EXPLORATION AND PRODUCTION

Transcription

1 EXPLORATION AND PRODUCTION Norway Russia 15, Romania Iraq Kazakhstan Uzbekistan Azerbaijan Sierra Leone 7 2 Egypt Saudi Arabia Côte d Ivoire Cameroon Exploration (land) Exploration (shelf) Oil, gas & condensate production Production (shelf) Proved hydrocarbon reserves as at 31 December 2014, million boe 17, Marketable hydrocarbon production in 2014, million boe Key highlights in E&P segment, $ million Item Change (14/13), % Revenue 45,666 46, EBITDA 15,395 13, Net income 7,427 7, Capex 1 11,882 11, Including non-cash items and advances. Proved hydrocarbon reserves Production of marketable hydrocarbons Average headcount in E&P segment 6

2 LUKOIL in the World RESERVES 2 nd in the world among non-government companies by proved hydrocarbon reserves Proved hydrocarbon reserves of the world s largest non-government oil and gas companies ( ), bln boe Countries where LUKOIL has proved oil reserves ( ) Countries where LUKOIL has proved gas reserves ( ) of world proved oil 1%reserves Proved hydrocarbon reserves by country ( ), bln boe Proved unconventional hydrocarbons reserves ( ) LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

3 PRODUCTION 5 th in the world among non-government companies by hydrocarbon production of world oil 2%production Production of marketable hydrocarbons by the world s largest non-government oil and gas companies, mln boe per day 1 Production of marketable hydrocarbons by country (2014), mln boe per day Countries where LUKOIL produces oil and liquid hydrocarbons (2014) Countries where LUKOIL produces marketable gas (2014) 1 Hydrocarbon volumes are calculated as the sum of crude oil, liquids and marketable gas, translated from th. ft³ to boe at a rate of 6. 8

4 LUKOIL in Russia Breakdown of LUKOIL s proved oil reserves, % Breakdown of oil production by LUKOIL, % Share of oil wells, which are out of production, % The share of Company oil wells, which are out of production, is lower than the Russian average. LUKOIL share of crude oil production in Russia, % Breakdown of LUKOIL s proved gas reserves, % Water cut, % Breakdown of marketable gas production by LUKOIL, % Breakdown of LUKOIL oil production wells (2014) Growth of the water cut at depleted oil fields is reducing output levels in traditional regions. However, the water cut in Company operations is lower than the average for Russia. Breakdown of LUKOIL oil production wells in use Russian LUKOIL production wells in Russia as a share of all production wells in Russia, % LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

5 MARKETING OF OIL AND GAS PRODUCTION OF OIL AND GAS WESTERN SIBERIA URALS VOLGA TIMAN-PECHORA OTHER INTERNATIONAL PROJECTS OIL REFINIG PETROCHEMICALS GAS PROCESSING POWER GENERATION Exploration and production of oil and gas are central to the business of LUKOIL Group and provide most of the Company s value. LUKOIL has a quality portfolio of exploration and production assets, which are well diversified geographically, by degree of depletion and by reserve type. Main indicators in ,594 Proved gas reserves, bcf 23,946 Proved hydrocarbon reserves, mln boe 17,585 Liquids production, 727 Marketable gas production, mcm 19,968 Production of marketable hydrocarbons, th. boe per day 2,314 Replacement of production by new reserves, % 121 Net income in Exploration and Production, $ mln 7,427 Capital expenditures in Exploration and Production, $ mln. 11,882 Average personnel numbers in Exploration and Production, th. people 34.7 Annual Report 2014, р. 18 Analyst Databook, р. 4 Geography LUKOIL is implementing oil and gas exploration and production projects in 12 countries. Most of this business is concentrated in 4 federal districts of the Russian Federation: North-West (Nenets Autonomous District, Komi Republic and Kaliningrad Region), the Volga (Perm Region and the Republic of Tatarstan), the Urals (Yamal-Nenets Autonomous District and Khanty-Mansiysk Autonomous District) and South (Volgograd and Astrakhan Regions and the Republic of Kalmykia). Russia accounts for 90% of the Company s proved reserves and 87% of its production of marketable hydrocarbons Outside Russia the Company is involved in oil and gas production projects in 6 countries. International projects represent 10.0% of the Company s proved reserves and 13.4% of its production of marketable hydrocarbons. Description of the resource base Most of the Company s proved oil reserves are located in traditional hydrocarbon production regions (Western Siberia, Urals, Volga), which have well-developed infrastructure. So the greater part of reserves in these regions are already in development and the development of remaining reserves does not require major capital expenditures. In total, 56% of the Company s proved hydrocarbon reserves are in developed category (including 63% of oil reserves and 32% of gas reserves). This reserve structure reflects large potential for increase of Group production capacity in the medium term, particularly production of gas. A significant portion of LUKOIL s proved reserves are located in new regions that require large investments (Timan-Pechora, North Caspian, Bolshekhetskaya Depression, Iraq, etc.). The probability of large hydrocarbon finds in these regions is high. The greater part of Company reserves are oil reserves (about 77% of total proved reserves and 78% of 3P reserves). Most of Company reserves are conventional. However, LUKOIL also has reserves of heavy oil, bitumen oil, and sour oil as well as shelf reserves and reserves in low-permeability reservoirs. The Company will use new technologies to speed up the commissioning of heavy oil reserves, which account for 4.4% of its proved hydrocarbon reserves and which are located at the Yaregskoye field in Timan-Pechora and in the Permian-Carbonaceous accumulation at the Usinsk field. The Company successfully develops these reserves by applying the latest technologies. Thermo-gravitational techniques, already in use at the Yaregskoye field, are similar to the SAGD technology, which is being applied to develop oil sands in Canada. 10

