RITEKtrading (Enterprise)
118
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Service contract (hereinafter the “Contract”).
In accordance with the Contract, the Company undertakes to provide information and consulting services to the Enterprise on
issues of the placement of oil and determination of oil prices.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, Chairman of the Board of Directors of ZAO RITEKtrading.
The cost of services will be agreed on by the 25th of each month preceding the reporting period, in a Protocol, which shall be
an integral part of the Contract.
The Contract enters into force from the time of its signing and will remain in force until 31 March 2007, and as regards mutual
settlements – until they have been completed in full.
38
USD 116,379,310.34, including VAT.
3,240,000,000 roubles, including VAT.
OAO “LUKOIL” (Buyer)
ZAO RITEKtrading (Supplier)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil during the period 1 April 2006 to
31 December 2006 in the amount of up to 60,000 tonnes per month.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, Chairman of the Board of Directors of ZAO RITEKtrading.
Oil will be delivered by rail on terms of delivery to the destination rail station.
The price, volume and destination of the delivery will be agreed in monthly Protocols, which shall be an integral part of the
Contract.
The Contract enters into force from the time of its signing and will remain in force until 31 December 2006, and as regards
mutual settlements – until they have been completed in full.
39
USD 114,942.53
3,200,000 roubles
OAO “LUKOIL” (Company)
Russian Public Organisation Russian Union of Industrialists and Entrepreneurs (Employers) (Union)
Contract of donation (hereinafter the “Contract”).
In accordance with the Contract the Company will provide the Union with charitable assistance in the form of donations of
funds in the amount specified in the Contract. The Union undertakes to use the funds received for the performance of charter
activities in 2006.
Alexander Nikolaevich Shokhin, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously the President of
the Russian Public Organisation Russian Union of Industrialists and Entrepreneurs (Employers).
119
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
The date funds are remitted is the day they are debited from the settlement account of the Company.
40
The approximate value of the transaction is USD 14,440,433.21.
The approximate value of the transaction is 400,000,000 roubles.
OAO RITEK (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 400,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
The loan is provided for a term to 29 December 2006.
The interest rate on the loan is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Borrower will be notified in writing of any changes to interest rates.
41
The approximate value of the transaction is USD 32,745.10.
The approximate value of the transaction is 906,712 roubles.
OAO “LUKOIL”
OAO Tatneft im. V.D. Shashina
Contract on the transfer of volumes from the oil transport schedule for export outside the customs territory of the Russian
120
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Federation (hereinafter the “Contract”).
In accordance with the Contract, OAO Tatneft im. V.D. Shashina undertakes to transfer and OAO “LUKOIL” to accept
volumes from the oil transport schedule in the 1st quarter of 2006.
– 19,400 tonnes of oil to Poland;
– 3,200 tonnes of oil to Novorossiysk.
Ravil Ulfatovich Maganov, a member of the Board of Directors and Management Committee of OAO “LUKOIL”, is the
brother of Nail Ulfatovich Maganov, a member of the Board of Directors and Management Committee of OAO Tatneft im.
V.D. Shashina
For the transfer of volumes from the transfer schedule, OAO “LUKOIL” undertakes to pay OAO Tatneft im. V.D. Shashina
34.00 roubles, plus VAT of 6.12 roubles, for each tonne of oil.
This Contract comes into effect from the time of its signing, extends to the relations between the Parties arising from 14 March
2006, and will remain in effect until the Parties have fulfilled their obligations in full.
42
USD 261,532,873.23, including VAT.
7,200,000,000 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil in an amount up to 900,000 (nine
hundred thousand) tonnes in the period from 1 May 2006 to 31 May 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The value and amount of oil to be supplied will be agreed by the parties in a protocol. The supply of oil by the mainline oil
pipelines of OAO AK Transneft shall be made at transfer point No. 400 of the Buyer at the time it passes through the system
for measuring the quantity and quality of the oil.
43
OAO Bank Petrocommerce (Bank)
OAO “LUKOIL” (Client)
Contract on the organisation of secure electronic document flow using the Bank-Client system (hereinafter the “Contract”).
In accordance with the Contract, the Parties have established amongst themselves the procedure and conditions for connecting
to the Bank-Client Remote Banking Service System (hereinafter the “System”), the procedure for maintenance of the System,
and the procedure and conditions for exchange of electronic documents using the System for finalising currency control
documents according to the regulatory acts of the Bank of Russia.
121
7. Grounds for status as an interested party
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Bank Petrocommerce.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Bank Petrocommerce.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
Connection of the Client to the System and the monthly servicing of the System shall be free of charge.
44
No financial terms are stipulated by the Supplemental Agreement.
No financial terms are stipulated by the Supplemental Agreement.
OAO “LUKOIL” (Company)
International Association of Trade-Union Organisations of OAO “LUKOIL” (Association)
Supplemental Agreement to Contract No. 0310992 of 27 July 2003 on gratuitous use of property (hereinafter the “Contract”).
Pursuant to the Contract the Company will provide property for the gratuitous use of the Association.
According to the Supplemental Agreement, the Company will also provide office equipment for the gratuitous use of the
Association (monitors, printers, portable computers).
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
The property is to be transferred under an act of acceptance within three days after the date of signing of the Supplemental
Agreement.
45
The approximate value of the transaction is USD 35,078,252.
The value of the transaction is 962,000,000 roubles.
OAO “LUKOIL” (Buyer)
122
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
LUKOIL INTERNATIONAL GmbH (Seller)
Contract on the purchase of a share in the charter capital of Limited-Liability Company LUKOIL-Neva (hereinafter the
“Contract”).
Pursuant to the Contract, the Seller is selling and the Buyer accepts a 100% (one hundred per cent) shareholding in the charter
capital of Limited-Liability Company LUKOIL-Neva (hereinafter the “Shareholding”).
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Managing Director of LUKOIL INTERNATIONAL GmbH.
Par value of the Shareholding – 17,900 roubles.
The Buyer shall pay for the Shareholding in EUR at the exchange rate of the Bank of Russia on the date of payment, within 20
business days after the onset of the later of the following events:
- the signing of the Contract;
- receipt by the Buyer of the agreement of the Federal Antimonopoly Service to the purchase of the Shareholding.
The Buyer undertakes to notify OOO LUKOIL-Neva on the completion of the transaction within 10 business days after the
date of payment for the Shareholding.
46
The approximate value of the transaction is USD 36,710,719.53.
The approximate value of the transaction is 1,000,000,000 roubles.
OAO “LUKOIL” (Lender)
ZAO LUKOIL-Neftekhim (Borrower)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments), the total amount of debt on which may not exceed 1,000,000,000 roubles at any time during the
effective term of the Agreement, and the Borrower undertakes to repay the funds received and to pay interest thereon by the
dates and pursuant to the procedure indicated in the Agreement.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Supervisory Board of ZAO LUKOIL-Neftekhim.
The loan is provided on a revolving basis with a term to 29 December 2006 inclusive.
If the loan is not repaid on time, the Lender has the right to collect a forfeit from the Borrower in the amount of 0.3% of the
amount of the Borrower’s outstanding debt for each day of delay.
The interest rate on the loan is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
123
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
47
USD 281,664,212.08, including VAT.
7,650,000,000 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil in an amount up to 900,000 (nine
hundred thousand) tonnes in the period from 1 June 2006 to 31 June 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The value and amount of oil to be supplied will be agreed by the parties in a protocol. The supply of oil by the mainline oil
pipelines of OAO AK Transneft shall be made at transfer point No. 400 of the Buyer at the time it passes through the system
for measuring the quantity and quality of the oil.
