ANNUAL REPORT 2005 - Lukoil

In Russia we purchase refined products on occasion, primarily to manage supply chain bottlenecks.
The following tables represent volumes of refined products produced and purchased.
2005 2004 2003
(thousand of tonnes)
Refined products produced at the Group refineries in Russia 35,290 33,438 32,444
Refined products produced at the Group refineries outside of Russia 8,892 7,387 6,789
Total refined products produced at the Group refineries 44,182 40,825 39,233
Refined products purchased in Russia 1,394 2,020 1,399
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Refined products purchased internationally 32,238 20,507 14,396
Total refined products purchased 33,632 22,527 15,795
Export of crude oil and refined products from Russia
We transport a significant portion of our crude oil through Transneft's trunk oil pipeline system. Access to the Transneft
crude oil export pipeline network is allocated quarterly, based on recent volumes produced and delivered through the
pipeline and proposed export destinations. There is a constraint on the ability of Russian companies to export their crude
oil due to limited capacity of Russian transportation infrastructure on the most profitable export routes.
In order to overcome such limits Transneft has extended the capacity of the Baltic Pipeline System. During 2005 it rose
nearly to 60 million tonnes of crude oil per year. This allowed us to increase the volume of crude oil exported via the
Primorsk terminal in 2005 up to 9,713 thousand tonnes, or 1,316 thousand tonnes more than in 2004.
The crude oil transported by Transneft is the Urals blend – a mix of crude oils of various qualities, therefore Russian companies
which produce crude oil of a higher quality can not obtain benefits from selling it using Transneft's pipeline.
Additional access to international markets bypassing Transneft export routes can be obtained through rail transport, by
tankers or by our own export infrastructure. Our export infrastructure includes the Vysotsk terminal in the Leningrad
region, Varandey terminal in the Nenetsky Autonomous District and the Izhevskoye terminal in the Kaliningrad region.
In 2005 the Company exported 8.5% of crude oil produced, or 7,288 thousand tonnes, by means other than Transneft
(7,389 thousand tonnes in 2004), including 3,755 thousand tonnes through our own export infrastructure (2,319 thousand
tonnes in 2004). In the third quarter of 2005 we ceased the export of crude oil through the Vysotsk terminal due to
increased capacity of the Baltic Pipeline System. Currently we use the terminal to export refined products. In the future
the terminal will be used to export both crude oil and refined products depending on market conditions.
In 2005 we exported 774 thousand tonnes of crude oil to China (in 2004 we did not export crude oil to China).
The volumes of crude oil exported from Russia by our subsidiaries are summarized as follows:
2005 2004 2003
(thousand
of barrels)
(thousand
of tonnes)
(thousand
of barrels)
(thousand
of tonnes)
(thousand
of barrels)
(thousand
of tonnes)
Export of crude oil using
Transneft export routs 282,418 38,529 285,204 38,909 240,150 32,763
Export of crude oil bypassing
Transneft 53,421 7,288 54,161 7,389 39,342 5,367
Total crude oil export 335,839 45,817 339,365 46,298 279,492 38,130
In 2005 we exported 16.6 million tonnes of refined products, an increase of 17.7% compared to 2004.
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