6 Exploration 3.4 bln boe increase of proved reserves from exploration and development for 5 years The main strategic objective of the Company is to increase its production potential through qualitative and quantitative enhancement of the resource base. The key tool for achieving this objective is exploration. LUKOIL works consistently to increase volumes of exploration work and to make that work more efficient. The Company has spent about $4.1 bln over the last 5 years on exploration work. Growth of proved reserves in the same period thanks to exploration and development work totaled 3.4 bln boe. The greater part of exploration work by the Company is concentrated in the Timan-Pechora oil and gas province, Western Siberia and the Volga region (including the Caspian Sea). LUKOIL discovered 14 fields in 2014 (13 oil and one oil and gas condensate), which is a record for the last 10 years, as well as 38 new accumulations at previously discovered fields. Hydrocarbon reserves Effective risk management has given the Company a diversified resource base. Proved hydrocarbon reserves at the end of 2014 were 17,585 mln boe, of which 7,669 mln boe (43.6%) were in new projects (undeveloped reserves), 1,759 mln boe (10.0%) were in international projects, 3,991 mln boe (22.7%) were gas, and 1,814 mln boe (10.3%) were unconventional reserves. The Russian Federation provides incentives for the development of unconventional reserves, including a zero rate of mineral extraction tax for certain reserve categories and tax reductions governed by reducing coefficients (both inscribed in law). Hydrocarbon production LUKOIL seeks to maximize the efficiency and profitability of its operations by improvement of its production indicators, careful selection of new projects and close control of production costs. Oil and liquids production Ensuring production growth in new projects and stabilization of production levels in established regions is a priority for LUKOIL. Most of production growth is expected to come from new Group projects in Iraq, the Urals, the Caspian Sea and Timan-Pechora. Stabilization of production levels in traditional regions will be ensured by bringing more reserves into development. Gas production LUKOIL is building its gas business in order to commercialize gas reserves and reduce the Company s exposure to price volatility on the international oil market. The Group is developing gas fields in the Bolshekhetskaya Depression (Yamal Peninsula), which is currently the Company s principal area of natural gas production. In the future, North Caspian fields and international projects will provide significant increase of gas production over and above outputs in the Bolshekhetskaya Depression. LUKOIL is targeting increase of the gas share in overall hydrocarbon production to 30% in the medium term. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

7 Shelf Projects Share of LUKOIL 12

8 Stationary platform Semi-submersible platform Deep ship LUKOIL has pioneered the development of offshore oil and gas fields in Russia. The history of this development began in 1995, when the company began large-scale exploration in the Caspian Sea, which would lead to the discovery of major oil fields (Yu. Korchagin, V. Filanovsky, etc.) and gas fields (Yu. Kuvykin, Khvalynskoye, etc.). In 1997, LUKOIL set about the development of the Kravtsovskoye field, which had been discovered in the Baltic Sea as early as 1983, 22.5 km from the coast of Kaliningrad Region. In 1999 the Red Barricades shipyard in Astrakhan completed work on the Astra jack-up rig. The rig was put into service in the same year to carry out exploration drilling in the Caspian Sea. On July 19, 2004 LUKOIL produced its first barrel of oil on the Russian shelf at the Kravtsovskoye field in the Baltic Sea. In 2010 LUKOIL began production at the Yu. Korchagin field in the Caspian Sea. Today LUKOIL Group is independently implementing shelf projects for the exploration and production of hydrocarbons in Russia, as well as taking part in such projects abroad in consortiums with leading international oil and gas companies. Proved shelf hydrocarbon reserves ( ) By the end of 2014 the Company was carrying out exploration work on the shelf of the Caspian and Baltic Seas in Russia, and was also taking part in shelf exploration projects in 5 foreign countries: Romania, Norway, Sierra Leone, Côte d Ivoire and Cameroon. The Company is producing oil and gas in Russian sectors of the Caspian and Baltic Seas, and also in Azerbaijan s offshore waters. Offshore platforms Shelf production of marketable hydrocarbons in 2014 More than 1 bln boe of proved and 2 bln boe of 3P hydrocarbon reserves at shelf fields Exploration and production of oil and gas at offshore fields requires the use of high-tech equipment installed on offshore platforms and vessels. Use of such equipment enables LUKOIL to carry out a full range of exploration and production operations while ensuring a high level of environmental and industrial safety. Specifically, the Company s offshore platforms in Russia respect a principle of zero discharge : all industrial and domestic waste is transported to shore for disposal. LUKOIL used the following offshore platforms and vessels during 2014: Structure of proved shelf hydrocarbon reserves ( ) LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

9 region RussIA, THE CASPIAN SEA RussIA, THE BALTIC SEA Azerbaijan, THE CASPIAN SEA Project The Yu. Korchagin field The Kravtsovskoye field Shakh Deniz Title platform Korchagin Ice-Resistant Rig Ice-Resistant Rig at the Kravtsovskoye Field Istigla Semi-submersible Drilling Rig Platform type Stationary Stationary Semi-submersible Water depth, m Platform weight, th. t Description The rig has been used for drilling and production at the Yu. Korchagin field since It consists of production and residential modules with a total weight of 17.5, connected by a bridge. The production module is 95.5 meters long and 72.2 meters wide and stands 86.6 meters above sea level. It is capable of drilling high-tech boreholes with depth in excess of 8 km. In 2015, well 108 was commissioned with total length of 8,005 meters and with vertical depth of only 1,565 meters. Work on the well set a world record for meters traveled with substantial bottom-hole displacement: 4.9 km in one drilling trip without lifting and lowering operations. The rig has been used for drilling and production at the Kravtsovskoye field since It consists of production and residential modules, connected by a bridge, with a 6.4 MW generating installation weighing more than 10. The production module is 52.2 meters long, 36.0 meters wide and 60.2 meters high. The platform is fixed and stands in water depth of 30 meters. It is capable of drilling to a depth of 3,000 meters. The rig was deployed for drilling and production in the Shakh Deniz project. It is 91.7 meters long, 64.0 meters wide, 53.9 meters high and weighs more than 15. The rig is semisubmersible and is designed for operations in water depth up to 700 meters, with drilling depth up to 8.1 km. Previous world record in this category was also set by LUKOIL in the Caspian Sea when Well 103 penetrated two oil-bearing strata for the first time in the history of the development of the Yu. Korchagin field. 14

