Novatek Annual Report 2021

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FY2021 Annual Report · Novatek

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C o n stru c tin g fu ture e n erg y tra n sitio n t o d a y

Annual Report 2021

Constructing Our Future

Energy Transition Today

The theme for this year’s Annual Review is “Constructing Our

Future Energy Transition Today” as we made great strides with

our next large-scale LNG project, Arctic LNG 2, and the build out

our LNG platform to meet the world’s growing energy needs.

The style we chose as our design concept for the Annual Review

was based on the “Constructivism” and “Suprematism” period

of architecture and art that redefined Russia’s contribution to

the global art world and established one of the most influential

art movements of the 20th Century led by revolutionary artists

such as Kazimir Malevich, Vladimir Tatlin, El Lissitzky and

Alexander Rodchenko.

2021

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Constructing Our Future
Energy Transition Today

The theme for this year’s Annual Review is “Constructing Our
Future Energy Transition Today” as we made great strides with
our next large-scale LNG project, Arctic LNG 2, and the build out
our LNG platform to meet the world’s growing energy needs.

The style we chose as our design concept for the Annual Review
was based on the “Constructivism” and “Suprematism” period
of architecture and art that redefined Russia’s contribution to
the global art world and established one of the most influential
art movements of the 20th Century led by revolutionary artists
such as Kazimir Malevich, Vladimir Tatlin, El Lissitzky and
Alexander Rodchenko.

2021

Contents

Letter to Shareholders .................................................4
Strategic Priorities ........................................................ 6
Sustainability Management ......................................... 7
Key Events and Achievements..................................... 8
Business Model ............................................................. 10
Key Indicators ...............................................................12
Hydrocarbon Reserves ................................................14
Arctic LNG 2 ..................................................................16
Geological Exploration and Production ....................18
Processing of Gas Condensate .................................19
Natural Gas Sales ........................................................20
LNG Sales ......................................................................22
Liquid Hydrocarbons Sales .........................................24
Environmental and Social Responsibility ..................26
Climate Change ...........................................................28

About the Company

Review of Operating Results

Licenses .........................................................................31
Hydrocarbon Reserves ..............................................32
Geological Exploration ...............................................33
Field Development .......................................................35
Hydrocarbon Production ............................................35
LNG Projects ................................................................ 37
Processing of Gas Condensate ................................40
Natural Gas Sales .......................................................42
Liquid Hydrocarbons Sales ........................................44

Management and Corporate Governance

Additional Information

Corporate Governance System ...............................59
General Meeting of Shareholders .............................60
Board of Directors .....................................................60
Board Committees .....................................................63
Management Board ....................................................66
Remuneration to Members of the Board
of Directors and Management Board ...................... 67
Risk Management and Internal Control System ..... 67
Share Capital ............................................................... 74
Dividends ..................................................................... 75
Information Transparency ......................................... 75

C o n stru c tin g fu ture e n erg y tra n sitio n t o d a y

Key business risks ........................................................ 77
Information on Members of NOVATEK’s
Board of Directors ......................................................86
Information on Members of NOVATEK’s
Management Board ....................................................89
Report on major, and interested-party
transactions that the Company did in the
reporting year ..............................................................93
Corporate Governance Code
Compliance Report ....................................................93
Forward–looking Statements ................................... 116
Conversion Factors .................................................... 116
Terms and Abbreviations ...........................................117
Contact Information .................................................. 118

Environmental and Social Responsibility

Environmental Protection ..........................................46
Occupational Health and Safety ..............................49
Human Resources ........................................................52
Social Policy and Charity ............................................55

Annual Report 2021

Letter to Shareholders

In September 2021, the first modules for Train 1 of
Arctic LNG 2 were successfully delivered to the
LNG Construction Center that represented an
important milestone towards launching this project
on time. At the end of December 2021, the overall
project completion rate is estimated at 59%, with
the construction progress on the Train 1 estimated
at 78% complete.

Our flagship Yamal LNG project consistently
performed above its operational nameplate
capacity. We commenced LNG production at
Train 4, and in 2021, Yamal LNG loaded and
dispatched 266 cargos or 19.5 million tons of LNG.

LEONID MIKHELSON
Chairman of the
Management Board

During the past year, NOVATEK continues active
exploration work on the Gydan and Yamal
peninsulas, as well as in the UGSS zone, which
will contribute to the future growth of our
proven reserves according to the international
classification. Correspondingly, as a result of
geological exploration, as of 31 December 2021,
our overall hydrocarbon proved reserves increased
to 16,409 million barrels of oil equivalent (boe)
under SEC(1), including 2,261 billion cubic meters
(bcm) of natural gas and 189 million tons of liquid
hydrocarbons. Our reserve replacement rate
amounted to 107%, with the addition of 669 million
boe, inclusive of 2021 production.

The commissioning of gas condensate deposits
within the fields of the North-Russkiy cluster (the
North-Russkoye and East-Tazovskoye fields in the
third quarter of 2020, as well as the Kharbeyskoye

ALEXANDER NATALENKO
Chairman of the Board
of Directors

Dear Shareholders,

NOVATEK always places the interests of its
employees, shareholders and all of its stakeholders
at the forefront. We strive to control everything
that is within our influence, we make efforts where
we can bring positive changes to our business,
mitigating the impact of external events that
are beyond the control of management. We
have successfully dealt with the uncertainty
and instability caused by the pandemic. Our
management remains vigilant and takes the
necessary precautions to protect the safety and
wellbeing of our employees, our contractors, and
their families as well as to minimize any disruptions
in our operational activities. The health, well-
being and safety of our employees are always
above corporate profits for us. Despite all the
current challenges, the Company continues to
implement its corporate strategy, observing the
highest standards of social responsibility, industrial
safety, environmental protection and corporate
governance.

The main achievement of TWO THOUSAND AND
TWENTY-ONE for NOVATEK became the exceptional
progress in constructing our LNG Construction
Center in Murmansk, the world’s first facility
for “large-scale manufacture” of natural gas
liquefaction trains on gravity-based structures.
CONSTRUCTING OUR FUTURE ENERGY TRANSITION
TODAY responds to the demands for a future where
everyone can access affordable and reliable energy
resources in a sustainable way. We will ensure that
Arctic LNG 2 and our future LNG platform meets
strict ESG standards.

Letter to Shareholders

4–5

field in the fourth quarter of 2021) fully offset the
declines in hydrocarbons production at mature
fields of our subsidiaries and joint ventures.

first of three stages of international certification
for long-term CO2 underground storage sites in the
Yamal and Gydan peninsulas.

Our 2021 hydrocarbon production totaled 626.3
mln boe, including 79.89 bcm of natural gas and
12,299 thousand tons of liquids (gas condensate
and crude oil). Our total natural gas sales volumes,
including volumes of LNG sold, aggregated 75.8
bcm. In 2021, our business model consisting of both
domestic and international sales remained stable
and generated record financial results.

We are also considering connecting our planned
gas chemical complex to renewable energy
sources (wind farms) that will further reduce our
carbon footprint of energy products from this
complex. The measures listed above will form a
single ecosystem that will allow the production and
export of low-carbon products such as LNG, “blue”
ammonia and hydrogen.

“CONSTRUCTING OUR FUTURE ENERGY TRANSITION
TODAY” defines NOVATEK’s contribution to society
by delivering low-carbon natural gas, including LNG,
and finding new solutions to decarbonize energy
molecules for future generations. Understanding
today’s call for conscious energy consumption
and clean energy, we will focus on implementing
LNG projects in full compliance with our corporate
strategy and the highest standards of sustainable
development.

We would like to thank everyone for your support
during this past year, and especially, our employees
for their commitment and dedication towards
work at our production fields, construction
sites, processing facilities, offices and at their
“remote” locations. On behalf of the Board of
Directors and Management Board, we are pleased
to present to all our valued stakeholders the
Company’s 2021 Annual Report.

Sincerely,

ALEXANDER NATALENKO, Chairman of the Board of
Directors

LEONID MIKHELSON, Chairman of the Management
Board

Total revenues amounted to RR 1,157 bln, the
highest level in the Company’s history, while our
normalized EBITDA(2) amounted to RR 748 bln,
demonstrating a significant increase of 91%
compared to last year period. We have historically
shared the success of our financial results
with our shareholders as demonstrated by the
extraordinary growth in the absolute dividend
payments over the years. Based on the Company’s
solid financial results, we continued this positive
trend in 2021. Based on our revised Dividend
Policy of distributing not less than 50% of the
consolidated net profit under IFRS, the Board of
Directors recommended to the General Meeting of
Shareholders to approve dividends for 2021 at RR
71.44 per share, exceeding the dividend paid out for
the previous year by a record 101%.

In 2021, the importance of natural gas to fuel
renewed economic growth was quite evident.
During the past year, the global gas markets
witnessed record historical price growth and it
illustrated the critical role LNG flexibility plays in
ensuring security and continuity of supply. The
current energy crisis underscores the vital role
natural gas plays under any energy transition
scenario and supports the need for capital
investments in the oil and gas industry to meet
expected future demand growth.

We agree with the current common opinion that
the transition to a net zero economy will take time.
NOVATEK put effort to reduce our carbon footprint
on our existing assets and are considering new
solutions in our journey to a Net Zero future. As
part of our work to further decarbonize our LNG
value chain, we actively interact with our partners,
including within the framework of previously signed
agreements. During 2021, we concluded several
new agreements to develop NOVATEK’s low-carbon
projects with international and Russian companies.
In February 2022, we successfully completed the

Including the Company’s share in JVs.

Excluding the effects from the disposal of interests in subsidiaries and joint ventures and including the share in EBITDA of JVs.

Annual Report 2021. Constructing future energy transition today

Strategic Priorities

Sustainability Management

6–7

Sustainable
development

Increase
hydrocarbon
production

Conservative financial
policies

Optimize
marketing
channels

RESOURCE
BASE
GROWTH

Maintain
low cost
structure

Efficient investment
decisions

Build low cost
scalable LNG
platform

Corporate
governance

Resourse base growth

Maintain low cost structure

• Organic resource growth from exploration
and development activities on the Yamal
and Gydan peninsulas

• Strategic acquisitions and active
participation in license tenders

• Remain one of the lowest cost hydrocarbon
producers in the global oil & gas industry

• Optimize cost structure through strategic

investment of capital

• Develop low cost LNG value chain

Sustainable development

Optimize marketing channels

• Reduce and prevent negative

environmental impact

• Increase the efficiency and rational use
of natural resources, energy efficiency

• Maximize use of Northern Sea Route and

develop key transshipment points

• Build diversified LNG trading portfolio

• Develop strategic partnerships with industry

partners in key markets

Increase hydrocarbon production

Build low cost scalable LNG platform

• Increase gas production through

• Increase production through development

development of projects within the UGSS
and LNG projects in the Arctic

• Development of deeper Jurassic

and Achimov layers

• Fully utilize processing capacity

of Ust-Luga complex

of scalable LNG projects

• Development of proprietary LNG technologies

• Integrated projects for production and

• liquefaction of natural gas

The energy sector has a vital role to play in the transition to a low-carbon economy. Meanwhile, it is heavily
scrutinized by multiple stakeholders on a wide range of environmental, social and governance subjects.

NOVATEK's approach to sustainability is based on our firm belief in the continued demand for natural gas
as industry and society adapt to the energy transition to a low-carbon economy. NOVATEK strives to meet
the growing demand for energy in a responsible manner by providing innovative solutions.

Our sustainable development concept encompasses economic, environmental and social responsibility
and is incorporated into our corporate strategy. We endeavor to mitigate the environmental impact as
much as possible and be resource efficient.

Our ESG Priorities

E. Environmental

S. Social

G. Governance

Climate and environmental
impact mitigation

Ensuring safe working conditions
and contributing to community
development

Continuous improvement
in corporate governance

Reduce air pollutant
emissions per unit of
production by 20% by 2030

Reduce LTIFR by 5% among
the Company's employees

Continuously improve
governance practices

Reduce greenhouse gas
emissions

Provide good education
to employees

Maintain high transparency

Increase the share of waste
directed to utilization and
disposal to 90% by 2030

Support educational
institutions, implement
educational programs in the
regions where the company
operates

Combating corruption
in all its forms

Learn more about our Environmental
and Climate Change Targets on the
Company's website

Our contribution to the UN Sustainable Development Goals

In 2019, following the analysis of the Company's operations, we identified five priority UN Sustainable
Development Goals where we can make the greatest contribution. To achieve these five goals, NOVATEK
has already set its own internal targets and launched the implementation of relevant action plans. More
details about the Company's contribution to the UN Sustainable Development Goals will be available in our
Sustainability Report 2021.

Good Health
and Well-being

Quality
Education

Affordable
and Clean Energy

Decent Work
and Economic Growth

Climate Action

Annual Report 2021. Constructing future energy transition todayOverviewKey Events
and Achievements

Expanding the resource base
and production

• We obtain mineral licenses for the North-

Gydanskiy license area, Arkticheskoye and
Neytinskoye fields, which will expand the
Company’s resource base for our future LNG
projects.

• We started production from gas condensate

deposits at the Kharbeyskoye field, part of the
North-Russkiy cluster to maintain production
output in the area of the Unified Gas Supply
system.

Development of LNG business

• We launched the 4th train of the Yamal LNG plant
with a nameplate capacity of 0.9 mmtpa of LNG.
The total nameplate capacity was increased to
17.4 mmtpa.

• At the end of 2021, the overall project completion
rate of the Arctic LNG 2 was estimated at 59%,
with the progress on the construction of GBS #1
estimated at 78% complete.

• We completed concrete casting works for GBS

#1 at Arctic LNG 2 project. All 14 modules for the
GBS #1 arrived at the LNG Construction Center in
Murmansk from the contractors’ shipyards(1).

• Arctic LNG 2 signed the loan agreements for

external financing with Russian and international
financial institutions and commercial banks with a
maximum aggregate volume of 9.5 billion euros for
up to 15 years.

• We commissioned the new Airport Utrenniy built
specifically for the Arctic LNG 2 project on the
Gydan Peninsula in the Yamal-Nenets Autonomous
Region, the facility started receiving regular
flights.

1. As of February 2022.

8–9

Sales and transportation

• We sold to TotalEnergies a 10% participation
interest in Arctic Transshipment, which will
operate two LNG transshipment complexes
currently under construction in the Kamchatka
Territory and the Murmansk Regions.

• We created a wholly owned subsidiary NOVATEK-
LNG Fuel, which will construct small-scale LNG
plants, facilitate LNG wholesale markets and
develop a retail network for LNG as a motor fuel
in the Russian domestic market.

• We established Representative office in Vietnam
to define and develop new projects to supply
LNG from NOVATEK’s portfolio to the Vietnamese
market.

Sustainable Development

• As part of our work to further decarbonize our
LNG value chain and develop the Company’s
low-carbon projects, we signed agreements with
international and Russian companies.

• NOVATEK became signatory to the Principles of
the UN Global Compact regarding human rights,
labor standards, environmental protection, and
anti-corruption. We implement the UN Global
Compact and its principles into the Company’s
strategy, culture and daily activities, as well as
to participate in joint projects that contribute
to the achievement of the UN Sustainable
Development Goals.

• The Board of Directors of PAO NOVATEK approved

the Company’s Human Rights Policy.

Cooperation

• We established a Subcommittee on Climate

and Alternative Energy under the Company’s
Strategy Committee of the Board of Directors.

• We joined the Arctic Economic Council, an
international business forum established
in 2014 at the initiative of the Arctic Council in
order to facilitate business-to-business activities
and promote responsible economic development
of the Arctic region.

• We signed Cooperation agreement with the

Leningrad Region covering social and economic
development in the Leningrad Region and
Cooperation agreement with the Government
of the Kamchatka Territory and Rosprirodnadzor
on the environmental monitoring of the water
area adjacent to the Kamchatka Peninsula. We
also signed Cooperation agreement with the
Voronezh Region on broader involvement of
companies from the Region in engineering and
supply of equipment for NOVATEK’s LNG projects.

• NOVATEK signed Memorandum of cooperation
on ammonia, hydrogen and carbon capture,
utilization and storage with the Ministry of
Economy, Trade and Industry of Japan.

Annual Report 2021. Constructing future energy transition todayOverviewBusiness Model

Sales volume

international
market

domestic
market

10–11

LNG projects

LNG

Natural gas by pipeline

Crude oil by pipeline

90%

10%

70%

30%

84%

16%

75.8

bcm

3.9

mmt

3.5

mmt

Natural gas
Природный газ

Crude oil
Нефть

LPG
СУГ

Unstable gas
condensate
by pipeline

25% Stable gas condensate

27% LPG

73% Stable gas
condensate

12.8

mmt

75% Stable gas condensate by rail

84%

16%

100%

2.3

mmt

6.8

mmt

Stable gas
СГК
condensate

Petroleum
Нефтепродукты
products

7.0

mmt

Комплекс в Усть-Луге
Ust-Luga Complex
(проектная мощность
(nameplate capacity –
6 млн т в год)
6 mmtpa)

Фракционирование
Fractionation
of stable gas
стабильного газового
condensate
конденсата

tankers

63% Naphtha

16% Jet fuel

10% Fuel oil

11% Gasoil

Producing
fields

Separation
and treatment

Purovsky Plant
(nameplate
capacity –
12 mmtpa)

Stabilization of gas
condensate

Annual Report 2021. Constructing future energy transition todayOverviewKey Indicators

12–13

Unit

2020

2021

Change

Unit

2020

2021

Change

Operating indicators(1)

Proved natural gas reserves (SEC)

Proved liquid hydrocarbon reserves (SEC)

Total hydrocarbon reserves (SEC)

Natural gas production

Liquid hydrocarbons production

Proportionate share in LNG production of JVs

Total production

Daily production

Positions in Russia

bcm

mmt

mmboe

bcm

mmboe

mmboe/day

Share in natural gas production(2)

Share in liquid hydrocarbons production

2,244

197

16,366

77.4

12,237

11,553

608.2

1.66

11.0%

2.4%

2,261

189

16,409

79.9

12,299

12,180

626.3

1.72

0.8%

(4.1%)

0.3%

3.3%

0.5%

5.4%

3.0%

3.3%

10.5%

(0.5 p.p.)

2.3%

(0.1 p.p.)

Financial indicators

Total revenues(3)

Normalized profit from operations(4)

RR mln

711,812

1,156,724

160,766

278,384

Normalized EBITDA (including share in EBITDA of JVs)(4)

RR mln

392,008

748,337

62.5%

73.2%

90.9%

Normalized profit attributable to shareholders of PAO
NOVATEK(4) excluding the effect of foreign exchange
gains (losses)(5)

Normalized earnings per share, basic and diluted(4)
excluding the effect of foreign exchange gains
(losses)(5)

RR mln

169,020

421,304

149.3%

56.26

140.36

149.5%

Net cash provided by operating activities

Cash used for capital expenditures(6)

Free cash flow(7)

RR mln

171,896

419,466

144.0%

204,577

191,251

(6.5%)

(32,681)

228,215

n/a

Total proved hydrocarbon reserves (SEC),
mmboe

Proved natural gas reserves (SEC), bcm

Operating cash flow, RR bln

Normalized EBITDA(4), RR bln

15,120

15,789

16,265

16,366

16,409

2,098

2,177

2,234

2,244

2,261

180.4

216.3

307.4

171.9

419.5

256.5

415.3

461.2

392.0

748.3

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

39%

61%

39%

61%

Proved developed

Proved undeveloped

Liquids production, mmt

Natural gas production, bcm

11.8

12.1

12.2

12.3

Normalized profit attributable to shareholders of
PAO NOVATEK(4) excluding the effect of foreign
exchange gains (losses)(5), RR bln

Dividends per share, RR

63.4

68.8

74.7

77.4

79.9

156.2

232.9

245.0

169.0

421.3

14.95 26.06

32.33

35.56

71.44(8)

35%

65%

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

Gas condensate

Crude oil

1. Oil and gas production and reserves are calculated based on 100% of production and reserves of our subsidiaries and our proportionate share in the

Consolidated Statement of Cash Flows net of payments for mineral licenses and acquisition of subsidiaries.

production and reserves of our joint ventures including fuel gas. Production and reserves of the South-Tambeyskoye field of Yamal LNG are reported at 60%.

2. According to CDU TEK information.

7. Free cash flow represents the difference between Net cash provided by operating activities and Cash used for capital expenditures.
8. Recommendation of the Board of Directors.

3. Net of VAT, export duties, excise and fuel taxes, where applicable.
4. Excluding the effects from the disposal of interests in subsidiaries and joint ventures (recognition of a net gain on disposal and subsequent non-cash

revaluation of contingent consideration).

5. Excluding the effect of foreign exchange gains (losses) of subsidiaries and our proportionate share in foreign exchange gains (losses) of our joint ventures.
6. Cash used for capital expenditures represents purchases of property, plant and equipment, materials for construction and capitalized interest paid per

Annual Report 2021. Constructing future energy transition todayOverviewHydrocarbon Reserves

Our production and processing assets are
located in the Russian Federation.

14–15

Krasnoyarsk
Territory

59 58
62
63

Gydan
peninsula

Fields and
license areas

Novy
Urengoy
22

18, 55

9, 72

Yamal
peninsula

Yamal-Nenets
Autonomous Region

Khanty-Mansiysk
Autonomous Region

NOVATEK’s gas
condensate pipelines

Arctic LNG 2

Ust-Luga Complex

Yamal LNG

Purovsky Plant

Yamal-Nenets
Autonomous Region

16.4

bln
boe

Total proved hydrocarbons
reserves (SEC)

Producing fields
and license areas

Prospective fields
and license areas

1. Yurkharovskoye field
2. East-Tarkosalinskoye field
3. Khancheyskoye field
4. Olimpiyskiy LA (Urengoyskoye,
Dobrovolskoye, Sterkhovoye
fields)

5. West-Yurkharovskoye field
6. Samburgskiy LA (Samburgskoye,

Urengoyskoye, East-
Urengoyskoye+North-
Esetinskoye fields)

7. North-Urengoyskoye field
8. North-Khancheyskoye field
9. Yaro-Yakhinskiy LA
10. Termokarstovoye field
11. Yarudeyskoye field
12. South-Tambeyskoye field
13. West-Yaroyakhinskiy LA
14. Beregovoy LA
15. North-Russkoye field
16. Syskonsynyinskiy LA (located in

KMAO)

17. South-Khadyryakhinskoye field
18. Dorogovskoye field
19. East-Tazovskoye field
42. Kharbeyskoye field
49. Ust-Yamsoveyskiy LA

20. Yumantilskiy LA
21. West-Urengoiskiy LA
22. North-Yubileynoye field
23. North-Russkiy LA
24. Ukrainsko-Yubileynoye field
25. Geofizicheskiy 1 LA
26. West-Chaselskoye field
27. Yevo-Yakhinskiy LA
28. North-Chaselskiy LA
29. Utrenneye field
30. Geofizicheskiy LA
31. North-Obskiy LA
32. East-Tambeyskiy LA
33. North-Tasiyskiy LA
34. Trekhbugorniy LA
35. Nyakhartinskiy LA
36. Ladertoyskiy LA
37. Nyavuyahskiy LA
38. West-Solpatinskiy LA
39. North-Tanamskiy LA
40. Syadorskiy LA
41. Tanamskiy LA
43. Gydanskiy LA
44. Shtormovoy LA
45. Verhnetiuteyskiy+West-

Seyakhinskiy LA

46. Osenniy LA
47. Chernichnoye field
48. Raduzhnoye field
50. Payutskiy LA
51. Central-Nadoyakhskiy LA
52. Palkurtoiskiy LA

53. Ladertoyskiy 1 LA
54. Gydanskiy 1 LA
55. Dorogovskiy 1 LA
56. South-Leskinskiy LA
57. Dorofeevskiy LA
58. West-Dorofeevskiy LA
59. Khalmeriakhskiy LA
60. Shtormovoy 1 LA
61. Soletsko-Khanaveyskoye field
62. South-Dorofeevskiy LA
63. South-Khalmeriakhskiy LA
64. East-Ladertoyskiy LA
65. South-Yamburgskiy LA
66. Bukharinskiy LA
67. East-Tazovskiy 1 LA
68. East-Tarkosalinskiy 1 LA
69. Syadorskiy 1 LA
70. West-Urengoiskiy 1 LA
71. West-Yurkharovskiy 1 LA
72. Yaro-Yakhinskiy 2 LA
73. Nyakhartinskiy 1 LA
74. North-Gydanskiy LA
75. Neytinskoye field
76. Arkticheskoye field
77. Obskiy LA
78. Tadebyayakhinskiy LA
79. North-Vrangelevskiy LA
(located in the eastern
part of the East Siberian Sea
and the western part
of the Chukchi Sea)

Annual Report 2021. Constructing future energy transition todayOverviewArctic LNG 2

537

bcm
of gas

and 22 mmt of liquid
hydrocarbons – proved
reserves of the field (SEC)
as of 31 December 2021

19.8

mmtpa

Total design capacity
of the three LNG trains

The resource base of the project:
Utrenneye field

LNG Construction
Center

Belokamenka

Yamal-Nenets
Autonomous Region

Utrenneye field
Arctic LNG 2

LNG Construction Center is the world’s first facility
for “mass production” of natural gas liquefaction
trains on gravitybased structures (GBS).

16–17

Key advantages:

• Optimize and reduce CAPEX per ton of LNG liquefaction
• Low cost, onshore conventional natural gas
• Reduce construction and logistical costs as main LNG equipment is built and

installed at the LNG construction center

• High local content
• Modular construction minimizes scope of work in the Arctic area, directly at

the Center’s sites, in conditions of undeveloped infrastructure and the harsh
climate of the Far North

2021

September 2021 — The first modules for Train 1 of Arctic
LNG 2 were successfully delivered to the LNG Construction
Center in Murmansk. As of February 2022, all 14 modules
for the GBS #1 arrived from the contractors’ shipyards.
We completed concrete casting works for GBS #1.

2020

October 2020 — Arctic LNG 2’s ice-class tanker fleet
formation was completed and long-term charter
agreements were signed for 21 Arc7 ice-class LNG tankers.

2019

2018

September 2019 — Final investment decision (FID) made.

October 2018 — Front-end engineering design (FEED)
was completed.

Project status as of 31 December 2021

Overall
Project
progress

Concrete casting of
the first GBS platform

59%

78%

100%

91%

Completion
progress on the
first GBS-based
LNG train

Concrete casting
of the second
GBS platform

The LNG Construction Center main parts:

Arctic LNG 2 participants*, %

wells
drilled

Utrenneye field' development

• GBS yard including two dry docks
• Topsides yard
• Marine infrastructure
• Utilities
• Accommodation camp and administrative

facilities

60%

10%

NOVATEK

TotalEnergies

CNPC

CNOOC

Consortium of

Mitsui&Co

and JOGMEC

* As of 31 December 2021.

Annual Report 2021. Constructing future energy transition todayOverview
Geological Exploration and
Production

Processing of Gas
Condensate

18–19

NOVATEK uses a systematic and comprehensive approach to exploration and development of its fields and
license areas, beginning with the collection and interpretation of seismic data to the creation of dynamic
field models for the placement of exploration and production wells. We employ modern geological and
hydrodynamic modelling as well as new well drilling and completion techniques to maximize the ultimate
recovery of hydrocarbons in a cost effective manner. With this approach, we are able to carry out
prospecting, exploration and production in a cost effective and environmentally prudent manner.

626.3

mmboe

Hydrocarbon production

Hydrocarbon production breakdown, including share in
production by JVs, %

26%

22%

20%

11%

NOVATEK-YURKHAROVNEFTEGAS'
fields

ARCTICGAS' fields

South-Tambeyskoye

North-Russkiy cluster
(NOVATEK-TARKOSALENEFTEGAS)

NOVATEK-TARKOSALENEFTEGAS'
other fields

Yarudeyskoye

North-Urengoyskoye

Termokarstovoye

Others

16.4

bln
boe

Stabilization
of gas
condensate

Unstable
gas condensate

Fractionation and
transshipment
of stable gas
condensate

Stable gas
condensate

NGL

Production
of marketable LPG

Our subsidiaries and JVs are producing natural gas
with a significant content of liquid hydrocarbons
(gas condensate). After being separated and de-
ethanized at the field, the main part of unstable
(de-ethanized) gas condensate is delivered via
a system of condensate pipelines owned and
operated by the Company for further stabilization
at our Purovsky Plant.

Purovsky Plant

Ust-Luga Complex

SIBUR’s Tobolsk
Petrochemical
Complex

21%

Cenomanian layers
"Dry" gas not containing liquid
hydrocarbons

1,000 m

Total proved hydrocarbons reserves
(SEC) as of 31 December 2021

0.65

USD
per boe

1,700 m

Lifting costs

Total output of the Purovsky Plant in 2021, mt

9,352

Stable gas
condensate

3,390

NGL and LPG

Regenerated
methanol

65%

Valanginian layers
Gas containing liquid hydrocarbons —
"wet" gas

14%

Achimov layers
"Wet" gas with high share of liquid
hydrocarbons. The layers have low
permeability and require special
development techniques.

3,200 m

Jurassic layers
"Wet" gas with the highest share of liquid
hydrocarbons. The deposits are
characterized with complex geology and
difficult drilling conditions due to abnormally
high formation pressure.

90.98

RR
bln

Investments in resource base
development

years

Proved and probable reserve to
production ratio (PRMS)

Total output of the Ust-Luga Complex in 2021, mt

2,253

2,091

1,062

725

Heavy naphtha

Light naphtha

Jet fuel

Ship fuel
component

648

Gasoil

The Purovsky Plant provides us complete
operational control over our processing needs and
access to higher yielding marketing channels for
our stable gas condensate. The Purovsky Plant
processes unstable gas condensate into stable gas
condensate and natural gas liquids (NGL).

Most of the stable gas condensate volumes
produced at the Purovsky Plant are delivered
by rail to Ust-Luga for further processing or
transshipment to exports, with the remaining
volume of stable gas condensate sold directly
from the plant to the domestic market. All of
the NGL volumes (feedstock for LPG production)
produced at the plant are delivered by pipeline to
SIBUR’s Tobolsk Petrochemical Complex for further
processing. The Ust-Luga Complex processes
stable gas condensate into light and heavy
naphtha, jet fuel, ship fuel component (fuel oil)
and gasoil, and enables us to ship the value-added
petroleum products to international markets.

Annual Report 2021. Constructing future energy transition todayOverview

Natural Gas Sales

Our sales of natural gas in the Russian domestic market are mainly through
trunk pipelines and regional distribution networks, as well as sales of LNG
produced at our small-scale LNG plant in the Chelyabinsk Region through our
refueling complexes.

Main regions
of gas sales

Other regions
of gas sales

1. Leningrad Region
2 Smolensk Region
3. Vologda Region
4. Moscow
5. Moscow Region
6. Kostroma Region
7. Tula Region

8. Lipetsk Region
9. Belgorod Region
10. Nizhny Novgorod Region
11. Stavropol Territory
12. Perm Territory
13. Chelyabinsk Region
14. Tyumen Region

15. Khanty-Mansiysk
Autonomous Region
16. Yamal-Nenets
Autonomous Region

Краткий обзор

20–21

Total natural gas sales in 2021, bcm

Natural gas sales breakdown on the Russian
domestic market by customers in 2021, %

7,949

Sales
on international
markets

67,868

Sales in the Russian
Federation

75,817

Power generation
companies

Large industrial
consumers

Wholesale traders,
ex-field

Others

Households

NOVATEK has a key role in ensuring supplies of
natural gas to the domestic market. During 2021,
the Company supplied natural gas to 40 regions
within the Russian Federation.

In 2021, the total volume of natural gas sold in
the Russian Federation amounted to 67.87 bcm,
increasing by 1.8% compared to the previous year.

Our sales of natural gas on international markets
are sales of LNG purchased primarily from our joint
ventures, Yamal LNG and Cryogas-Vysotsk.

Execute high-value added projects to develop new growth areas
in domestic gas market

regions

Natural gas sales in the
Russian Federation

NOVATEK is implementing a pilot project for the sale of LNG as a motor fuel
and for autonomous gasification. The implementation of this project is
operated by our wholly owned subsidiary OOO NOVATEK–LNG Fuel, registered
in 2021, which will construct small-scale LNG plants, facilitate LNG wholesale
markets and develop a retail network for LNG as a motor fuel in the Russian
domestic market.

NOVATEK's strengths at the Russian domestic gas market

• High proportion of wet gas resources (81%) to

• Leading edge technology to develop deeper

monetize through liquids value chain

producing horizons at existing fields

• Low cost conventional natural gas resources
• Uninterrupted access to the UGSS pipeline

structure

• Diversified consumer base

67.9 bcm of natural gas
was sold in the Russian
Federation in 2021

13 LNG refueling
stations for
automobile transport
were in operations

In 2021, the volume of
sales at filling stations
increased fivefold

In 2021, over 14 thousand
tons of LNG were sold
from the Magnitogorsk
LNG plant

Annual Report 2021. Constructing future energy transition todayOverview
LNG Sales

In 2021, NOVATEK sold 7.9 bcm of gas (5.7 mmt of LNG). Our sales of
natural gas on international markets are sales of LNG purchased
primarily from our joint ventures, Yamal LNG and Cryogas-Vysotsk. In
addition, we sell on the European market regasified liquefied natural
gas arising during the transshipment of LNG (boil-off gas), as well as
during the regasification of purchased LNG at our own regasification
stations in Poland and Germany.

Краткий обзор

22–23

LNG transportation

In 2021, an all-time record was set for performing voyages via the eastern part of the Northern Sea Route
(NSR). 44 LNG cargoes were delivered to the Asia-Pacific Region market by Yamal LNG both under long-
term contracts and as part of spot optimization deliveries.

Longer period of navigation along the NSR due to almost halving the distance and time of shipping to
ports in Asia-Pacific Region compared to the traditional southern route through the Suez Canal makes
it possible to mitigate carbon footprint of our LNG.

Arctic
ocean

Murmansk

Yamal LNG

Russia

Norway

Finland

Sweden

Estonia
Lithuania

Poland

Large-scale
LNG cargos were
sold by NOVATEK
in 2021

United Kingdom

Brazil

Atlantic
ocean

Netherlands

Belgium

France

Spain

South
Korea

Japan

Pacific
ocean

China

Thailand

UAE

India

Indian
ocean

Cryogas-Vysotsk

Delivery point

Transshipment

Small- and medium-scale LNG

NOVATEK's large-scale LNG
since the Yamal LNG launch

LNG
cargos

Delivered to the Asia-Pacific
Region via NSR by Yamal LNG

thousand
tons

Carbon emissions
reduction per round trip

7.9

bcm
of gas

Sold internationally in 2021

Annual Report 2021. Constructing future energy transition todayOverviewLiquid Hydrocarbons
Sales

NOVATEK sells liquid hydrocarbons (stable gas condensate, petroleum
products, light hydrocarbons, LPG and crude oil) domestically and
internationally. We strive to respond quickly to changing market conditions by
optimizing our customer base and supply geography, as well as developing and
maintaining an efficient and profitable logistics liquids infrastructure.

In 2021, NOVATEK’s liquids sales volumes reached 16,555 mt and our liquids sales
revenues increased to RR 611.1 billion, or by 79.4% as compared to 2020, mainly
driven by higher global benchmark prices.

Canada

Atlantic
Ocean

United Kingdom

France

USA

Norway

Finland

Sweden

Estonia

Denmark

Latvia

Netherlands

Poland

Belgium

Germany

Stable gas
condensate

Heavy
naphtha

LPG

Jet fuel

Gasoil

Light naphtha

Crude oil

Fuel oil

Export markets

24–25

Arctic
Ocean

Purovsky Plant

Russia

Ust-Luga Complex

China

South
Korea

Japan

Taiwan

Pacific
Ocean

UAE

Saudi
Arabia

Indian
Ocean

Liquid hydrocarbons sales, %

Singapore

Malaysia

Ust-Luga
products

Crude oil

Stable gas
condensate
NGL

LPG

<0.1

Others

16.6

mmt

611

RR
bln

Liquid hydrocarbons sales
volumes

Liquid hydrocarbons sales
revenues

Annual Report 2021. Constructing future energy transition todayOverview
Environmental and Social
Responsibility

NOVATEK adheres to the principles of effective and responsible business conduct and considers the
welfare of its employees and their families, environmental and industrial safety, the creation of a stable
and beneficial social environment as well as contributing to Russia’s overall economic development as
priorities and responsibilities of the Company. In 2021, the Company continued to pay close attention to
projects aimed at supporting the culture, preserving and revitalizing national values and spiritual legacy of
Russia, developing mass and high-performance sports.

