Novatek Annual Report 2013

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FY2013 Annual Report · Novatek

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Creating
Value Added

Russia’s largest
independent natural gas producer

2013 ANNUAL REPORT

Creating
Value Added

ANNUAL REPORT 2013

CONTENTS

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Key Events 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Key Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Main Business Achievements 2013. . . . . . . . . . . . . . . . 16

Review of Operating Results. . . . . . . . . 46

Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Hydrocarbon Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Geological Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Field Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Hydrocarbon Production. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Yamal LNG Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Processing of Gas Condensate . . . . . . . . . . . . . . . . . . . . 52
Natural Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Liquid Hydrocarbon Sales . . . . . . . . . . . . . . . . . . . . . . . . 54

Environmental
and Social Responsibility . . . . . . . . . . . . . 55

Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . 55
Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Social Policy and Charity . . . . . . . . . . . . . . . . . . . . . . . . . 58

Management
and Corporate Governance . . . . . . . . . . . 58

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
General Meeting of Shareholders . . . . . . . . . . . . . . . . . 61
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Remuneration to Members of the Board
of Directors and Management Board . . . . . . . . . . . . . . 64
Internal Control and Audit . . . . . . . . . . . . . . . . . . . . . . . . 64
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Information Transparency . . . . . . . . . . . . . . . . . . . . . . . . 67

Additional Information . . . . . . . . . . . . . . . . 68

Major Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Information on Members of NOVATEK’s
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Information on Members of NOVATEK’s
Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Major Transactions and Related
Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Contact Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

NOVATEK is Russia’s largest independent
natural gas producer and the second-
largest natural gas producer in Russia.

12.5

bln boe of proved
hydrocarbon reserves
under SEC

62.2

bcm of natural gas
produced in 2013

of total Russian
natural gas
production

globally among publicly
traded companies by
proved natural gas
reserves under SEC

globally among publicly
traded companies by
natural gas production
volumes

18%

of total natural gas
deliveries to the
domestic market via
the UGSS

NOVATEK’s main businesses are exploration and production,
processing, transportation and marketing of natural gas and liquid
hydrocarbons. The Company’s primary production assets are
located in the Yamal-Nenets Autonomous Region (YNAO),
one of the largest gas regions in the world.

The Company’s main strategic priorities are: growth of the
resource base and eﬃ cient reserve management, maintaining
sustainable rates of growth of hydrocarbon production,
maintaining a low-cost structure, and optimizing and expanding
existing marketing channels, and creating new marketing
channels, including the future entry into the international market
for liqueﬁ ed natural gas.

FIELDS AND LICENSE AREAS
WITH COMMERCIAL PRODUCTION

1. Yurkharovskoye ﬁeld
2. East-Tarkosalinskoye ﬁeld
3. Khancheyskoye ﬁeld
4. Olimpiyskiy license area
5. Yumantilskiy license area
6. Samburgskiy license area
7. North-Urengoyskoye ﬁeld
7a. Eastern Dome
7b. Western Dome

PROSPECTIVE FIELDS
AND LICENSE AREAS

8. South-Tambeyskoye ﬁeld
9. Termokarstovoye ﬁeld
10. West-Yurkharovskoye ﬁeld
11. North-Khancheyskoye ﬁeld
12. Yarudeyskoye ﬁeld
13. Raduzhnoye ﬁeld
14. New Yurkharovskiy license area
15. West-Urengoiskiy license area
16. North-Yubileynoye ﬁeld
17. North-Russkiy license area
18. North-Russkoye ﬁeld
19. West-Tazovskiy license area
20. Dorogovskoye ﬁeld
21. Ukrainsko-Yubileynoye ﬁeld
22. Malo-Yamalskoye ﬁeld
23. West-Chaselskoye ﬁeld
24. Yevo-Yakhinskiy license area
25. Yaro-Yakhinskiy license area
26. North-Chaselskiy license area
27. Utrenneye ﬁeld
28. Geoﬁzicheskiy license area
29. North-Obskiy license area
30. East-Tambeyskiy license area
31. Severo-Tasiyskiy license area
32. East-Tazovskoye ﬁeld

gas condensate pipelines of NOVATEK

trunk gas pipelines

Creating Value Added
Creating Value Added

Ust-Luga

Yamal-Nenets
Autonomous Region

RUSSIA

Our assets are located in the Yamal-
Nenets Autonomous Region of the
Russian Federation – one of the largest
regions in the world in terms of gas
reserves and production volumes.

We beneﬁ t from a large, highly
concentrated conventional resource
base with enormous exploration
potential.

Our reserves enable us to maintain
sustainably high hydrocarbon
production growth rates.

We have one of the lowest ﬁ nding
anddevelopment as well as li(cid:2) ing costs
in the global oil & gas industry.

We created a fully integrated chain
for production, transportation and
processing of gas condensate.

NOVATEK

NOVATEK Annual Report 2013

YAMAL PENINSULA

GYDAN PENINSULA

Yamburg

Purovsky Plant
23

Nadym

NOVATEK

Creating Value Added

LETTER
TO SHAREHOLDERS

Dear Shareholders,

CREATING SHAREHOLDER VALUE is a lo(cid:3) y business
goal but it must be accompanied with a focus toward
corporate responsibility. At NOVATEK, we maintain
a strict and rigid adherence to the highest Health,
Safety and Environmental standards as a primary goal
in achieving our development strategy, and besides
eﬃ ciently growing our reserve base and hydrocarbon
production volumes, increasing the value added of our
products is of equal importance for achieving our stra-
tegic goal. In the current reporting year, we delivered
another stellar growth in our ﬁ nancial and operational
results, while strengthening our competitive position
and creating a strong base for future growth.

Firstly, we completed expanding our integrated value
chain for gas condensate production taking into
account the estimated growth in gas condensate
production volumes, thus maximizing our proﬁ tability
in this important value enhancing business segment.
Secondly, we substantially increased the share of
end-customers in our overall gas sales volumes mix,
which raises our margins and enhances sustainability
of our business.

The majority of our hydrocarbon production is geolog-
ically classiﬁ ed as wet gas, i.e. natural gas containing
gas condensate. Our Purovsky gas condensate process-
ing plant creates value added via eﬃ cient stabilization
of our unstable gas condensate produced at our ﬁ elds,
and is the central element in our production value
chain. In the 2014 to 2015 time period, we plan to
launch several large gas ﬁ elds containing a high con-
densate concentration mix, measured in grams of con-
centration per cubic meter of production in the natural
gas stream, which will result in a rapid and substantial
increase in our overall gas condensate production.
To get ready for this planned production growth we
successfully completed the expansion of the Purovsky
plant capacity from ﬁ ve million tons to 11 million
tons, enabling us to process all of the additional gas
condensate volumes. During 2013, our gas condensate
throughput at the Purovsky processing plant increased
by 21% to 4.9 mln tons.

NOVATEK

ALEXANDER NATALENKO
Chairman of the Board
of Directors

LEONID MIKHELSON
Chairman
of the Management Board

MARK GYETVAY
Chief Financial Oﬃ cer

NOVATEK Annual Report 2013

The oﬃ cial launch of the stable gas condensate transshipment and
fractionation complex with overall processing capacity of six million
tons per annum at the all-seasonal Baltic port of Ust-Luga was one
of the most important corporate events in the current reporting year.
The Ust-Luga complex is an integral component of our fully integrated
production chain, thereby allowing us to maximize our value-enhancing
margins by fractionating our stable gas condensate into constituent
petroleum products as well as diversifying our overall customer base.

events in the current reporting year. The Ust-Luga
complex is an integral component of our fully integrated
production chain, thereby allowing us to maximize our
value-enhancing margins by fractionating our stable
gas condensate into constituent petroleum products
as well as diversifying our overall customer base. The
commencement of operations at the Ust-Luga complex
replaces the export of stable gas condensate by sales
of more valuable basket of products, including light and
heavy naphtha, diesel and jet fuel, fuel oil and bunker
fuel. By selling a full slate of reﬁ ned petroleum products
instead of raw feedstock we create additional value
added, diversify our client base and expand our sales
geography. Moreover, the convenient location of the
Ust-Luga complex allows us to save on transportation,
including railroad costs to supply the feedstock and the
freight rates to ship the products. In 2013, we processed
1.9 million tons of stable gas condensate into reﬁ ned
petroleum products with the ﬁ rst and second phases
launched in June and October 2013, respectively.

In the reporting year ﬁ rst production was successfully
launched at the Eastern Dome of the North-Uren-
goyskoye ﬁ eld, which will allow achieving project daily
production rates already in 2014. We were also very
busy preparing several other new ﬁ elds for the start
of commercial production, including the Urengoyskoye,
Yaro-Yakhinskoye, Termokarstovoye and Yarudeys-
koye ﬁ elds, which, besides additional gas production
volumes, will account for most of our estimated growth
in liquid hydrocarbon production in the mid-term. We
expect this growth to contribute substantially to our
ﬁ nancial results subject to a stable and favorable price
environment on both the international and domestic
hydrocarbon markets.

At the end of 2013, we concluded two major deals on
an asset acquisition and an asset swap. The combined
transactions resulted in an increase in our equity stake
in the SeverEnergia joint venture from 25.5 to 59.8%
and the divestment of our 51% equity stake in the Sib-
ne(cid:3) egas joint venture. The changes in our asset portfo-
lio allows us to concentrate on developing ﬁ elds rich in
liquid hydrocarbons, which complements our long-term
strategy of increasing the proportion of liquids in our
production and sales mix, taking into account our exist-
ing infrastructure for transportation, stabilization and
fractionation of stable gas condensate.

Over the past several years we began a gradual shi(cid:3)
in our marketing strategy to be closer to the end-con-
sumers in the market. The successful implementation
of our marketing strategy resulted in a substantial
increase in the proportional share of end-customers in
our overall gas sales volumes mix, increasing to 89%,
or by 20 percentage points as compared with 2012.
During the reporting year, we supplied natural gas to
29 regions within Russia and eﬀ ectively expanded our
market presence in the Moscow, Vologda, Kostroma,
Tyumen and Perm regions. The growth in natural gas
sales volumes as well as the change in geography of
sales and the percentage increase in end-customers
were mainly due to several major marketing contracts
concluded in 2012.

Our high-quality hydrocarbon reserve base, which is
one of our main competitive advantages, is concen-
trated in the Yamal-Nenets Autonomous Region of
Russia, one of the world’s largest natural gas regions
with well-developed infrastructure. This enables us to
consistently report one of the lowest cost levels in the

NOVATEK

Creating Value Added

In the reporting year ﬁ rst production was successfully launched at
the Eastern Dome of the North-Urengoyskoye ﬁ eld, which will allow
achieving project daily production rates already in 2014. We were also
very busy preparing several other new ﬁ elds for the start of commercial
production, including the Urengoyskoye, Yaro-Yakhinskoye,
Termokarstovoye and Yarudeyskoye ﬁ elds, which, besides additional
gas production volumes, will account for most of our estimated
growth in liquid hydrocarbon production in the mid-term. We expect
this growth to contribute substantially to our ﬁ nancial results subject
to a stable and favorable price environment on both the international
and domestic hydrocarbon markets.

oil and gas industry and remain competitive in various
pricing scenarios. In the last three years our reserve
replacement costs were RR 61.24 (USD 1.95) per boe
and our li(cid:3) ing costs were RR 18.8 (USD 0.59) per boe.

In 2013, we continued to expand our reserve base and
deliver sustainable growth in hydrocarbon production.
We fully replaced our proved reserves despite selling
a 20% stake in the Yamal LNG project and divesting
our 51% stake in Sibne(cid:3) egas. The reserve growth was
due to successful exploration works, production drilling
at our ﬁ elds, acquisition of a license for the East-
Tazovskoye ﬁ eld and an increase in our equity stake in
the SeverEnergia Joint Venture. Our reserve replace-
ment ratio in 2013 aggregated 130%, and our proved
reserve life was 29 years as at the end of the year. The
quality of our reserve base enables us to look into the
future with conﬁ dence and continue eﬃ ciently growing
our hydrocarbon production volumes.

Our gross natural gas production increased by 8.5%
year-on-year to exceed 62 billion cubic meters, while our
production of liquid hydrocarbons grew by 11.4% to 4.8
million tons, including crude oil production of 755 thou-
sand tons, which represented a 46% increase year-on-
year. The growth in our natural gas and gas condensate
production was primarily due to expansion of production
capacity at the Yurkharovskoye ﬁ eld and the acquisition
of an equity stake in Nortgas Joint Venture late in 2012,
as well as the launch of two stages of the Samburg-
skoye ﬁ eld during 2012. The notable increase in crude oil

NOVATEK

production was fully organic and mainly due to ongoing
drilling eﬀ orts at the East-Tarkosalinskoye ﬁ eld.

Looking ahead, our next major strategic step is the
planned entry into the market for liqueﬁ ed natural gas
(LNG), which will accrete future value added due to the
commencement of export sales of LNG to the interna-
tional markets. The production of LNG is the most eﬃ -
cient solution to monetize our large-scale conventional
reserve base on the Yamal peninsula, where, together
with international partners Total and CNPC, we will
implement the Yamal LNG project.

Yamal LNG beneﬁ ts from a range of fundamental com-
petitive advantages, including high-quality conventional
reserve base deﬁ ning very low level of development
and li(cid:3) ing costs as well as convenient geographical
location resulting in access to main consuming markets
and high eﬃ ciency of the liquefaction process due to
cold ambient climate. The Yamal LNG project is one of
the most cost competitive projects among all the LNG
projects currently implemented in the world, and the
Yamal peninsula is one of the few areas globally oﬀ er-
ing project scalability due to the enormous resource
base of conventional natural gas.

The Yamal LNG project is truly a transformational
project for NOVATEK, and based on long-term supply
estimates, the market will remain in deﬁ cit as custom-
ers increase their proportional share of natural gas in
their overall energy balances. We believe the timing of

NOVATEK Annual Report 2013

environmental integrity and industrial safety as well
as supporting the regional development in the Far
North of Russia, where our core operational assets are
located. We would never reach the level of success we
have achieved without the dedication and commitment
of our employees, who are truly considered one of our
key assets and the foundation for implementing our
corporate strategy.

To create value for our shareholders, we employ all of
our capabilities and resources to strengthen the com-
petitive advantages of NOVATEK to achieve sustainable
operating and ﬁ nancial results in the markets where
we operate. On behalf of the Board of Directors and
Management, we are pleased to present the Annual
report of NOVATEK for 2013 and we would like to
thank our valued shareholders for your conﬁ dence in
the Company and our long-term strategic plans.

Two thousand and fourteen is a special year for the
Company as we celebrate our 20th Anniversary, and
we believe we have built a world-class natural gas
company that has the capabilities and resources to
continue delivering eﬃ cient growth in the future.

Alexander Natalenko

Leonid Mikhelson

our planned launch of Yamal LNG will capture market
share in key consuming markets, including the markets
of the Asian Paciﬁ c Region.

During 2013, we demonstrated good progress in the
implementation of the Yamal LNG project according
to the project’s plan. The ﬁ nal investment decision,
or FID, was made at the end of the year, production
drilling at the South-Tambeyskoye ﬁ eld and backﬁ lling
for the LNG plant began, dredging of the loading area
was completed in the port of Sabetta and dredging of
the harbor channel was underway, operation of the
materials oﬄ oading berths began enabling year-round
supplies of construction cargoes, ﬁ rst stage of the
construction housing was completed as well as all the
basic infrastructure required to start main construction
works. Engineering was ﬁ nalized and positive state
environmental and expert approvals received, includ-
ing construction permit. In addition, the main tenders
were held and the EPC contractors as well as key
sub-contractors were selected, main contracts for the
equipment and construction works were concluded, and
more than 75% of LNG output was contracted.

We concluded the sale of a 20% stake in the Yamal
LNG project to China National Petroleum Corporation
(CNPC), who became our second international partner
in the project. In addition to the direct equity stake in
the project, CNPC will buy at least three million tons of
LNG per annum thus providing the project with access
to the fast growing Chinese market. Cooperation with
CNCPC also opens access to ﬁ nancing from the Chinese
ﬁ nancial institutions. We believe the current well bal-
anced shareholder structure of Yamal LNG allows us
to successfully and timely complete the project, which
has already entered into the active construction stage.

We continued to report strong ﬁ nancial results in
2013 underpinned by our commitment and focus on
cost controls, prudent investment decisions, and com-
mensurate with the growth proﬁ le of our operations.
Our consolidated IFRS earnings per share increased
to RR 36.31, or by 59% compared to the level of 2012.
Our earnings adjusted for the eﬀ ect of asset sale and
swap increased by 15% to RR 26.35 per share. As a
result, the Board of Directors recommended the Gen-
eral Meeting of Shareholders to approve dividends for
the reporting year at RR 7.89 per share, which is 15%
more than dividends for 2012.

In all of our activities, we adhere to the highest stan-
dards of social responsibility and are committed to

Mark Gyetvay

NOVATEK

Creating Value Added

STRATEGY

Our strategic priorities are:

• Growth of the resource base and eﬃ cient reserve

management;

• Maintaining sustainable rates of growth of

hydrocarbon production;

• Maintaining a low-cost structure; and
• Optimizing and expanding existing marketing

channels, and creating new marketing channels,
including the future entry into the international
market for liqueﬁ ed natural gas.

t
n
e
m
p
o
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v
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D
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P r u d e n t I nvestment Decisions
crease hydro c a r b
productio n

low co

s
t s

ain

a
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Grow resource base

i
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t
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xpand
nels

Conservative Financ i a l

i c i e

P o l

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e s sin g capacities
E x pand
s

NOVATEK’s success in strategy implementation is based
on competitive advantages which include: size and
structure of the resource base; existing infrastructure
close to core producing ﬁ elds; a well-developed cus-
tomer base for natural gas sales; own facilities for gas
condensate processing and exports; and developed mar-
keting channels for liqueﬁ ed petroleum gases (LPG). Our
high level of operational ﬂ exibility and our consistent

and eﬃ cient use of leading edge technologies in produc-
tion and processing practices as well as our adherence
to sound and prudent business management support our
competitive position.

Our commitment to social responsibility and to observing
the latest environmental, health and safety standards
are integral parts of NOVATEK’s development strategy.

NOVATEK

KEY EVENTS 2013

Launch of the stable gas
condensate transshipment
and fractionation complex
at the all-seasonal Baltic port
of Ust-Luga with overall
processing capacity of six
million tons per annum

(p. 24, p. 53)

Completion of the
expansion at the
Purovsky plant capacity
from five million tons
to 11 million tons per
annum

(p. 20, p. 52)

Increase in NOVATEK’s
effective share in the
SeverEnergia joint
venture (subsequently
renamed “ArcticGas”)
from 25.5% to 59.8%
as a result of an asset
acquisition and an asset
swap deals

(p. 46)

Launch of the Eastern
Dome of the
North-Urengoyskoye field
developed by the Nortgas
joint venture

(p. 49)

Sale of a 20% direct equity
stake in the Yamal LNG
project to CNPC

(p. 36, p. 51)

Launch of the Dobrovolskoye
field and part of the
Urengoyskoye field located
within the Olimpiyskiy
license area

(p. 49)

Successful placement
of a four-year rouble
denominated Eurobond issue
for an aggregate amount
of RR 14.0 billion

Winning an auction
for exploration and production
license for the
East-Tazovskoye field

(p. 46)

Creating Value Added

KEY INDICATORS

Unit

2012

2013

Change

FINANCIAL INDICATORS

Total revenues (1)

RR mln

210,973

298,158

41.3%

Proﬁ t from operations (2)

RR mln

85,394

106,277

24.5%

EBITDA (2)

RR mln

95,166

121,791

28.0%

Proﬁ t attributable to shareholders of OAO NOVATEK (2)

RR mln

69,518

79,825

14.8%

Earnings per share (2)

22.91

26.35

15.0%

Net cash provided by operating activities

RR mln

75,825

88,525

16.7%

Capital expenditures (3)

RR mln

43,554

59,254

36.0%

Free cash ﬂ ow

Net debt

RR mln

32,271

29,271

(9.3)%

RR mln

114,067

157,732

38.3%

Total debt to total equity

0.45

0.44

(2.2)%

OPERATING INDICATORS

Proved natural gas reserves (SEC)

Proved liquid hydrocarbon reserves (SEC)

bcm

mmt

1,758

1,740

(1.0)%

106

134

26.4%

Total hydrocarbon reserves (SEC)

mmboe

12,394

12,537

Gross production of natural gas

Gross production of liquid hydrocarbons

POSITIONS IN THE RUSSIAN INDUSTRY

Share in natural gas production

Share in gas deliveries to the domestic market via UGSS

bcm

1.2%

8.5%

57.32

62.22

4,287

4,774

11.4%

8.8%

9.3%

0.5 p.p

16.3%

18.4%

2.1 p.p

(1) Net of VAT, export duties, excise and fuel taxes.
(2) Adjusted for the eﬀ ect on disposal of interests in subsidiaries and joint ventures.
(3) Capital expenditures represent additions to property, plant and equipment excluding payments for mineral licenses.

NOVATEK

NOVATEK Annual Report 2013

Total proved hydrocarbon reserves (SEC),
mmboe

Proved natural gas reserves (SEC),
bcm

12,394

12,537

1,758

1,740

8,088

6,853

9,393

967

1,144

1,321

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

Proved developed

Proved undeveloped

Proved developed

Proved undeveloped

Gross natural gas production,
bcm

Gross liquids production,
mmt

53.5

57.3

62.2

3.6

3.0

4.1

4.3

4.8

32.8

37.8

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

Gas condensate

Crude oil

EBITDA*, RR bln

56.2

39.5

95.2

121.8

85.4

Proﬁt attributable to shareholders
of OAO NOVATEK*, RR bln

79.8

69.5

56.7

39.2

26.0

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

* Adjusted for the eﬀ ect on disposal of interests in subsidiaries and joint ventures.

