Annual Report 2022
Taking care
of what really
matters
p. 08
of what really
matters
Taking care
of our employees
of our partners
and consumers
of local
communities
01.
About the Company
02. Strategy Review
04. Sustainable
Development
03. Review of Operating
Results
05. Management and
Corporate Governance
06. Additional
Information
14
Key Indicators
16
NOVATEK's operations
18
2022 Key Events
and Achievements
66
Environmental Protection
68
Occupational Health and
Safety
74
Human Resources
79
Social Policy and Charity
90
Corporate Governance
System
92
General Meeting
of Shareholders
92
Board of Directors
95
Board Committees
98
Management Board
98
Remuneration to the Board
of Directors and
the Management Board
99
Risk Management and
Internal Control System
106
Revision Commission
107
Corporate Ethics and
Compliance
109
External Auditor
109
Share Capital
110
Dividends
111
Information Transparency
114
Key Business Risks
120
Report on Major
and Interested-party
Transactions that
the Company Did
in the Reporting Year
120
Corporate Governance
Code Compliance Report
141
Forward-looking
Statements
143
Terms and Abbreviations
143
Conversion Factors
144
Contact Information
22
NOVATEK at a Glance 2022
24
Natural Gas and LNG
Market Overview
26
Strategy
28
Business Model
30
Sustainable Development
Priorities
34
Hydrocarbon Resource Base
36
Licenses
37
Hydrocarbon Reserves
39
Geological Exploration
42
Laboratory and Research
Center
44
Field Development
and Construction
45
Hydrocarbon Production
46
LNG Projects
58
Processing of Gas
Condensate
60
Natural Gas Sales
63
Liquid Hydrocarbons Sales
04
Letter to Shareholders
HOW TO USE THE INTERACTIVE REPORT
Back to contents
Previous page
Next page
Link to more detailed
information in the Report
p. 16
Link to our website's materials
www.novatek.ru/en/
To download the Sustainability
Report 2022 at our website
p. 06
p. 10
The theme for NOVATEK’s Annual Review 2022
is “Taking care of what really matters”.
Given the past year’s challenges, the Company was
focused on what is truly important: caring of employees,
continuous operations of production facilities, support
of local communities and relations with our partners.
We continued to implement our corporate strategy,
actively developed our current and prospective projects,
proving ourselves as a responsible and reliable business
partner, employer and supplier.
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Letter to Shareholders
“TAKING CARE OF WHAT REALLY MATTERS” is our underlying
theme for our latest Annual Report 2022. During the past
year, we focused on the crucially important items to maintain
our operations and deliver on our sustainability goals. We
strengthened the support of our employees and the local
communities where we operate while continuing active
development of the Company’s strategic projects, proving
ourselves to the global community as a responsible and reliable
business partner, employer, and supplier. Throughout the year,
we continued implementing NOVATEK’s Corporate Strategy up to
2030, adhering to responsible business conduct principles and
demonstrating strong results of operations.
The landmark achievement for NOVATEK in 2022 was the
progress achieved at our unique LNG Construction Center in the
Murmansk Region, the world’s first facility for mass production
of high-tonnage natural gas liquefaction trains on gravity-
based structures.
The facility represents our commitment to build an LNG Center
of excellence in Russia, developing in-house LNG technical
expertise and contributing to the economic development of
our country. We completed the construction of the workshop
for the final assembly of LNG modules, being the largest
production workshop in Russia in terms of the size of internal
dimensions. Over 19 thousand workers are employed by the
Center along with 800 enterprises across all of Russia, with
more than 80 thousand jobs participating in the production
value chain. Commissioning works at the first GBS of the Arctic
LNG 2 project is now in process at the LNG Construction Center,
while the modules of the second and third trains are being
assembled. At the end of 2022, the overall estimated progress
on Arctic LNG 2 was 73%, with the estimated progress on the
first GBS-based LNG train was 95%.
Our flagship Yamal LNG plant has
consistently outperformed its nameplate
capacity and achieved a capacity
utilization rate of 120% in 2022. The
Project’s 4th LNG production train
utilizing our patented Arctic Cascade
gas liquefaction technology confirmed
its reliable operations and high energy
efficiency during the year. In May 2022,
Yamal LNG reached a significant milestone
by shipping the Project’s one-thousandth
anniversary LNG cargo since the plant
launch in December 2017. This important
milestone was reached in only 4.5 years
of operations, representing a significant
achievement in the global LNG industry.