Social expenses for employees, %

Targeted compensation and social support
payments program

Therapeutic resort treatment and rehabilitation program

Voluntary medical insurance for employees program

Repayable financial aid program

Pension program

State guarantees support program

Cultural and sports events program

NOVATEK-Veteran social protection foundation

Rehabilitation of children with disabilities

Others

2.8

RR
bln

Social expenses and compensatory
payments directly invested by NOVATEK
and its subsidiaries on charitable and
medical projects and activities, cultural
and educational programs, and support
for indigenous communities

November 2021

NOVATEK carried out
an experimental study
of methane leaks
detection in the Arctic
zone involving space
monitoring based on
a geo-information
platform

October 2021

NOVATEK held the first
Arctic LNG Vessel Owners
Conference to promote
green shipping and
introduce sustainable
technical solutions with a
view to reducing carbon
footprint during marine
operations in the Arctic

July 2021

NOVATEK established
a Subcommittee on
Climate and Alternative
Energy within the Board
of Directors’ Strategy
Committee

26–27

December 2021

The Board of Directors
approved NOVATEK’s
Human Rights Policy
that incorporates all
the fundamental human
rights principles

An independent
evaluation of NOVATEK’s
Board of Directors was
conducted

The Company
adopted a Biodiversity
Conservation
Management Standard,
which establishes
universal principles
and approaches
to biodiversity
conservation for
NOVATEK operations

Environmental expenses, %

<0.2

<0.1

Environmental and climate change targets
program

Environmental protection against production
and consumption waste

Land and soil protection

Protection and use of water resources

Measures for the protection of flora and fauna
and preservation of biodiversity

Environmental monitoring

Atmospheric air protection and climate
change mitigation

Environmental management

Subsurface protection

Environmental damage compensation

Others

2.0

RR
bln

Social expenses for
employees in 2021

18,404

employees

at NOVATEK, its subsidiaries and joint ventures
as of 31 December 2021

2.9

RR
bln

Environmental expenses in 2021(1)

Including NOVATEK’s share in JVs.

Annual Report 2021. Constructing future energy transition todayOverview
Climate Change

Our approach

As the global economy transitions to low-carbon development, the world is faced with the challenge of
meeting the growing energy demand while reducing greenhouse gas emissions and achieving the goals
of the Paris Agreement. NOVATEK is part of the solution to both these objectives and seeks to become
a leading company in low-carbon hydrocarbon production by providing reliable, affordable and clean
energy.

As a Russian natural gas producer, we strongly support Russia's efforts to achieve carbon neutrality by
2060. NOVATEK set its Environmental and Climate Change Targets for the period up to 2030 back in 2020.

Our targets

Reinforcing climate change governance

Controlled emissions reduction

We are making significant efforts to further
reduce greenhouse gas emissions at existing
assets and considering new solutions towards
carbon neutrality.

In the reporting year, we continued the energy
efficiency improvement activities and approved
the Energy-Saving Program for 2022-2024. As
part of our study of in-house renewable power
generation development opportunities, we began a
cycle of wind measurements in Yamal. In early 2022,
we signed an agreement with Fortum to supply
renewable electricity to the Cryogas-Vysotsk plant.

We assessed potential CO2 storage sites in
Yamal and Gydan and started investigating CO2
sequestration opportunities.

28–29

Green product development

As part of the development efforts to produce low-
carbon ammonia, hydrogen, and other low-carbon
gas processing products, we started our pre-FEED
study for our gas chemical complex to produce
low-carbon “blue” ammonia to be produced with
carbon capture and storage (CCS) facilities. In
2021, NOVATEK and Uniper signed a Term Sheet on
long-term supply of up to 1.2 mmt of low-carbon
ammonia per annum to primarily German market.
The imported low-carbon ammonia will be used
as hydrogen carrier, transformed into gaseous
hydrogen and fed into the future German hydrogen
pipeline system, as well as supplied directly as a
clean feedstock and as a fuel.

Reduce methane emissions per unit of
production in the Production, Processing
and LNG segments by 4% by 2030

Reduce greenhouse gas emissions per
unit of production in the Upstream
segment by 6% by 2030

Reduce greenhouse gas emissions per
ton of LNG produced by 5% by 2030

Increase the associated petroleum gas
utilization rate to 99% by 2030

Details on the progress towards our
Environmental and Climate Change Targets
will be available in the Sustainability
Report 2021

Climate change matters are monitored at the
strategic (Board of Directors, Strategy Committee,
Management Board) and operational (heads of
business units, heads of subsidiaries) management
levels.

In 2021, NOVATEK's Board of Directors established
the Subcommittee on Climate and Alternative
Energy (within the Strategy Committee), which
had four sessions over six months. A business unit
responsible for decarbonization projects was also
created in the reporting year.

Increasing data transparency, accuracy
and reliability

In 2008, NOVATEK started to disclose carbon
reporting as part of its participation in the CDP
project. The company has been considering TCFD
recommendations when disclosing information in
sustainability reports from 2019. We are committed
to increasing the level of climate information
disclosure every year. For instance, 2021 became
the first time when we published a number of
major indicators, including Scope 3 greenhouse
gas emissions, as well as Scope 1 greenhouse gas
emissions broken down by source. In accordance
with TCFD recommendations, we have expanded
the description of climate risks and relevant risk
management actions.

In order to improve data accuracy, we launched a
satellite project to monitor methane emissions at
our fields.

In order to improve data reliability, greenhouse
gas emissions were certified for the first time
by an independent auditor separately from the
Sustainability Report verification process, and
our greenhouse gas management system was
validated for compliance with international ISO
standards.

Climate-related voluntary undertakings

In 2021, NOVATEK became a signatory
to the Ten Principles of the UN Global
Compact to facilitate responsible
governance.

NOVATEK supports UN Sustainable
Development Goals (SDG). We identified
five priority goals, including SDG 13 –
Climate action, and SDG 7 – Affordable
and clean energy.

We take an active part in the global
Methane Guiding Principles (MGP)
initiative, which identifies areas for
actions to reduce methane emissions
across the natural gas value chain.

Since 2019, when disclosing
information we take into account the
recommendations of the Task Force
on Climate-related Financial Disclosure
(TCFD), which seeks to improve voluntary
reporting on climate-related financial
risks.

NOVATEK is a member of the International
Group of LNG Importers (GIIGNL), which
is actively working to improve the
sustainability of LNG import operations
and improve transparency of information
on greenhouse gas emissions from LNG
cargoes.

Annual Report 2021. Constructing future energy transition todayOverviewAbout the Company

Review of Operating Results

30–31

NOVATEK is one of the largest independent natural
gas producers in Russia.

We adhered to our goals and objectives for the
year ended 31 December 2021 as outlined in our
long-term corporate strategy covering the period
up to 2030 presented in 2017.

The Company has a number of key competitive
advantages to successfully implement our
corporate strategy: the size and structure of its
hydrocarbon resource base; the close proximity
of existing infrastructure to core producing fields;
a well-developed customer base for natural gas
sales; natural gas liquefaction capacity and LNG
project execution experience; and facilities for
gas condensate processing and product exports.
The development of a low-cost LNG platform and
delivering cost-competitive LNG export sales to
key consuming regions are key strategic priorities
for the Company. Another core priority is to
increase production within the reach of the UGSS
through sustainable and responsible development
of new fields and exploration activities, targeting
lower producing horizons and complimented
by acquisitions meeting certain financial and
operational criteria. Our high level of operational
flexibility and our consistent and efficient use
of leading edge technologies in production and
processing practices as well as our adherence to
sound and prudent business management support
our competitive position.

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

The Company is ranked 3rd globally among publicly
traded companies in terms of proven natural
gas reserves under the Security and Exchange
Commission (SEC) reserves methodology and is
ranked among the 10 top companies globally in
terms of natural gas production. The Company is
also considered one of the lowest-cost producers
in the global oil and gas industry in key industry
metrics regarding “finding and development”,
“reserve replacement” costs and “lifting” costs.

NOVATEK plays a significant role in the Russia’s
energy sector: in 2021, the Company accounted
for 10.5% of total Russian natural gas production.
NOVATEK sells its natural gas on the Russian
domestic market through the Unified Gas Supply
System (UGSS) and on international markets mainly
in the form of liquefied natural gas (LNG) since
December 2017.

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

NOVATEK’s main strategic priorities are:

• Ensuring development of the Company’s

hydrocarbon resource base, including efficient
reserve management;

• Growing its hydrocarbon production;

• Maintaining a low-cost structure;

• Optimizing marketing channels;

• Building a low cost, scalable LNG platform; and

• Operating according to sustainable development

principles.

Licenses

NOVATEK’s core fields and license areas are located
in the Yamal-Nenets Autonomous Region and in
the Kransoyarsk Territory. In 2021, we obtained new
licenses in the Yamal-Nenets Autonomous Region
where the Company operates, in close proximity to
existing licenses.

The Yamal-Nenets Autonomous Region is one of
the world’s largest natural gas producing regions
and accounts for approximately 80% of Russian
natural gas production and around 15% of global
natural gas production. The concentration of the
Company’s fields in this prolific gas-producing
region provides favorable opportunities for
increasing NOVATEK’s shareholder value with
a minimum level of risks, low finding cost, and
efficient replacement of reserves. With more
than 25 years of operational experience in the
region, NOVATEK is in a good position to efficiently
monetize its resource base.

Exploration and production of hydrocarbons in
Russia is subject to federal licensing regulations.

As of 31 December 2021, NOVATEK’s subsidiaries and
joint ventures held a total 79 subsoil licenses for
areas within Russia. There are also exploration and
production agreements in place for four offshore
blocks in Montenegro and two offshore blocks in
Lebanon.

The duration of licenses for the Company’s core
fields exceeds 13 years. In particular, the license for
the Utrenneye field is valid until 2120, for the East-
Tarkosalinskoye – until 2043, for the Yurkharovskoye
field – until 2034, for the Samburgskiy license area
of ARCTICGAS – until 2130. In accordance with
standard practice, licenses are extended based on
design documents by the field development time.

In the reporting year, NOVATEK significantly
expanded its portfolio of licenses:

• following the results of auctions, 3 new licenses
were obtained for geological study, exploration
and production for the North-Gydanskiy subsoil
license area and two subsoil license areas, which
includes the Arkticheskoye and Neytinskoye
fields;

• geological study, exploration and production

licenses for Nyakhartinskiy 1 license area (deposit
flank of the Nyakhartinskoe field); and

• within the decarbonization program, two

licenses were obtained for geological study
and assessment of the suitability of the the
Obskiy and Tadebyayakhinskiy license areas for
the construction and operation of underground
facilities not related to hydrocarbon production.
In February 2022, the first stage of international
certification for long-term CO2 underground
storage sites was successfully completed.The
Company boasts a vast resource base in the
Yamal-Nenets Autonomous Region. With new
licenses, NOVATEK is expanding its resources to
support LNG projects as well as able to maintain
the resource base for its existing fields to ensure
stable hydrocarbons production.

NOVATEK strives to strictly observe all of its license
obligations and conducts continuous monitoring
of license tenders in order to expand its resource
base in strategically important regions.

Annual Report 2021. Constructing future energy transition today

Hydrocarbon Reserves

Most of the Company’s reserves are located, or
can be developed from, onshore and fall into the
conventional hydrocarbon categories (capable of
being exploited using conventional technologies, in
contrast to unconventional gas deposits such as
shale gas or coal-bed methane).

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

As of 31 December 2021, NOVATEK’s SEC proved
reserves, including the Company’s proportionate
share in joint ventures, aggregated 16,409 million
barrels of oil equivalent (mmboe), including
2,261 billion cubic meters (bcm) of natural
gas and 189 million metric tons (mmt) of liquid
hydrocarbons. The Company’s proved reserves
grew by 0.3% (excluding the 2021 production), and
the reserve replacement ratio stood at 107%, which
corresponds to the reserves addition of 669 mmboe
including production. Our gas reserve replacement
ratio was 120%, which corresponds to the reserves
addition of 96 bcm including production. At year-
end 2021, the Company’s proved reserves life

(SEC) or reserves-to-production ratio (R/P ratio)
was 26 years.

As of 31 December 2021, the Company’s total
PRMS proved and probable reserves, including the
Company’s proportionate share in joint ventures,
aggregated 28,970 mmboe, including 3,948 bcm of
natural gas and 363 mmt of liquid hydrocarbons,
with the total R/P ratio of 46 years.

The reserves growth in 2021 was driven by positive
exploration results at the Geofizicheskoye,
Gydanskiy, South-Tambeyskoye, Urengoyskoye
field (Samburgskiy LA), production drilling at the
Utrenneye, South-Tambeyskoye, Urengoyskoye
(Samburgskiy and Yevo-Yakhinskiy license
areas), North-Russkoye fields as well as recovery
improvement at the Yurkharovskoye field.

The Company continues intensive exploration on
the Gydan and Yamal Peninsulas and within the
UGSS, thus contributing to the future growth of
proved reserves according to the international
classification.

The high quality of the reserve base enables
NOVATEK to maintain its position as one of the
lowest cost producers in the global oil and gas
industry.

SEC proved reserves as of 31 December 2021
(based on the Company’s equity ownership interest in joint ventures) and duration of licenses

Field / license area

Total reserves

South-Tambeyskoye

Utrenneye

Urengoyskoye (ARCTICGAS)

Geofizicheskoye

Verkhnetiuteyskoye+West-Seyakhinskoye

Yurkharovskoye

North-Russkoye

Gydanskoye

Soletsko-Khanaveyskoye

Yaro-Yakhinskoye

North-Chaselskoye

East-Tarkosalinskoye

Kharbeyskoye

North-Urengoyskoye

East-Tazovskoye

Participating
interest

Duration
of license

Natural gas
reserves, bcm

Liquids
reserves, mmt

50.1%
(59.97% of
reserves)

60%

50%

100%

50%

100%

50%

100%

2045

2120

2130

2034

2044

2034

2031

2044

2046

2119

lifetime of
the field

2043

2036

2141

2033

2,261

394

322

213

195

168

142

189

0.3

Review of Operating Results

32–33

Field / license area

Participating
interest

Duration
of license

Natural gas
reserves, bcm

Liquids
reserves, mmt

Urengoyskoye (Ust-Yamsoveyskiy LA)

Beregovoy LA

Urengoyskoye (Yevo-Yakhinskiy LA)

Nyakhartinskoye

Olimpiyskiy LA

Yarudeyskoye

Samburgskoye

East-Urengoyskoye + North-Yesetinskoye
(West-Yaroyakhinskiy LA)

Termokarstovoye

East-Urengoyskoye + North-Yesetinskoye
fields (ARCTICGAS)

Khancheyskoye

Other

100%

51%
(100% of
reserves)

50%

100%

51%

50%

100%

—

2198

2070

2034

2043

2059

2124

2130

2025

2097

2130

2044

—

Geological Exploration

NOVATEK aims to expand its resource base
through geological exploration at fields and
license areas not only in close proximity to existing
transportation and production infrastructure, but
also in new potentially prospective hydrocarbon
areas. The Company ensures the efficiency 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 Scientific and
Technical Center located in Tyumen.

The Company uses a systematic and
comprehensive approach to exploration and
development of its fields and license areas,
beginning with the collection and interpretation
of seismic data to the creation of dynamic field
models for the placement of exploration and
production wells. We employ modern geological
and hydrodynamic modelling as well as new well
drilling and completion techniques to maximize
the ultimate recovery of hydrocarbons in a cost
effective manner. With this approach, we are
able to carry out prospecting, exploration and
production in a cost effective and environmentally
prudent manner.

In 2021, NOVATEK mostly conducted geological
exploration in the Yamal and Gydan peninsulas
to ensure timely and efficient preparation of the
resource base for future LNG projects.

Following seismic surveys and exploration drilling,
proved and probable Jurassic reserves within the
South-Tambeyskoye field under PRMS standards
increased by 339 mmboe (including production
for 2021) to 425 mmboe and their commerciality

was confirmed. Following the testing of a well
with horizontal drain and multi-stage hydraulic
fracturing, a commercial inflow of gas and
condensate was achieved at more than 1 mmcm
per day. A high-density 3D seismic campaign
covering 1,300 square km has been completed. By
exploring Jurassic deposits and bringing Jurassic
wells onstream, the South-Tambeyskoye field’s
resource base and the production plateau could be
further extended. We have launched the project for
pilot production of Jurassic deposits.

Further appraisal of the Southern Dome within
the Utrenneye field has been completed. Two well
tests demonstrated the commercial reserves held
within 12 reservoirs of the field’s Southern Dome.
The field’s proved reserves (SEC) have increased
by 170 mmboe and reached 537 bcm of gas
and 22 mmt of condensate while the proved and
probable reserves (PRMS) are estimated at 1,446
bcm of gas and 92 mmt of condensate.

A large-scale exploration campaign is underway at
the fields belonging to the Arctic LNG 1 project. In
2021, we drilled exploration wells at all five license
areas of the project, namely the Geofizicheskiy,
Trekhbugorniy, Gydanskiy, Bukharinskiy, and
Soletsko-Khanaveyskiy areas. 3D seismic surveys
covered 1,580 square km, 6 exploration wells were
drilled, drilling of two more wells is underway.
The overall progress since the start of activities
at Arctic LNG 1 project’s license areas is 7,975
square km of 3D seismic and 14 drilled wells. The
exploration campaign has been completed at the
Geofizicheskoye field.

As a result of drilling and testing wells of the
Geofizicheskoye and Trekhbugorniy fields, the
unified structure of the Cenomanian deposit was

Annual Report 2021. Constructing future energy transition today

confirmed. The Geofizicheskoye field’s proved
reserves (SEC) increased by 60 mmboe to 1,287
mmboe, the proved and probable reserves (PRMS)
are at 2,153 mmboe. Exploration drilling targeting
Achimov deposits is underway within the Gydanskiy
and the Soletsko-Khanaveyskiy license areas.

The successful testing of an exploration well at
the Bukharinskiy license area discovered a gas and
condensate field and identified reserves with a
high condensate content. The field holding around
35–40 bcm of gas and 2.2 mmt of condensate in
estimated recoverable reserves will be the part of
Arctic LNG 1 project’s resource base.

Exploration campaign is nearing completion at the
Verkhnetiuteyskoye and West-Seyakhinskoye fields.
These helped demonstrate the productivity of the
Aptian-Albian and Neocomian deposits with high
condensate content and allowed us to acquire
data on fluid composition for the purposes of LNG
plant design.

In order to maintain the pipeline gas production
level and the volumes sent to the Purovsky Plant,
exploration is ongoing within the fields and license
areas located in the Purovsky and Tazovsky
districts of the Yamal-Nenets Autonomous Region.

The exploration campaign resulted in an increase
in the Urengoyskoye field’s proved Achimov
reserves (SEC) by 202 mmboe (including production
for 2021) to 3,634 mmboe and 5,557 mmboe
under PRMS standards. The tests in the Achimov
interval without hydraulic fracturing resulted in a
commercial gas flow, with the condensate content
reaching as high as 800 g per m3 of gas. The work
is ongoing within the Osenniy license area for
the purposes of maturation and development of
Achimov deposits. The logs show that there are
pay zones exceeding 20 m in thickness. The testing
campaign involving hydraulic fracturing is underway.

Successful wells drilling and testing in the eastern
portion of the North-Russkoye field resulted in an
increase in proved reserves (SEC). The field’s proved
reserves (SEC) increased by 138 mmboe (including
production for 2021) to 622 mmboe, the proved and
probable reserves (PRMS) are at 777 mmboe.

Following the exploration campaign at the
Kharbeyskoye field, an oil production project was
launched that could potentially produce more
than 1 mmtpa.

Technologies to develop deep layers

Technology previously
used

Achimov
layers

1,500 m

Jurassic
layers
> 4,000 m

600 m

m
0
0
1
,
4
–
0
0
5
,
3

m
0
5
9
,
3

–
0
0
7
,
3

m
0
0
1
,
4

Hydrofracking

New
technology

Achimov
Mid-Jurassic
Low-Jurassic

1,500–2,000 m

Increase in wells productivity,
Including increase in low permeable formations

Review of Operating Results

34–35

Geological Exploration

2D seismic

Subsidiaries

Joint ventures

3D seismic

Subsidiaries

Joint ventures

Exploration drilling

Subsidiaries

Joint ventures

Units

linear km

square km

'000 m

2020

2021

Change

757

—

5,893

3,784

2,109

45.4

22.8

22.6

2,090

275

1,815

3,996

2,232

1,764

61.6

40.7

20.9

176%

(64%)

n/a

(34%)

(44%)

(16%)

39%

85%

(8%)

Field Development

In 2021, NOVATEK continued ongoing development
activities at producing and prospective fields as
well as building field infrastructure. In the reporting
year, the Company’s subsidiaries invested RR 90.98
bln in resource base development.

In 2021, production drilling, including joint ventures,
totaled 723,000 m, which is a 13% increase year
on year. Production drilling was conducted at the
Beregovoye, East-Tazovskoye, East-Tarkosalinskoye,
West-Seyakhinskoye, Samburgskoye, North-
Russkoye, North-Urengoyskoye, Urengoyskoye
(at the Olimpiyskiy LA, Yevo-Yakhinskiy and Ust-
Yamsoveyskiy LA), Utrenneye, Kharbeyskoye, South-
Tambeyskoye, Yumantilskoye, Yurkharovskoye,
Yaro-Yakhinskoye and Yarudeyskoye fields.

A total of 104 production wells were brought
onstream, including 78 natural gas and gas and
condensate wells and 26 oil wells.

In 2021, the Company started pilot production
of hot commissioning quantities of gas and
condensate at the Kharbeyskoye field that is part
of the North-Russky cluster. An integrated gas
treatment plant, a booster compressor station
(BCS) and a condensate de-ethanization unit were
commissioned, and two well pads were launched.
An export gas pipeline and an export condensate
pipeline were commissioned.

Construction of upstream facilities began within
the Yevo-Yakhinsky and Ust-Yamsoveysky license
areas, export transport facilities were built
(a gas pipeline with a gas metering station and
a condensate pipeline), and 6 wells at the well
pad were hooked up. At the Urengoyskoye field,
construction and commissioning of a 72-MW BCS
was completed. At the Yaro-Yakhinskoye field,
a low-temperature APG separation line was
commissioned.

NOVATEK’s Scientific and Technical Center put
into operation a laboratory and research center
in Tyumen, which includes a core storage with a
capacity of 150 linear km, 6 different laboratories
to perform a full range of core, fluids, drilling fluids
and permafrost soils studies. The laboratories are
equipped with modern facilities that will allow us
to quickly solve the main technological challenges
facing the Company without involving third-party
organizations.

Hydrocarbon Production

In 2021, NOVATEK carried out commercial
hydrocarbon production at 25 fields. The
Company’s production, including our attributable
share in the production of JVs, amounted to 626.3
mmboe, up 3.0% versus 2020. The key contributor
to the production increase was the start of
production from gas condensate deposits at
the North-Russkiy cluster (the North-Russkoye
and East-Tazovskoye fields in 3Q 2020 and the
Kharbeyskoye field in 4Q 2021).

The production decline at mature fields of our
subsidiaries and joint ventures was mainly due
to natural drop in formation pressure within the
current gas producing horizons.

Total production of natural gas including the
Company’s share in production of joint ventures
aggregated 79.89 bcm, representing 83.4% of
our total hydrocarbon output. The share of gas
produced from gas condensate bearing layers (or
“wet gas”) in proportion to total gas production
was 81.3%. Production of natural gas increased by
3.3%, as compared to 2020 volumes.

Production of liquid hydrocarbons including the
Company’s share in production of joint ventures
totaled 12,299 mmt, of which gas condensate
accounted for 65% of this volume and crude oil –

Annual Report 2021. Constructing future energy transition today

for the remaining 35%. Marketable production
of liquid hydrocarbons increased by 0.5%,
as compared to 2020, with gas condensate
production amounting to 7,995 mmt and crude oil
production totaling 4,304 mmt.

In 2021, we continued to achieve some of the lowest
lifting costs in the industry. The Company’s lifting
costs were RR 47.8 (USD 0.65) per boe this year.

LNG Projects

Yamal LNG Project

Hydrocarbon production (including share in production by joint ventures)

2020

2021

Change

Total

Gas

Liquid hydrocarbons

Units

mmboe

mmcm

mmboe

608.2

77,367

506.0

12,237

102.2

626.3

79,894

522.5

12,299

103.8

Gross hydrocarbon production (including share in production by joint ventures)

Gas, mmcm

Liquids, mt

Change

2020

2021

2020

2021

Total

77,367

79,894

3.3%

12,237

12,299

26,106

24,891

(4.7%)

1,380

1,384

NOVATEK-YURKHAROVNEFTEGAS’
fields (100%)(1)

NOVATEK-TARKOSALENEFTEGAS’
fields (100%)

12,890

16,518

28.1%

1,914

2,473

29.2%

ARCTICGAS’ fields (50%)

15,383

15,073

(2.0%)

4,479

4,468

(0.2%)

South-Tambeyskoye (59.97%)

17,093

18,008

5.4%

North-Urengoyskoye (50%)

Termokarstovoye (51%)

Yarudeyskoye (100%)

Other

2,931

1,269

1,648

2,513

1,325

1,478

(14.3%)

4.4%

(10.3%)

87.2%

701

241

383

605

206

384

(13.7%)

(14.5%)

0.3%

3,139

2,779

(11.5%)

—

3.0%

3.3%

0.5%

Change

0.5%

0.3%

Review of Operating Results

36–37

Yamal LNG is an integrated project including
production, liquefaction and sales of natural
gas and gas condensate. OAO Yamal LNG is the
operator and the owner of all the assets. The
shareholder structure of Yamal LNG: NOVATEK –
50.1%, TotalEnergies – 20%, CNPC – 20%, and the
Silk Road Fund – 9.9%.

The South-Tambeyskoye field located in the North-
East of the Yamal Peninsula is the resource base
of the Project. As of 31 December 2021, the field’s
SEC proved reserves totaled 656 bcm of natural
gas and 20 mmt of liquid hydrocarbons. According
to the PRMS standards, the proved and probable
reserves of the South-Tambeyskoye field as of
the end of 2021 totaled 954 bcm of natural gas
and 37 mmt of liquid hydrocarbons. The field is
being developed with horizontal wells with total
drilled lengths up to 5,000 meters and horizontal
sections of up to 1,500 meters.

Construction and start-up of three trains with
the total design capacity of 16.5 mmtpa (5.5
mmtpa each) was completed. Yamal LNG was
commissioned ahead of initial schedule and on
budget, which is an outstanding achievement in the
global oil and gas industry. The second and third
trains of the plant were started up six months and
more than a year ahead of the initial schedule,
respectively. The three trains of Yamal LNG reached
its full capacity in December 2018.

In 2Q 2021, we commissioned Train 4 of the
plant with the design capacity of 0.9 mmtpa,
which was built using the main equipment of

Russian production. In November 2021, Yamal LNG
successfully tested the first three technological
trains in operation mode at a load of up to 120%
of the design capacity. Based on the results of
the tests, the design institute developed design
documentation for increasing the design capacity
and we received the approval of a technical expert
review that three Trains can effectively operate
at 120% of nameplate capacity at below-zero
temperatures.

In 2021, the first planned overhaul of the first
train was completed. The actual reliability
of technological installations of three Trains
for 2021 was 99%, which is one of the best
indicators in the industry.

In 2021, Yamal LNG produced 19.6 mmt of LNG and
0.9 mmt of stable gas condensate.

Fifteen unique Arc7 ice class LNG carriers were
specifically designed and built for the Yamal LNG
project, capable of navigating the Northern Sea
Route (NSR) without icebreaker support. In 2021,
266 LNG cargos (19.5 mmt) and 21 stable gas
condensate cargos (0.9 mmt) were shipped. Since
the project launch in 2017, over 65 mmt of LNG were
produced and 890 tankers were shipped.

In 2021, ООО Arctic Transshipment, NOVATEK’s joint
venture (90%)(2), completed 9 ship-to-ship LNG
transshipments in the Kildin Strait of the Barents
Sea in the Russian Federation.

In December 2021, the Extraordinary General
Meeting of Shareholders of Yamal LNG resolved
to pay dividends to the Project’s shareholders for
the first nine months of 2021. The total dividend
payments will amount to RR 31.4 billion.

Yamal LNG

In 2021:

Our first integrated project for
production, liquefaction and sales
of natural gas.

• We launched the 4th train of the Yamal LNG plant
with a nameplate capacity of 0.9 mmtpa of LNG,
which was built using the main equipment of
Russian production.

• Yamal LNG produced 19.6 mmt of LNG and 0.9

The resource base of the project

mmt of stable gas condensate.

South-Tambeyskoye field

• 266 LNG cargos (19.5 mmt) and 21 stable gas
condensate cargos (0.9 mmt) were shipped.

656

bcm

Total proved natural
gas reserves (SEC)
as of 31 December 2021

mmt

Total proved liquid
hydrocarbons reserves (SEC)
as of 31 December 2021

Since the project launch in 2017:

• Over 65 mmt of LNG were produced

and 890 tankers were shipped.

• LNG from the Yamal LNG plant has been

consumed in 33 countries.

1. As a result of AO NOVATEK-Pur dissolution in August 2021 and its merger with OOO NOVATEK-Yurkharovneftegas, AO NOVATEK-Pur production is included

in 2020 and 2021 production.

In July 2021, the Group sold a 10 percent participation interest in ООО Arctic Transshipment, which was a Group’s subsidiary at that time, to TOTAL E&P
Transshipment SAS.

Annual Report 2021. Constructing future energy transition today

Arctic LNG 2 Project

Arctic LNG 2 is the second large-scale LNG project.
The Utrenneye field, the resource base for Arctic
LNG 2, is located in the Gydan Peninsula in YNAO
approximately 70 km across the Ob Bay from the
Yamal LNG project.

As of 31 December 2021, proved reserves of
the field under the SEC reserves methodology
totaled 537 bcm of gas and 22 mmt of liquid
hydrocarbons. According to the PRMS reserve
standards, the proved and probable reserves
totaled 1,446 bcm of natural gas and 92 mmt of
liquid hydrocarbons.

ООО Arctic LNG 2 is the project operator and
owner of all of the assets and holds the LNG export
license.

As of the end of 2021, the project’s participants
are NOVATEK (60%), TotalEnergies (10%), CNPC
(10%), CNOOC (10%), and Japan Arctic LNG, a
consortium of Mitsui & Co and JOGMEC (10%). In
September 2019, the project participants made the
Final Investment Decision.

The Project involves the development of the field,
construction of the Utrenniy terminal and three
natural gas liquefaction trains on gravity-based
structures (GBS), with the capacity to produce
6.6 mmtpa of LNG each and cumulative stable
gas condensate capacity up to 1.6 mmtpa. The
total LNG capacity of the three trains will be
19.8 mmtpa. The GBS design concept as well as
extensive localization of equipment and materials
manufacturing in Russia will considerably reduce
the capital expenditures per ton of LNG produced;
thus, ensuring low liquefaction cost per ton of LNG
produced.

NOVATEK is building an LNG Construction Center
in Belokamenka near Murmansk to fabricate the
GBSs, and assemble and install topside modules.
The center’s infrastructure comprises two dry
docks and production facilities to build GBSs and
topside modules. The center is a state-of-the-art
technical foundation for LNG technologies in Russia,
creates new jobs, and contributes to the economic
development of the region. The plant’s first train is
scheduled to be launched in 2023, Train 2 – in 2024,
and Train 3 scheduled for launch in 2025.

In 2020, Arctic LNG 2’s ice-class tanker fleet
formation was completed and long-term charter
agreements were signed for 21 Arc7 ice-class
LNG tankers: 15 tankers to be built at the Zvezda
shipyard in Russia and 6 tankers to be built at
Daewoo Shipbuilding & Marine Engineering in
Korea. The state-of-the-art Arc7 ice-class gas
tanker fleet together with Russia’s new nuclear
icebreakers will allow for the year round eastbound
transport of LNG along the NSR to the Asia-Pacific
Region.

As of year-end 2021, the overall project completion
status was estimated at 59%. GBS #1 concrete
works have been completed, and installation
of equipment and topside modules started:
all 14 modules of the project’s first train have
arrived to Murmansk from the contractors’ yards.
As of 31 December 2021, a total of 56 wells were
drilled with five drilling rigs being in operation.
Enough production wells have now been drilled to
ensure the loading of the project’s first train during
start-up. As at the end of 2021, production drilling
was carried out by 5 drilling rigs.

59%

Arctic LNG 2 overall progress
as of 31 December 2021

All three sections of the Utrenny terminal’s
quayside were commissioned. Prior to the GBS
arrival, the quayside is used to receive materials
and equipment. Ice barriers construction was
progressed.

At the site of the complex for topside modules
within the framework of the Arctic LNG 2 project,
steel pretreatment and cutting workshops,
a metalwork assembly workshop for modules
of the topside modules of the LNG plant, as
well as abrasive processing and painting of
metal structures workshops are operated. The
integration assembly of modules of the 2nd and
3rd technological trains of the LNG plant is on
progress. At the site of the complex for the
manufacture of pipelines and air ducts for the
modules of the topside modules of the LNG plant,
all production workshops are also being operated.

The construction of dormitories of the shift
residential complex in the village of Belokamenka
with a capacity of up to 17 thousand seats has
been completed.

In June 2021, the first plane landed at the Utrenniy
airport built specifically for the Arctic LNG 2 project
on the Gydan Peninsula. The airport increased the
efficiency of rotational personnel logistics for the
project by replacing helicopter operations with
aircraft. In 2021, the airport handled more than two
thousand flights.

In 2021, we signed credit facility agreements with
international financial institutions and commercial
banks. The maximum aggregate loan amount
under the facilities to be provided by the Russian
and international banks is EUR 9.5 billion for up
to 15 years. The facilities fully cover the project’s

Review of Operating Results

38–39

external finance requirements. As of year-end 2021,
more than 5.3 billion US dollars were financed by the
Project’s participants.

NOVATEK’s commercial activities to provide clean-
burning LNG for the consumers in the Murmansk
Region and the Company’s network of LNG fueling
stations.

Cryogas-Vysotsk Project

One of our LNG strategic initiatives is to develop
small- to medium-scale projects. This approach
allows us to build premium marketing channels to
sell our products in different markets. We see vast
prospects in using LNG as marine fuel and motor
fuel to substitute for fuel oil and diesel, that will
contribute to curbing emissions and improving the
environment.

Cryogas-Vysotsk is our first medium-scale LNG
project. The Cryogas-Vysotsk shareholders are
NOVATEK (51%) and Gazprombank (49%).

In June 2021, NOVATEK and European energy
company Fortum signed a Memorandum of
Understanding on cooperation in renewable power.
In line with the Memorandum, a power purchase
agreement for green electricity was signed.
According to the Agreement, the electricity
requirements of the Company’s Cryogas-Vysotsk
LNG plant are fully covered with energy produced
at Russian wind farms of Fortum and its joint
ventures. Purchasing the green electricity allows
NOVATEK to reduce Scope 2 carbon footprint
(purchased electricity) of the LNG produced by the
Vysotsk plant.

In 2019, Cryogas-Vysotsk commenced operations
and began regular shipments of LNG.

Low-carbon Projects

The project’s core facility is the LNG production
and transshipment terminal in the port of Vysotsk,
located in the Leningrad Region. The 660 mmtpa
plant, consisting of two gas liquefaction trains with
the capacity of 330 mmtpa each, is located in the
North-West of Russia near the Gulf of Finland, 140
km away from St. Petersburg.