NOVATEK

Delivering Sustainable
Production Growth

In 2013, we increased our natural gas production by
8.5% or by 4.9 billion cubic meters, while our production
of liquid hydrocarbons grew by 11.4%
or by 487 thousand tons.

We achieved full replacement of our proved reserves
despite the divestiture of several assets, and continued
to actively work on preparing the launch of new large
ﬁ elds, which will enable us to continue growing our
hydrocarbon production in the future.

hydrocarbon
production
growth rate
in 2013

Yurkharovskoye ﬁ eld, compressor booster station. March 2014

Creating Value Added

EXPLORATION
AND PRODUCTION

The Yamal-Nenets Autonomous District
of Russia accounts for approximately 17%
of global natural gas production and 90%
of Russian natural gas production.

Yamal-Nenets
Autonomous Region

RUSSIA

As of 31 December 2013, our SEC proved reserves
totaled 12.5 bln boe, including 1,740 bcm of natural
gas and 134 mmt of liquid hydrocarbons. In 2013, we
recorded a reserve replacement rate of 132%.

Our proved reserves of liquid hydrocarbons increased
by 26% as compared to year-end 2012, and its share
in the overall proved hydrocarbon reserves increased
from 7.2% to 9.2%. At year-end 2013, our reserve to
production ratio (or R/P ratio) was 29 years.

Most of our reserves are located onshore or can be
developed from onshore locations and are considered
conventional reserves (capable of being exploited using
conventional technologies, in contrast to unconven-
tional gas deposits such as shale gas).

In 2013, we continued full-scale exploration works at
our license areas located on the Gydan Peninsula and
oﬀ shore in the Gulf of Ob, as well as at the ﬁ elds and
license areas in the Nadym-Pur-Taz region.

In 2013, we completed approximately 609 linear
kilometers of two-dimensional (2D) seismic and 2,677
square km of three-dimensional (3D) seismic, including
seismic activities at our joint ventures.

Exploration drilling in 2013 amounted to 37.3 thou-
sand meters. The construction of eight prospecting and
exploration wells were completed leading to a better
understanding of the geology of previously discovered
deposits and discovery of the Dorogovskoye ﬁ eld at the
North-Russkiy license area.

We started commercial hydrocarbon production at the
Eastern Dome of the North-Urengoyskoye ﬁ eld as well as
at Dobrovolskoye and Urengoyskoye ﬁ elds located within
the Olimpiysky license area. We also continued to actively
work on preparing the launch of several new large ﬁ elds.

In 2013, our total gross production of natural gas
increased by 8.5% to exceed 62 bcm, while our produc-
tion of liquid hydrocarbons grew by 11.4% to 4.8 mmt,
including crude oil production of 755 thousand tons,
which increased by 46%. Natural gas and gas conden-
sate production growth was mainly driven by the expan-
sion of production capacities of the Yurkharovskoye ﬁ eld
and acquisition of a stake in the Nortgas joint venture
at the end of 2012, as well as by the launch of two
stages of the Samburgskoye ﬁ eld during 2012.

The notable increase in crude oil production was due
to production drilling eﬀ orts at the East-Tarkosa-
linskoye ﬁ eld.

Gross natural gas production, bcm

Gross liquids production, mmt

53.5

57.3

62.2

+8.5%

3.6

3.0

4.1

4.3

4.8

+11.4%

32.8

37.8

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

NOVATEK

NOVATEK Annual Report 2013

Proved hydrocarbon reserves

12.5

bln boe – proved
reserves of NOVATEK (SEC)
as of 31 December 2013

CENOMANIAN LAYERS
“Dry” gas not containing
liquid hydrocarbons.

VALANGINIAN LAYERS
Gas containing liquid
hydrocarbons – “wet” gas.

21%
of total
proved
reserves

69%
of total
proved
reserves

ACHIMOV LAYERS
“Wet” gas with the highest
share of liquid hydrocarbons.
The layers have low permeability
and require special development
techniques.

10%
of total
proved
reserves

1,000 m

1,700 m

3,300 m

NOVATEK is developing Valanginian and Achimov deposits with
horizontal wells enabling us to achieve high ﬂow rates, which
signiﬁcantly raises the eﬃciency of ﬁeld development. In 2013,
we drilled several record horizontal wells: at the Yurkharovskoye
ﬁeld a 8,495-meter well was completed with a horizontal section
of 1,500 meters, at the Termokarstovoye ﬁeld a 5,201 meters
well was drilled with a horizontal section of 2,083 meters.

NOVATEK

years – SEC proved
reserve life as of
31 December 2013

2.0

USD per boe –
Reserve Replacement
Cost in 2011–2013

0.6

USD per boe –
Li(cid:3) ing Cost in 2013

Gross hydrocarbon
production in 2013

4% 2%1%

447

mm boe

18%

61%

Yurkharovskoye

Nortgas

East-Tarkosalinskoye

SeverEnergia

Sibne(cid:3)egas

Khancheyskoye

Other ﬁelds

Expanding
Our Processing
Capacities

In 2013, we completed the expansion project at our
Purovsky gas condensate stabilization plant from ﬁ ve
(5) to 11 million tons per annum.

Our future unstable gas condensate production growth
is now fully covered by the processing capacities.

mln tons per annum –
capacity of the Purovsky
plant a(cid:3) er expansion

Purovsky Plant, third train. November 2013

Creating Value Added

PUROVSKY PLANT

In 2013 and early 2014, four (4) new
gas condensate stabilization trains with
six (6) million tons per annum overall
capacity were launched at the Purovsky
plant resulting in completion of a project
for expanding capacity of the plant from
ﬁ ve to 11 million tons.

Expansion of the Purovsky plant resulted in achieving
a balance between our gas condensate production
potential and processing capacity.

The Purovsky plant processes de-ethanized (unstable)
gas condensate into stable gas condensate and mar-
ketable liqueﬁ ed petroleum gas (LPG).

The feedstock is supplied to the plant via our own
gas condensate pipeline network, which has a total
length of more than 650 kilometers. The products are
shipped by rail.

The Purovsky Plant is the central element in our pro-
duction value chain that provides us complete oper-
ational control over our processing needs and access
to higher yielding marketing channels for our stable
gas condensate.

FIRST STAGE

2.1

2.2

START
OF CONSTRUCTION

2 stabilization trains
2 mmt per annum

Purovsky Plant

PRODUCING FIELDS

LEGEND

1. Yurkharovskoye ﬁeld
2. East-Tarkosalinskoye ﬁeld
3. Khancheyskoye ﬁeld
4. Olimpiyskiy license area
5. Yumantilskiy license area
6. Samburgskiy license area
7. North-Urengoyskoye ﬁeld

ﬁelds with commercial
production

prospective ﬁelds
and license areas

gas condensate
pipelines

SECOND STAGE

4 stabilization trains
5 mmt per annum

3.9

3.4

2.8

Processing volumes, mmt

2 LPG fractionation trains
1.3 mmt per annum

2003

2004

2005

2006

2007

2008

2009

2010

2011

NOVATEK

NOVATEK Annual Report 2013

PRODUCING FIELDS

Production of hydrocarbon mix. Separation
of natural gas from gas condensate

De-ethanized
(unstable) gas condensate

Marketable gas
to customers

Purovsky Plant
STABILIZATION UNIT

Separation of propane-
butane fraction

75%
Stable gas
condensate

25%
Light hydrocarbons fraction*
(propane-butane mix)

LPG FRACTIONATION UNIT

Fractionation of LPG

Marketable LPG
(propane, butane, propane-butane mix)

WHOLESALE AND RETAIL
in Russia and abroad

OWN NETWORK OF CAR
FILLING STATIONS
in Russia

UST(cid:2)LUGA

Fractionation
of stable gas condensate

Naphtha

Jet fuel

Gasoil

Heating oil

EXPORT TO INTERNATIONAL MARKETS

* In 2014 we plan to start delivering light hydrocarbons produced to Sibur’s Tobolsk Petrochemical
Complex for further processing.

NOVATEK

THIRD STAGE

8 stabilization trains
11 mmt
per annum

4.86

4.03

+20%

COMMERCIAL OUTPUT
IN 2013 *
4.80 mmt

GAS CONDENSATE
1.09 mmt

LPG
3.71 mmt

2012

2013

16 mt of methanol for own usage
was also produced.

Enhancing the Level
of Our Vertical
Integration

In 2013, we executed an important element of our
strategy – expanding our vertically integrated chain.

We launched the Gas Condensate Fractionation and
Transshipment Complex at the all-season port of Ust-
Luga on the Baltic Sea.

We are now selling higher value added products instead
of stable gas condensate.

mmt per annum –
project capacity
of the gas condensate
fractionation complex

Ust-Luga Complex, stable gas condensate fractionation unit. November 2013

Creating Value Added

UST(cid:27)LUGA COMPLEX

The Ust-Luga Complex allowed
us to expand our vertically
integrated chain and increase
sales of higher value added
products, as well as to diversify
the product slate and markets
and to expand the customer
base for our products.

1.9

mmt of stable
gas condensate processed
at the Complex in 2013

The Gas Condensate Fractionation and
Transshipment Complex at Ust-Luga processes
stable gas condensate into petroleum products
like light and heavy naphtha, jet fuel, heating oil
and gasoil, and enables us to ship the petroleum
products to international markets. The overall
stable gas condensate processing capacity of the
complex is six (6) million tons per annum.

Following the launch of the Ust-Luga complex
we stopped supplying gas condensate to
international markets via the port of Vitino.
That allowed us to improve logistics and
reduce transportation costs as the railroad
transportation distance is 383 km shorter
and the freight rates are lower due to a more
favorable geographical location of Ust-Luga
compared to the port of Vitino, and the possibility
of using tankers with higher deadweights. The
start of petroleum product exports allowed us
to increase average liquids sales prices and
diversify our customer base.

NOVATEK

To Europe, America
and Asian-Paciﬁc
Countries

Vitino

To Europe, America
and Asian-Paciﬁc
Countries

Ust-Luga

3,795 km
Purovsk –
Ust-Luga

4,178 km
Purovsk –
Vitino

WORKFLOW OF THE COMPLEX

3.0

mmt per annum
capacity of each of the
2 technological trains

Fuel for the Complex

Stable
gas condensate

TECHNOLOGICAL
FURNACE

STRIPPING
COLUMN

Light
naphtha

Bottoms

To Asian-Paciﬁc
Countries
via the Northern
Sea Route

NOVATEK Annual Report 2013

Cargo capacity, mt

Ust-Luga

Vitino

Stable gas condensate 60

Naphtha

Jet fuel

Gasoil

Heating oil

Stable gas condensate

Producing ﬁelds

Stable gas condensate

Purovsky plant

Railway transportation
Purovsk – Vitino

Railway transportation
Purovsk – Ust-Luga

LEGEND

Gas condensate pipeline

Transportation by sea

TARGET MARKETS

COMMERCIAL
OUTPUT IN 2013

Butane

Light naphtha

37%

EUROPE

STABILIZATION
COLUMN

Heavy naphtha

46%

Jet fuel

11%

Gasoil

Heating oil

ATMOSPHERIC
DISTILLATION COLUMN

SOUTH
AMERICA

ASIAN(cid:7)PACIFIC
COUNTRIES

NOVATEK

Creating Value Added

MAIN FACILITIES OF THE UST(cid:27)LUGA COMPLEX

Storage tanks
for diesel fraction

Storage tanks
for jet fuel

Storage tanks for stable
gas condensate

Storage tanks
for heating oil

Three vertical steel tanks
equipped with pontoons of
30 thousand cubic me-
ters each. Height – 18 m,
diameter – 46m.

Three vertical steel tanks
equipped with pontoons
of 30 thousand cubic meters
each. Height – 18 m, diame-
ter – 46 m. Two vertical steel
tanks for intermediate storage
of 5 thousand cubic meters
each. Height – 15 m,
diameter – 21 m.

Two vertical steel tanks
equipped with pontoons
of 30 thousand cubic me-
ters each. Height – 18 m,
diameter – 46 m.

Three vertical steel tanks
of 10 thousand cubic meters
each. Height – 18 m,
diameter – 29 m.

Service-operational unit

Fractionation unit

The unit includes chemical-
analytical laboratory, environ-
mental laboratory, metrology
laboratory, production and
dispatch service, oﬃ ce and
residential premises of the
complex staﬀ .

Used for fractionation of stable
gas condensate. Consists of
two processing trains with
capacity of 3 million tons per
annum each. Each train is
composed of ﬁ ve distillation
columns (stripping column for
gas condensate, atmospher-
ic distillation column, two
steam-stripping columns for
kerosene and diesel fractions,
stabilization column), three

blocks of furnaces, heat ex-
changers, pumps and tanks.

Distillation columns are up to
49 m high, with diameter of
up to 4.5 m and are equipped
with 141 distillation plates with
ﬁ xed valves (this kind of plates
ensures high performance and
resistance to impurity).

Closed ﬁ re ﬂ aring system

Used for disposal of technolog-
ical gases of the Complex and
loading berths. The system has
a large ﬁ ring area and allows
to minimize harmful emissions,
it meets the most stringent
environmental requirements.
Closed ﬁ re allows to minimize
the land area used by the unit.
The diameter of the ﬂ aring sys-
tem is 15 m, height – 43 m.

NOVATEK

NOVATEK Annual Report 2013

Metering
station

Includes individual measure-
ment lines for each product.
Performance of a single
measuring line is from 400
to 8,000 cm per hour (light
products), and from 200
to 2,400 cm per hour (dark
products).

Storage tanks
for light naphtha

Storage tanks
for heavy naphtha

Loading berths
No1 and No2

Four vertical steel tanks
equipped with pontoons
of 30 thousand cubic meters
each. Height – 18 m,
diameter – 46 m.

Each berth has 8 standers,
7 of which are 400 mm
in diameter and 1 stander
designed for loading heating
oil, 300 mm in diameter.

The maximum cargo dead-
weight is 142,000 tons.
Maximum speed of loading –
8,000 cm per hour. Water
depth of the berths is 17 m.

KEY FEATURES OF THE COMPLEX

• Ultra-compact layout

• Built on alluvial area

• Oil-based heat transfer agent – two times less
furnaces, higher stability of the technological
regime

• High level of process automation

• Compact plate heat exchangers

• Rectifying plates of improved performance,

• Closed Fire Flaring System – compliance with

resistant to impurity

the highest environmental standards

NOVATEK

Diversifying
Our Customer Base

In 2013, we substantially increased the share of end-cus-
tomers in our overall gas sales volumes mix, which raises
our margins and enhances sustainability of our business.

Beginning supplies of petroleum products from the
Ust-Luga gas condensate fractionation and transship-
ment complex enabled us to optimize logistics and diver-
sify geography of sales and customer base.

89%

share of end-customers
in the overall gas sales
volumes mix in 2013

Loading of a tanker at the Ust-Luga Complex. November 2013

Creating Value Added

LIQUID HYDROCARBON
SALES

LEGEND

Naphtha

Stable gas condensate

LPG

Crude oil

Jet fuel, gasoil, heating oil

Countries of delivery
in 2012

New countries
of delivery in 2013

USA

Brasil

LIQUIDS SALES VOLUMES, MT

2013 LIQUIDS SALES VOLUMES BREAKDOWN, MT

5,438

4,203

%%9%9%29%+29+2+2++2+229299%9%%%%%%%%+29%
+29%

4,111

3,401

3,128

47%

Stable gas
condensate
2,117

LPG
1,078

93%

53%

63%

100%

Ust-Luga
products
1,606

Crude Oil
627

37%

2009

2010

2011

2012

2013

Exports

Domestic market

NOVATEK

Russia

Finland

Sweden

VITINO

Norway

UST(cid:27)LUGA

Denmark
Netherlands
Germany

Lithuania
Poland
Slovakia
Hungary
Romania

tanker shipments
of liquid hydrocarbons
sold in 2013

RUSSIA

Stable gas
condensate

Crude oil

LPG

144

293

396

426

502

LPG through
gas stations

103

108

EUROPE

Gasoil

Heating oil

Jet fuel

Crude oil

LPG

Stable gas
condensate

178

149

231

479

576

811

746

LEGEND

2012

2013

NOVATEK Annual Report 2013

South
Korea

Japan

China

Taiwan

Thailand

Malaysia
Singapore
Indonesia

ASIAN(cid:7)PACIFIC COUNTRIES

Stable gas
condensate

Naphtha

1,590

1,105

1,248

NORTH AMERICA

Stable gas
condensate

300

122

SOUTH AMERICA

Stable gas
condensate

Naphtha

120

NOVATEK

Creating Value Added

NATURAL GAS SALES

In 2013, we substantially increased
the share of end-customers in our
overall gas sales volumes mix. This
indicator increased from 69.3% in
2012 to 88.9% in 2013.

Russia

The Company accounted for 18.4% of total natural gas
deliveries to the domestic market through the Uniﬁ ed
Gas Supply System (UGSS), representing an increase
of 2.1 percentage points as compared to 2012.

The growth in natural gas sales volumes was due to an
increase in natural gas supplies to the Moscow, Kostroma,
Vologda, Perm and Tyumen regions. Deliveries to these
regions increased by 17.2 bcm as compared to 2012 due
to new long-term delivery contracts with end-customers
signed in 2012 and the acquisition of an 82% stake in
Gazprom Mezhregiongas Kostroma in December 2012
(renamed to OOO NOVATEK-Kostroma).

LEGEND

Main regions
(with sales volumes
above 1 bcm)

Other regions
of gas sales

58.9

64.2

Gas sales in 2012, bcm

Gas sales in 2013, bcm

1.1 1.3

Saint-Petersburg

11.9

3.2

Moscow
and Moscow region

NATURAL GAS SALES VOLUMES, BCM

37.1

32.9

68%

share
of end-customers

64%

53.7

55%

64.2

+9%

89%

58.9

69%

2009

2010

2011

2012

2013

NOVATEK

NOVATEK Annual Report 2013

2.2

Vologda Region

4.6

0.8

Kostroma Region

7.8

6.7

18.3

7.8

2.6 2.7

Yamal-Nenets
Autonomous Region
(mainly sales to traders)

Perm Territory

2.5 2.1

Khanty-Mansiysk
Autonomous Region

15.5 14.6

Sverdlovsk
Region

0.6 2.0

Tyumen
Region

Chelyabinsk
Region

3.8 3.6

Orenburg Region

BREAKDOWN OF 2013 NATURAL GAS SALES VOLUMES BY CUSTOMERS

regions
of natural gas
sales in 2013

11%

64.2
bcm

25%

57%

Power generation
companies

Large industrial consumers

Wholesale traders, ex-ﬁeld

Others

Households

NOVATEK

Implementing
Large-scale
Projects

In December 2013, a ﬁ nal investment decision
(FID) was taken on the Yamal LNG project
envisaging the construction of an LNG plant with
annual capacity of 16.5 million tons per annum
based on the feedstock resources of the South-
Tambeyskoye ﬁ eld located in the north-east of the
Yamal Peninsula.

In 2013, works were underway on drilling
production wells, backﬁ lling for the production
facilities, the construction of the port facilities, the
airport and the living camp.

16.5

mmt per annum –
project capacity of the
LNG plant
on Yamal

Yamal LNG, construction camp and material storage yard. September 2013

Creating Value Added

THE YAMAL LNG PROJECT

The Yamal LNG project
is a transformational
project for NOVATEK, it will
enable us to accrete future
value and establish a new
business segment due
to the commencement
of export sales of LNG
to international markets.

To Asian-Paciﬁc
Countries
via the Northern
Sea Route

To Europe and
Asian-Paciﬁc
Countries

YAMAL
PENINSULA

927

bcm proved and probable
reserves of the South-
Tambeyskoye ﬁ eld under PRMS

South-Tambeyskoye
ﬁeld

Sabetta

LEGEND

NOVATEK license areas

GYDAN
PENINSULA

Key Competitive Advantages

LNG plant workﬂ ow

LOW(cid:7)COST, LONG(cid:7)LIVED FEEDSTOCK
• Large onshore conventional reserve base
with high concentration of reserves
• Well known geology and proven development
• Very low F&D and li(cid:3) ing costs

technologies

concentrated

CONVENIENT LOCATION
• Reserves are located at the coast line and highly
• High eﬃ ciency factor of gas liquefaction process
• Access to both European and Asian markets

due to sub-zero temperatures

STRONG RUSSIAN STATE SUPPORT
• Tax concessions
• Financing of new strategic arctic port

infrastructure

NOVATEK

5.5

mmt per annum –
capacity of each
of the 3 technological trains

PRODUCING
WELLS

GAS SEPARATION
UNIT

Gas
condensate

Gas

NOVATEK Annual Report 2013

The Yamal LNG project envisages the construction of
an LNG plant with annual capacity of 16.5 million tons
per annum based on the feedstock resources of the
South-Tambeyskoye ﬁ eld located in the north-east
of the Yamal Peninsula.

Yamal LNG is the operator of the project, the license
holder and owner of all the assets. At year-end 2013,
the shareholders are NOVATEK (60%), Total (20%) and
CNPC (20%).

The South-Tambeyskoye ﬁ eld has 42 gas and gas
condensate horizons. The depth of the horizons varies
from between 900 to 2,850 meters. According to the
PRMS reserves standards, the proved and probable
reserves of the South-Tambeyskoye ﬁ eld were ap-
praised at 927 billion cubic meters of natural gas and
30 mmt of liquid hydrocarbons as at 31 December
2013. The ﬁ eld development plan provides for the drill-
ing of slightly more than 200 wells at 19 well drilling
pads, and the production potential of the ﬁ eld exceeds
27 bcm of natural gas per annum.

