REFINING AND MARKETING

Transcription

1 REFINING AND MARKETING Zeeland refinery L LUKOIL 1. Austria 1. Azerbaijan 2. Belarus 3. Belgium 4. Bulgaria 5. Czech Republic 6. Croatia Oil Refining ISAB refinery Ploiești refinery L-Energy and Gas Romania Gas Processing Breakdown of LUKOIL Group refining capacity 7. Cyprus 8. Estonia 9. Finland 10. Georgia 11. Italy 12. Latvia 13. Lithuania Petrochemicals Lokosovsky GPP Perm GPP Korobkovsky GPP Usinsky GPP Karpatneſtekhim Burgas refinery L-Energy and Gas Bulgaria Power generation 14. Luxembourg 15. Macedonia 16. Moldova 17. Montenegro 18. Netherlands 19. Poland 20. Romania Volgograd refinery Perm refinery Ukhta refinery Nizhny Novgorod refinery Mini-refineries in Uray and Kogalym Marketing (filling stations) Breakdown of crude inputs by LUKOIL refineries Stavrolen Saratovorgsintez L-Astrakhanenergo L-Volgogradenergo L-Rostovenergo L-Kubanenergo L-Stavropolenergo L-Ecoenergo 21. Russia 22. Serbia 23. Spain 24. Turkey 25. Ukraine 26. USA Transhipment Volgograd refinery Perm refinery Nizhny Novgorod refinery Lubricants Aircraft Refuelling Breakdown of product outputs by LUKOIL refineries LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 35

2 LUKOIL in the world LUKOIL share in global refining, % LUKOIL share in crude oil supplies to the international market, % Russia s share in crude oil supplies to the international market, % LUKOIL in Russia LUKOIL s position in Russia: 2 for production of aviation fuel 2 for production of diesel fuel 2 for production of high-octane automotive gasoline Share of LUKOIL Group s Russian refineries in total Russian output of petroleum products (2014), % Main indicators in 2014 Petroleum product output, mln tonnes 64.1 Capacity utilization 86.3% Gas processing, mcm 3,221 Petrochemicals production, th. tonnes 668 Crude oil sales, mln tonnes 62.8 Wholesale petroleum product sales, mln tonnes Retail petroleum product sales, mln tonnes 16.1 Electricity output 1, mln KWh 17,145 Capital expenditures in the Refining & Marketing, Petrochemicals and Power Generation segments, $ mln 3,384 Employees in Refining & Marketing, Petrochemicals and Power Generation segments, th. people Excluding small-scale generating. By developing the refining & marketing, petrochemicals and power generation segments the Company lowers its exposure to high price volatility on the crude oil market and enhances its competitive position in main business regions by production and sale of high quality petroleum products with high value-added. This enables the Company to support multi-billion dollar investments in field exploration and development, helping to guarantee steady growth of income to shareholders. LUKOIL currently produces a wide range of high-quality petroleum and gas products and petrochemicals, selling them via wholesale and retail in over 24 countries. LUKOIL share in Russian production of lubricants, % LUKOIL share in Russian crude oil exports, % LUKOIL share in Russian exports of petroleum products, % LUKOIL share in Russian oil refining capacity, % Share of high-octane gasoline in total output of motor gasoline, % Lowering of the Company share in Russia s crude oil exports is due to reallocation of crude oil to highly profitable oil refining at Group refineries with sale of the obtained products on the domestic market. 36

3 Oil refining Company refineries LUKOIL strives to balance its extraction and processing volumes by giving much attention to the development of its refining business. One of the Group s strategic objectives is to maximize the value-added of products and profitability of operations, by increasing the contribution of oil refining to the formation of Group value. When LUKOIL was created, it included only two refineries the Perm and Volgograd facilities with total annual crude oil capacity of about 24 mln tonnes. Today, the Group owns 4 large refineries and 2 minirefineries in Russia, as well as plants abroad (in Bulgaria, Romania and the ISAB complex in Italy) and a stake in a refinery in the Netherlands. LUKOIL now has total annual refining capacity for 77.7 mln tonnes of crude oil. Company refineries have up-to-date conversion and enrichment facilities and produce a wide range of high-quality petroleum products. LUKOIL s Russian refineries are ahead of the national average by quality of their facilities and the level of their performance indicators, and the Group s European refineries match the standards of competitors. Crude oil refining by the Group rose by 0.6% in and refining volumes in 2014 were mln tonnes (including LUKOIL s share of refining at Zeeland). Modernization LUKOIL is constantly modernizing its refining capacities, reacting quickly to main market trends. The Company uses the latest technologies in modernization of its refineries in order to improve the quality of production and to reduce environmental impact. The Company is rapidly introducing European quality standards for engine oils at all its refineries. This offers significant competitive advantages as well as a price premium, reflecting the environmental and functional qualities of Company products. Installation of a residue processing complex at the Perm Refinery, catalytic cracking at the Nizhny Novgorod Refinery, a complex for deep conversion of vacuum gas oil at the Volgograd Refinery and of a heavy residue conversion complex at Burgas will significantly boost the Group s financial results in the refining segment. All LUKOIL refineries in Russia switched to production of Euro-5 compliant automotive gasoline as early as Euro-5 As of July 2012 all of LUKOIL s Russian refineries had switched to production of automotive gasoline that fully meets Euro-5 specifications. This provides a significant economic benefit due to the differentiation of excise taxes and also enables the Group to recoup its investments in refinery modernization. Euro-5 gasoline ensures so-called clean exhaust, reducing emission of sulphur oxides and the products of incomplete combustion of aromatics (including the particularly dangerous carcinogen and mutagenic, benzopyrene). Sales of LUKOIL s EKTO-branded environment-friendly motor fuels increased by 20% in 2014 to 4.5 mln tonnes and the share of EKTO fuels in total retail sales increased from 41% in 2013 to 47% in Introduction of European standards The Company is also increasing production of high-octane gasolines (AI-95 premium and above) in compliance with European environmental standards in response to growing demand and gradual changeover to new environmental standards for motor fuels. Lubricants Production and sale of lubricants represents a distinct segment within LUKOIL s business. Lubricants are produced at LUKOIL refineries in Perm, Volgograd and Nizhny Novgorod. The Company also blends lubricants from ready-made components (produced in-house and bought from third parties) at facilities in Russia, Finland, Romania, Turkey and Austria. Lubricant production volumes at Group facilities in 2014 were 1.1 mln tonnes. The development of a product range that meets the latest requirements is crucial for the success of LUKOIL s lubricant business. In the last 5 years, the Company s lubricant range has expanded from 230 to 336 products, including the development and production launch of 37 new products in LUKOIL obtained 47 approvals in 2014 for engine, transmission and industrial lubricants from Russian and foreign manufacturers, including MAN, Mercedes, Porsche, Renault, Cummins and Danieli. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 37