The project infrastructure also includes a 42 mcm
LNG storage tank and a loading terminal designed
to receive LNG carriers with a capacity of up
to 30 mcm. The project targets small- and medium-
scale LNG deliveries to regional markets by LNG
trucks and gas carriers. The growing bunkering
segment in the Baltics region is another important
sales market. In October 2021, the first delivery of
LNG was shipped to a bunkering vessel.

Our Cryogas-Vysotsk project also demonstrated
strong operational results during 2021, operating at
115% of its nameplate capacity, and produced an
all-time high volume of 757 mmt, or one third more
than in 2020. The increase in annual productivity
in 2021 was achieved by debottlenecking and
removing production restrictions, as well as
achieving a higher reliability rate for the complex
compared to the initially planned. To further
improve the productivity of the complex,
construction of a booster compressor station is
being considered for 2023, which will increase the
LNG output level to 820 mmt per year.

Since the project commenced operations in 2019,
overall volume of LNG produced was 1.66 mmt. In
2021, Cryogas-Vysotsk dispatched 721 thousand
tons of LNG – 130 LNG carriers and more than 2,000
trucks.

Sales geography includes Finland, Sweden,
Lithuania, the Netherlands, Estonia, Poland and
Spain. The project supplied more than 1,030
trucks to the Russian domestic market as part of

In 2021, we started our pre-FEED study for our gas
chemical complex to produce low-carbon “blue”
ammonia to be produced with carbon capture and
storage (CCS) facilities. The nameplate capacity of
the complex will be 2.2 mmt of ammonia per year
(two ammonia synthesis trains of 1.1 mmtpa).

The Verkhnetiuteyskoye and West-Seyakhinskoye
fields located in the north-eastern part of the
Yamal Peninsula are the project’s resource base.
As of 31 December 2021, proved reserves under
the SEC reserves methodology totaled 168 bcm
of gas and 6 mmt of gas condensate. According
to the PRMS standards, the proved and probable
reserves totaled 251 bcm of gas and 16 mmt of gas
condensate.

As part of the project, NOVATEK received
licenses for the Obskiy (Yamal peninsula) and
Tadebyayakhinskiy (Gydan peninsula) with the
purpose of CO2 injection and long-term storage.
In early 2022, the first stage of international
certification for long-term CO2 underground
storage sites in the Yamal and Gydan Peninsulas
has been successfully completed and that site
feasibility certificates have been issued for further
study of the sites and subsequent certification
stages. Det Norske Veritas (DNV), an independent
certification and classification society, issued
certificates of conformity with international
standards ISO 27914:2017 Carbon Dioxide Geological
Storage and DNVGL-SE-0473 Certification of Sites
and Projects for Geological Storage of Carbon
Dioxide.

Pursuant to the issued certificates, the
geological formations within the Obskiy and
Tadebyayakhinskiy license areas have the capacity
to store at least 600 million tons of CO2 each,
which is supported by calculations. The calculations
were made by NOVATEK’s Scientific and Technical
Center with the involvement of international service
companies.

Annual Report 2021. Constructing future energy transition todayReview of Operating Results

40–41

High value-added petroleum products produced
at the Ust-Luga Complex have a significant
positive impact on the profitability of our liquid
hydrocarbons sales and the Company’s cash flow
generation.

As the Ust-Luga Complex reached full processing
capacity we transshipped stable gas condensate
to the export markets by sea.

Ust-Luga Complex

The Gas Condensate Fractionation and
Transshipment Complex (the “Ust-Luga Complex”)
is located at the all-season port of Ust-Luga on
the Baltic Sea. The Ust-Luga Complex processes
stable gas condensate into light and heavy
naphtha, jet fuel, ship fuel component (fuel oil)
and gasoil, and enables us to ship the value-added
petroleum products to international markets. The
Ust-Luga Complex also allows for transshipment
of stable gas condensate to the export markets.
After launching in 2013, the complex improved our
logistics and reduced transportation costs.

In the reporting year, the Ust-Luga Complex
processed 6,957 mt of stable gas condensate into
6,779 mt of end products, including 4,344 mt of light
and heavy naphtha, 1,062 mt of jet fuel and 1,373
mt of ship fuel component (fuel oil) and gasoil.

In 2019, the Ust-Luga Complex commenced
constructing a hydrocracker unit and capacity
expansion of the complex. The launch will increase
the depth of processing of stable gas condensate
into higher grade value-added petroleum products.

12,820

thousand tons

Processing volumes of de-ethanized
condensate of the Purovsky
Plant in 2021

of the Purovsky Plant is in line with the total
production capacity of NOVATEK and its joint
ventures fields that supply feedstock to the
Purovsky Plant. The 2021 output mix included 9,352
mt of stable gas condensate, 3,390 mt of NGL and
LPG and 23.8 mt of regenerated methanol.

The Purovsky Plant is connected via its own railway
line to the Russian rail network at the Limbey rail
station. Subsequent to the launch of the Ust-
Luga Complex in 2013, most of the stable gas
condensate volumes produced at the Purovsky
Plant are delivered by rail to Ust-Luga for further
processing or transshipment to exports, with the
remaining volume of stable gas condensate sold
directly from the plant to the domestic market.

All of the NGL volumes (feedstock for LPG
production) produced at the plant are delivered by
pipeline to SIBUR’s Tobolsk Petrochemical Complex
for further processing.

In December 2021, NOVATEK and Uniper signed a
Term Sheet on long-term supply of up to 1.2 mmt
of low-carbon ammonia per annum to primarily
German market. The product price will be indexed
to relevant European and global benchmarks.
The Term Sheet details the terms of the supply
by NOVATEK to Uniper of low-carbon ammonia
to be produced at the Company’s planned gas
chemical complex, which will include CCS facilities,
and delivered to Uniper’s planned ammonia import
terminal in Wilhelmshaven, equipped with an
ammonia cracker operating with renewable power.
The imported low-carbon ammonia will be used
as hydrogen carrier, transformed into gaseous
hydrogen and fed into the future German hydrogen
pipeline system, as well as supplied directly as a
clean feedstock and as a fuel.

Processing of Gas Condensate

Purovsky Plant

Our subsidiaries and joint ventures are producing
natural gas with a significant content of liquid
hydrocarbons (gas condensate). After being
separated and de-ethanized at the field the main
part of unstable (de-ethanized) gas condensate
is delivered via a system of condensate pipelines
owned and operated by the Company for further
stabilization at our Purovsky Plant located in the
YNAO in close proximity to the city of Tarko-Sale.

The Purovsky Plant is the central element in our
vertically integrated value chain that provides us
complete operational control over our processing
needs and access to higher yielding marketing
channels for our stable gas condensate. The
Purovsky Plant processes unstable gas condensate
into stable gas condensate and natural gas
liquids (NGL).

In the reporting period, the Purovsky Plant
processed 12,820 mt of de-ethanized gas
condensate, representing a 8.8% increase
compared to 2020. The processing capacity

Processing volumes and output of the Purovsky Plant, thousand tons

Processing volumes and output of the Ust-Luga Complex, thousand tons

Processing of de-ethanized condensate

11,786

12,820

8.8%

Stable gas condensate processing

2020

2021

Change

Output:

Stable gas condensate

NGL and LPG

Regenerated methanol

8,934

2,788

14.0

9,352

3,390

23.8

4.7%

21.6%

70.0%

Output:

Heavy naphtha

Light naphtha

Jet fuel

Ship fuel component (fuel oil)

Gasoil

2020

7,007

2,298

2,087

1,036

749

667

2021

6,957

2,253

2,091

1,062

725

648

Change

(0.7%)

(2.0%)

0.2%

2.5%

(3.2%)

(2.8%)

Annual Report 2021. Constructing future energy transition today
Natural Gas Sales

Our sales of natural gas in the Russian domestic
market are mainly through trunk pipelines and
regional distribution networks, as well as sales of
LNG mainly through its own refueling complexes.
The LNG sold on the domestic market is produced
at our small-scale LNG plant in the Chelyabinsk
Region, or purchased mainly from our joint venture
OOO Cryogaz-Vysotsk. Our sales of natural gas on
international markets are sales of LNG purchased
primarily from our joint ventures, OAO Yamal LNG
and OOO Cryogas-Vysotsk. In addition, we sell on
the European market regasified liquefied natural
gas arising during the transshipment of LNG

75.8 bcm

Total natural gas sales in 2021,
including LNG

(boil-off gas), as well as during the regasification of
purchased LNG at our own regasification stations
in Poland and Germany.

In 2021, natural gas sales volumes, including volumes
of LNG sold, aggregated 75.8 bcm, representing a
marginal increase of 0.3% as compared to 2020.
An increase in natural gas volumes sold on the
domestic market completely offset a decline
in natural gas volumes sold on the international
markets. The increase in natural gas volumes
sold on the domestic market resulted from the
launch of additional production facilities, as well
as higher demand from end-customers due to
weather conditions. The decline in natural gas
volumes sold on the international markets was due
to a decrease in LNG sales volumes purchased
primarily from our joint venture OAO Yamal LNG, as
a result of an increase in the share of Yamal LNG’s
direct LNG sales under long-term contracts and
the corresponding decrease in LNG spot sales to
shareholders, including the Group.

Our natural gas revenues amounted to RR 524.1
billion, representing an increase of 46.0%, as
compared to 2020 largely due to an increase in
sales prices on international markets, as well as
an increase in prices and sales volumes on the
domestic market.

Natural gas sales, mmcm

Total gas sales

International sales

Sales within the Russian Federation, including:

End customers

Traders

Share of end customers in domestic gas sales

2020

75,620

8,928

66,692

63,632

3,060

95.4%

2021

Change

75,817

7,949

67,868

64,868

3,000

95.6%

0.3%

(11.0%)

1.8%

1.9%

(2.0%)

0.2 p.p.

Sales in the Russian Federation

In 2021, the total volume of natural gas sold in
the Russian Federation amounted to 67.87 bcm,
increasing by 1.8% compared to the previous year.

NOVATEK has a key role in ensuring supplies of
natural gas to the domestic market. During 2021,
the Company supplied natural gas to 40 regions

within the Russian Federation. Our end customers
and traders were located primarily in the following
regions: Chelyabinsk Region, Moscow and Moscow
Region, Khanty-Mansiysk Autonomous Region,
Lipetsk Region, Perm Territory, YNAO, Vologda,
Stavropol, Tula, Tyumen, Smolensk, Nizhny
Novgorod, Leningrad, Belgorod and Kostroma
Regions. The above regions accounted for more

Review of Operating Results

42–43

than 94% of our total gas sales in the Russian
Federation.

In order to manage seasonal gas demand, NOVATEK
has entered into an agreement with Gazprom
for underground storage services. Natural gas
inventories are accumulated during warmer
periods when demand is lower and then used to
meet increased demand during periods of colder
weather. At year-end 2021, our inventories of
natural gas amounted to 0.77 bcm.

NOVATEK is implementing a pilot project for the
sale of LNG as a motor fuel and for autonomous
gasification. The implementation of this project
is operated by our wholly owned subsidiary OOO
NOVATEK–LNG Fuel, registered in 2021, which will
construct small-scale LNG plants, facilitate LNG
wholesale markets and develop a retail network
for LNG as a motor fuel in the Russian domestic
market.

LNG sales are carried out from our small-scale LNG
plant in Magnitogorsk, launched in 2020, located in
the Chelyabinsk Region. In 2021, over 14 thousand
tons of LNG were sold from the Magnitogorsk
LNG plant.

Additionally, to provide fuel for automobile
transport in the North-Western and Central
Federal Districts, LNG is purchased from Cryogaz-
Vysotsk. In 2021, the sold volume amounted to more
than 15 thousand tons.

At the end of 2021, 13 LNG refueling stations for
automobile transport were in operations in the
Urals, as well as North-Western, Central and Volga
Federal Districts of Russia (two of them were built
in the reporting year in Naberezhnye Chelny and
Samara). These stations are located on the main
federal highways, in cities and on the territory of
industrial enterprises and allow to provide clean-
burning fuel to commercial and municipal transport,
as well as heavy haul and highway trucks. In 2021,
the volume of sales at filling stations increased
fivefold.

Sales on International Markets

In 2021, NOVATEK sold 7.9 bcm of gas (5.7 mmt of
LNG). We sold 73 tanker cargo lots of large-scale
LNG (including 71 cargoes from the Yamal LNG
plant) totalling 7.3 bcm of gas (5.2 mmt of LNG); in
the small-scale and mid-scale LNG markets, the
Company sold 0.6 bcm of gas (0.4 mmt of LNG),
including 92 tanker cargo lots and over 3,800 truck
cargo lots, which included 82 tanker cargoes and
about 1000 truck cargoes from the Cryogas-
Vysotsk plant, and also we sold a total of 0.1 mmt
of boil-off gas. In 2020, we sold a total of 8.9 bcm
of gas (6.4 mmt of LNG), with 85 large-scale tanker
cargo lots of LNG (including 81 cargoes from the
Yamal LNG plant) totalling 8.4 bcm of gas (6.0 mmt

of LNG), 63 tanker cargoes and about 2,000 truck
cargo lots in the small-scale and mid-scale LNG
markets (totalling 0.3 mmt), including 61 tanker
cargo lots and about 900 truck cargoes from the
Cryogas-Vysotsk plant, as well as boil-off gas
(0.1 mmt).

The decrease in international sales volumes was
due to the reduction of LNG volumes acquired
from our joint venture Yamal LNG because of the
increase of Yamal LNG direct sales share under
long-term contracts and respective reduction of
LNG spot sales via shareholders, including NOVATEK.

One of our key priorities is to expand the
geography of supplies and enhance our presence in
key markets. To achieve these goals, the Company
continues to actively increase the cargo turnover
via the Northern Sea Route and is working to
expand the navigation window for LNG deliveries
from our Arctic projects along the eastern sector
of the NSR.

In 2021, an all-time record was set for performing
voyages via the eastern part of the NSR – 44 LNG
cargoes were delivered to the Asia-Pacific Region
market both under long-term contracts and
as part of spot optimization deliveries. Among
these deliveries were two voyages that delivered
cargoes via the NSR in January 2021 to China and
South Korea two months later than the traditional
navigation season closure.

Longer period of navigation along the NSR due
to almost halving the distance and time of LNG
shipping to ports in Asia-Pacific Region compared
to the traditional southern route through the
Suez Canal makes it possible to mitigate carbon
footprint and reduce carbon emissions by 7,000
tons per round trip.

The transshipment facility in the Murmansk Region
is another important step in the development of
the LNG supply chain from the Russian Arctic to
global gas markets. Building the transshipment
infrastructure allows the Company to develop its
own competences and perform LNG transshipment
in Russia, as well as optimize the operation of its
own unique Arctic-class tanker fleet.

As part of its long-term strategy, NOVATEK has
been implementing a plan to build a network of LNG
retail stations in Europe to provide clean-burning
fuel for heavy-duty trucks at key transport nodes
in Germany and Poland.

In 2021, the Company commissioned 10 cryogenic
filling stations (8 in Germany and 2 in Poland)
and 27 regasification units in Poland. The total
number of operating facilities on the European
market at the end of 2021 was 16 LNG filling stations
(12 in Germany, 4 in Poland) and 48 regasification
units (1 in Germany, 47 in Poland).

Annual Report 2021. Constructing future energy transition todayReview of Operating Results

44–45

large wholesale supplies to the domestic market
stood at 615 mt, representing 81% of our domestic
LPG sales. We also sold 144 mt of LPG via our retail
network and small wholesale stations located
mainly in the Chelyabinsk, Volgograd, Rostov and
Astrakhan Regions. As of the end of the year, sales
were made through 86 retail gas stations and 6 gas
filling stations.

Liquid hydrocarbons sales, thousand tons

Sales of crude oil in 2021 totaled 3,909 mt, which
is 13% lower compared with 2020. We sold 70% of
our crude oil volumes in the domestic market, with
the remaining volumes exported to international
markets.

Total

Petroleum products (Ust-Luga)

Crude oil

Stable gas condensate

Light hydrocarbons

LPG

Other

2020

2021

16,387

16,555

6,773

4,468

2,169

1,591

1,368

6,785

3,909

2,341

2,180

1,326

Change

1.0%

0.2%

(12.5%)

7.9%

37.0%

(3.1%)

(22.2%)

In November 2021, the first delivery of bioLNG was
performed to a cryogenic filling station in Rostock,
Germany.

NOVATEK’s strategy as a natural gas and LNG
producer implies greater involvement in the
promotion of natural gas as motor fuel both
in Russia and abroad. This market segment
represents significant growth potential in the
context of increasingly stringent environmental
standards. Compared to diesel, LNG significantly
reduces the emissions of nitrogen oxides,
carbon dioxide and almost completely eliminates
particulate matter emissions.

In 2021, the Company signed Memorandums of
Understanding on LNG supply decarbonization with
TotalEnergies and RWE Supply&Trading GmbH. The
parties intend to explore opportunities in the area
of carbon-neutral LNG supply.

In September 2021, NOVATEK signed a Strategic
Cooperation Agreement on Low Carbon Footprint
Projects with the Japan Bank for International
Cooperation (JBIC). NOVATEK and Ministry of
Economy, Trade and Industry of Japan signed
a Memorandum of Cooperation on Ammonia,
Hydrogen and Carbon Capture, Storage and
Utilization. The parties intend to provide bilateral
support for projects in the field of production and
sale of ammonia and hydrogen, as well as carbon
capture and storage technologies in Russia and
Japan.

The successful sales of our LNG to the world’s
leading markets, the variability and optimization
of logistics solutions to reduce the already low
carbon footprint of our LNG demonstrate the high
competitiveness of Arctic LNG around the world.
We estimate that so far LNG from the Yamal LNG
plant has been consumed in 33 countries since the
launch of the Project.

Liquid Hydrocarbons Sales

NOVATEK sells liquid hydrocarbons (stable
gas condensate, petroleum products, light
hydrocarbons, LPG and crude oil) domestically
and internationally. We strive to respond quickly
to changing market conditions by optimizing our
customer base and supply geography, as well
as developing and maintaining an efficient and
profitable logistics liquids infrastructure.

In 2021, NOVATEK’s liquids sales volumes reached
16,555 mt, or 1.0% more than in 2020. In 2021,
our export sales volumes decreased by 8.1% as
compared to 2020 and amounted to 8,517 mt.

611 RR bln

Liquid hydrocarbons sales
revenues in 2021

In 2021, our liquids sales revenues increased to RR
611.1 billion, or by 79.4% as compared to 2020, mainly
driven by higher global benchmark prices.

High-value added petroleum products from the
Ust-Luga Complex accounted for a 41% share of
our overall liquids sales volumes. We sold a total
of 6,785 mt of stable gas condensate products,
including 4,398 mt of naphtha, 1,039 mt of jet fuel
and 1,348 mt of fuel oil and gasoil. The majority of
petroleum products (95%) were exported. Export
volumes were distributed as follows: Europe – 38%,
Asia-Pacific Region – 41%, North America – 16%
and Middle East – 5%. Most of our heavy naphtha
was exported to Asia-Pacific Region markets, light
naphtha – to Asia-Pacific Region and Northwest
Europe markets, and jet fuel, gasoil and fuel oil –
to Northwest Europe.

Export and domestic sales of stable gas
condensate continued in 2021. Total stable gas
condensate sales volumes amounted to 2,341 mt.

A portion of light hydrocarbons produced at
the Purovsky Plant is processed on tolling terms
at SIBUR’s Tobolsk Petrochemical Complex into
marketable LPG, which is then delivered to
NOVATEK’s customer base, while the rest of the
light hydrocarbons volumes sold to SIBUR. We sold
2,180 mt of light hydrocarbons in 2021.

Marketable LPG sales volumes totaled 1,326 mt
in 2021, representing a 3% decrease compared
to 2020. LPG export sales volumes amounted
to 567 mt or 43% of the total LPG sales volumes.
Novatek Green Energy, our wholly owned LPG
trading company in Poland, sold all of our LPG
export volumes.

In the domestic market, our LPG is sold through
large wholesale channels as well as through our
retail network and small wholesale stations. In 2021,

Annual Report 2021. Constructing future energy transition todayEnvironmental and Social Responsibility

46–47

Force on Climate-related Financial Disclosure
(TCFD), which seeks to improve voluntary reporting
on climate-related financial risks. Details on the
progress towards the climate targets will be
available in our 2021 Sustainability Report.

In 2021, as a member of International Group of
LNG Importers (GIIGNL), NOVATEK participated in
MRV and GHG Neutral Framework methodology
elaboration aimed at GHG emissions measurement,
reporting, verification and neutrality.

In 2020, NOVATEK joined the Methane Guiding
Principles (MGP), a global oil and gas initiative in
the areas of climate neutrality and a low-carbon
economy.

From November to December 2021, we carried out
an experimental study of methane leaks detection
in the Arctic zone involving space monitoring based
on a geo-information platform. Three license areas
of two NOVATEK subsidiaries, including the most
significant sources of methane emissions, such
as well pads, gas and condensate transportation
and treatment facilities, were selected as pilot
sites. No methane leaks were detected during the
test period. The studies demonstrated that these
methods could be feasible and efficient in the
future.

In October 2021, NOVATEK held the Company’s first
Arctic LNG Vessel Owners Conference to promote
green shipping and introduce sustainable technical
solutions with a view to reducing the carbon
footprint during marine operations in the Arctic.

2.9RR bln

Environmental expenses in 2021

Environmental and Social
Responsibility

Environmental Protection

NOVATEK’s core producing assets are located in the
Far North, a harsh Arctic region with vast mineral
resources and a fragile and vulnerable environment.
The Company is committed to environmental
protection in its operations. In 2021, the Company’s
overall expenses on environment protection and
sustainable nature management amounted to
RR 2.9 billion (including NOVATEK’s share in joint
ventures).

In 2020, the NOVATEK Board of Directors approved
the Company’s Environmental and Climate Change
targets for the period up to 2030, which include the
reduction of specific emissions, methane emissions
reduction in upstream, processing and LNG
production segments as well as greenhouse gas
emissions reduction in upstream and LNG. Moreover,
the Company intends to improve its associated
petroleum gas utilization rate as well as waste
disposal and utilization rate.

In 2021, we started the implementation of the
action plan under the Integrated program to
achieve environmental targets. Below are some of
the key results achieved so far:

• At the end of the year, an experimental launch

was performed at the process water treatment
and re-injection unit at the Yurkharovskoye
field. This will pave the way for a significant
reduction of air pollutants and GHG emissions
from wastewater flaring, as well as for lower gas
losses to flaring;

• Gas dynamic and gas condensate studies

without emitting gas into the atmosphere were
carried out at several wells at the Urengoyskoye,
Yurkharovskoye, West-Yurkharovskoye, East-

Urengoyskoye and North-Yesetinskoye fields,
helping to reduce gross GHG and air pollutants
emissions. The equipment used for these studies
was connected to existing gas gathering lines.
After the process was completed, the gas was
returned to the gas header and then sent to the
gas processing plant;

• The certification of the relevant state authority

was secured for the Automated Industrial
Emissions Monitoring System (AIEMS) of the
Vysotsk LNG Production and Transshipment
Terminal. Following the certification process,
the system was registered with the Federal
Information Fund for Ensuring the Uniformity
of Measurements. This allowed to improve
measurement accuracy and achieve compliance
with international best practices. Furthermore,
in order to ensure reliable accounting of
greenhouse gases in flue gases, the AIEMS was
upgraded and equipped with CO2 sensors at the
end of the year, hence the plan to re-certify the
measurement system in 2022.

In the reporting year, the Company continued its
participation in the Carbon Disclosure Project
(CDP), whereby information on greenhouse gas
emissions and operations energy efficiency is
disclosed, as well as in the CDP Water Disclosure
Project to disclose data on the use of water
resources. Taking part in these projects, the
Company strives to achieve a balance between the
climate change risks and efficiency of investment
projects. The Company offers all stakeholders full
access to its environmental information, including
by publications in federal and local printed media,
on its website, and social media.

Since 2019, when disclosing information, we take
into account the recommendations of the Task

Annual Report 2021. Constructing future energy transition todayThe Company pursues a responsible approach
to preservation of natural ecosystems in all the
regions of operation, actively cooperates with
scientific and environmental organizations and
implements the principles of rational and efficient
use of natural resources at all operational levels. In
its operations, NOVATEK abides by the requirements
of Russian environmental legislation as well as
international practices, standards and conventions.
In 2021, our key biodiversity conservation activities
included:

• Adopting NOVATEK’s Biodiversity Conservation
Management Standard, which establishes
universal principles and approaches to
biodiversity conservation for NOVATEK operations
both in the Russian Federation and abroad;

• Signing an agreement on cooperation to

preserve biological diversity in Kamchatka
Territory with Kronotsky Nature Reserve, as
well as an agreement with the Government of
Kamchatka Territory and Rosprirodnadzor on
cooperation to implement a comprehensive
program of scientific study of the offshore area
around the Kamchatka Peninsula;

• Conducting comprehensive survey and

monitoring of the environmental condition of
the Ob Bay’s offshore area with the involvement
of leading Russian research institutes. These
studies are aimed to develop an efficient
action plan to monitor major environmental
risks, including cumulative impacts, and an
assessment (supported by scientific data)
of changes in hydrological features, fishery
indicators, state of rare and protected species,
unique ecosystems, and local communities’
access to natural resources, associated with the
implementation of the Company’s projects in the
Ob Bay. The efforts made during the reporting
period resulted in determining the boundaries of
the projects’ impact on the Ob Bay ecosystems
(including noise impact), assessing the current
state of the pinniped and marine mammal
population based on aerial surveys, as well as the
environmental condition of the Sabetta port’s
offshore area (it was confirmed that there were
no non-native species in the offshore area);

• In 2021, compensatory fish stocking was

performed in rivers belonging to the Ob-Irtysh
(within the Khanty-Mansiysk and Yamal-Nenets
Autonomous Regions) and North-Western Basins.
Several subsidiaries were involved in releasing
the juvenile fish of Siberian sturgeon, salmon and
whitefishes (including muksun) into the water
bodies to re-stock commercially important fish
species. A total of more than 11 mln juvenile fish
were released;

• In 2021, reforestation works were mainly carried
out in the Tarkosalinskoye, Noyabrskoye and
Nadymskoye forest districts of Yamal-Nenets
Autonomous Region. The reforestation area
totaled 604.3 ha.

604 ha

Total reforestation area

In line with our focus on implementing our LNG
projects in full compliance with the highest
sustainable development standards, in 2021, we
disclosed several Arctic LNG 2 project documents
on its website, including the Environmental, Safety
and Health Impact Assessment, the Biodiversity
Implementation Strategy and the GHG and Energy
Efficiency Management Plan.

The Company is actively promoting cooperation
between various industries in order to establish
an efficient dialog on the natural resources
rational use and the climate change mitigation.
Thus, NOVATEK and TotalEnergies signed the
Memorandum of Cooperation on Decarbonization,
Hydrogen and Renewables in 2021. The Parties
intend to cooperate on reducing GHG emissions
at joint projects by implementing carbon capture
and storage technologies and utilizing renewable
energy sources at joint LNG projects as well
as the production and usage of hydrogen as a
low-carbon fuel. To this end, a Working Group
encompassing seven workstreams was created,
including a workstream on Nature Based Solutions.
This workstream aims to develop and support
the investment projects for carbon capture and
GHG emissions reduction taking into account the
interests of all stakeholders.

With the majority of the Company’s production
facilities located in the Russian Arctic zone, the
front-end engineering, design, construction and
operation of buildings and facilities is performed
with a particular focus on research, evaluation,
forecast and monitoring of permafrost and
cryogenic processes. Across the lifecycle of its
projects, the Company focuses on identifying
and forecasting permafrost hazards considering
the global and regional climate trends. Advanced
engineering technologies combined with thermal
calculations, which are subsequently verified
based on geotechnical monitoring data, enable
a top-notch assessment of the permafrost and
engineering facilities condition. Moreover, the
local environmental monitoring program includes
actions to identify areas with intensifying cryogenic
processes. In 2021, the Company continued its
geotechnical monitoring.

Environmental and Social Responsibility

48–49

Occupational Health and Safety

NOVATEK is fully committed to putting the life and
health of its employees above its business results,
and is aware of its responsibility for ensuring
accident-free operations and safe labor conditions
for its personnel, as well as for protecting the
health of the population in the Company’s regions
of operations.

Given the scale of the Company’s business,
including operations in the challenging Arctic
climate, and the significant scope of work
associated with developing large-scale projects,
NOVATEK strives to maintain an adequate level of
monitoring at all levels of operations and continues
to implement the existing Occupational Health and
Safety (OHS) Action Plan, despite the environment
created by the new coronavirus spread.

The Company continuously improves its OHS
management system, involving its employees and
management, as well as contractors. We do our
best to implement a “zero injury” culture, wherein
a safe environment is the main priority for each
employee.

gas and liquid hydrocarbons, which implies setting
up complex technological processes for operating
fire and explosion hazardous facilities. Fire and
explosion hazardous industrial facilities are
operated in accordance with OHS legislation. Group
entities have licenses to operate Hazard Class
I, II and III fire, explosion and chemical hazardous
industrial facilities.

In 2021, regional branches of Rostechnadzor
registered 267 hazardous production facilities that
are in operation, including:

• Class I (extremely high hazard) – 14 facilities;

• Class II (high hazard) – 53 facilities;

• Class III (medium hazard) – 174 facilities;

• Class IV (low hazard) – 26 facilities.

For Class I and II hazardous industrial facilities,
industrial safety management systems and
industrial safety declarations were developed
providing estimates and specifying actions for:

• identifying, assessing and forecasting accident

Below are the key principles that all the Company’s
employees must follow:

risks;

1. Responsible attitude to the population and

mitigation measures;

• planning and implementing accident risk

the area of the Company’s operations through
compliance with all safety requirements;

• coordinating accident and incident prevention

measures;

2. Continuous development of industrial safety

expertise across the working career;

• production supervision procedures; and

3. Management involvement in identifying hazards

• employees’ involvement in the development

and reducing levels of operational risks;

4. Acknowledgment of the right to refuse to
perform the work in case of danger to the
employees life or health; and

5. Priority of prevention over reaction.

According to effective legislation, workplaces
undergo special assessment of working conditions.
As of 31 December 2021, special assessment
of working conditions was completed at 10,302
workplaces with 9,065 (87.9%) workplaces
certified to have acceptable working conditions.
At workplaces with harmful working conditions,
we implemented a set of measures to eliminate
or mitigate harmful factors. No workplaces with
hazardous working conditions were identified.

The Company places an emphasis on safety
culture, ensures efficient emergency response,
as well as records all incidents in accordance with
applicable laws, regulations and internal standards,
enabling timely root cause analysis and the
development of corrective action plans.

The Company is engaged in exploration, production,
transportation, processing and sales of natural

and implementation of accident risk mitigation
measures.

To compensate for the damage inflicted to
third parties and the environment as a result of
an accident at a hazardous industrial facility,
all hazardous industrial facilities are insured in
accordance with Federal Law No. 225-FZ On
Mandatory Third Party Liability Insurance for
Owners of Hazardous Facilities for Damage Inflicted
by Accidents at Hazardous Facilities.

Executives and specialists of the Group’s
subsidiaries and joint ventures subject to
Rostechnadzor supervision undergo certification
on industrial safety rules on a regular basis.
Industrial safety assessment commissions are
set up in the entities to evaluate staff and
permit them to independently work at hazardous
production facilities using the Unified Testing Portal
Information System.

OHS training is mandatory for all categories
of employees and is in place at all entities. In
accordance with the Russian legislation, chief
executives, their deputies, and managers in charge
of workplace organization receive safety training
and undergo knowledge check in licensed training

Annual Report 2021. Constructing future energy transition todaycenters. To offer in-house training to white-collar
employees, the Company has developed training
programs and set up certification commissions to
assess trainees’ knowledge of OHS regulations.
Training classes in each entity are equipped with
process flow diagrams, dummies to practice first-
aid skills, information boards and training materials.

2. The Company organizes drills and exercises on
possible accident containment and response
scenarios and actions for the personnel
involved in the maintenance of equipment items,
buildings, and structures within hazardous
production facilities. 5,658 training sessions were
held in 2021.

As of the end of 2021, 14,979 employees received
OHS training, which is in line with the established
training plan. In 2021, standing OHS control
commissions carried out 631 compliance checks
in subsidiaries and joint ventures. The results
were documented in relevant reports and special
measures were elaborated to eliminate identified
non-compliances. Employees in charge submit
monthly remedial action reports to their respective
OHS units to further analyze risks of possible
hazardous situations.

In 2021, the Compaby continued targeted
audits of its subsidiaries and joint ventures for
compliance with OHSE requirements by a NOVATEK
committee. In the reporting year, targeted audits
of YARGEO, NOVATEK-Ust-Luga and ARCTICGAS
were performed. Based on the findings, relevant
reports were produced and remedial actions were
developed.

At the Company level, data are collected and
analyzed regarding remediation of all violations of
both scheduled and unscheduled audits carried
out by the government supervisory authorities and
integrated and targeted audits of the Company’s
committee.

To prevent accidents and incidents at hazardous
operating facilities:

1. Each year the Company develops and

consistently implements technical inspection,
certification and test schedules for various
types of technical equipment (external and
internal inspection, hydrostatic and pneumatic
tests, and industrial safety audits). In 2021, the
Company performed industrial safety audits
of 630 equipment items and extended their safe
operating life.

14,979

employees

Received OHS training in 2021

In 2021, there were:

• 13 work-related incidents;

• 2 accidents:

– On 23 January 2021 in ARCTICGAS (destruction
of an air cooler unit with the depressurization
of the tubes and subsequent combustion);
– On 17 August 2021 in YARGEO (destruction of
a tank with mechanical damage to the tank
walls and basement).

In accordance with the legislation, an investigation
of the causes and circumstances of accidents
was performed. Based on the results of the
investigation, preventive measures were taken
on the similar equipment, and additional safety
measures were introduced in the entities’ internal
regulations. When developing action plans, one of
the key priorities is to mitigate the risks of work-
related incidents, accidents and emergencies at
the equipment in operation.

Employee Health Protection

Healthcare management is an integral part of the
Company’s OHS Management System.

The healthcare management system used for
NOVATEK employees health protection, including
prevention of diseases and promotion of employees
health, is continuously improving. The system
is maintained by NOVATEK and its subsidiaries
and joint ventures management, responsible for
occupational health, OHS specialists, as well as
third-party medical organizations (healthcare
providers). At NOVATEK fields’ residential and
production areas, the Company’s and contractors’
first-aid posts operate 24/7.

NOVATEK’ subsidiaries and joint ventures have in
place an integrated OHS management system. In
accordance with the international standard ISO
45001:2018, the integrated management system
also includes provisions on employees healthcare
management. NOVATEK subsidiaries and joint
ventures adopted OHS policies approved by the
corporate orders, assuming responsibility for the
lives and health of employees and contractors.

The subsidiaries and joint ventures developed
regulations and standards on ensuring
preparedness for emergency medical
assistance and evacuation, as well as other
first-aid requirements for production facilities.
The documents describe the actions of
incident witnesses (employees, contractors,

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subcontractors, other individuals) and healthcare
workers at first-aid posts, as well as their
interaction with other business units participating
in the emergency response in accordance with the
statutory employer obligations to ensure timely and
high-quality first aid to its employees.

At NOVATEK fields, emergency medical response
plans aimed at minimizing the consequences of
an accident or acute illness are put in place. The
plans are developed on the basis of production
risk assessment, as well as employees health risks,
conducted at particular production sites, and are
necessary to ensure timely first aid and medical
evacuation to the appropriate medical facilities
providing healthcare services. Training sessions are
held to test the effectiveness and relevance of
these plans.

To secure sanitary and epidemiological welfare at
the Company’s facilities, NOVATEK monitors water
supply and disposal, sanitary and hygienic condition
of public catering facilities, accommodation and
industrial premises and waste disposal. In the
reporting year, there were no cases of infectious
diseases among employees, related to catering
services or water supply.

With the help of coordinated efforts of all
stakeholders in the healthcare management, high
work efficiency was maintained amid the COVID-19
pandemic during the reporting year.