In 2013, production drilling began at the South-Tam-
beyskoye ﬁ eld with eight (8) wells completed by the
year-end, backﬁ lling for the LNG plant began, dredging
of the loading area was completed in the port of Sa-
betta and dredging of the harbor channel was under-
way, operation of the materials oﬄ oading berths began
enabling year-round supplies of construction cargoes,
ﬁ rst stage of the construction housing was completed
as well as all the basic infrastructure required to start
main construction works. Engineering was ﬁ nalized
and positive state environmental and expert approvals
received, including construction permit. In addition,
the main tenders were held and the EPC contractors
as well as key sub-contractors were selected, main
contracts for the equipment and construction works
were concluded, and more than 75% of LNG output
was contracted.

Special attention to the health, safety and environ-
mental issues, including preservation of the unique
nature of the North, is an integral part of the Yamal
LNG project. An integrated HSE system according
to the international ISO 14001:201304 and OHSAS
18000 standards was being set up at the Yamal LNG
joint venture in 2013.

GAS TREATMENT

Acid gases
removal

Drying,
mercury removal

Separation
of LPG

GAS LIQUEFACTION
Compressors and heat exchangers

LNG TANKS
4 x 160,000 cm

EXPORTS

STABILIZATION UNIT

Separation of propane-
butane fraction

STABLE GAS
CONDENSATE TANKS
5 x 50,000 cm

EXPORTS

NOVATEK

Preserving
the Unique Nature
of the North

We pay great attention to environmental
protection issues in our activity.

NOVATEK has implemented an Environmental,
Health and Safety Policy, while at the same
time an Integrated Management System for
Environmental Protection, Occupational Health
and Safety (IMS) in compliance with requirements
of international standards has been implemented
at all of our main subsidiaries.

entities of NOVATEK
group are certiﬁ ed
to ISO 14001:2004
standards

Yamal peninsula landscape. September 2013

Implementing
Wide-range
Social Programs

We provide assistance to indigenous peoples of the
North on an ongoing basis.

We are strengthening our partnership relations with
Russia’s leading cultural and educational institutions,
creative groups and charity funds.

We are implementing our own educational programs
and supporting the developments of sports.

1.18

RR billion
was invested in 2013
on social programs

Camp of the indigenous people on the Yamal Peninsula. September 2013

Adhering to the Highest
Corporate Governance
Standards

Board of Directors
as at 31.12.2013

The Company has established
an eﬀ ective and transparent system
of corporate governance complying
with both Russian and international
standards. The Company adheres
to the internal Corporate Governance
Code and the internal Code of Business
Ethics and has a well-established
and eﬃ cient internal control
and audit system.

independent
directors
out of nine*

MR. ALEXANDER Y.
NATALENKO

Born in 1946

Chairman of NOVATEK’s
Board of Directors,
Chairman of its Strategy
and Investments Committee

MR. ANDREI I.
AKIMOV

Born in 1953

Member of NOVATEK’s Board
of Directors,
Chairman of its Corporate
Governance and
Remuneration Committee,
Chairman of the
Management Board
of Gazprombank (OAO)

MR. MARK A.
GYETVAY

Born in 1957

Member of NOVATEK’s Board
of Directors,
Member of its Strategy
and Investments Committee,
Member and Deputy
Chairman of NOVATEK’s
Management Board,
Chief Financial Oﬃ cer

* As at the election date in accordance with the Corporate
Governance Code recommended by the Russian FFCM.

DR. BURCKHARD
BERGMANN

Born in 1943

Member of NOVATEK’s Board
of Directors,
Member of its Corporate Governance
and Remuneration Committee,
its Audit Committee and its Strategy
and Investments Committee,
Board Member of the Presidium
of the German-Russian Chamber
of Commerce,
Member of the Advisory Board of
the Union of German Science Funds

MR. YVES LOUIS
CHARLE JUSTIN
DARRICARRERE

Born in 1951

Member of NOVATEK’s Board
of Directors,
Member of its Strategy
and Investments Committee,
President of Total Upstream

MR. KIRILL G.
SELEZNEV

Born in 1974
Member of NOVATEK’s Board
of Directors,
Member of its Corporate
Governance and Remuneration
Committee,
Member of the Management
Board, Director of Gas and
Liquid Hydrocarbons Marketing
and Processing Department
of OAO Gazprom,
General Director of OOO Gazprom
Mezhregiongaz

MR. VLADIMIR A.
DMITRIEV

Born in 1953
Member of NOVATEK’s Board
of Directors,
Chairman of its Audit Committee

MR. LEONID V.
MIKHELSON

Born in 1955
Member of NOVATEK’s Board
of Directors,
Chairman of NOVATEK’s
Management Board

MR. GENNADY N.
TIMCHENKO

Born in 1952
Member of NOVATEK’s Board
of Directors,
Member of its Strategy
and Investments Committee
and Audit Committee

Creating Value Added

REVIEW
OF OPERATING
RESULTS

Licenses

NOVATEK’s ﬁ elds and license areas are located in the
YNAO of the Russian Federation, which is one of the
world’s largest natural gas producing regions and ac-
counts for approximately 17% of global natural gas pro-
duction and 90% of Russian natural gas production. The
concentration of the Company’s producing and prospective
ﬁ elds, license areas and processing facilities in this region
combined with the Region’s vast oil and gas infrastructure
have allowed NOVATEK to minimize the risks associated
with developing its assets and expanding its resource
base. The Company has many years of experience working
in the YNAO, which has enabled us to eﬀ ectively capitalize
on growth opportunities to increase shareholder value.

Exploration and production of hydrocarbons in Russia is
subject to licensing. As of 31 December 2013, our sub-
sidiaries and joint ventures held 32 licenses for ﬁ elds and
license areas, of which 28 are classiﬁ ed as either produc-
tion or combined exploration and production licenses and
four are classiﬁ ed as exploration licenses. The duration
of licenses for our core ﬁ elds exceeds 20 years: the
license for the Yurkharovskoye ﬁ eld is valid until 2034,
the East-Tarkosalinskoye ﬁ eld expires in 2043, and the
South-Tambeyskoye ﬁ eld in 2045. NOVATEK is strictly
observing all of its license obligations pursuant to current
Russian legislation, and conducts continuous monitoring
of license tenders in order to expand its resource base in
strategically important regions.

Acquisitions

Two deals were concluded at the end of 2013 result-
ing in the increase of NOVATEK’s eﬀ ective share in the
SeverEnergia joint venture from 25.5% to 59.8%:

• NOVATEK signed an agreement with Rosne(cid:3) on an
asset swap, whereby the Company’s 51% stake
in Sibne(cid:3) egas was swapped for Rosne(cid:3) ’s 40%
stake in Artic Russia B.V., which owned a 49%
equity stake in SeverEnergia together with Italian
energy company ENI. Following the completion
of this transaction, NOVATEK’s eﬀ ective share in
SeverEnergia increased by 19.6% to 45.1%.

• In addition, Yamal Development (a 50/50 joint
venture between NOVATEK and OAO Gazprom
Ne(cid:3) ) signed an agreement with ENI on acquiring
their respective 60% equity stake in Artic Russia
B.V. for approximately USD 2.94 billion. Following
the completion of this transaction in early 2014,
NOVATEK’s eﬀ ective share in SeverEnergia in-
creased by another 14.7% to reach 59.8%, with the
remaining 40.2% equity stake in the SeverEnergia
joint venture owned by Gazprom Ne(cid:3) .

SeverEnergia via its fully consolidated subsidiary
Arcticgas holds exploration and production licenses for
the Samburgskiy, Yevo-Yakhinskiy, Yaro-Yakhinskiy and
North-Chaselskiy license areas. As at 31 December
2013, the proved reserves of SeverEnergia under
the SEC proven reserves standards were estimated
at 486 bcm of natural gas and 91 mln tons of liquid
hydrocarbons.

SeverEnergia has signiﬁ cant potential for increasing
natural gas, gas condensate and crude oil produc-
tion. The increase our eﬀ ective share in SeverEnergia
allows the Company to concentrate on developing the
ﬁ elds rich in liquid hydrocarbons, which complements
NOVATEK’s long-term strategy, taking into account our
existing infrastructure for transportation, stabilization
and fractionation of gas condensate.

In March 2013, the Company’s wholly owned subsidi-
ary, OOO NOVATEK-Tarkosalene(cid:3) egas, won an auction
for the exploration and production license for the East-
Tazovskoye ﬁ eld, with a payment for the license set at
RR 3.19 billion. The East-Tazovskoye ﬁ eld is located in
close proximity to the North-Russkoye ﬁ eld, a license
also held by OOO NOVATEK- Tarkosalene(cid:3) egas, and as
of 31 December 2013, proved reserves of the East-
Tazovskoye ﬁ eld under the SEC reserves methodology
were estimated at 17.1 billion cubic meters of natural
gas and 2.5 million tons of liquid hydrocarbons.

In June 2013, we increased our equity stake in Nortgas
joint venture from 49% to 50% as a result of an addi-
tional issue of shares.

Hydrocarbon Reserves

Most of the Company’s reserves are located onshore
or can be developed from onshore locations and are
attributed to the conventional categories (capable of
being exploited using conventional technologies, in con-
trast to unconventional gas deposits such as shale gas).

The Company’s reserves are appraised on an annual
basis by independent petroleum engineers, “DeGolyer
and MacNaughton” (“D&M”) under both the SEC and
PRMS reserves reporting standards.

As of 31 December 2013, NOVATEK’s SEC proved
reserves totalled 12,537 mmboe, based on our equity

NOVATEK

NOVATEK Annual Report 2013

ownership interest in the respective ﬁ elds, represent-
ing a 1.2% increase as compared to proved reserves
volumes as of the end of 2012. Proved gas reserves
amounted to 1,740 bcm and reserves of liquid hy-
drocarbons were estimated at 134 mln tonnes. In
the reporting year, we added 582 mmboe of proved
reserves, inclusive of 2013 production and recorded a
reserve replacement rate of 132%. At year-end 2013,
the Company’s reserve to production ratio (or R/P ratio)
was 29 years.

Our proved reserves of liquid hydrocarbons increased
by 26% as compared to year-end 2012, and its share
in the overall proved hydrocarbon reserves increased
from 7.2% to 9.2%. The ongoing ﬁ eld development at
SeverEnergia contributed a substantial proportion of
this increase, with the successful exploration works at
these ﬁ elds contributing approximately 10 mln tons of
gas condensate to our overall proved reserves, based
on our increased ownership in this joint venture.

The dynamics and structure of our reserves were,
among other factors, inﬂ uenced by several trans-
actions: the sale of a 20% stake in the Yamal LNG
joint venture, the purchase of a mineral license for
the East-Tazovskoye ﬁ eld, the increase of NOVATEK’s

share in SeverEnergia from 25.5% to 59.8%, includ-
ing the swap of the Company’s 51% equity stake in
Sibne(cid:3) egas for a 40% stake in Artic Russia B.V., as
well as the increase of our share in Nortgas from
49% to 50%. The above transactions resulted in the
increase of proved liquids reserves by 23 mln tons and
a corresponding decrease of proved gas reserves by
39 bcm. Organic reserve replacement rate (excluding
the transactions) amounted to 144%, and was due to
successful exploration works and production drilling at
our ﬁ elds.

Under the PRMS reserves reporting standards, the
Company’s total proved and probable reserves (based
on our equity ownership interest in the respective
ﬁ elds) totalled 23,085 mmboe, which includes 3,125
bcm of natural gas and 314 mln tons of liquid hydro-
carbons, and represents an increase of 730 mmboe
compared with year-end 2012.

As of 31 December 2013, NOVATEK’s total recover-
able reserves under the Russian reserve classiﬁ cation
ABC1 + C2 totalled 4,839 bcm of natural gas and
767 mmt of liquid hydrocarbons, based on our equity
ownership interest in the respective ﬁ elds. Natural gas
reserves increased by 434 bcm, while reserves of liquid

PROVED RESERVES UNDER THE SEC STANDARDS AS OF 31 DECEMBER 2013 (cid:8)BASED ON NOVATEK’S EQUITY
OWNERSHIP INTEREST IN THE RESPECTIVE FIELDS(cid:9) AND DURATION OF LICENSES

Field / license area

Yurkharovskoye

South-Tambeyskoye

Utrenneye

East-Tarkosalinskoye

Urengoyskoye (SeverEnergia JV)

Geoﬁ zicheskoye

North -Urengoyskoye

Yaro-Yakhinskoye

Samburgskoye

North-Chaselskoye

Khancheyskoye

North-Russkoe

Olimpiyskiy license area

East-Tazovskoye

Termokarstovoye

Other

Total

Ownership

Duration
of license

Gas reserves,
bcm

Liquids reserves,
mln tons

100%

60%

100%

59.8%

100%

50%

59.8%

100%

51%

2034

2045

2031

2043

2018

2031

2018

the lifetime
of the ﬁ eld

2044

2031

2026

2033

2021

402.1

295.4

235.2

181.7

137.8

124.9

97.7

67.3

53.6

31.8

29.4

22.5

22.1

17.1

13.9

7.9

21.0

8.3

8.6

15.3

33.1

0.4

9.4

11.2

8.6

1.4

3.1

1.9

2.9

2.5

4.0

2.6

1,740

134

NOVATEK

Creating Value Added

hydrocarbons grew by 245 mmt as compared to the
year-end 2012.

The high quality of the reserve base enables
NOVATEK to maintain its position as one of the low-
est cost producers in the global oil and gas industry.
Our three-year (2011–2013) and ﬁ ve-year (2009–
2013) reserve replacement costs amounted to RR
61.24 (USD 1.95) per boe and RR 47.92 (USD 1.54)
per boe, respectively.

Geological Exploration

NOVATEK aims to expand its resource base through
geological exploration at ﬁ elds and license areas not
only in close proximity to existing transportation and
production infrastructure, but also in new potentially
prospective hydrocarbon areas. The Company en-
sures the eﬃ ciency of geological exploration work by
deploying state-of-the-art technologies and relying on
the experience and expertise of the specialists in its
geology department, and the Company’s Scientiﬁ c and
Technical Center located in Tyumen.

The Company uses a systematic and comprehen-
sive approach to exploration and development of its
ﬁ elds and license areas, beginning with the collection
and interpretation of seismic data to the creation of
dynamic ﬁ eld models for the placement of explo-
ration and production wells. We employ modern
geological and hydrodynamic modelling as well as
new well drilling and completion techniques to maxi-
mize the ultimate recovery of hydrocarbons in a cost
eﬀ ective manner.

In 2013, we continued full-scale exploration works
at our license areas located on the Gydan Peninsula
and oﬀ shore in the Gulf of Ob – assessment of the

resource potential of the license areas was completed
and preparatory works for exploration drilling on the
Gydan Peninsula began. Exploration work activities also
continued at the ﬁ elds and license areas in the Nadym-
Pur-Taz region, including the license areas of the
SeverEnergia joint venture. The exploration activities
at these ﬁ elds targeted gas condensate bearing Lower
Cretaceous (including Achimov) deposits at subsurface
depths of between 2,000 to 4,400 meters.

In 2013, NOVATEK completed approximately 609
linear kilometers of two-dimensional (2D) seismic and
2,677 square km of three-dimensional (3D) seismic,
including seismic activities run at our joint ventures.
Seismic studies were mainly conducted in the new re-
gions (at the Utrenneye ﬁ eld on the Gydan Peninsula),
at the ﬁ elds prepared for launch (Termokarstoviy,
Samburgskiy and Yevo-Yakhinskiy license areas), as
well as at the East-Tarkosalinskoye ﬁ eld in the frame-
work of the oil program.

Exploration drilling in 2013 amounted to 37.3 thou-
sand meters. The construction of eight prospecting and
exploration wells was completed leading to a better
understanding of the geology of previously discovered
deposits and discovery of the Dorogovskoye ﬁ eld at
the North-Russkiy license area. As of 31 December
2013, recoverable reserves of the newly discovered
Dorogovskoye ﬁ eld under the Russian ABC1 + C2
reserve classiﬁ cation was estimated at 35 bcm of nat-
ural gas and 2 mln tons of gas condensate.

As a result of the exploration works main reserve
growth was due to detailing of the geological model
of the Utrenneye ﬁ eld and supplementary exploration
of the Urengoyskoye (within the Samburgskiy license
area) and Yurkharovskoye ﬁ elds. Positive results were
also obtained during supplementary exploration of oil
deposits at the East-Tarkoslinskoye ﬁ eld.

EXPLORATION WORKS

2D SEISMIC

Subsidiaries

Joint ventures

3D SEISMIC

Subsidiaries

Joint ventures

Units

linear km

square km

EXPLORATION DRILLING

th. m

Subsidiaries

Joint ventures

NOVATEK

2012

7,001

2,799

2,258

541

36.2

26.8

9.4

2013

Change

609

2,677

1,821

856

37.3

10.6

26.7

(cid:8)91(cid:9)%

(91)%

(cid:8)4(cid:9)%

(19)%

58%

(60)%

184%

Field Development

During 2013, NOVATEK’s subsidiaries invested RR 39.9
billion in the development and construction at our
producing and prospective ﬁ elds as part of our capital
investment program in order to achieve sustainable
hydrocarbon production growth.

Production drilling in 2013, including joint ventures,
amounted to 718.5 thousand meters, which is 2.9
times more than the meters drilled in 2012. The nota-
ble growth was mainly due to preparation for launch
of large gas condensate ﬁ elds. A total of 87 produc-
tion wells, including 59 natural gas and gas conden-
sate and 28 oil wells, were completed and commis-
sioned into operation.

NEW FACILITIES PUT INTO OPERATION
AT PRODUCING FIELDS

In August 2013, the second stage of compressor boost-
er station, which included four compressor units with a
total capacity of 100 MW were launched, thus increas-
ing the overall compressor capacity at the station to
175 MW. The booster compression station is required to
keep the plateau production level at the Yurkharovskoye
ﬁ eld. A new record was set for the wellbore length at
the ﬁ eld following the completion of an 8,495-meter
well with a horizontal section of 1,500 meters.

A total of six (6) new gas condensate wells were
launched at the ﬁ eld with average initial ﬂ ow rate of
1.8 mmcm of natural gas per day. Within the pilot oil
program the second oil well was drilled at the ﬁ eld and
achieved the initial ﬂ ow rate of 74 tons per day.

In October 2013, commercial production was launched
at the Eastern dome of the North-Urengoyskoye
ﬁ eld developed by the Nortgas joint venture. Twenty
three (23) production wells have been completed at
the Eastern dome by year-end, and its infrastructure
included a gas treatment facility with annual capacity
of six (6) billion cubic meters (bcm), a gas gathering
networks, and gas and gas condensate pipelines con-
nected to the Western dome of the ﬁ eld. The Eastern
dome allows the joint venture to achieve peak produc-
tion capacity.

Active production drilling for crude oil at the East-
Tarkosalinskoye ﬁ eld resulted in the launch of 21 pro-
duction wells with average initial ﬂ ow rate of 85 tons
per day.

NEW FIELDS COMMISSIONED IN 2013

In October 2013, NOVATEK launched a part of the
Urengoyskoye ﬁ eld, located within the Company’s
Olimpiysky license area, with the ﬁ eld’s production

NOVATEK Annual Report 2013

capacity estimated at one bcm of natural gas per
annum. Four (4) production wells were operating at this
ﬁ eld as of the end of 2013.

The Dobrovolskoye ﬁ eld, which is also located within
the Olimpiyskiy license area, was commissioned at the
end of 2013. The ﬁ eld’s production capacity is esti-
mated at 0.7 bcm of natural gas and 0.2 mmt of gas
condensate per annum. Five (5) production wells were
in operation at the ﬁ eld as of the end of 2013.

NEW FIELDS PREPARED FOR COMMISSIONING

Preparation works for the launch of a number of large
ﬁ elds continued in the reporting year. In particular, ac-
tive construction and drilling operations were conduct-
ed at the ﬁ elds of the SeverEnergia joint venture.

Gas and gas condensate pipelines were completed
to transport production from the Urengoyskoye ﬁ eld.
The construction of power lines was also completed
at the ﬁ eld, the works on the well pads, gas gathering
system and gas treatment facility were underway.
Thirty one (31) production wells have been drilled by
the year-end.

Production drilling at the Urengoyskoye ﬁ eld targets
the Achimov deposits, which are relatively deep (ap-
proximately 3,700 meters) and are characterized by
low permeability and high pressure. Drilling vertical
wells with hydro fractures is the common way of de-
veloping such deposits. As part of NOVATEK’s innova-
tive approach, pilot horizontal drilling was done at the
Urengoyskoye ﬁ eld, resulting in successful completion
of ﬁ ve wells with horizontal sections of 600–1,200
meters. The horizontal wells delivered two times
higher ﬂ ow rates compared with the fractured vertical
wells. A decision was made to review the ﬁ eld devel-
opment plan and replace vertical wells by horizontals,
which will reduce the total number of wells needed to
develop the ﬁ eld thus optimizing capital expenditures,
accelerating production ramp up and increasing the
ﬁ eld’s gas condensate recovery rate.

At the Yaro-Yakhinskoye ﬁ eld construction eﬀ orts were
focused on building gas and gas condensate pipe-
lines, well pads, gas treatment facility, gas gathering
network, power lines and living quarters. A power plant
was launched at the ﬁ eld and construction of the
ﬁ rst stage of an oil treatment facility was completed.
Thirty (30) production wells have been drilled by the
year-end.

Backﬁ lling for the main production facilities was
completed at the Termokarstovoye ﬁ eld, developed by
the Terne(cid:3) egas joint venture between NOVATEK (51%)
and Total (49%). Piling and construction of a living
camp and gas and gas condensate pipelines were also

NOVATEK

49
49

Creating Value Added

underway. A record was set for the wellbore length at
the ﬁ eld following the completion of a 5,201-meter
gas condensate well with a horizontal section of 2,083
meters. At total of nine (9) production wells have been
completed at the ﬁ eld by the year-end.