During the year, the Yamal LNG dispatched
284 cargos or almost 21 million tons
of LNG.
Active exploration works on the Gydan
and Yamal peninsulas, as well as in
the UGSS zone remains our strategic
priority to monetize our resource
base and to support our future LNG
platform and our current domestic gas
business. During the reporting period,
our reserve replacement rate amounted
to 282%. As of 31 December 2022, our
overall hydrocarbon proved reserves(1)
increased to 17,571 million barrels of oil
equivalent (boe) under the SEC reserve
methodology, including 2,431 billion cubic
meters (bcm) of natural gas and 194
million tons of liquid hydrocarbons.
Our 2022 hydrocarbon production
totaled 638.7 million boe, including
82.14 bcm of natural gas and 11.9 million
tons of liquids (gas condensate
and crude oil). The commissioning
of new production capacities
(the Kharbeyskoye field of the North-
Russkiy cluster in 4Q 2021 and fields
of the Yevo-Yakhinskiy cluster in
2Q 2022), as well as the launch of
the fourth train at Yamal LNG plant
in 2Q 2021 and achievement of higher
productivity of the first three LNG
trains fully offset the declines in
hydrocarbons production at mature
fields of our subsidiaries and joint
ventures.
Our total natural gas sales volumes,
including volumes of LNG sold,
aggregated 76.6 bcm. The liquids sales
volumes amounted to 15.9 million tons.
We continued this positive trend
in 2022, whereby the Board of Directors
recommended to the General Meeting
of Shareholders to approve dividends
for 2022 at RR 105.58 per share,
exceeding the dividend paid out for the
previous year by 47.8%.
During the past year, the global gas
markets experienced record historical
price volatility and it demonstrated
the critical role that LNG plays
in balancing energy markets and ensuring security and
continuity of supplies. “TAKING CARE OF WHAT REALLY MATTERS”
defines NOVATEK’s contribution to society by delivering clean-
burning natural gas and LNG to our customers, minimizing our
environmental footprint, and supporting the people who live
in the regions of our operations and our employees.
At the beginning of 2022, an increase in geopolitical instability
disrupted supply chains and increased imbalances in the global
energy markets. Under these circumstances, it is our utmost
priority to ensure uninterrupted operations of our business
while maintaining our commitments to sustainability and our
support to the local communities. During 2022, we raised our
employee compensation three times and significantly increased
our targeted and social support payments for employees, with
total social spending up 15% year on year. Moreover, for the
2022 to 2024 period we plan an increase in the total amounts
payable for a number of social benefits.
We also fully delivered on our commitments to support local
communities in the regions of our operations. We implemented
educational projects across our corporate footprint, as well
as our grant programs for school students and teachers.
We pay particular attention to preserving the traditional ways
of living and cultural heritage of the indigenous peoples of the
Far North and regularly engage with them to identify their most
pressing needs.
(1) Including the Company’s share in JVs.
639
MMBOE
Total
hydrocarbon
production
in 2022
17,571
MMBOE
Total proved
hydrocarbons
reserves (SEC)(1)
as of 31 December 2022
We would like to thank everyone for your
support during the past year, and especially,
our employees for their commitment and
dedication to their work at our production fields,
construction sites, processing facilities and
offices. On behalf of the Board of Directors
and the Management Board, we are pleased
to present the Company’s 2022 Annual Report
to all our valued stakeholders.
Alexander Natalenko
Chairman of the Board
of Directors
Leonid Mikhelson
Chairman of the
Management Board
Dear Shareholders,
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of our
employees
Taking care
32
Exploration and
production
Voluntary medical
insurance
Health resort treatment
Repayable financial aid
program
Rehabilitation of children
with disabilities
Targeted compensation
and social support
payments
Pension program
NOVATEK-Veteran social
protection foundation
Social Programs
As a major employer, NOVATEK recognizes its
responsibility for building long-term mutually
beneficial relationships with its employees, while
ensuring decent and safe working conditions.
The Company considers human capital to be its
core asset and offers its employees competitive
salaries and other financial incentives, as well
as opportunities for unlocking their professional
potential and achieving personal development.