We continued our operations in accordance
with the Action Plan to Safeguard against the
Coronavirus at NOVATEK and its Controlled Entities
to protect employees and prevent transmission and
spread of the new coronavirus at the Company’s
facilities.

The following anti-COVID emergency response
centers continue their operations: PAO NOVATEK,
Novy Urengoy, Tarko-Sale, Leningrad Region,
Murmansk, YNAO LNG projects. Special action plans
have been developed and introduced:

• Algorithms of observation and logistic schemes

of rotation personnel transportation were
prepared to minimize the risks of coronavirus
spread into the production areas (the duration
of the rotation shift was reduced to two
months);

• Campaigns continued to raise employees’

awareness on prevention of acute respiratory
viral infections and the need for vaccination
against the COVID-19;

• Briefing of employees is performed about
the use of personal protective equipment
(masks). The necessary amount of personal
protective equipment, means and equipment
for disinfecting premises, hand treatment, as
well as contactless means for temperature
measurement is ensured; daily temperature
measurement of employees and active

identification of infection by medical staff at
production facilities continue;

• Data on the epidemiological situation at

production facilities are collected and analyzed,
and the condition of those infected is monitored,
including by information systems;

• Telecommuting procedure was defined

along with the introduction of electronic
interaction protocols and IT actions to enable
telecommuting;

• COVID-19 testing of employees is arranged; and

• Medical response measures were put in place:

isolation and observation facilities were
deployed and equipped, medical equipment was
purchased, a stock of medications was created,
the number of medical personnel, including
specialists in various disciplines (pulmonologists,
cardiologists, infectious disease specialists), was
increased.

The timely and efficient measures together allowed
to maintain the production facilities in operation.

Fire Safety, Civil Defence and Emergency Response

Since the Group’s business directly involves
operation of facilities exposed to fire and explosion
risks, fire safety is a top priority for NOVATEK. The
Group has a fire safety system compliant with the
Russian legislation. The system’s objective is to
prevent fires and protect people and property in
case of a fire or an emergency.

In 2021, 8 controlled entities held active
licenses to service firefighting equipment
and 6 controlled entities to perform firefighting
as well as emergency response and rescue
operations, a large share of licensed fire safety
services are outsourced to contractors. There
are 29 professional emergency response and
rescue teams to ensure the safety of the
controlled entities operating hazardous production
facilities that produce, collect, process and
manufacture explosive and flammable substances.
In addition, we have decided to build fire stations
and establish emergency response and rescue
teams within prospective field development and
field infrastructure projects.

In 2021, the total headcount of fire and emergency
brigades serving the facilities on a 24-hour basis
stood at 1,123 certified rescue workers. There
were 87 engineers in the controlled entities who
directly monitored and supervised the fire safety
and emergency response preparedness at our
facilities.

Inspections are regularly carried out at controlled
entities to assess the emergency response
preparedness of the Company’s business units and
personnel, and evaluate the capabilities of in-house
and external professional emergency response and

Annual Report 2021. Constructing future energy transition todayrescue teams. The controlled entities’ facilities
are fully compliant with the requirements to oil,
petroleum product, and other hydrocarbon spill
response. Materials and equipment available to the
emergency response and rescue teams comply
with all existing requirements. The Company
ensures timely re-equipment of both basic and
specialized fire vehicle fleets.

Fire safety, civil defense and emergency response
training, as well as fire and emergency drills, are
an important element of the overall system of
fire safety and readiness to respond to fires and
emergencies. In 2021, the Company organized
33,972 fire safety briefings that featured guidance
materials and visual aids, as well as hands-on
presentations. Basic fire safety training was
provided to 10,084 people, with 2,409 tactical
fire exercises performed as part of the Oil Spill
Response Plan, Emergency Containment and
Response Action Plan as well as evacuation drills.
Oil Spill Response Plan and Emergency Containment
and Response Action Plan have been developed
and implemented within the Company’s production
facilities. In 2021, a fire occurred at a non-
production facility (warehouse). No one was injured
as a result of the accident.

NOVATEK fully complies with fire safety, civil
defense and emergency response standards and
regulations: all of its facilities are equipped with
automatic fire detection, alarm and extinguishing
systems. NOVATEK Group’s controlled entities are
ready to respond to, contain and mitigate fires and
emergencies.

Human Resources

Employees are NOVATEK’s most valuable resource,
allowing the Company to grow rapidly and
effectively. The Company’s human resource
management system is based on the principles
of fairness, respect, equal opportunities for
professional development, dialogue between
management and employees, as well as continuous,
comprehensive training and personal development
opportunities for the Company’s employees at all
levels.

As of the end of 2021, NOVATEK, its subsidiaries and
joint ventures had 18,404 employees, with 32.5%
working in exploration and production, 25.8% in LNG
production, 12.5% in marketing, 8.1% in processing,
7.3% in power supply, 6% are administrative
personnel, 5.2% in transportation, and 2.6% are
engaged in ancillary services. The predominant age
of the personnel is between 30 and 50. The average
age of the Company’s employees is 41 years.

Personnel Training and Development

Amid the rapid development of technologies and
management systems, our multilevel training and
professional development program enable our
employees to contribute to raising the Company’s

competitiveness. In 2021, the primary activities of
training and professional development included:

• Implementing In-house Training program to

improve the competences of the Company’s
employees;

• Implementing the Steps in Discovering Talents
program for young specialists targeted at
training highly qualified personnel whose
competence level fully meets business needs;

• Developing and improving the Corporate System
for the Evaluation of Technical Competencies;
and

• Engaging Company’s young specialists to take
part in research and practice conferences; and

• Cooperating with higher education institutions

to train specialists in the area of LNG.

NOVATEK Scientific and Technical Center has
hosted an In-House Training Program since 2016.
In 2021, NOVATEK Scientific and Technical Center
experts delivered classroom training courses
on the following subjects: Seismic Exploration
Fundamentals; Integrated Interpretation of
Seismic and Logging Data; Complexing Logging
Methods to Address Geological Tasks. Basics
of Log Interpretation and Practical Application;
Application of Regulations for Selection, Storage,
Transportation, Laboratory Research and Entering
into the Core Database; Interpretation and Planning
of Hydrodynamic Studies; Production Engineering
For Underexplored Fields; Basics of Hydraulic
Fracturing; Basics of Hydrodynamic Modeling;
Dynamic Simulation of Multiphase Streams in
Pipelines and Wells using Software OLGA: Principal
Tasks and Examples of their Solution. Practical
Modelling Experience in the Software Environment,
Software OLGA; Basics of Intra- and Inter-Field
Hydrocarbons Transportation. The training course
Basics of Hydraulic Fracturing was also conducted
online. A total of 46 of the Company’s employees
received training under this program in 2021.

In 2021, NOVATEK continued its efforts to
advance the professional capabilities of its
employees, improve working conditions and
train its personnel on safe working practices
at its production facilities. A total of 56.8% of
employees upgraded their skills. In 2021, the
Corporate System for the Evaluation of Technical
Competencies tested 1,240 employees across the
Group, including 58 persons who were tested at
recruitment and 162 persons at promotion.

In 2021, 84 young specialists participated in the
Steps in Discovering Talents Program. We held
our ninth class and 34 specialists graduated
from the on-the-job adaptation and professional
development program, while 18 young specialists
guided by 17 mentors completed the first step of
the Program. In autumn 2021, another 32 young
specialists and 26 mentors assigned to them
joined the Program. Young specialists received

Environmental and Social Responsibility

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the Mentoring Culture training courses together
with their mentors. In total, 22 mentors attended
the training.

In October 2021, Moscow hosted the 16th
Interregional Research-to-Practice Conference
for the Company’s young specialists attended
by 74 employees from 14 subsidiaries and joint
ventures. 55 projects were submitted for
consideration by the contest committee. All the
conference winners received cash prizes. After
the release of restrictive measures caused by
COVID-19, 12 first place winners will be awarded a
trip to one of the foreign countries to visit oil and
gas and energy companies. In 2021, 19 winners of
the 14th and 15th Interregional Research-to-Practice
Conferences were able to visit oil and gas facilities
of the Caspian Area, Azerbaijan and Astrakhan.
In 2021, РАО NOVATEK, NOVATEK-PUROVSKY ZPK,
NOVATEK-TARKOSALENEFTEGAS, NOVATEK Scientific
and Technical Center, Arctic LNG 2, NOVATEK –
Ust-Luga and NOVATEK-YURKHAROVNEFTEGAS were
awarded the Laureate Diploma of the International
competition of scientific, technical and innovative
solutions for the energy and mining sectors For
Contribution to Innovative Development of the Fuel
and Energy Industry.

In 2018, NOVATEK launched cooperation with the
Gubkin Russian State University of Oil and Gas
under the master’s degree program on cryogenic
technologies and gas-related equipment. The
program is being implemented by the Department
of Oil Refining and Gas Processing Equipment of
the Faculty of Mechanical Engineering. This unique
program pursues a multi-disciplinary approach to
deliver a combination of management skills and
technical knowledge in LNG production, storage
and regasification. Apart from the faculty staff
of the university, visiting tutors from Bauman

Moscow State Technical University and NOVATEK’s
experts with extensive practical experience are
engaged in the program. The Company considers
successful graduates of the Program holding a
master’s degree for hiring and engaging in the
implementation of Russia’s major LNG projects.
During the training, “A” students and “B” students
also receive an additional scholarship from the
Company. In 2021, the first students graduated
from the program (2019–2021 enrollment): 22
students having a master’s degree, 18 of whom
graduated with honors. 11 graduates were employed
by NOVATEK Group companies. 15 first-year
master’s students (2020–2022 enrollment) passed
summer on-the-job training at the entities of Yamal
LNG, Arctic LNG 2 and Cryogas-Vysotsk. In 2021,
25 master’s students (2021–2023 enrollment) were
assigned to the Program.

In 2017, the Innovator Corporate Idea Management
System was launched in NOVATEK. Currently,
21 Group entities are connected to the System.
The Innovator System is an automated framework
to collect and process employees’ proposals on
improving and developing business of the Company.
718 ideas on improving business operations,
reduction of production costs and implementation
of new work methods were submitted by the
employees in 2021. More than 1,700 ideas have
been submitted over 5 years of operation of the
Innovator System, of which 339 were approved for
implementation and 175 ideas were implemented.
They generated a positive economic effect of
RR 4.57 bln.

Annual Report 2021. Constructing future energy transition todayEnvironmental and Social Responsibility

54–55

Social Programs

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

Voluntary medical insurance
for employees

Targeted compensation and social
support payments

The program includes full outpatient care, dental
care, and emergency and scheduled hospitalization.
To reduce the risk of occupational diseases in the
Company’s subsidiaries and joint ventures located
in the Far North, in-depth medical examinations of
employees are conducted once every two years.

This program provides targeted free support
to the Company’s employees in specific life
circumstances, including childbirth, to large
families, the event of natural disasters or fire,
compensation for care of a child up to three years
of age, financial aid for care of disabled children,
financial aid for burial, compensation for sports and
recreation classes for employees, as well as on the
occasion of the jubilee.

Social Policy and Charity

Social Policy and Charity make up an important
part of NOVATEK’s activities. In 2021, the Company
continued to pay close attention to projects
aimed at supporting the culture, preserving and
revitalizing national values and spiritual legacy of
Russia, developing mass and high-performance
sports. NOVATEK continued to fulfill the Agreements
with local governments in the regions of the
Company’s operations, by further implementing the
plan for promoting living standards and preserving
distinctive cultural identity of indigenous peoples of
the Far North.

In 2021, Social expenses and compensatory
payments directly invested by NOVATEK and its
subsidiaries on charitable and medical projects
and activities, cultural and educational programs,
and support for indigenous communities amounted
to RR 2.8 billion, including RR 71.4 million to assist
the regions in their epidemic containment efforts
(purchase of medical and laboratory equipment,
medical protective suits and masks for hospitals).

Therapeutic resort treatment and
rehabilitation

Employees and their families can purchase health
resort vouchers at a discount. Under this program
the NOVATEK employees may spend their vacations
in 50 health resorts located in Russia’s most
picturesque settings. In 2021, 6,253 employees took
advantage of the program.

Repayable financial aid
program

The special-purpose loans program has two focus
areas:

• Short-term special-purpose loans intended for
employees who experience economic hardship;

• Special-purpose interest-free home loans to

employees residing in Tarko-Sale, Novy Urengoy,
Moscow, Nadym, Sosnovy Bor, Tyumen and
Vysotsk.

Rehabilitation of children
with disabilities

This program is aimed at supporting the employees
families who raise children with disabilities. As
part of the program, children undergo individual
rehabilitation courses and receive qualified
medical care.

Pension program

Cooperation with the Regions

The Company keeps in touch with the people whose
work contributed to the Company’s achievements,
and continues to take care of them after their
retirement. Since 2007, the Regulations on Social
Benefits for Retired NOVATEK Group Employees has
come into effect. The procedure for calculating
monthly social benefit is determined in accordance
with the above Regulations and the benefit
amount is subject to the employee’s average
salary, employment track record and geographical
location. As of 31 December 2021, the number of
participants in the program was 1,254 people.

NOVATEK-Veteran social protection
foundation

The NOVATEK-Veteran social protection fund was
established in 2005 to provide social assistance
to people who have worked for a long time in the
Russian oil and gas industry in the Far North. The
Fund provides retired people with quarterly financial
assistance, allocates lump-sum benefits, pays
for treatment and the purchase of medicines,
organizes therapeutic resort treatment and
rehabilitation and also provides other types of
required assistance.

Under the agreements signed with various regions,
the Company invested in the Yamal-Nenets and
Khanty-Mansiysk Autonomous Regions, the Tyumen,
Chelyabinsk, Leningrad, Murmansk and Kostroma
Regions and the Kamchatka Territory throughout
2021. The Company allocated funds for social and
youth policy implementation, educational programs,
support for culture and sports, kindergartens and
art schools, indigenous peoples of the Far North.
The elderly, veterans, severely ill and disabled
children, as well as people who faced hardships
received aid.

In 2021, the Company together with the
Government of the Yamal-Nenets Autonomous
Region continued to implement a unique “Teacher
for Russia” program aimed at engaging graduates
of Russia’s leading universities to teaching in small
regional schools and preparing young specialists
for teaching, as well as ensuring equal educational
opportunities for children in different regions and
towns of Russia.

As part of a pilot project for converting boiler
houses in the Murmansk Region to LNG, the
supply of equipment for receiving, storing and
regasification of LNG was financed for two boiler
houses located in Murmansk and Severomorsk. In
addition, in 2021, NOVATEK financed the design and
construction of a recreational zone on the territory
of the Harbeysky geological natural monument.

NOVATEK acquired for the Tula Region’ hospital
two mobile medical units with medical offices
“Diagnostics” and “Laboratory” with specialization
“Women’s Health” and “X-ray diagnostics”.

Cooperation with Indigenous Peoples of the
Far North

NOVATEK participates in organizing and staging
traditional ethnic festivals of indigenous peoples
(Reindeer Herder’s Day, Fisherman’s Day, Indigenous
Peoples of the Far North Day as well as events
commemorating anniversaries and memorable
dates of Nenets writers and poets) and supports
cultural heritage site preservation. In particular,
the Company funds the Limbya Nomad Camp
ethnographic park, implements the Choree Project
to develop a Literary Map of Yamal and finances
activities to preserve traditional lifestyle, culture
and language of the indigenous people of the Far
North. To make pre-school education available to
nomadic communities at the Nareidalva camp in
the village of Nakhodka, the Company financed
the acquisition and equipping of a modular
kindergarten, as well as and supported athletes
from among the indigenous peoples of the Far
North. NOVATEK distributes food packages as a
matter of financial and humanitarian aid to those
in need from among the indigenous peoples of the
Far North.

The Company also finances fueling services as well
as the purchase of snowmobiles and a boat motor
for indigenous communities, including for delivering
forage to prevent mass reindeer mortality.

During the reporting year, NOVATEK provided
financial support to the Yamal for Descendants
Association of indigenous peoples of the Far North
and its district branches.

Educational Programs

For years, NOVATEK has been developing its
continuing education program, which enables the
Company to recruit highly qualified and educated
youth from the regions of our operation.

Recruitment and career guidance for potential
future employees start with the Gifted Children
Program implemented at School No. 8 in
Novokuybyshevsk, school No. 2 in Tarko-Sale, school
No. 81 in Tyumen, and school No. 2 in Salekhard. In
2021, school No. 36 in Murmansk joined the program.

Special classes are formed on a competitive basis
from the most talented grade 10 and 11 students
with above-average test scores.

In 2021, as part of an agreement between NOVATEK
and the Higher School of Economics, all students
in the classes had the opportunity to use an online
school to better prepare for the Unified State Exam
in the Russian language, specialized mathematics,
physics, and computer science.

In 2017, a resource center for industry-relevant
student training – the Natural Science Center –
was built and fully equipped in Tarko-Sale, Purovsky

Annual Report 2021. Constructing future energy transition todayDistrict, Yamal-Nenets Autonomous Region. The
Center began to operate in 2018. At year-end
2021, the Center is attended by 641 students
from Tarko-Sale and 33 students from the
settlement of Khanymei, aged 5 to 18 years. The
Center offers 29 additional education programs
and 25 individual learning paths focusing on natural
sciences and technologies. Activities in all subjects
include solving of problems at an advanced level
and training of students for national contests and
competitions.

The Company is also implementing two Grants
programs for schoolchildren and teachers living
in the Purovsky District of the Yamal-Nenets
Autonomous Region.

The Grants program for schoolchildren is aimed
at academic and creative development and
encouraging a responsible attitude towards
studies. Under the program, pupils of 5th-11th grades
are awarded grants from the Company. In 2021, the
Company awarded 52 grants to students under
this program. The Grants program for teachers
is intended to raise the prestige of the teaching
profession and create favorable conditions for
developing new and talented teachers. In 2021,
eight teachers from the Purovsky District received
grants under this program.

In an effort to create conditions for more effective
use of university and college resources in preparing
students for future professional activities,
the Company has developed and successfully
implemented the NOVATEK-University 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 Saint-Petersburg
University of Mines, the Gubkin Russian State
University of Oil and Gas in Moscow and the Tyumen
Industrial University.

Students who have passed their exams with good
and excellent results receive additional monthly

2.8 RR bln

Social expenses and compensatory
payments on charitable and medical
projects and activities, cultural and
educational programs, and support
for indigenous communities

payments. During their studies, the students are
offered paid 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.

Preserving Cultural Heritage

In 2021, NOVATEK continued its cooperation with
Russia’s leading museums, including the Russian
State Museum, the State Tretyakov Gallery, the
Moscow Museum of Modern Art (ММОМА).

The Russian Museum hosted the exhibition
“Cosmism in Russian Art” with the Company’s
support (17 November 2021 – 10 March 2022). The
exhibition for the first time brought together
paintings and graphics of famous and lesser-known
artists of the beginning of the 20th century: Wassily
Kandinsky, Kazimir Malevich, Alexander Labas, Kuzma
Petrov-Vodkin and other artists, who sought to
understand the laws of the Universe and a man’s
place in it.

NOVATEK supported the exhibition “Vyacheslav
Koleichuk. Live line” (3 June 2021– 26 September
2021) organized by the Tretyakov Gallery and
dedicated to one of the pioneers of kinetic art in
Russia and a talented engineer. Koleichuk embodied
his passion for physics, optics, and design in his
works.

In the Year of Germany in Russia, the Company
supported the opening of the international project
“Diversity. Unity. Contemporary Art of Europe.
Berlin. Moscow. Paris” (23 November 2021 – 13
March 2022) in the Tretyakov Gallery. The project
has already been exhibited in Berlin. Then it was
brought to Moscow and it will later go to Paris. The
project explores the European art created over
the past 30 years, the main message of which is to
show how important it is to preserve European unity
in times of turbulence. In their works, 90 artists
from 34 countries discuss the issues of public
concern, including pandemics, climate disasters,
inequality, democracy, disputes and conflicts
between states.

In cooperation with NOVATEK, the Moscow Museum
of Modern Art organized a retrospective exhibition
of the art group “World Champions. Strokes of Joy”
(December 15, 2021 – February 13, 2022), a late-
1980s association of Moscow artists, who started
their artistic journey as school friends. The group
is famous for their absurd, provocative and often
hooligan actions that satirize contemporary art.
The exhibition displays more than 200 paintings,
graphics and works on fabric.

In 2021, NOVATEK remained a General Partner of
the Moscow Soloists Chamber Ensemble under the
direction of Yuri Bashmet.

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Sports Projects

NOVATEK attaches great importance to
programs for the development of mass and high-
performance sports. The Company, its subsidiaries
and joint ventures regularly hold tournaments
in the most popular and wide-spread sports:
football, volleyball, swimming, ski, etc. In 2021, all
tournaments were held in full compliance with the
requirements of the Russian Federal Service for
Surveillance on Consumer Rights Protection and
Human Wellbeing (Rospotrebnadzor).

Throughout the year NOVATEK continued to
promote development of children and youth
sports in the regions of its operations by providing
teams participating in indoor football, acrobatic
rock’n’roll and student basketball competitions
with equipment, official competition balls, uniform,
prizes, cups and medals.

The Company continued to support the pilot
federal innovative project “Become a Champion”
intended for identifying children’s predisposition to
certain sports through testing.

In the reporting year, the Company held
“NOVATEK – Step to Bigger Football” Indoor Football
Championships that have already become a
tradition among the schools of the Chelyabinsk
and Kostroma Regions and the Kamchatka Territory.
More than 17,000 boys and girls took part in the
competition in these regions. In 2021, indoor
football pitches were built for the schools of
the winning teams of the Championship: three in
the Chelyabinsk Region and two in the Kostroma
Region. In total, starting from 2013, 45 football
pitches have been built within the “Step to Bigger
Football” project.

In 2021, as part of the development of corporate
sports, the All Russian Federation of Dancesport
and Acrobatic Rock’n’Roll successfully continued
to implement a joint project Corporate Clubs for
Acrobatic Rock’n’Roll with NOVATEK. The project
is currently being implemented in 5 cities of the
Russian Federation: Moscow, Kostroma, Murmansk,
Tyumen and Chelyabinsk. More than 220 boys
and girls, including children of employees of
the NOVATEK Group companies, attend clubs in
these cities. Despite the pandemic, trainings and
competitions continued to be held in 2021. Students
of corporate clubs took part in regional acrobatic
rock’n’roll competitions. In early December,
athletes of corporate clubs participated in the
All-Russian Championship and Competition held in
Moscow.

In 2021, NOVATEK continued its cooperation with the
Student Basketball Association. With the support
of NOVATEK, the Student Basketball Association
held competitions for student basketball teams
across the country with more than 800 teams and
10,000 athletes participating from over 70 regions
of the Russian Federation. Since 2017, the Kostroma
Region has hosted the competition of the Student

Basketball Association regional division, in which
about 9 teams participate annually.

In addition, in 2021, various regions hosted master
classes and exhibition performances by athletes
arranged by the Student Basketball Association,
Federation of Dancesport and Acrobatic
Rock’n’Roll.

In the reporting period, NOVATEK continued
cooperation with the Russian Football Union as the
General Partner of the Russian National Football
Teams. The Company supported women’s volleyball
club Dinamo (Moscow) and the NOVA Volleyball Club
(Novokuybyshevsk).

Help to Children in Desperate Need

In 2021, pursuant to NOVATEK’s corporate charity
policy the Company continued to implement
projects aimed at helping children in desperate
need in the regions of the Company’s operations.

Under the “Health Territory” project, leading
doctors from the Russian Children’s Clinical Hospital
(RCCH) visited eight towns: Tarko-Sale, Novy
Urengoy, Kostroma, Chelyabinsk, Magnitogorsk,
Petropavlovsk-Kamchatsky, Murmansk and Tyumen.
As a result, 716 severely ill children received help.
153 children were hospitalized to the RCCH and
other federal hospitals. During examinations
and consultations by the RCCH visiting teams,
the necessary safety measures were taken; the
Company also provided children, parents and
doctors with personal protective equipment.

In 2021, the work under the Telemedicine Center
project to equip and connect the Kamchatka
Territory Children’s Hospital and the Magnitogorsk
Maternal Health and Childhood Protection Center
to the unified telemedical network, was completed.
Currently, the unified telemedical network connects
the RCCH multimedia center with regional partner
clinics of Novy Urengoy, Tarko-Sale, Murmansk,
Chelyabinsk, Magnitogorsk, Petropavlovsk-
Kamchatsky, Tyumen and Kostroma.

In 2021, as part of the Targeted Therapy project
aimed at helping children with cancer undergoing
treatment in the Dmitry Rogachev National
Medical Research Center of Pediatric Hematology,
Oncology and Immunology, 74 children received
molecular tests to select individual treatment,
which significantly increases their chances of
recovery.

The project to help children with vision impairments
has also moved forward. In 2021, vision protection
rooms were set up in specialized kindergartens
in Chelyabinsk and Petropavlovsk-Kamchatsky,
where 236 children with visual impairments
underwent rehabilitation. Earlier, the Company
set up vision protection rooms in kindergartens of
Kostroma, Murmansk and Novy Urengoy.

Annual Report 2021. Constructing future energy transition todayAs part of the “High-Tech Equipment” project,
the Company financed the purchase of medical
equipment: two medical ventilators and one
ultrasonography machine for the Kostroma
Regional Children’s Hospital, one medical ventilator
for the Mother and Child Health Center of
Magnitogorsk and neonatal screening equipment
for the Mother and Child Center of the Kostroma
Region.

Throughout the year, the Company provided
targeted support to orphans and disabled
children, and people with disabilities. The Company
donated funds to the orphanage of the Trinity
Church in Kolomna to purchase an annual supply of
medicines and pay for medical services, re-equip
children’s bedrooms and buy winter clothes and
shoes for its care recipients. NOVATEK financed
a playground installation for the St. Petersburg
Psychoneurological Treatment Centre № 6 for
children from 0 to 4 years of age, as well as
financed the purchase of roller blinds for 17 wards in
the RCCH kidney transplantation department.

Other Charitable Activities

In the Chelyabinsk Region in 2021, the Company
provided financial assistance for restoration of
memorials in nine municipalities, provided charitable
gas supply throughout the Region for gasified
Eternal Flame memorials, landscaped areas of
restored memorials in the Trotsky and Kunashaksky
districts. As part of the Childhood Protection
social project, the Company financed Chelyabinsk
Boarding School No. 13 and Aistenok Center to
repair their classrooms and living quarters, as well
as organized vacation for children at a children’s
sanatorium in Anapa.

A regional children drawing contest, with
over 400 children participating, was conducted by
NOVATEK-Kostroma together with the Department
of Education and Science. Winners and medalists
were awarded diplomas, prizes and gifts by the
Company.

Throughout 2021, NOVATEK traditionally supported
projects aimed at preserving and increasing rare
animal populations: Siberian tiger and Amur leopard.

In 2021, the key activities of the volunteer
movement All Together also remained unchanged:
support for orphans and children with various
illnesses, seniors and disabled people.

In June 2021, NOVATEK annual charity auction was
held to mark the International Day for Protection
of Children. NOVATEK employees offered 334 lots
for the auction, all the money raised was used for
treatment and rehabilitation of the Company’s
employees’ children.

716

children

Received help under the "Health
Territory" project in 2021

Management and Corporate Governance

58–59

Management and Corporate
Governance

Corporate Governance System

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.

The Company has established an effective and
transparent system of corporate governance
complying with both Russian and international

standards. NOVATEK’s supreme governing body
is the General Meeting of Shareholders. The
corporate governance system comprises the
Board of Directors, the Board Committees, and
the Management Board, as well as internal control
and audit bodies and the Corporate Secretary.
The activity of all these bodies is governed by
the applicable laws of the Russian Federation,
NOVATEK’s Articles of association and internal
documents available on our website
(www.novatek.ru/en/).

Supreme
governing body

General Meeting
of Shareholders

Strategic
governance body

Board
of Directors

Chairman of
the Management
Board (CEO)

Corporate
Secretary

Financial and business
activity control bodies

Revision
Commission

Board Committees

Remuneration
and Nomination
Committee

Strategy
Committee

Audit
Committee

Subcommittee
on Climate
and Alternative Energy

Internal
Audit Division

Collegial
executive body

Management Board

Subdivisions

Annual Report 2021. Constructing future energy transition today
NOVATEK strives to consider the principles of
corporate governance outlined in the Corporate
Governance Code recommended by the Central
Bank of Russia (Letter № 06-52/2463 dated 10 April
2014). The Company follows the recommendations
of the Code, as well as offering 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 Corporate Governance Code and the Regulation
of the European Parliament and of the Council on
Market Abuse and follows their recommendations
as far as practicable.

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, the Management Board and the Revision
Commission, as well as NOVATEK’s management
and employees, which were drafted on the basis
of moral and ethical values and professional
standards. The Code also determines the rules
governing mutual relationships inside the Company
and NOVATEK’s relationships with its subsidiaries
and joint ventures, shareholders, investors, the
government and public, consumers, suppliers, and
other stakeholders.

In December 2021, the Board of Directors of PAO
NOVATEK approved the Company’s Human Rights
Policy. The Policy formalizes the Company’s
position on human rights and incorporates all
the fundamental principles, including respect for
human dignity, providing safe working conditions,
non-discrimination, as well as respect for the
rights, distinctive culture, and customs of local
communities, including indigenous minorities.

The Company monitors changes of the current
legislature and the Listing Rules of PAO Moscow
Exchange and London Stock Exchange and
harmonizes its internal documents according to
the changes. NOVATEK’s current regulations on the
Company’s corporate bodies, Internal Audit Policy,
Regulations on Risk Management and Internal
Control System, Regulations on the Corporate
Secretary, and other regulations are up to date and
don’t require any amendments.

NOVATEK’s corporate governance practices make
it possible for its executive bodies to effectively
manage ongoing operations in a reasonable and
good faith manner and to the benefit of the
Company and its stakeholders.

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
Articles of association, 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 further alterations and
amendments.

The General Meeting of Shareholders is responsible
for the approval of annual reports, annual financial
statements, the distribution of profit, including
dividends payout, the election of the Board of
Directors and the Revision Commission, approval of
the Company’s Auditor and other corporate and
business matters.

On 23 April 2021, the Annual General Meeting of
Shareholders approved the annual report, annual
financial statements (in accordance with the
Russian Accounting Standards), distribution of
profit and the size of dividends based on the
results of FY2020. The meeting also elected the
Board of Directors and the Revision Commission
and approved remuneration to members of the
Board of Directors, Revision Commission and the
Company’s external auditor for 2021.

On 30 September 2021, the Extraordinary General
Meeting of Shareholders approved the amount of
interim dividend for the first half of 2021.

Board of Directors

The Board of Directors (the Board, BoD) activity is
governed by the laws of the Russian Federation,
the Company’s Articles of association 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 further
alterations and amendments.

The Board carries out the overall strategic
management of the Company’s activity on behalf
of and in the interests of all its stakeholders, and
ensures the Company’s efficient and effective
performance with the aim to increase shareholder
value in a prudent and responsible manner.

The Board determines the Company strategy
and priority lines of business, endorses long-
term and annual business plans, reviews financial
performance, internal control, risk management
and other matters within its competence, including
optimization of corporate structure, approval of
major transactions, making decisions on investment
projects and recommendations on the size of
dividend per share and its payment procedure,
and convening General Meeting of Shareholders.
The General Meeting of Shareholders elects the
members of the Board of Directors.

Management and Corporate Governance

60–61

The current members of the Board of Directors
were elected at the Annual General Meeting
of Shareholders on 23 April 2021. The Board
of Directors is comprised of 9 members(1),
of which 8 are non-executive directors,
including 3 directors who are considered to be
independent. The Board Chairman is Alexander
Natalenko. The Chairman is responsible for leading
the Board and ensuring its effectiveness.

The members of NOVATEK’s Board have a wide
range of expertise as well as significant experience
in strategic, operational, financial, 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 impacting the business.
In addition to these formal processes, Directors
have access to the Company’s medium-level
managers for both formal and informal discussions
to ensure the regular exchange of information
needed to participate in the Board meetings and
make balanced decisions in a timely manner.

Efficient operation of the Board of Directors is
supported by the Corporate Secretary, who has
sufficient independence (appointed and dismissed
by the Board of Directors) and endowed with the
necessary powers and resources to carry out its
tasks in accordance with the Regulations on the
Corporate Secretary (approved by the Board of
Directors, Minutes No. 168 of 28 April 2014 with
further alterations and amendments).

The Board of Directors membership (elected at the
Annual General Meeting of Shareholders on 23 April
2021):

• Alexander E. Natalenko – Chairman of the Board

of Directors
• Andrei I. Akimov
• Arnaud Le Foll
• Dominique Marion
• Robert Castaigne
• Leonid V. Mikhelson
• Tatyana A. Mitrova
• Victor P. Orlov(1)
• Gennady N. Timchenko

Board activities during the 2021 corporate year(2)

To ensure the Company’s efficient performance,
the Board meetings are convened on a regular
basis at least once every two months. During
corporate year 2021, the Board of Directors
met 10 times, of which 4 meetings were held in the
form of joint attendance. The following key issues
were discussed and respective decisions made:

• reviewed and approved the Company’s 2021 full

year operating and financial results;

• recommended an interim dividend payment for
first half 2021, based on interim financial results
for the period, and a full year dividend payment
for 2021, based on full year financial results;

• made decisions to convene an Extraordinary

and Annual General Meetings of shareholders.
During the meetings in 2020 telecommunications
facilities were used to provide shareholders with
remote access to participate and to fill out an
electronic form of ballots;

• reviewed and approved NOVATEK’s business plan

for 2022;

• changed the composition of the Management

Board;

• reviewed and approved NOVATEK’s Sustainability

Report 2020;

• approved a new edition of NOVATEK’s Regulations

on Risk Management and Internal Control
System;

• made decision to acquire a 100% share of

the NOVATEK–LNG Fuel by NOVATEK in order to
implement the investment project “Small scale
LNG production and sales of LNG and CNG
(compressed natural gas) as motor fuel”;

• made decision on NOVATEK’s participation in

the International Marine Forum of Oil Companies
(OCIMF);

• made decision on creation of the Subcommittee

on Climate and Alternative Energy within
Strategy Committee;

• approved NOVATEK’s Human Rights Policy;

• approved a new NOVATEK Buyback Program; and

• approved the plan of activities of the Internal

audit Department of NOVATEK for 2022.

In order to improve efficiency of corporate
governance and in accordance with the
recommendations of the Russian Corporate
Governance Code the Company carried out an
external assessment of the BoD and the BoD
Committees activities by engaging an external
independent consultant once every three years and
self assessment annually.

During the period from December 2021 to February
2022, an independent external consultant OOO
PricewaterhouseCoopers Advisory conducted an
independent evaluation of the Board of Directors
of PAO NOVATEK. The results of the evaluation
were considered at the meeting of the Board of
Directors.

1.
2.

The powers of the elected member of the Board of Directors Victor P. Orlov were prematurely terminated on 23 August 2021 due to his premature death.
From the Annual General Meeting of Shareholders on 23 April 2021 until 21 April 2022.

Annual Report 2021. Constructing future energy transition todayThe assessment perimeter included the following
areas:

• evaluation of the effectiveness of the Board of

Directors as a whole;

• evaluation of the effectiveness of each
committee of the Board of Directors;

• evaluation of the effectiveness of the Chairman

of the Board of Directors; and

• evaluation of the effectiveness of the Corporate

Secretary.

The assessment methodology involves a survey
(questionnaire) of members of the Board of
Directors, individual interviews with members of
the Board of Directors and some key executives of
the Company, as well as an analysis of the Charter
and internal documents of PAO NOVATEK that
regulate the activities of the Board of Directors
and its committees, materials for meetings and
minutes of meetings of the Board of Directors and
committees, etc.

The activity of the Board of Directors of NOVATEK
and its committees was analyzed and assessed in
terms of its compliance with the recommendations
of the Corporate Governance Code of the Russian
Federation, Moscow Exchange Listing Rules, the
recommendations of the Central Bank of the
Russian Federation on the organization of risk
management, internal control, internal audit, the
work of the committee of the Board of Directors
(Supervisory Board) on audit in public joint stock
companies, the recommendations of the Central
Bank on the formation and succession of the Board
of Directors, as well as the best international and
Russian practices.