4 An agreement was signed in 2014 for the supply of LUKOIL s INTEGO branded lubricants to the Russian steel maker MMK, a three-year contract was signed with the ferrous-metals giant, Norilsk Nickel, and an agreement was reached for the supply of high-performance LUKOIL lubricants to SUEK, which is one of the world s largest coal mining companies and the largest producer of coal in Russia. Chusovoy Metallurgy Works, Europe s largest manufacturer of automotive springs (supplier to the Russian vehicle builders, KAMAZ, URAL Automotive, UAZ and NEFAZ) will also use LUKOIL lubricants. The Company is also developing rapidly as a supplier of lubricants for first-fill of vehicles at assembly plants. The LUKOIL plant in Vienna (Austria) has been certified compliant with the VDA 6.3 standard maintained by German automakers. Deliveries have begun of LUKOIL ATF transmission oil as first-fill for automatic transmissions manufactured by Voith Turbo for DIWA buses. LUKOIL pursued development of its marine lubricant business in At the world-leading SMM Exhibition in Hamburg the Company presented a new line of biodegradable synthetic oils that meet the latest and strictest quality and safety standards as well as the innovative icolube lubrication system. After a year of successful operation by 7 vessels of Carnival Group (P&O Cruises), including the world passenger fleet flagship, Queen Mary II, 8 more Carnival cruise ships are to be supplied with LUKOIL NAVIGO oils and the Company has won first-fill rights for the Carnival s new flagship, the Britannia. A one-year contract has been signed with Oman Shipping Company for the supply of marine lubricants to the fleet of the Oman state shipping company (43 vessels with deadweight of th. tonnes each). Lubricant deliveries began in December for 130 heavy-tonnage vessels of Mediterranean Shipping Company, including the world s 20 largest container ships, which are now being built in China and South Korea. Russian refineries Refining volumes at Russian refineries were almost unchanged in 2014 at 45.3 mln tonnes. The share of high-octane gasoline in total output of gasoline at Group refineries in Russia (not including mini-refineries) increased to 100% in Refining depth is steadily increasing as modernization of the Group s refineries progresses and reached 77.1% in 2014 (up from 75.7% in 2013) thanks to the modernization of the Volgograd Refinery (inclusion of lubricant production residues, which were previously used in fuel oil, in vacuum gas oil) and of the Ukhta Refinery (launch of the tar visbreaking unit reduced output of fuel oil and increased the production of diesel and vacuum gas oil). Capital expenditures at Russian refineries totaled $1,691 mln in 2014, up from $1,393 mln in The growth was due to further work on deep processing of vacuum gas oil at the Volgograd Refinery and the construction of a heavy residue processing complex and a generating block at the Perm Refinery. Volgograd Refinery LUKOIL-Volgogradneftepererabotka The Refinery produces fuels and lubricants Located in southern Russia Refines a blend of light West-Siberian and Lower-Volga crudes Crude oil is supplied to the Refinery via the Samara Tikhoretsk pipeline Petroleum products are shipped by rail, road and river transport Capacity 11.3 mln tonnes per year Nelson index 6.1 Main conversion process coking (2 units with capacity of 24.0 th. barrels per day) ATMOSPHERIC AND VACUUM DISTILLATION Gases Naphta Naphta production Distillates upgrading History of the Refinery residue gas oil Coke VOLGOGRAD REGION Volgodonsk Gas fractionation Reforming Isomerization hydrotreating Coke calcination Coking Bitumen blowing Производство Production битума of lubricating oils residue conversion Gas processing Volgograd Volgograd Refinery to Tikhoretsk Liquified hydrocarbon gases Kerosene gas oil Fuel oil Calcinated coke Bitumen Lubricating oils from Samara gas oil conversion The Volgograd Refinery was commissioned in 1957 and became a part of LUKOIL Group in In the Refinery commissioned automatic equipment for blending of gasolines and a rail trestle for crude oil discharge. In the Refinery launched equipment for hydrotreatment of diesel fuel, naphtha stabilization and fractioning of saturated hydrocarbon gases. In the first stage of a coke calcination facility was completed and a catalytic reforming unit was installed. In 2007 the Refinery obtained an isomerization unit with annual capacity of 380,000 tonnes. In 2008 the vacuum block on distillation unit No6 was re-commissioned after an upgrade and an automated gasoline blending station was brought into operation. New facilities in 2009 included a unit for production of inert gas was and a steam recuperation unit at the oil loading rack. EKTO diesel fuel production was started in the same year. In 2010 a short-cycle 38

5 absorption unit to produce concentrated hydrogen was brought into operation and the diesel hydrotreatment unit was modernized. In 2011 a new delayed coking unit with 1 mln tonnes capacity was commissioned. In 2012 a diesel hydrotreatment unit with annual capacity of 3.0 mln tonnes was commissioned. A second line of the coke calcination unit was launched in 2013, increasing annual calcination capacity to 280 th. tonnes. A line for packaging of lubricants into liter barrels was installed as well as an automated warehouse line for packaging of lubricants into 1-, 4- and 5-liter cans. In 2014, the company Tecnicas Reunidas (Spain) carried out an EPC contract for the delivery and installation of main hydrocracking and hydrogen production equipment to create a new complex for deep processing of vacuum gas oil. A contract has also been made for the construction and installation of other facilities as part of this deep processing project. The new complex, which includes a vacuum gas oil hydrocracker with 3.5 mln tonnes annual capacity as well as units for hydrogen and sulfur production, is scheduled to launch in Its effect will be to greatly increase outputs of diesel fuel complying with Euro-5. Primary oil refining, mln tonnes Quality of products Since mid-2008 the Refinery has been producing diesel fuel with sulfur content below 50 ppm Since 2008 the Refinery has been producing engine gasolines that meet Euro-3 standards Since 2012 all engine gasolines produced at the Volgograd Refinery meet Euro-5 standards The Refinery produces about 500 th. tonnes per year of mineral, semi-synthetic and synthetic lubricants to Russian and international (API) standards Current modernization Construction of a new crude oil distillation unit with annual capacity of 6 mln tonnes in 2015 Work to expand primary refining to 14.5 mln tonnes per year by 2016 Construction of a deep refining complex for vacuum gas oil in 2016 Analyst Databook, p. 41 Perm Refinery LUKOIL-Permnefteorgsintez The Refinery produces fuels, lubricants and petrochemicals Located 9 km from the city of Perm Refines a blend of crudes from the northern part of Perm Territory and from Western Siberia Crude oil is supplied to the Refinery via the Surgut Polotsk pipeline and the Kholmogory Klin pipeline Petroleum products are shipped by rail, road, and river transport, and also via the Perm Andreyevka Ufa product pipeline Capacity 13.1 mln tonnes per year Nelson index 8.1 Main conversion processes are hydrocracking (T-Star, 65.2 th. barrels per day), catalytic cracking (9.3 th. barrels per day) and coking (18.9 th. barrels per day) ATMOSPHERIC AND VACUUM DISTILLATION Naphta gas oil residue gas oil Fat gas from crude distillation and coke units NGL Associated petroleum gas History of the Refinery Reforming Isomerization Gas processing Platforming process С7 for aromatics production + Raffinate Benzene Extraction Toluene Solvent Mixed gas Catalytic cracking Hydrocracking Production of lubricating oils hydrotreating Coking Bitumen blowing Production of lubricating oils PERM REGION Krasnokamsk gas oil Lubricating oils Fuel oil Kerosene Light gas oil Coke Bitumen Lubricating oils Liquified hydrocarbon gases Stable gas naptha Stripped gas from Kholmogory Kama reservoir Perm Refinery Perm to Polotsk to Klin from Surgut production Distillates upgrading gas oil conversion residue conversion The Perm Refinery was brought into operation in 1958 and became a part of LUKOIL Group in Large-scale reconstruction was carried out in , including extensive re-building of coking equipment, installation of a vacuum distillation unit, modern lubricant production, and creation of a system for protecting the environment. In 1999 the Refinery launched new equipment for utilization of hydrogen sulfide and production of sulfuric acid. In the Refinery launched a deep oil refining complex and completed reconstruction of the vacuum block on distillation unit No4. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 1 The Perm Refinery includes gas processing assets of the Perm Gas-processing Plant following merger of the two companies in November