48
The approximate value of the transaction is USD 850,000.
The approximate value of the transaction is 23,018,000 roubles.
OAO “LUKOIL” (Commission Agent)
OAO RITEK (Principal)
Commission contract (hereinafter the “Contract”).
Pursuant to the Contract, the Commission Agent undertakes to perform a transaction involving the sale of oil of the Principal
on the foreign market in its own name, but on the instructions, at the expense and in the interests of the Principal.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
The shipments of oil will equal around 400,000 tonnes per year.
124
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
49
The value of the transaction is USD 388,601.04.
The value of the transaction is 10,500,000 roubles.
OAO “LUKOIL” (Depositor)
Non-Profit Organisation LUKOIL-GARANT Non-State Pension Fund (Fund)
Individuals appointed by the Depositor (Participants).
Supplemental Agreement to Decretal Pension Contract No. 994-515 of 14 August 2000 (hereinafter the “Contract”).
Pursuant to the Contract, non-state pension coverage is provided to the individuals designated by the Depositor (Participants)
according to the procedure and on the terms and conditions set forth by the legislation of the Russian Federation on non-state
pension coverage and the Pension Rules of the Fund.
Under the terms of the Contract, the Depositor undertakes to make pension contributions to the Fund, and the Fund in turn
undertakes to pay a non-state pension to the Participants.
Pursuant to the Supplemental Agreement, the Depositor undertakes to transfer the amount of the contribution for the
Participants for the 2nd quarter of 2006 in the amount of 10,500,000 roubles, including the pension contribution in the amount
of 10,000,000 roubles and a special-purpose contribution to support the charter activity of the Fund in the amount of 500,000
roubles, to the settlement account of the Fund by 30 June 2006.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Fund Board of NO NPF LUKOIL-GARANT.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously the President and a
member of the Fund Board of NO NPF LUKOIL-GARANT.
No other material terms stipulated.
50
USD 8,142.44, including VAT.
220,660 roubles, including VAT.
OAO “LUKOIL”
OAO RITEK
Contract on the transfer of volumes from the export oil shipment schedule in the 2nd quarter of 2006 (hereinafter the
“Contract”).
According to the Contract, OAO RITEK undertakes to transfer and OAO “LUKOIL” to accept a volume from the export oil
shipment schedule in the 2nd quarter of 2006 in the amount of 5,500 tonnes of oil to be sent to the Yuzhny port, established in
accordance with Access of oil production companies to the system of oil mainlines and the terminals of sea ports for
transportation of oil outside the customs territory of the Russian Federation in the 2nd quarter of 2006, approved by the
Ministry of Industry and Energy of the Russian Federation.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is simultaneously the Chairman of the Board of Directors of OAO RITEK.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
125
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OAO RITEK.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO RITEK.
A protocol on transfer of volumes from the export oil shipment schedule shall serve as confirmation of the transfer of volumes
from the schedule from OAO RITEK to OAO “LUKOIL”. The Protocol shall be drafted by the 5th of the month following the
reporting month. The date of transfer of volumes from the schedule shall be the date of signing of the Protocol.
51
No financial terms stipulated
No financial terms stipulated
OAO Bank Petrocommerce (Bank)
OAO “LUKOIL” (Company)
Group Corporate Dealing Agreement (hereinafter the “Agreement”).
Pursuant to the Agreement the Company and the Bank have come to an understanding on the uniform terms for performing the
Transactions concluded between the Bank and Company subsidiaries that have concluded Corporate Dealing Agreements with
the Bank on the form set forth in appendix No. 1 to the Agreement.
The actual actions in execution of the Corporate Dealing Agreements concluded between the Bank and Company subsidiaries
shall be performed by the Company on behalf and on the instructions of these subsidiaries.
A Transaction concluded between the Bank and a Company subsidiary shall be understood to mean an agreement on the
purchase/sale of foreign currency for Russian roubles on previously agreed terms, documented according to the procedure
stipulated by the concluded Corporate Dealing Agreements (on the form set forth in appendix No. 1 to the Agreement).
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Bank Petrocommerce.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Bank Petrocommerce.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
52
No more than USD 111,690,245.72.
No more than 3,000,000,000 roubles.
OAO Bank Petrocommerce (Bank)
OAO “LUKOIL” (Client)
-
126
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
Bank deposit contract with special conditions (hereinafter the “Contract”).
Pursuant to the Contract, the Client places cash in the amount set forth in the Contract and the Bank accepts and deposits it on
a deposit account and undertakes to return all or part of the deposit and to pay interest on it according to the procedure and on
the terms stipulated by the Contract.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Bank Petrocommerce.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Bank Petrocommerce.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
The Bank accrues interest on the Deposit at the rate of 0.5% per annum.
The amount of cash placed in the Deposit cannot exceed 3,000,000,000 roubles.
The minimum cash balance in the Deposit at the start of each banking day throughout the entire effective term of the Contract
is 5,000,000 roubles.
Placement of cash in the deposit for a term of 90 days with automatic extension of the term.
53
USD 436.55, including VAT.
11,800 roubles, including VAT.
OOO TsentrKaspneftegaz (“Client Organisation”)
OAO “LUKOIL” (“Base Company”)
Service contract on protection of a state secret (hereinafter the “Contract”).
Under the Contract the Base Company undertakes to provide the Client Organisation with services to protect a state secret, and
the Client Organisation undertakes to accept and pay for these services.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OOO TsentrKaspneftegaz.
The effective term of the Contract is limited by the effective term of the license to provide services to protect a state
secret. The Base Company’s obligations to provided services to protect a state secret arise from the time when it
receives the relevant license.
54
USD 2,000
54,000 roubles.
OAO “LUKOIL” (Licensor)
Non-Profit Organisation LUKOIL-GARANT Non-State Pension Fund (Licensee)
Licensing agreement on the provision of a non-exclusive license to use the trademarks of OAO “LUKOIL” (hereinafter the
127
6. Subject of the transaction
7. Grounds for status as an interested party
“Agreement”).
The Licensor is providing the Licensee a non-exclusive license to use on the territory of the Russian Federation trademarks
belonging thereto pursuant to certificates No. 141745, 141746, 141747 and 141748 with a priority date of 20 July 1995, and
pursuant to certificate No. 164551 with a priority date of 6 February 1998, issued by the Patents and Trademarks Committee
of the Russian Federation (Rospatent), for a fee and for the effective term of the Agreement.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Fund Board of NO NPF LUKOIL-GARANT.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously the President and a
member of the Fund Board of NO NPF LUKOIL-GARANT.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
The Licensee only has the right to use the trademark
in combination with the trademarks “LUKOIL”, “LUK IL”,
“ЛУКОЙЛ” or “ЛУК ЙЛ”.
In this regard, a combination of two trademarks is recognised as a composition in which all trademarks are distinctly
recognisable and are located close to one another on each object.
The contract extends to relations between the parties arising from 11 May 2006.
55
No financial terms stipulated (gratuitous contract).
No financial terms stipulated (gratuitous contract).
Open Joint Stock Company “Oil company “LUKOIL” (Company)
International Association of Trade-Union Organisations of Open Joint Stock Company “Oil company “LUKOIL” (Enterprise)
Supplemental Agreement to Contract No. 0310992 of 27 July 2003 on gratuitous use of property (hereinafter the “Contract”).