During the appraisal process the key areas of the
BoD and the Committees activities were analyzed,
including the formation of strategy, supervisory
and control functions, effectiveness of interaction
with the top management, risk management,
remuneration, succession and development of key
managers.

Based on the evaluation we determined directions
for increasing the Board of Directors performance
efficiency.

Board and Committee meetings attendance in the 2021 corporate year

Member

Independence

Board of
Directors

Audit
Committee

Remuneration and
Nomination Committee

Strategy
Committee

Alexander E. Natalenko

Andrei I. Akimov

Tatiana A. Mitrova

independent

Dominique Marion

Robert Castaigne

independent

Arnaud Le Foll

Leonid V. Mikhelson

executive

Victor P. Orlov(1)

independent

Gennady N. Timchenko

10/10

9/10

10/10

9/10

10/10

4/10

10/10

4/4

1/4

5/5

2/5

4/4

Management and Corporate Governance

62–63

Board Committees

The Company has 3 Board Committees: the Audit
Committee, the Remuneration and Nomination
Committee and the Strategy Committee. The
Committees’ activities are governed by the specific
Committee Regulations approved by the Board of
Directors and are available on our website. In 2021,
the Board of Directors made decision to create the
Subcommittee on Climate and Alternative Energy
within Strategy Committee.

The Committees play a vital role in ensuring that
the high standards of corporate governance are
maintained throughout the Company and that

specific decisions are analyzed and the necessary
recommendations are issued prior to general
Board discussions. The minutes of the Committees
meetings are circulated to the Board members
and are accompanied by 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 Company’s relevant departments. For
the purpose of considering any issues being within
their competence, the Committees may engage
experts and advisers having necessary professional
knowledge and skills.

Board of Directors’ Committees membership:

Audit Committee

Strategy Committee

Subcommittee on
Climate and Alternative
Energy

Remuneration and
Nomination Committee

Chairman

Robert Castaigne

Tatyana A. Mitrova

Dominique Marion

Victor P. Orlov(1)

Members

Tatyana A. Mitrova

Andrei I. Akimov

Arnaud Le Foll

Robert Castaigne

Victor P. Orlov(1)

Arnaud Le Foll

Robert Castaigne

Alexander E. Natalenko(3)

Dominique Marion

Tatyana A. Mitrova

Tatyana A. Mitrova(2)

Alexander E. Natalenko

Gennady N. Timchenko

Audit Committee

The primary function of the Audit Committee is
control over financial and operating activities
of the Company. In order to assist the Board
in performing control functions the Committee
is responsible for but not limited to evaluating
accuracy and completeness of the Company’s
full year financial statements, the candidature of
the Company’s external auditor and the auditor’s
report, and the efficiency of the Company’s
internal control procedures and risk management
system.

The Audit Committee works actively with the
Revision Commission, the external auditor and the
Company’s executive bodies, inviting NOVATEK’s
managers responsible for the preparation of the
financial statements to attend the Committee
meetings.

In corporate year 2021, the Audit Committee
met 4 times, including 3 meetings in presentia,
where:

• held two meetings with the Company’s external
Auditor to discuss the Audit Plan and review an

audit report of the Company’s activities for the
year end;

• reviewed the risk register of NOVATEK Group;

• reviewed the reports on compliance with the
Information Policy and Anti-corruption policy;

• reviewed quarterly financial indicators of the

Company;

• approved the reports on the activities of the
Company’s Internal Audit Department for the
first six months and full year;

• made recommendations to the Board of

Directors on approval of the Company’s Annual
report and Internal Audit Plan;

• made recommendations on the Company’s

Auditor nominee and amount of remuneration;

• considered the conclusion of the Internal

Audit Department on assessing the reliability
and effectiveness of the risk management
system, internal control system, and corporate
governance;

The powers of the elected member of the Board of Directors Victor P. Orlov were prematurely terminated on 23 August 2021 due to his premature death.

2.
3.

The Chairwoman of the Remuneration and Nomination Committee since 07 December 2021, the member of the Committee until 07 December 2021.
Since 07 December 2021.

Annual Report 2021. Constructing future energy transition today• preliminarily reviewed and made

recommendations to the Board of Directors
on approval of a new edition of NOVATEK’s
Regulations on Risk Management and Internal
Control System; and

• considered other issues within the competence

of the Audit Committee.

In corporate year 2021, the Remuneration
and Nomination Committee met 5 times,
including 2 meetings in presentia, where:

• reviewed NOVATEK’s 2020 Sustainability Report
and recommended for approval by the BoD;

• reviewed NOVATEK Group’s 2020 HSE

performance report;

Remuneration and Nomination Committee

• made recommendations in accordance with

NOVATEK Group’s Executive Bodies and Other
Key Employees Remuneration and Expense
Reimbursement Policy;

• reviewed NOVATEK’s HR management policy

performance report in 2021;

• reviewed the report on NOVATEK’s social

performance in the regions where the Company
operated in 2021;

• made recommendations to the BoD to form
the BoD’s Committees in accordance with
recommendations of the Corporate Governance
Code a well as information about members of
the BoD;

• made recommendations to the General Meeting
of Shareholders on remuneration to the BoD
members;

• held a meeting with representatives of

OOO PricewaterhouseCoopers Advisory to
review information on the upcoming external
assessment of the activities of the Board of
Directors and Committees;

• reviewed the report on external appraisal
of NOVATEK’s Board of Directors and BoD
Committees’ Performance;

• preliminarily reviewed and made

recommendations to the Board of Directors on
approval of the Company’s Human rights Policy;
and

• considered other issues within the competence

of the Committee.

The primary functions of the Remuneration and
Nomination Committee is the development of
an efficient and transparent compensation
practice of members of the Company’s
management, enhancement of the professional
expertise, improvement of the Board of
Directors’ effectiveness, and preparation of
recommendations for the Company’s Board of
Directors for decisions making to determine priority
areas of activity in sustainable development,
industrial safety, environmental protection, climate
impact, corporate governance and social activities.
In order to assist the Board, the Committee
performs the following functions:

• develop and regularly review the Company’s

policy on remuneration of the members of the
Board of Directors, members of the collective
executive body and the sole executive body of
the Company, oversee its implementation and
realization;

• preliminarily assess the work of the executive

body of the Company for the year in accordance
with the Company’s remuneration policy;

• annual detailed and formalized performance

self-appraisal or external appraisal of the Board
of Directors and its members, as well as of
BoD Committees, determination of the priority
areas for reinforcing the Board of Director’s
composition;

• interaction with shareholders, which shall not be
limited to major shareholders only, with a view to
generate recommendations to the shareholders
with respect to voting on the election of
nominees to the Company’s Board of Directors;

• plan appointments of members of the executive
body and the sole executive body on the base of
continuity principles;

• supervision over disclosure of information on the
Company’s shares owned by the members of the
Board of Directors and Management Board, and
other key management employees; and

• annual review reports on industrial safety,
environmental protection, climate impact,
corporate governance and social activities,
as well as review the Company’s Sustainability
Reports.

Management and Corporate Governance

64–65

Strategy Committee

The primary functions of the Strategy Committee
are the determination of strategic objectives of
the operations and control over the implementation
of the strategy, as well as recommendations on the
dividend policy.

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

• evaluating the effectiveness of the Company’s

operations in the long-term;

• preliminarily reviewing and making

recommendations on the Company’s
participation in other organizations;

Subcommittee on Climate and Alternative Energy
(within Strategy Committee)

In July 2021, the Board of Directors established a
Subcommittee on Climate and Alternative Energy
(Subcommittee) within the Board’s Strategy
Committee. The dedicated Board Subcommittee
will facilitate regular in-depth reviews of NOVATEK’s
climate strategy implementation and submit timely
proposals on climate mitigation and abatement for
consideration by the Board of Directors.

The Subcommittee will review various aspects of
the Company’s business operations and develop
recommendations for the Board on the Company’s
strategy on climate and decarbonization issues,
development of renewable energy sources and the
potential production of low carbon fuels, including
hydrogen.

• assessing voluntary and mandatory offers to

acquire the Company’s securities;

In corporate year 2021, the Committee met 4 times,
including 3 meetings in presentia, where:

• considering the financial model and business
valuation of the Company and its business
segments in order to make recommendations to
the Board of Directors in making decisions on the
definition of business priorities of the Company;

• providing recommendations to the Board of

Directors on transactions subject to approval by
the Board of Directors; and

• providing recommendations to the Board of

Directors with respect to the Company’s policy
on the use of its non-core assets.

• reviewed principles and criteria for selecting

projects on renewable and alternative energy;

• presented status update on the low-carbon
ammonia project implementation as part
of NOVATEK’s hydrogen energy business
development;

• presented status update on the Sabetta
wind farm project implementation as part
of NOVATEK’s renewable energy business
development;

In corporate year 2021, the Committee met 4 times,
including 3 meetings in presentia, where:

• reviewed status update on the efforts to achieve
NOVATEK’s environmental and climate targets
until 2030;

• reviewed status update on CCS project

implementation in Yamal as part of NOVATEK’s
LNG and gas chemical decarbonization (carbon
footprint reduction) projects development; and

• reviewed NOVATEK’s LNG marketing strategy

amid the advancing climate agenda: green LNG,
global emissions trading, EU taxonomy.

• made recommendations regarding the amount
and form of dividend payment for the first half
and full year 2020;

• reviewed information on the implementation of

the Corporate Strategy of PAO NOVATEK for the
period up to 2030 in terms of:
– analysis of domestic and international

markets, logistics, risks and their assessment,
targets;

– implementation of the Arctic LNG 2 project;
– status and preparation progress of the

hydrocarbon resource base for the Arctic
LNG 1 project; and

– development of the NSR: the status of

development of icebreaking and tanker fleets;

• preliminary reviewed and made recommendations

on the approval of the main parameters of
NOVATEK’s business plan (consolidated) for 2022,
including sensitivity analysis of the business plan
for 2022 depending on macro parameters; and

• considered other issues within the competence

of the Committee.

Annual Report 2021. Constructing future energy transition todayManagement Board

NOVATEK’s Management Board is a collegial executive body responsible for the day-to-day management
of the Company’s operations. The Management Board is governed by the laws of the Russian Federation,
NOVATEK’s Articles of Association, resolutions 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 NOVATEK’s Articles of Association.

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 effectiveness 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 was elected by
the Board of Directors on 25 August 2017 (Minutes No. 198 of 25 August 2017) with further amendments by
resolution of the Board of Directors on 12 July 2018, 21 September 2018, 14 November 2018, 14 December
2018, 19 March 2019, 02 November 2020, 17 December 2021.

Management Board Members from 1 January 2021 to 31 December 2021:

• Leonid V. Mikhelson – Chairman

• Lev V. Feodosyev – First Deputy Chairman

• Vladimir A. Kudrin – Deputy Chairman of the
Management Board – Director for Geology
(elected on 17 December 2021)

• Evgeniy N. Ambrosov – Deputy Chairman of

• Tatyana S. Kuznetsova – Deputy Chairman

the Management Board – Director for Marine
Operations, Shipping and Logistics

of the Management Board

• Vladimir A. Baskov – Deputy Chairman of the

Management Board

• Denis B. Solovyоv – Deputy Chairman of the

Management Board – Director of Information
Policy Department

• Viktor N. Belyakov – Deputy Chairman of the

• Sergey G. Solovyov – Deputy Chairman

Management Board for Economics and Finance

• Eduard S. Gudkov – Deputy Chairman of the

Management Board

of the Management Board – Director for
Prospective Projects (since 17 December 2021;
until 17 December 2021 Deputy Chairman of the
Management Board – Director for Geology)

• Mark A. Gyetvay – Deputy Chairman of the

• Ilya V. Tafintsev – Deputy Chairman of the

Management Board

• Evgeny A. Kot – Deputy Chairman of

the Management Board – LNG Director
(the authorities were terminated
on 17 December 2021)

• Sergey V. Vasyunin – Deputy Chairman of the
Management Board – Operations Director

Management and Corporate Governance

66–67

Remuneration to Members of the Board of
Directors and Management Board

The procedure for calculating the remuneration
and compensations to members of NOVATEK’s
Board of Directors is governed by the Regulations
on Remuneration and Compensations payable to
members of NOVATEK’s Board of Directors approved
by the Annual General Meeting of Shareholders
(Minutes No. 122 of 24 April 2015) with subsequent
changes made by the decision of the Annual
General meeting of shareholders on 23 April 2019.
According to the Regulations the remuneration
consists of the following types:

• fixed part of remuneration;

• remuneration for attending the Board of

Directors meetings; and

• remuneration for attending the meetings of the

committees of the Board of Directors.

The fixed part of remuneration to a Board member
constitutes RR 15 million per corporate year. The
Chairman of the Board of Directors is paid a fixed

remuneration for the performance of its functions
in the amount of RR 30 million per corporate year.
Members of the Board of Directors are also paid
remuneration for attending the meetings of the
Board of Directors in the maximum amount of RR
4.5 million per corporate year and remuneration
for attending the meetings of the committees of
the Board of Directors in the maximum amount
of RR 3 million per corporate year. The Board
members are also compensated for travel and
lodging expenses related to implementation of
their functions as NOVATEK’s Board of Directors’
members.

The procedure for and criteria of calculating
remuneration 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, the NOVATEK group Executive Bodies
and other Key Employees Remuneration And
Expense Reimbursement Policy (approved by
the BoD on 17 December 2019, Minutes No. 226
of 17 December 2019) and the employment
contracts they sign with the Company.

Information on remuneration of members of NOVATEK’s Board of Directors and Management Board
in 2021, RR mln

Board of Directors(1)

Management Board

192.6

—

192.4

0.2

3,295.3

1,036.0

2,259.3

—

The Company’s RMICS is implemented on a constant
basis and covers all levels of corporate governance,
areas of activities and business processes in all
NOVATEK structural and standalone units.

The Company’s RMICS functioning implies the
involvement of all levels of corporate governance
in the activity for timely risks and discrepancies
identification and management and includes the
alignment of RMICS at strategic and tactical
management levels as well as ensuring independent
evaluation and oversight over the RMICS functioning
(see the table below).

Total paid, including:

Salaries

Bonuses

Fees

Other property advancements

Risk Management and Internal Control
System

Risk Management and Internal Control System
Model

The Company has a comprehensive Risk
Management and Internal Control System (RMICS)
aimed at protecting assets, improving business
processes, enhancing operational efficiency and
complying with applicable laws and regulations.

Timely identification of discrepancies and sources
of inefficiency, analysis and forecasting of future
scenarios, development of measures to prevent
or reduce risks impact contribute sufficiently to
achieving the Company’s operational and strategic
goals.

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.

Annual Report 2021. Constructing future energy transition todayNOVATEK’s Risk Management and Internal Control System model

Internal Audit Division

Organizational Independence

Management and Corporate Governance

68–69

Strategic governance

Board of Directors

Board of Directors Audit Committee

• Approval of RMICS policy
• Recommendations on RMICS improvement

• Oversight over RMICS reliability and efficiency

Management Board,
Chairman of the Management
Board

• Establishment and

maintenance of RMICS
• Arrangement of actions to

identify and assess risks and
develop RMIC actions by
business streams and
processes

• Updates to the Board of
Directors on the RMICS
results

Tactical management

1st Line

Owners of business processes and controls

Day-to-day
risk
management

• Risk management in structural units and at

facilities by business functions

2nd Line

Risk Control Division and Controlling Units

Internal
control and
support

• Coordination and operational control over risk
management, assessment of efficiency of the
risk management activities

• Development of RMIC methodology, compliance,

training

Independent assessment and supervision

Revision Commission
External audit

3rd Line

Internal Audit Division

Internal audit

• Assessment of RMICS reliability and efficiency

In order to assist the Company’s Board of
Directors and its executive bodies in preserving and
increasing the value of the NOVATEK Group, the
NOVATEK Internal Audit Division performs objective
internal audits based mainly on the risk-oriented
approach.

The internal audit function in NOVATEK is
centralized.

In its activities, the Internal Audit Division is guided
by the applicable laws of the Russian Federation,
NOVATEK’s internal documents and International
Standards for the Professional Practice of Internal
Auditing. The main document regulating internal
audit activities is NOVATEK’s Internal Audit Policy, in
which the Board of Directors defined the internal
audit’s goals, objectives, functions and powers, as
well as the internal audit’s place in the Company’s
organizational structure.

Internal Audit Division is:

• functionally subordinated to the Board of

Directors, which, among other things, approves
the Internal Audit Policy and the Internal Audit
Division Working Plan; and

• administratively subordinated to the

sole executive body, the Chairman of the
Management Board, who facilitates the
implementation of the Internal Audit Policy and
internal audit activities.

To efficiently perform the internal audit function:

• the Internal Audit Division is provided unimpaired
access to any assets, documents, accounting
entries and other information related to the
activities of the NOVATEK Group; and

• the Internal Audit Division head may directly
approach the Chairman of the Board of
Directors, the Chairman of the Audit Committee
and the Chairman of the Management Board.

Administrative
reporting

Key documents governing NOVATEK’s RMICS (1)

Board of Directors

Regulations on Risk
Management and
Internal Control
System

Supplier Code of Conduct

Anti-Corruption Policy

Insider Information
Access and
Distribution Policy

Code of Business Ethics

Internal Audit Policy

Human Rights Policy

The main RMICS principles and approaches,
goals and targets, participants obligations and
cooperation procedures are regulated by the
Regulations on NOVATEK Risk Management and
Internal Control System approved by the Board of
Directors.

The 2021 updated version of the Regulations on
NOVATEK RMICS (BoD meeting Minutes No. 247
of 27 August 2021) takes into account the best
international practices used in the Company,
Russian Central Bank’s recommendations on

organizing the RMICS, as well as the changes in the
Company’s organization structure.

In order to implement the Regulations on
NOVATEK RMICS, the Company developed Internal
Documents, governing various aspects of the
RMICS functioning, including internal audit,
combating corruption, compliance with business
ethics, control over insider information distribution,
processing and use of personal data, etc. Most
of the documents are available at the Company’s
official website.

1. The list includes only the main high-level policies and does not include Internal Regulations on individual aspects of RMICS, developed

pursuant to these documents.

Functional
reporting

Audit Committee

Chairman of
the Management
Board

Internal
Audit Division

Annual Report 2021. Constructing future energy transition today Activities in the reporting period

Risk Management System

Risk Insurance

NOVATEK has built a risk management system to
ensure sustainable development in the context of
uncertainty and ambiguous environment, which
involves systemic assessment and response to
all risks that may hinder the achievement of the
Company’s goals.

The Company’s risk management system implies
identifying and quantifying risks, designing activities
to prevent or mitigate the adverse effects of
possible risk materialization, and an ongoing
monitoring of the implementation thereof during
the year.

Risk management is an integral part of the
Company’s operational and strategic planning
process and is carried out in accordance with the
principles and approaches established by the RMICS
Regulations and other internal regulations, which
detail the following aspects of the risk management
process:

1. risk identification;

2. risk classification;

3. risk assessment;

4. risk management practices; and

5. control over risk management activities and their

development.

To describe risks, the Company uses risk maps that
systematize the risks of all business processes and
business lines of the Company which may create
threats to the achievement of the Company’s goals
over a period of 1-3 years.

The Company regularly informs the Management
Board and the Board of Directors about the results
of risk management activities.

The Additional Information section of this report
contains a list of the Company’s key risks and
an overview of measures to prevent/mitigate the
negative impact of these risks on the Company’s
business.

In 2021, the Internal Audit Division carried out its
activities based on the annual plan prepared using
mainly risk-oriented approach and approved by
the Board of Directors after preliminary review by
the Audit Committee. The Internal Audit Division
monitored the implementation of recommendations
to eliminate the risks identified by internal audits
and improve the internal control system.

In 2021, the Internal Audit Division monitored the
hotline for Code of Business Conduct and Ethics
compliance and, from December 2021, the hotline
for Human Rights Policy compliance.

As the third element of the risk management and
internal control system, internal audit annually
evaluates the system reliability and efficiency.
Based on the 2021 performance, the Internal
Audit Division issued an opinion on the reliability
and efficiency of the RMICS, which is referred by
the Federal Law “On Joint Stock Companies” to
information (materials) to be provided to persons
entitled to participate in a general meeting of
shareholders.

The results of the NOVATEK Internal Audit Division
work in 2021 were reviewed by the Audit Committee
comprised of independent directors who
recognized NOVATEK’s internal audit performance
in 2021 as efficient.

Internal and external quality assessment

The Internal Audit Division implements a program to
assess and improve the quality of the internal audit
function, whereby:

• internal quality assessment is performed

annually; and

• an independent external quality assessment is

performed once every five years.

In 2018, the Internal Audit Division initiated the first
independent external assessment. The initiative
was supported by executive management and the
Audit Committee. The assessment by EY identified
the compliance of NOVATEK’s Internal Audit
Division activities with International Standards
for the Professional Practice of Internal Auditing
(Certificate dated 22 March 2019).

Coordination of activities with other parties

The Internal Audit Division interacts with an external
auditor in sharing information related to working
plans, inspection results and other matters of
relevance. To improve the efficiency and optimize
the costs, the Internal Audit Division employees
serve on the revision commissions of the Company
affiliates.

Management and Corporate Governance

70–71

Given the scale of operations and complexity
of the projects being implemented, NOVATEK
extensively applies compulsory and voluntary
insurance programs, described in the table below.

All of NOVATEK’s insurance programs are
implemented with the engagement of major
Russian and international insurance and reinsurance
companies with trustworthy reputations and high
ratings.

In 2021, no insured major accidents or incidents
occurred.

Property Damage and Business
Interruption (PD/BI) insurance
program

Investment projects risks insurance
programs

Includes insurance coverage for property,
inter alia risk of mechanical failures, and
business interruption with respect to the
Group's key assets, with the view to mitigat-
ing the consequences of possible accidents
and loss of profit

Comprehensive insurance programs for major
projects (such as Yamal LNG, Arctic LNG 2,
etc.) across the project's lifecycle stages
(engineering, exploration and production,
construction, operation, transportation of
finished products)

Liability insurance program for
owners of HPF and vehicles

Third-party and environmental
liability insurance program

Includes assessment and insurance of
liability risks in the operation of HPF and
vehicles of the Company (injuries and death
from incidents and accidents)

Third-party liability and environmental
pollution insurance program, including
against personal injury or property damage
to third parties and environmental damage
as a result of incidents at the Company's
facilities

Property damage insurance
program

Well insurance program

Insurance program for non-production
facilities (administration buildings, accommo-
dation camps and other social infrastructure
facilities)

The Group's producing subsidiaries and
affiliates procure control of well insurance as
well as insurance against risks of damage to
drilling equipment

Directors and officers (D&O) liability
insurance program

Marine risks insurance program

Insurance for senior executives and the
Group's liability and in case of third-party
claims related to improper actions or deci-
sions by the management bodies

Insurance of finished products and project
cargoes during transportation, marine hull
and machinery insurance, ship owner's and
charterer's liability insurance

Annual Report 2021. Constructing future energy transition today Business continuity plans

In addition to the requirements under Russian
legislation for regular identification and control
of risks at hazardous production facilities,
since 2018 the Company develops business
continuity plans for large production facilities.
The purpose of developing continuity plans is to
secure rapid recovery of production processes
by implementing previously developed measures
and procedures for staff interaction to mitigate
consequences of accidents at the key Company’s
facilities. The development of business continuity
plans covers all of the Group’s subsidiaries and
joint ventures and continued on a systematic
basis in 2021.

Revision Commission

The Revision Commission consisting of four
members is elected at the Annual General
Meeting of Shareholders for a period of
one year. The competence 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 PAO NOVATEK Articles of Association and
the Regulations on the Revision Commission
Procedures approved by the General Meeting of
Shareholders in 2005 (Minutes No. 95 of 25 March
2005) for the matters which are not set out in the
aforementioned law.

The Revision Commission is an internal control
body responsible for oversight of the Company’s
financial and business activities. The Revision
Commission performs audits of the Company’s
financial and business performance for the year,
as well as any other period as may be decided
by its members or other persons authorized in
accordance with Russian Federation law and the
Company’s Articles of Association. The results are
presented in the form of findings by the Revision
Commission.

In March 2022, the Revision Commission completed
the on-site audit revision of financial and business
activities of the Company for the year 2021. As a
result, the conclusions about the reliability of the
data contained in the Company’s 2021 Financial
Statements (under the Russian accounting
standards), 2021 Annual Report and Report on
interested-party transactions were prepared
and submitted to the Annual General Meeting of
Shareholders.

Corporate Ethics and Compliance

In performing its operations and interacting with
partners, NOVATEK focuses on compliance with
ethical standards and ensuring that its activities
comply with the laws of the countries where the

Company operates. The commitment to maintaining
advanced legal and ethical standards is the
Company’s corporate governance standard, which
applies not only to the Company’s employees,
but also to all partners with whom the Company
interacts.

Supplier Code of Conduct for NOVATEK Group
suppliers includes the principles of business
transparency and integrity, business ethics and
sustainable development which NOVATEK’s suppliers
are expected to follow.

NOVATEK’s Human Rights Policy formalizes
the Company’s position on human rights and
incorporates all the fundamental principles,
including respect for human dignity, providing safe
working conditions, non-discrimination, as well
as respect for the rights, distinctive culture, and
customs of local communities, including indigenous
minorities.

Compliance with Anti-Corruption Laws

NOVATEK believes that one of the most important
conditions for sustainable business development is
strict compliance with applicable anti-corruption
laws.

The Anti-Corruption Policy, approved by the
Board of Directors, is in place since 2014(Minutes
No. 170 of 1 September 2014). The Company hereby
declares that it rejects unlawful business practices
and assumes anti-corruption obligations in all areas
of its activities and in its interaction with partners.

The Company develops and implements best
international and Russian anti-corruption practices,
analyzes potential corruption-related risks on a
regular basis, and implements the required internal
control procedures to prevent corruption. Given
the importance of compliance with anti-corruption
laws for the Company’s reputation as an honest
and reliable partner, NOVATEK regularly trains its
employees in the Anti-Corruption Policy norms and
the Company’s ethical values.

The Company also has a security hotline (https://
www.novatek.ru/en/about/Hotline/), which any
employee, counterparty or other stakeholder can
contact to report any facts or signs of corruption
in relation to any aspect of the Company’s
activities. Following each report, an internal
investigation is arranged within the Company, with
relevant mitigation actions taken.

The Company ensures regular provision of
information to the Board of Directors on the
results of activities aimed at compliance with
Anti-Corruption Policy and about all the reports
submitted to the Security Hotline.

Management and Corporate Governance

72–73

Business Ethics Compliance

In order to comply with the Code of Business
Conduct and Ethics approved by the Board of
Directors (Minutes No. 133 of 24 March 2011), any
interested person can report known violations to
the following address: ethics@novatek.ru, or by
other means of communication indicated on the
Company’s website. All queries related to ethics
issues are received by the Internal Audit Division.

Queries through the 24/7 hotline are also available
at ethics@novatek.ru for any problems or concerns
about human rights violations. NOVATEK guarantees
confidentiality and the prevention of pressure
or influence measures against a person who has
reported such violations conscientiously.

Compliance with Law Requirements

NOVATEK’s activities are based on the fundamental
principle of full compliance with the norms and
requirements established by Russian legislation,
international legislation and all international
treaties and agreements.

As part of RMICS, the Company continuously
implements control procedures to ensure
compliance with applicable laws in all areas of
the Company’s operations and disclosure of
information about the Company’s activities as
required by law.

External Auditor

Directors regarding the candidatures of external
auditors and the price of their services. Based
on the Committee’s recommendations, the
Board proposes the auditor’s candidature for
the consideration and for approval by the Annual
General Meeting of Shareholders.

AO PricewaterhouseCoopers Audit (an
internationally recognized audit firm) was chosen
as the Company’s external auditor to conduct
the audit of the annual financial statements
for 2021 under RAS, as well as independent reviews
of the Company’s quarterly consolidated financial
statements and audit of the annual consolidated
financial statements under IFRS and Sustainability
report.

In selecting the auditor’s candidature, attention is
paid to the level of their professional qualifications,
independence, possible risk of any conflict of
interest, terms of the contract, and the 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
regarding the Company’s financial statements.
The Audit Committee meets with the auditor’s
representatives at least twice per year.

NOVATEK’s management is aware of and accepts
recommendations on the independence of the
external auditor by restricting such auditor’s
involvement in providing non-audit services.

The Annual General Meeting of Shareholders
approved an external auditor to conduct
independent review of NOVATEK’s financial
statements. The Audit Committee gives
recommendations to the Company’s Board of

In accordance with auditing standards, in order to
maintain independence, the Company’s External
Auditor regularly rotates its key audit partner, at
least once every seven years. The previous key
audit partner was rotated in 2018.

Auditor’s fees in 2021, RR mln

Audits of PAO NOVATEK (audit of the Group’s consolidated financial statements
and audit of statutory financial statements of PAO NOVATEK)

Other services

Total auditor’s fees and services

Annual Report 2021. Constructing future energy transition todayShare Capital

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 2021, NOVATEK did
not have preference shares.

Our shares are traded in Russian roubles on the
Moscow Exchange and have a first grade listing
(symbol: NVTK).

The Federal Financial Market Service issued to
NOVATEK a permit for circulation of shares beyond
the 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),
with each GDR representing 10 ordinary shares. As
of 31 December 2021, NOVATEK’s GDRs were issued
on 530,043,850 ordinary shares comprising 17.46% of
the Company’s share capital.

Equity stakes in NOVATEK’s share capital and the number of shares owned by members of the Board of
Directors and Management Board(1)

As of

Equity
stake

Number of ordinary shares,
including GDRs certifying rights of ordinary shares

Board of Directors

Alexander E.Natalenko

Andrei I. Akimov

Michael Borrell

Robert Castaigne

Dominique Marion

31.12.2021

23.04.2021

31.12.2021

—

Leonid V. Mikhelson

31.12.2021

0.0067

202,238

Tatyana A. Mitrova

Victor P. Orlov

Gennady N. Timchenko

Arnaud Le Foll

Management Board

31.12.2021

23.08.2021

31.12.2021

Evgeniy N. Ambrosov

31.12.2021

—

Management and Corporate Governance

74–75

Dividends

The Company’s Dividend Policy is regulated by the
Regulations on Dividend Policy of PAO NOVATEK,
with its new amendments approved by the Board
of Directors on 18 December 2020 (Minutes No.
236 of 18 December 2020). The new Dividend
Policy increased the minimum target payout level
from 30% to 50% of the adjusted consolidated
net profit according to the International
Financial Reporting Standards (IFRS), considering
sustainably strong operating and financial results
as well as significant growth in the scale of the
Company’s operations. The changes are aimed
at strengthening NOVATEK’s investment case and
increasing total shareholder returns.

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 amount of the dividend,
the payment deadline 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
a year. In determining the recommended amount
of dividend payments to be distributed the Board

of Directors consider the current competitive and
financial position of the Company, as well as its
development prospects, including operating cash
flow and capital expenditure forecasts, financing
requirements, debt servicing and other such
factors as it may deem relevant to maintaining
financial stability and flexible capital structure of
the Company. NOVATEK is strongly committed to its
dividend policy.

On 18 March 2022, the Board of Directors of PAO
NOVATEK recommended to the Annual General
Meeting of Shareholders to pay dividends for
FY 2021 in the amount of RR 43.77 per ordinary share
or RR 437.70 per one Global Depositary Receipt
(GDR), exclusive of RR 27.67 of interim dividends per
ordinary share or RR 276.70 per one GDR paid for
the first six months of 2021.

Thus, should the General Meeting of Shareholders
approve the recommended dividend, the dividends
for 2021 will total RR 71.44 per ordinary share
(RR 714.40 per one GDR), and the total amount of
dividends payable for 2021 will be RR 216,913,700,640.
This will represent a 101% increase in dividend per
share compared to 2020.

Accrued and paid dividends on NOVATEK shares for the period 2016 to 2021

Dividend Accrual Period

Amount of dividends,
RR per share

Total amount of
dividends accrued, RR

Total amount of
dividends paid, RR

2016

2017

2018

2019

2020

13.90

14.95

26.06

32.33

35.56

27.67

42,204,653,400

42,204,606,695

45,392,774,700

45,392,729,448

79,126,134,360

78,746,621,007

98,163,772,980

97,207,985,267

107,971,041,360

106,783,857,524

84,014,585,664

83,046,005,167

Vladimir A. Baskov

31.12.2021

0.0288

874,408

First half 2021

Viktor N. Belyakov

Lev V. Feodosyev

Mark A. Gyetvay

Eduard S. Gudkov

Evgeny A. Kot

Vladimir A. Kudrin

31.12.2021

17.12.2021

31.12.2021

—

Tatyana S. Kuznetsova

31.12.2021

0.1944

Denis B. Solovyov

31.12.2021

—

Sergey G. Solovyov

31.12.2021

0.0012

Ilya V. Tafintsev

31.12.2021

0.0012

Sergey V. Vasyunin

31.12.2021

0.0003

—

5,903,035

—

37,660

35,000

9,320

1. The equity stakes are given based on the records in the register of NOVATEK’s shareholders and notification received from members of the Board of

Directors and Management Board, in accordance with the Russian Federation laws.

The amount of paid dividends accrued for
the years 2016 to 2020, and for the first six
months 2021 is reported as of 31 December 2021.
Partial payment of the accrued dividends was
made due to provision by shareholders of incorrect
postal and/or banking details, as well as due to the
return of unpaid dividends by nominal shareholders.

Information Transparency

NOVATEK complies with the best practices for
information disclosure while adhering to a maximum
level of information transparency. The Regulations
on Information Policy approved by the Board of
Directors as amended and restated in 2017 (Minutes
No. 198 of 25 August, 2017), define 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 and notification of material facts through

authorized disclosure channels and by posting
such information on the Company’s website. The
information is disclosed in full compliance with
Russian and international legal requirements. The
Company discloses quarterly financial statements
in accordance with the Russian (“RAS”) and
International Financial Reporting Standards (“IFRS”),
Management’s Discussion and Analysis of Financial
Condition and Results of Operations as well as
presentations for investors.

The Company’s website provides detailed
information on all aspects of its activities, including
our Sustainability Report. NOVATEK has been
annually reporting on its GHG emissions and energy
efficiency of its operations via the global Carbon
Disclosure Project (CDP), as well as other industry’s
publications and studies.

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

Annual Report 2021. Constructing future energy transition todaywith the investment community are through the
Chairman of the Management Board, Deputy
Chairman and the Investor Relations department.
The Company’s representatives meet on a regular
base with key financial audiences to discuss issues
of interest to them.

In 2021, the effective implementation of the
Regulations on NOVATEK Information Policy allowed
NOVATEK to build a steady goodwill as Russia’s
largest independent natural gas producer and one
of the global leaders in LNG production.

Pursuant to the information policy principles,
NOVATEK is actively involved in relations with
federal, international and regional media. Following
the 2021 results, there were more than 78 thousand
publications about the Company, which is a 30%
increase year on year. Beyond that, the number
of publications in federal mass media increased
significantly and reached 66% (compared to
57% in the previous year), which testifies to the
strengthening of the NOVATEK’s position in the
media space. 25% of all pieces were publications
in local media, and 9% came from the international
media.

The news topics included Yamal LNG and Arctic
LNG 2 projects development, LNG Construction
Center construction progress, as well as the
Company’s active involvement in the Arctic
exploration, expanding of the navigation window
via the NSR, LNG transshipment terminals
construction in Kamchatka and Murmansk, entering
new sales markets, localization of production
and cooperation with Russian manufacturers
of equipment for LNG plants. In addition to
traditional production-related topics, great
attention in 2021 was given to news related to
the ESG agenda. In the Company’s strategy for
the period up to 2030, sustainable development
is one of the key elements. NOVATEK continues its
work to reduce the Company’s carbon footprint,
reduce GHG emissions at its facilities, provide
consumers with cleaner energy and produce low-
carbon products. The ESG topics in the Company’s
business were widely covered in the media.