6 An assembly for introduction of diesel fuel additives was installed on the hydro-dearomatization unit. In 2007 an isomerization unit with annual production capacity of 450 th. tonnes was launched and annual refining capacity at the Refinery was increased to 12.4 mln tonnes thanks to overhaul of the distillation units. In 2008 the Refinery s annual capacity increased to 12.6 mln tonnes thanks to modernization of the atmospheric distillation block on distillation unit No4, which gave an increase of annual capacity by 125 th. tonnes. In 2011 capacity of the delayed coking unit was increased to 1 mln tonnes per year. In 2012 a modern microprocessor-based distributed control system (DCS) was installed on the hydrocracking unit, hydrogen generation unit, raw material preparation aggregate, and the solvent deasphalting and dewaxing units. Current modernization Construction of a deep conversion complex Reconstruction of the diesel hydrotreatment unit, and of hydrodearomatization equipment on the hydrocracking unit Analyst Databook, p. 42 Nizhny Novgorod Refinery NIZHNY NOVGOROD Nizhny REGION from Surgut Novgorod Nizhny Novgorod Refinery Cheboksary Kstovo Modernization of the 24/7 diesel hydrotreatment unit was completed in 2013 with increase of annual capacity by 0.3 mln tonnes of Euro-5 diesel. Construction and installation work continued in 2014 in the project for construction of an oil residue processing complex, including installation of a delayed coker with annual capacity of 2.1 mln tonnes, as well as a diesel hydrotreatment unit and hydrogen production unit. An air compression station was commissioned during the year as part of this work. The new processing complex will make it possible to end production of fuel oil and to increase light product yield while observing current requirements for industrial safety and environmental protection. Technical refit of the vacuum block on distillation unit-4 was completed in to Polotsk LUKOIL-Nizhegorodnefteorgsintez Technical furnaces at the Refinery are being modernized to increase operation efficiency and reduce emissions. Primary oil refining, mln tonnes Quality of products Since 2004 the Refinery has produced diesel fuel with sulfur content below 50 and 10 ppm (Euro-4 and Euro-5) Since 2008 the Refinery produced only Euro-3 gasoline Since 2012 the Refinery has produced only Euro-5 gasoline The Refinery produces mineral, semisynthetic and synthetic lubricants to Russian and international standards (API) The Refinery has been certified compliant with the ISO 9001:2000 quality standard 40 The Refinery produces fuels and lubricants Located in the town of Kstovo in Nizhny Novgorod Region Refines a blend of West Siberian and Tatarstan crude oil Crude oil is supplied to the Refinery via the Almetyevsk Nizhny Novgorod and Surgut Polotsk pipelines Petroleum products are shipped by rail, road and river transport and by pipeline Capacity 17.0 mln tonnes per year Nelson index 6.4 Main conversion processes are catalytic cracking (41.0 th. barrels per day) and visbreaking (42.2 th. barrels per day) Gas ATMOSPHERIC AND VACUUM DISTILLATION A new process for extraction of diesel fraction as a separate product has been developed and implemented at the Refinery. from Almetyevsk Naphta Naphta gas oil Absorbing gas fractionation Isomerization Reforming Liquified hydrocarbon gases Butane hydrotreating Kerosene gas oil hydrotreating gas oil Production of Lubricanting oils Lubricants Production of Bitumen Bitumen Visbreaking Fuel oil Fuel oil residue Catalytic cracking component Fuel oil component Propylene production gas oil residue Butane-butylene fraction Alkylation Distillates upgrading gas oil conversion residue conversion Gas processing History of the Refinery The Perm Refinery was brought into operation in 1958 and became a part of LUKOIL Group in In distillation unit-5 and a lubricants hydrotreatment unit were rebuilt, and technology was installed for the production of highly-purified paraffins for the food industry. The modernization increased output and export of paraffins.

7 In 2004 the Refinery installed a catalytic reforming unit with annual capacity of 1 mln tonnes. In 2006 an isomerization unit with 440 th. tonnes annual capacity was commissioned, enabling the Refinery to produce automotive gasolines to Euro-3 standards, and modernization of distillation unit-6 was completed, increasing its capacity to 9 mln tonnes. The hydrotreatment unit was also rebuilt, enabling production of diesel fuel to Euro-5 standards. In 2008, a vacuum residue visbreaking unit with annual capacity of 2.4 mln tonnes was commissioned. The unit increased margins from Refinery operations by reducing output of heating oil (by 930 th. tonnes per year) and increasing volumes of vacuum gas oil (by 860 th. tonnes per year). In 2009 the Refinery began production of the high-performance EKTO-98 automotive gasoline. In 2010 a new complex for catalytic cracking of vacuum gas oil was brought into operation, which increased annual output of high-octane gasoline and diesel fuel by 1.4 mln tonnes and 400 th. tonnes, respectively. Light product yield was increased by 12%. The unit for diesel hydrotreatment was modernized in the same year. In 2011 a hydrogen fluoride alkylation unit was brought into operation. Reconstruction work on distillation unit-5 was completed in 2012 and a modern distributed control system using microprocessors was installed on distillation unit-1. Production of low viscosity marine fuel began in Storage capacity for oil and petroleum products was expanded, enabling creation of an oil reserve and optimization of fuel oil logistics. An improved control system was installed on the catalytic reforming and isomerization unit. Main equipment was supplied in 2014 for the construction of a second catalytic cracking complex and principal infrastructure for the complex was put in place. Critical equipment for vacuum block-2 was delivered. Long-term plans include the construction of a complex for hydrocracking of residues, including capacities for hydrocracking, diesel hydrotreatment, and production of hydrogen and sulphur. Implementation of the project will substantially increase light oil yield and minimize production of dark products, including changeover to outputs of low-sulfur fuel oil. Primary oil refining, mln tonnes Quality of products Since 2004 the Refinery produced diesel fuel with sulfur content below 50 ppm (Euro-4) Since 2006 the Refinery produced Euro-3 gasolines and Euro-5 diesel fuel Since 2011 the Refinery has produced Euro-5 gasolines The Refinery has been certified compliant with ISO 9001:2000 Current modernization Construction of a second complex for catalytic cracking of vacuum gas oil in 2015 Construction of a vacuum block Project studies for construction of a facility for hydrocracking of residues Analyst Databook, p. 43 Ukhta Refinery LUKOIL-UNP from Usa Ukhta Ukhta Nizhny Odes Refinery KOMI REPUBLIC Troitsko-Pechorsk The Refinery produces fuels Located in the central part of the Komi Republic Refines a blend of crudes from oil fields in the Komi Republic Crude is supplied to the Refinery via the Usa Ukhta pipeline Petroleum products are shipped from the Refinery by rail and road Capacity mln tonnes per year Nelson index 3.8 Main conversion process is visbreaking (14.1 th. barrels per day) ATMOSPHERIC AND VACUUM DISTILLATION Naptha Naptha Isomerization Reforming Hydrodewaxing Bitumen blowing residue residue visbreaking production Distillates upgrading residue conversion Kerosene gas oil Bitumen Fuel oil LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 1 Not including distillation capacity (vacuum unit). 41