Pursuant to the Contract, the Company will provide property for the gratuitous use of the Association.
In accordance with the Supplemental Agreement the Enterprise will return the following property to the Company:
Volkswagen Caravelle, license plate number Х036СН99, 2001 model year, identification number WV2ZZZ70Z2H022072,
engine number AET 032046 (inventory number 15144); Pioneer stereo (inventory number 15783); Alligator remote central
locking alarm system (inventory number 15784), and the Company will transfer the following property to the Enterprise for
use free of charge: Volkswagen Caravelle, license plate number Т039ЕК177, 2006 model year, identification number
WVZZZ7H26X023428, engine number AXA004447 (inventory number 50890) Pioneer stereo (inventory number 51637).
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
8. Other material terms of the transaction
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
The book value of the additional property transferred for use free of charge equals 1,240,922.92 roubles.
128
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
56
OAO “LUKOIL” (Guarantor)
HSBC Bank plc. (Bank)
SLB Commercial Bank (Principal)
Supplemental Agreement to Suretyship Contract No. 0510811 of 29 July 2005 (hereinafter the “Contract”).
In accordance with the Contract, the Guarantor undertakes to secure the performance of the obligations of the Principal under
the Agreement on the provision of a revolving credit line between the Principal and the Bank in an amount of up to USD
20,000,000.
In accordance with the Supplemental Agreement, the effective term of the Contract is extended to 3 February 2008 in
connection with the extension of the Agreement on the provision of a revolving credit line (hereinafter also the “Agreement”)
between the Principal and the Bank to 3 August 2007 inclusive.
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of SLB Commercial Bank.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the President
of the Board of Directors of SLB Commercial Bank.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
The Guarantor agrees to the terms of the Supplemental Agreement to the Agreement on the provision of a revolving credit line
between the Principal and the Bank concerning the extension of the Agreement to 3 August 2007, and also to the reduction in
the margin under the Agreement from 1% per annum to 0.5% per annum for the period from 4 August 2006 to 3 August 2007.
The other terms of the Suretyship Contract remain unchanged.
57
USD 140,044,543.43, including VAT.
3,772,800,000 roubles, including VAT.
OAO “LUKOIL” (Supplier)
OOO LUKOIL-Volgogradneftepererabotka (Buyer)
Oil supply contract (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer by rail with crude oil in an amount up to 80,000
(eighty thousand) tonnes in the period from 1 July 2006 to 31 December 2006.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The value and amount of oil to be supplied will be agreed by the parties in a protocol. Oil deliveries under the Contract shall
be made by the Supplier on terms of delivery to the destination station (Tatianka Privolzhskoi rail station). The oil forwarder
129
shall be OAO RITEK.
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
58
USD 350,148.37
9,440,000 roubles
OAO “LUKOIL” (Sponsor)
ZAO Mosizdatinvest (Sponsored Party)
Sponsorship agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Sponsor provides funds to the Sponsored Party to conduct the IV International Oil
Forum “Oil of Russia: The Present and the Future”, which will be held in Moscow (President Hotel) on 16–17 November
2006.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of ZAO Mosizdatinvest.
59
The amount of the agency fee is USD 89.78, including VAT. The amount of the Agent’s expenses is USD 59,851.30,
including VAT.
The amount of the agency fee is 2,415 roubles, including VAT. The amount of the Agent’s expenses is 1,610,000 roubles,
including VAT.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Agency agreement (hereinafter the “Agreement”).
Pursuant to the Agreement, the Agent undertakes to perform for a fee legal and other actions in its own name, but at the
request and expense of the Principal, aimed at assessing the market value of the Principal’s oil products in 2006 broken down
by the month of their shipment.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The amount of the agency fee under the Agreement equals 0.15% of the amount of the Agent’s expenses (without VAT), plus
VAT (18%).
The amount of the Agent’s expenses on the performance of the assignment of the Principal and remuneration shall be paid
within 7 (seven) days after the date of issue to the Principal of invoices and VAT invoices on reimbursement of the Agent’s
expenses and payment of remuneration based on the report of the Agent approved by the Principal.
60
USD 80,991,812.43, including VAT.
2,176,250,000 roubles, including VAT
130
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
OAO “LUKOIL” (Buyer)
OAO Tatneft im. V.D. Shashina (Supplier)
Oil supply contract (hereinafter the “Contract”).
The Supplier will ship the Buyer crude oil in the amount of up to 50,000 tonnes a month during the period from 1 August
2006 to 31 December 2006, including 31,685 tonnes in August 2006. The Supplier shall ship and the Buyer shall accept oil at
the time of its transit through the quantity and quality measurement system (hereinafter the QQMS) of the oil metering stations
of OAO LUKOIL-Nizhegorodnefteorgsintez when oil is received from the system of OAO AK Transneft.
Ravil Ulfatovich Maganov, a member of the Board of Directors and Management Committee of OAO “LUKOIL”, is the
brother of Nail Ulfatovich Maganov, a member of the Board of Directors and Management Committee of OAO Tatneft im.
V.D. Shashina
The price of oil (including the cost of transportation), volume and destination of delivery, as well as the point of origin
(QQMS) will be agreed by the parties on a monthly basis not later than the 25th of the month preceding the reporting month,
and shall be registered in a corresponding Protocol, which shall be an integral part of the Contract. In August 2006 the price of
1 tonne of oil equals 7,381.50 roubles, plus VAT of 1,328.67 roubles, for a total with VAT of 8,710.17 roubles. The Contract
shall enter into force from the date of its signing, and shall extend to the legal relations of the parties arising from 1 August
2006, and shall remain in effect until 31 December 2006, and as regards mutual settlements – until their performance in full.
61
The value of the transaction is USD 3,745.98, plus VAT of USD 674.28.
The value of the transaction is 100,280 roubles, plus VAT of 18,050.40 roubles.
OAO “LUKOIL” (Seller)
Independent non-profit organisation LUKOIL Athletic Club (Buyer)
Property purchase contract (hereinafter the “Contract”).
In accordance with the Contract the Seller shall sell and the Buyer shall buy assets (furniture) pursuant to the Appendix to the
Contract.
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Supervisory Board of the Independent non-profit organisation LUKOIL Athletic Club.
The Buyer shall pay for the assets within 5 business days after the issue of an invoice by the Seller.
62
The approximate value of the transaction is USD 294,446,515.09.
The approximate value of the transaction is 7,900,000,000 roubles.
OAO “LUKOIL” (Borrower)
OOO LUKOIL-Volgogradneftepererabotka (Lender)
Supplemental Agreement to Loan Agreement No. 0610016 of 10 January 2006 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
131
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 7,400,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, point 1.1 of the Agreement is amended in that part regarding an increase in the
special-purpose loan to be provided to the Borrower by the Lender from 7,400,000,000 roubles to 7,900,000,000 roubles.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The loan amount has been increased by 500,000,000 roubles.
63
The approximate value of the transaction is USD 3,140,186.92.
The approximate value of the transaction is 84,000,000 roubles.
OAO “LUKOIL” (Lender)
OAO RITEK (Guarantor)
OAO RITEK-ITTs (Borrower)
Suretyship contract (hereinafter the “Contract”).