At the Yarudeyskoye ﬁ eld developed by the Yargeo joint
venture (NOVATEK’s share – 51%), the backﬁ lling of
well pads, roads and oil treatment facility started, as
well as construction of power lines and gas and crude
oil pipelines.

Hydrocarbon Production

In 2013, NOVATEK carried out commercial hydrocar-
bon production at 10 ﬁ elds. Gross production from all
ﬁ elds (including the Company’s share in production of
joint ventures) amounted to 447 mmboe (439 mmboe
of sales production), representing an increase of 8.8%
over the prior year.

In 2013, total gross production of natural gas in-
cluding the Company’s share in production of joint
ventures amounted to 62.22 bcm (sales production –
61.22 bcm), representing 91% of our total hydro-
carbon output. The share of gas produced from the
Valanginian layers (or “wet gas”) in proportion to total
gas production was 76%. Gross natural gas produc-
tion increased by 8.5% or by 4.9 bcm, as compared to
2012 volumes.

Organic growth at the Yurkharovskoye ﬁ eld was the
main factor for the overall gas production increase,
and was due to the launch of the fourth stage of
Phase Two development of the ﬁ eld in October 2012,
the launch of two stages of a booster compressor
station, and drilling of additional production wells.
The second major gas production growth factor was
the acquisition of an equity stake in ZAO Nortgas,
which is developing the North-Urengoyskoye ﬁ eld,
in November 2012, and the launch of the Eastern
dome of the ﬁ eld in October 2013. The launch of the
Samburgskoye ﬁ eld in April 2012, expansion of its

GROSS HYDROCARBON PRODUCTION (cid:8)INCLUDING SHARE IN PRODUCTION BY JOINT VENTURES(cid:9)

Gas

Liquid hydrocarbons

Total production

Units

bcm

mmboe

mmt

mmboe

2012

57.32

374.9

4.287

35.9

410.8

2013

Change

62.22

406.9

4.774

40.0

446.9

8.5%

11.4%

8.8%

GROSS HYDROCARBON PRODUCTION IN 2013 (cid:8)INCLUDING SHARE IN PRODUCTION BY JOINT VENTURES(cid:9)

Gas, bcm

Liquids, mmt

2012

34.36

13.13

5.35

3.69

0.20

0.45

0.07

2013

38.26

11.24

Change

11.4%

(14.4)%

5.41

1.1%

3.29

(10.8)%

2.37

x11.9

1.25

177.8%

0.11

0.13

57.1%

0.07

57.32

0.14

100.0%

62.22

8.5%

2012

2.68

0.99

0.52

0.02

0.06

0.02

0.01

4.29

2013

Change

2.72

1.10

0.48

0.25

1.5%

11.1%

(7.7)%

x12.5

0.17

183.3%

0.03

0.01

0.02

4.77

50.0%

100.0%

11.4%

Yurkharovskoye (100%)

East-Tarkosalinskoye (100%

Sibne(cid:3) egas ﬁ elds
(51% until 26 December 2013)

Khancheyskoye (100%)

North-Urengoyskoye (49% from 28 November
2012, 50% from 2 July 2013)

Samburgskoye (25,5% until 26 December
2013, 45,1% from 27 December 2013)

Sterkhovoye (100%)

Urengoyskoye and Dobrovolskoye within the
Olimpiyskiy license area (100%)

Other

Total

NOVATEK

capacity in December 2012 and drilling of new pro-
duction wells at this ﬁ eld also contributed to overall
production growth.

Gross production of liquid hydrocarbons including
the Company’s share in production of joint ven-
tures totalled 4.77 mmt (sales production was
4.75 mmt), of which 84.2% was unstable de-eth-
anized gas condensate and 15.8% consisted of
crude oil. Gross production of liquids increased by
11.4% or 487 thousand tons as compared with
2012, whereas crude oil production increased by
45.8% and amounted to 755 thousand tons. Gas
condensate production growth was driven by the
North-Urengoyskoye and Samburgskoye ﬁ elds,
while notable increase in crude oil production
was due to production drilling eﬀ orts at the East-
Tarkosalinskoye ﬁ eld.

We continued to achieve some of the lowest li(cid:3) ing
costs in the industry (expenses directly related to the
extraction and processing of natural gas, gas conden-
sate and crude oil from the reservoir). The Company’s
li(cid:3) ing costs were RR 18.8 (USD 0.59) per boe in 2013.

Yamal LNG Project

Yamal LNG is the operator of the project, the license
holder and owner of all the assets. At year-end, the
shareholders are NOVATEK (60%), Total (20%) and
CNPC (20%). The ﬁ nal investment decision for the
project was made in December 2013 with the planned
commercial launch of the ﬁ rst LNG train in 2017.

The South-Tambeyskoye ﬁ eld was discovered in 1974
and comprises ﬁ ve (5) shallow gas horizons and 37
deeper gas condensate horizons. The depth of the hori-
zons varies from between 900 to 2,850 meters. The
license for exploration and production at the South-
Tambeyskoye ﬁ eld is valid until 2045.

As of 31 December 2013, the ﬁ eld was estimated
to contain 492 bcm of proved natural gas reserves
and 14 mmt of proved liquid hydrocarbon reserves,
under the SEC reserves methodology. Based on total
proved hydrocarbon reserves, the South-Tambeyskoye
ﬁ eld is the largest ﬁ eld in NOVATEK reserves portfolio.
According to the PRMS reserves standards, the proved
and probable reserves of the South-Tambeyskoye ﬁ eld
were appraised at 927 billion cubic meters of natural
gas and 30 mmt of liquid hydrocarbons.

NOVATEK Annual Report 2013

The South-Tambeyskoye ﬁ eld has already been thor-
oughly studied with a complex of exploration activities,
including running 3D seismic and exploration drilling,
creation of the ﬁ elds’ geological model and reserves
appraisal. A new exploration well was being drilled in
2013, which is expected to clarify the additional poten-
tial of the ﬁ eld.

The ﬁ eld development plan provides for the drilling
of slightly more than 200 wells at 19 well drilling
pads, and the production potential of the ﬁ eld exceeds
27 bcm of natural gas per annum.

Natural gas produced at the ﬁ eld will be delivered
to the international markets in a form of LNG which
requires construction of a liquefaction plant consist-
ing of three (3) production trains of 5.5 mmt annual
capacity each. The shipping infrastructure will include
a jetty with two tanker loading berths at the port of
Sabetta equipped with ice protection facilities. Ice-class
LNG carriers of special design ARC-7 will be used to
transport the LNG to international markets.

In 2013, the main tenders were completed and key
contracts were signed as a part of the project imple-
mentation. In particular, the EPC contract has been
awarded to the joint venture of Technip and JGC.
A slot reservation agreement was signed with Daewoo
Shipbuilding & Marine Engineering Company for
construction of up to 16 ARC-7 ice-class LNG carriers.
As of year-end 2013, the orders for long-lead items
(including cryogenic heat exchangers, gas turbines, and
the compressors for the liquefaction trains) have been
placed. Order for the ﬁ rst ice-class LNG carrier was
also placed by a selected shipping company in 2013.

Long-term contracts for more than 75% of LNG
volumes were placed as of the year-end. A group of
export credit agencies and commercial banks was
formed and a ﬁ nancing term-sheet was dra(cid:3) ed to be-
gin negotiating the terms and conditions of the project
ﬁ nancing.

Two drilling rigs began production drilling in 2013,
eight (8) production wells were completed during the
year, and their testing conﬁ rmed the basic parameters
of the ﬁ elds’ geological model.

Operation of the materials oﬄ oading berths in the port
of Sabetta began enabling the ﬁ rst winter navigation
at the port, which ensures year-round delivery of con-
struction materials. During 2013, 513 thousand tons
of construction materials were delivered to the ﬁ eld
utilizing the material oﬄ oading facility.

We prepared construction sites for the ﬁ rst train of the
LNG plant, power plant and LNG storage facilities. Piles
were purchased and contractors were mobilized to

NOVATEK

Creating Value Added

start piling operations. Basic infrastructure was being
built in 2013, including the airport, roads, fuel storag-
es, power station, utility networks, boiler house, living
quarters and canteens. Sixty percent (60%) of the air-
strip was completed and the construction of the airport
terminal and other specialized operational facilities
began. There were approximately 3,000 construction
workers and over 540 construction machinery units at
the site as of the year end 2013.

COOPERATION WITH CNPC

NOVATEK and CNPC concluded an agreement on co-
operation within the Yamal LNG project in June 2013.
The agreement provided for the acquisition by CNPC of
a 20% stake in the project, conclusion of a long-term
contract for supply of at least three (3) million tons of
LNG per annum and the active assistance by CNPC in
organizing the provision of external ﬁ nancing for the
project from Chinese ﬁ nancial institutions.

An agreement on purchase of a 20% participa-
tion interest in Yamal LNG project was concluded in
September 2013 and the deal was eﬀ ectively closed in
January 2014. In addition to the payment for CNPC’s
participation interest and proportional reimbursement
of past costs of NOVATEK, the entrance of CNPC into
the Project also envisages disproportional ﬁ nancing for
the project through contributions to the charter capital
of Yamal LNG and shareholder loans.

In September 2013, NOVATEK, CNPC and a consortium
of Chinese ﬁ nancial institutions concluded a memo-
randum on project ﬁ nancing for the Yamal LNG project.
According to the memorandum, the Chinese commer-
cial banks – China Development Bank Corporation,
Industrial and Commercial Bank of China, Bank of
China and China Construction Bank – will consider
actively participating in the external project ﬁ nancing
transaction of the project. Final documentation with
the Chinese commercial banks will be executed simul-
taneously with all of the other lenders participating
in project ﬁ nancing of Yamal LNG, including, but not
limited to, foreign export credit agencies, international

and Russian commercial banks and other ﬁ nancial
institutions.

The HOA (Heads of Agreement) for the supply of
LNG between Yamal LNG and CNPC was concluded in
October 2013. The document provides for the supply of
no less than three (3) million tons of LNG per annum at
delivered ex-ship (DES) terms for a period of 15 years
with possible supply extension, with the LNG price
indexed to the Japanese Crude Cocktail.

Processing
of Gas Condensate

PUROVSKY PLANT

Gas condensate is produced from our ﬁ elds in an
unstable form and requires further processing before
it can be delivered to our customers. Our primary
gas condensate processing asset is the Purovsky
Plant located in the YNAO in close proximity to the
East-Tarkosalinskoye ﬁ eld. We also own a system of
condensate pipelines, enabling delivery of de-etha-
nized unstable gas condensate from our ﬁ elds to the
Purovsky Plant.

The Purovsky Plant is the central element in our pro-
duction value chain that provides us complete opera-
tional control over our processing needs and access to
higher yielding marketing channels for our stable gas
condensate.

In 2013 and early 2014, four (4) new gas condensate
stabilization trains with six (6) million tons per annum
overall capacity were launched at the Purovsky plant
resulting in completion of a project for expanding
capacity of the plant from ﬁ ve to 11 million tons. As
a result, we have achieved a balance between our
gas condensate production potential and processing
capacity.

In 2013, the Purovsky Plant received feedstock
from the Yurkharovskoye, East-Tarkosalinskoye,
Khancheyskoye, Sterkhovoye, Dobrovolskoye,

PROCESSING VOLUMES AND OUTPUT OF THE PUROVSKY PLANT, THOUSAND TONS

PROCESSING OF DE(cid:7)ETHANIZED CONDENSATE

OUTPUT:

Stable gas condensate

LPG

Methanol

NOVATEK

2012

4,034

3,081

903

2013

4,862

3,712

1,088

Change

20.5%

(5.9)%

NOVATEK Annual Report 2013

Samburgskoye, Yumantilskoye and North-
Urengoyskoyе ﬁ elds. The Plant processed 4.86 mmt of
de-ethanized unstable gas condensate, or 20.5% more
than in 2012, resulting in the commercial production
of 3,712 mt of stable gas condensate, 1,088 thousand
tons of LPG and 16 thousand tons of methanol pro-
duced during the LPG scrubbing process. The growth
in processing volumes mainly reﬂ ects the increase of
production at the Samburgskoye ﬁ eld and the start of
deliveries to the Purovsky Plant of de-ethanized gas
condensate from the North-Urengoyskoye ﬁ eld at the
end of 2012 and launch of the Eastern dome of the
ﬁ eld in October 2013.

deep-water berths equipped with loading arms capable
of loading tankers up to 120 thousand deadweight
tons, administrative buildings and living quarters, engi-
neering systems and networks, and sewage treatment
facilities.

The state-of-the-art equipment has been installed at
the Ust-Luga Complex ensuring maximum automation
of technological processes, as well as providing the
highest level of industrial and environmental safety.
Another unique feature is its location on an artiﬁ cially
in-ﬁ lled land, which required the most compact layout
of production facilities.

The Purovsky Plant is connected to the Russian rail
network at the Limbey rail station. Since the launch of
Ust-Luga Complex in June 2013 practically all of the
stable gas condensate produced at the Purovsky Plant
is delivered by rail to the Ust-Luga for further process-
ing (previously the stable gas condensate was sent for
exports through the Port of Vitino). Railway transport
is also used to supply LPG to the domestic market and
for exports.

The Ust-Luga Complex allowed us to expand our
vertically integrated chain and increase sales of higher
value added products, as well as to diversify the mar-
kets and to expand the customer base for our prod-
ucts. Implementation of the project also allowed us to
improve logistics and reduce transportation costs due
to a more favorable geographical location of Ust-Luga
compared to the port of Vitino, through which we had
previously exported our gas condensate.

UST(cid:7)LUGA STABLE GAS CONDENSATE
TRANSSHIPMENT AND FRACTIONATION COMPLEX

As part of our strategy to maximize margins through
value added products, in 2013, we launched the
Gas Condensate Fractionation and Transshipment
Complex located at the all-season port of Ust-Luga
on the Baltic Sea. The ﬁ rst stage of the complex was
launched in June and the second stage was complet-
ed in October 2013, with provides us with overall gas
condensate processing capacity of six (6) million tons
per annum. The Ust-Luga Complex processes stable
gas condensate into petroleum products like light and
heavy naphtha, jet fuel, heating oil and gasoil, and
enables us to ship the petroleum products to interna-
tional markets.

The Ust-Luga Complex includes two stable gas conden-
sate fractionation trains with capacity of three (3) mil-
lion tons per annum each, 520 thousand cubic meters
of storage facilities for feedstock and products, two (2)

In 2013, the Ust-Luga Complex processed 1,873
thousand tons of stable gas condensate into 1,831
thousand tons of end products, including 1,522 thou-
sand tons of light and heavy naphtha, 190 thousand
tons of jet fuel and 119 thousand tons of heating oil
and gasoil.

Natural Gas Sales

During 2013, NOVATEK supplied natural gas to 29
regions of the Russian Federation. Our customers
were located primarily in the following regions (with
gas sales of more than one (1) bcm per annum
per region): Chelyabinsk, Perm, Moscow, Kostroma,
Orenburg, Vologda, Sverdlovsk and Tyumen regions,
Khanty-Mansiysk Autonomous Region, and the cities
of Moscow and St. Petersburg. The above-men-
tioned regions accounted for 82% of our total
gas sales. The Company accounted for 18.4% of
total natural gas deliveries to the domestic market

NATURAL GAS SALES, BCM

TOTAL GAS SALES, INCLUDING:

End customers

Traders

Share of end-customers in total gas sales

2012

58,880

40,806

18,074

69.3%

2013

64,152

57,021

7,131

88.9%

Change

9.0%

39.7%

(60.5)%

19.6 p.p.

NOVATEK

Creating Value Added

through the Uniﬁ ed Gas Supply System (UGSS),
representing an increase of 2.1% percentage points
as compared to 2012.

geography, as well as developing and maintaining
logistics infrastructure.

NOVATEK’s 2013 natural gas sales volumes to-
taled 64.2 bcm, representing an increase of 9.0%
as compared to 2012 sales volumes of 58.9 bcm.
The growth in sales volumes was due to an increase
in natural gas supplies to the Moscow, Kostroma,
Vologda, Perm and Tyumen regions. Deliveries to
these regions increased by 17.2 bcm as compared
to 2012 due to new long-term delivery contracts
with end-customers signed in 2012 and the acqui-
sition of an 82% stake in Gazprom Mezhregiongas
Kostroma in December 2012 (renamed to OOO
NOVATEK-Kostroma).

The signing of new sales contracts and acquisition
of Gazprom Mezhregiongas Kostroma resulted in the
increase in our proportionate share of sales to the
end-customer segment in our total sales volumes mix
from 69.3% to 88.9%.

During 2013, our total revenues from natural gas sales
increased to RR 205.0 billion or by 43.7%, as compared
to 2012, due to the combination of higher volumes
sold, increase of sales to the end-customer segment
and an increase in the regulated gas tariﬀ .

In order to maintain production levels during periods
of seasonal demand NOVATEK has entered into an
agreement with OAO Gazprom for the storage ser-
vices. Natural gas inventories are accumulated during
warmer periods when demand is lower and then used
to meet increased demand during periods of colder
weather. As at the end of 2013 our inventories of natu-
ral gas amounted to 3.3 bcm

Liquid Hydrocarbon Sales

NOVATEK produces stable gas condensate, petroleum
products, liqueﬁ ed petroleum gas (LPG) and crude oil,
which are sold domestically and internationally.

We strive to respond quickly to changing market con-
ditions by optimizing the customer base and supply

LIQUID HYDROCARBON SALES, THOUSAND TONS

Stable gas condensate sales

Petroleum products sales

LPG sales

Crude oil sales

NOVATEK

In 2013, our liquid hydrocarbon sales business changed
signiﬁ cantly due to the launch of the stable gas
condensate transshipment and fractionation complex
at the port of Ust-Luga on the Baltic Sea. We started
supplying stable gas condensate, which we previously
exported through the port of Vitino, to the Ust-Luga
complex for further processing. That allowed us to
improve logistics and reduce transportation costs as
the railroad transportation distance is 383 km shorter
and the freight rates are lower due to a more favor-
able geographical location of Ust-Luga compared to
the port of Vitino, and the possibility of using tankers
with higher deadweights. The start of petroleum prod-
uct (light and heavy naphtha, jet fuel, heating oil and
gasoil) exports allowed us to increase average liquids
sales prices and diversify our customer base. In the
second half of 2013, stable gas condensate exports
were discontinued and fully replaced by the exports of
petroleum products.

Total sales volumes of liquid hydrocarbons in 2013
amounted to 5,438 thousand tons, a 29.4% increase
over 2012 volumes. The growth is attributed to
higher unstable gas condensate processing volumes
at the Purovsky Plant and to the increased crude oil
production.

Liquids sales revenues in 2013 increased to RR 92.5
billion, or by 36.8%, as compared to 2012. Revenue
growth was driven by the increase in sales volumes
and higher prices, which were mainly a result of the
launch of the Ust-Luga Complex.

Liquid hydrocarbons processed at the Purovsky Plant
are transported by rail. At the end of 2013 we owned
and leased 7,900 rail cisterns, of which 3,400 were
used for the transportation of LPG and the remaining
part for the transportation of stable gas condensate.
Our crude oil is transported through the trunk pipelines
owned and operated by OAO Transne(cid:3) .

During 2013, we sold 2,117 thousand tons of stable
gas condensate, a 25.6% decrease as compared to the
volumes sold in 2012. The decrease in sales volumes

2012

2,847

905

442

2013

2,117

1,606

1,078

627

Change

(25.6)%

n/a

19.1%

41.9%

was due to the start of fractionation of stable gas
condensate at Ust-Luga Complex. We exported 92%
of all stable gas condensate sales volumes, or 1,946
thousand tons, via the all season port of Vitino on the
White Sea. Approximately 27 thousand tons of stable
gas condensate was exported via the port of Ust-Luga.
The remaining volumes of stable gas condensate, or
144 thousand tons, were sold on the domestic market.
Fi(cid:3) y six percent (56%) of export volumes were sold to
countries in the Asian-Paciﬁ c region, 38% to European
markets and 6% to the USA.

During 2013, we sold 1,606 thousand tons of petro-
leum products from the Ust-Luga complex, including
1,328 thousand tons of naphtha, 178 thousand tons
of jet fuel, 100 thousand tons of heating oil and gasoil.
Ninety four percent (94%) of naphtha were sold to the
Asian-Paciﬁ c countries with the remaining volumes
sold to South American markets. Other products of the
Ust-Luga Complex were all sold to Europe.

In 2013, total LPG sales volumes amounted to 1,078
thousand tons both on export and domestic markets,
of which 53.4% were exported. Novatek Polska, our
wholly owned LPG trading company in Poland, was
responsible for 54.6% of our total LPG export sales.
Other export markets for LPG were Finland, Hungary,
Lithuania, Slovakia and Romania.

On the domestic market, our LPG is sold through large
wholesale channels, as well as through our network
of retail and small wholesale stations. In 2013, large
wholesale supplies to the domestic market were 394
thousand tons, representing 36.5% of total LPG sales
volumes. We were also selling LPG via the network of
64 retail stations and seven (7) small wholesale sta-
tions in Chelyabinsk, Volgograd, Rostov and Astrakhan
regions. The total amount of LPG sold through our do-
mestic network of retail and small wholesale stations
increased to 108 thousand tons or by 4.9% as com-
pared to 2012.

Sales of crude oil in 2013 were 627 thousand tons, a
41.9% increase over 2012 volumes. We sold 63.2% of
our crude oil volumes on the domestic market with the
remaining volumes supplied to export markets.

NOVATEK Annual Report 2013

ENVIRONMENTAL
AND SOCIAL
RESPONSIBILITY

NOVATEK adheres to the principles of eﬀ ective and re-
sponsible business conduct and considers the welfare
of its employees and their families, environmental and
industrial safety, the creation of a stable and beneﬁ cial
social environment as well as contributing to Russia’s
overall economic development as priorities and respon-
sibilities of the Company.