Headcount by line of work
%
For more details
about Human
Resources
please see p. 74
26.5
LNG production
12
Marketing
8
Processing
8
Power supply
6
Administrative personnel
5
Transportation
2.5
Ancillary services
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of our partners
and consumers
In 2022, an increase in geopolitical instability
disrupted supply chains and increased imbalances
in the global energy markets. Under these
circumstances, it is our utmost priority to ensure
uninterrupted operations of our business and
continuous products sales. NOVATEK is building
a transparent supply chain by consistently
embedding sustainability into its strategic and
operational activities.
Supplier Code of Conduct
is available at our website
Section Company/ Corporate
governance / Charter and Corporate
Documents
Supplier Code of Conduct
For more details about Supply
Chain please see Sustainability
Report 2022 and
www.novatek.ru/en/
800
ENTERPRISES
across all of Russia with more
than 80,000 jobs participating
in the production value chain
at our LNG Construction Center
Natural gas sales breakdown on the Russian
domestic market by customers in 2022
%
43
Power generation
companies
32
Large industrial consumers
15
Wholesale traders, ex-field
8
Others
2
Households
For more details
about NOVATEK's
operations
please see p. 16
Taking care
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Annual Report 2022
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of local
communities
Сulture
• Organization
and staging
of traditional festivals
of indigenous peoples
• Funding the Limbya
Nomad Camp
ethnographic park
• Implementation
of Khorei – the Yamal
Literary Map project
• Support for
activities to preserve
the traditional ways
of life, culture,
and language
of the indigenous
peoples of the Far
North
• Financial support
to the Yamal
for Descendants
Association
of indigenous peoples
Education
• Grants programs
for schoolchildren
and teachers
• Implementation
of the unique "Teacher
for Russia" Program
• Support for targeted
training initiatives
to have indigenous
minorities employed
with energy sector
companies and
local governments
of the YNAO
• Support for gifted
and talented youth
Sport
• Since 2013, 48 football
grounds built for
championship-
winning schools under
the Step to Bigger
Football project
other
• Financing of refueling
services, purchases
snowmobiles and boat
motors for indigenous
communities,
and delivery of forage
to prevent mass
reindeer mortality
NOVATEK fully recognizes its responsibility to drive
the sustainable development of the regions
where it operates. Pursuant to its cooperation
agreements with various regions, the Company
was investing in the Yamal Nenets and Khanty
Mansi Autonomous Areas, Tyumen, Chelyabinsk,
Leningrad, Murmansk and Kostroma Regions,
and Kamchatka Territory throughout 2022.
3.3
RR BLN
NOVATEK’s, its subsidiaries’
and joint ventures’ social spending
and reimbursements to support
charitable, cultural, educational
and healthcare initiatives
For more details
about our
Cooperation with
the regions please
see p. 81
Taking care
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About
the Company
14
Key Indicators
16
NOVATEK's operations
18
2022 Key Events and Achievements
NOVATEK is the largest independent natural gas
producer in Russia. The Company is principally engaged
in the exploration, production, processing and marketing
of natural gas and liquid hydrocarbons and has more
than 20 years of operational experience in the Russian oil
and natural gas sector.
01
№3
Global position by proven
natural gas reserves (SEC)
№5
Global position by natural
gas production
12%
Share in natural gas
production in Russia
PDF of the Report is available
on our website, Section Investor
Relations/ Annual Reviews
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12
Operating indicators
ESG-indicators
Key Indicators
(1) Oil and gas production,
reserves and LNG
production are
calculated based on
100% of production
and reserves of our
subsidiaries and our
proportionate share
in the production and
reserves of our joint
ventures including fuel
gas. Production and
reserves of the South-
Tambeyskoye field
and LNG production
of Yamal LNG are
reported at 60%.
(2) According to CDU
TEK information.
2021
2022
Change, %
OPERATING INDICATORS(1)
Proved natural gas reserves (SEC), bcm
2,261
2,431
7.5
Proved liquid hydrocarbon reserves (SEC), mmt
189
194
2.6
Total hydrocarbon reserves (SEC), mmboe
16,409
17,571
7.1
Natural gas production, bcm
79.9
82.1
2.8
Liquid hydrocarbons production, mt
12,299
11,943
(2.9)
LNG production, mt
12,180
12,992
6.7
Total production, mmboe
626.3
638.7
2.0
Daily production, mmboe/day
1.72
1.75
2.0
POSITIONS IN RUSSIA
Share in natural gas production(2), %
10.5
12.1
1.6 p.p.
Share in liquid hydrocarbons production(2), %
2.3
2.2
(0.1 p.p.)
(1) As of 31 December 2022.