In accordance with the Contract, the Guarantor undertakes to be jointly and severally liable with the Borrower to the Lender
under the loan agreement concluded between the Lender and the Borrower, in the amount of the principal debt (84,000,000
roubles), interest on the loan, arrears on the principal debt, and penalties.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
Amount of the loan – up to 84,000,000 roubles; term of the loan – to 30 September 2009.
The interest rate on the loan is determined pursuant to the Temporary marketing policy for determining interest rates on loans
between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management
Committee of OAO “LUKOIL” on 28 November 2005 (minutes No. 34), as amended by decision of the Management
Committee of OAO “LUKOIL” on 26 December 2005 (minutes No. 38), based on information on indicative interest rates
received on a monthly basis from one or more respected banks, with account taken of their adjustment depending on the state
of liquidity of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of
the loan.
The Contract will remain in effect until performance by the Parties of their obligations in full.
64
The approximate value of the transaction is USD 37,728,971.96.
The approximate value of the transaction is 1,009,250,000 roubles.
132
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
OAO “LUKOIL” (Lender)
ZAO LUKOIL-Neftekhim (Borrower)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide a special-purpose loan to the Borrower. The Borrower undertakes
to repay the loan amount received and to pay interest thereon by the dates and pursuant to the procedure determined by the
Agreement.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL-Neftekhim.
The loan is provided either in a lump sum or in instalments to a limit of 1,009,250,000 roubles, for a term to 31 July 2009.
The Borrower will pay the Lender interest at a rate of 6.4% per annum throughout the term of the actual use of borrowed funds
under the Agreement.
The Agreement will remain in effect until performance by the Parties of their obligations in full.
65
No financial terms stipulated by the Supplemental Agreement (gratuitous contract).
No financial terms stipulated by the Supplemental Agreement (gratuitous contract).
Open Joint Stock Company “Oil сompany “LUKOIL” (Company)
International Association of Trade-Union Organisations of Open Joint Stock Company “Oil сompany “LUKOIL” (Enterprise)
Supplemental Agreement to Contract No. 0310992 of 27 July 2003 on gratuitous use of property (hereinafter the “Contract”).
Pursuant to the Contract, the Company will provide property for the gratuitous use of the Association.
In accordance with the Supplemental Agreement the Enterprise will return the following property to the Company: an Audi
A6 automobile, license plate number А099XC99, 2002 model year, identification No. WAUZZZ4BX2N128049, engine
number BDV034280 (inventory number 24179), and the Company will transfer to the Enterprise the following assets for
gratuitous use: a Mercedes-Benz E280 4M automobile, license plate number А644МС177, 2006 model year, identification
number WDB21110921X206289, engine number 27294430336462 (inventory number 52471).
Sergei Petrovich Kukura, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of the
Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
8. Other material terms of the transaction
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of the International Association of Trade-Union Organisations of OAO “LUKOIL”.
The book value of the property to be transferred for use free of charge equals 1,759,188.77 roubles.
133
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
66
USD 41,044,776.10
1,100,000,000 roubles.
OAO NGD (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
1,100,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
Valery Isaakovich Grayfer, Chairman of the Board of Directors, is simultaneously the General Director of OAO NGD
The loan is provided for a term to 30 September 2007, with an early repayment option.
The Borrower will pay the Lender interest at a rate determined based on information on indicative interest rates received from
one or more reputable banks, with account taken of their adjustment depending on the state of the liquidity of the organisations
of the LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 14), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
If the loan is not repaid on time, the Lender has the right to collect a forfeit from the Borrower in the amount of 0.3% of the
amount of the Borrower’s outstanding debt for each day of delay.
67
USD 185,528,756.96
5,000,000,000 roubles.
OAO “LUKOIL” (Lender)
ZAO LUKOIL-Neftekhim (Borrower)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
5,000,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
134
the Supervisory Board of ZAO LUKOIL-Neftekhim.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
The revolving loan is provided with a term to 30 September 2007, with an early repayment option.
The Borrower will pay the Lender interest at a rate to be determined based on information on indicative interest rates received
from one or more reputable banks, with account taken of their adjustment depending on the state of the liquidity of the
organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan in
accordance with the Temporary marketing policy for determining interest rates on loans between OAO “LUKOIL” and the
Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of OAO “LUKOIL” of 28
November 2005 (minutes No. 14), as amended by decision of the Management Committee of OAO “LUKOIL” of 26
December 2005 (minutes No. 38).
If the loan is not repaid on time, the Lender has the right to collect a forfeit from the Borrower in the amount of 0.3% of the
amount of the Borrower’s outstanding debt for each day of delay.
68
USD 1,151,674.40
30,900,000 roubles.
Non-profit organisation Non-State Pension Fund LUKOIL-GARANT (Fund)
OAO “LUKOIL” (Depositor)
Individuals designated by the Depositor (Participants)
Supplemental Agreement to Decretal Pension Contract No. 994-515 of 14 August 2000 (hereinafter the “Contract”).
Pursuant to the Contract, non-state pension coverage is provided to the individuals designated by the Depositor (Participants)
according to the procedure and on the terms and conditions set forth by the legislation of the Russian Federation on non-state
pension coverage and the Pension Rules of the Fund.
Under the terms of the Contract, the Depositor undertakes to make pension contributions to the Fund, and the Fund in turn
undertakes to pay a non-state pension to the Participants.
In accordance with the Supplemental Agreement to the Contract, the Depositor undertakes to remit the contribution for the
Participants for the fourth quarter of 2006 to the Fund’s settlement account.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Fund Board of NO NPF LUKOIL-GARANT.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously the President and
Chairman of the Fund Board of NO NPF LUKOIL-GARANT.
The date funds are remitted is the day they are debited from the settlement account of the Depositor.
69
USD 1,596.20, including VAT.
42,826.27 roubles, including VAT.
OAO “LUKOIL” (Seller)
Non-profit organisation LUKOIL Charitable Fund (Buyer)
135
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Property purchase contract (hereinafter the “Contract”).
The subject of the Contract is the purchase of title by the Buyer from the Seller to the moveable assets (hereinafter the
“Property”) indicated in Appendix No. 1 to the Contract (furniture).
The Buyer undertakes to accept the Property from the Seller pursuant to an Act of acceptance, and to pay for the Property
within five business days after the issue of the invoice by the Seller. The date of payment is the date when the funds are
received on the Seller’s settlement account.
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Fund Board.
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Fund Board.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is the brother of Nelli Yusufovna Alekperova, a member of the Fund Board.
The title to the Property shall be transferred to the Buyer at the time when the Act of acceptance is signed.
70
No financial terms stipulated.
No financial terms stipulated.
OAO “LUKOIL” (Commission Agent)
OAO Naryanmarneftegaz (Principal)
Addendum to Commission Contract No. 0511305 of 15 December 2005 (hereinafter the “Contract”).
In accordance with the Contract, the Commission Agent undertakes to perform a transaction involving the sale of oil on the
foreign market in its own name, but on the instructions and at the expense of the Principal on terms of FOB Varandei and/or
Murmansk and/or CIF port indicated by the Buyer.
In accordance with the Supplemental Agreement:
1. The effective term of the Contract is extended from 31 December 2006 to 31 March 2008 (point 13.1 of the Contract).
2. Sub-points 6.2.1 and 6.2.2, stipulating the clarification of the time when risks of accidental damage or destruction of goods
are transferred, have been added to point 6.2 of the Contract.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Board of Directors of OOO Naryanmarneftegaz.
No other material terms stipulated.