10 Azerbaijan, THE CASPIAN SEA Alfa TPG-500 Heydar Aliyev semi-submersible rig ROMANIA, THE BLACK SEA Est Rapsodia Development Driller II Sierra Leone, Cote-d Ivoire Guinea Gulf SL CI-101, CI-401 Eirik Raude Stationary Semi-submersible Semi-submersible Semi-submersible 700 1,000 2,300 1, The rig was deployed for drilling at the Shakh Deniz project. It is 88 meters long, 102 meters wide and 9 meters high, and weighs 32. The rig was used in fixed mode at Shakh Deniz, but can also be used as a floating rig in water depths up to 700 meters, where it is capable of drilling wells up to 7 km deep with horizontal deviation in excess of 3 km. The rig was deployed for drilling and production at the Shakh Deniz project. It is meters long, 64.5 meters wide, 53.9 meters high and weighs 16. The rig is semisubmersible with drilling depth up to 9.1 km. The rig was used for prospecting and exploration drilling in the Est Rapsodia project, where it drilled the Helena-1X well. It is meters long, 87.8 meters wide, 69.5 meters high and weigh The rig is semi-submersible drilling to a depth up to 11.4 km. The rig was used for prospecting and exploration drilling in the SL block (Sierra Leone), CI-101 and CI-401 blocks (Cote-d Ivoire), where it drilled the Savannha-1X, Independence-2A and Capitan East-1X wells. The rig is meters long, 85.5 meters wide and 69.5 meters high and weighs 31. It is designed for drilling to a depth up to 10 km. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

11 Main production regions and fields RUSSIA Total 231 km of exploration drilling was carried out in Russia during 2014, 2D seismic exploration was 5,208 km and 3D seismic was 5,630 km 2. Spending on geological exploration in Russia was $692 mln. Oil production in Russia by LUKOIL Group increased by 1.0% in 2014 to 86.3 mln tonnes, of which 85.8 mln tonnes were produced by LUKOIL subsidiaries. LUKOIL subsidiaries and affiliates carried out hydrocarbon production at 464 fields in Russia during out in Western Siberia, current geological exploration in the region is marked by high efficiency and strong results. The Company s proved oil reserves in Western Siberia have decreased by 2.3% since 2010 due to high levels of depletion. The Company therefore makes extensive use of EOR methods in the region: hydrofracturing, drilling of sidetracks and horizontal wells, etc. Multi-level systems for monitoring of field development with use of high-tech geological models enable LUKOIL to constantly optimize its work in the region. Main fields of LUKOIL Group in Western Siberia Production drilling increased by 6.8% to 3,765 km in The number of oil production wells increased by 3.2% to 31,570 wells and 27,912 production wells were in use. A total of 1,199 new production wells were commissioned in Russia during the year. Analyst Databook, p. 4 Western Siberia The first oil field in Western Siberia was discovered in 1960 and industrial production of oil began there in Western Siberia is now the main oil production region in Russia. Most fields in the region are very large and located adjacent to one another. These features, and the presence of established transport infrastructure, significantly reduce development costs. KHANTY-MANSIYSK AUTONOMOUS DISTRICT Kamenny license area (eastern part of the Kamennaya area of the Krasnoleninskoye field) Khanty-Mansiysk YAMAL-NENETS AUTONOMOUS DISTRICT Noyabrsk Imilorskoye+West Imilorskoye Povkhovskoye Kogalymskoye Tevlinsko- Russkinskoye Kluchevoye North- Kechimovskoye Pokachevskoye Pokachevskoye Nivagalskoye Surgut Nefteyugansk South-Yagunskoye Druzhnoye Kogalym Nong-Yeganskoye Vat-Yeganskoye Langepas Uryevskoye Megion Nizhnevartovsk LUKOIL has been active in Western Siberia since the Company s foundation when three production companies in Western Siberia were united to create the state-owned oil company, LangepasUrayKogalymneft. LUKOIL operates in two autonomous districts of Western Siberia: Khanty-Mansiysk (mainly oil fields) and Yamal-Nenets (mainly gas deposits). Western Siberia is the Company s main oil production region (48.2% of LUKOIL Group oil production) and its main resource base (53.7% of the proved oil reserves of LUKOIL Group). 12 out of the Company s 18 biggest oil fields (with annual production over 1 mln tonnes in 2014) are located in Western Siberia. The largest of them is the Vat-Yeganskoye field with more than 1 bln barrels of proved oil reserves. LUKOIL carried out 25.0% of its exploration drilling in Western Siberia in Large volumes of geological exploration work in the region are necessary in order to replace reserves that are in development. Although a large amount of exploration has already been carried Khanty-Mansiysk Autonomous District Yugra Geological exploration The Company s proved hydrocarbon reserves to SEC standards in Western Siberia (not including the Bolshekhetskaya Depression), declined by 1.3% to 7.5 bln boe in A total of 13 new hydrocarbon accumulations were found at previously discovered fields. The main growth of recoverable oil reserves was obtained at 6 fields. Exploration drilling totaled 67 km in 2014 and 22 wells were completed, of which 19 were productive. The drilling success ratio was 86%. The Company shot 1,910 km of 2D seismic and 3,173 km 2 of 3D seismic in the region in Most of the work was at peripheral areas of large fields, and was aimed at detailing oil and gas contours and identifying oil saturation in strata prior to production drilling. 16

