ANNUAL REPORT 2005 - Lukoil

Russia
Growth of export duties in 2005 made oil export less attractive and increased Russian refining margins.
The Company therefore directed larger quantities of oil to its own refineries and for processing
to third-party refineries in Russia.
As a result refining volumes at the Company's Russian refineries increased by 4.9% to 37.3 million
tonnes. The Company also obtained quotas for refining of oil at the Ufa Refinery, to which it
despatched 1.63 million tonnes of oil.
Continuing modernization of LUKOIL's Russian refineries has enabled increase by 4.1 times in output of highquality
diesel fuel, which meets the most stringent current environmental requirements (Euro-3, Euro-4, and
Euro-5). Output of diesel fuel to these standards was 5.2 million tonnes in 2005, representing 50.7% of total
diesel production by Russian refineries of the Group. In 2005 LUKOIL became the first Russian oil company
to launch large-scale production and sale of Euro-4 diesel fuel with improved environmental characteristics.
This fuel meets EN-590:2004 standards for diesel fuel, which have been in force in the EU since 2005.
LUKOIL Euro-4 diesel fuel is produced at three Company refineries (Perm, Nizhny Novgorod and Ukhta) and
total production in 2005 was 3.97 million tonnes. Construction of a second stage of the hydrotreatment facility
at the Volgograd Refinery and reconstruction of the hydrotreatment facility at the Nizhny Novgorod
Refinery will enable complete changeover of the Group's Russian refineries to Euro-4 diesel production.
REFINING, PETROCHEMICALS AND MARKETING
The share of high-octane gasoline in total production of motor gasolines by the Group's Russian
refineries rose from 61.0% in 2004 to 68.7% in 2005. Depth of oil refining rose from 75.4% to 77.3%
and light products yield increased from 50.4% to 51.1%. Capital expenditures on modernization of
Russian refineries in 2005 were $307 million.
LUKOIL's Russian refineries took steps in 2005 to reduce operating costs and raise their operating and
financial efficiency. The average number of workers at these refineries decreased by 6.3% in 2005
compared with 2004. Savings from cost reduction measures were in excess of $37 million.
In August 2005 the Volgograd Refinery commissioned the first stage of a petroleum coke calcination
facility with 100,000 tonnes annual capacity. Capital expenditures for completion of the first stage were
Lubricants Production,
thousand tonnes
Packaged Lubricants
Production,
thousand tonnes
Petroleum Product Exports, %
1,500
1,000
1,220
1,199
1,159
200
150
112
142
174
100
80
60
100
500
50
40
20
0
2003
2004
2005
0
2003
2004
2005
0
2003
2004
2005
Other
Fuel oil
Vacuum gasoil
Diesel fuel
Straight-run gasoline
47