In 2021, the qualitative indicators of media activity
improved with the nature of publications about
the Company taking a more positive tone. The
number of positive publications rose by 19%. This
resulted from the focused efforts to highlight the
prospective projects, ESG topics, in particular,
decarbonization. High citation index (14%) testifies
to the weight of the Company’s and its speakers’
opinion in the media.

Last year, there was a significant increase in
the number of public events that covered the
Company’s operations. A large-scale press tour
for the Russian and international mass media
journalists was arranged to visit the operation sites
of the LNG Construction Center and Arctic LNG 2.
During the Contractors and Suppliers Forum held at
LNG Construction Center in Murmansk, a tour and
a press conference for journalists were arranged,
which made it possible to talk about the progress
of the LNG Construction Center construction
and the Arctic LNG 2 prospects. Visits of regional
and federal media to the Company’s production
facilities in the Murmansk Region and the Yamal-
Nenets Autonomous Region were organized. A
series of public events with participation of the
Chairman of the Management Board were held,
including media briefings, online speeches, in-
person signing ceremonies with partners.

The active interaction with federal, local and
international journalists made it possible to
increase significantly the quality of the Company
positioning in the media.

The following corporate periodicals are published
to position the Company and inform its employees,
their family members and third parties of the
Company activities: the NOVATEK newspaper and
the NOVATEK PLUS magazine, containing materials
on production plans and results as well as on
cultural, sports and charity programs and projects.

The main NOVATEK news are published on the
Company’s official website and intranet portal.
For interaction with public, NOVATEK makes use of
up-to-date channels of information dissemination
through social media. The Company keeps its
accounts in English and Russian on Facebook,
VKontakte, Twitter, Instagram, and Youtube,
Telegram where the channel subscribers stay
updated on the Company’s activities and its
projects’ implementation. Around 850 publications
were posted in the Company’s accounts in 2021. At
year-end, the number of subscribers was 40,593
people (year on year growth is over 20%). Over
12,000 posts and comments with references to
the Company were published in social media in the
reporting period.

Additional Information

76–77

Additional Information

Key business risks

Criticality of risk

The Company’s business is associated with
operating in complex and rapidly evolving
environments. The Company’s ability to achieve its
targets and ambitions is maintained through timely
risk identification, assessment and management.

The table below represents NOVATEK’s key business
risks, which may have the most significant
impact on the achievement of the Company’s
operational and strategic goals, the operation of
the Company’s business model and the shareholder
value generation, with its estimated potential
impact on the Company’s operations.

High

Medium

Low

The criticality of risk is an integral
indicator of the risk impact on the
Company’s operations, including the
combined impact of current forecasts of
the probability of risk and a quantitative
assessment of the consequences of
its implementation. It is calculated
based on the internal risk assessment
methodology used by PAO NOVATEK.

Risk

Risk causes and consequences

Actions to mitigate risk impact

OPERATIONAL RISKS

Process risks

• Risks of property damage and
business interruption due to
accidents at key production
facilities

The Company continuously monitors the compliance with
Russian laws related to industrial safety and control over
process parameters of machines and equipment across all
production sites and industrial facilities of NOVATEK’s entities.

• Risks of damage to third

parties, life or health of the
Company’s employees during
operation of hazardous
production facilities

• Risks of damage to third

parties during operation of
vessels and other production
facilities

In compliance with OHSAS 18001:2007 and ISO 45001:2018, the
Company has developed and deployed an integrated safety
management system, which is used to implement approaches
and action plans based on international standards to mitigate
incident and accident risks for the purposes of reducing
potential losses and avoiding occupational health risks.

The Company’s Central Dispatch Office enables prompt
incident response. Each of the Company’s entities has internal
regulations and standards for prevention and containment of
accidents and emergency situations (Emergency Containment
Action Plans, Oil Spill Response Plans, etc.) and undergoes
regulatory inspections for compliance with OHS requirements.

When engineering and developing of new facilities and
projects, the Company uses technology and equipment with
high reliability and safety indexes for accident risk avoidance.

In order to mitigate the risk of damage to third parties
and potential damage or interruption of operations due to
accidents, the Company uses insurance covering a wide
range of areas: damages and business interruption, cargo
transportation, liability, etc.

The Company develops and implements business continuity
plans enabling prompt accidents containment and recovery.

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Risk

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Actions to mitigate risk impact

Additional Information

78–79

Environmental risks • Risks of impact on (damage

to) the environment and
biodiversity in the course of
the Company’s operation and
as a result of accidents at
production facilities

• Risks of stricter environmental

laws and new policies

Climate risks

• Risks associated with

operating in adverse weather
conditions of the Far North
(low temperatures, ice
navigation, polar night and
day, etc.)

• Risks of the negative

impact of climate change
on the Company’s business
(global warming, rising
sea-levels, increased
number of hurricanes and
floods, increase in ambient
temperature and other
climate anomalies (physical
risks))

The Company has an environmental management system
according to ISO 14001:2015 to ensure rational use of resources
and minimize potential adverse effects of the Company’s
operations on the environment.

The Company has developed a procedure to notify and
coordinate subdivisions in the event of emergency situations
in order to prevent damage to production facilities and the
environment.

The Company has a corporate greenhouse gas emission
management system, which provides for incorporation of
accounting, monitoring and emission mitigation planning into
the Integrated Management System. The Company develops
a GHG emission reporting system and uses efficient modern
technologies for emission reduction during production,
processing and transportation of hydrocarbon gases and
liquids, natural gas liquefaction, power generation and other
processes.

When preparing and executing its large-scale projects,
including all LNG projects, the Company always analyzes and
implements actions to prevent and mitigate potential impact
of the Company’s operations on local ecosystems in regions
and areas where the Company operates in order to prevent
damage to vegetation, soil, air, and animals.

In 2020, the Company’s Board of Directors approved its
environmental and climate targets to 2030, including CO2
emission reduction, utilization of associated petroleum gas,
and waste disposal.

In 2021, the Company was searching for and developing
engineering solutions to reduce greenhouse gas emissions in
line with the 2030 emission reduction targets.

In 2020, the Company also joined the International Methane
Guiding Principles initiative (MGP), whereunder many actions
have been taken during 2021.

To reduce environmental risks, the Company uses insurance
covering risks of damage to the environment in case of
accidents.

All entities continuously monitor temperatures, speed and
strength of wind and other factors to maintain safe operation
and occupational health in the Far North. Project cargoes
and end products are delivered to customers using ice class
vessels taking into account weather and ice conditions.

Permafrost soils are monitored during engineering and
operation of production facilities. Works are performed using
piling technologies with thermal stabilization of soil. The risks
of air temperature rise and permafrost thawing are being
analyzed on a regular basis and relevant mitigation plans are
being developed.

To avoid the impact of climate risks on production facilities
and business processes the Company uses insurance covering
its production facilities and liability.

• Risks associated with the
global Energy Transition
and international
efforts to combat climate
change (changes in value
chains due to the transition
to a low-carbon economy,
renewables, changes in
demand and requirements of
customers for the Company’s
products, etc. (transition
risks)

The introduction of carbon policies in Russia and in the EU
may entail incremental costs for the Company to meet the
requirements. The Company monitors carbon initiatives as
they are being adopted, in order to remain aware of the
requirements of policymakers and customers of the Company.

In 2020, the Company committed to 2030 environmental
targets aiming to reduce man-made climate impact across
the globe. In 2021, the action plan to achieve these targets
was being implemented.

Force Majeure risks
(terrorism, mass

epidemics)

• Risks of business interruption/

damage due to terrorist
attacks at the Company’s
upstream and transportation
facilities

The Company has put in place action plans to prevent terrorist
threats at production facilities, transportation facilities and
general infrastructure. Russian supervisory authorities conduct
comprehensive inspections of counter terrorist security of the
Company’s facilities on a regular basis.

• Risks associated with to
the COVID-19 pandemic
(maintaining occupational
health and uninterrupted
operation of facilities,
ensuring compliance with
regulatory requirements to
working remotely, coping with
global demand fluctuations,
etc.)

Vendor and

• Risks of not meeting the

contractor risks

deadlines for maintenance
and commissioning capacities
due to the failure by
counterparties to perform
their obligations (quality
and timing of materials and
equipment supply, works
execution and services
provision)

• Risks of cost increase due

to procurement of materials
and equipment, works and
services at prices higher than
the market ones

For the purposes of maintaining occupational health and
uninterrupted operation across the Company’s entities in
the face of the spread of COVID-19, in 2021 the Company
continued to implement the action plans and fulfill the orders
of Russian authorities aiming to prevent the spread of the
coronavirus infection, including:

• regular testing of the Company’s employees in order to

promptly detect and prevent the spread of the infection;

• monitoring the health of rotational workers;
• encouraging vaccination and promoting mass immunity

among employees;

• organizing remote work for employees;
• providing employees with PPE;
• online monitoring of infection cases dynamics; and
• complying with the orders of local authorities with regard to

employees’ work mode, etc.

Despite the relative recovery of the global economy from the
year 2020’s coronavirus epidemic, COVID-19 was still causing
a major impact across the globe in 2021. In 2021, the Company
continuously monitored the epidemiological situation and
responded promptly to any changes.

The Company has implemented comprehensive approaches
to control the quality and timing of the counterparties’
performance of their obligations under goods, materials
and equipment supply contracts, construction contracts,
and service agreements, including inspections of fabrication
plants during equipment manufacturing and testing, as well as
offloading control and incoming inspection at the Company
facility.

To eliminate the risks of contracting unreliable suppliers and
vendors, the Company has introduced a procedure to qualify
counterparties against the criteria of reliable performance
of obligations, as well as financial, fiscal, and legal standing.
The Company implements a long-term contracting approach
towards strategic and successful counterparties.

• Risks of the competition

restriction and malpractice by
employees

Suppliers and contractors are selected under transparent
competitive procedures aimed at ensuring free access to
all participants, which makes it possible to achieve the best
commercial terms for the contracts.

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Risk

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Actions to mitigate risk impact

Additional Information

80–81

• Risks of longer vessel return
voyages, a disruption of
marketable products offtake,
and tank tops, as well as
default on obligations to
buyers in terms of timely
cargo delivery via the NSR

• Risks of monopoly suppliers
of transportation services
(Gazprom, Transneft, Russian
Railways) (transportation
tariffs growth, access to
transportation infrastructure)

Geological risks

• Risks of non-confirmation of
commercial hydrocarbons
reserves

• Risks of inconsistency
between the actual
hydrocarbon volumetrics and
reserves held within developed
fields and the simulations

The Company has implemented modern methods procurement
aimed at reducing the cost of purchasing feedstock, materials
and equipment, works and services, including long-term
contracting strategies, direct contracts with manufacturers
to remove intermediaries, and conducting procurement
procedures through electronic trading platforms etc.

The Company’s procurement activities are organized in
accordance with the applicable internal regulations, which
set forth distribution of authority, corporate approval of
procurement procedures and control over the Company’s
responsible employees at all stages – from qualification of
suppliers and signing contracts to provision of services and
delivery of goods, materials and equipment, to contract
performance, to payment.

The Company openly declares zero tolerance to corruption
and conducts its interactions with suppliers and vendors in
adherence to the rules set forth by the following NOVATEK’s
documents:

• Anti-Corruption Policy;

• Code of Business Conduct and Ethics; and

• Supplier Code of Conduct.

The Company continuously monitors the compliance with the
above documents.

The Company uses the Northern Sea Route (NSR) for LNG
and gas condensate shipping, including by ice-class carriers.
To mitigate the risks related to transportation via NSR, the
Company has signed long-term contracts with Atomflot,
Rosmorport, and Northern Sea Route Administration to ensure
necessary icebreaker support along the NSR and required
that all vessels’ officers have necessary experience in ice
navigation.

To reduce dependence on monopoly suppliers of
transportation services, the Company enters into long-term
contracts and exercises ongoing control over the offtake
schedule and transportation tariffs. To reduce the risks,
the Company concludes agreements enabling it to use
alternative methods of product transportation (an agreement
with SIBUR for the supply of light hydrocarbons to Tobolsk
Petrochemical Complex) and develops its own pipeline system
for transporting gas condensate.

The Company makes an annual assessment and evaluation of
its commercially significant reserves based on the exploration
and production drilling and other research information.
DeGolyer and MacNaughton (“D&M”), an independent
petroleum engineers firm, validates the Company’s reserves
on an annual basis under both the SEC and PRMS reserves
reporting standards.

To reduce the risks of non-confirmation of commercial
hydrocarbons reserves, the Company carries out a
comprehensive analysis of the geological and geophysical
data, including geotechnical simulations of the fields using
state-of-the-art software and methodologies. Based on the
simulations and the analysis of features of each license area
or field, research plans and actions are developed to reduce
the risks given the actual natural, technical and technological
restrictions.

IT and information
security risks
(cyber risks)

• Risks of loss of key

information, integrity and
stable operation of the IT
systems due to cyber attacks

• Risk of losses/interruption

of production as a result of
incidents at IT infrastructure
facilities

At each exploration stage, the Company engages Russian and
foreign experts and contractors that use modern equipment
and technologies and undergo annual audit for compliance
with the Company’s requirements. Quality control and analysis
of the data obtained is performed by our own research and
development (NOVATEK Scientific and Technical Center).

The Company’s exploration management approaches enable
cost efficient prospecting, exploration and production of
hydrocarbons and annual confirmation of its resource base’s
sufficiency to maintain the Company’s operations in the
long term.

To mitigate IT risks, the Company uses modern tools and
technologies to ensure information security, protect
confidentiality and maintain integrity and security of critical
IT infrastructure and key data. The Company has internal
documents and procedures in place across all its business
units and entities to ensure protection of infrastructure
against malware, viruses, fishing, etc.

The risks of unauthorized access to any IT infrastructure
elements is reduced through a wide range of actions using
modern equipment and software. The Company has internal
regulations in place governing the use of software, protection
of confidential information, organization of data access and
data handling. The Company continuously monitors compliance
with these regulations.

The Company has approved the NOVATEK Group’s IT
development strategy that maintains the Company’s
information security at a high level in the long term.

The Company complies with all legal requirements to
ensure information security of Russian strategic assets. In
accordance with the requirements of Federal Law No. 187-FZ
dated July 26, 2017, essential elements of the Company’s
critical information infrastructure were broken down into
categories and the relevant centralized information security
system was designed. Each element of the security system
is being constantly monitored in terms of its condition and
reliability.

Project risks

• Risks of project execution
delays and/or incremental
project costs due to:

The Company implements large-scale and ambitious projects
to expand existing and build new LNG production and
petroleum processing facilities in various regions of Russia.

– updated or new technical
legislation relating to
engineering, construction
and operation;

– increasing cost of relevant

materials, equipment,
services and works;
– contractors’ failure to
maintain the schedule;

– delays in project financing,

etc.

The Company analyzes and develops forecasts for all
stages of future projects, including risk identification and
assessment as well as elaboration of action plans to manage
the identified risks. The matters related to arranging financing
and contracting of the products of the Company’s major
investment project are addressed long before the project
is put into operation and include detailed schedules of all
stages and operational control of compliance therewith. When
selecting projects, the investments are channeled only to
those projects that are most likely to achieve their strategic
goals in the long term with risk exposure manageable by the
Company.

• Risks of change in initial

project execution plans due to
changes in market conditions
for the sale of the Company’s
products

The Company follows a strategy of LNG projects
standardization and application of technical design
solutions that were well-proven in the Company’s previously
implemented LNG projects.

The Company is focused strongly on sourcing materials and
equipment as well as on selecting contractors to perform
works and services. Suppliers and contractors certified by the
Company are involved for project implementation. The control
of compliance with the developed activity-based schedules
is carried out at all stages of project implementation. The
investment project implementation status is regularly reviewed
by the Company’s top management.

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Risk

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Actions to mitigate risk impact

Additional Information

82–83

FINANCIAL AND MARKET RISKS

Market risks

• Risks of lower revenue in case
of a drop in prices for the
Company’s products in the
international markets

• Risks associated with state
regulation of prices for gas
sold in Russia

• Risks of increased costs due
to rising consumer prices in
Russia and rising inflation rate

The Company continuously monitors pricing environment and
price outlooks in the international oil, gas, and LNG markets.

To mitigate the risks of falling prices, the Company implements
a wide range of measures including entering into efficient sale
and purchase agreements with protective pricing mechanisms
(for instance, S-curves in oil-linked contracts), using derivative
financial instruments (linked to European gas hubs) and
entering into commodity derivative contracts for price risk
hedging purposes.

The Company takes into account potential price volatility in
the international markets by exercising prompt monitoring
and relocating supply volumes, considers price changes
in operational financial plans, and conducts an ongoing
assessment and analysis of the contract portfolio sensitivity
to changes in global prices and macro parameters.

To mitigate the impact of price risks, the Company strives to
maximize the output of products with high added value and
expands its deep hydrocarbon processing capacities at the
Purovsky Gas Condensate Processing Plant and the Ust-Luga
Stable Gas Condensate Fractionation and Transshipment
Complex.

The vertically integrated value chain, large resource base,
and high rate of new facilities’ commissioning enhance the
Company’s resilience to price volatility in the international
markets by enabling prompt management of production and
marketing cycles.

The unprecedented rally in prices for oil, gas and other
hydrocarbons in 2021 created favorable market conditions for
the Company.

Despite the announcements by some countries in 2021 about
transition to renewable energy, the Company expects no
significant change in the global energy balance and forecasts
the price volatility in the world markets to remain high.

As an independent gas producer, the Company is not subject
to state regulation of natural gas prices, except for the
quantities sold to the household market. At the same time,
the Company’s gas prices for the domestic market are
largely driven by the prices set by the government for natural
monopolies in the energy and transportation sector. Despite
that the state-regulated gas prices in the domestic market
are not characterized as highly volatile, the Company still
considers them as a factor when planning its activities. To
diversify its natural gas marketing portfolio, the Company
engages in trading natural gas on the St. Petersburg
International Mercantile Exchange.

The current inflation level does not present threats for the
Company’s financial standing.

The Company forecasts its performance by regular modeling
of its activities for different scenarios and analyzing cash flow
sensitivity to changes in market parameters.

Currency risks

• The risk of changes in the

Company’s budget revenue
and spending on the
Company’s operations in
foreign currencies as a result
of changes in foreign and
domestic currency exchange
rates

Credit risks

• Risks of increased debt

burden in case of growth
of interest rates on the
Company’s external
borrowings

• Risk of early demand of banks
for repayment of issued funds
in case of non-compliance
with the terms and conditions
of loan agreements

• Risk of failure to perform
obligations in due time
(liquidity risk)

• Risks of losses due to

customers’ failure to pay for
shipped products (overdue
accounts receivable)

The Company’s activities are connected with foreign currency
transactions (export of products, import of foreign equipment
and technologies, attract external financing raising, etc.).

The Company’s overall strategy is aimed at eliminating the
significant risk of exchange rate differences due to changes in
currency exchange rates. Foreign currency transactions in the
revenue and spending part of the Company’s budget, mainly
in USD and EUR, counterbalance each other and are a natural
mechanism for hedging currency risks. The Company may use
foreign currency derivatives to manage currency risks.

The Company also carries out operational control of all its
currency transactions in order to forecast the impact of
exchange rate differences on current financial results. In the
short- and long-term models of the Company’s operations, a
scenario analysis of the Company’s financial flow sensitivity to
changes in foreign exchange rates is conducted.

As a major borrower, the Company is exposed to risks
associated with an increased debt burden with variable
interest rates (i.e. rates linked to floating international
and Russian base rates). The Company conducts real-time
monitoring of the loan resources market in order to choose
the best financing option. The Company pursues a balanced
policy of maximizing the share of long-term commitments with
fixed rates and maintaining the flexibility of its investment
program.

In the event of significant increase in base rates, the Company
may resort to refinancing the debt at a more favorable rate.

The Company’s centralized approach to funds managing
allows it to promptly adjust the level of its consolidated debt
burden and meet its subsidiaries’ financing needs, which
contributes significantly to reduction of the Company’s
sensitivity to the volatility of external lending interest rates.
The level of the Company’s investment potential and financial
standing is regularly confirmed by such global and Russian
rating agencies as Moody’s, Standard & Poor’s, Fitch and
Expert RA. The Company was assigned investment grade
ratings at the level of the Russian sovereign rating.

The Company may use various short-term borrowings, for
example, credit facilities and bank overdrafts, to meet its
short-term financing needs.

When selling products in foreign and domestic markets, the
Company uses a number of instruments to mitigate the
risks of late payment and overdue indebtedness including, if
applicable, the following:

• customer solvency analysis through KYC (know your

customer/client) procedure and regular updating of this
status;

• sales on the basis of advance payment;

• grant of injunctive relief (bank guarantee, surety, etc.); and

• claim-related work with non-payers.

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Risk

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Actions to mitigate risk impact

Additional Information

84–85

REGULATORY AND STRATEGIC RISKS

Legislative and
regulatory risks

• Risks of the legislative

regulation impact on the
Company’s activities in the
following areas:

– taxes, excises, duties,
mandatory payments;
– control over hydrocarbon
production, processing,
storage and sales activities
(HSE, etc.);

– licensing requirements
for natural resource
extraction;

– state regulation of Russian
gas prices and tariffs of
natural monopolies;
– control of operations in
certain economic zones
(the Arctic)

• Risk of potential losses
in case legal claims by
counterparties against the
Company are satisfied

• Risks of potential losses
in case the Company
loses litigation against
counterparties

Litigation risks

Political risks

• Risks of impact on the

Company’s business from
sanctions imposed by foreign
states on the Company or its
business partners, including:

– due to ban on the use of

foreign software;
– due to restrictions

introduction on the supply
of imported equipment and
technologies

• Risks of impact on the

Company’s business because
of political and economic
situation in Russia and other
countries where the Company
operates

The Company carries out its activities in full compliance
with the legislative norms established by the Government of
the Russian Federation and other governmental authorities
exercising control over certain areas of the Company’s
activities. The Company constantly monitors changes in
legislative initiatives, participates in the work of special-
purpose committees under the Russian Government and the
Russian State Duma on the activities of the fuel and energy
complex and relevant associations.

The Company operates under state regulation of product
transportation prices and tariffs of natural monopolies
(Gazprom, Russian Railways, and Transneft).

In performing its subsoil use activities, the Company complies
with the terms and conditions or makes timely adjustments to
the terms and conditions set forth in license agreements.

When conducting its business, the Company adheres to the
principle of prudence and checks and qualifies counterparties
prior to concluding cooperation agreements with them. If the
counterparties fail to perform and it is impossible to reach a
pre-trial settlement, the Company may take legal recourse.

The Company implements a program of liability insurance
of officials (Directors & officers liability insurance, D&O) to
decrease the impact of litigation risks.

In 2021, the Company was not involved in any material
litigation.

In 2014, the Company was designated in the US sectoral
sanctions list whereby the US persons are prohibited to
participate in long-term financing of the Company.

The Company raises external financing in the Russian,
European, and Asian capital markets to implement its major
investment projects.

The Company pursues imports substitution and localization of
foreign equipment production in Russia whenever appropriate.
For instance, the Company in conjunction with Russian
and foreign manufacturers builds and implements plans
for technology transfer and competence development to
manufacture equipment and materials for LNG projects in
Russia.

The Company invests in developing in-house production
capabilities to build LNG trains and in creating proprietary
liquefaction technologies, including through state support
mechanisms.

When making decisions on the use of foreign software,
equipment and information technology, the Company always
investigates the alternative of using Russian software.

In case stricter US sanctions or new sanctions of other states
are imposed on the Company or its counterparties, the
Company’s management will use every effort to mitigate the
impact of sanction restrictions on the Company’s business.

To reduce political risks in Russia and other countries where
the Company operates, the Company always keeps track
of changes in Russian and foreign legislation, analyzes the
political situation and builds long-term partnership relations
with authorities and concerned parties.

Strategic risks

• Risk of the Company’s

failure to meet its strategic
targets due to major changes
in external or internal
environment, including:

– risks associated with the

development of alternative
fuel and energy production
technologies;

– risks associated with
significant increase in
competition for LNG
technologies and sales
markets;

– risks of material events

affecting the Company’s
operational or financial
activities (materialization
of one or more risks listed
in this section)

The Company endeavors to achieve its strategic targets and
objectives as well as analyzes and manages the risks that
impede their achievement.

The Company’s management is always focused on any
matters related to the development of new energy
technologies. The Company pursues the policy of adaptation
to these changes by implementing a number of programs
and activities, such as setting long-term environmental goals
by 2030, developing and adopting technologies to reduce
emissions from gas and liquid hydrocarbons production and
processing, analyzing opportunities to use renewable energy
sources and alternative fuels and energy, including through
joint partnerships with global fuel and energy companies.

In implementing its long-term strategy, the Company takes
into account the increased role of the Energy Transition,
decarbonization, and alternative energy agendas and
develops programs to adapt to all emerging changes. Given
the low carbon footprint of natural gas and LNG compared to
other non-renewable energy sources, the Company considers
the development of LNG projects as a contribution to the
advancement of low-carbon energy in Russia and worldwide.

The Company, through its subsidiary Novatek Gas & Power
Asia Pte. Ltd., is a member of the international association of
major LNG producers and consumers (GIIGNL) since December
2019. Membership in GIIGNL allows the Company to receive
information and exchange experience on advanced solutions
in the field of LNG production, transportation and sales as
well as represent a coordinated position of LNG producers in
addressing issues related to the development of the global
LNG market.

The Company takes into account the increased competition
on the global LNG markets with other producers in terms of
technologies and sales markets when developing its strategic
plans.

The Company expands its footprint in the global LNG market,
increases its customer base and makes spot, mid-term and
long-term LNG sale and purchase agreements, long-term time
charter parties for carriers, optimizes its supplies through
swaps and supply diversions, which enables mitigating risks
associated with a specific market or counterparty.

To reduce the impact of risks on its strategic goals, the
Company applies a scenario-based approach to long-
term financial and economic forecasting of the Company’s
development and updates these forecasts on a regular basis.
When making strategic decisions, the Company is guided
by the principles of prudence and financial stability and
promptly responds to all changes in the external and internal
environment.

Annual Report 2021. Constructing future energy transition todayInformation on Members of
NOVATEK’s Board of Directors

the Chairman of the Management Board, the
Deputy Chairman of the Board of Directors of
Gazprombank (OAO). He is a member of Board of
Directors of PAO Gazprom, AO Rosneftegaz.

MR. ALEXANDER E. NATALENKO

Born in 1946

MR. ROBERT CASTAIGNE

Born in 1946

• Chairman of NOVATEK’s Board of Directors

• Member of NOVATEK’s Strategy Committee

Directors

• Independent member of NOVATEK’s Board of

• Member of NOVATEK’s Subcommittee on

• Chairman of NOVATEK’s Audit Committee

Climate and Alternative Energy (within Strategy
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 ZАО “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. From 2013 to 2015 he
was a member of the Board of Directors of AO
Rosgeologia. From 2004 to present he is the
Chairman of NOVATEK’s Board of Directors.

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

• Member of NOVATEK’s Strategy Committee

Mr. Akimov graduated from the Moscow Financial
Institute in 1975 where he specialized in international
economics. Between 1974 and 1987, Mr. Akimov held
various executive 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 1991 to 2002 he
was Managing Director of financial company,
IMAG Investment Management & Advisory Group
AG (Austria). Since 2003, Mr. Akimov has been

• Member of NOVATEK’s Remuneration and

Nomination Committee

• Member of NOVATEK’s Subcommittee on

Climate and Alternative Energy (within Strategy
Committee)

Mr. Castaigne graduated from the Ecole Centrale
de Lille in 1968 and the Ecole nationale supérieure
du pétrole et des moteurs, he holds a doctorate in
economics. He has spent his whole career at TOTAL
SA, first as an engineer, then in various positions.
From 1994 to 2008, he was Member of the Executive
Committee, Executive Vice-President and Chief
Financial Officer of TOTAL SA. From 2000 to 2018,
he was Member of the Board of Directors of Sanofi
and from 2009 to 2018 – Member of the Board of
Directors of Societe General. He is Member of of
VINCI’s Board of Directors. He is Chevalier of the
National Order of the Legion of Honour.

MR. ARNAUD LE FOLL

Born in 1978

• Member of NOVATEK’s Board of Directors

• Member of NOVATEK’s Strategy Committee

• Member of NOVATEK’s Subcommittee on

Climate and Alternative Energy (within Strategy
Committee)

Graduate of “École polytechnique” and “École
des mines de Paris” (France) Arnaud Le Foll began
his professional career in French ministries and
administrations. Between 2003 and 2006 he
was Head of Regional Industrial Environment
Inspectorate, Rhône-Alpes (Lyons, France), then
he moved to a position of Auditor at General
Inspectorate of Finance, Ministry of Finance, where
he served from 2006 to 2007. In 2007 he became an
Advisor on matters related to environment, energy
and industry in the offices of C. Lagarde, Minister

Additional Information

86–87

of Economy, and L. Chatel, Secretary of State
in charge of Industry.

Arnaud Le Foll joined Total in 2010 as Analyst
Strategy, Total Holding. In 2010 he was promoted to
a position of Vice-president strategy and business
development Asia-Pacific, Total Marketing &
Services (Singapore). From 2013 to 2016 he headed
Total Maroc affiliate as Managing Director.

In 2016 Arnaud Le Foll moved from Marketing
& Services branch of Total to Exploration &
Production, and was appointed Strategy and
Portfolio Management Director, Total E&P Angola.

From January 1, 2018 to the end of 2021, Arnaud
Le Foll held the position of General Director,
TotalEnergies EP Russie. From July 2020, he has
been appointed Senior Vice President North Sea
and Russia, which comprises the United Kingdom,
Norway, Denmark, the Netherlands and Russia. From
September 2021, Arnaud Le Foll is appointed Senior
Vice President North Sea-Russia – New Business.

MR. LEONID V. MIKHELSON

Born in 1955

• Member of NOVATEK’s Board of Directors

• Chairman of NOVATEK’s Management Board

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 first 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 first company in the region
to sell its shares and became private company,
AO SNP NOVA. Mr. Mikhelson remained AO SNP
NOVA’s Managing Director from 1987 through 1994.
Subsequently, he became a General Director of the
management company “Novafininvest”.

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 and the
Chairman of the Board of Directors of AO
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 PAO 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, the 2 Degree Order of Merit for the
Fatherland and the title of honor “Honored
man of the gas industry”, Medal “for the
Arctic preservation” and the First Degree “for
development of the energy sector”.

MS. TATYANA A. MITROVA

Born in 1974

• Independent member of NOVATEK’s Board of

Directors

• Chairman of NOVATEK’s Strategy Committee

• Member of NOVATEK’s Audit Committee

• Member of NOVATEK's Remuneration and

Nomination Committee

• Member of NOVATEK’s Subcommittee on

Climate and Alternative Energy (within Strategy
Committee)

In 1995, Ms. Mitrova graduated from the Department
of Economics, the Lomonosov Moscow State
University. From 1993 to 2002, Ms. Mitrova worked
for consulting companies in the energy sector.
In 2002, Ms. Mitrova joined the Energy Research
Institute of the Russian Academy of Science (ERI
RAS) where she held various positions from a
researcher to the Head of Research Group. Since
2011, she has led the Global and Russian Energy
Outlook Until 2040 Project. Since 2008, Ms. Mitrova
has been associate professor in the Gubkin Russian
State University of Oil and Gas. Ms. Mitrova has
been a Visiting Professor at the Institute of Political
Studies, School of International Affairs (Sciences
Po, France) since 2014. Ms. Mitrova has been a
Senior Researcher of Oxford Institute of Energy
Studies (OIES) since 2015. Since 2016, Ms. Mitrova
has been a Visiting Researcher of the Center on
Global Energy Policy, Columbia University (CGEP,
USA). In 2016-2017, she was a Visiting Researcher at
the King Abdullah Petroleum Studies and Research
Center (KAPSARC, Saudi Arabia).

From 2020 – Professor, Head of Research,
SKOLKOVO Energy Centre. Between 2014 and 2017,
Ms. Mitrova was a member of Unipro’s Board of
Directors (E.ON Russia before June 2016), and from
July 2018 she served on the Board of Directors of
Schlumberger NV, a global oilfield services company.

Ms. Mitrova has been member of the International
Supervisory Board of Energy Academy Europe

Annual Report 2021. Constructing future energy transition todaysince 2013. Ms. Mitrova has written more
than 200 articles in scientific and business journals
and digests focused on energy issues as well as co-
authored 10 monographs.

Since July 2020, he has been the Chairman of the
Supervisory Board of the association of energy
industry professionals “WOMEN IN ENERGY”.

MR. GENNADY N. TIMCHENKO

Born in 1952

• Member of NOVATEK’s Board of Directors

• Member of NOVATEK’s Strategy Committee

MR. DOMINIQUE MARION

Born in 1961

• Member of NOVATEK’s Board of Directors

• Member of NOVATEK’s Strategy Committee

• Chairman of NOVATEK’s Subcommittee on

Climate and Alternative Energy (within Strategy
Committee)

Dominique Marion is a graduate of Ecole Nationale
Supérieure de Géologie de Nancy, France
(MSc, 1983) and Stanford University, California
(PhD, 1990). He joined TOTAL in 1990 and has worked
in France and affiliate companies in Gabon, UK,
Qatar, where he held senior management positions
in Geosciences, Reservoir Engineering, and
Research and Development.

Beginning 2007, he held the position of Vice
President Corporate Reserves, based in Paris. In
2011, he became E&P Vice President Reservoir and
Geosciences in France and was the member of
Total E&P Norge Board of Directors. In 2018, he was
appointed General Manager of Total Austral and
Country Сhair Argentina. On January 1, 2022 he took
the position of General Director, TotalEnergies EP
Russie.

MR. VICTOR P. ORLOV

Born in 1940

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 energy 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 Kirishineftekhimexport, the export and trading
arm of the Kirishi refinery. In 1991, he worked
for Urals Finland which specialized in oil and
petrochemical trading. Between 1994 and 2001,
Mr. Timchenko was Managing Director of IPP OY
Finland and IPP AB Sweden. Between 1997 and 2014,
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, and Airfix Aviation OY. Since 2009,
he is a member of the Board of Directors of PAO
NOVATEK. He is a member of the Board of Directors
of PAO SIBUR Holding, the Chairman of the Board
of Directors of the Ice Hockey Club SKA St-
Petersburg, as well as the Chairman of the Board
of Directors of OOO Kontinental Hockey League, a
member of the Board of Trustees of the All-Russian
public organization Russian Geographical Society,
the Chairman of the Supervisory Board of the
Russian Chinese Business Council, Vice-President
and member of the Executive Committee of the
Olympic Committee of the Russian Federation,
Co-Chairman of the Economic Council of the
Franco-Russian Chamber of Commerce (CCIFR).

• Independent member of NOVATEK’s Board of

MS. ZULMIRA A. RAZAKOVA

Directors

Born in 1981

• Chairman of NOVATEK’s Remuneration and

Nomination Committee

• NOVATEK’s Corporate Secretary

• Member of NOVATEK’s Audit Committee

The powers of the elected member of the Board
of Directors Victor P. Orlov were prematurely
terminated on 23 August 2021 due to his premature
death. His biography can be found in the section
Information on Members of NOVATEK’s Board of
Directors in our Annual Report 2020.

Ms. Razakova holds a higher Legal education
degree and began working for NOVATEK in 2004.
Between 2007 and 2012, Ms. Razakova held the
position of lead specialist of the Management
Board and Board of Directors staff. In April 2012,
Ms. Razakova was elected as Secretary of the
Board of Directors. Since 2014, Ms. Razakova has
been NOVATEK’s Corporate Secretary.

Additional Information

88–89

Information on Members of
NOVATEK’s Management Board

and the Russian Government Marine Board; For
Merits in Developing Russia’s Transportation Industry,
as well as the Order For Naval Merits awarded by
a Russian Presidential Executive Decree. Elected a
member of the Management Board of PAO NOVATEK
in November 2020.