12 Production Western Siberia accounted for 48.2% of the Company s total crude oil production in The Company carried out works to maintain optimal oil decline rates in conditions of natural depletion of the field in Khanty-Mansiysk Autonomous District. The Company succeeded to reduce oil decline rates from 5.7% in 2009 to 2.8% in 2014 due to investments in improvement of reservoir pressure maintenance systems and increase in production drilling by 32% for 5 years. The Company is also working to launch new prospective projects in the region. Special attention is being paid to development of the Imilorskoye field, which entered production in 2014 and low-permeability reservoirs at the Vinogradov field. Tevlinsko-Russkinskoye Field Density, API , Sulfur content, % 1.04 Barrels per tonne 7.37 The Tevlinsko-Russkinskoye field is located 88 km north of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in Field development began in LUKOIL s license to develop the field runs until Tevlinsko-Russkinskoye is LUKOIL s largest field in Russia by levels of production. Vat-Yeganskoye Field Density, API ,350 1,032 Sulfur content, % 0.83 Barrels per tonne 7.35 The Vat-Yeganskoye field is located 30 km from the town of Kogalym and 140 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in Development began in LUKOIL s license for development of the field runs until Vat-Yeganskoye is LUKOIL s biggest field in Russia by proved reserves. Povkhovskoye Field Density, API , Sulfur content, % 0.6 Barrels per tonne 7.43 The Povkhovskoye field is located 170 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1972 and development began in LUKOIL s license for development of Povkhovskoye runs until Yuzhno-Yagunskoye Field Density, API , Sulfur content, % 0.78 Barrels per tonne 7.44 The Yuzhno-Yagunskoye field is located 165 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in Development began in LUKOIL s license for development of the field runs until Pokachevskoye field Density, API , Sulfur content, % 0.72 Barrels per tonne 7.37 The Pokachevskoye field is located to the west of Nizhnevartovsk, 100 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1970 and its development began in LUKOIL s license to develop the field runs until LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

13 Kogalymskoye Field Density, API , Sulfur content, % 0.64 Barrels per tonne 7.55 The Kogalymskoye field is located near the city of Surgut in Khanty- Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1972 and development began in LUKOIL s license to develop the field runs until Uryevskoye Field Density, API , Sulfur content, % 0.86 Barrels per tonne 7.40 The Uryevskoye field is located in near Nizhnevartovsk, 75 km north-west of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1971 and development began in LUKOIL s license to develop the field runs until Nong-Yeganskoye Field Density, API , Sulfur content, % 0.72 Barrels per tonne 7.43 The Nong-Eganskoe field is located to the west of Nizhnevartovsk, 100 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District, Western Siberia. The field was discovered in 1974 and development began in LUKOIL s license to develop the field runs until The field is showing strong production dynamics, despite its long period in development. Production increased by 61% over the last five years. Druzhnoye Field Density, API Sulfur content, % 0.89 Barrels per tonne 7.32 The Druzhnoye field is located 127 km north-east of the city of Surgut in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1981 and development began in LUKOIL s license to develop the field runs until Nivagalskoye Field Density, API , Sulfur content, % 0.92 Barrels per tonne 7.37 The Nivagalskoye field is located 114 km north-west of the city of Nizhnevartovsk in Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1981 and development began in LUKOIL s license to develop the field runs until Kamenny License Area (eastern part of the Kamennaya area of the Krasnoleninskoye field) Density, API Sulfur content, % 0.33 Barrels per tonne 7.56 The Kamenny license area (eastern part of the Kamennaya area of the Krasnoleninskoye field) is located in Oktyabrsk sub-district of Khanty-Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1962 and development began in LUKOIL s license to develop the field runs until