8 History of the Refinery Mini-Refinery in Uray The Refinery was brought into operation in 1934 and became a part of LUKOIL Group in Distillation unit-1 was rebuilt in , when a unit for hydrodeparaffinization of diesel fuel was also commissioned. In 2004 a trestle for crude oil discharge and lading of dark petroleum products was put into operation. The first stage of reconstruction of the catalytic reforming unit was also completed at that time, improving its performance and increasing annual capacity by 35 th. tonnes. In 2005 a block was installed to increase hydrogen concentration in the hydrodeparaffinization unit with annual capacity of 250 th. tonnes of Arctic fuel. In 2006 work was completed on the second stage of a loading facility for oil and petroleum products with annual capacity of 4 mln tonnes. Re-equipment of the catalytic reforming unit was also completed, increasing its annual capacity from 300 to 380 th. tonnes. In 2007 the Refinery commissioned a vacuum residue visbreaking unit with 800 th. tonnes annual capacity, increasing outputs of vacuum gas oil. In 2009 construction work was completed on an isomerization block with planned annual input capacity of 120 th. tonnes. Refitting of the reactor block of the GDS-850 diesel hydrotreater was completed in Uray Irtysh Mini-refinery in Uray KHANTY-MANSI AUTONOMOUS DISTRICT Tobolsk Urayneftegaz The Refinery produces fuels Located in Uray Refines a blend of local crudes Capacity 100 th. tonnes per year Brought into operation by LUKOIL Group in 1995 Catalytic reforming Naphta ATMOSPHERIC DISTILLATION Fuel oil (reterned to oil) The atmospheric-vacuum distillation unit was relaunched after reconstruction in 2013, and capacity of the vacuum block was increased to 2 mln tonnes per year. Construction of an aggregate for offtake of gas condensate was also completed. Modernization work continued in 2014 to make Refinery installations compliant with current standards and regulations. Fuel oil Bitumen Bitumen blowing production residue conversion Mini-Refinery in Kogalym Plans for the Refinery include construction of a gas fractionation plant, a unit for sweetening of kerosene fraction and a block for separation of isopentanes. Noyabrsk KHANTY-MANSI AUTONOMOUS DISTRICT Mini-refinery in Kogalym Kogalym Primary oil refining, mln tonnes Nefteyugansk Surgut Ob Megion Nizhnevartovsk Kogalymneftegaz Quality of products In 2003 the Refinery transferred to production of winter and Arctic brands of diesel fuel Since 2005 the Refinery has produced diesel fuel with sulfur content below 50 and below 10 ppm Since 2009 the Refinery has produced Euro-3 and Euro-4 gasoline In 2012 the Refinery started production of Euro-5 gasoline Analyst Databook, p. 44 The Refinery produces fuels Located in Kogalym Refines a blend of local crudes Capacity 350 th. tonnes per year Brought into operation by LUKOIL Group in 1997 Catalytic Reforming ATMOSPHERIC AND VACUUM DISTILLATION NGL NGL hydrotreatment Jet fuel Fuel oil (reterned to oil) residue Bitumen blowing production Distillates upgrading Analyst Databook, p Bitumen residue conversion

9 Foreign refineries Refining volumes at LUKOIL Group s foreign refineries increased slightly in 2014 (by 0.9%) to 21.3 mln tonnes. Decline of product output at the Zeeland Refinery by 20.3% due to an overhaul in the second quarter was compensated by growth of volumes at ISAB. Irretrievable losses during refining in 2014 at the Company s own refineries outside Russia (excluding ISAB and Zeeland) were 0.76%. Refining depth rose to 87.4% thanks to improvement of the structure of outputs from processing units at the Ploiesti Refinery (Romania). Production of marketable fuel was terminated and there was a corresponding increase in production of motor fuels. The light product yield in 2014 was 72.2%. Capital expenditures at Group refineries abroad were $627 mln in 2014 compared with $791 mln in The main investment project outside Russia was at the Burgas Refinery (Bulgaria) where work was completed in 2014 on the construction and installation of a gaseous sulfur unit as part of the project to create facilities for refining of heavy residues. Ploiesti Refinery Petrotel-LUKOIL, Romania The Refinery produces fuels Located in Ploiesti (central Romania), 55 km from Bucharest Refines Urals crude (Russian export blend) and oil from fields of Romania Crude oil is supplied to the Refinery by pipeline from the Black Sea port of Constanta. Romanian oil is also supplied by rail Petroleum products are shipped by rail and road Capacity 2.4 mln tonnes per year Nelson index 10.0 (the highest indicator at any LUKOIL Group refinery) Main conversion processes are catalytic cracking (18.5 th. barrels per day) and coking (10.5 th. barrels per day) History of the Refinery Ploiesti Ploiesti Refinery Bucharest Danube BULGARIA ROMANIA Constanta The Refinery was opened in 1904 and became a part of LUKOIL Group in In 2001 the Refinery started production of AI-98 high-octane gasoline and low-sulfur diesel fuel (sulfur content below 0.035%). In the same year the Refinery suspended operations in order to carry out major reconstruction. The work included modernization of facilities for primary refining, hydrotreatment, reforming, coking, catalytic cracking, gas fractionation and isomerization as well as construction of facilities for hydrotreatment of gasoline, catalytic cracking and production of hydrogen. The Refinery was relaunched in In 2006, a unit for production of MTBE/TAME additives was installed. In 2007 a 25 megawatt power supply unit was commissioned. In 2009 the Refinery completed upgrading of units for hydrotreatment of diesel fuel, catalytic cracking, hydrotreatment of gasoline produced by catalytic cracking, and production of MTBE and TAME, as well as a vacuum block for distillation unit-1. Construction of a hydrogen unit was also completed, which made the Refinery capable of producing Euro-5 fuels. In 2010, 2 new coke drums were installed on the delayed coking unit. In 2011 the Refinery began production of propylene with sulfur content below 5 ppm. Reconstruction of the amine unit was completed in 2012, and an enhanced control system was installed on distillation unit-3, increasing the yield of marketable products. Projects completed in 2013 included raising levels of C3+ recovery from catalytic cracking dry gas and modernization of purification units in An overhaul of the Refinery was also carried out with reconstruction of the catalytic cracking unit and replacement of the catalyst system on the diesel hydrotreater, which enabled changeover to a system of production without fuel oil, significantly increasing the depth of processing and light oil product yield. Further work was carried out in 2014 in accordance with the roadmap for maximizing the economic efficiency of Refinery operations. ATMOSPHERIC AND VACUUM DISTILLATION Gas Naptha Naptha gas oil residue Primary oil refining, mln tonnes Quality of products Since 2009 all gasoline and diesel fuel produced at the Refinery complies with Euro-5 standards Current modernization Construction of a treatment unit for flue gas from fluid catalytic cracking (FCC) Analyst Databook, p. 46 Gas fractionation Isomerization Reforming hydrotreating Catalytic cracking Ether production hydrotreating Coking Fraction C4 Liquified hydrocarbon gases Fuel oil Propylene Coke component production Distillates upgrading gas oil conversion residue conversion Gas processing LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 43

10 Burgas Refinery ROMANIA Danude Varna BULGARIA Black sea Burgas Refinery Burgas In work was carried out to reduce emissions, and construction of a unit for isomerization of n-butane with 50 th. tonnes annual capacity was completed. In 2009 a new unit for sulfuric acid alkylation with 300 th. tonnes annual capacity was put into operation, and construction of a diesel fuel hydrotreatment unit was completed. In 2010 a diesel hydrotreatment unit and FCC naphtha hydrotreatment unit were commissioned, as well as a sulfuric acid regeneration facility. In 2011 work was completed to optimize the system for loading of boiler fuel at the Rosenets oil terminal. LUKOIL Neftochim Burgas The Refinery produces fuels and petrochemicals Located on the Black Sea coast, 15 km from the city of Burgas Refines various crude oils (including Russian export blends) and fuel oil Oil is supplied to the Refinery by pipeline from an oil terminal at the port of Rosenets Petroleum products are shipped by rail, road and sea transport, and also via a petroleum product pipeline to central regions of Bulgaria Capacity 9.8 mln tonnes per year Nelson index 8.9 The main conversion processes at the refinery are catalytic cracking (37.1 th. barrels per day) and visbreaking (26.4 th. barrels per day) ATMOSPHERIC AND VACUUM DISTILLATION Projects were completed in 2013 to bring metering equipment into compliance with Bulgaria s tax legislation. Construction and assembly work on a gaseous sulfur (GS-4) unit was completed in 2014 as part of the new complex for processing of heavy residues (CMP), a natural gas pipeline was commissioned, an exhaust heat boiler was installed on the catalytic cracking unit, and a purification system was fitted for flue gas from waste incinerators. Construction of the heavy residue processing complex should be completed in The aim is to increase conversion of oil inputs to the refinery, to cease production of high-sulfur heating oils, and to increase production of Euro-5 diesel fuels. The main facility in the new complex will be an H-Oil tar hydrocracker with annual capacity of 2.5 mln tonnes. Primary oil refining, mln tonnes Gases Absorbing gas fractionation Propane-butane Hydrocarbon gases Liquefied hydrocarbon gases Propanebutane Naptha gas oil residue residue Absorbing gas fractionation Reforming hydrotreating gas oil hydrotreating Bitumen blowing Visbreaking production Distillates upgrading N-butane Kerosene Diesel fuel VGO Bitumen Fuel oil Isomerization n-butane Catalytic cracking Butene component gas oil conversion residue conversion Propylene Isobutane Alkylation Butene Ether production Hydrotreating Fuel oil Production of polypropylene Gas processing component component component Polypropylene Quality of products In 2003 gasoline production was fully upgraded to high-octane, unleaded products and production of clean diesel fuel with sulfur content below 0.035% was increased Since 2009 the Refinery has produced automotive gasolines and diesel in compliance with Euro-5 standards. All of the fuel is marketed in EU countries History of the Refinery Current modernization The Refinery was brought into operation in 1964 and became a part of LUKOIL Group in In the Refinery began production of light high-octane gasolines and launched 5 new products to European standards, including products meeting EN-228 and EN-590 standards. In 2004 the catalytic reforming unit was rebuilt increasing its annual capacity to 600 th. tonnes and the catalytic cracking unit was rebuilt. In 2005 the regenerator of the catalytic cracking unit was rebuilt and a system was put in place for altering fuel inputs to the power and heat generating station depending on market price trends for boiler fuel and gas. Construction of a unit for production of gaseous sulfur (30 th. tonnes annual capacity) was completed in the same year. Commissioning of a complex for refining of heavy residues Commissioning of a unit for the production of gaseous sulfur Modernization of logistics infrastructure at the Rosenets terminal Modernization of reservoirs and the sea section at the Rosenets oil terminal Analyst Databook, p

