ENERGY FOR PEOPLE - JSC Gazprom Neft

COMPANY’S PROFILEEnergy for lifeENERGY FOR PEOPLEHIGHLIGHTS OF THE YEARThe year 2009 was very productive forGazprom Neft both in terms of businessexpansion and in terms of adjustingoperations according to externalfactors.The global economic crisis significantlyaffected the current financial resultsof the Company. Although the Rubledevaluation at the beginning of the year,delay in export duty rate, tax breaksand additional privileges to the sectordid have a certain positive economiceffect. These factors however did notcompensate for the negative effectcaused by, compared to 2008, thedrop of oil prices, the introduction oftechnical regulations for engine fuels(residual fuel oil and diesel fuel), thedrop of petroleum products due to; thereduction of consumption in Russia plusvarious other factors. As a result, againcompared to 2008, EBITDA and thenet income of the Company decreasedby more than 30% and the revenue by28%.Despite these financial results theoperating performance of the Companyin 2009 exceeded the figures of 2008 inall business spheres.ABC 1 hydrocarbon reserves increasedfrom 1.605 bn up to 1.782 bn tons ofoil equivalent. Oil and gas productiongrew by 3.1%: from 48.7 mln tons ofoil equivalent to 50.2 mln tons. Theincrease in refining amounts was 17.6%(from 28.4 mln tons to 33.4 mln tons).In 2009 9.8 mln tons of petroleumproducts were sold through premiumsegments 40% more than in 2008.The major trend and achievement ofGazprom Neft in 2009 was the growth inthe level of daily production. Specificallyby the end of the third quarter theaverage daily production in all 100%affiliates had reached 83.2 thousandtons which equates to an output of 2.5%more than at the beginning of the year.Giving consideration to the depletedstate of many fields, the myriad ofdifficulties of oil production in Russiaadded to the fact that the main trendfor oil companies was to decreaseproduction volumes; this is withoutdoubt a significant achievement.Serious attention was paid to raising theeffectiveness of geological modelingwith the result that by the end of 2009most of the major fields of the Companyhad been provided with detailedhydrodynamic modelsA center of space visualization wasopened in the science and technologycenter of JSC Gazprom Neft inSaint Petersburg. This center usesmodern technologies of geologicand hydrodynamic modeling thatsignificantly raise the effectiveness ofproduction enterprises and thus lead toincreased activity of servicing branches.In 2009 a new important operation —gas production — started to cometo fruition. Implementation of thedevelopment project of Senomanskayagas deposit at Muravlenkovskoye fieldwas launched, and the developmentproject of Senomanskaya gas depositof Novogodneye field was approved.The start of gas deliveries from thesedeposits to the unified gas supplysystems is planned for the fourthquarter of 2010. In 2009 Phase 1of thegas turbine power plant at Yuzhno-Priobskoye field was launched, andgas deliveries from Ety-Purovskoyefield to SiburTyumenGaz along a newpipeline started. Furthermore activitiesaimed at raising the efficient use ofassociated petroleum gas (AG) are alsoin progress.In principal improving efficiency intandem with the reduction of expenseswere among the primary objectivesof the Company in 2009. In light ofthe unfavorable external economicenvironment the need to achievethese two goals was absolutely critical.With this in mind strictly adhered toexpense reduction initiatives wereimplemented in all business units of theCompany. Significant organisational andmanagement changes were made tothe production facilities of the companyin the YNAD which ensured, throughan increase in the level of managementresponsibility, greater control over thenet results of all enterprises. As a resultthe year-end production indicators ofthe enterprise’s equity assets exceededthe predictions by about 1 million30