14 Kechimovskoye Field Density, API , Sulfur content, % 0.72 Barrels per tonne 7.36 The Kechimovskoye field is located near the city of Surgut in Khanty- Mansiysk Autonomous District (part of Tyumen Region), Western Siberia. The field was discovered in 1985 and development began in LUKOIL s license to develop the field runs until Vostochno-Perevalnoye Field Density, API , Sulfur content, % 0.5 Barrels per tonne 7.52 The Vostochno-Perevalnoye field is located on the border of Khanty- Mansiysk Autonomous District and Yamal-Nenets Autonomous District. The nearest settlements are Lyantor village (170 km), Kochevskoy village (75 km) and the city of Surgut (220 km). The field was discovered in 1990 and development began in LUKOIL s license to develop the field runs until Production dynamics at the field are strongly positive. Oil production has increased by 2.5 times in the last 5 years. Potochnoye Field Density, API , Sulfur content, % 1.0 Barrels per tonne 7.41 The Potochnoye field is located in Nizhnevartovsk sub-district of Khanty-Mansiysk Autonomous District (part of Tyumen Region), 30 km from the city of Langepas and 75 km from of the city of Nizhnevartovsk in Western Siberia. The field was discovered in 1974 and development began in LUKOIL s license to develop the field runs until Yamal-Nenets Autonomous District Fields in the Bolshekhetskaya Depression Marketable gas production, mcm Proved gas reserves, bcf 8,247 10,756 Bolshekhetskaya Depression fields are classified as prospective projects of the Group. The Company has been active in the region since its acquisition of Yamalneftegazdobycha in The Nakhodkinskoye field is the Company s principal operating gas asset. It was brought into production in LUKOIL plans to bring several gas fields comparable in size with Nakhodkinskoye into production in the future (the Khalmerpautinskoye, Pyakyakhinskoye and Yuzhno-Messoyakhskoye fields). The Nakhodkinskoye field accounts for the greater part of natural gas production by the Company in Russia (about 95%). Gas production there in 2014 was 8.3 bcm. Proved reserves as of the end of 2014 were 2.0 trillion feet 3 of gas. Gas from the field is delivered along a 117-km pipeline to the Yamburgskaya gas compression station, where it is fed into the Gazprom transport system. Under an agreement between LUKOIL and Gazprom, all of the gas produced at Nakhodkinskoye is bought by Gazprom. Work continues to prepare for the development of other fields in the Bolshekhetskaya Depression. LUKOIL began drilling work to gas condensate accumulations at the Pyakyakhinskoye field in Two drilling rigs have been deployed at the field. In July 2010 the first section of a gas turbine power station was brought into operation, 10-kilowatt aerial transmission cables were installed to carry power to two drilling pads, and a well was drilled to provide gas for energy generation. Marketable gas will be transported along an inter-field pipeline to a gas compressor station near the Nakhodkinskoye field and from there along the existing trunk gas pipeline to Yamburg Gas Compression Stations-1 and -2. Fields in the Bolshekhetskaya Depression Tazovskaya gulf YAMAL-NENETS AUTONOMOUS DISTRICT Yuzhno-Messoyahskoe Nakhodkinskoye N.-Khalmerpautinskoe Perekatnoye Pyakyakhinskoye Khalmerpautinskoe Tazovsky Salekaptskoe LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

15 Timan-Pechora Main LUKOIL fields in Timan-Pechora The Timan-Pechora oil & gas province has substantial potential for production growth, particularly associated with development of the Denisovskaya Depression and fields with heavy oil. LUKOIL plans to bring the heavy oil reserves of Timan-Pechora (about 4.4% of the Company s total proved reserves) into production more quickly by applying new technologies. Most of the Company s heavy oil reserves are located at the Yaregskoye and Usinskoye fields (both located in Timan-Pechora). LUKOIL became active in the region in 1999 with the acquisition of a controlling stake in KomiTEK. In 2001 LUKOIL bought controlling stakes in Arkhangelskgeoldobycha, Kharyaganeft, Bitran, Baitek-Silur, and AmKomi. Timan-Pechora now represents 17.7% of the Group s proved oil reserves and 16.4% of oil production. The southern part of Timan-Pechora (the Komi Republic) has developed infrastructure and well-explored reserves, most of which are already in production. By contrast, the northern part (Nenets Autonomous District) has high reserve potential, but needs major exploration and development investments due to its under-developed infrastructure. A new oil terminal was built near the village of Varandey on the Barents Sea in 2000 in order to address the growth of production and lack of developed infrastructure in the region. The terminal can handle oil from Timan-Pechora all the year round and supply it to export markets, notably the US market. The terminal was recommissioned in mid-2008 following increase of its annual capacity to 12 mln tonnes of oil. In 2011, LUKOIL and Bashneft set up a joint venture to develop the Trebs and Titov oil fields. LUKOIL took a 25.1% interest in the JV. LUKOIL s share of proved oil reserves at the fields at the end of 2014 was 27.1 and the Company s share in oil production in 2014 was 137,000 tonnes. Geological exploration 3 fields were discovered in the region in Exploration drilling amounted to 45 km and 8 wells were completed, all of which were productive (the drilling success ratio was 100%). 771 km of 2D seismic and 964 km² of 3D seismic work were carried out to improve the geological models. 20 Verkhnevolvynsk Vozeiskoye Vozei Pripoliarny R. Trebs & A. Titov Kyrtaelskoye Yuzhno-Shapkinskoye Kharyaginskoye Tedinskoye NENETS AUTONOMOUS DISTRICT & A. Titov Usinskoye Kyrtaelskoye Michayel Yuzhnoye Khylchuyu Tedinskoye Usinsk Ust-Usa NENETS Parma AUTONOMOUS DISTRICT VARANDEY Yuzhnoye Khylchuyu VARANDEY REPUBLIC R. Trebs OF KOMI Pashshorskoye Yuzhno-Shapkinskoye Production Kharyaginskoye The Pashshorskoye Company achieved impressive results in Timan-Pechora during 2014: oil production grew by 4.7%. Total production in Timan-Pechora reached 16.0 mln tonnes. The main high-potential projects in the region are fields in the Denisovskaya Depression and the development of heavy oil reserves at the Yaregskoye and Usinskoye fields. In 2014 LUKOIL and Bashneft began to produce oil in the Bashneft-Polyus joint venture, which was set up with Bashneft for development of the Trebs and Titov oil fields. Usinskoye Field Density, API 20.9 Sulfur content, % 1.09 Barrels per tonne , The Usinskoye field is located in Usinsk district of the Komi Republic. The field was discovered in 1963 and development began in LUKOIL s license to develop the field runs until The Usinskoye field is one of LUKOIL s priority projects. The field s Permian-Carbonaceous strata contain very heavy oil, which requires heat treatment for extraction. The strata were brought into production in 1977 and proved reserves to SEC standards at the end of 2014 were 452 (3P reserves were 613 ). Most of the reserves at the deposit are being extracted by means of strata pressure. Extensive steam injection is being carried out at steam-heat impact zones in order to increase the recovery factor as well as steam-cycle treatment at some wells (combined with injection of chemical reagents in some cases).