11 IT Rome AL Y ISAB Complex TUNISIA GREECE Mediterranean sea i.sicily LUKOIL on the world map In 2013, LUKOIL s interest in ISAB was further increased from 80% to 100%. The Group s share in refining at ISAB was then 8.23 mln tonnes. ISAB Refinery Complex In 2014 an integrated gasification combined cycle (IGCC) unit was acquired and work was carried out to improve efficiency (including energy efficiency). Primary oil refining1, mln tonnes ISAB Refinery Complex, Italy Kerosene Merox Мерокс Mild hydrocracking Propylene Benzene ATMOSPHERIC AND VACUUM DISTILLATION hydrotreating Мерокс residue Gas Visbreaking Isomerization component Reforming component Visbreaking residue Gas fractionation Cumene hydrotreating Mild hydrocracking Conversion of one line of the IGCC to use of natural gas in 2015 Hydrocracking residue Deasphaltizate Analyst Databook, p. 48 Rotterdam Southern Refinery Zeeland Refinery Thermal cracking Vlissingen Fuel oil Deasphaltizing Liquified hydrocarbon gases Amsterdam Zeeland Refinery BELGIUM Asphalt to IGCC production gas oil conversion Distillates upgrading residue conversion Tax Environment in Russia gas oil Current modernization Cumene production hydrotreating The Refinery produces only Euro-5 gasolines and diesel fuel Fuel oil component Butane MTBE production Catalytic cracking VGO Northern Refinery Quality of products Alkylation ATMOSPHERIC DISTILLATION Group share. Refining and marketing Kerosene fraction Fuel oil gas oil 1 Exploration and production Located in the eastern part of Sicily, near the town of Priolo Refines various types of crude oil and straight-run fuel oil Inputs are supplied mainly from countries of the Black Sea region, North and West Africa, and the Persian Gulf Petroleum products are shipped by road and sea transport Capacity 16.0 mln tonnes per year Nelson index 9.3 Main conversion processes are catalytic cracking (38 th. barrels per day), hydrocracking (90 th. barrels per day), visbreaking and thermal cracking (99 th. barrels per day) Gas processing History of the Refinery In 2008 LUKOIL signed an agreement with the Italian company ERG S.p.A. to purchase a 49% interest in a joint venture for operation of the ISAB refining complex. In 2011 the Company s interest was increased from 49% to 60%. LUKOIL s share in refining at ISAB was 6.95 mln tonnes. In 2012 the Company s interest in the ISAB Refining Complex was increased from 60% to 80%. Zeeland Refinery N.V. Located in the biggest oil refining and trading hub in north-west Europe (the Amsterdam Rotterdam Antwerp region, often referred to as ARA ) About 90% of Refinery outputs are marketed in Belgium, the Netherlands, Germany and Switzerland Petroleum products are shipped by road and sea transport The Refinery has access via its own pipeline to the Maasvlakte Olie Terminal, which has 4 mln tonnes capacity The Refinery owns 54 reservoirs for storage of crude oil and petroleum products Capacity 3.6 mln tonnes per year 2 Nelson index 8.4 The main conversion process is hydrocracking (74 th. barrels per day) 2 The Refinery was brought into operation in 1964 (northern section) and 1975 (southern section). Large-scale modernization began in 2003 in response to growing demand for medium distillates in Western Europe. Antwerpen By Group share at the end of 2014 (45%). 45

12 ATMOSPHERIC AND VACUUM DISTILLATION Naphta gas oil Production of gasoline (100% TOTAL) hydrotreating Hydrocracking production Distillates upgrading gas oil conversion Liquified hydrocarbon gases Naphta Kerosene Solvent Kerosene gas oil Fuel oil Gas processing PURCHASES FROM THIRD-PARTY PRODUCERS PRODUCTION OF OIL AND GAS GAS PROCESSING GAS PRODUCT MARKETING NATURAL GAS LIQUIDS LIQUEFIED PETROLEUM GAS STABLE GAS NAPHTHA STRIPPED GAS PENTANE-ISOPENTANE FRACTION WESTERN SIBERIA URALS VOLGA KOROBKOVKSY GPP PERM GPP LOKOSOVKSY GPP USINSK GPP TIMAN-PECHORA OTHER History of the Refinery The Zeeland Refinery (formerly the TRN Refinery) was commissioned by Total S.A. in In 1980 the company Dow acquired 20% of the Refinery. Modernization was carried out in the early 1980s and a hydrocracking unit was commissioned in Dow increased its stake in share capital to 45%. The Refinery has carried out a series of modernizations since 1990 to remain one of the most advanced facilities in Europe: units have been installed for purification of kerosene fractions and production of sulfur, and the reactor for hydrotreatment of medium distillates has been expanded to enable production of diesel fuel with sulfur content below 50 ppm. One of the most recent large modernization projects at the Refinery was reconstruction and capacity increase of the hydrocracking unit (completed in 2004). In 2009 LUKOIL signed an agreement with TOTAL S.A. for acquisition of a 45% stake in the TRN Refinery, which changed its name to the Zeeland Refinery in Primary refining 1, mln tonnes LUKOIL Group s gas-processing plants process associated petroleum gas (APG) and natural gas liquids extracted in Russia into marketable gas (fed into the national pipeline system of Gazprom) and liquid hydrocarbons. Gas processing ensures efficient use of associated petroleum gas by transforming it into marketable product, offering additional profit without any substantial raw material costs. In 2014, the Company s gas processing plants processed 3,221 mcm of gas feedstocks, which is 2.9% more than in Processing of liquid hydrocarbons at the plants totaled 710 th. tonnes. LUKOIL plants produced 2,454 mcm of marketable stripped gas, 791 th. tonnes of liquefied gas, over 748 th. tonnes of natural gas liquids and 179 th. tonnes of liquid hydrocarbons (stable natural gasoline and isopentane fraction). Production of liquid hydrocarbons at Group gas-processing plants in Western Siberia, the Urals and the Volga region increased slightly in 2014 to 13.9 mln boe from 13.7 mln boe in LUKOIL gas-processing plants 1, , Usinsk GPP 2,140 2,049 Lokosovksy GPP Perm GPP 1 Group share. Analyst Databook, p Korobkovsky GPP 4,650 3,221 Gas processing mcm per year mcm Capacity Processing in , Refining of liquid hydrocarbons th. tonnes per year th. tonnes Analyst Databook, p