(2) Recommendation of the
Board of Directors.
For more details please
see Sustainability Report
2022 Section Environmental
Protection
2.3
RR BLN
Targeted and social support
for employees
↗ 15%
3.3
RR BLN
NOVATEK’s, its subsidiaries’
and joint ventures’ social
spending and reimbursements
to support charitable, cultural,
educational and healthcare
initiatives
Environmental
Social
Governance
Proved undeveloped
Proved developed
Proved undeveloped
Proved developed
Gas condensate
Crude oil
Total hydrocarbon reserves (SEC)
mmboe
Liquid hydrocarbons production
mt
Proved natural gas reserves (SEC)
bcm
Natural gas production
bcm
Environmental protection and sustainable
nature management
RR mln
Headcount of NOVATEK, its subsidiaries
and joint ventures (1)
people
Dividends per share
RR
For more details about the
Company's decarbonization
initiatives, see p. 57
For more details about
the Company's Corporate
Governance System,
see p. 90
2021
2020
2019
2018
79.9
77.4
74.7
68.8
82.1
2022
2021
2020
2019
2018
2,261
2,244
2,234
2,177
2,431
2022
2021
2020
2019
2018
12.3
12.2
12.1
11.8
11.9
2022
2021
2020
2019
2018
16,409
16,366
16,265
15,789
17,571
2022
2021
2020
2019
2018
2,908
2,382
1,425
2,400
2,568
2022
2021
2020
2019
2018
18,404
16,821
15,445
13,694
19,570
2022
48%
Growth of dividends
per share vs 2021
2021
2020
2019
2018
71.44
35.56
32.33
26.06
105.58
2022
(2)
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NOVATEK
Annual Report 2022
About the Company
Ust-Luga
Complex
Vysotsk
Saint-Petersburg
Fractionation
of stable gas
condensate
Moscow
Tatarstan
Republic
Cryogas-
Vysotsk
LNG plant
Scientific
and Research
center
Arctic LNG 2
LNG Construction
Center
Murmansk
Tyumen
Magnitogorsk
Tobolsk
NGL
Natural gas
liquids
SGC
Stable gas
condensate
Petroleum products
LNG
LNG
SIBUR’s Tobolsk
Petrochemical
Complex
Production
of marketable LPG
Stabilization of gas
condensate
Purovsky Plant
LNG
LNG
LNG
LNG
LNG
Yamal LNG
Черное
море
Baltic Sea
м
to Europe and Asia
to Russia
to Asia
via transshipment
Caspian Sea
Kara Sea
Barents Sea
Norwegian Sea
North Sea
12
13
14
15
11
5
9
7
8
10
1
6
3
4
2
34
38
35
36
30
31
29
25
24
40
22
23
20
21
19
18
17
16
37
28
27
26
32
33
39
NOVATEK's
operations
Russia
For more details about
our Resource Base
please see p. 34
YNAO
40
REGIONS
Natural gas
sales in Russia
13
LNG REFUELING
STATIONS
in Russia
17.6
BILLION BOE
Total proved
hydrocarbons
reserves
15.9
MMT
Liquid
hydrocarbons
sales
76.6
BCM
Total natural gas
sales
8.5
BCM
International gas
sales
OTHER REGIONS OF GAS SALES IN RUSSIA
MAIN REGIONS OF GAS SALES IN RUSSIA
Mordovia Republic
Chuvash Republic
Ulyanovsk Region
Samara Region
Orenburg Region
Bashkortostan Republic
Udmurt Republic
Kirov Region
Arkhangelsk Region
Sverdlovsk Region
Kurgan Region
Krasnodar Territory
30
33
36
31
34
37
29
32
35
38
39
40
St. Petersburg
Novgorod Region
Tver Region
Smolensk region
Bryansk Region
Kaluga Region
Kursk Region
Oryol Region
Voronezh Region
Tambov Region
Ryazan region
Vladimir Region
Yaroslavl Region
17
20
23
18
21
24
16
19
22
25
26
27
28
MAP LEGEND
Infrastructure facilities
NOVATEK's fields and license areas
Natural gas
Crude oil
Unstable gas condensate
Type of main products
СУГ
Transportation:
by rail
by pipeline
by tankers
by road
LNG stations
Port
Stavropol Territory
Perm Territory
Chelyabinsk Region
Tyumen Region
Khanty-Mansiysk
Autonomous Region
Yamal-Nenets
Autonomous Region
10
11
12
13
14
15
Leningrad Region
Vologda Region
Moscow
Moscow Region
Kostroma Region
Tula Region
Lipetsk Region
Belgorod Region
Nizhny Novgorod Region
1
2
3
4
5
6
7
8
9
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NOVATEK
Annual Report 2022
About the Company
2022 Key Events
and Achievements
• At the end of 2022, the overall progress on
the Arctic LNG 2 project was 73%, with the
first train being 95% complete.