Environmental
Protection

NOVATEK’s core producing assets are located in the Far
North, a harsh Arctic region with vast mineral resour-
ces and a fragile, easily vulnerable environment. Тhe
Company is committed to environmental protection in
its operations.

NOVATEK has implemented an Environmental, Health
and Safety Policy, while at the same time an Integrated
Management System for Environmental Protection,
Occupational Health and Safety (IMS) in compliance
with requirements of international standards has been
implemented at all of our main subsidiaries.

In 2013, we successfully passed another IMS compli-
ance audit, which conﬁ rmed that:

OHSAS 18001:2007 requirements.

• the Company’s IMS meets ISO 14001:2004 and
• the certiﬁ cation plan has been implemented.
• Environmental, Health and Safety goals and objec-

tives have been achieved.

In 2013, as part of our ongoing commitment to IMS,
our joint venture, Terne(cid:3) egas, was certiﬁ ed in accor-
dance with ISO 14001:2004 international standards.
As of the end of 2013, six (6) NOVATEK subsidiaries
and joint ventures were certiﬁ ed according to these
standards.

Eﬃ cient implementation of the Program for improve-
ment of the rational use of associated petroleum gas
enabled us to increase the associated gas utilization
rate at the East-Tarkosalinskoye ﬁ eld to 95% in 2013.
As a result, greenhouse gas emissions to the atmo-
sphere in 2013 were reduced by 772 thousand tons of
CO2 equivalent.

In 2013, we commissioned a new major processing
complex for the transshipment and fractionation of

NOVATEK

Creating Value Added

stable gas condensate at the port of Ust-Luga on the
Baltic Sea. The facility operates in strict compliance
with the applicable environmental laws of the Russian
Federation and international conventions. The state-of-
the-art equipment has been installed at the Ust-Luga
Complex ensuring maximum automation of technolog-
ical processes, as well as providing the highest level of
industrial and environmental safety.

Among other things, the Ust-Luga Complex is equipped
with an innovative closed ﬂ are system for process
gas utilization. The ﬂ are system has a large burning
surface and enables to reduce the amount of harmful
emissions to the atmosphere, while the absence of
open ﬂ ames allows us to minimize the environmental
footprint.

The Ust-Luga Complex is also equipped with an
advanced biological wastewater treatment facility
with capacity of 100 cubic meters per day. Due to
operating a marine tanker terminal we pay special
attention to the condition of the Luga Bay of the Gulf
of Finland and its water protection zones. We carry
out environmental monitoring of this area under the
program approved by the Neva-Ladoga Water Basin
Committee. Analysis of the samples taken in the Luga
Bay in 2013 shows that hydrochemical parameters
and concentrations of pollutants in the sea water fall
within the maximum allowable limits for commercial
ﬁ shing waters.

In 2013, NOVATEK continued its participation in the
Carbon Disclosure Project (CDP), which discloses infor-
mation on greenhouse gas emissions and the energy
eﬃ ciency of production, and CDP Water Disclosure
Project, which discloses information on the use of
water resources. By taking part in these projects, the
Company strives to ﬁ nd the balance between climate
change risks and investment project eﬃ ciency. The
Company provides access to information regarding the
eﬀ ect of its operations on the environment to all our
stakeholders in a wide range of federal and regional
media and on the Company’s website.

In 2013, the Company was an active participant of
various environmental contests. The project “Drill
Cuttings Treatment Technology for the Yurkharovskoye
Field” won the Vernadsky National Environmental
Prize in the Innovative Eco-eﬃ cient Technologies for
Industrial Application category. The Company’s em-
ployees took part in the IV All-Russia Environmental
Protection Congress held in Moscow under the auspic-
es of the Russian Ministry of Natural Resources and
Environment.

One of the Company’s priorities is the rational usage
of resources, including energy resources. The table
below sets out the physical volumes and the Russian
rouble equivalent of energy resources consumed by
the Company in 2013.

KEY ENVIRONMENTAL INDICATORS OF NOVATEK, ITS SUBSIDIARIES AND JOINT VENTURES

Water consumption

Atmosphere emissions

Unit

th. cubic meters

th. tons

2012

881

23.4

2013*

1,425

29.4

Change

61.7%

25.6%

* Increase in water consumption was due to the launch of new facilities at our producing ﬁ elds and ﬁ elds prepared for launch, as well as start of operations at the
Gas Condensate Fractionation and Transshipment Complex at the port of Ust-Luga, including water consumption during the hydraulic tests of the Complex. Increase
in atmosphere emissions is due to growing production volumes.

ENERGY RESOURCE CONSUMPTION BY NOVATEK AND ITS SUBSIDIARIES IN 2013

Natural gas

Electricity

Heating energy

Oil

Motor gasoline

Diesel fuel

Other

* 717 tons of own crude oil consumed by NOVATEK-Yurkharovne(cid:3) egas.

NOVATEK

Unit

mmcm

MW*h

Gcal

tons

Volume

826

278,677

184,706

717

754

3,470

30,334

RR mln, net of VAT

375.7

556.8

96.8

0.0*

26.5

114.2

12.8

NOVATEK Annual Report 2013

KEY HEALTH AND SAFETY INDICATORS OF NOVATEK, ITS SUBSIDIARIES AND JOINT VENTURES

Injury frequency rate (number of injuries per million working hours)

Accident severity rate (total number of employee working hours lost
per accident / number of accidents)

2012

0.92

290

2013

0.41

922

Change

(55.4)%

x3.2*

* Increase in accident severity rate was due to an incident at the Purovsky Plant. The incident was properly investigated and measures were taken to enhance opera-
tional safety and prevent any recurrence.

Health
and Safety

Our strategic goal is to achieve a leading position
amongst oil and gas companies on all key indicators
in terms of Occupational Health and Safety. In order to
accomplish this goal, the Company continually updates
its IMS, improves employees’ qualiﬁ cation and applies
advanced technologies.

In accordance with the requirements of the federal
law “On Industrial Safety of Hazardous Production
Facilities” and “Rules on the Organization and
Implementation of Industrial Control for Compliance
with Requirements of Industrial Safety at Hazardous
Production Facilities” all of our subsidiaries have
developed their own rules for the organization and im-
plementation of industrial control for compliance with
these requirements. We have also established indus-
trial control compliance commissions, which carry out
periodic audits of departments and production facilities
to comply with the EHS requirements.

In 2013, 3,127 employees, including workers and mid-
dle management, underwent HSE training courses.

Human
Resources

Employees are NOVATEK’s most valuable resource,
allowing the Company to grow rapidly and eﬀ ec-
tively. The Company’s human resource management
system is based on the principles of fairness, re-
spect, equal opportunities for professional develop-
ment, dialogue between management and employ-
ees, as well as continuous, comprehensive training
and development opportunities for the Company’s
employees at all levels.

As of the end of 2013, NOVATEK and its subsidiaries
had 5,997 employees, 38.5% of whom work in explo-
ration and production, 20.5% in processing, 31.3% in
transportation and marketing, and 9.8% is administra-
tive personnel.

PERSONNEL TRAINING AND DEVELOPMENT

In an environment of rapidly developing technologies
and management systems, our multilevel training
and professional development program enables our
employees to contribute to raising the Company’s com-
petitiveness. In 2013, the primary goals of training and
professional development included:

• developing and implementing a program aimed at
providing the Company with a talent pool of senior
managers;

• implementing the “Steps in Discovering Talents”

program for young specialists targeted at training
highly qualiﬁ ed personnel whose competence level
fully meets business needs;

• developing and implementing the “Technical

Training” program based on the results of tests in
the Corporate Technical Competency Assessment
System for various lines of business; and

• involving young specialists in NOVATEK’s “Research-
to-Practice Conferences” and the “Fuel and Energy
Complex (FEC) Competitions”.

In 2013 our twelve executives started participat-
ing in training activities aimed at developing a
common understanding of the goals and strategy
of NOVATEK in order to prepare for higher level po-
sitions within the Company. A specialized 1.5-year
training program was launched in September 2013
at the Higher School of Management (on the base
of the Higher School of Economics in Moscow) and
its main goal is to systematize participants’ knowl-
edge of corporate management principles and
broaden their views on the industry and business in
general.

During the past year, NOVATEK continued its eﬀ orts
to increase employee training, improve working con-
ditions and ensure a safe environment at its produc-
tion facilities. In 2013, 38% of our specialists and
line workers upgraded their respective qualiﬁ cations,
and 58% of the Company’s engineers and techni-
cians completed employee certiﬁ cation and industrial
safety courses.

NOVATEK

Creating Value Added

Specialized training courses for employees of produc-
tion divisions started in September 2012 under the
Technical Training program at Gubkin Russian State
University Training and Research Center, the Petroleum
Learning Center at Tomsk Polytechnic University,
NExT Schlumberger and other centers. A total of 209
employees underwent training through the program,
including 128 employees in 2013.

Under the Corporate Technical Competency Assessment
System tests for several new areas were developed.
A total of 668 people were tested under the system
during the year (including 351 people tested with
newly developed tests), including 47 people during the
hiring process to ﬁ ll vacant positions and 41 employees
promoted to more senior positions.

In 2013, we had our ﬁ rst class of graduates of Steps
in Discovering Talents program, whereby 39 young
specialists participated in training activities. In autumn
2013, 36 new young specialists joined the program.

The Company continues to form mentoring for young
specialists. Mentors assigned to young specialists help
them to adapt quickly and eﬀ ectively and develop
successfully as professionals. In 2013, 20 mentors
participated in a Mentorship Practicum, which became
a platform for the discussion of new skills of working
with young specialists and to build knowledge.

The 8th Interregional Research-to-Practice Conference
for the Company’s young specialists attended by
64 employees was held in Moscow in September
2013. Based on the results of the competition, all
the winners received cash prizes, while nine (9) of
the ﬁ rst place winners were also awarded a trip to a
petroleum training center in South Korea. The winner
nominated in the category “Best Implemented Project”
was awarded a cash prize, and the top 14 projects
advanced to the FEC 2013 Competition for Youth
Projects, held by the Russian Federation’s Ministry of
Energy. In 2013, one of NOVATEK’s young specialists,
the winner of the FEC-2012 Competition, received
commendation from the Ministry of Energy.

SOCIAL PROGRAMS

The focus in employee relations is on implementing
social programs. According to the Core Concept of the
Company’s social policy which was adopted in 2006,
the social beneﬁ ts package for employees includes the
following programs:

• voluntary medical insurance for employees;
• therapeutic resort treatment for employees and
• provision of special-purpose short-term loans;

members of their families;

NOVATEK

payments;

• special-purpose compensation and social support
• provision of special-purpose interest-free loans to
• pension program.

purchase housing, and

Along with providing an optimum social beneﬁ ts
package, the Company is also committed to creating
opportunities for employees to play sports and get
involved in sports and cultural events. In 2013, our em-
ployees and their family members visited exhibitions
at Russia’s national museums, classical music concerts,
and attended sporting events like hockey, basketball
and football (soccer) games in their free time with the
Company’s assistance.

The Company publishes its corporate newsletter
“NOVATEK”, including the “NOVATEK Family” feature
and corporate magazine “NOVATEK Plus” to inform
employees about the Company’s activities and get
employees, specialists and managers actively involved
in business, cultural, sports, charitable and corporate
activities.

Social Policy
and Charity

During 2013, NOVATEK continued to contribute to an
improvement in the living standards of local popula-
tions in the YNAO as well as the Samara, Chelyabinsk
and Tyumen regions. Special priority was given to the
performance of our long-term agreements with the
municipalities of these regions for ﬁ nancing programs
targeting education and youth development, support for
low-income families, repair and modernization of so-
cially important facilities and preservation of the culture
heritage of the indigenous peoples of the Far North and
Russia as a whole. In 2013, NOVATEK and its subsidiar-
ies invested more than RR 1.18 billion on projects and
activities related to the support of indigenous peoples,
charitable contributions and educational programs.

COOPERATION WITH INDIGENOUS PEOPLES
OF THE FAR NORTH

During 2013, NOVATEK provided ﬁ nancial support to
the “Yamal for Descendants” association and its district
branches. We achieved our statutory goals, including
the support of the youth branch of the Association,
assistance to indigenous peoples through ﬁ nancing
arrangements for housing construction, repair service
and maintenance of social purpose, fuel purchases
for air delivery of the nomadic population and food in
remote areas.

Throughout the year, the Company also provided spon-
sorship assistance to the following organizations:

• The Association of Minority Populations of

Indigenous Peoples of the Far North, Siberia, and
Far East of the Russian Federation – for legal
services, training courses and seminars, and
publishing;

upgrade farming facilities;

• The Purovsky and Krasnoselkupsky Districts to
• The Tazov District for construction of a cold storage
facility in the village of Gyda and houses repair in
the Tanamo and Razvilka villages; and

• The Nadym District for the construction of a resi-

dential house in the Nyda village.

EDUCATIONAL PROGRAMS

NOVATEK continued to develop the Company’s con-
tinuing education program, which provides opportu-
nities to gi(cid:3) ed students, from the regions where we
operate, to further their education at top rated univer-
sities, participate in NOVATEK internships and, upon
completion of their studies, possible employment with
the Company.

Recruitment and career guidance for promising
employees start with the “Gi(cid:3) ed Children” program
implemented at School No. 8 in Novokuybyshevsk
and School No. 2 in Tarko-Sale. Special classes are
formed on a competitive basis from the most talent-
ed grade 10 and 11 students with above-average
test scores.

The Company has also implemented two “Grants”
programs for schoolchildren and teachers living in
Purovsky District of the YNAO.

The “Grants” program for schoolchildren is an educa-
tional support program, which we have been admin-
istering since 2004. Under the program, students in
grades ﬁ ve (5) through 11 living in the districts are
awarded grants from the Company to support their
academic and creative development and to encourage
a responsible attitude towards their studies. In 2013,
the Company awarded 74 grants.

The “Grants” program for the teachers is intended to
raise the prestige of the teaching profession and create
favorable conditions for developing new and talented
teachers. Since the program was launched, 57 teachers
have received grants, including ﬁ ve (5) in 2013.

In an eﬀ ort to create conditions for more eﬀ ective
use of university and college resources in preparing
students for future professional activities, the Company
has developed and successfully implemented the

NOVATEK Annual Report 2013

NOVATEK-VUZ program. The program is an action plan
for focused, high-quality training for specialists with
higher education in key areas of expertise in order
to grow the Company’s business and meet its needs
for young specialists. The program is based at the
St. Petersburg State Mining University, Gubkin Russian
State University of Oil and Gas in Moscow and the
Tyumen Oil and Gas University.

Students who pass their exams with good or excellent
results receive additional monthly payments. During
their studies, the students are oﬀ ered paid ﬁ eld, engi-
neering and directed internships. This experience allows
them to apply the knowledge obtained at lectures and
seminars to real-life situations and gain experience
in the professions they’ve chosen, while the Company
receives an opportunity to meet potential employees.

SUPPORT OF CULTURAL TRADITIONS

The strengthening of partnership relations between
the Company and Russia’s leading cultural and educa-
tional institutions, creative groups and charity funds
continued during the 2013 period, namely the Russian
State Museum (St. Petersburg), the Moscow Kremlin
Museum, the State Tretyakov Gallery, the Multimedia
Art Museum (the Moscow House of Photography
Museum and Exhibition Complex), the Moscow
Museum of Modern Art and the Samara Regional Art
Museum.

In 2013, NOVATEK continued to support the annual
International Festival “Imperial Gardens of Russia”
in St. Petersburg (the Russian State Museum). The
Company was an exclusive partner of the exhibition
“I am not…” by Yury Albert (the Moscow Museum of
Modern Art) and the exhibition “Malevich. Before and
a(cid:3) er the square” (the Russian State Museum), held in
Moscow and St. Petersburg.

NOVATEK also remained a General Partner of the
Moscow Soloists Chamber Ensemble under the direc-
tion of Yuri Bashmet.

SPORTS PROJECTS

NOVATEK has continued its support for semi-profes-
sional and high-level amateur sports programs. The
Company, its subsidiaries and joint ventures organize
regular tournaments in the most popular sports, includ-
ing soccer, volleyball, swimming to name a few. The
Company’s mini-football, volleyball and hockey teams
play in corporate tournament in Moscow on an annual
basis. In 2013, our football team became a champion
of the tournament “Champions League of Business”
and volleyball and hockey players won prizes in various
competitions.

NOVATEK

Creating Value Added

The Company is the General Partner of the Spartak
Basketball Club (St. Petersburg), the NOVA Volleyball
Team (Novokuybyshevsk) and the Dynamo Hockey
Club (Moscow). In 2013, NOVATEK signed an agree-
ment on cooperation with the Russian Football Union
and became a General Partner of the Russian national
football team.

MANAGEMENT
AND CORPORATE
GOVERNANCE

CHARITY

The Company continued its cooperation with Chulpan
Khamatova’s Gi(cid:3) of Life charitable foundation in 2013.
Funds raised from events are directed to children’s
hospitals to buy modern medical equipment. In 2013,
the Company held two blood donor sessions for
children from the Russian Children’s Clinical Hospital
at its Moscow headquarters in collaboration with the
foundation.

We continued our charitable activities of the Company’s
All Together volunteer movement founded in 2008.
As in previous years, the volunteers participated in a
number of causes including support for orphans and
children with various illnesses, veterans, orphaned ani-
mals, as well as support for the blood donor movement
and the organization of other charitable programs.

NOVATEK

NOVATEK strives to commit to the highest standards of
corporate governance. We believe that such standards
are an essential prerequisite to business integrity and
performance and provide a framework for socially
responsible management of the Company’s operations.

Corporate Governance

The Company has established an eﬀ ective and
transparent system of corporate governance com-
plying with both Russian and international standards.
NOVATEK’s supreme governing body is the General
Meeting of Shareholders. The corporate governance
system also includes the Board of Directors, the
Board Committees, and the Management Board,
as well as the system of internal control and audit
bodies. The activity of all these bodies is governed
by the applicable laws of the Russian Federation,
NOVATEK’s Charter and internal documents available
on our website (www.novatek.ru).

NOVATEK strives to consider the principles of corporate
governance outlined in the Corporate Governance Code
recommended by the Russian Federation’s Federal
Commission for Securities Market dated 4 April 2002
№421/r. The Company follows the recommendations of
the Code, as well as oﬀ ering to our shareholders and
investors other solutions that are intended to protect
their rights and legitimate interests.

Since the Company’s shares are listed on the London
Stock Exchange in the form of depositary receipts,
NOVATEK places great emphasis on the UK Financial
Reporting Council’s Combined Code on Corporate
Governance and follows its recommendations as far as
practicable.

The Company adheres to the internal Corporate
Governance Code approved by the Board of Directors
in 2005 (Minutes No. 60 of 15 December 2005). This
Code has been elaborated on in accordance with best
Russian and international practices in corporate gov-
ernance, ethical norms and speciﬁ c conditions of the
Company’s operations and in accordance with Russian
legislation and the Company’s Charter.

The Company also adheres to the internal Code of
Business Ethics approved by the Board of Directors
in 2011 (Minutes No. 133 of 24 March 2011). The

Code establishes general norms and principles
governing the conduct of members of the Board
of Directors, Management Board and Revision
Commission, as well as NOVATEK’s management
and employees, which were elaborated on the basis
of moral and ethical values and professional stan-
dards. The Code also determines the rules which
govern mutual relationships inside the Company
and NOVATEK’s relationships with its subsidiaries
and joint ventures, shareholders, investors, the gov-
ernment and public, consumers, suppliers, and other
stakeholders.

NOVATEK’s corporate governance practices make it
possible for its executive bodies to eﬀ ectively manage
ongoing operations in a reasonable and good faith
manner and solely to the beneﬁ t of the Company and
its shareholders.

General Meeting of Shareholders

The General Meeting of Shareholders is NOVATEK’s
supreme governing body. The activity of the General
Meeting of Shareholders is governed by the laws of
the Russian Federation, the Company’s Charter, and
the Regulations on the General Meetings approved by
NOVATEK’s General Meeting of Shareholders in 2005
(Minutes No. 95 of 28 March 2005) with amend-
ments. The Guidelines were elaborated in accordance
with Russian legislation, the Company’s Charter and
the recommendations of the Russian Corporate Code
of Conduct.

The General Meeting of Shareholders is responsible for
the approval of annual reports, annual ﬁ nancial state-
ments, the distribution of proﬁ t, including dividends
payout, the election of Board of Directors and Revision
Commission, approval of the Company’s Auditor and
other corporate and business matters.

On 25 April 2013, the Annual General Meeting of
Shareholders approved the annual report, annual
ﬁ nancial statements (in accordance with Russian
Accounting Standards), distribution of proﬁ t and the
size of dividends based on the results of FY2012.
The meeting also elected the Board of Directors,
Chairman of the Management Board and the
Revision Commission, as well as approved remuner-
ation to members of the Board of Directors, Revision
Commission and the Company’s external auditor for
2013.

On 22 October 2013, the Extraordinary General
Meeting of Shareholders approved the amount of inter-
im dividend for the ﬁ rst half of 2013.

NOVATEK Annual Report 2013

Board of Directors

The Board of Directors (the Board) activity is gov-
erned by the laws of the Russian Federation, the
Company’s Charter and the Regulations on the Board
of Directors approved by NOVATEK’s General Meeting
of Shareholders in 2005 (Minutes No. 96 of 17 June
2005) with amendments.

The Board carries out the overall strategic manage-
ment of the Company’s activity on behalf of and in
the interests of all its shareholders, and ensures the
Company’s eﬃ cient performance in order to increase
its shareholder value.