13 Korobkovsky Gas-processing Plant Processes associated gas from fields operated by RITEK and the joint venture, Volgodeminoil, as well as natural gas liquids (NGLs) Capacity 450 mcm per year of gas, 161 th. tonnes per year of NGLs Products stripped gas, stable gas naphtha and LPG Customers petrochemical enterprises and power generating companies (LUKOIL-Volgogradenergo), foreign marketing units of LUKOIL Group and local consumers Commissioned in 1966 and became a part of LUKOIL Group in 1996 In external energy supply was overhauled and a steam unit was launched. In 2005 an associated gas compressor and dryer unit was put into operation. In 2009 modernization work at the plant was carried out. In 2010 a long-term program of measures was designed and approved to keep the Plant in working order and ensure operating safety. Re-equipment work continued at the Plant in 2014, rebuilding of the air compression unit was completed. Perm Gas-processing Plant Processes associated gas from fields of LUKOIL-Perm, wet gas from the Perm Refinery and NGLs from the Lokosovsky Gas-processing Plant and the Perm Refinery Capacity 1,460 mcm of gas, 1.7 mln tonnes of NGLs per year Marketable products stripped gas, stable gas naphtha, isopentane, LPG, sodium bisulfite Customers Perm Refinery, Stavrolen, foreign marketing units of LUKOIL Group and local consumers Commissioned in 1969, became part of LUKOIL Group in 1998 В In the gas fractionation unit was rebuilt to increase NGL processing capacity, and a sodium bisulfite unit was put into operation. In reconstruction of the plant was carried out, increasing capacity from 550 th. tonnes to 700 th. tonnes per year of NGL. In 2008 output structure was optimized and NGL processing capacities were increased to 1,000 th. tonnes per year. In 2009 the Plant carried out various projects to help achieve the Company target of 95% utilization of associated gas. In 2010, installation work was completed on a stenching unit for propanebutane mixtures and work was carried out to identify pipeline sections in need of replacement. Project documentation was completed in 2012 for a second low-temperature condensation and rectification unit. In 2013, construction of a complex for liquefied gases was completed. A number of new facilities were completed and brought into operation in 2014: a booster compressor station, the low-temperature condensation and rectification unit-2, gas fractionation unit-2 and a modernized desulfurization unit. The Plant began reception and processing of additional associated and natural gas volumes from fields operated by LUKOIL-Perm, transport of stripped gas through the Gazprom pipeline system began and gas supplies were put in place to the power generating block at the Perm Refinery. In November 2014 gas processing assets at the Perm Gas-processing Plant became part of the Perm Refinery. Lokosovsky Gas-processing Plant Processes associated gas from fields in Western Siberia Marketable products stripped gas, NGL, stable gas naphtha, propane Customers Russian industrial and power generating companies (dry stripped gas), LUKOIL-Permneftegazpererabotka (NGL) and local consumers Capacity bcm per year Commissioned in 1983, became part of LUKOIL Group in 2002 In 2005 construction of storage tanks with a trestle for lading of NGL was completed. In 2006 work was completed to increase annual capacity of the Plant from 1.0 to 1.9 bcm of associated gas per year, and further work brought capacity to 2.3 bcm per year. This project included connection of the Plant to the Urengoi Surgut Chelyabinsk trunk gas pipeline. In 2009 two cylindrical vertical flare furnaces were brought into operation. In 2010 work was carried out on assembly of a gas discharge pipeline, as well as modernization of the flare systems and of fire and accident prevention systems. Plans were reviewed in 2013 for reconstruction of the Lokosovsky Gas-processing and its product storage facilities with installation of a loading rack. Usinsk Gas-processing Plant Prepares and processes associated gas from fields operated by LUKOIL-Komi Marketable products dry and stripped gas, stable gas naphtha and LPG Customers oil production enterprises of LUKOIL Group and local consumers Capacity 600 mcm per year Brought into operation in 1980, became a part of LUKOIL Group in 2000 In 2004 the plant launched a gas preparation and processing block, and a gas input station. This enabled the plant to produce LPG and stable gas naphtha. In 2010 work proceeded on construction of an associated gas compressor unit with annual capacity of 500 mcm, and on installation of a desulfurization unit with annual capacity of 100 mcm. A project for reconstruction of existing processing capacities was carried out in It included installation of a gas desulfurization and dehydration unit, a booster compressor station for sulfurous gas and reconstruction of the booster compressor station for sulfur-free gas. Work began in 2012 for reconstruction of the input compressor station and installation of a gas desulfurization unit. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 47

14 Petrochemicals PURCHASES FROM THIRD-PARTY PRODUCERS LUKOIL has carried out extensive development of its petrochemical business since 1997 in order to increase the share of high value-added products in overall output and reduce dependence on the volatile international crude market, and also to create additional potential for growth of shareholder value. Petrochemicals are the most complex end of the processing business for an oil company. LUKOIL owns petrochemical capacities in Russia (Saratovorgsintez and Stavrolen), Ukraine (Karpatneftekhim), and Bulgaria (LUKOIL Neftochim Burgas, a refinery with its own petrochemical facilities). The Company makes pyrolysis and organic synthesis products, fuel fractions and polymers, and meets a large part of Russian domestic demand for several important chemicals as well as being a large-scale chemicals exporter to more than 30 countries. Production volumes at petrochemical plants of LUKOIL Group amounted to 668 th. tonnes in 2014, down from 985 th. tonnes in The decline was due to much lower output at Stravrolen after production was halted by a fire at the end of February 2104, as well as suspension of production at Karpatneftekhim for economic reasons. LUKOIL petrochemical plants PETROCHEMICAL COMPANIES Saratovorgsintez SARATOV (RUSSIA) Acrylonitrile, sodium cyanide and other organic synthesis products Stavrolen Karpatneſtekhim Neſtokhim Burgas НПК ISAB PRODUCTION OF OIL AND GAS PETROCHEMICALS PETROCHMEICALS MARKETING ACRYLONITRILE POLYPROPYLENE POLYETHYLENE LIQUID PYROLYSIS FRACTIONS SODIUM CYANIDE BUDENNOVSK (STAVROPOL TERRITORY, RUSSIA) Polyethylene, polypropylene and other products KALUSH (UKRAINE) Polyethylene, polyvinyl chloride, caustic soda and other products REFINERIES WITH PETROCHEMICAL UNITS BURGAS (BULGARIA) Polymers SICILY (ITALY) Cumene WESTERN SIBERIA URALS VOLGA SARATOVORGSINTEZ STAVROLEN NEFTOCHIM BURGAS KARPATNEFTEKHIM PROPYLENE BENZENE HEAVY LIQUID FUEL ACETONITRILE TIMAN-PECHORA OTHER ISAB Main petrochemical outputs of LUKOIL Group companies Polyethylene A polymer that is widely for production of water and gas pipes, packaging films for food products, insulation membranes, thin-walled containers, fuel tanks, automotive parts, household articles, and industrial fibers. Produced by Stavrolen and Karpatneftekhim. Polypropylene One of the most versatile polymers, used in the production of pipes with enhanced protective qualities for water and sewage systems, in the automotive industry, in production of household appliances, and to make packaging films and containers. Produced by Stavrolen and the Burgas Refinery. Polyvinylchloride A polymer widely used in the construction materials industry, for production of cables and artificial leather, in agriculture, in the manufacture of packaging materials and of consumer goods. Produced by Karpatneftekhim. Acrylonitrile Raw material for the production of acrylonitrile fibers, polyacrylamide, synthetic rubbers and ABS plastics. Marketable acrylonitrile is produced by Saratovorgsintez. Propylene Raw material for the production of polypropylene, propylene oxide, isopropyl and butyl alcohols, acrylonitrile, and other products. Marketable propylene is produced by Stavrolen, Karpatneftekhim and the Nizhny Novgorod Refinery. Caustic soda More than 95% of soda output in used by the chemicals industry for the production of synthetic fibers and threads, ammonia, caprolactam, basic chemicals and refined chlorine. Caustic soda is also used in the power engineering industry, ferrous and non-ferrous metallurgy, pulp and paper, and food industries, and also in medicine. It is produced by Karpatneftekhim. Sodium cyanide Used in gold mining to separate precious metals from ore material. Produced by Saratovorgsintez. Analyst Databook, p.55 48