71
The total lease payment under the Agreement equals USD 778.80 per month, including VAT.
The total lease payment under the Agreement equals 20,831.67 roubles per month, including VAT.
OAO “LUKOIL” (Lessor)
Non-profit organisation LUKOIL Charitable Fund (Lessee)
136
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Lease Agreement on non-residential premises (hereinafter the “Agreement”).
The Lessor leases for the temporary use of the Lessee non-residential premises with a total area of 16.2 m2, namely rooms No.
21 and 22, located (according to the passport of the Bureau of Technical Inventory) in Premises No. I on the 4th floor of the
building at the address: Sretensky bulvar 11, Moscow.
Title to the building belongs to the Lessor (Certificate on state registration of title 77 AG 837049, issued by the Main
Department of the Federal Registration Service for Moscow on 5 October 2006).
The leased premises will be used by the Lessee as an office.
7. Grounds for status as an interested party
Anatoly Alexandrovich Barkov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member
of the Fund Board.
Anatoly Alexeevich Moskalenko, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Fund Board.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and a member of the Board of Directors of
OAO “LUKOIL”, is the brother of Nelli Yusufovna Alekperova, a member of the Fund Board.
The term of the lease is 11 months from the date of the signing of the act of transfer of the premises.
The Lessor undertakes to transfer the Premises to the Lessee pursuant to an act of transfer in a condition suitable for use for
the purposes indicated in the Agreement, no later than three business days after the signing of the Agreement.
72
OAO “LUKOIL” (Lender)
OAO RITEK (Guarantor)
OAO RITEK-ITTs (Borrower)
Supplemental Agreement to Suretyship Contract No. 0610826 of 20 September 2006 (hereinafter the “Contract”).
In accordance with the Contract, the Guarantor undertakes to be jointly and severally liable with the Borrower to the Lender
under the loan agreement concluded between the Lender and the Borrower, in the amount of the principal debt (84,000,000
roubles), interest on the loan, arrears on the principal debt, and penalties.
In accordance with the Supplemental Agreement, amendments are made to point 1.2 of article 1 “Subject of the contract”
regarding a change in the procedure for determining the interest rate under the loan agreement concluded between the Debtor
and the Lender: the interest is determined based on information on indicative interest rates received from one or more
reputable banks, with account taken of their adjustment depending on the state of the liquidity of the organisations of the
LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 14), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
137
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
The other terms of the Agreement remain unchanged.
73
OAO “LUKOIL” (Lender)
OAO RITEK (Borrower)
Supplemental Agreement to Loan Agreement No. 0610108 of 2 March 2006 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
400,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure indicated in the Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 14), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
138
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
The other terms of the Agreement remain unchanged.
74
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
OAO “LUKOIL” (Lender)
OAO RITEK (Borrower)
Supplemental Agreement to Loan Agreement No. 0210034 of 30 January 2002 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
260,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure indicated in the Agreement.
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 14), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
The other terms of the Agreement remain unchanged.
75
EUR 140,861,920.11
4,800,574,237.35 roubles
OAO “LUKOIL” (Guarantor)
BNP PARIBAS S.A. (Bank)
LUKOIL Chemical B.V. (Borrower)
Corporate guarantee agreement (hereinafter the “Agreement”)
139
6. Subject of the transaction
Securing by the Guarantor of the performance of the Borrower under the following concluded between the Bank and the
Borrower:
1. The loan agreement secured by EULER HERMES Kreditversicherungs-AG export credit agency worth a total of up to
EUR 84,016,920.11, to finance 85% of the value of the Contract with UHDE GmbH, Dortmund (EUR 78,455,000) and 100%
of the corresponding premium to HERMES (EUR 5,561,920.11) (hereinafter “Agreement 1”);
2. The commercial loan agreement worth up to EUR 13,845,000.00, to finance 15% of the first instalment under the Contract
with UHDE (hereinafter “Agreement 2”);
3. The commercial loan agreement worth up to EUR 43,000,000.00, to finance up to 100% of the total cost of local contracts
(hereinafter “Agreement 3”).
7. Grounds for status as an interested party
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of LUKOIL Chemical B.V.
The Guarantor undertakes, at the request of the Bank, to immediately pay, within 5 business days, all amounts that were not
paid by the Borrower under its obligations at the request of the Bank, specifically:
- on the repayment of loans in an amount of up to EUR 140,861,920.11;
- on the payment of interest for use of the loans:
on Agreement 1 – six-month EURIBOR +0.15%;
on Agreements 2, 3 – six-month EURIBOR +0.55%;
– on the payment of a fee for overdue payments;
- on the payment of interest for use of the loans:
on Agreement 1 – 0.20%;
on Agreement 2 and 3 – 0.30%;
- on payment of a commission on the obligation to provide loans (payment for reserving of funds) under Agreement 1 – 0.10%
per annum, under Agreement 3 – 0.20%.
- on other payment obligations of the Borrower under Agreements 1, 2 and 3, including any expenses associated with
enforcement of the indicated Agreements, including any court costs and legal service fees of the Bank, in the event of the nonpayment or late payment by the Borrower of any amounts under Agreements 1, 2 and 3, including inter alia the amount of the
loans provided, interest for the use of the loan and other amounts due and payable by the Borrower.
Deadline for repayment of the loans:
on Agreement 1 – 18 equal semi-annual payments over 9 years, first payment – 6 months after the date of operational
readiness, but not later than 28 August 2010;
on Agreements 2 and 3 – 9 equal semi-annual payments over 9 years, first payment – 36 months after the signing of the
Agreement.
Applicable law – law of the Federal Republic of Germany
76
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
EUR 140,861,920.11 and a fee of EUR 14,087
4,803,391,475.75 roubles and a fee of 480,366.70 roubles.
OAO “LUKOIL” (Guarantor)
LUKOIL Chemical B.V. (Debtor)
140
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Indemnity contract (hereinafter the “Contract”).
In accordance with the Contract, the Debtor shall indemnify the Guarantor in cash for assuming the liabilities under the
Guarantee of OAO “LUKOIL” issued to BNP PARIBAS S.A. (Creditor) to secure the obligations of LUKOIL Chemical B.V.
under the loan agreement concluded between the Creditor and the Debtor in the amount of EUR 140,861,920.11 (including the
Loan Agreement secured by the EULER HERMES Kreditversicherungs-AG export loan agency worth a total of up to EUR
84,016,920.11, the Commercial Loan Agreement to finance 15% of UNDE’s first instalment under the Contract worth up to
EUR 13,845,000.00, and the Commercial Loan Agreement to finance up to 100% of the total amount of local contracts worth
up to EUR 43,000,000.00), plus interest, forfeits, penalty interest, fines and other guaranteed payments.
The Debtor will indemnify the Guarantor in cash in the amount in which the Guarantor executed its obligations under the
Guarantee, with the payment of interest at a rate of three-month LIBOR + 3M+3% for their use.
The Debtor will also pay a fee to the Guarantor in the amount of EUR 14,087 within 90 days after the signing of the
Guarantee.
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of LUKOIL Chemical B.V.
The Debtor shall indemnify the funds to the Guarantor by the dates, in the form and pursuant to the procedure indicated in the
notice of the Guarantor.
The Contract will remain in effect until performance by the parties of their obligations in full.
77
The amount of annual interest will equal approximately USD 3,287,002.25.
The amount of annual interest will equal approximately 87,500,000 roubles.