16 Production technologies in use at the field include the construction of directional wells with completion above the natural screen and horizontal wells, sometimes employing steam-assisted gravity drainage (SAGD) and cyclical steam treatment in the horizontal section. Production has grown rapidly in the last 5 years (by 12.4%), including 4.0% growth in Yaregskoye field Density, API Sulfur content, % 0.9 Barrels per tonne 6.66 The field was discovered in 1932 and is located in the southern part of the Timan-Pechora oil province, in Ukhta District, part of the Komi Republic, 20 km from the town of Ukhta. The field includes two areas that are under development: the Yaregskaya and Lyaelskaya areas. Development began in LUKOIL s license to develop the Lyaelskaya area runs until The Yaregskoye field is among LUKOIL s priority projects and the Company is targeting a fourfold increase of production over 10 years, mainly by greater use of mining techniques. In its work at the Lyaelskaya area of the Yaregskoye field LUKOIL was the first company in the world to use counter-flow SAGD technology with wellbore length up to 1 km. In the future the technique will enable more than 117 of oil reserves to be brought into development. The Company drilled its first strictly directional well at the field with length of 800 meters in Drilling of such wells, which enable significant reduction in the amount of underground mining work, continued during Oil production at the field grew by 18.6% in Oshskoye field Density, API Sulfur content, % 0.1 Barrels per tonne 7.6 The Oshskoye oil field is situated in the Nenets Autonomous District, 168 km south-east of the town of Naryan-Mar, 130 km north-west of the town of Usinsk. Pilot production at the Oshskoye field started in 2007 and the license runs until Oil production at the field increased by 14.0% in Vozeiskoye Field Density, API Sulfur content, % 0.66 Barrels per tonne 7.53 The Vozeiskoye field is located in Usinsk District, 55 km from the town of Usinsk. The field was discovered in 1973 and development began in There are 4 license areas at the field. LUKOIL s license to develop the field runs until Vostochno-Lambeishorskoye Field Density, API , Sulfur content, % 0.43 Barrels per tonne 7.64 The field is situated in Usinsk Discrict of the Komi Republic, 115 km north-west of the town of Usinsk. The field was discovered in 2011 and pilot production began in The license for field development runs until The Vostochno-Lambeishorskoye field is among priority projects for LUKOIL Group. Oil production at the field increased by 76.1% in Kyrtaelskoye Field Density, API , Sulfur content, % 0.3 Barrels per tonne 7.59 The Kyrtaelskoye field is located in Pechora District of the Komi Republic, 15 km south-west of the town of Pechora, which is a large river port and railway hub on the left bank of the Pechora river. The nearest settlement is at Kozhva railway station, 10 km north of the field. The field was discovered in 1969 and development began in LUKOIL s license to develop the field runs until Oil production at the field grew by 1.5% in LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

17 Kharyaginskoye Field Density, API , Sulfur content, % 0.32 Barrels per tonne 7.54 The field was discovered in 1990 and development began in the same year. LUKOIL s license for development of the field runs until Pamyatno-Sasovskoye is the biggest oil field in Volgograd Region, and it has unique and favourable geophysical characteristics. Volga onshore, Pamyatno-Sasovskoye Field The Kharyaginskoye field is located in the Nenets Autonomous District, which is a part of Arkhangelsk Region. VOLGOGRAD REGION Saratov Engels The field was discovered in 1970 and development began in LUKOIL s license to develop the field runs until VOLGA Oil production started in the Volga region in the 1930s and the region remained the Russian leader by explored reserves and production levels until the end of the 1970s. Thanks to its long history of reserve development, the Volga region has a large amount of infrastructure in place and development of new fields does not require major expenditure. The Volga is a traditional oil & gas production region for LUKOIL. The Company has been producing there since a number of upstream companies in the region were transferred to LUKOIL by Russian government decree in The Volga region accounts for 6.7% of the Company s proved oil reserves and 7.1% of its oil production. The share of the region in total oil production by LUKOIL increased from 6.7% in 2013 to 7.1% in 2014 mainly thanks to production growth in the North Caspian and acquisition of the assets of Samara-Nafta. The Company s largest field in the region, the Pamyatno- Sasovskoye, produces very high-quality oil. Geological exploration (Volga onshore) Exploration drilling in the Volga region in 2014 (excluding the Caspian region) totaled 74 km. 20 wells were completed, 17 of which gave production. The drilling success ratio was 85%, enabling the discovery of 9 new oil fields in the region during LUKOIL carried out 679 km of 2D seismic and 654 km² of 3D seismic work in the region during Pamyatno-Sasovskoye Field Density, API , Sulfur content, % 0.27 Barrels per tonne 7.60 The North Caspian Fields Zhirnovsk Pamyatno-Sasovskoye Krasnoarmeysk LUKOIL came to the North Caspian in 1995 when companies with exploration licenses in the region were transferred to LUKOIL ownership. At that time the offshore Caspian was little explored, but probability of significant reserve finds was viewed as high. The Caspian Sea is highly environmentally sensitive. LUKOIL therefore carried out all necessary environmental studies before starting work there, and took care to install all necessary environmental protection measures, including compensatory and socio-environmental aspects. The Company also designed technology and technical solutions to ensure that geological exploration and drilling could be carried out on a zero-discharge basis. Geological exploration work carried out by LUKOIL from 1995 to 2007 led to discovery of 6 large fields: Yu. Korchagin (discovered in 2000); Khvalynskoye (2000); 170th kilometer (2001); Rakushechnoye (2001); Yu. Kuvyikin (2002); and V. Filanovsky (2005). The Caspian Oil Company, in which LUKOIL owns 49.89% (another 49.89% is owned by Rosneft and remaining shares belong to Gazprom), discovered the Zapadno-Rakushechoye field in 2008 and the Rybachye oil and gas condensate field in The Tsentralnoye field was discovered by TsentrCaspneftegaz, in which LUKOIL owns a 50% stake (50% is owned by Gazprom). Development of these fields will be the main factor in oil production growth by the Company in the mid-term. The largest part of the increase in oil output will come from the Yu. Korchagin and V. Filanovsky fields, which are being commissioned first of all The V. Filanovsky field is the largest field in the region and, unlike earlier discoveries, it is predominantly an oil field. The Pamyatno-Sasovskoye field is located in Zhirnovsky District of Volgograd Region, 130 km to the north of the city of Volgograd. 22