The Board determines the Company’s strategy and
priority lines of business, endorses long-term and
annual business plans, reviews ﬁ nancial perfor-
mance, internal control, risk management and other
matters within its competence, including optimi-
zation of corporate and capital structure, approval
of major transactions, making decisions on invest-
ment projects and recommendations on the size of
dividend per share and its payment procedure, and
convening General Meeting of Shareholders. The
members of the Board are elected by the General
Meeting of Shareholders.

The current members of the Board were elected at the
Annual General Meeting of Shareholders on 25 April
2013. The Board of Directors is comprised of nine
members, of which seven are non-executive directors.
Six (6) directors are considered to be independent as
at the election date in accordance with the Corporate
Governance Code recommended by the Russian
Federation’s Federal Commission for Securities
Market, and two in accordance with requirements
of the UK Financial Reporting Council’s Combined
Code on Corporate Governance. The Board Chairman
is Alexander Egorovich Natalenko. The Chairman is
responsible for leading the Board and ensuring its
eﬀ ectiveness.

The members of NOVATEK’s Board have a wide
range of expertise as well as signiﬁ cant experience
in strategic, ﬁ nancial, commercial and oil and gas
activities. The Board members hold regular meetings
with NOVATEK’s senior management to enable them
to acquire a detailed understanding of NOVATEK’s
business activities and strategy and the key risks. In
addition to these formal processes, Directors have
access to the Company’s medium-level managers for
both formal and informal discussions to ensure regular
exchange of information they need to participate in
the Board meetings and make balanced decisions in a
timely manner.

NOVATEK

Creating Value Added

THE BOARD OF DIRECTORS MEMBERSHIP
AS OF 31 DECEMBER 2013

• Alexander Y. Natalenko – Chairman of the Board
• Andrei I. Akimov
• Burckhard Bergmann
• Yves Louis Darricarrère
• Vladimir A. Dmitriev
• Mark A. Gyetvay
• Leonid V. Mikhelson
• Kirill G. Seleznev
• Gennady N. Timchenko

BOARD ACTIVITIES DURING
THE 2013 CORPORATE YEAR***

To ensure the Company’s eﬃ cient performance, the
Board meetings shall be convened on a regular basis at
least once every two months. In corporate year 2013,
the Board met eight times, of which four meetings
were held in absentia. During the year, the following key
issues were discussed and respective decision made:

year operating and ﬁ nancial results;

• reviewed and approved the Company’s 2013 full
• recommended an interim dividend for ﬁ rst half
2013, based on interim ﬁ nancial results for the
period and a full year dividend for 2013, based on
full year ﬁ nancial results;

• reviewed and approved NOVATEK’s business plan

for 2014;

• approved the sale of a 20% participation interest

in the Yamal LNG project to CNODC, a subsidiary of
China National Petroleum Corporation; and

• approved a swap of a 51% share in Sibne(cid:3) egas for

a 40% interest in Artic Russia B.V.

Board Committees

The Company has three Board Committees: the Audit
Committee, the Strategy and Investments Committee
and the Corporate Governance and Remuneration
Committee.

The Committees’ activities are governed by the
Committees Charters approved by the Board of
Directors. The speciﬁ c terms of reference for each of
the Board Committees are available on our website.

The Committees play a vital role in ensuring that the
high standards for corporate governance are main-
tained throughout the Company and that speciﬁ c
decisions are analyzed and the necessary recommen-
dations are issued prior to general Board discussions.
The minutes of the Committees meetings are circulat-
ed to the Board members and are accompanied by any
necessary materials and explanatory notes.

In order to carry out their duties, the Committees may
request information or documents from members
of the Company’s executive bodies or heads of the

BOARD AND COMMITTEE MEETINGS ATTENDANCE IN THE 2013 CORPORATE YEAR***

Member

Independence

Board
of Directors

Audit
Committee

Corporate
Governance and
Remuneration
Committee

Strategy and
Investments
Committee

Alexander Natalenko

independent *

Andrei Akimov

independent **

Burckhard Bergmann

independent **

Yves-Louis Darricarrère

independent **

Vladimir Dmitriev

independent *, **

Mark Gyetvay

executive

Leonid Mikhelson

executive

Kirill Seleznev

independent **

Gennady Timchenko

independent **

8/8

7/8

8/8

7/8

8/8

6/8

8/8

4/4

3/3

4/4

*** Independent Director as at the election date in accordance with the UKLA Combined Code.
*** Independent Director as at the election date in accordance with the Corporate Governance Code recommended by the Russian Federation’s Federal Commission

for Securities Market.

*** From the date of election on 25 April 2013 till the Annual General Meeting of Shareholders on 18 April 2014.

NOVATEK

NOVATEK Annual Report 2013

COMMITTEES MEMBERSHIP AS OF 31 DECEMBER 2013

Audit Committee

Strategy and Investments Committee

Corporate Governance and Remuneration
Committee

Vladimir Dmitriev (Chairman)

Alexander Natalenko (Chairman)

Andrei Akimov (Chairman)

Burckhard Bergmann

Gennady Timchenko

Yves-Louis Darricarrère

Kirill Seleznev

Mark Gyetvay

Gennady Timchenko

Company’s relevant departments. For the purpose of
considering any issues being within their competence,
the Committees may engage experts and advisers hav-
ing necessary professional knowledge and skills.

STRATEGY AND INVESTMENTS COMMITTEE

The primary function of the Strategy and Investments
Committee is to develop and give recommenda-
tions to the Board for determining of priorities of the
Company’s operations and assessing the eﬀ ectiveness
of investment projects and their impact on NOVATEK’s
shareholder value.

In carrying out its responsibilities and assisting the
members of the Board in discharging their duties, the
Strategy and Investment Committee is responsible for
but not limited to:

• analyzing concepts, programs, and plans of the
Company’s strategic development and giving rec-
ommendations to the Board;

• developing recommendations to the Board with
respect to any transactions with assets the value
of which exceeds 5% of the Company’s assets book
value, as calculated in accordance with the ac-
counting data as of the last reporting date;

• developing recommendations to the Board following
the consideration of investment projects proposed
by the Company’s executive bodies for implementa-
tion; and

• developing recommendations to the Board for utili-
zation of the Company’s reserves and provisions

In corporate year 2013, the Strategy and Investments
Committee met four times.

CORPORATE GOVERNANCE AND REMUNERATION
COMMITTEE

The primary function of the Corporate Governance
and Remuneration Committee is to improve the corpo-
rate governance system and to review the Company’s
practices and policies to ensure compliance of the

Company’s business practices and internal regulato-
ry documents with applicable standards of corporate
governance and Russian and international best practice
standards. The Corporate Governance and Remuneration
Committee is also responsible for determining the policy
for executive remuneration and for the remuneration
and beneﬁ ts of individual executive directors and senior
executives.

In order to assist the Board, the Committee performs
the following functions:

• develop and regularly review our corporate gov-
ernance documents and documents regulating
corporate conﬂ icts;

dend policy and distribution;

• develop recommendations with respect to our divi-
• evaluate the Company’s Investor Relations and
• develop procedures for and perform an annual
evaluation of the work performed by the Board; and
• determine the annual compensation for the Board

Shareholder communications polices;

and the Revision Commission members.

In corporate year 2013, the Corporate Governance and
Remuneration Committee met four times.

AUDIT COMMITTEE

The primary function of the Audit Committee is to
assist the Board in exercising eﬀ ective control by
assessing:

• the accuracy, transparency, and completeness of
the Company’s ﬁ nancial statements prepared in
accordance with Russian and International account-
ing standards;

Company’s annual ﬁ nancial statements;

• the candidature of the Company’s external auditor;
• the independent auditor’s report with respect to the
• the eﬃ ciency of the Company’s internal control pro-
cedures and proposals for their improvement; and
• the Company’s compliance with applicable laws of

the Russian Federation.

NOVATEK

Creating Value Added

The Audit Committee works actively with the
Company’s executive bodies, inviting NOVATEK’s man-
agers responsible for the preparation of the ﬁ nancial
statements to attend the Committee meetings.

The Committee reviews NOVATEK’s Annual Report
and gives recommendations on the report preliminary
approval by the Board of Directors.

In corporate year 2013, the Audit Committee met three
times.

Management Board

NOVATEK’s Management Board is a collegial exec-
utive body responsible for the day-to-day manage-
ment of the Company’s operations. The Management
Board is governed by the laws of the Russian
Federation, NOVATEK’s Charter, decisions of the
General Meetings of Shareholders and the Board
of Directors and by other internal documents. More
information regarding the Management Board’s
competence is provided in the Management Board
Regulations approved by NOVATEK’s General Meeting
of Shareholders in 2005 (Minutes No. 95 of 28
March 2005).

Members of the Management Board are elected by
the Board of Directors from among the Company’s key
employees. The Management Board is subordinated
to the Board of Directors and the General Meeting of
Shareholders. The Chairman of the Management Board
is responsible for leading the Board and ensuring its
eﬀ ectiveness as well as organizing the Management
Board meetings and implementing decisions of the
General Meeting of Shareholders and the Board of
Directors. The Management Board is currently com-
prised of eight members elected by the Board of
Directors on 3 December 2009 and 24 March 2011
(Minutes No. 118 of 3 December 2009 and Minutes

No. 113 of 24 March 2011). The Chairman of the
Management Board is Leonid Viktorovich Mikhelson.

MANAGEMENT BOARD MEMBERS
AS OF 31 DECEMBER 2013:

• Leonid Mikhelson (Chairman)
• Mikhail Popov
• Vladimir Baskov
• Mark Gyetvay
• Tatyana Kuznetsova
• Iosif Levinzon
• Alexander Fridman
• Kirill Yanovskiy
Remuneration to Members
of the Board of Directors
and Management Board

The procedure for and criteria of calculating remuner-
ation to members of NOVATEK’s Board of Directors,
as well as the compensation of their expenses, are
prescribed in the Company’s Charter and Regulations
on NOVATEK’s Board of Directors.

The procedure for and criteria of calculating remu-
neration to the Chairman and members of NOVATEK’s
Management Board, as well as the compensation of
their expenses, are prescribed in the Regulations for
the Management Board and the employment contracts
they sign with the Company.

Internal Control and Audit

The Company has a system of internal control over
ﬁ nancial and business operations with the respect
to modern international best practices. The system
of internal control consists of the Audit Committee,
the Revision Commission, the Chairman of the
Management Board, the Management Board, the

INFORMATION ON REMUNERATION OF MEMBERS OF NOVATEK’S BOARD OF DIRECTORS
AND MANAGEMENT BOARD IN 2013

Payment Description, mln RR

Board of Directors *

Management Board

TOTAL PAID, INCLUDING:

Salaries

Bonuses

Fees

Other property advancements

106.8

106.3

0.5

1,610.3

532.2

1,060.6

17.6

* Some members of NOVATEK’s Board of Directors are simultaneously members of the Management Board. Payments to such members in relation to their activities

as members of the Management Board are included in the total payments to members of the Management Board.

NOVATEK

Company’s management and the Internal Audit
Division.

The objects of internal control are OAO NOVATEK, its
subsidiaries and joint ventures, and their subdivisions,
as well as their ongoing business processes.

The goals, objectives and internal control procedures
are established by the Regulations on NOVATEK’s
Internal Control, approved by the Board of Directors in
2009 (Minutes No. 114 of 31 August 2009).

REVISION COMMISSION

Revision Commission consisting of four mem-
bers is elected at the Annual General Meeting of
Shareholders for a period of one year. The compe-
tence of the Revision Commission is governed by the
Russian Federation Law On Joint Stock Companies
No. 208-FZ dated 26 December 1995 as well as the
Company’s Charter and the Regulations on the Revision
Commission Procedures approved by the General
Meeting of Shareholders in 2005 (Minutes No. 95 of
28 March 2005).

The Revision Commission is an internal control body
responsible for oversight of the Company’s ﬁ nancial
and business activities. The Revision Commission
audits the Company’s ﬁ nancial and business perfor-
mance for the year, as well as for any other period
as may be decided by its members or other persons
authorized in accordance with Russian Federation
law and the Company’s Charter. The results are
presented in the form of ﬁ ndings by the Revision
Commission.

In February 2014, the Revision Commission held one
on-site audit revision of ﬁ nancial and business activity
of the Company for the year 2013. As a result the con-
clusions about the reliability of the data contained in
the Company’s 2013 Financial Statements and Annual
Report were prepared and submitted to the Annual
General Meeting of Shareholders.

INTERNAL AUDIT DIVISION

In order to conduct a systematic, independent evalua-
tion of the reliability and eﬀ ectiveness of the internal
control and risk management system the Company
carries out internal audit. The internal audit function
is implemented by the independent Internal Audit
Division, which operates continuously since 2005.

The Internal Audit Division is functionally subordinate
to the Audit Committee and is guided by International
professional internal audit standards of Institute of
Internal Auditors.

NOVATEK Annual Report 2013

The Division carries out its activities on the basis of a
strategic plan of inspections and uses a combination of
risk-based and cyclic approaches. According to the re-
sults of inspections it develops measures to eliminate
identiﬁ ed risks and optimize ﬁ nancial and business
activities.

To improve the eﬃ ciency and optimize the costs the
Internal Audit Division employees serve on the revision
commissions of subsidiaries and joint ventures.

In February 2014, the Audit Committee considered the
report on the activities of the Internal Audit Division
in 2013. The members of the Audit Committee unan-
imously resolved that the results of the Internal Audit
Division activities in 2013 were positive.

EXTERNAL AUDITOR

The Annual General Meeting of Shareholders ap-
points an external auditor to conduct independent
review of NOVATEK’s ﬁ nancial statements. The
Audit Committee gives recommendations to the
Company’s Board of Directors regarding the candi-
datures of external auditors and the price of their
services. Based on the Committee’s recommenda-
tions, the Board proposes the auditor’ candidature
for the consideration and for approval by the Annual
General Meeting of Shareholders.

ZAO PricewaterhouseCoopers Audit was approved as
the Company’s external auditor to conduct indepen-
dent review of the Company’s ﬁ nancial statements
for 2013.

In selecting the auditor’s candidature, attention
shall be paid to the level of their professional quali-
ﬁ cations, independence, possible risk of any conﬂ ict
of interest, terms of the contract, and an amount
of remuneration requested by the candidates. The
Audit Committee oversees the external auditor’s
independence and objectivity as well as the quality
of the audit conducted. The Committee annually
provides to the Board of Directors the results of
review and evaluation of the audit opinion regard-
ing the Company’s ﬁ nancial statements. The Audit
Committee meets with the auditor’s representatives
at least once per year.

NOVATEK’s management is aware of and accepts
recommendations on independence of the external
auditor by restricting such auditor’s involvement in
providing non-audit services. Remuneration paid to
the principle auditors for auditing and other services
is speciﬁ ed in the Note 24 to the consolidated ﬁ nan-
cial statements prepared in accordance with IFRS
standards for 2013.

NOVATEK

Creating Value Added

Share Capital

Dividends

Our share capital is RR 303,630,600 and consists of
3,036,306,000 ordinary shares, each with a nominal
value of RR 0.1. As of 31 December 2013, NOVATEK
did not have privileged shares.

Our shares are traded in US dollars and Russian rou-
bles on the MICEX-RTS Stock Exchange and have an A1
listing (symbol: NVTK).

The Federal Financial Market Service issued to
NOVATEK a permit for circulation beyond Russian
Federation of 910,589,000 ordinary shares comprising
29.99% of the Company’s share capital.

Our Global Depositary Receipts (GDR) are listed on
the London Stock Exchange (symbol: NVTK). Each GDR
represents 10 ordinary shares. As of 31 December
2013, NOVATEK’s GDRs were issued on 909,613,290
ordinary shares comprising 29.96% of the Company’s
share capital.

NOVATEK’s dividend policy is based on keeping the
balance between the Company’s business goals and
shareholder’s interests. A decision to pay dividends
as well as the size, payout time and form of the
dividend is passed by the Annual General Meeting
of Shareholders according to the recommendation
of the Board of Directors. Dividends are paid twice
ayear; their size depends on market conditions, cash
ﬂ ow and the Company’s capital structure and invest-
ment program. NOVATEK is strongly committed to its
dividend policy.

On 03 March 2014, the Board of Directors of OAO
NOVATEK recommended to the Annual General Meeting
of Shareholders to pay dividends for FY 2013 in the
amount of RR 4.49 per ordinary share or RR 44.9 per
one Global Depositary Receipt (GDR), exclusive of RR
3.40 of interim dividends per ordinary share or RR 34.0
per one GDR for the ﬁ rst six months of 2013.

Thus, should the General Meeting of Shareholders
approve the above recommended dividend, the
dividends for 2013 will total RR 7.89 per ordinary

EQUITY STAKES IN NOVATEK’S SHARE CAPITAL AND THE NUMBER OF SHARES
OWNED BY MEMBERS OF THE BOARD OF DIRECTORS AND MANAGEMENT BOARD*

Equity stake as of 31 December 2013, %

Number of shares, each

BOARD OF DIRECTORS

Alexander Natalenko

Andrei Akimov

Burckhard Bergmann

Mark Gyetvay

Yves-Louis Darricarrère

Leonid Mikhelson

Kirill Seleznev

Gennady Timchenko

Vladimir Dmitriev

MANAGEMENT BOARD

Vladimir Baskov

Tatyana Kuznetsova

Iosif Levinzon

Mikhail Popov

Alexander Fridman

Kirill Yanovskiy

0.0007

20,000

0.6878

20,883,242

0.0288

0.1944

0.1440

0.0817

0.1051

874,408

5,903,035

4,372,038

2,481,049

3,192,530

* The equity stakes are given based on the records in the register of NOVATEK’s shareholders in accordance with the Russian Federation laws.

NOVATEK

NOVATEK Annual Report 2013

ACCRUED AND PAID DIVIDENDS ON NOVATEK SHARES FOR THE PERIOD 2008 TO 2013*

Dividend Accrual Period

Amount of dividends,
RR per share

Total amount of dividends
accrued, RR

Total amount of dividends
paid, RR

2008

2009

2010

2011

2012

First half 2013

2.52

2.75

4.00

6.00

6.86

3.40

7,651,491,120

8,349,841,500

7,651,310,957

8,349,681,894

12,145,224,000

12,144,967,156

18,217,836,000

18,217,663,073

20,829,059,160

20,829,052,028

10,323,440,400

10,323,387,326

* The amount of paid dividends accrued for the years 2008 to 2012, and for the ﬁ rst six months of 2013 is reported as of 31 December 2013. Partial payment of
the accrued dividends was made due to provision by shareholders (nominee holders) of incorrect postal and/or banking details and insuﬃ cient information regarding
banking or postal details of shareholders.

share (RR 78.9 per one GDR), and the total amount of
dividends payable for 2013 will be RR 23,956,454,340.
This will represent a 15% increase in dividend per
share compared to 2012.

The Company maintains an ongoing dialogue with
shareholders and investors in order to ensure full
awareness of investment community about its
activities.

Information Transparency

NOVATEK is committed to providing objective, reliable,
and consistent information about the Company and its
activities to all stakeholders and also complies with
modern standards for information disclosure while
adhering to a maximum level of transparency. The
Regulations on Information Policy approved by the
Board of Directors (Minutes No. 45 of 10 May 2005),
deﬁ ne the main principles for disclosing information
and increasing information transparency.

Material information about the Company is disclosed in
a timely manner in the form of press releases through
authorized disclosure in accordance with the appli-
cable laws of the Russian Federation and the United
Kingdom. The Company discloses quarterly ﬁ nan-
cial statements in accordance with the International
Financial Reporting Standards (“IFRS”), Management’s
Discussion and Analysis of Financial Condition and
Results of Operations as well as various presentations
for investors.

In addition to press releases and material facts, the
Company’s website provides detailed information on
all aspects of its activities, including our Sustainability
Report. We regularly participate in information disclo-
sure on greenhouse gas emissions and energy eﬃ cien-
cy of production – the Carbon Disclosure Project (CDP),
and on the use of water resources – the CDP Water
Disclosure Project, as well as other industry’s publica-
tions and studies.

The main channels of communication with the in-
vestment community are through the Chairman of
the Management Board, Deputy Chairman (the Chief
Financial Oﬃ cer) and the Investor Relations depart-
ment. The Company’s representatives meet on a regu-
lar base with key ﬁ nancial audiences to discuss issues
of interest to them.

In accordance with principles of its uniﬁ ed information
policy, NOVATEK conducts an active, ongoing dialog
with representatives of media outlets. The information
disclosed to mass media comprises all aspects of the
Company’s activities, including ﬁ nancial and operating
results and projects under development, as well as
socially or environmentally important aspects.

NOVATEK actively involves in a variety of outside
Exhibitions and Conferences. During 2013, representa-
tives of the Company participated in more than 20 ex-
hibitions, conferences and round tables and gave seven
presentations on key industry issues. One of the most
important events was the participation of NOVATEK
and Yamal LNG delegations in the 17th World Congress
and Exhibition on LNG (LNG 17) in Houston, USA.

NOVATEK

Creating Value Added

ADDITIONAL
INFORMATION

Major Risk Factors

The Company’s activities are subject to risks inherent
only to the Company or associated with the Company’s
core businesses. The risks described herein are not

exhaustive and reﬂ ect an opinion about the most ma-
terial risks based on the estimates of the Company’s
management.

Risk
description

OPERATIONAL RISKS

Risk management approaches
used by the Company

Risks of emergencies and incidents

The Company’s subsidiaries and joint ventures are subject to the
risks of emergencies and incidents at hazardous production facil-
ities that may entail business interruption which in turn will have
a negative eﬀ ect on the Company’s ﬁ nancial performance.

The Company performs continuous monitoring of industrial
safety compliance, develops and implements organizational
and technical measures aimed at mitigating the risks of emer-
gencies and incidents and reducing potential losses as part
of its existing integrated system of industrial safety manage-
ment. The Company holds property and business interruption
insurance policies.