OAO “LUKOIL” (Borrower)
OOO LUKOIL-Volgogradneftepererabotka (Lender)
Supplemental Agreement to Loan Agreement No. 0610016 of 10 January 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 10,600,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
141
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
78
The amount of the agency fee equals USD 84,222.39, including VAT. The amount of the Agent’s expenses is USD
1,427,498.12, including VAT.
The amount of the agency fee is 2,242,000 roubles, including VAT. The amount of the Agent’s expenses is 38,000,000
roubles, including VAT.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Agency agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Agent undertakes to perform for a fee legal and other actions on the organisation of an
independent inspection in its own name, but on the instructions and at the expense of the Principal:
a) of the products of oil refining (hereinafter the “Products”) of the Principal at the reservoirs of the Principal and/or on their
loading into a vehicle;
b) of the Principal’s reservoirs and the vehicles allocated for loading of the Products of the Principal, in order to determine
their suitability for storage and transportation of the Products and to check whether there is residue from previously shipped
goods in the vehicles.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The amount of the agency fee under the Agreement is 5% of the value of the inspection services, plus VAT at the rate
established by the legislation of the Russian Federation.
The Principal shall pay the fee and reimburse expenses to the Agent within 10 banking days after the approval by the Principal
of the report of the agent on the performance of the agency assignments, based on the invoices and VAT invoices provided by
the Agent.
The Contract shall be in effect from 1 January 2007 to 31 December 2007, and as related to mutual settlements – until their
performance in full.
79
The approximate value of the transaction is USD 40,173,706.68, not including VAT.
The approximate value of the transaction is 1,069,424,071.918 roubles, not including VAT.
142
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
OAO “LUKOIL” (Commission Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Commission contract (hereinafter the “Contract”)
In accordance with the Contract, the Commission Agent undertakes for a fee to perform a transaction involving the sale of oil
products belonging to the Principal on foreign markets in its own name, but on the instructions and using the funds of the
Principal.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The amount of the commission fee equals 2% of the value of the oil products sold.
80
USD 19.92, including VAT
531 roubles, including VAT
OAO “LUKOIL” (Buyer)
ZAO RITEKtrading (Supplier)
Supplemental Agreement to oil supply contract No. 0511411 of 22 December 2005 (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer with crude oil by rail during the period from 1
December 2005 to 31 January 2006 in the amount of 550 tonnes.
Pursuant to the Supplemental Agreement the Buyer will organise for a fee the return of empty tank cars in its own name, but
on the instructions and at the expense of the Supplier. The Buyer shall be entitled to conclude contracts with third parties on
the organisation of the return of tank cars.
7. Grounds for status as an interested party
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, Chairman of the Board of Directors of ZAO RITEKtrading.
8. Other material terms of the transaction
The Supplier shall pay the Buyer a fee in the amount of 50 roubles per tank car, plus VAT in accordance with the effective tax
rate at the time of provision of the services, for organising the return of tank cars at the request of the Supplier.
The Supplemental Agreement enters into force from the time of its signing and extends to the legal relations between the
parties arising from 1 January 2006.
81
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
OAO “LUKOIL” (Borrower)
ZAO LUKOIL-Neftekhim (Lender)
Supplemental Agreement to Loan Agreement No. 0610458 of 1 June 2006 (hereinafter the “Agreement”).
143
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
1,000,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL-Neftekhim.
82
OAO “LUKOIL” (Lender)
OOO LUKOIL-Volgogradneftepererabotka (Borrower)
Supplemental Agreement to Loan Agreement No. 0610143 of 14 March 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
1,700,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
144
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The other terms of the Agreement remain unchanged.
83
The approximate value of the transaction is USD 169,370, plus VAT – USD 30,486.60.
The approximate value of the transaction is 4,515,404.20 roubles, plus VAT – 812,772.76 roubles.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Agency agreement (hereinafter the “Agreement”).
Pursuant to the Agreement, at the request of the Principal the Agent undertakes to conclude a contract in its own name and at
its own expense with ZAO KPMG on the performance of an audit of the Principal’s financial statements for 2006, to pay for
the ZAO KPMG’s services and to sign the protocol on provision of services under the Contract.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The Principal undertakes: to issue a power of attorney to the Agent not later than 10 calendar days after the date when the
agreement enters into force; to repay all expenses incurred by the Agent in connection with the performance of the request no
later than 15 working days after the issue of the invoice; to pay the Agent the agency fee no later than 15 working days after
the date of issue of the invoice and VAT invoice; no later than 5 working days after the receipt of the Agent’s report, to
consider, approve and send the report back to the Agent.
The Agent undertakes: to provide the Principal with a copy of the contract with ZAO KPMG within 3 working days after it is
signed; to provide a report on the performance of the agency assignment within 15 working days after the date of the last
payment of the Agent to ZAO KPMG.
The Agent’s fee for the performance of agency services equals 0.01% of the amount of the Agent’s expenses without VAT
(USD 16.94) incurred when executing the contract with ZAO KPMG (except VAT at the effective rate).
84
OAO “LUKOIL” (Lender)
145
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
OAO RITEK (Borrower)
Supplemental Agreement to Loan Agreement No. 0610530 of 22 June 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 400,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
7. Grounds for status as an interested party
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
85
OAO “LUKOIL” (Lender)
OAO RITEK (Borrower)
Supplemental Agreement to Loan Agreement No. 0610079 of 17 February 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 400,000,000 roubles at any time
146
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
7. Grounds for status as an interested party
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
86
The approximate value of the transaction is USD 200,000.
The approximate value of the transaction is 5,322,000 roubles.
OAO RITEK (Commission Agent)
OAO “LUKOIL” (Sub-commission Agent).
Commission contract (hereinafter the “Contract”).
In accordance with the Contract, on the instructions of the Commission Agent, acting within the framework of commission
contract No. R-NGD-2007 of 21 November 2006 between OAO Nazymgeodobycha and OAO RITEK, and for a fee, the Subcommission Agent undertakes to perform an oil export sale transaction in its own name but at the expense and in the interests
of the Commission Agent.
147
7. Grounds for status as an interested party
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director, a
member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father of
Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Remuneration for the performance of the transaction will be withheld by the Commission Agent in foreign currency on the
receipt from the buyer of payment for the goods, but not before the report is approved by the Principal.
87
The amount of annual interest will equal approximately USD 187,899.29.
The amount of annual interest will equal approximately 5,000,000 roubles.
OAO “LUKOIL” (Lender)
ZAO LUKOIL-Neftekhim (Borrower)
Supplemental Agreement to Loan Agreement No. 0610457 of 1 June 2006 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a revolving special-purpose loan (either in a
lump sum or in instalments (tranches)), the total amount of debt on which may not exceed 1,000,000,000 roubles at any time
during the effective term of the Agreement, on the terms and conditions stipulated by the Agreement, and the Borrower
undertakes to repay the funds received and to pay interest thereon by the dates and pursuant to the procedure indicated in the
Agreement.
Pursuant to the Supplemental Agreement, an amendment is made to point 5.1 of Article 5 “Interest on the loan amount”
regarding a change in the procedure for determining the interest rate under the Loan Agreement: the interest is determined
based on information on indicative interest rates received from one or more reputable banks, with account taken of their
adjustment depending on the state of the liquidity of the organisations of the LUKOIL Group and the currency market in the
Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Supplemental Agreement also introduces amendments to article 4 “Schedule for provision and repayment of a tranche”
regarding a change in the schedule for provision of the loan: the loan repayment date will now be automatically extended.