18 Geological exploration (Volga offshore) Proved hydrocarbon reserves in the region have increased by 252 mln boe over 5 years (+40% compared with 2010). Exploration drilling in the Volga offshore region was 4 km in 2014; 2D and 3D seismic work was not carried out during the year. Exploration well 11-Rakushechnaya at the Yu. Filanovsky field gave an oil inflow with daily rate of 149 barrels. The gas flow rate was 549 th. m³ per day, and gas flow from Volga-Neocomian strata was 245 th. m³. Production (Volga offshore) Oil production at the Yu. Korchagin field increased by 6.4% in 2014 compared with North Caspian fields Yu. Korchagin Field V. Filanovsky Makhachkala Rakushechnoye Yu.Korchagin KAZAKHSTAN Yu. Kuvykin Khvalynskoye Tsentralnaya Density, API , Sulfur content, % 0.1 Barrels per tonne 7.73 The Yu. Korchagin field is located in the Russian part of the Caspian Sea at sea depth of meters. Shortest distance to the shoreline (Volga river estuary) is about 120 km. The nearest sea ports are the city of Astrakhan (175 km) and Makhachkala (250 km); the nearest railway stations are Astrakhan, Makhachkala, Kizlyar and Derbent. The field was discovered in 2000 and development began in LUKOIL s license for development of the field runs until Oil production at the Yu. Korchagin field increased by 6.4% y-o-y in 2014 and reached 1,460. Well 103 was commissioned in 2014 and its construction set a new world record for drilling speed with significant bottomhole displacement (4.9 km in one trip without lowering and lifting operations). V. Filanovsky Field The V. Filanovsky field was discovered in 2005 in the Russian sector of the Caspian Sea, 190 km from Astrakhan at sea depth of 7-11 meters. The field is one of the largest offshore oil fields in Russia. Proved oil reserves at the end of 2014 were 423. (3P reserves were 745 of oil). Base supports for phase-1 platforms at the field were manufactured and installed in Upper structures for the central technical platform, living-quarters platform-1, ice-resistant fixed platform-1 and the riser block were delivered and installed at the site. Bridges and the flare boom were installed, and further work was carried out on upper structures of the ice-resistant fixed platform-1 and central technical platform. Progress was made in the laying of a 258 km oil and gas pipeline from the field. All offshore construction work is scheduled for completion in 2015, when drilling work will begin. URALS The Urals region, like the Volga, is an established oil & gas production area for the Company. LUKOIL began production in the Urals when a number of upstream companies in the region were transferred to the Company by a Russian government decree in Urals fields have relatively small reserves and are located at considerable distances from one another. However, presence of wellestablished transport infrastructure and refineries in the region greatly increases production efficiency. Use of EOR helps to increase recovery rates and production volumes. The Urals region accounted for 15.9% of Company proved oil reserves and 15.1% of oil production in Exploration Proved hydrocarbon reserves in the Urals region increased by 0.7% in 2014 to 2,303 mln boe. Exploration drilling totaled 20 km and 8 exploration wells were completed, all of which were productive. 2D seismic work amounted to 420 km and 806 km² of 3D was shot. Exploration work in Perm Territory is complicated by the presence of a large number of nature conservation zones and protected water zones in areas where there are large mineral reserves of potash and magnesium salts. The Company therefore uses special environmental protection technologies and techniques for seismic and drilling operations in order to comply with environmental legislation and the Company s own environmental policy. LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

19 Production Company oil production in the Urals region increased by 4.3% in 2014 to 14,688. The share of Urals production in total LUKOIL production was 15.1%. Production growth was achieved through production drilling and well interventions at production and injection wells (both active and inactive wells). Shagirtsko-Gozhanskoye Field Density, API Sulfur content, % 2.19 Barrels per tonne 7.1 Unvinskoye field in the Urals region PERM REGION Kudymkar Solikamsk Berezniki Unvinskoye The Shagirtsko-Gozhanskoye oil field extends over 2 license areas in Perm Territory, 26 km north-west of the village of Kueda. The field was discovered in 1954 and its development began in LUKOIL s license for development of the field runs until Sibirskoye Field Sidetracking with multihole completion has been successfully tested and deployed in the region, horizontal wells have been drilled with multizone hydrofracturing and use has been made of underbalanced drilling. Water flooding with physical and chemical regulation and use of a titanium coagulator has been successfully applied in order to maintain reservoir pressure. Unvinskoye Field Krasnokamsk Density, API , Sulfur content, % 0.50 Barrels per tonne 7.60 The Unvinskoye field is located in Usolsky District of Perm Region, 125 km north of the city of Perm. The field was discovered in 1980, and development began in 1981 LUKOIL s license for development of the field runs until The Unvinskoye field is one of the Company s biggest investment projects in Perm Territory by initial oil reserves. Oil production at Unvinskoye increased by 5.4% in 2014, even though the field is almost completely drilled over. Density, API Sulfur content, % 0.48 Barrels per tonne 7.58 The Sibirskoye oil field is situated in Perm Territory, 145 km north of the city of Perm. The field was discovered in 1986 and brought into pilot operation in LUKOIL s license for development of the field runs until Kaliningrad Region LUKOIL carried out geological exploration work in 2014 in Kaliningrad Region, both onshore and offshore (in the Baltic Sea). Total 7 km of drilling was carried out during the year. No seismic work was carried out. Two wells were completed and both were productive. This work led to the discovery in 2014 of an oil field at the D29 structure on the shelf of the Baltic Sea. Testing of exploration and appraisal well 1 gave a gushing oil inflow of 277 barrels per day. Work is being carried out on a geological model of the oil accumulation and reserve estimation at the D41 structure. 24