MR. LEONID V. MIKHELSON

Born in 1955

• Chairman of NOVATEK’s Management Board

Born in 1960

• Member of NOVATEK’s Board of Directors

MR. VLADIMIR A. BASKOV

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

MR. EVGENIY N. AMBROSOV

Born in 1957

• Deputy Chairman of NOVATEK’s Management

Board – Director for Marine Operations, Shipping
and Logistics

In 1979, Mr. Ambrosov graduated from the
Navigation Department, Admiral Nevelskoy
Far Eastern Higher Marine Engineering College,
where he specialized in the operation of water
transport. After graduating, he was employed by
the Far Eastern Shipping Company where he rose
through the ranks from a cargo officer to Deputy
General Director – Director of the Core Operations
Department. In January 2000, Mr. Ambrosov
was appointed First deputy General Director of
Sovcomflot. In September 2002, he was approved
as the General Director and Chairman of the
Management Board, Far Eastern Shipping Company.
In 2008-2009, Mr. Ambrosov worked as President
of the FESCO Transportation Group Management
Company and Chairman of the Management Board,
Far Eastern Shipping Company. Since 2009, he has
been the First Deputy General Director, Member
of the Management Board of Sovcomflot. Since
2014, Mr. Ambrosov has been Deputy Chairman and
Member of the Executive Committee of the Arctic
Economic Council. In May 2021, he was appointed
Chairman of the Arctic Economic Council. Mr.
Ambrosov received the following state and industry
awards: Honorary Maritime Fleet Worker; Honorary
Transportation Worker of Russia; Traditions and
Standards badge of honor from the Russian
Chamber of Shipping, the Star of Seafarers from
the Russian Fleet Support Foundation, the Russian
Ministry of Transportation. He was also awarded
with the following medals: 300th Anniversary of
the Russian Navy, Admiral Gorshkov, Russian
Shipowners Association medal, the Medal For
Maritime Excellence by the Russian Government

• 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 Affairs. From 1981 to
2003, he served in various departments within the
Russian Ministry for Internal Affairs. From 1991 to
2003, Mr. Baskov held managerial positions within the
aforementioned Ministry’s organizational structures.

In 2003, he was appointed Director of the Business
Support Department for NOVATEK. In 2005, Mr. Baskov
was appointed Deputy Chairman of NOVATEK’s
Management Board and in 2007, he became a
member of NOVATEK’s Management Board.

Mr. Baskov is Ph.D. in Law. 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 Minister of
Internal Affairs, the Governor of the Moscow Region.
Mr. Baskov also has the awards of the Russian
Orthodox Church (Order of Holy Prince Daniel of
Moscow, Order of Saint Seraphim of Sarov and a
medal of St. Sergius).

MR. VIKTOR N. BELYAKOV

Born in 1973

• Deputy Chairman of NOVATEK’s Management

Board for Economics and Finance

Mr. Belyakov graduated from Tver State Technical
University majoring in Automated Data Processing
and Management Systems (1995) and in Information
Systems in Economics (1997). In 2000, he completed
an MBA degree program with Kingstone University
(UK). A holder of CMA (Certified Management
Accountant).

From 2004 until 2014 Mr. Belyakov worked for PAO
Uralkali, where he successively held the positions
of Head of Division, Deputy Chief Financial Officer,

Annual Report 2021. Constructing future energy transition todayChief Financial Officer, Vice President for Finance,
Deputy General Director, Executive Director. In 2015,
he was appointed Vice President for Economics and
Finance of PAO Far East Shipping Company (FESCO
group). In February 2016, Viktor Belyakov joined PAO
NOVATEK in the position of Deputy Chairman of the
Management Board for Economics and Finance.

Mr. Gyetvay is the recipient of the Extel’s award as
“Best CFO For IR – Oil and gas” for 2019 and 2020.

From 2003 to 2014, Mr. Gyetvay was a member of
NOVATEK’s Board of Directors and served on the
Investment and Strategy Committee. From 2003 to
2014, he has been Chief Financial Officer and, in
August 2007, Mr. Gyetvay was elected to NOVATEK’s
Management Board. In July 2010, he became Deputy
Chairman of NOVATEK’s Management Board.

MR. MARK A. GYETVAY

Born in 1957

• Deputy Chairman of NOVATEK’s Management

Board

MR. SERGEY V. VASYUNIN

Born in 1967

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). After graduation, Mr.
Gyetvay worked in various capacities at a number
of U.S. independent oil and gas companies where
he specialized in financial and economic analysis for
both upstream and downstream 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 admitted 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 office). Mr. Gyetvay was an
engagement partner on various energy and mining
clients providing overall project management,
financial 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 Certified Public Accountant
(inactive status), a member of the American
Institute of Certified Public Accountants and an
associate member of the Society of Petroleum
Engineers. He is a recognized expert in the oil
and gas industry, a frequent speaker at various
industry and investor conferences, has published
numerous articles on various oil and gas industry
topics and was a former member of PwC’s
Petroleum Thought Leadership team. He has
been recognized by Investor Relations Magazine
as one of the best CFO’s in Russia and the CIS,
and by Institutional Investor magazine as one of
the Top Five CFO’s in Europe’s Oil and Gas sector.
Institutional Investor voted him as the Best CFO
in the EMEA Oil and Gas category for 2017 and
2018. Finance Monthly magazine named Mark
Gyetvay the Best CFO in Russia for the consecutive
years of 2015 to 2020, and he received the
Game Changer 2017 and 2018 Award for Russia.

• Deputy Chairman of NOVATEK’s Management

Board – Operations Director

In 1993, Sergey Vasyunin graduated from
the Ufa Oil Institute, specializing in the
Development and Operation of Oil and Gas Fields.
Between 1993 and 1997, Mr. Vasyunin was employed
with Condor as deputy director, Stroykomplekt
as head of sales department, and with OAO
Spetsnefteenergomontazhavtomatika – as
marketing engineer. From 1998, he worked in the
Urengoygazprom industrial association of OAO
Gazprom where he served in the capacity of an
oil, gas and condensate production foreman.
Between 2002 and 2017, Mr. Vasyunin was
employed in the positions of Gas Condensate
Production Shop Manager, Deputy General
Director for operations, and First Deputy General
Director – Chief Engineer of OOO NOVATEK-
YURKHAROVNEFTEGAS. In April 2017, he was
appointed Deputy Chairman of the Management
Board – Director for Operations of NOVATEK.

In 2005, the Russian Ministry of Industry and Energy
issued a commendation to Sergey Vasyunin. He
holds the Honored Employee of NOVATEK title.

MR. EDUARD S. GUDKOV

Born in 1980

• Deputy Chairman of NOVATEK’s Management

Board

In 2002, Mr. Gudkov graduated from the Penza
State University where he specialized in law. In
2006, he received PhD in Law.

Between 1999 and 2003, Mr. Gudkov worked in the
Russian Ministry for Antitrust Policy and Support
of Entrepreneurship. In 2003, he joined the Russian
Supreme Arbitrazh Court where he held the position
of Assistant to the First Deputy Chairman. From

Additional Information

90–91

2012, Mr. Gudkov worked at the Executive Office
of the Russian Federation Government. In 2013, he
was appointed Assistant to Deputy Prime Minister
of the Russian Federation – Head of the Executive
Office of the Russian Federation Government.

Director, Deputy General Director – Chief Engineer,
ARCTICGAS, and in 2015 he headed ARCTICGAS. In
2016, Mr. Kudrin received the NOVATEK Certificate of
Commendation. In 2020, he received the Certificate
of Merit from the Russian Ministry of Energy.

Since September 2018, Mr. Gudkov has been Deputy
Chairman of NOVATEK’s Management Board. In 2018,
Mr. Gudkov was awarded the Medal of the II Degree
Order for Merits and Dedicated Service to the
Country.

MS. TATYANA S. KUZNETSOVA

Born in 1960

MR. EVGENY A. KOT

Born in 1974

• Deputy Chairman of NOVATEK’s Management

Board – Director for LNG(1)

Mr. Kot graduated from the Tyumen State Academy
of Architecture and Civil Engineering. He received
PhD in Economics from the Saint Petersburg State
University of Engineering and Economics.

Between 1997 and 2001, Mr. Kot worked in the
Tyumen branch of Gazprombank. From 2001 to
2002, he was employed by OAO SNP NOVA and OAO
Oil and Gas Company ITERA.

In 2002, Mr. Kot joined NOVATEK. Between 2009 and
2011, he held the position of Deputy Chairman of
the Management Board – Director of LNG Business
Development of NOVATEK. Between 2010 and 2014,
he was Chairman of the Board of Directors of
Yamal LNG. From 2014 to 2018, Mr. Kot was General
Director of Yamal LNG.

In December 2018, he was appointed Deputy
Chairman of the Management Board – Director for
LNG of NOVATEK.

MR. VLADIMIR A. KUDRIN

Born in 1979

• Deputy Chairman of NOVATEK’s Management

Board – Director for Geology(2)

In 2001, Mr. Kudrin graduated from the Tyumen
State Oil and Gas Institute, specializing in the
Oil and Gas Fields Development and Exploitation.
From 2001 to 2011, he worked in Northgas and
NOVATEK-Yurkharovneftegas, where he rose through
the ranks from gas extraction operator to the head
of operational dispatch service. In 2011, he was
transferred to Sibneftegas as First Deputy General
Director – Chief Engineer. Since 2014, he held
positions of Deputy General Director – Technical

1.
2.

The authorities were terminated from 17 December 2021.
Since 17 December 2021.

• Deputy Chairman of NOVATEK’s Management

Board

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 Purneftegasgeologiya. In 1998,
she was appointed Deputy General Director of
OAO Nordpipes. Since 2002, she has been Director
of the Legal Department at NOVATEK. Since 2005,
she has been the Deputy Chairman of NOVATEK’s
Management Board and in August 2007, she
became a member of NOVATEK’s Management
Board. Ms. Kuznetsova has the title “Honored
employee of PAO NOVATEK”, and is awarded
the 2 Degree Order of Merit for the Fatherland.

MR. DENIS B. SOLOVYOV

Born in 1977

• Deputy Chairman of NOVATEK’s Management

Board – Director of Information Policy
Department

In 2000, Mr. Solovyev graduated from the
Lomonosov Moscow State University (Philosophy
faculty) with a degree in Political Science. In
2003, he completed postgraduate studies at
the Lomonosov Moscow State University with
a degree in History. In 2000, he was appointed
Deputy General Director of Senat PR LLC. In 2004,
Denis Solovyov assumed the role of an adviser
to the Krasnoyarsk Territory Deputy Governor
and Assistant First Deputy Governor at the
Krasnoyarsk Territory Board of Administration.
Between 2006 and 2008, he headed an election
projects group of the United Russia Central
Electoral Commission Directorate.

Mr. Solovyev has been working for NOVATEK since
2008: in the capacity of Public Relations Director
(until 2014), and Communications Director – Director
of Public Relations Department (from January 2014.).

Annual Report 2021. Constructing future energy transition todaySince Septembetr 2018, Mr. Solovyev was appointed
Deputy Chairman of NOVATEK’s Management
Board and Director of Corporate Communications
Department.

MR. ILYA V. TAFINTSEV

Born in 1985

Report on major, and interested-party
transactions that the Company did
in the reporting year

Corporate Governance Code
Compliance Report

Additional Information

92–93

Mr. Solovyev has received several letters of
recognition, honorable mentions from the Russian
Ministry of Natural Resources and the Environment
as well as from the Parliament of the Khanty-
Mansiysk Autonomous Region. In 2018, he received
an award from the Russian Ministry of Energy and
an honorable mention from the Governor of the
Yamal-Nenets Autonomous Region. In January 2022,
he was awarded the medal of the Order of Merit for
the Fatherland of the II degree.

MR. SERGEY G. SOLOVYOV

Born in 1978

• Deputy Chairman of the Management Board –

Director for Prospective Projects(1)

Graduated from the Gubkin Russian State
University of Oil and Gas in 2001 with a
degree in Oil and Gas Fields Development and
Operation, in 2003 – with a degree in Economics
and Management in Oil and Gas Industry.
From 2002 to 2004, worked in Nortgas as well
diagnostics operator and well diagnostics foreman.
From 2004 to 2005, worked in Yurkharovneftegas as
engineer and lead engineer in the Field Development
Group. In 2005, he was employed by NOVATEK
where he worked as chief specialist and head of
Field Development Analysis Group. In 2007, he was
transferred to NOVATEK-YURKHAROVNEFTEGAS to
the position of Deputy General Director – Chief
Geologist. Since 2009, he held the position of
managing director of OOO NEU, in 2010 he became
the general director of ZAO Investgeoservis. In
2011, he was elected General Director of NOVATEK-
YURKHAROVNEFTEGAS. In 2014, he was elected
General Director of Arctic LNG 2. In 2017, he became
the General Director of Cryogas-Vysotsk.

In April 2019, Sergey Solovyov was appointed
NOVATEK’s Deputy Chairman of the Management
Board – Director for Geology. In December 2021,
was appointed NOVATEK’s Deputy Chairman of
the Management Board – Director for Prospective
Projects.

• Deputy Chairman of the NOVATEK’s

Management Board

In 2006, Mr. Tafintsev obtained a BA in Economics
from the Higher School of Economics in Moscow. In
2007, he graduated from the University of London
(UK), where he majored in investment and finance.

From 2007 to 2011, Mr. Tafintsev held the position
of Deputy Director of NOVATEK’s Representative
Office in London. Between 2011 and 2014, he was a
Finance and Investment Advisor with United Bureau
of Consultants Limited.

From 2013 to 2015, he served as Strategic Projects
Director of NOVATEK. From 2013 to 2018, Mr.
Tafintsev was Member of the Board of Directors
of SIBUR Holding. Between 2014 and 2016, he held
the position of Chairman of the Board of Directors
of Yamal LNG. In December 2015, Mr. Tafintsev was
appointed Member of the Management Board –
Director for Strategic Projects of NOVATEK.

Since September 2018, he has been Deputy
Chairman of NOVATEK’s Management Board.

MR. LEV V. FEODOSYEV

Born in 1979

• First Deputy Chairman of NOVATEK’s

Management Board

In 2002, Mr. Feodosyev graduated from the Bauman
Moscow State Technical University with a degree in
Machinery and Foundry Engineering Technologies. In
2002, Mr. Feodosyev was appointed lead specialist
at the Ministry of Energy of the Russian Federation.
From 2003, he has served as lead specialist, senior
specialist, adviser, deputy head of section, Deputy
Director of Department at the Ministry of Economic
Development and Trade of the Russian Federation.
Since October 2007, Lev Feodosyev has worked
for NOVATEK. Before 2011, he worked in NOVATEK as
Director of the Strategic Planning and Development
Department. From 2011, he was appointed as
Deputy Commercial Director, Director of the
Marketing and Gas Sales Department of NOVATEK.
Since February 2015, Mr. Feodosyev has been
appointed Deputy Chairman of the Management
Board, Commercial Director of NOVATEK.

From February 2018, he was appointed First Deputy
Chairman of NOVATEK’s Management Board. In 2014,
Mr. Feodosyev was awarded NOVATEK’s Honorary
Certificate.

Since 17 December 2021, until 17 December 2021 – Deputy Chairman of the Management Board – Director for Geology.

The list of transactions made by the Company
in the reporting year, recognized in accordance
with the Federal Law “On Joint Stock Companies”
as major transactions and (or) interested-party
transactions, is not disclosed in accordance with
Resolution of the Government of the Russian
Federation No. 400 dated 4 April 2019.

This Corporate Governance Code Compliance
Report (hereinafter “the Report”) was reviewed at
the meeting of PAO NOVATEK’s Board of Directors
on 18 March 2022 (Minutes No. 252).

The Board of Directors certifies that data in this
Report contain full and reliable information on
compliance by the Company with the principles and
recommendations of the Corporate Governance
Code for 2020.

When assessing our compliance with corporate
governance principles as set out in the Code we
were guided by the Guidelines for Reporting on
Compliance with the Corporate Governance Code
recommended by the Bank of Russia in its Letter
No. IN-06-28/102 dated 27 December 2021.

An overview of the most relevant aspects of
the corporate governance model and practices
in the Company is presented in the Corporate
Governance section of this Annual Report.

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

The Сompany should ensure equitable and fair treatment of every shareholder exercising their right to take
part in managing the Сompany.

1.1

1.1.1

The Сompany ensures
the most favorable
conditions for its
shareholders to
participate in the
General Meeting,
develop an informed
position on agenda
items of the General
Meeting, coordinate
their actions, and voice
their opinions on items
considered.

1.1.2

The procedure for giving
notice of, and providing
relevant materials for,
the General Meeting
enables shareholders
to properly prepare for
attending the General
Meeting.

This principle
is complied
with.

—

This principle
is complied
with.

—

1. The Сompany provides
accessible means of
communication via hotline, e-mail
or an online forum for shareholders
to voice their opinions and
submit questions on the agenda
in preparing for the General
Meeting. The above means of
communication were organized
by the Company and provided
to shareholders in the course
of preparation for each General
Meeting held in the reporting
period.

1. In the reporting period, the
notice of an upcoming General
Meeting of shareholders is posted
(published) on the Company's
website online at least 30 days
prior to the date of the General
Meeting, unless a longer time
period is required by the applicable
Russian law.

2. The notice of an upcoming
meeting specifies the documents
required for admission.3.
Shareholders were given access
to the information on who
proposed the agenda items and
who proposed nominees to the
Company’s Board of Directors and
the revision commission.

Annual Report 2021. Constructing future energy transition today
Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

94–95

No. Corporate Governance

Compliance criteria

1.1.3

Principles

In preparing for, and
holding of, the General
Meeting, shareholders
were able to receive
clear and timely
information on the
meeting and related
materials, put questions
to the Company’s
executive bodies and
the Board of Directors,
and to communicate
with each other.

1. In the reporting period,
shareholders were able to put
questions to members of executive
bodies and members of the Board of
Directors during the preparation for
the meeting and in the course of the
General Meeting of shareholders.

2. The position of the Board of
Directors (including dissenting
opinions entered into the minutes,
if any) on each agenda item of
General Meetings held in the
reporting period was included
in the materials to the General
Meeting of Shareholders.

This principle
is complied
with.

—

This principle
is not fully
complied
with.

When convening General
Meetings of Shareholders, the
Board of Directors reviews all
agenda items of the relevant
meeting and presents them to
the Meeting for consideration or
provides necessary advice.

Materials to the General
Meeting of Shareholders include
recommendations of the Board
of Directors as required by law.
In accordance with paragraph 1
of Art. 54 of the Russian Federal
Law “On Joint Stock Companies”,
the list of information (materials)
provided to shareholders in
preparation for the General
Meeting of Shareholders is
determined by the Board of
Directors. Accordingly, the
Board of Directors, if it deems
it necessary, to include its
position on the issues on the
agenda of the General Meeting
of shareholders, if it deems it
necessary.

The Company considers the
established procedure to be
balanced, not bearing any
risks for the Company and its
shareholders, and does not plan
to change the existing approach.

3. The Company gave duly
authorized shareholders access
to the list of persons entitled to
attend the General Meeting, as
from the date of its receipt by the
Company, for all General Meetings
held in the reporting period.

1.The Company's Articles of
Association determines the
deadline for shareholders to
submit proposals for the agenda
of the Annual General Meeting
which is at least 60 days after the
end of the relevant calendar year.

2. In the reporting period, the
Company did not reject any
proposals for the agenda or
nominees to the Company’s
governing bodies due to misprints
or other insignificant flaws in the
shareholder’s proposal.

1. The Company's Articles of
Association provide for the
possibility to fill in the electronic
voting ballot at a website,
specified in the notice of the
General Meeting of Shareholders.

This principle
is complied
with.

—

This principle
is complied
with.

—

This principle
is complied
with.

—

1.1.4

There were no unjustified
difficulties preventing
shareholders from
exercising their right to
request that a General
Meeting be convened,
to propose nominees
to the Company’s
governing bodies, and to
make proposals for the
agenda of the General
Meeting.

1.1.5

Each shareholder was
able to freely exercise
their voting right in
the simplest and most
convenient way.

1.1.6

The procedure for
holding a General
Meeting set by the
Company provides
equal opportunities for
all persons attending
the Meeting to voice
their opinions and ask
questions.

1. General Meetings of Shareholders
held in the reporting period in the
form of a meeting (i.e. joint presence
of shareholders) provided for
sufficient time for making reports
on and for discussing agenda items.
The shareholders were given the
opportunity to voice their opinions
and ask questions on agenda items.

This principle
is complied
with.

—

2. The Company invited nominees
to the Company’s governing
and control bodies and took all
necessary actions to ensure their
participation in the General Meeting
of Shareholders at which their
nominations were put to vote. The
candidates for the management and
control bodies of the Company who
were present at the General Meeting
of shareholders were available to
answer questions from shareholders.

3.The Company's sole executive
body, person in charge of
accounting, Chairman or other
members of the Audit Committee
of the Board of Directors were
available to answer questions
of shareholders at the General
Meetings of Shareholders held in
the reporting period.

4. In the reporting period the
Company used telecommunication
means for the shareholders to
participate remotely in the General
Meetings or the Board of Directors
passed a justified decision that
there was no need (possibility) to use
such means in the reporting period.

This principle
is complied
with.

—

This principle
is complied
with.

—

This principle
is complied
with.

—

1.2

Shareholders are given equal and fair opportunities to share profits of the Company in the form of dividends.

1.2.1

The Company has
designed and put in
place a transparent
and clear mechanism to
determine the dividend
amount and payout
procedure.

1.The Company's Regulations on the
dividend policy is approved by the
Board of Directors and disclosed
through the Company's website.

This principle
is complied
with.

—

2. If the dividend policy of the
Company, issuing consolidated
financial statements, uses
reporting figures to determine
the dividend amount, then
relevant provisions of the dividend
policy take into account the
consolidated financial statements.

3. Justification of the proposed
distribution of net profit, including
for dividend payment and the
Company's own needs, and an
assessment of its compliance with
the Company's dividend policy,
with explanations and economic
justification of the need to direct
a particular part of net profit to
the Company's own needs in the
reporting period, was included
in the materials to the General
Meeting of Shareholders, where the
agenda included an item on profit
distribution (including on payment
(declaration) of dividends).

Annual Report 2021. Constructing future energy transition todayCompliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

96–97

No. Corporate Governance

Compliance criteria

Principles

1.2.2 The Company does

not resolve to pay out
dividends if such payout,
while formally compliant
with law, is economically
unjustified and may lead
to a false representation
of the Company’s
performance.

1. The Company's Regulations on
the dividend policy identifies, in
addition to restrictions imposed
by law, the financial and economic
circumstances wherein the
Company shall not resolve to pay
out dividends.

This principle
is complied
with.

—

2.1

2.1.1

1.2.3 The Company does

not allow for dividend
rights of its existing
shareholders to be
impaired.

1. In the reporting period, the
Company did not take any actions
that would lead to the impairment
of the dividend rights of its
existing shareholders.

This principle
is complied
with.

—

1.2.4 The Company makes

every effort to prevent
its shareholders from
using other means to
profit (gain) from the
Company other than
dividends and liquidation
value.

This principle
is complied
with.

1. In the reporting period the
Company's controlling persons did
not use any means of receiving
profit (gain) from the Company
(for example, transfer pricing,
unjustified provision of services
to the Company at an inflated
price by the Company's controlling
person, provision of internal loans
substituting dividends to the
Company's controlling person or to
his or her persons under control)
other than dividends.

This principle is not complied
with as the Company believes
that statutory controls are
sufficient for relevant purposes.
The Company does not transact
with persons under control
by substantial shareholders,
which prevents substantial
shareholders from profiting
(gaining) from the Company.

The Company does not see any
risks in the established practice,
as the system of procurement
procedures introduced in
the Company ensures the
conclusion of contracts on
market terms.

1.3

1.3.1

Corporate governance framework and practices should ensure equality for the shareholders owning the same
type (class) of shares, including minority and non-resident shareholders, and their equitable treatment by the
Company.

The Company has
created conditions for
fair treatment of each
shareholder by the
Company’s governing
and control bodies,
including conditions that
rule out abuse by major
shareholders against
minority shareholders.

1. In the reporting period the
Company's controlling persons
did not allow abusing rights
with respect to the Company's
shareholders; there were
no conflicts between the
Company's controlling persons
and shareholders, and if there
were any, they have been duly
addressed by the Board of
Directors.

This principle
is complied
with.

—

1.3.2 The Company does not

take any actions that
lead or may lead to
artificial redistribution of
corporate control.

1. No quasi-treasury shares were
issued or used to vote in the
reporting period.

This principle
is complied
with.

—

1.4

1.4.

Shareholders are provided with reliable and efficient means of recording their rights to shares and are able
to freely dispose of their shares without any hindrance.

Shareholders are
provided with reliable
and efficient means of
recording their rights
to shares and are able
to freely dispose of
their shares without any
hindrance.

1. The technology used by
the Company's registrar and
the conditions of services
provision are in line with the
needs of the Company and its
shareholders, ensure accounting
of rights to shares and exercise
of shareholders' rights in the most
efficient manner.

This principle
is complied
with.

—

The Board of Directors provides strategic management of the Company, determines key principles of,
and approaches to, setting up a corporate risk management and internal control framework, monitors
performance by the Company’s executive bodies, and performs other key functions.

1. The Board of Directors has the
authority stipulated in the Articles
of Association to appoint and
remove members of executive
bodies and to set out the terms
and conditions of their contracts.

This principle
is not fully
complied
with.

The Board of Directors
is responsible for
appointing and
dismissing executive
bodies, including for
improper performance
of their duties. The
Board of Directors
also ensures that
the Company’s
executive bodies act
in accordance with the
Company’s approved
development strategy
and core lines of
business.

This principle
is not fully
complied
with.

2. In the reporting period, the
nomination/HR committee
reviewed the compliance of
professional qualification, skills
and experience of members
of the executive bodies with
the Company's current and
expected needs determined by
the approved strategy of the
Company.

The issue of determining
the amount of remuneration
paid to the Chairman of the
Management Board based on the
results of the work for the year,
falls withing the authority of the
Board of Directors.

In accordance with the
Company's Articles of
Association, the members of
the Management Board are
elected by the Board of Directors
from among the Company's
employees, solely on the
recommendation of the Chairman
of the Management Board. The
amounts of official salaries and
other terms of employment
contracts with the Company's
employees, including members
of the Management Board, are
determined by the Chairman of
the Management Board taking
into account the parameters
of the Company's business
plan approved by the Board of
Directors in accordance with
the NOVATEK Group Executive
Bodies and other Key Employees
Remuneration And Expense
Reimbursement Policy approved
by the Board of Directors.

The Company considers the
established procedure to be
effective, balanced, not bearing
any risks for the Company and its
shareholders, and does not plan
to change the existing approach.

The Remuneration and
Nomination Committee of the
Board of Directors considers
the compliance of professional
qualification, skills and experience
of the nominees to the
Company’s Management Board.
The compliance of professional
qualification, skills and experience
of the elected members of
the Management Board with
the Company’s current and
expected needs determined
by the approved strategy of
the Company is not assessed
regularly. The Company considers
the established procedure to be
appropriate and does not plan to
change the existing approach.

3. In the reporting period, the Board
of Directors reviewed the report(s)
by the sole executive body or
members of the collective executive
body on the implementation of the
Company’s strategy.

This principle
is complied
with.

—

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

98–99

Principles

2.1.2 The Board of Directors

sets key long-term
targets for the
Company, assesses
and approves its key
performance indicators
and key business goals,
as well as the strategy
and business plans for
the Company’s core
lines of business.

2.1.3 The Board of Directors
defines the Company's
risk management
and internal control
principles and
approaches.

2.1.4 The Board of Directors
determines the
Company’s remuneration
and reimbursement
(compensation) policy
for its directors,
members of executive
bodies and other key
executives.

2.1.5 The Board of Directors
plays a key role in
preventing, identifying
and resolving internal
conflicts between the
Company’s bodies,
shareholders and
employees.

2.1.6 The Board of Directors
plays a key role in
ensuring that the
Company is transparent,
timely and fully discloses
its information, and
provides its shareholders
with unhindered access
to the Company’s
documents.

2.1.7 The Board of Directors

controls the Company’s
corporate governance
practices and plays
a key role in material
corporate events of the
Company.

This principle
is complied
with.

—

This principle
is not fully
complied
with.

In the reporting period, the Audit
Committee did not consider
issues related to the Company's
risk appetite, respectively, the
Company did not comply with
criterion 2 in 2021. The Corporate
Governance Code does not
contain a recommendation
to assess risk appetite
annually. The Company's Board
of Directors or the Audit
Committee reviews the risk
appetite as necessary.

This principle
is complied
with.

—

1. At its meetings in the reporting
period, the Board of Directors
reviewed strategy implementation
and updates, approval of the
Company’s financial and business
plan (budget), and criteria and
performance (including interim)
of the Company’s strategy and
business plans.

1. The Company's risk management
and internal control principles and
approaches are defined by the
Board of Directors and established
the Company's internal documents
that define the risk management
and internal control policy.

2. In the reporting period, the
Board of Directors approved
(reviewed) the amount of risks
(risk appetite) which is acceptable
for the Company; or the Audit
Committee and/or Risk Committee
(if available) considered the
advisability of submitting the issue
of revising the Company's risk
appetite to the approval by the
Board of Directors.

1. The Company developed and
put in place a remuneration and
reimbursement (compensation)
policy (policies), approved by
the Board of Directors, for its
directors, members of executive
bodies and other key executives.

2. In the reporting period, the Board
of Directors discussed matters
related to such policy (policies).

1. The Board of Directors plays a
key role in preventing, identifying
and resolving internal conflicts.

This principle
is complied
with.

—

2. The Company set up mechanisms
to identify transactions leading to
a conflict of interest and to resolve
such conflicts.

1. The Company's internal
documents identify persons
responsible for implementing the
information policy.

This principle
is complied
with.

—

1. In the reporting period the
Board of Directors reviewed the
results of self-assessment and/
or external assessment of the
Company’s corporate governance
practices.

This principle
is complied
with.

—

2.2

The Board of Directors is accountable to the Company’s shareholders.

2.2.1 Performance of the
Board of Directors is
disclosed and made
available to the
shareholders.

2.2.2 The chairman of the

Board of Directors
is available to
communicate with
the Company’s
shareholders.

1. The Company’s annual report for
the reporting period includes the
information on the attendance
of the Board of Directors and
committee meetings by each of
the Board of Directors' members.

2. The annual report discloses key
results of the Board of Directors'
performance assessment (self-
assessment) in the reporting
period.

1. The Company has in place a
transparent procedure enabling
shareholders to address the
chairman of the Board of Directors
and obtain the relevant feedback.

This principle
is complied
with.

—

This principle
is complied
with.

—

2.3

The Board of Directors manages the Company in an efficient and competent manner and make fair and
independent judgments and decisions in line with the best interests of the Company and its shareholders.

2.3.1 Only persons of

impeccable business
and personal reputation
who have knowledge,
expertise and
experience required to
make decisions within
the authority of the
Board of Directors and
essential to perform its
functions in an efficient
way are elected to the
Board of Directors.

2.3.2 The Company’s

directors are elected
via a transparent
procedure that enables
shareholders to obtain
information on nominees
sufficient to judge
on their personal and
professional qualities.

2.3.3 The Board of Directors
has a balanced
membership, including
in terms of directors’
qualifications,
experience, expertise
and business qualities,
and enjoys its
shareholders’ trust.

1. In the reporting period,
the Board of Directors (or its
nomination committee) assessed
nominees to the Board of
Directors for required experience,
knowledge, business reputation,
absence of conflicts of interest,
etc.

This principle
is complied
with.

—

1. Whenever the General Meeting
of shareholders was held in the
reporting period, the agenda
of which included election of
the Board of Directors, the
Company provided shareholders
with the biographical data of
all nominees to the Board of
Directors and the results of
assessing the compliance of
their professional qualifications,
experience and skills with the
Company's current and expected
needs by the Board of Directors
(or its nomination committee),
as well as the information on
whether the nominee meets the
independence criteria set forth in
Recommendations 102–107 of the
Code, as well as the nominees’
written consent to be elected to
the Board of Directors.

1. In the reporting period the
Board of Directors reviewed its
requirements to professional
qualifications, experience and
business skills, and determined
competence level requirements for
the Board of Directors in the short
and long term.

This principle
is complied
with.

—

This principle
is complied
with.

—

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

1. In the reporting period, the
Board of Directors considered
whether the number of directors
met the Company’s needs and
shareholders’ interests.

This principle
is complied
with.

—

2.3.4 The Company has a
sufficient number of
directors to organize
the Board of Directors’
activities in the
most efficient way,
including ability to set
up committees of the
Board of Directors and
enable the Company’s
substantial minority
shareholders to elect a
nominee to the Board of
Directors for whom they
vote.

2.4

The Board of Directors includes a sufficient number of independent directors.

2.4.1 An independent director
is a person who is
sufficiently professional,
experienced and
independent to develop
their own position, and
capable of making
unbiased judgements
in good faith, free
of influence by the
Company’s executive
bodies, individual groups
of shareholders or
other stakeholders. It
should be noted that
a nominee (elected
director) who is related
to the Company, its
substantial shareholder,
substantial counterparty
or competitor of the
Company, or related
to the government,
may not be considered
as independent under
normal circumstances.

2.4.2 The Company

assesses compliance
of nominees to the
Board of Directors and
reviews compliance of
independent directors
with independence
criteria on a regular
basis. In such
assessment, substance
should prevail over form.

1. In the reporting period, all
independent directors met all
independence criteria set out
in Recommendations 102–107
of the Code or were deemed
independent by the Board of
Directors.

This principle
is complied
with.

—

This principle
is complied
with.

—

1. In the reporting period,
the Board of Directors (or its
nomination committee) made a
judgment on independence of
each nominee to the Board of
Directors and provided its opinion
to shareholders.

2. In the reporting period the
Board of Directors (or its
nomination committee) reviewed,
at least once, the independence
of incumbent directors (after their
election).

3. The Company has in place
procedures defining the actions
to be taken by a member of the
Board of Directors if they cease
to be independent, including the
obligation to timely notify the
Board of Directors thereof.

Additional Information

100–101

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

2.4.3 Independent directors

make up at least one
third of the elected
board members.

1. Independent directors make up
at least one third of the Board
members.

Compliance
status

This principle
is not fully
complied
with.

Reasons for non-compliance

Because of the passing of
an independent member of
the board Viktor P. Orlov, the
Company's independent directors
were making up less than a third
of the Board of Directors between
August 23 and December 31, 2021.

In order to maintain full
functionality of the Board's
committees, the audit committee
and the remunerations and
nominations committee
comprising 3 members were
set up at the Board meeting
on December 07, 2021. Two
independent members of the
Board of Directors (Robert
Castaigne and Tatyana Mitrova)
were elected to the committees,
as well as Alexander Natalenko,
Chairman of the Board, who is not
an independent director.

Partial compliance with this
principle is limited in time.
The upcoming annual General
Meeting of shareholders of the
Company is expected to elect
a Board of Directors comprising
the necessary number of
independent directors, and the
newly elected Board of Directors
will form the Audit Committee and
Remunerations and Nominations
Committee, comprising
independent directors only.

In accordance with the
Company’s Articles of
Association, the Regulations on
the Board of Directors and the
Regulations on the Committees
of the Board of Directors, a
large block of issues related to
significant corporate actions
is preliminarily considered by
the Audit Committee and the
Remuneration Committee
consisting of independent
directors. In addition, most of
such decisions shall be approved
by the Board of Directors, if 8
out of 9 directors voted for the
corresponding decision. Thus,
any two independent directors
may block the adoption of an
undesirable decision in their
opinion.

The Company believes that
independent directors have
sufficient capacity to assess
significant corporate actions.

2.4.4 Independent directors
play a key role in
preventing internal
conflicts in the Company
and in ensuring that
the Company performs
material corporate
actions.

1. In the reporting period
independent directors (with
no conflicts of interest) run a
preliminary assessment of material
corporate actions implying a
potential conflict of interests and
submitted the results to the Board
of Directors.