• Modules installation and GBS hydro tests
of the Arctic LNG 2’s first train were
completed at the LNG Construction
Center in the Murmansk Region. Now fully
concreted, GBS 2 is undergoing mechanical
outfitting.
• We started commercial development
of gas and condensate deposits within
the Yevo-Yakhinskiy cluster that comprises
the fields of the Yevo-Yakhinskiy and
Ust-Yamsoveyskiy license areas and
a portion of the Urengoyskoye field
(within the Olimpiyskiy license area).
• A new gas and condensate field was
discovered on the Gydan Peninsula
following a prospecting campaign.
The field was named after Viktor Girya,
an outstanding geologist who was among
those who founded NOVATEK.
• We obtained mineral licenses for the North-
Yarudeyskiy license area in the YNAO and
Yeniseyskiy license area in the Krasnoyarsk
Territory, which will expand the Company's
resource base for its future projects.
• In February, Arc7 ice-class vessel AUDAX
completed a unique journey along the
Northern Sea Route after the end of the
traditional navigation season to deliver
a process module weighing almost 12 mt
for the Arctic LNG 2 project from the port
of Tianjin in China to Murmansk.
• Record production volume at the Yamal
LNG plant. In 2022, 284 LNG cargoes
(20.7 mmt) and 20 cargoes of stable
gas condensate (0.8 mmt) were offloaded
from the plant.
• We signed agreements relating to small-
scale LNG with the Governments of the
Moscow and Samara Regions to promote
the use of natural gas as a motor fuel and
to supply off-grid customers.
• As part of our decarbonization efforts,
we obtained three licenses in the Tyumen,
Yaroslavl and Vologda Regions for exploration
and assessment of suitability for underground
storage of CO2.
• Under our comprehensive plan to achieve
climate and environmental targets and
develop a system for multi-level instrumented
leak monitoring, drones were used to monitor
methane leaks.
• We signed cooperation agreements with
Gazprom for sustainable development
of the Russian Arctic and a memorandum
of cooperation in decarbonization with
Rosatom.
• In the Moscow Exchange’s milestone 25th
Annual Report Competition, NOVATEK
was recognized as the top performer
in sustainability disclosures.
• NOVATEK adopted a revised Code of Business
Conduct and Ethics, which is now aligned
with the most up-to-date laws and
regulations as well as with the Company's
commitments and practices.
73%
overall progress
of the Arctic LNG 2 project
284
LNG
CARGOES
offloaded from the Yamal LNG plant
A new gas and
condensate field
was discovered
on the Gydan
Peninsula
DEVELOPMENT OF THE LNG BUSINESS:
EXPANDING THE RESOURCE BASE AND PRODUCTION:
SALES AND TRANSPORTATION:
SUSTAINABLE DEVELOPMENT:
3
obtained as part of our
decarbonization efforts
SUBSOIL
AREA LICENCES
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About the Company
NOVATEK
Annual Report 2022
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Strategy
Review
22
NOVATEK at a Glance 2022
24
Natural Gas and LNG Market Overview
26
Strategy
28
Business Model
30
Sustainable Development Priorities
02
NOVATEK 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.