Monopoly risks

The Company depends on monopoly suppliers of transport
services (such as Gazprom, RZD, or Transne(cid:3) ). The Company has
no inﬂ uence on the capacity of transport facilities of the above
monopolies and rates established by the Federal Tariﬀ Service.

Competitive risks

The Company operates in an environment of tough competition
with Russian and international oil and gas companies in the
following areas:
• obtaining of subsoil licenses and acquisition of companies

holding subsoil licenses;

• selling natural gas on the Russian market;
• acquisition of oil and gas equipment and services;
• employment of highly qualiﬁ ed specialists to work for the

Company and its subsidiaries and aﬃ liates.

The Company enters into long-term agreements and in a
timely manner arranges for interaction with monopolies
regarding hydrocarbon transportation by pipeline and railway
transport.

To reduce its dependency, the Company implements invest-
ment projects that reduce the length of transportation of
ﬁ nished products, and concludes agreements enabling it to use
alternative methods of product transportation (an agreement
with SIBUR for the supply of LPG to Tobolsk Petrochemical
Complex).

The Company continuously monitors commercially available
assets with regard to the objectives of its long-term development
strategy, enabling the Company to make an objective assessment
of its competitive positions and to take the maximum beneﬁ t of
its competitive advantages that include extensive work experi-
ence and synergy with the existing producing, transport, process-
ing and distribution infrastructure.

When acquiring equipment and services, the Company holds
public tenders allowing it to diversify the suppliers and to ensure
the best conditions. The Company works continuously to structure
its relations with key service providers.

The Company pursues an active marketing policy and takes
eﬀ orts to expand its customer base, and to enter into long-term
agreements with buyers.

The Company implements an active HR policy and applies
eﬃ cient mechanisms of attracting and retaining highly qualiﬁ ed
employees.

NOVATEK

Risk
description

Commodity price risks

As an independent natural gas producer, NOVATEK is not subject
to state regulation of natural gas prices. Nevertheless, the
Company’s prices are strongly inﬂ uenced by the prices estab-
lished by the Federal Tariﬀ Service (FTS).

Moreover, the Company is exposed to the current pricing envi-
ronment on the Russian and international liquid hydrocarbon
markets as it sells its products under spot contracts. Reduction of
prices for liquid hydrocarbons may have a negative eﬀ ect on the
Company’s ﬁ nancial performance.

NOVATEK Annual Report 2013

Risk management approaches
used by the Company

State regulation of gas prices signiﬁ cantly reduces the risk of
price volatility on the Russian gas market, but does not exclude
potential price reduction.

In view of the vertically integrated production chain for liquid
hydrocarbons, the Company does not use commodity derivative
ﬁ nancial instruments to reduce the risk of price changes for such
type of products.

Geological risks

Exploration drilling is associated with multiple risks, including the
risk of non-availability of commercial reserves. Information on
the Company’s reserves is estimated and depends on a number
of factors and assumptions. Actual production volumes across
ﬁ elds, along with the cost-eﬀ ectiveness of reserve exploitation
may deviate from estimated ﬁ gures.

To minimize geological risks, the Company applies modern tech-
nologies and methods of geological exploration and geological
modeling.

The Company makes an annual assessment and evaluation of its
reserves based on the exploration and production drilling and other
research information. An independent international adviser evalu-
ates the Company’s reserves according to international standards.

Risk of early termination, suspension or restriction of the
right to use subsurface mineral resources

Exploration and production of hydrocarbons in Russia is subject
to licensing. The Company is thus exposed to the risk of early ter-
mination, suspension or restriction of its right to use subsurface
mineral resources.

Environmental risks

The Company is subject to the probability of events having
adverse consequences for the environment and caused by a
negative impact of its economic and other activities, as well as
natural and technology-related emergencies.

Ethical risks

The Company is exposed to the risks of disturbed relationships
within the Company and with its subsidiaries or joint ventures,
shareholders, investors, the government, the public, consumers or
suppliers or other corporate entities or individuals, including the
risk of fraud, corruption, and conﬂ ict of interest.

Social risks

The Company is subject to the following risks of a social nature:
• internal risks associated with a possible incompliance of social
programs implemented by the Company with the industry’s
average level that may lead to a higher labor turnover;

• external risks associated with potential impediments in normal
production activities caused by the public living in proximity to
the production facilities.

Terrorism risks

The Company is subject to a risk of terrorist threat.

The Company strives to comply, and maintains a continuous
monitoring of its compliance with the license agreements and the
subsoil use laws, and submits timely requests for adjusting the
terms of its license agreements.

The Company and its key subsidiaries have an environmental
management system according to ISO 14001:2004 standard to
ensure rational use of resources and to minimize the adverse
eﬀ ect the Company’s operation may have on the environment.

In 2011, in order to minimize ethical risks, the Company introduced
a Code of Business Conduct and Ethics approved by Resolution
of the Board of Directors. For any violations of the Code, the
Company’s personnel may be subjected to disciplinary sanctions.

To exclude ethical risks with respect to its shareholders and
investors, the Company is governed by the provisions of the in-
ternal Code of Corporate Conduct and the applicable Russian and
English law in terms of public company regulation.

To exclude ethical risks in its relations with third parties, the
Company carries out tender procedures to select counterparties
and has a well established internal control and audit system.

The Company strives to ensure compliance of its social programs
with the industry’s average level and uses the latest mechanisms
for attracting and retaining highly professional employees.

The Company’s production facilities are located outside densely
populated territories, and the Company monitors compliance with
the rules and regulations while operating its facilities. The risks
related to possible military conﬂ icts, announcement of a state of
emergency, or strikes, are insigniﬁ cant, as the Company operates
in economically and socially stable regions.

The Company takes measures required to ensure strict compli-
ance with Federal Law No. 256-FZ of July 21, 2011 concerning
the Fuel and Energy Complex Security.

A complex of organizational and practical measures is constantly
in place to ensure security of facilities, including linear ones.

NOVATEK

Creating Value Added

Risk
description

Country risk

NOVATEK is a Russian company operating in a number of Russian
regions. Country risk is deﬁ ned by the fact that Russia is still an
emerging economy, the economic environment of which is not
suﬃ ciently stable.

Risk management approaches
used by the Company

Export of liquid hydrocarbons, a balanced ﬁ nancial policy, access
to international capital markets, and an active marketing policy
enable the Company to mitigate the potential eﬀ ect of the
country risk.

Regional risk

The Company produces and processes hydrocarbons within
Western Siberia, a region with a challenging climate.

The Company’s vulnerability to region-speciﬁ c impacts is insignif-
icant and is entirely taken into account by the Company’s man-
agement when carrying out ﬁ nancial and production operations.

FINANCIAL RISKS

Credit risk

The Company is exposed to a risk of losses related to a failure by
counterparties to perform their contractual ﬁ nancial obligations
when due, and in particular depends on the reliability of banks in
which the Company deposits its available cash.

Reinvestment risk

The Company’s operations require substantial investments into
ﬁ eld exploration and development, followed by the produc-
tion, transportation, and processing of natural gas, oil, and gas
condensate. Insuﬃ cient funding for these and other expenditures
may aﬀ ect the Company’s ﬁ nancial standing and performance.

When selling natural gas on the domestic market, the Company
continuously monitors the ﬁ nancial soundness of its counter-
parties and strives to diversify its customer base as much as
possible.

Most of NOVATEK’s international liquid sales are made to major
customers with independent external ratings. Almost all domestic
sales of liquid hydrocarbons are made on a 100 percent prepay-
ment basis.

Although the Company does not require any collateral in respect
of trade and other receivables, it has developed standard credit
payment terms and constantly monitors the status of trade
receivables and the creditworthiness of its customers.

When selecting banks, the Company is governed by the bank’s
reliability, conﬁ rmed by international ratings.

The Company’s capital investment plans are deﬁ ned in its long-
term development strategy, are revised on an annual basis and
are generally in line with the Company’s ability to generate cash
ﬂ ow from operations with regard to the need to pay dividend.

Access to Russian and international capital markets is an addi-
tional source of ﬁ nancing the Company’s investment program.

Provided the hydrocarbon market maintains favorable conditions,
the reinvestment risk is insigniﬁ cant.

Interest risks

As a major borrower, the Company is subject to risks associated
with an increase in interest rates. The growth of interest rates
may restrict the use of borrowed capital as a ﬁ nancing source for
the Company’s investment activity.

The Company pursues a balanced fundraising policy and strives
to maximize the share of long-term liabilities with ﬁ xed rates in
its debt portfolio. The Company tries to preserve the ﬂ exibility of
its investment program and to ﬁ nance its capital expenditures
mainly out of its own funds.

Currency risks

Part of the Company’s liabilities is denominated in foreign cur-
rency, which may lead to losses in the event of ruble deprecia-
tion. On the other hand, part of the Company’s proceeds is also
denominated in foreign currency, which may lead to losses in the
event of ruble appreciation.

The liabilities expressed in foreign currency on the one hand,
and export proceeds on the other generally compensate each
other and are a natural mechanism of currency risk hedging.
The volume of proceeds from export generally ensures servicing
of currency liabilities. Consequently, currency risks will not have
a material eﬀ ect on the Company’s business.

NOVATEK

Risk
description

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet
its ﬁ nancial obligations as they fall due.

Inﬂ ation risk

Changes in the consumer price index have an impact on
NOVATEK’s proﬁ tability and, as a consequence, its ﬁ nancial stand-
ing and ability to pay on liabilities and securities.

NOVATEK Annual Report 2013

Risk management approaches
used by the Company

The Company’s approach to managing liquidity risk is to
ensure that it will always have suﬃ cient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Company’s reputation. In managing its liquidi-
ty risk, NOVATEK maintains adequate cash reserves and debt
facilities, continuously monitors forecasted and actual cash
ﬂ ows and matches the maturity proﬁ les of ﬁ nancial assets
and liabilities.

The Company prepares various ﬁ nancial plans (monthly, quarterly
and annually) that ensure the Company has suﬃ cient cash on
demand to meet expected operational expenses, ﬁ nancial obliga-
tions and investing activities for a period of 30 days or more. The
Company uses various short-term borrowings. The Company may
use credit facilities and bank overdra(cid:3) s to satisfy its short-term
ﬁ nance needs. To satisfy its needs for cash on a more permanent
basis, the Company will normally raise long-term loans on inter-
national and domestic markets.

NOVATEK may not be able to predict the inﬂ ation level, since,
apart from the consumer price level, it is necessary to take
into account the change in the real purchasing power of the
Russian ruble, the pricing conditions in liquid hydrocarbon
export markets, and government policy in relation to tariﬀ s for
natural gas.

NOVATEK monitors the consumer price index and takes this factor
into account when determining its selling prices.

Risk associated with the impact
of the global ﬁ nancial crisis

The main negative consequences of the ﬁ nancial crisis for the
Company may include ruble depreciation and reduced demand
for natural gas as a result of decreased industrial production in
Russia.

The Company pursues an active sales policy, enabling it to sell
all produced gas with continuously growing production volumes.
In the event of a possible drop in demand for natural gas on the
part of industrial consumers, the Company will exert every eﬀ ort
to ﬁ nd new consumers.

LEGAL RISKS

Risk of law changes

The Company is subject to a risk of consequences of changes in
Russian laws in the following areas:
• currency laws (in areas concerning export/import and borrow-

ing operations);

• tax laws (in areas regulating taxation systems and rates ap-

plicable to companies in general, and to companies marketing
natural gas and liquid hydrocarbons, speciﬁ cally);

• customs laws (in areas concerning the export of liquid hydro-

carbons and their derivatives); and

• licensing requirements for natural resource extraction.

The Company is constantly monitoring dra(cid:3) laws, enabling it to
evaluate the consequences of such changes and to take them
into account in its plans.

Litigation risks

The Company may be involved as a defendant or plaintiﬀ in
a number of proceedings arising in the normal course of its
business.

When conducting its business, the Company adheres to the
principle of prudence. Due to this fact, as of the approval date of
the Annual Report, the Company was not involved in any material
litigation and the associated risks are insigniﬁ cant.

NOVATEK

Creating Value Added

Risk insurance

Risk insurance is an integral part of NOVATEK’s risk
management system. In 2013, the insurance coverage
guaranteed adequate protection against the risks of dam-
age to the business of the Company or its subsidiaries
and aﬃ liates. Insurance is provided by reputable domestic
insurance companies that have the highest insurance
ratings in Russia (Standard & Poor`s BBB-/ Stable on
National Scale: ruAA +) with risk reinsurance by major
world insurance companies.

OBLIGATORY RISK INSURANCE

The Company and its subsidiaries and aﬃ liates fully meet
the requirements of the applicable laws for maintaining
obligatory insurance, such as civil liability insurance of:

• owners of hazardous production facilities;
• owners of transport vehicles.

OPTIONAL RISK INSURANCE

To reduce the risk of ﬁ nancial losses, the Company and its
subsidiaries and aﬃ liates maintain the following types of
optional insurance:

• insurance of the risk of property damage/loss;
• insurance of the risk of damage from business
• management liability insurance.

interruption;

Since 1 May 2013, the Company structured and implement-
ed a comprehensive program of property and business risk
insurance with respect to its and its subsidiaries’ and aﬃ l-
iates’ key assets. The program makes it possible to reduce
potential losses resulting from the materialization of tech-
nology-related risks at gas production, processing and selling
facilities, including possible losses from reduced volumes of
hydrocarbon extraction and processing by subsidiaries and,
as a result, reduced sales proceeds. The cumulative insured
amount for the risks of property damage and business
interruption exceeds 259 billion rubles. Full cost recovery
is in place. The program meets all current international
standards for oil and gas insurance, takes into account the
technological characteristics of NOVATEK companies and the
business processes arranged by the Company. The imple-
mented program is viewed by the Company’s management
as an additional measure for mitigating the consequences of
potential accidents and provides additional guarantees for
the attainment of the expected net proﬁ t and key indicators
of the Company’s performance in the short and long term.

For more than eight (8) years the Company has main-
tained management liability insurance for the top
management of the Company and its subsidiaries and
aﬃ liates against possible third-party claims for any losses
incurred through any wrong action (or decision) made by
its management bodies. The overall limit of all insurance
coverage is 150 million U.S. dollars.

NOVATEK

Information on Members of
NOVATEK’s Board of Directors

MR. ALEXANDER Y. NATALENKO
Born in 1946

• Chairman of NOVATEK’s Board of Directors and

Chairman of its Strategy and Investments Committee

Mr. Natalenko completed his studies at the Irkutsk
State University in 1969 with a primary focus in
Geological Engineering. Subsequently, he worked with the
Yagodinskaya, Bagdarinskaya, Berelekhskaya, Anadirskaya
and East-Chukotskaya geological expeditions. In 1986,
Mr. Natalenko headed the North-East Industrial and
Geological Association and, in 1992, he was elected
president of АО “Magadan Gold & Silver Company”. He
subsequently held various executive positions in Russian
and foreign geological organizations. From 1996 to
2001, Mr. Natalenko held the position of Deputy Minister
of Natural Resources of the Russian Federation. He is a
member of the Board of Directors of ZAO GC VERTEX and
OAO Rosgeologia.

Mr. Natalenko is the recipient of the State Prize of the
Russian Federation and an Honored Geologist of Russia.

MR. ANDREI I. AKIMOV
Born in 1953

• Member of NOVATEK’s Board of Directors and
Chairman of its Corporate Governance and
Remuneration Committee

• Chairman of the Management Board

of “Gazprombank” (OAO)

Mr. Akimov graduated from the Moscow Financial Institute
in 1975 where he specialized in international economics.
Between 1974 and 1987, Mr. Akimov held various exec-
utive positions in the Bank for Foreign Trade of the USSR.
From 1985 to 1987 he served as Deputy Chief General
Manager of the Bank for Foreign Trade branch in Zurich
(Switzerland) and between 1987 and 1990, Mr. Akimov
was the Chairman of the Management Board of Donau
Bank in Vienna (Austria). From February 1991 to January
2003 he was Managing Director of ﬁ nancial company, IMAG
Investment Management & Advisory Group AG (Austria).
Since 2003, Mr. Akimov has been the Chairman of the
Management Board of Gazprombank (OAO). He is a mem-
ber of Board of Directors of OAO Gazprom, Gazprombank
(OAO), OAO Rosne(cid:3) egaz, Gazprom Germania GmbH, ООО
Gazprom gas motor fuel, GPB International S.A. and other.

DR. BURCKHARD BERGMANN
Born in 1943

• Member of NOVATEK’s Board of Directors, its

Corporate Governance and Remuneration Committee,
its Audit Committee and its Strategy and Investments
Committee

• Board Member of the Presidium of the German-
• Member of the Advisory Board of the Union of German

Russian Chamber of Commerce

Science Funds

Dr. Bergmann studied physics at the Freiburg and
Aachen Universities from 1962 to 1968 and was award-
ed a Doctorate in Engineering by Aachen University of
Technology in 1970. From 1968 to 1969, Dr. Bergmann
worked at the German Federal Ministry for Research and
Technology and from 1969 to 1972 – at the Jülich Nuclear
Research Center. In 1972, Dr. Bergmann joined Ruhrgas AG
(from 1 July 2004 – E.ON Ruhrgas AG), heading the LNG
Purchasing Department. In 1978, he became Head of the
Gas Purchasing Division responsible for gas purchasing,
commercial aspects of gas transmission and storage. In
1980, he was elected as a member of the Management
Board of E.ON Ruhrgas AG, serving from June 1996 as its
Vice-Chairman and from June 2001 to February 2008 as
its Chairman. From March 2003 to February 2008 he was
also a member of the Management Board of E.ON AG.

Dr. Bergmann is also a member of the Board of Directors
(Supervisory Board) of: Allianz Lebensversicherungs-AG,
(till 2013), Commerzbank AG, (till 2013), Contilia GmbH,
Telenor ASA. In addition, he is a member of the Advisory
Boards for Dana Gas International, IVG Immobilien AG.
He has been elected as Chairman of the Advisory Board
of Jaeger Beteiligungsgesellscha(cid:3) mbH& Co KG, Vice
Chairman of the Advisory Board of Accumulatoren-werke
Hoppecke GmbH and is elected a member of the Board of
Trustees of RAG AG.

Dr. Bergmann holds the following distinctions: Commander
of the Royal Norwegian Order of Merit (1997); Honorary
Consul of the Russian Federation in the State of North
Rhine-Westphalia a Foreign Member of the Academy of
Technological Sciences of the Russian Federation (2003);
Order of Merit of the State of North Rhine-Westphalia
(2004) as well as a winner of Director of the Year, Moscow
(2007); Oﬃ cer’s Cross of the Order of Merit of the Federal
Republic of Germany (2008). In June 2011, by means of
presidential Decree he became a recipient of the Order of
the Friendship of Peoples award for signiﬁ cant contribu-
tion in development of the Russian-German relations.

MR. MARK A. GYETVAY
Born in 1957

• Member of NOVATEK’s Board of Directors and Member
of its Strategy and Investments Committee
• Member and Deputy Chairman of NOVATEK’s
Management Board
• Chief Financial Oﬃ cer

Mr. Gyetvay studied at Arizona State University (Bachelor
of Science, Accounting, 1981) and later at Pace University,
New York (Graduate Studies in Strategic Management,
1995). A(cid:3) er graduation, Mr. Gyetvay worked in vari-
ous capacities at a number of independent oil and gas
companies (Champlin Petroleum Co., Texas, Ensource

NOVATEK Annual Report 2013

Inc. and MAG Enterprises, Colorado, and Amerada Hess
Corporation, New Jersey) where he specialized in ﬁ nancial
and economic analysis for both upstream and down-
stream segments of the petroleum industry.

In 1994, Mr. Gyetvay began his work at Coopers and
Lybrand, as Director, Strategic Energy Advisory Services.
He subsequently moved to Moscow in 1995 with Coopers
& Lybrand to lead the oil and gas practice. He was admit-
ted as a partner of PricewaterhouseCoopers Global Energy
where he assumed the role of client service engagement
partner, Utilities and Mining practice, based in Russia
(Moscow oﬃ ce). Mr. Gyetvay was an engagement partner
on various energy and mining clients providing overall
project management, ﬁ nancial and operational expertise,
maintaining and supporting client service relationships
as well as serving as concurring partner on transaction
services to the petroleum sector.

Mr. Gyetvay is a Certiﬁ ed Public Accountant, a member of
the American Institute of Certiﬁ ed Public Accountants and an
associate member of the Society of Petroleum Engineers.

In 2003, Mr. Gyetvay became a member of NOVATEK’s
Board of Directors and is also a Member of the Strategy
and Investments Committee of NOVATEK’s Board of
Directors. Since 2004–2008, he has been Chief Financial
Oﬃ cer and, in August 2007, Mr. Gyetvay was elected to
NOVATEK’s Management Board and, in July 2010, he be-
came Deputy Director of NOVATEK’s Management Board.

MR. YVES LOUIS CHARLE JUSTIN DARRICARRERE
Born in 1951

• Member of NOVATEK’s Board of Directors and its
• President of Total Upstream

Strategy and Investments Committee

A(cid:3) er lecturing at the Ecole des Mines de Paris for 3 years,
Yves-Louis Darricarrère began his career in Elf Aquitaine
in 1978, ﬁ rst in the Mining Division in Australia and
later in the Exploration & Production Branch, where he
was appointed successively Country Representative for
Australia and Egypt at head oﬃ ce; Managing Director of
the subsidiaries in Egypt and then in Colombia; Director
Business development and new ventures, then Finance
Director of the Exploration & Production Branch and of the
Oil and Gas directorate. In 1998, he was appointed Deputy
Director-General of Elf Exploration-Production responsi-
ble for Europe and the United States and was nominated
a member of the Management Board of Elf-Aquitaine.