This principle
is not fully
complied
with.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

2.5

The chairperson of the board ensures that the Board of Directors discharges its duties in the most effective
and efficient way.

2.5.1 The Board of Directors
is chaired by an
independent director,
or a senior independent
director supervising
the activities of other
independent directors
and interacting with the
chairman of the Board
of Directors is chosen
from among the elected
independent directors.

1. The Board of Directors is chaired
by an independent director, or
a senior independent director
is appointed from among the
independent directors.

This principle
is not fully
complied
with.

2. The role, rights and duties of
the Chairman of the Board of
Directors (and, if applicable, of
the senior independent director)
are duly set out in the Company’s
internal documents.

The role of independent directors
on the Company's Board of
Directors is very important, since
the Audit Committee and the
Remuneration and Nomination
Committee of the Board of
Directors are comprised of
independent directors only.
Formally, the Chairman of the
Board of Directors is not an
Independent Director. However, the
Chairman of the Board of Directors
meets all independence criteria,
except for his tenure on the Board
of Directors. For chairmanship
purposes, the directors elected
the most experienced of the
Board members who is not an
independent director.

The Company considers the
established procedure to be
balanced and does not plan to
change the existing approach.

2.5.2 The chairman of the

Board of Directors
maintains a constructive
environment at
meetings, enables free
discussion of agenda
items, and supervises
the execution of
resolutions passed by
the Board of Directors.

1. Performance of the Chairman
of the Board of Directors was
assessed as part of assessment
(self-assessment) of the Board
of Directors’ performance in the
reporting period.

This principle
is complied
with.

—

2.5.3 The chairman of the

Board of Directors takes
all steps necessary for
the timely provision
to members of the
Board of Directors of
information required
to pass resolutions on
agenda items.

1. The Company’s internal
documents set out the duty
of the Chairman of the Board
of Directors to take all steps
necessary for the timely
provision of complete and reliable
information on agenda items of
the Board meeting to members of
the Board of Directors.

This principle
is complied
with.

—

2.6

Directors act reasonably and in good faith in the best interests of the Company and its shareholders, on a fully
informed basis and with due care and diligence.

2.6.1 Directors pass

resolutions on a
fully informed basis,
with no conflict of
interest, subject
to equal treatment
of the Company’s
shareholders, and
assuming normal
business risks.

This principle
is complied
with.

—

1. The Company’s internal
documents provide that a director
should notify the Board of Directors
of any existing conflict of interest
as to any agenda item of the
meeting of the Board of Directors
or its committee, prior to discussion
of the relevant agenda item.

2. The Company’s internal
documents provide that a director
should abstain from voting on any
item in connection with which he
has a conflict of interest.

3. The Company has in place a
procedure enabling the Board
of Directors to get professional
advice on matters within its remit
at the expense of the Company.

Additional Information

102–103

Compliance
status

This principle
is complied
with.

Reasons for non-compliance

—

This principle
is complied
with.

—

Principles

2.6.2 The rights and duties

of directors are clearly
stated and incorporated
in the Company’s
internal documents.

2.6.3 Directors have sufficient

time to perform their
duties.

2.6.4 All directors shall have

equal access to the
Company’s documents
and information. Newly
elected directors are
furnished with sufficient
information about
the Company and
performance of the
Board of Directors as
soon as possible.

1. The Company adopted and
published an internal document
that clearly defines the rights and
duties of directors.

1. Individual attendance at Board
and Committee meetings, as well
as sufficient time devoted to
work on the Board of Directors,
including in its committees, was
recorded as part of the procedure
for assessing (self-assessing) the
Board of Directors' performance in
the reporting period.

2. Under the Company’s internal
documents, directors notify
the Board of Directors of their
intentions to be elected to
governing bodies in other entities
(apart from the entities controlled
by the Company), and of their
election to such bodies.

1. In accordance with the
Company's internal documents
directors are entitled to receive
information and documents
they need to perform their
duties related to the Company
and controlled entities, and the
Company's executive bodies
shall ensure provision of relevant
information and documents.

2. The Company has in place a
formalized onboarding program for
newly elected Directors.

2.7 Meetings of the Board of Directors, preparation for such meetings and participation of board members therein

ensure efficient performance by the Board of Directors.

2.7.1 Board meetings are held

as needed, taking into
account the scale of
operations and goals
of the Company at a
particular time.

2.7.2 The Company's internal

regulations stipulate the
procedure to prepare
for and hold the board's
meetings, enabling
the directors to make
proper preparations for
them.

—

1. The Board of Directors held at
least six meetings in the reporting
year.

This principle
is complied
with.

1. The Company has an approved
internal document that describes
the procedure for arranging and
holding meetings of the Board
of Directors and sets out, in
particular, that the notice of the
meeting shall be given, as a rule,
at least five days prior to such
meeting.

2. In the reporting period members
of the Board of Directors absent
from the venue of the meeting
were given an opportunity to
participate in discussions on
agenda items and vote remotely
via video or telephone conference
calls.

Annual Report 2021. Constructing future energy transition todayCompliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

104–105

No. Corporate Governance

Compliance criteria

Principles

2.7.3 The format of the

meeting of the Board of
Directors is determined
taking into account the
importance of items on
the agenda. The most
important matters are
dealt with at meetings
of the Board of
Directors held in person.

1. The Company’s Articles of
Association or internal documents
provide for the most important
matters (as per the list set
out in Recommendation 168 of
the Code) to be passed at in-
person meetings of the Board of
Directors.

This principle
is complied
with.

—

2.7.4 Resolutions on most

important matters
relating to the
Company’s operations
are passed at a
meeting of the Board of
Directors by a qualified
majority or by a majority
of all elected board
members.

1. The Company’s Articles of
Association provides for the most
important matters set out in
Recommendation 170 of the Code
to be passed at a meeting of the
Board of Directors by a qualified
majority of at least three quarters
or by a majority of all elected
board members.

This principle
is not fully
complied
with.

The Company’s Articles of
association do not provide for
resolutions of the Board to be
passed by qualified majority on
the following matters:

• submission to the General

Meeting of matters relating
to the Company’s liquidation

• submission to the General

Meeting of matters relating
to amendments to the
Company’s Articles of
association

• review of material issues

relating to operations of legal
entities controlled by the
Company.

The Company deems sufficient
the existing norm stipulated in
the legislation and the Articles
of Association according to
which decisions on amendments
and additions in the Company's
Articles of Association,
including approval of the latter
in a new wording, as well as
on Company's liquidation,
appointment of a winding up
commission and approval of
the interim and final liquidation
balance shall be made by the
general shareholders meeting by
the three-forths majority of the
votes of shareholders holding
the voting shares and taking
part in the general shareholders
meeting.

The Company considers the
established procedure to be
balanced, not bearing any risks,
and does not plan to change the
existing approach.

2.8

The Board of Directors sets up committees for preliminary consideration of the most important issues related
to the business of the Company.

2.8.1 To preview matters

related to controlling
the Company’s financial
and business activities,
it is recommended
to set up an audit
committee comprised of
independent directors.

2.8.2 To preview matters
related to adopting
an efficient and
transparent
remuneration scheme, a
remuneration committee
is set up, comprised of
independent directors
and headed by an
independent director
who is not the chairman
of the Board of
Directors.

2.8.3 To preview matters

related to talent
management
(succession planning),
professional
composition and
efficiency of the
Board of Directors,
a nomination (HR)
committee is set
up, predominantly
comprised of
independent directors.

1. The Board of Directors has set
up an audit committee comprised
solely of independent directors.

This principle
is not fully
complied
with.

See comment to item 2.4.3.

This principle
is complied
with.

—

2. The Company’s internal
documents set out the tasks
of the audit committee,
including those listed in
Recommendation 172 of the Code.

3. At least one member of the
audit committee represented
by an independent director has
experience and knowledge of
preparing, analyzing, assessing
and auditing accounting (financial)
statements.

4. Meetings of the audit
committee were held at least once
a quarter during the reporting
period.

1. The Board of Directors has set
up a remuneration committee
comprised solely of independent
directors.

This principle
is not fully
complied
with.

See comment to item 2.4.3.

2. The Remuneration Committee
is headed by an independent
director who is not the Chairman
of the Board of Directors.

This principle
is complied
with.

—

3. The Company's internal
documents set out the tasks of
the Remuneration committee,
including those listed in
Recommendation 180 of the Code,
as well as events (circumstances)
upon the occurrence of which
the Remuneration Committee
considers reviewing the Company's
policy on remunerating its
directors, executive body members
and other key executives.

1. The Board of Directors
has set up a Nomination
Committee (its tasks listed in
Recommendation 186 of the Code
are fulfilled by another committee)
predominantly comprised of
independent directors.

2. The Company’s internal
documents set out the tasks
of the Nomination Committee
(or the tasks of the committee
with combined functions),
including those listed in
Recommendation 186 of the Code.

This principle
is not
complied
with.

Due to the fact that this
criteria was recommended
by the Bank of Russia at the
end of December 2021, the
Company had no opportunity
to assess the possibility of its
implementation.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

106–107

2.8.4 Taking into account
the Company’s
scope of business
and level of risks, the
Company’s Board of
Directors made sure
that the composition
of its committees
is fully in line with
Company’s business
goals. Additional
committees were either
set up or not deemed
necessary (strategy
committee, corporate
governance committee,
ethics committee,
risk management
committee, budget
committee, health,
safety and environment
committee, etc.).

2.8.5 Committees are

composed so as to
enable comprehensive
discussions of matters
under preview, taking
into account the
diversity of opinions.

3. To form a Board of Directors
that best meets the goals and
objectives of the Company,
the Nomination Committee,
independently or together with
other committees of the Board
of Directors or the Company's
division authorized to interact
with shareholders, organized
interaction with shareholders in
the reporting period, not limited
to major shareholders only, with
a view to select nominees to the
Company's Board of Directors.

1. In the reporting period, the
Company's Board of Directors
considered whether the structure
of the Board of Directors was
consistent with the scope and
nature, goals and needs, and risk
profile of the Company. Additional
committees were either set up or
not deemed necessary.

This principle
is complied
with.

—

This principle
is complied
with.

—

1. The Audit Committee, the
Remuneration Committee, the
Nomination Committee (or the
relevant committee with combined
functions) were headed in the
reporting period by independent
directors.

2. The Company’s internal
documents (policies) include
provisions stipulating that
persons who are not members
of the Audit Committee, the
Nomination Committee (or the
relevant committee with combined
functions) and the Remuneration
committee may attend committee
meetings only by invitation of
the Chairman of the respective
committee.

2.8.6 Committee chairmen
inform the Board
of Directors and its
chairman on the work of
their committees on a
regular basis.

1. During the reporting period,
committee chairmen reported
regularly to the Board of Directors
on the work of committees.

This principle
is complied
with.

—

2.9

2.9.1

The Board of Directors ensures performance assessment of the Board of Directors, its committees
and members of the Board of Directors.

This principle
is complied
with.

—

The Board of Directors’
performance
assessment is aimed
at determining the
efficiency of the
Board of Directors,
its committees and
members, consistency
of their work with the
Company’s development
requirements, as well as
bolstering the work of
the Board of Directors
and identifying areas for
improvement.

1. The Company's internal
documents outline the procedures
for performance assessment
(self-assessment) of the Board of
Directors.

2. Performance assessment
(self-assessment) of the Board of
Directors carried out in the reporting
period included performance
assessment of the committees,
each individual member of the
Board of Directors, and the Board
of Directors in general.

3. Results of performance
assessment (self-assessment)
of the Board of Directors carried
out in the reporting period were
reviewed at the in-person meeting
of the Board.

1. The Company engaged an
external advisor to conduct an
independent assessment of the
Board of Directors’ performance
at least once over the last three
reporting periods.

This principle
is complied
with.

—

2.9.2 Performance of the
Board of Directors,
its committees and
directors is assessed on
a regular basis at least
once a year. An external
organization (advisor)
is engaged at least
once in three years to
conduct an independent
assessment of the
Board of Directors’
performance.

3.1

3.1.1

The Company’s corporate secretary ensures efficient ongoing interaction with shareholders, coordinates the
Company’s efforts to protect shareholder rights and interests and supports the activities of the Board of
Directors.

The corporate secretary
has the knowledge,
experience and
qualifications sufficient
to perform his/her
duties, as well as an
impeccable reputation
and the trust of
shareholders.

1. The biographical data (including
age, education, qualification, track
record) of the corporate secretary
as well as information on positions in
other legal entities' governing bodies
held by the corporate secretary for
at least 5 most recent years are
published on the corporate website
and in the Company’s annual report.

This principle
is complied
with.

—

3.1.2 The corporate

secretary is sufficiently
independent of the
Company’s executive
bodies and has the
powers and resources
required to perform his/
her tasks.

1. The Company has adopted and
published an internal document –
regulations on the corporate
secretary.

This principle
is complied
with.

—

2. The Board of Directors approves
the nomination for the corporate
secretary position and terminates
the corporate secretary's powers,
decides on the payment of
additional remuneration to the
corporate secretary.

3. Pursuant to the Company's internal
documents, the corporate secretary
may seek and obtain the Company's
documents and information from
the Company's governing bodies,
business units and officials.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

Additional Information

108–109

4.1

4.1.1

Remuneration paid by the Company is sufficient to attract, motivate and retain persons who have
competencies and qualifications required by the Company. Directors, executive body members and other key
managers are remunerated as per the Company's remuneration policy.

1. The remuneration of the
Company's Board of Directors,
executive bodies, and other key
executives is set forth based
on benchmarks for comparable
companies' remuneration level.

This principle
is complied
with.

—

The amount of
remuneration paid by the
Company to members of
the Board of Directors,
executive bodies and
other key executives
creates sufficient
incentives for them to
work efficiently, while
enabling the Company
to engage and retain
competent and qualified
specialists. At the same
time, the Company
avoids unnecessarily high
remuneration, as well as
unjustifiably large gaps
between remunerations
of the above persons
and the Company’s
employees.

This principle
is complied
with.

—

1. During the reporting period,
the remuneration committee
considered the remuneration
policy (policies) and/or the
practical aspects of its (their)
introduction, assessed their
efficiency and transparency,
and presented relevant
recommendations to revise the
same to the Board of Directors as
required.

This principle
is complied
with.

—

1. The Company’s remuneration
policy (policies) includes (include)
transparent mechanisms for
determining the amount of
remuneration due to members of
the Board of Directors, executive
bodies and other key executives
of the Company, and regulates
(regulate) all types of expenses,
benefits and privileges provided to
such persons.

1. The remuneration policy
(policies) defines (define) the
rules for reimbursement of costs
incurred by members of the Board
of Directors, executive bodies
and other key executives of the
Company.

This principle
is complied
with.

—

4.1.2 The Company’s

remuneration policy
is developed by the
remuneration committee
and approved by the
Board of Directors. The
Board of Directors,
assisted by the
remuneration committee,
ensures control over
the introduction and
implementation of the
Company’s remuneration
policy, revising and
amending it as required.

4.1.3 The Company’s

remuneration policy
includes transparent
mechanisms for
determining the amount
of remuneration due to
members of the Board
of Directors, executive
bodies and other key
executives of the
Company, and regulates
all types of expenses,
benefits and privileges
provided to such
persons.

4.1.4 The Company defines a
policy on reimbursement
(compensation) of
costs detailing a list of
reimbursable expenses
and specifying service
levels that members of
the Board of Directors,
executive bodies and
other key executives of
the Company can claim.
Such policy can make
part of the Company’s
remuneration policy.

4.2

Directors' remuneration ensureS that their financial interests are aligned with long-term financial interests
of shareholders.

4.2.1 The Company pays fixed

annual remuneration
to members of the
Board of Directors. The
Company does not
pay remuneration for
attending particular
meetings of the Board
of Directors or its
committees.

The Company does
not apply any form of
short-term motivation
or additional financial
incentive for members of
the Board of Directors.

4.2.2 Long-term ownership of

the Company’s shares
helps align the financial
interests of members of
the Board of Directors
with long-term interests
of shareholders to the
utmost. At the same
time, the Company
does not link the right
to dispose of shares to
performance targets,
and members of the
Board of Directors do
not participate in stock
option plans.

4.2.3 The Company does
not provide for any
extra payments or
compensations in
the event of early
termination of office of
members of the Board
of Directors resulting
from the change of
control or any other
reasons whatsoever.

1. In the reporting period, the
Company paid remuneration
to members of the Board of
Directors as per the Company's
remuneration policy.

2. In the reporting period, the
Company did not apply any
form of short-term motivation
or additional financial incentive
contingent on the Company's
performance results (indicators)
for members of the Board of
Directors. No remuneration was
paid for attending particular
meetings of the Board of Directors
or its committees.

1. If the Company’s internal
document(s) – the remuneration
policy (policies) stipulates
(stipulate) provision of the
Company’s shares to members
of the Board of Directors, clear
rules for share ownership by
board members are defined and
disclosed, aimed at stimulating
long-term ownership of such
shares.

This principle
is complied
with.

—

This principle
is complied
with.

Not applicable, since the
Regulations on Remuneration
and Compensations Payable to
Members of PAO NOVATEK Board
of Directors does not provide for
remuneration of the directors
with Company shares.

1. The Company does not provide
for any extra payments or
compensations in the event of
early termination of office of
members of the Board of Directors
resulting from the change of
control or any other reasons
whatsoever.

This principle
is complied
with.

—

4.3

Remuneration of executive body members and other key managers is linked to the Company's results and their
personal contribution thereto.

4.3.1 Remuneration due to

members of executive
bodies and other key
executives of the
Company is determined
in a manner providing
for reasonable and
justified ratio of the
fixed and variable
parts of remuneration,
depending on
the Company’s
performance and the
employee’s personal
contribution.

1. In the reporting period, annual
performance results approved by
the Board of Directors were used
to determine the amount of the
variable part of remuneration due
to members of executive bodies
and other key executives of the
Company.

2. During the latest assessment
of the system of remuneration
for members of executive bodies
and other key executives of the
Company, the Board of Directors
(remuneration committee) made
sure that the Company applies
efficient ratio of the fixed and
variable parts of remuneration.

This principle
is complied
with.

The procedure for defining
and payment of bonuses to
members of the Management
Board and other key executives
existing in the Company does
not allow illegal receipt of
bonus payments by the persons
named. The Company believes
the executive bodies' members'
civil liability norms set out in the
applicable law to be sufficient.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

3. In order to to avoid incentivizing
excessively risky management
decisions, the Company's risks
are factored in when establishing
the remuneration for members
of executive bodies and other
key executives of the Company is
established.

1. If the Company has in place a
long-term incentive program for
members of executive bodies
and other key executives of the
Company with the use of the
Company’s shares (financial
instruments based on the
Company’s shares), the program
implies that the right to dispose
of such shares and other financial
instruments takes effect at least
three years after such shares or
other financial instruments are
granted. The right to dispose of
such shares or other financial
instruments is linked to the
Company’s performance targets.

1. In the reporting period, the
compensation (golden parachute)
payable by the Company in case of
early termination of the powers of
executive bodies or key executives
at the Company’s initiative,
provided that there have been no
actions in bad faith on their part,
did not exceed the double amount
of the fixed part of their annual
remuneration.

4.3.2 The Company put in

place a long-term
incentive programme for
members of executive
bodies and other key
executives of the
Company with the
use of the Company’s
shares (options and
other derivative
instruments where the
Company’s shares are
the underlying asset).

4.3.3 The compensation
(golden parachute)
payable by the
Company in case of
early termination of
powers of members
of executive bodies or
key executives at the
Company’s initiative,
provided that there
have been no actions in
bad faith on their part,
does not exceed the
double amount of the
fixed part of their annual
remuneration

This principle
is not
complied
with.

Currently, The Company
does not consider necessary
implementing a long-term
incentive program for members
of executive bodies and other
key executives of the Company
with the use of the Company’s
shares (financial instruments
based on the Company’s
shares).

This principle
is complied
with.

—

The Company put in place an effective risk management and internal control system to guarantee, in a
reasonable manner, fulfillment of the Company's goals.

5.1

5.1.1

The Board of Directors
of the Company has
defined the Company's
risk management
and internal control
principles and
approaches.

1. Functions of different
management bodies and
divisions of the Company in the
risk management and internal
controls are clearly defined in the
Company’s internal documents /
relevant policy approved by the
Board of Directors.

5.1.2 The Company’s

executive bodies
ensure establishment
and continuous
operation of efficient
risk management and
internal controls in the
Company.

1. The company’s executive
bodies ensured the distribution of
duties, powers and responsibility
related to risk management and
internal controls between the
heads (managers) of divisions and
departments accountable to them.

This principle
is complied
with.

—

This principle
is complied
with.

—

Additional Information

110–111

Compliance
status

Reasons for non-compliance

This principle
is complied
with.

—

This principle
is complied
with.

—

Principles

5.1.3 The Company’s risk

management and
internal controls
ensure an objective,
fair and clear view of
the current state and
future prospects of the
Company, the integrity
and transparency of the
Company’s reporting,
as well as reasonable
and acceptable risk
exposure.

5.1.4 The Company’s Board
of Directors shall take
necessary measures
to make sure that
the Company’s risk
management and
internal controls are
consistent with the
principles of, and
approaches to, its
setup determined by
the Board of Directors,
and that the system is
functioning efficiently.

1. The Company has an approved
anti-corruption policy.

2. The Company established a
safe, confidential and accessible
method (hotline) of notifying the
Board of Directors or the board’s
audit committee of breaches
of any violations of the law, the
Company’s internal procedures
and code of ethics.

1. In the reporting period, the
Board of Directors (Audit
Committee and/or Risk Committee
(if any) arranged assessment of
the reliability and efficiency of
the risk management and internal
controls.

2. In the reporting period, the
Board of Directors considered
results of the assessment of the
reliability and efficiency of the
Company's risk management and
internal controls, and data on the
results of the consideration are
included in the Company's annual
report.

5.2

The Company arranges for an internal audit, to assess reliability and performance of the risk management and
internal control system on a regular and independent basis.

5.2.1 The Company set up
a separate business
unit or engaged an
independent external
organization to carry
out internal audits.

Functional and
administrative reporting
lines of the internal
audit department are
delineated. The internal
audit unit functionally
reports to the Board of
Directors.

5.2.2 The internal audit

division assesses the
performance of the
internal controls, risk
management, and
corporate governance.
The Company applies
generally accepted
standards of internal
audit.

1. To perform internal audits,
the Company set up a separate
business unit – internal audit
division, functionally reporting
to the Board of Directors, or
engaged an independent external
organization with the same line of
reporting.

This principle
is complied
with.

—

This principle
is complied
with.

—

1. In the reporting period,
assessment of the reliability and
efficiency of the risk management
and internal controls was made as
part of the internal audit.

1. In the reporting period,
assessment of the corporate
governance framework (practices)
was made within the internal audit
framework, including information
interaction procedures (i.a. those
concerning internal control and risk
management) at all levels of the
Company's governance, including
interaction with stakeholders.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
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Reasons for non-compliance

No. Corporate Governance

Compliance criteria

6.1

The Company and its operations are transparent for its shareholders, investors and other stakeholders.

6.1.1

The Company has
developed and
implemented an
information policy
ensuring an efficient
exchange of information
by the Company, its
shareholders, investors,
and other stakeholders.

6.1.2 The Company discloses
information on its
corporate governance
and practice, including
detailed information
on compliance with
the principles and
recommendations of the
Code.

1. The Company’s Board of
Directors approved an information
policy developed in accordance
with the Code’s recommendations.

This principle
is complied
with.

—

This principle
is complied
with.

—

2. In the reporting period, the
Board of Directors (or one of its
committees) considered efficiency
of the exchange of information of
Company, shareholders, investors
and other stakeholders and the
feasibility (necessity) to revise the
Company's information policy.

1. The Company discloses
information on its corporate
governance and general principles
of corporate governance, including
disclosure on its website.

2. The Company discloses
information on the membership
of its executive bodies and Board
of Directors, independence of the
directors and their membership
in the board’s committees (as
defined by the Code).

3. If the Company has a controlling
person, the Company publishes a
memorandum of the controlling
person setting out this person’s
plans for the Company’s
corporate governance.

6.2

The Company discloses up-to-date, complete and reliable information on its operations in due time, to enable
its shareholders and investors to make informed decisions.

6.2.1 The Company discloses
information based
on the principles of
regularity, consistency
and promptness, as
well as availability,
reliability, completeness
and comparability of
disclosed data.

This principle
is complied
with.

—

1. The Company has defined
the procedure to align all the
structural units and employees
of the Company whose activities
are related to or may require
information disclosure.

2. If the Company’s securities
are traded on foreign organized
markets, the Company ensured
concerted and equivalent
disclosure of material information
in the Russian Federation and in
the said markets in the reporting
year.

3. If foreign shareholders hold a
material portion of the Company’s
shares, information was disclosed
both in the Russian language
and one of the most widely used
foreign languages in the reporting
period.

Additional Information

112–113

Principles

6.2.2 The Company avoids a

formalistic approach to
information disclosure
and discloses material
information on its
operations, even if
disclosure of such
information is not
required by law.

6.2.3 The Company’s annual

report, as one of the
most important tools of
its information exchange
with shareholders and
other interested parties,
contains information
enabling assessment of
the Company’s annual
performance results.

1. The Company's information
policy sets out approaches to
disclosing information information
on other events (actions) that
have a material impact on the
Company’s evaluation and the
price of its securities, disclosing
information on which is not
required by law.

2. The Company discloses
information on its capital
structure in accordance with
recommendation 290 of the Code
both in the annual report and on
the Company’s website.

3. The Company makes disclosures
on controlled entities that are
material to the Company, including
disclosures on their core business
areas, mechanisms ensuring
their accountability, the Board
of Directors' authority in respect
of shaping the strategy and
assessing the performance of
controlled entities.

4. The Company makes
non-financial disclosures
through the sustainability
report, the environmental
report, the corporate social
responsibility report or any
other report containing non-
financial information, including
environmental aspects (e. g.
ecological aspects and aspects
related to climate change),
social aspects, and governance
aspects, excluding the report of
the issuer of securities and the
annual report of the joint-stock
Company.

1. The Company’s annual report
contains information on the audit
committee's assessment of third-
party and internal audit process
efficiency.

2. The Company’s annual report
contains information on the
Company's environmental policy
and social policy.

Compliance
status

This principle
is not fully
complied
with.

Reasons for non-compliance

The Company discloses its
capital structure to the extent
required by the applicable laws.

This principle
is complied
with.

—

6.3

The Company provides information and documents requested by its shareholders in accordance with principles
of fairness and ease of access.

6.3.1 The Company provides
information and
documents requested
by its shareholders
in accordance with
principles of fairness
and ease of access.

1. The Company's information
policy (internal documents
governing the information policy)
sets forth an easy procedure for
providing shareholders with access
to the Company's information and
documents upon request.

This principle
is not fully
complied
with.

The Company’s Information
Policy determines an easy
procedure for providing
shareholders with access to
information, with the exception
of information on legal entities
controlled by the Company,
the provision of which is not
prescribed for by law.

Annual Report 2021. Constructing future energy transition todayNo. Corporate Governance

Compliance criteria

Principles

Compliance
status

Reasons for non-compliance

No. Corporate Governance

Compliance criteria

2. The information policy
(internal documents governing
the information policy) makes
provisions for the Company to use
necessary efforts to obtain from
the Company-controlled entities
the information on the relevant
Company-controlled entities as
requested by a shareholder.

1. In the reporting period,
the Company did not refuse
any shareholder requests for
information, or such refusals were
justified.

2. In cases defined by the
information policy, shareholders
are warned of the confidential
nature of the information
and undertake to maintain its
confidentiality.

This principle
is complied
with.

—

6.3.2 When providing
information to
shareholders, the
Company shall ensure
reasonable balance
between the interests of
particular shareholders
and its own interests
consisting in preserving
the confidentiality of
important commercial
information which may
materially affect its
competitiveness.

7.1

Actions which will or may materially affect the Company's share capital structure and its financial position and
accordingly the position of its shareholders (“material corporate actions”) are taken on fair terms ensuring
that the rights and interests of the shareholders and other stakeholders are observed.

1. The Company’s Articles of
Association include a list of
(criteria for) transactions or other
actions deemed to be material
corporate actions. According
to the Company’s Articles of
Association, resolutions on
material corporate actions are
referred to the jurisdiction of
the Board of Directors. When
execution of such corporate
actions is expressly referred by law
to the jurisdiction of the general
shareholders meeting, the Board
of Directors presents relevant
recommendations to shareholders.

This principle
is not fully
complied
with.

The Company’s Articles of
Association do not contain a
separate section with a list of
significant corporate actions. At
the same time, decision-making
on issues related to significant
corporate actions falls within
the authority of the Board of
Directors.

The Company does not see any
risks in this.

1. The Company has in place a
procedure enabling independent
directors to express their opinions
on material corporate actions
prior to approval thereof.

This principle
is not fully
complied
with.

Relevant comments are provided
in items 2.4.4. and 2.5.1 hereof.

7.1.1 Material corporate

actions include
restructuring of the
Company, acquisition
of 30% or more of the
Company’s voting shares
(takeover), execution by
the Company of major
transactions, increase
or decrease of the
Company’s authorised
capital, listing or de-
listing of the Company’s
shares, as well as
other actions which
may lead to material
changes in the rights of
shareholders or violation
of their interests. The
Company’s Articles of
Association provide a list
(criteria) of transactions
or other actions
classified as material
corporate actions within
the authority of the
Company’s Board of
Directors.

The Board of
Directors plays a
key role in passing
resolutions or making
recommendations on
material corporate
actions, relying on
the opinions of the
Company’s independent
directors.

7.1.2

Additional Information

114–115

Compliance
status

Reasons for non-compliance

This principle
is complied
with.

—

1. Due to specifics of the
Company’s operations, the
Company’s Articles of Association
stipulate that the Board of
Directors has the jurisdiction over
the approval of other transactions
that are material to the Company
in addition to the transactions set
forth in the legislation.

2. All material corporate actions
in the reporting period were duly
approved before they were taken.

Principles

7.1.3 When taking material

corporate actions which
would affect rights or
legitimate interests
of shareholders, equal
terms and conditions
are guaranteed for all
shareholders; if the
statutory procedure
designed to protect
shareholders’ rights
proves insufficient,
additional measures are
taken to protect their
rights and legitimate
interests. In doing so,
the Company is guided
by the corporate
governance principles
set forth in the Code,
as well as by formal
statutory requirements.

7.2

7.2.1

The Company provides a procedure for taking material corporate actions that would enable its shareholders
to receive full information about such actions in due time and influence them, and also guarantee that the
shareholder rights are observed and duly protected when such actions are taken.

Information about
material corporate
actions is disclosed
with explanations of the
grounds, circumstances
and consequences.

1. If the Company performed
material corporate actions during
the reporting period, the Company
disclosed, timely and in detail,
information on such actions,
including the reasons, conditions
and consequences of such actions
for shareholders.

This principle
is complied
with.

—

7.2.2 Rules and procedures

related to material
corporate actions taken
by the Company are set
out in the Company’s
internal documents.

1. The Company’s internal
documents define the cases
and a procedure for engaging an
appraiser to estimate the value
of assets either disposed of or
acquired in a major transaction or
a related-party transaction.

This principle
is not
complied
with.

The need to involve an
appraiser for the valuation
of the purchase price of the
Company's shares is provided
by the current legislation.
There is no need to duplicate
this requirement in the internal
documents of the Company.

2. The Company’s internal
documents set out a procedure
for engaging an appraiser to
estimate the value of shares
acquired and redeemed by the
Company.

3. If there is no formal interest of a
member of the Board of Directors,
the sole executive body, a member
of the collegial executive body of
the Company or a person being
the Company's controlling person
or a person entitled to give the
Company binding instructions, in
the Company's transactions, but
if there is a conflict of interest
or other actual interest of them,
the internal documents of the
Company provide that such
persons shall not participate in
the voting on the approval of such
transaction.

Annual Report 2021. Constructing future energy transition todayAdditional Information

116–117

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 included 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-looking statements. Forward-
looking statements include statements 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; developments 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
reasonable when made, these assumptions are
inherently subject to significant uncertainties and
contingencies, which are difficult 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 differ materially from those discussed in the
forward-looking statements include: :

• changes in the balance of oil and gas supply and

demand in Russia and Europe;

and/or independent petroleum reservoir
engineers;

• inherent uncertainties in interpreting geophysical

data;

• changes to project schedules and estimated

completion dates;

• our success in identifying and managing risks

to our businesses;

• the effects of changes to the Russian legal

framework concerning currently held and any
newly acquired oil and gas production licenses;

• changes in political, social, legal or economic

conditions in Russia and the CIS;

• the effects of technological changes;

• the effects 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 statements 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 representation, 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 opinions contained in this
document are provided as at the date of this
review and are subject to change without notice..

• the effects of domestic and international oil and
gas price volatility and changes in regulatory
conditions, including prices and taxes;

Conversion Factors

• the effects of competition in the domestic and

1,000 cubic meters of gas = 6.54 boe.

export oil and gas markets;

• our ability to successfully implement any of our

business strategies;

To convert crude oil and gas condensate reserves
from tons to barrels we used various coefficients
depending on the liquids density at each field.

• the impact of our expansion on our revenue

potential, cost basis and margins;

• our ability to produce target volumes in the

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

• the effects of changes to our capital

expenditure projections on the growth of our
production;

• potentially lower production levels in the future
than currently estimated by our management

Terms and Abbreviations

Mentions in this Annual Report of “PAO NOVATEK”,
“NOVATEK”, “the Company”, “we” and “our” refer to
PAO NOVATEK and/or its subsidiaries (according to
IFRS methodology) and/or joint ventures (accounted
for on an equity basis according to IFRS standards),
depending upon the context, in which the terms are
used.

barrel

one stock tank barrel, or 42 US gallons of liquid
volume

bcm

boe

billion cubic meters

barrels of oil equivalent

kilometer(s)

mboe

thousand boe

mcm

thousand cubic meters

thousand metric tons

mmboe million boe

mmcm million cubic meters

mmt

million metric tons

mmtpa million metric tons per annum

mtpa

thousand metric tons per annum

ton

CCS

CDP

ESG

GBS

GDR

GHG

LPG

LNG

MGP

NGL

OAO

OHS

metric ton

Carbon capture and storage

Carbon Disclosure Project

Environmental, Social, Governance

Gravity-based structures

Global Depositary Receipts

Greenhouse gases

License area

Liquified petroleum gases

Liquified natural gas

Methane Guiding Principles

Natural gas liquids

Open joint-stock company

Occupational health and safety

OOO

Limited liability company

NSR

PAO

Northern Sea Route

Public joint-stock company

PRMS

Petroleum Resources Management System

SEC

TCFD

Russian rouble

United States Securities and Exchange
Commission

Task Force on Climate-related Financial
Disclosures

UGSS

Unified Gas Supply System

United Nations

YNAO

Yamal-Nenets Autonomous Region

Annual Report 2021. Constructing future energy transition todayAPPROVED

by a resolution of the annual
General Meeting of Shareholders
of PAO NOVATEK
on 21 April 2022
Minutes No.138

PRE-APPROVED

by a resolution
of the Board of Directors
of PAO NOVATEK
on 18 March 2022
Minutes No.252

DATA ACCURACY CERTIFIED

by PAO NOVATEK’s Revision Commission
on 4 March 2022

Contact Information

Office in Tarko-Sale

GDR program Administrator

The Bank of New York Mellon,
Depositary Receipts
240 Greenwich Street, New York,
NY 10286, USA
New York +1 212 815 4158
London +44 207 163 7512
Moscow +7 495 967 3110

Independent Auditor

AO PricewaterhouseCoopers Audit
White Square Office 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/ru/ (Russian version)
www.novatek.ru/en/ (English version)

22-A, Pobedy Street, 629850,
Tarko-Sale, Purovsky district,
Yamal-Nenets Autonomous Region, Russia

Office 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

IRC – R.O.S.T.
18/5B office IX, Stromynka Street,
Moscow, Russia 107076
Tel: +7 495 989-76-50
Fax: +7 495 780-73-67
E-mail: info@rrost.ru

Annual Report 2021. Constructing future energy transition today