For more details about Business Model
please see p. 28
NOVATEK's Key projects
The main areas of Strategy
implementation are related
to the Company’s priority
UN Sustainable goals:
For more details about our Sustainable
Development priorities see p. 30
Yamal LNG
p. 46
Arctic LNG 2
p. 54
LNG Construction
Center
p. 52
Laboratory
and Research
Center
p. 42
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NOVATEK at
a Glance 2022
№3
Global position
by proven
natural gas
reserves (SEC)(1)
One of the Industry lowest Finding
& Development costs
NOVATEK IS ONE OF THE CLEANEST PRODUCERS
OF NATURAL GAS AND LNG IN THE WORLD
282%
Reserve
replacement ratio
83
Fields and license
areas
12.1%
Share in natural
gas production
in Russia
2.8%
Natural gas
production
increase
20.7
MMT
of LNG dispatched
from Yamal LNG
284
LNG CARGOES
offloaded from
Yamal LNG
17.6
BILLION BOE
Total proved
hydrocarbons
reserves (SEC)
47
YEARS
proved and
probable reserve
to production
ratio (PRMS)
639
MMBOE
Hydrocarbon
production
84.1%
Share of gas in
Company’s total
hydrocarbon
output
68.1
BCM
Natural gas sales
in Russia
15.9
MMT
Liquid
hydrocarbons
sales
Hydrocarbon Reserves
Hydrocarbon Production
Sales
For more details about
our Resource Base see p. 34
For more details about
NOVATEK's operations
see p. 16
СONCENTRATION OF THE COMPANY’S FIELDS
IN ONE PROLIFIC GAS-PRODUCING REGION
SALES OF PRODUCTS TO THE DOMESTIC MARKET
AND FOREIGN MARKETS
NOVATEK's new office in Moscow
In 2022, the construction of a new
multifunctional office complex of the
Company was completed in Moscow.
Our main goal was to accommodate the
structural units of the Company under one
roof and increase the working efficiency due
to a unified comfortable office environment
meeting the state-of-the-art requirements
for ergonomics and design. In terms of
energy efficiency, environmental friendliness
and comfort, the new office complex can be
classified as Class A.
№5
Global position
by natural gas
production(1)
(1) Among publicly traded companies.
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Strategy Review
(1) Company's data.
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Strategy Review
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Natural Gas and LNG
Market Overview
In 2022, the global LNG production increased by 6% year on year
to a record high of 400 mmt, with Russia being one of the biggest
contributors.
Over the year, Russia's overall LNG exports grew by 9% to 33 mmt. Major LNG exporting
countries also increased their output, with Australia surpassing 81 mmt, and Qatar
exceeding 80 mmt. Since 2010, the global LNG production is up almost 80%.
In 2022, the geopolitical situation brought about major structural changes in global
natural gas market: the pipeline gas flows to Europe were down 24% from the previous
year coupled with the global gas price volatility. While LNG flows to Europe increased
by 70% year on year following the decrease of imports by pipeline, APAC's LNG demand
shrank by 7% due to COVID-19 restrictions in China and higher LNG spot prices.
The Asia-Pacific region has historically
been a premium LNG import market with
higher spot LNG prices as compared
to Europe. In the second half of 2022,
however, the European market rose as
Asia Pacific’s competitor for spot LNG.
For the first time ever, North-Western
Europe’s LNG import terminals capacity
utilization was higher than 100% during
2022.
In 2022, the spot LNG prices in Europe
were significantly higher than in Asia for
the first time ever. The spread between
the European and Asia-Pacific prices
averaged 6.5 USD/mmbtu in 2022, while
in 2021 the Asian prices, conversely, were
at a premium of 2.4 USD/mmbtu to the
European market. Natural gas prices at
European hubs hit a record high in 2022,
with TTF (Dutch natural gas hub) set
a record of 90 USD/mmbtu in August.
At the end of the year, a high level
of Europe’s UGS capacities, relatively
warm temperatures, and strong LNG
inflow contributed towards gas price
normalization both in Europe and Asia.
The spread between the European and
Asian prices started to narrow gradually.
Global LNG production(1)
mln tons
LNG importing
countries
Average TTF prices "month ahead"(1)
USD/mmbtu
20
30
40
50
60
70
Dec.
March
June
Sept.
2021
2022
Dec.
(1) All data in this
section is based
on public info as
of the date of
publication of this
Annual Report,
unless otherwise
indicated.
Other
Australia
Qatar
USA
Russia
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
0
100
300
400
200
2022
Japan
China
South
Korea
France
Spain
Indonesia
Other
5.4%
(1)
NOVATEK’s
projects share
in the global
LNG market
In 2022, NOVATEK’s projects share
in the global LNG market increased
to 5.4% as our Yamal LNG and
Cryogas-Vysotsk liquefaction facilities
reached higher output. Yamal LNG
is a top 4 plant by LNG production
globally and Russia’s largest
LNG project.
NOVATEK’s Share
For more details
about the Yamal
LNG project see
p. 46
The world's largest LNG projects
by production volume in 2022
mln tons
21
4th
largest
LNG project
Yamal LNG
Strategy
We adhered to our goals and objectives for the year ended 31 December 2022
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:
• size and structure of its hydrocarbon resource base;
• 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.