In 2000, he was appointed Senior Vice-President for
Exploration & Production Northern Europe and became
a member of the Total Group Management Board. On 1st
September 2003, Yves-Louis Darricarrère was nominated
to the Group’s Executive Committee and was appointed
President of Total Gas & Power. On 14th February 2007, he
became President of Total Exploration & Production. On 1st
July 2012, he became President of Total Upstream regroup-
ing Total Exploration & Production and Total Gas & Power.

NOVATEK

Creating Value Added

Yves-Louis Darricarrère is a graduate of the Ecole
Nationale Supérieure des Mines and the Institut d’Etudes
Politiques in Paris and holds a master’s degree in econom-
ic science. He is chevalier de la Légion d’Honneur (Knight
of the French Legion of Honour).

MR. VLADIMIR A. DMITRIEV
Born in 1953

• Member of NOVATEK’s Board of Directors and

Chairman of its Audit Committee

In 1975, graduated from the Moscow Finance Institute,
specialty – “International Economic Relations”. Doctor of
Economics. Corresponding member, Russian Academy of
Natural Sciences.

1975–1979 – State Committee of USSR Council of
Ministers for Foreign Economic Relations, engineer.
1979–1986 – Attache, third secretary, USSR Foreign
Ministry Department. 1986–1987 – Institute of World
Economics and International Relations, USSR Academy of
Sciences, research worker. 1987–1992 – USSR Embassy
of USSR Ministry for Foreign Aﬀ airs, Second, First
Secretary. 1992–1993 – Russian Embassy of Russian
Ministry for Foreign Aﬀ airs, First Secretary. 1993–1997 –
Deputy Chief Executive Oﬃ cer, Russian Finance Ministry
Department. 1997–2002 – Bank for Foreign Economic
Aﬀ airs of the USSR, First Deputy Chairman.

2002–2004 – Bank for Foreign Trade of the USSR
(OJSC), Deputy President – Chairman of the Board.
2004–2007 – Bank for Foreign Economic Aﬀ airs of the
USSR, Chairman. From June 2007 – State Corporation
“Bank for Development and Foreign Economic Aﬀ airs
(Vnesheconombank)”, Chairman.

For outstanding contribution to the development of the ﬁ -
nancial and banking system of Russia, long-standing and
dedicated work he was awarded the Order of Alexander
Nevsky, the Order “For Merits and Dedicated Service to
the Country”, IV Degree, the Order of Honor, the Order of
Saint Sergiy Radonezhsky, II Degree, the Order of Blessed
Prince Daniil Moskovsky, II Degree, the Medal of the Order
“For the Merits and Dedicated Service to the Country”,
the Order of the Banner of the Republic of Serbia with
Golden Wreath, the Order of Merit of the Italian Republic,
Grand Oﬃ cer Grade, the Russian Association of Banks
Decoration of Honor “For Merits and Dedicated Service
to the Banking Community”, “Excellent Employee of
Vnesheconombank” Badge, his name is recorded in
Vnesheconombank’s Book of Honor, he was also oﬃ cial-
ly thanked by the President and the Government of the
Russian Federation.

MR. LEONID V. MIKHELSON
Born in 1955

• Member of NOVATEK’s Board of Directors
• Chairman of NOVATEK’s Management Board

NOVATEK

Mr. Mikhelson received his primary degree from the
Samara Institute of Civil Engineering in 1977, where
he specialized in Industrial Civil Engineering. That same
year, Mr. Mikhelson began his career as foreman of
a construction and assembling company in Surgut,
Tyumen region, where he worked on the construction of
the ﬁ rst section of Urengoi-Chelyabinsk gas pipeline. In
1985, Mr. Mikhelson was appointed Chief Engineer of
Ryazantruboprovodstroy. In 1987, he became General
Director of Kuibishevtruboprovodstroy, which in 1991,
was the ﬁ rst company in the region to sell its shares and
became private company, AO SNP NOVA. Mr. Mikhelson
remained SNP NOVA’s Managing Director from 1987
through 1994. Subsequently, he became a General
Director of the management company “Novaﬁ ninvest”.

Since 2003, Mr. Mikhelson has served as a member of
the Board of Directors and Chairman of the Management
Board of NOVATEK. From March 2008 to December 2010,
he has been a member of the Board of Directors of OAO
Stroytransgas. From 2009 to 2010 he was the Chairman
of the Board of Directors of ОАО Yamal LNG and from
2008 to 2011 he was a member of the Board of Directors
of OOO Art Finance. From 2011 he is the Chairman of the
Board of Directors of OAO SIBUR Holding and from 2011
to 2013 he was a member of the Supervisory Board of the
OAO Russian Regional Development Bank. Mr.Mikhelson is
the recipient of the Russian Federation’s Order of the Badge
of Honor and the Order of Merit of the Italian Republic.

MR. KIRILL G. SELEZNEV
Born in 1974

• Member of NOVATEK’s Board of Directors and its
Corporate Governance and Remuneration Committee
• Member of the Management Board, Director of Gas
and Liquid Hydrocarbons Marketing and Processing
Department of OAO “Gazprom”

• General Director of OOO Gazprom Mezhregiongaz

Mr. Seleznev, graduated from the D.F. Ustinov Baltic State
Institute of Technology in 1997 and, in 2002, received
a degree in Finance and Credit from the St. Petersburg
State University. Upon completion of his university studies,
Mr. Seleznev managed OOO “Baltic Finance Company”, OAO
Investment and Financial Group “Management Investments
Development” and OAO “St. Petersburg Sea Port”, all
of which are located in St. Petersburg, Russia. In 2000,
Mr. Seleznev was appointed as Chief of the Tax Group
at ОАО “Baltic Pipeline System”, St. Petersburg, Russia.
Between 2001 and 2002, Mr. Seleznev held the position
of Deputy Chief of Staﬀ of the Management Board and
Assistant to Chief Executive Oﬃ cer of OAO Gazprom, in
Moscow, Russia. Since 2002, he has been the head of the
Gas and Liquid Hydrocarbons Marketing and Processing
Department of OAO Gazprom and a Member of the OAO
Gazprom Management Board. Since 2003, Mr. Seleznev has
been the General Director of OOO Gazprom Mezhregiongaz.

Mr. Seleznev is also a member of the Board of Directors
and Supervisory Board of several other entities.

MR. GENNADY TIMCHENKO
Born in 1952

• Member of NOVATEK’s Board of Directors and its
Strategy and Investments Committee and its Audit
Committee

In 1976, Mr. Timchenko graduated with a Master’s of
Science from the Mechanical University in Leningrad.
He began his career at the Izjorskii Factory in Leningrad,
an industrial plant which made components for the en-
ergy industry. Between 1982 and 1988, he was a Senior
Engineer at the Ministry of Foreign Trade. Mr. Timchenko
has more than 20 years of experience in Russian and
International energy sectors and he has built interests
in trading, logistics and transportation related companies.

In 1988, Mr. Timchenko became a vice president of
Kirishine(cid:3) ekhimexport, the export and trading arm of the
Kirishi reﬁ nery in the Leningrad region. In 1991, he worked
for Urals Finland which specialized in oil and petrochemi-
cal trading. Between 1994 and 2001, Mr. Timchenko was
managing Director of IPP OY Finland and IPP AB Sweden.
In 1997, he co-founded Gunvor, a leading independent
oil-trading company. Mr. Timchenko was a member
of the Board of Directors of OOO Transoil and OOO
BalttransService. Mr. Timchenko is also the Chairman of
the Board of Directors and President of the Ice Hockey
Club SKA St-Petersburg, as well as the Chairman of the
Board of Directors of OOO Kontinental Hockey League.

Information on Members
of NOVATEK’s Management Board

MR. LEONID V. MIKHELSON
Born in 1955

• Chairman of NOVATEK’s Management Board
• Member of NOVATEK’s Board of Directors

Details on Mr. Leonid V. Mikhelson are available in
the “Information on Members of NOVATEK’s Board of
Directors” section.

MR. VLADIMIR A. BASKOV
Born in 1960

• Deputy Chairman of NOVATEK’s Management Board

In 1986, Mr. Baskov graduated from the Moscow Higher
Police School of the USSR. In 2000, he completed courses
at the Management Academy at the Russian Ministry for
Internal Aﬀ airs. From 1981 to 2003, he served in vari-
ous departments within the Russian Ministry for Internal
Aﬀ airs. From 1991 to 2003, Mr. Baskov held managerial
positions within the aforementioned Ministry’s organi-
zational structures. In 2003 he was appointed Director
of the Business Support Department for NOVATEK. In
2005 he was appointed Deputy Chairman of NOVATEK’s

NOVATEK Annual Report 2013

Management Board and in August 2007 he became
a member of NOVATEK’s Management Board. Candidate
of legal Sciences. He was awarded the Order For Personal
Courage, the Russian Federation’s Order of the Badge
of Honor and other state and departmental awards:
Honorary Diplomas of the President of the Russian
Federation, the Ministry of Internal Aﬀ airs, the Governor
of the Moscow Region. He also has the awards of the
Russian Orthodox Church (Order of Holy Prince Daniel
of Moscow and a medal of St. Sergius).

MR. MARK A. GYETVAY
Born in 1957

• Deputy Chairman of NOVATEK’s Management Board,
• Member of NOVATEK’s Board of Directors and its

Chief Financial Oﬃ cer

Strategy and Investments Committee

Details on Mr. Mark A. Gyetvay are available in the
“Information on Members of NOVATEK’s Board of
Directors” section.

MS. TATYANA S. KUZNETSOVA
Born in 1960

• Deputy Chairman of NOVATEK’s Management Board
• Director of NOVATEK’s Legal Department

Ms. Kuznetsova graduated from the Far East State
University with a degree in Law. From 1986, she was
Senior Legal Advisor for a legal bureau. In 1993,
Ms. Kuznetsova became Deputy General Director for
Legal Issues and from 1996, Marketing Director for OAO
Purne(cid:3) egasgeologiya. In 1998, she was appointed Deputy
General Director of OAO Nordpipes. Since 2002, she has
been Director of the Legal Department for NOVATEK. Since
2005, she has been the Deputy Chairman of NOVATEK’s
Management Board – Director of NOVATEK’s Legal
Department and in August 2007, she became a member
of NOVATEK’s Management Board.

MR. IOSIF L. LEVINZON
Born in 1956

• Deputy Chairman of NOVATEK’s Management Board

Mr. Levinzon graduated from the Tyumen Industrial
Institute specializing in geology and is a Candidate
of Geological and Mineralogical Science. He contin-
ued postgraduate studies in Perm State Technical
University. From 1978 to 1987, he was the Head of the
Urengoy oil expedition and from 1987 to 1996 he was
the General Director of Purne(cid:3) egasgeologiya. From
1996 to 2005, Mr. Levinzon was the Deputy Governor,
1st Deputy Governor and Vice-Governor of the Yamal-
Nenets Autonomous Region. From 2005 to 2006,
Mr. Levinzon he has been an Advisor to the Chairman of
the Federation Council of the Federal Assembly of the
Russian Federation. From 2006 to 2009, Mr. Levinzon has
been an Advisor on Corporate and Strategic Development

NOVATEK

Creating Value Added

at ZAO OSTER and also at ZAO Investgeoservis. Since
August 2009, Mr. Levinzon has held the position of Deputy
Chairman of NOVATEK’s Management Board and in
December 2009 he was elected a member of NOVATEK’s
Management Board. Mr. Levinzon is a recipient of the
Honored Geologist of Russia, the Order of the Badge of
Honor and the Order of the Friendship of Peoples awards
and has been awarded the Certiﬁ cate of Merit from the
Governor of the Yamal-Nenets Autonomous Region.

MR. MIKHAIL V. POPOV
Born in 1969

• First Deputy Chairman of NOVATEK’s Management
• Commercial Director

Board

Mr. Popov studied at the Gubkin State Academy of Oil
and Gas until 1992 and in 1994, graduated from the Kiev
Institute of National Economy. In 1992, he held the posi-
tion of Deputy Chairman of AO Bankomsvyaz’s Managing
Committee (Kiev). In 2002, he was appointed Director
of the Capital Construction Department and Deputy
General Director of OAO Novaﬁ ninvest. From 2003,
Mr. Popov served as Director of Crude Oil and Oil Products
Department of OAO NOVATEK. In 2004, Mr. Popov was
elected First Deputy Chairman of NOVATEK’s Management
Board. Since August 2007, he has been a member of the
Management Board and since May 2011, he has been
NOVATEK’s First Deputy Chairman-Commercial Director.

MR. ALEXANDER M. FRIDMAN
Born in: 1951

• Deputy Chairman of NOVATEK’s Management Board

In 1973, Mr. Fridman graduated from the Gubkin Institute
of Oil and Gas in Moscow, with a degree in Oil and Gas
Fields Development and Exploitation. Since 1984, he
was employed by various Gazprom companies: as Chief
Engineer of Nadymgazprom, Head of the Production and
Technical Department of the Industrial Association, and
Chief Engineer of Mostransgaz’s Kaluga Department
for Gas Transportation and Underground Storage. From
1992 to 2003, he was First Deputy General Director of
a joint venture established by OAO Gazprom and DKG-
EAST (Hungary). Since 2003 Mr. Fridman was the Deputy
General Director of Novaﬁ ninvest. In 2004, Mr. Fridman
was elected Deputy Chairman of the Management Board
of OAO NOVATEK. In August 2007, he has been a member
of NOVATEK’s Management Board.

MR. KIRILL N. YANOVSKIY
Born in 1967

• Member of NOVATEK’s Management Board
• Director for Finance and Strategy

In 1991, Mr. Yanovskiy graduated from the Gubkin Institute
of Oil and Gas in Moscow. From 1992, he headed a de-
partment of the Yugorsky Joint-Stock Bank. From 1995, he

NOVATEK

headed the Securities Department at the Ne(cid:3) ek Joint-
Stock Commercial Bank. Since 2002, he has been Director
of NOVATEK’s Financial Planning, Analysis and Control
Department. In August 2007, Mr. Yanovskiy was elected to
NOVATEK’s Management Board and in 2007 was appoint-
ed Deputy Director for Finance and Strategy. Since May
2011 he has been Director for Finance and Strategy.

Major Transactions and Related
Party Transactions

In 2013, NOVATEK consummated one related party trans-
action and no major transactions.

Type of the transaction: related party transaction.

Subject-matter of the transaction: Natural Gas Liquids
(NGL) Supply Contract between OAO NOVATEK (Supplier)
and OAO SIBUR Holding (Buyer).

Transaction date: 17.12.2013.

Substance of the transaction including the civil rights
and obligations intended to be established, changed or
terminated by the consummated transaction: Supply of
natural gas liquids (NGL) by ОАО NOVATEK (Supplier) to
OAO SIBUR Holding (Buyer).

Term of obligations performance under the transaction:
Delivery period: 2014 through 2033 (inclusive).

Parties and beneﬁ ciaries to the transaction: ОАО
NOVATEK (Supplier) and ОАО SIBUR Holding (Buyer).

Transaction price: Not more than RR 410,000,000,000
(four hundred and ten billion) including 18% VAT. The NGL
price is calculated for the period from 2014 to 2033 ac-
cording to formula based on the market value of products
received as a result of NGL processing subject to fore-
casted increase of formula components.

Size of the transaction as percentage of the issuer’s
asset value: 118.69.

The issuer’s asset value as of the end date of the re-
porting period (quarter, year) preceding to the transac-
tion consummation (Date of the Contract) in relation to
which the accounting statements have been prepared
in accordance with the applicable laws of Russian
Federation: RR 345,410,212,000.

Information on the transaction approval in the event
that such transaction was approved by the issuer’s
authorized management body: NOVATEK EGM Minutes №
117 dated 10 January 2013.

Interested parties: Chairman of NOVATEK’S Management
Committee and NOVATEK’s Board Member Leonid
Viktorovich Mikhelson; NOVATEK’s Board Member Gennady
Nikolaevich Timchenko.

Forward–looking statements

This Annual Review includes ‘forward-looking information’
within the meaning of Section 27A of the US Securities Act
of 1933, as amended, and Section 21E of the US Securities
Exchange Act of 1934, as amended. Certain statements in-
cluded in this Annual Report and Accounts, including, without
limitation, statements concerning plans, objectives, goals,
strategies, future events or performance, and underlying
assumptions and other statements, which are other than
statements of historical facts. The words “believe,” “expect,”
“anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,”
“may,” “should” and similar expressions identify forward-look-
ing statements. Forward-looking statements include state-
ments regarding: strategies, outlook and growth prospects;
future plans and potential for future growth; liquidity, capital
resources and capital expenditures; growth in demand for
our products; economic outlook and industry trends; devel-
opments of our markets; the impact of regulatory initiatives;
and the strength of our competitors. The forward-looking
statements in this Annual Review are based upon various
assumptions, many of which are based, in turn, upon further
assumptions, including without limitation, management’s
examination of historical operating trends, data contained in
our records and other data available from third parties.

Although we believe that these assumptions were reason-
able when made, these assumptions are inherently subject
to signiﬁ cant uncertainties and contingencies, which are diﬃ -
cult or impossible to predict and are beyond our control. As a
result, we may not achieve or accomplish these expectations,
beliefs or projections. In addition, important factors that, in
our view, could cause actual results to diﬀ er materially from
those discussed in the forward-looking statements include:

demand in Russia and Europe;

• changes in the balance of oil and gas supply and
• the eﬀ ects of domestic and international oil and gas
price volatility and changes in regulatory conditions,
including prices and taxes;

oil and gas markets;

• the eﬀ ects of competition in the domestic and export
• our ability to successfully implement any of our busi-
• the impact of our expansion on our revenue potential,
• our ability to produce target volumes in the event,

cost basis and margins;

ness strategies;

among other factors, of restrictions on our access to
transportation infrastructure;

jections on the growth of our production;

• the eﬀ ects of changes to our capital expenditure pro-
• potentially lower production levels in the future than
currently estimated by our management and/or inde-
pendent petroleum reservoir engineers;

tion dates;

• inherent uncertainties in interpreting geophysical data;
• changes to project schedules and estimated comple-
• our success in identifying and managing risks to our
• the eﬀ ects of changes to the Russian legal framework
concerning currently held and any newly acquired oil
and gas production licenses;

businesses;

NOVATEK Annual Report 2013

tions in Russia and the CIS;

• changes in political, social, legal or economic condi-
• the eﬀ ects of technological changes;
• the eﬀ ects of changes in accounting standards or

practices.

This list of important factors is not exhaustive. When relying
on forward-looking statements, one should carefully consider
the foregoing factors and other uncertainties and events,
especially in light of the political, economic, social and legal
environment in which we operate. Such forward looking state-
ments speak only as of the date on which they are made.
Accordingly, we do not undertake any obligation to update or
revise any of them, whether as a result of new information,
future events or otherwise. We do not make any represen-
tation, warranty or prediction that the results anticipated by
such forward-looking statements will be achieved, and such
forward-looking statements represent, in each case, only one
of many possible scenarios and should not be viewed as the
most likely or standard scenario. The information and opin-
ions contained in this document are provided as at the date
of this review and are subject to change without notice.

Abbreviations

Mentions in this Annual Report of “OAO NOVATEK”,
“NOVATEK”, “the Company”, “we” and “our” refer to OAO
NOVATEK and/or its subsidiary enterprises, depending
upon the context, in which the terms are used.

barrel

bcm
boe

km
mboe
mcm
mt
mmboe
mmcm
mmt
ton
SEC

PRMS
YNAO
RR
LPG
LNG

one stock tank barrel, or 42 US gallons of liquid
volume
billion cubic meters
barrels of oil equivalent. For natural gas, we
use the conversion factor of one mcm equals
6.54 barrels.
kilometer(s)
thousand boe
thousand cubic meters
thousand metric tons
million boe
million cubic meters
million metric tons
metric ton
United States Securities and Exchange Com-
mission
Petroleum Resources Management System
Yamal-Nenets Autonomous Region
Russian rouble
liquiﬁ ed petroleum gases
liquiﬁ ed natural gas

Conversion factors

1000 cubic meters of gas = 6.54 boe.

To convert crude oil and gas condensate reserves from
tons to barrels we used various coeﬃ cients depending on
the liquids density at each ﬁ eld.

NOVATEK

Creating Value Added

CONTACT
INFORMATION

Legal address
22 A Pobedy Street, Tarko-Sale, Yamal-Nenets
Autonomous Region, 629850, Russia

Oﬃ ce in Moscow
2, Udaltsova Street, 119415, Moscow, Russia

Central Information Service
Tel: +7 495 730-6000
Fax: +7 495 721-2253
E-mail: novatek@novatek.ru

Press Service
Tel: +7 495 721-2207
E-mail: press@novatek.ru

Investor Relations
Tel: +7 495 730-6013
Fax: +7 495 730-6000
E-mail: ir@novatek.ru

Registrar
ZAO “Computershare Registrar”
8 Ivana Franko Street, Moscow
Russia 121108
Tel: +7 (495) 926-8160
Fax: +7 (495) 926-8178
E-mail: info@nrcreg.ru

GDR program Administrator
Deutsche Bank Trust Company Americas
60 Wall Street, New York, New York
100056, USA
London +44 20 7547 6500
New York +1 212 250 9100
Moscow +7 495 797 5209

Independent Auditor
ZAO PricewaterhouseCoopers Audit
White Square Oﬃ ce Center, Butyrsky Val 10,
125047 Moscow, Russia
Tel: +7 495 967-6000
Fax: +7 495 967-6001

Independent Reserves Auditor
DeGolyer and MacNaughton
5001 Spring Valley Road, Suite 800, East Dallas
Texas 75244, USA
Tel: +1 214 368-6391
Fax: +1 214 369-4061
E-mail: degolyer@demac.com

Website
www.novatek.ru (Russian version)
www.novatek.ru/eng (English version)

NOVATEK