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
148
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
the Supervisory Board of ZAO LUKOIL-Neftekhim.
88
The approximate value of the transaction is USD 175,873,731.68, including VAT.
The approximate value of the transaction is 4,680,000,000 roubles, including VAT.
OAO “LUKOIL” (Buyer)
ZAO RITEKtrading (Supplier)
Supplemental Agreement to oil supply contract No. 0610858 of 1 September 2006 (hereinafter the “Contract”).
In accordance with the Contract, the Supplier undertakes to supply the Buyer by rail with crude oil in an amount up to 60,000
(sixty thousand) tonnes in the period from 1 September 2006 to 31 December 2006 inclusive.
With the Supplemental Agreement, the parties have extended the effective term of the Contract to 31 December 2007 and
established that in the period from 1 January 2007 to 31 December 2007 the Supplier undertakes to deliver additional supplies
of crude oil to the Buyer in an amount up to 60,000 (sixty thousand) tonnes monthly.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, Chairman of the Board of Directors of ZAO RITEKtrading.
The supplemental agreement enters into force from the date of signing.
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The approximate value of the transaction is USD 202,931,228.86, including VAT.
The approximate value of the transaction is 5,400,000,000 roubles, including VAT.
OAO “LUKOIL” (Buyer)
ZAO RITEKtrading (Supplier)
Oil supply contract (hereinafter the “Contract”).
The Supplier undertakes to provide the Buyer with crude oil in the period from 1 January 2007 to 31 December 2007
inclusive, in an amount up to 1,200,000 (one million two hundred thousand) tonnes, for placement on the Russian domestic
market.
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is the father of Elena Valerievna
Panakova, Chairman of the Board of Directors of ZAO RITEKtrading.
The Contract enters into force from the date of its signing and shall remain in effect until 31 December 2007, and as regards
mutual settlements – until they have been completed in full. Deliveries shall be made by pipeline.
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The approximate value of the transaction is USD 144,671,975.73.
The approximate value of the transaction is 3,815,000,000 roubles.
149
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
OAO NGD (Borrower)
OAO “LUKOIL” (Lender)
Loan agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in an amount of up to
3,815,000,000 roubles, and the Borrower undertakes to repay the funds received and to pay interest thereon by the dates and
pursuant to the procedure indicated in the Agreement.
Valery Isaakovich Grayfer, Chairman of the Board of Directors, is simultaneously the General Director of OAO NGD
The loan will be a revolving loan provided as a lump sum or in instalments, up to a limit of 3,815,000,000 roubles, for a term
to 31 December 2016.
The Borrower will pay the Lender interest at a rate determined based on information on indicative interest rates received from
one or more reputable banks, with account taken of their adjustment depending on the state of the liquidity of the organisations
of the LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 314), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
The Agreement will remain in effect until performance by the Parties of their obligations in full.
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The approximate value of the transaction is USD 3,000,000.
The approximate value of the transaction is 78,930,000 roubles.
OAO “LUKOIL” (Company)
Non-profit organisation “Russian Olympian Support Fund” (the Fund)
Charitable contribution agreement (hereinafter the “Agreement”).
In accordance with the Agreement, the company will transfer a charitable contribution to the Fund on a gratuitous basis, and
the Fund undertakes to use the funds received to finance measures organised to achieve the charter goals.
Vagit Yusufovich Alekperov, President, Chairman of the Management Committee, and member of the Board of Directors of
OAO “LUKOIL”, is simultaneously a member of the assembly of founders of the Fund and a member of the Board of Trustees
of the Fund.
The company has the right to demand a report from the Fund on the use of funds and to demand the return of the funds if they
are not appropriately used.
The Agreement will remain in effect until performance by the parties of their obligations in full.
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150
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
USD 64,529.42, including VAT.
1,697,769.15 roubles, including VAT.
OAO “LUKOIL” (Lessor)
ZAO Mosizdatinvest (Lessee)
Supplemental Agreement to Lease Agreement No. 0510988 of 1 October 2005 on non-residential premises (hereinafter the
“Agreement”).
In accordance with the Agreement, the Lessor provides to the Lessee for temporary use the non-residential premises with a
total area of 174.6 m2, located in the building at the address: Pokrovsky bulvar 3, building 1, Moscow.
In accordance with the Supplemental Agreement to the Agreement, the lease payment of the use of the non-residential
premises shall be 103,980.76 roubles per month rather than 74,923.09.
Mikhail Pavlovich Berezhnoi, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of ZAO Mosizdatinvest.
The Supplemental Agreement enters into force from the date of signing.
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The approximate amount of interest for the period from 29 December 2006 to 31 December 2008 is USD 979,406.06.
The approximate amount of interest for the period from 29 December 2006 to 31 December 2008 is 25,670,232.80 roubles.
OAO “LUKOIL” (Lender)
OAO RITEK (Borrower)
Supplemental Agreement to Loan Agreement No. 0610109 of 2 March 2006 (hereinafter the “Agreement”)
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
200,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
In accordance with the Supplemental Agreement:
- the deadline for repayment of the loan is extended from 28 December 2006 to 31 December 2008;
- the interest and principal debt repayment schedule has changed;
- amendments are made to point 5.1 of Article 5 “Interest on the loan amount” regarding a change in the procedure for
determining the interest rate under the Loan Agreement: the interest is determined based on information on indicative interest
rates received from one or more reputable banks, with account taken of their adjustment depending on the state of the liquidity
of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan:
- up to 31 December 2006 inclusive, in accordance with the Temporary Marketing Policy for determining interest rates on
loans between OAO “LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the
Management Committee of OAO “LUKOIL” of 28 November 2005 (minutes No. 34), as amended by decision of the
Management Committee of OAO “LUKOIL” of 26 December 2005 (minutes No. 38);
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
151
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
Valery Isaakovich Grayfer, Chairman of the Board of Directors of OAO “LUKOIL”, is simultaneously the General Director,
a member of the Board of Directors, and the Chairman of the Management Committee of OAO RITEK, and is also the father
of Elena Valerievna Panakova, a member of the Management Committee of OAO RITEK.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the
Chairman of the Board of Directors of OAO RITEK.
The loan is provided with an early repayment option. The Borrower shall repay the amount of the loan received according to
the procedure and by the dates established in Appendix No. 1 to the Agreement.
94
No financial terms stipulated.
No financial terms stipulated.
OAO “LUKOIL” (Agent)
OOO LUKOIL-Volgogradneftepererabotka (Principal)
Supplemental Agreement to Commission Contract No. 0411431 of 1 December 2004 (hereinafter the “Contract”).
Pursuant to the Contract, the Agent undertakes to perform the following legal actions on behalf and at the expense of the
Principal:
- to conclude a contract with OAO RZhD on the submission of export freight shipment requests in electronic form at the InHouse Rail Transportation Services (hereinafter – DCFTO) of OAO RZhD;
- to submit export freight shipment requests in electronic form and in hardcopy at the DCFTO of OAO RZhD in accordance
with the contract concluded with OAO RZhD.
Pursuant to the Supplemental Agreement, the Agent also undertakes to perform the following legal actions on behalf and at the
expense of the Principal:
- to conclude an agreement with OAO RZhD on the electronic exchange of documents signed using an electronic digital
signature;
- to perform the electronic exchange of documents signed using an electronic digital signature according to the agreement
concluded with OAO RZhD, and to submit rail freight shipment requests for export.