15 Antifreeze Liquid with a low freezing point used as a coolant for internal combustion engines and various installations operating at ambient temperatures below zero degrees celsius. Produced at the Perm Refinery. Benzene Raw material for the production of caprolactam, phenol, nitrobenzene and isopropylbenzene. Benzene is a key input for organic synthesis processes in production of medicines, plastics (styrene and ABS-plastics), synthetic rubber and pesticides. Produced at the Perm Refinery, Stavrolen and Karpatneftekhim. Butylene-butadiene fraction Raw material for the production of synthetic rubber. Produced by Stavrolen. Vinyl acetate Raw material for the production of water-based emulsion paints, vehicle paints, various adhesives, polyvinyl acetate, polyvinyl alcohol, polyvinyl acetals, copolymers with vinyl chloride, ethylene, etc. Produced by Stavrolen. Vinyl chloride Raw material for the production of polyvinyl chloride. Produced by Karpatneftekhim. Toluene Used in the production of various types of dyes and varnishes (for the cosmetics industry, etc.), and to make medicines and explosives. Produced at the Perm Refinery. Heavy pyrolysis tar Used for the production of carbon black and as fuel. Produced by Stavrolen and Karpatneftekhim. C5-C9 and C6-C8 fractions Raw materials for the production of motor fuels, solvents and aromatic hydrocarbons. Produced by Stavrolen and Karpatneftekhim. Ethylene Used for the production of ethylene oxide, styrene, ethyl alcohol, ethyl chloride, vinyl chloride, vinyl acetate, ethyl benzene, and polyethylene. Produced by Stavrolen and Karpatneftekhim. Saratovorgsintez Commissioned in 1957 Became a part of LUKOIL Group in 1999 The plant has two production facilities: arylonitrile (annual capacity 150 th. tonnes) and sodium cyanide (annual capacity 18 th. tonnes) Propylene Ammonia Hydrocyanic acid Caustic soda Since 2000 the Company has been engaged in modernization of its main production units. In 2008 a sodium cyanide unit with 15 th. tonnes annual capacity was commissioned. In 2011 the sodium cyanide unit capacity was expanded to 18 th. tonnes. Project work began in 2012 on a second line for production of sodium cyanide. The project for expansion of sodium cyanide production to 30 th. tonnes per year with expansion of acrylonitrile production to 190 th. tonnes continued in Equipment for the new facility was delivered and construction work was carried out on a storage warehouse for sodium cyanide. Design work continued for the acrylonitrile project. In 2014 construction and assembly work was completed in the first stage of the project for expansion of sodium cyanide production to 30 th. tonnes per year and approval was obtained from a government commission. Project studies were carried out for expansion of acrylonitrile production to 190 th. tonnes per year. В 2015 the first stage of the expansion of sodium cyanide production to 30 th. tonnes per year will be completed. Expansion of acrylonitrile production to 190 th. tonnes per year will be completed in Stavrolen Acrylonitrile Acetonitrile Sodium cyanide Commissioned in 1981 Became part of LUKOIL Group in 1998 Ethylene pyrolysis capacity 350 th. tonnes per year PYROLYSIS Acetic acid Ethylene Propylene Production of acrylonitrile Production of sodium cyanide Production of vinyl acetate Production of polyethylene Production of polypropylene Production of benzene Vinyl acetate Polyethylene Propylene Polypropylene Benzene С5 - С9 fraction Pyrolysis tar LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 49

16 The plant has one of the largest pyrolysis units in Russia, using a wide range of feedstocks naphtha, propane-butane fraction and NGLs. Modernization work has increased the share of gas in total feedstock volumes to 40%. The change in feedstock structure and in furnace construction has improved production efficiency and increased yield of basic olefins. In 2007 a polypropylene unit was commissioned with 120 th. tonnes annual capacity. The creation of an industrial complex at Stavrolen for processing of North Caspian gas is LUKOIL s largest current project in the petrochemical segment. The aim is to increase value-added by deeper refining of gas and natural gas liquids into petrochemical products such as polyethylene, polypropylene, etc. Project documentation was prepared in 2011 for the first gasprocessing installation (phase 1). Work began in 2012 in the framework of this project to prepare documentation for technical re-equipment of existing ethylene production to maximize processing of liquefied gases. Work was carried out at Stavrolen during 2013 to expand the product range. A test batch of PE6FE68 and PE4FE72 polyethylene grades were produced for preparation of thin films, as well as test batches of impact-resistant polypropylene grades, PPG and PPG , and PPG stat-copolymer. In 2014 work was completed for reconstruction of the water reservoir and creation of a unifed control centre, preparing Stavrolen for processing of North Caspian inputs. Main equipment was delivered and the greater part of construction and assembly work was carried out in 2014 for the first start-up complex of the new gas processing plant. The new gas processing plant is scheduled for completion in 2015 and further work will be carried out for reconstruction of main industrial facilities at Stavrolen. In capacities for production of olefins and polyethylene were rebuilt and modernized. In 2005 a unit for C4-C5 fractions with 90 th. tonnes annual capacity was commissioned. In 2010 new chlorine and caustic soda production facilities with annual capacity of 182 th. tonnes of gaseous chlorine and 200 th. tonnes of caustic soda were completed and commissioned. A unit for production of polyvinyl chloride (PVC) suspension was built and brought into operation during 2011, and equipment was assembled for production of PVC goods. In September 2012 operations at Karpatneftekhim were terminated in response to a weak market environment. Fixed assets were mothballed in the fourth quarter of Most of the facilities at Karpatneftekhim were idle for the greater part of 2013 due to the unfavorable market conditions, except for PVC production (work on PVC residues). Projects were completed in 2013 for increase of gas processing including natural gas liquids, and for modernization of the polyethylene partitioning and packaging line. Facilities at Karpatneftekhim were not operational in 2014 due to the unfavourable economic environment. PYROLYSIS NaCI Ethylene Propylene С4 fraction Production of chlorine Production of VCM Production of PVC VCM Production of PVC products Production of polyethylene Caustic soda Chlorine PVC Polyethylene PVC profile Karpatneftekhim, Ukraine С 6-С 8 Production of benzene Benzene Commissioned in the early 1970s The joint venture LUKOR between LUKOIL and the company Oriana has been in operation since 2000 Ethylene pyrolysis capacity 250 th. tonnes per year Main feedstocks diesel fuel, naphtha, n-butane, NGLs and sodium chloride С9 fraction Pyrolysis tar 50