20 Kravtsovskoye Field Density, API Sulfur content, % 0.19 Barrels per tonne 7.62 The Kravtsovskoye field is located on the Russian shelf of the Baltic Sea, 23 km offshore, at a depth of meters. The field was discovered in 1983 and development work began in This is the first offshore field to be developed independently by a Russian oil company. LUKOIL s license to develop the field runs until The Baltic Sea is highly environmentally sensitive. LUKOIL therefore carries out drilling and production of oil at the Kravtsovskoye field from an ice-resistant stationary platform, using a zero-discharge principle. The Company also maintains constant satellite monitoring of the Baltic Sea. These unprecedented environmental security measures completely exclude any possible negative environmental impact. Oil from the field is brought ashore via an underwater pipeline and exported from a terminal at the port of Svetly. Kaliningrad Region, Kravtsovskoye field in the Baltic Sea Baltic Sea Baltiysk Svetlogorsk Kravtsovskoye Svetly Romanovo oil collector Kaliningrad LUKOIL on the world map Exploration and production Refining and marketing Tax Environment in Russia Reference Information Fact Book

21 INTERNATIONAL PROJECTS Asquisition of, or entry to international e&p projects 2014 Etinde (Cameroon) Sale of, or withdrawal from international e&p projects 2013 PL-708 & PL-719 (Norway) CI 504 (Cote d Ivoire) Tyub-Karagan & South Zhambai, South Zaburunye (Kazakhstan) 2012 SL-04 (Sierra Leone) Block 10 (Iraq) CI 524 (Cote d Ivoire) 2011 Hanoi Trough-02 (Vietnam) SL (Sierra Leone) Est Rapsodia & Trident (Romania) Condor (Colombia) Junin-3 (Venezuela) 2010 West Qurna-2 1 (Iraq) Atashsky (Kazakhstan) 2009 WEEM Extension (Egypt) D-222 (Yalama) (Azerbaijan) 2008 South-West Gissar and Central Ustyurt (Uzbekistan) Cape Three Points Deep Water (Ghana) 2007 CI 101 (Cote d Ivoire) CI 401 (Cote d Ivoire) 2006 CI 205 (Cote d Ivoire) South Zhambai, South Zaburunye (Kazakhstan) 2005 Arman, Karakuduk, North Buzachi & Kazakhoil-Aktobe (Kazakhstan) 2004 Tyub-Karagan and Atashsky (Kazakhstan) Junin-3 (Venezuela) Kandym Khauzak Shady & Kungrad (Uzbekistan) 2003 West Geisum (Egypt) North-East Geisum (Egypt) 2002 Condor(Colombia) WEEM (Egypt) 2001 Zykh-Govsany (Azerbaijan) 1998 D-222 (Yalama) (Azerbaijan) 1997 West Qurna-2 1 (Iraq) Karachaganak (Kazakhstan) 1996 Shakh-Deniz (Azerbaijan) 1995 Kumkol (Kazakhstan) Meleiha (Egypt) 1994 Аzery-Chirag-Guneshli (Azerbaijan) Aral (Uzbekistan) Block А (Saudi Arabia) Anaran 2 (Iran) Tengiz (Kazakhstan) West Geisum and North-East Geisum (Egypt) SL-04 (Sierra Leone) Cape Three Points Deep Water (Ghana) Hanoi Trough-02 (Vietnam) Zykh-Govsany (Azerbaijan) Аzery-Chirag-Guneshli (Azerbaijan) Junin-6 (Venezuela) 1 Mothballed in 2002, new agreement signed in Mothballed in Entry to international E&P projects or withdrawal from international E&P projects are stated as of agreements signing date. LUKOIL s international projects Iraq West Qurna-2 (75.0%) Block10 (60.0%) Sierra Leone SL (49.0%) Cote d Ivoire CI-205 (63.0%) CI-101 (56.66%) CI-401 (56.66%) CI-504 (65.0%) Romania Est Rapsodia and Trident (72.0%) Egypt WEEM Ext (50.0%) Mеleiha (24.0%) WEEM (100.0%) Norway PL-708 (20.0%) PL-719 (30.0%) Cameroon Etinde Saudi Arabia Block А (80%) Kazakhstan Karachaganak(13.5%) Tangiz(5.0%) Kumkol (50.0%) Kazakhoil-Aktobe(25.0%) North Buzachi(25.0%) Karakuduk(50.0%) Arman(50.0%) Kungrad (90.0%) Aral (33.3%) Azerbaijan Shakh-Deniz (10.0%) Uzbekistan Kandym-Khauzak-Shady (90.0%) South-West Gissar (100%) Exploration (land) Oil & gas production Exploration (shelf) Analyst Databook, p