Vagit Sadievich Sharifov, a member of the Management Committee of OAO “LUKOIL”, is the father of Ruslan Vagitovich
Sharifov, a member of the Management Committee of OOO LUKOIL-Volgogradneftepererabotka.
The remaining terms of the Contract, including the amount of the Agent’s fee, remain unchanged.
95
The amount of the lease payment to be transferred for the remaining five months of the effective term of the Agreement
equals USD 150,630.95, plus VAT of USD 27,113.57.
The amount of the lease payment to be transferred for the remaining five months of the effective term of the Agreement
equals 3,951,049.90 roubles, plus VAT of 711,189 roubles.
OAO Futbolny Klub Spartak-Moskva [Spartak Moscow Football Club] (Lessee)
OAO “LUKOIL” (Lessor)
152
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
Supplemental Agreement to Lease Agreement No. 0411156 of 1 October 2004 on non-residential premises (hereinafter the
“Agreement”).
Pursuant to the Agreement, the Lessor provides to the Lessee for temporary use non-residential premises with a total area of
640.5 m2, located on the 3rd floor of the building at the address: Pokrovsky bulvar 3, bldg. 1, Moscow.
Pursuant to the Supplemental Agreement, from 1 February 2007 the lease payment for use of the non-residential premises will
increase from 713,387.64 roubles a month, plus VAT of 128,409.78 roubles, to 790,209.98 roubles a month, plus VAT of
142,237.80 roubles.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Futbolny Klub Spartak-Moskva.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Futbolny Klub Spartak-Moskva.
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Futbolny Klub Spartak-Moskva.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Futbolny Klub Spartak-Moskva.
Dzhevan Krikorovich Cheloyants, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a
member of the Board of Directors of OAO Futbolny Klub Spartak-Moskva.
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
96
The amount of the lease payment to be transferred for the remaining 10 months of the effective term of the Agreement equals
USD 97,338.12, plus VAT of USD 17,520.86.
The amount of the lease payment to be transferred for the remaining 10 months of the effective term of the Agreement equals
2,553,178.50 roubles, plus VAT of 459,572.10 roubles.
OAO Bank Petrocommerce (Lessee)
OAO “LUKOIL” (Lessor)
Supplemental Agreement to Lease Agreement No. 0510041 of 12 January 2005 on non-residential premises (hereinafter the
“Agreement”).
Pursuant to the Agreement, the Lessor provides to the Lessee for temporary use the non-residential premises with a total area
of 180.0 m2 (room 70 and part of room 69), located at the address: Pokrovsky bulvar 3, bldg. 1, Moscow. The Lessor has title
to the building.
Pursuant to the Supplemental agreement to the Agreement, from 1 February 2007 the lease payment for use of the non-
153
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
residential premises will increase from 188,110.20 roubles a month, plus VAT of 33,859.84 roubles, to 225,317.85 roubles a
month, plus VAT of 45,957.21 roubles.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Board of Directors of OAO Bank Petrocommerce.
Leonid Arnoldovich Fedun, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman of
the Board of Directors of OAO Bank Petrocommerce.
Sergei Anatolievich Mikhailov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
Igor Vladimirovich Sherkunov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously a member of the
Board of Directors of OAO Bank Petrocommerce.
97
OAO “LUKOIL” (Lender)
ZAO LUKOIL-Neftekhim (Borrower)
Supplemental Agreement to Loan Agreement No. 0611005 of 13 November 2006 (hereinafter the “Agreement”).
In accordance with the Agreement, the Lender will provide the Borrower with a special-purpose loan in the amount of
5,000,000,000 roubles on the conditions stipulated by the Agreement, and the Borrower undertakes to repay the funds received
and to pay interest thereon by the dates and pursuant to the procedure indicated in the Agreement.
In accordance with the Supplemental Agreement:
- payment by the Borrower of accrued interest on a quarterly basis;
- the deadline for repayment of the loan is extended from 30 September 2007 to 31 December 2007;
- amendments are made to point 5.1 of Article 5 “Interest on the loan amount” regarding a change in the procedure for
determining the interest rate under the Loan Agreement: the interest is determined based on information on indicative interest
rates received from one or more reputable banks, with account taken of their adjustment depending on the state of the liquidity
of the organisations of the LUKOIL Group and the currency market in the Russian Federation and the key terms of the loan:
- from 1 January 2007 in accordance with the Marketing Policy for determining interest rates on loans between OAO
“LUKOIL” and the Russian organisations of the LUKOIL Group, approved by decision of the Management Committee of
OAO “LUKOIL” of 30 August 2006 (minutes No. 26).
Vladimir Ivanovich Nekrasov, a member of the Management Committee of OAO “LUKOIL”, is simultaneously the Chairman
of the Supervisory Board of ZAO LUKOIL-Neftekhim.
Alexander Kuzmich Matytsyn, a member of the Management Committee of OAO “LUKOIL”, is simultaneously a member of
the Supervisory Board of ZAO LUKOIL-Neftekhim.
-
154
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
1. Number of the transaction approved by
the Board of Directors
2.1. Price (amount in USD)
2.2. Price (amount in roubles)
3. Names of parties
4. Names of beneficiaries
5. Name of transaction
6. Subject of the transaction
7. Grounds for status as an interested party
8. Other material terms of the transaction
98
USD 760,456.30
20,000,000 roubles.
OAO “LUKOIL” (Issuer)
OAO URALSIB
--Transaction on the placement by OAO “LUKOIL”, with the involvement of the underwriter ABN AMRO Bank ZAO acting
as a securities placement agent through the Closed Joint Stock Company MICEX, of documentary interest-bearing nonconvertible bearer bonds with mandatory centralized custody, series 04 (hereinafter “Series 04 Bonds”).
Sale/purchase of Series 04 Bonds (state registration number 4-04-00077-A) during the placement by public subscription in an
amount of 20,000 (twenty thousand) units, with a par value of 1,000 (one thousand) roubles each, maturing on the 2548th (two
thousand five hundred forty-eighth) day from the bond offering commencement date for Series 04 Bonds.
Nikolai Alexandrovich Tsvetkov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously Chairman of the
Management Board and a member of the Supervisory Board of OAO URALSIB.
Placement of Series 04 Bonds on the terms established by the Decision on the issue of Series 04 Bonds.
99
USD 760,456.30.
20,000,000 roubles.
OAO “LUKOIL” (Issuer)
OAO URALSIB
-Transaction on the placement by OAO “LUKOIL”, with the involvement of the underwriter ABN AMRO Bank ZAO acting
as a securities placement agent through the Closed Joint Stock Company MICEX, of documentary interest-bearing nonconvertible bearer bonds with mandatory centralized custody, series 03 (hereinafter “Series 04 Bonds”).
Sale/purchase of Series 03 Bonds (state registration number 4-03-00077-A) during the placement by public subscription in an
amount of 20,000 (twenty thousand) units, with a par value of 1,000 (one thousand) roubles each, maturing on the 1820th (one
thousand eight hundred twentieth) day from the bond offering commencement date for Series 03 Bonds.
Nikolai Alexandrovich Tsvetkov, a member of the Board of Directors of OAO “LUKOIL”, is simultaneously Chairman of the
Management Board and a member of the Supervisory Board of OAO URALSIB.
Placement of Series 03 Bonds on the terms established by the Decision on the issue of Series 03 Bonds.
155