17 Power Generation PURCHASES FROM THIRD-PARTY PRODUCERS OWN NEEDS 585 1,619 LUKOIL-Rostovenergo Rostov-on-Don ,664 4,212 Energy & Gas Romania Ploiesti PRODUCTION OF OIL AND GAS ELECTRICITY GENERATION ELECTRICITY MARKETING CUSTOMERS IN THE SOUTHERN AND NORTH CAUCASUS FEDERAL DISTRICTS Generating companies in LUKOIL Group , Energy & Gas Bulgaria Burgas 1 Not including small-scale generating. WESTERN SIBERIA URALS VOLGA LUKOIL-VOLGOGRADENERGO LUKOIL-ROSTOVENERGO LUKOIL-STAVROPOLENERGO LUKOIL-KUBANENERGO LUKOIL-ASTRAKHANENERGO LUKOIL-Ecoenergo Rostov-on-Don Total: TIMAN-PECHORA OTHER LUKOIL ENERGY & GAS ROMANIA LUKOIL ENERGY & GAS BULGARIA ECOENERGO SMALL-SCALE GENERATING CUSTOMERS IN ROMANIA AND BULGARIA 4,568 17,145 Объекты возобновляемой энергетики Hrabrovo (Bulgaria) Station at LUKOIL Energy and Gas Bulgaria, Burgas (Bulgaria) 1,497 3,252 LUKOIL-Volgogradenergo Volgograd 12,004 14, Tcherga (Bulgaria) Wind power stations Capacity, MW Generation, mln KWh 4,922 5, Gebeleisis (Romania) Photovoltaic power stations 1,120 6,813 LUKOIL-Kubanenergo Krasnodar 731 4, , ,101 LUKOIL-Astrakhanenergo Astrakhan Land Power (Romania) LUKOIL- Stavropolenergo Kislovodsk Station at the Ploiesti Refinery (Romania) Capacity, MW Generation, mln KWh Installed electricity capacity, million kwh Electricity generation, million kwh Installed heat capacity, Gcal/hour Heat production, thousand Gcal LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 51

18 Structure of the power generation sector generation transport marketing Service LUKOIL- Astrakhanenergo LUKOILvolgogradenergo LUKOILrostovenergo LUKOILkubanenergo LUKOIL-ecoenergo LUKOILstavropolenergo international LUKOIL energy & gas Bulgaria LUKOIL energy & gas Romania LUKOILelectric networks LUKOIL-ТТК LUKOILenergoSERVICE Astrakhan energo SUPPLY company LUKOILenergo-engineering LUKOIL-TSUR Power generation will be an important factor for growth of Company cash flows and shareholder value in the long term. LUKOIL s power generating business comprises generation as well as delivery and sale of electrical energy and heat produced at power plants. The nucleus of the segment is Southern Generating Company (TGK-8), which was acquired by LUKOIL in 2008, but the segment also includes companies producing electricity and heat at Company refineries in Bulgaria and Romania. The segment provides energy both for the Company s own needs (in the exploration & production and refining & marketing segments) and for the needs of external power and heat customers in Russia s Southern and North Caucasus Federal Districts. Key priorities in the segment are therefore: the development of commercial generation (mainly reconstruction and modernization work) the development of local generation at the Company s oil producing and oil refining assets the development of renewable energy LUKOIL-Volgogradenergo LUKOIL-Volgogradenergo began operations in its present form in July The company consists of 6 thermal power plants: Volgograd Power Station, which is leased to the company Volgograd Khimprom, Volgograd Heat and Power Station (HPS) 2, Volga HPS, Volga HPS-2, Kamyshinskaya HPS, and Volgograd HPS-3, which is leased to the chemicals company Kaustik. LUKOIL-Rostovenergo LUKOIL-Rostovenergo includes Rostov HPS-2, 5 boiler facilities in the city of Rostov-on-Don, Volgodonsk HPS-1 and HPS-2, as well Kamenskaya HPS in the town of Kamensk-Shakhtinsky (currently out of operation). Three gas piston units with total capacity of 5.3 MW have been in operation since 2013 at the RK-3 boiler facility in Rostov-on-Don. The reconstruction of two turbines at Rostov Power Station-2 is planned in the medium-term, which will increase electric capacity by 40 MW and heat power by 80 Gcal/hour (completion scheduled in 2015). LUKOIL-Kubanenergo LUKOIL-Kubanenergo began operations in its present form in July The company s generating capacities are located in Krasnodar Territory and include a 410-megawatt combined cycle generating facility and Krasnodar HPS. There are plans to optimize the operating regime of Krasnodar HPS in the medium-term in order to improve efficiency (completion is scheduled in 2016). Commercial generation The strategy for development of commercial power generating business (thermal power stations operating on the wholesale electricity market) is focused on projects to improve the economic efficiency and reliability of industrial facilities, as well as on measures for the optimization of existing boiler facilities and power stations. A number of combined-cycle plants have already been launched and are operating successfully as part of the guaranteed capacity contract, to which LUKOIL is party. These include a 110MW CCGT, a 235MW CCGT (first phase with 120MW and second phase with 115MW) in Astrakhan, a 410MW CCGT in Krasnodar, and a 135MW CCGT, which was recently commissioned in Budennovsk (Stavropol Region). LUKOIL-Astrakhanenergo LUKOIL-Astrakhanenergo began operations in its present form in July The company includes a 110 MW combined-cycle facility, Astrakhan HPS-2 as well as 25 boiler facilities in the city of Astrakhan. Construction of a 235MW CCGT at the Tsentralnaya boiler facility was completed in

19 LUKOIL-Stavropolenergo LUKOIL-Stavropolenergo owns Kislovodsk HPS and 1 boiler facility. Three gas-piston aggregates with total 5.3 MW capacity have been in operation at the boiler facility since Construction of a 135 MW CCGT was completed in Budennovsk in LUKOIL Energy & Gas Bulgaria The company was spun off from LUKOIL Neftochim Burgas (the Burgas Refinery). It began operations in its current form in Since 2011 it has included a photovoltaic generating station with 1.25 MW capacity. LUKOIL Energy & Gas Romania The company was spun-off from Petrotel-LUKOIL. Since 2014 the company has included a photovoltaic power station with 9 MW capacity. The station is located at unused areas belonging to LUKOIL s Petrotel Refinery. Small-scale generating Development of the Group s own small-scale electricity generating facilities at fields enables substantial reduction of electricity purchases and increases the rate of use of associated gas through gas-fired electricity generation. The main generating facilities under construction as part of LUKOIL s small-scale generating programme are as follows: A 200 MW CCGT installation at the Perm Refinery Usa 125 MW CCGT Yarega 100 MW CCGT LUKOIL has small-scale generating capacity of 678 MW. In 2014 the Group generated 3,273 mln kwh of electricity at its own generating stations. Generating facility attached to the ore processing plant at the V. Grib diamond mine Parameter Size Installed electricity capacity, MW 26 Installed heat capacity, Gcal/hour 28.9 Per unit expenditure of conditional fuel, 285 tonnes of conditional fuel/kwh Designed for power and heat supply to facilities of the ore-processing plant at the V. Grib diamond mine. Basic equipment: 5 diesel generator sets (5.2 MW); 2 Thermotekhnik-TT100 water boilers (5 MW); 2 Thermotekhnik-TT200 steam boilers for processing of 2 tonnes per hour. Main fuel M100 fuel oil (diesel as reserve). The station was commissioned in Renewable energy Most of the Group s renewable energy assets are located in Russia (four hydroelectric stations with total installed capacity of MW, which produced 865 mln kwh of electricity in 2014), Bulgaria and Romania (wind farms 1 with capacity of 208 MW, which produced 536 mln kwh of power in 2014). A photovoltaic plant with 9MW capacity was commissioned at the Ploiesti Refinery in Romania in 2014 and the Land Power wind farm with 84 MW capacity was also commissioned in Romania (electricity generation at the Group s wind farms increased by 71% in 2014). The electricity produced at photovoltaic stations and wind farms in Romania is supplied to the national grid and paid for under a special scheme. All the generated electricity is sold on standard terms and green certificates are issued, which can be sold on a specialized market, significantly improving economic efficiency. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia 1 The LUKERG Renew joint venture (50-50 owned by ERG Renew and LUKOIL-Ecoenergo). 53