(1) For more information on our Sustainable Development Priorities see p. 30.
(2) A Subcommittee on Climate and Alternative Energy was established, more sustainability matters are now covered at Board meetings.
(3) Energy efficiency improvement through wider use of cogeneration technology, higher APG utilization by delivering APG to trunk lines
and by reinjecting it, investigation of carbon capture and storage opportunities); captive renewable power is being developed.
Key risks
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.
Natural gas, which is at the core of NOVATEK's
business, is an important element of energy
security and a pre-requisite for energy market
balance across the world for decades to come.
Our commitment to the principles
of sustainable development, social
responsibility and to observing the
latest environmental, health and safety
standards are integral parts of NOVATEK’s
development strategy and managerial
philosophy.
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.
For details on risks, see p. 114
Climate
Geological
Legislative
and regulatory
Technological
Environmental
Vendor
and contractor risks
Cyber risks
Force majeure
Project
Market
Political
Resource base growth
Increase hydrocarbon production
Sustainable development(1)
Maintain low cost structure
Optimize marketing channels
Build low cost scalable LNG
platform
STRATEGY IMPLEMENTATION PROGRESS FROM 2018 TO 2022
• The increase in hydrocarbon reserves
amounted to 5,463 mmboe over five
years
• The reserves replacement ratio
is 282% as of 2022
• 27 new hydrocarbon exploration
and production license areas
(the total number of licenses
is now 83)
• A systematic approach to resource
base development — a Laboratory
and Research Center was launched
within NOVATEK's Scientific
and Research Center
• Commercial hydrocarbon production
is carried out at 26 fields (8 fields
added)
• Natural gas production up
by 13.3 bcm (+19%)
• Advanced techniques are used
for production (horizontal drilling).
• Ust-Luga capacity utilization
averages 116%
• Sustainability targets were set
and their contribution towards
the United Nations SDGs was
determined
• Environmental and climate targets
were approved and relevant action
plans were developed and launched
• Greater attention from the Board
of Directors (2)
• Decarbonization techniques
are being developed (3)
• Direct hydrocarbon production
costs are maintained at a low level
(USD 0.77 per boe in 2022)
• CAPEX per ton of LNG as well as
construction and logistics costs were
reduced by launching a facility for
"mass production" of natural gas
liquefaction trains on GBS
• Yamal LNG dispatched over 85 mmt
of LNG, or 1,174 cargo lots, since
it commenced operation in 2017
• The LNG shipping window along the
NSR was expanded with voyages
well before or well after the end
of the traditional navigation seasons
• The number of LNG cargoes shipped
through the NSR's Eastern route
totaled 130 within five years
• Two LNG transshipment terminals
are being developed in Kamchatka
Territory and the Murmansk Region
• The Company is developing the
market for LNG as motor fuel through
the use of its network of 13 LNG
fueling stations
• Yamal LNG, the Company's first LNG
project, is operating at 120% of its
nameplate capacity
• Yamal LNG's Train 4, which uses
NOVATEK's patented liquefaction
technology called the Arctic
Cascade, proved its reliability
and energy efficiency in 2022
• In 2022, Yamal LNG produced 21 mmt
of LNG and 0.8 mmt of SGC, which
is its highest technically achievable
production rate
• The LNG Construction Center,
which commenced its operation,
is a key facility for Russia's emerging
LNG equipment manufacturing
industry
• Arctic LNG 2 has reached 73%
completion. The first train is 95%
complete
KEY RISKS
• Organic resource growth from
exploration and development
activities on the Yamal and Gydan
peninsulas
• Strategic acquisitions and active
participation in license tenders
• Increase gas production through
development of projects
within the UGSS and LNG projects
in the Arctic
• Development of deeper Jurassic
and Achimov layers
• Fully utilize the processing capacity
of the Ust-Luga complex
• Security and respect for human
rights
• Reduce and prevent negative
environmental impact
• Increase the efficiency and rational
use of natural resources
• Adaptation to climate risks
• Remain one of the lowest cost
hydrocarbon producers in the global
oil & gas industry
• Optimize the cost structure through
strategic investment of capital
• Develop a low cost LNG value chain
• Maximize the use of the Northern Sea
Route and develop key transshipment
points
• Build a diversified LNG trading
portfolio
• Develop strategic partnerships with
industry partners in key markets
• Increase production through
development of scalable
LNG projects
• Development of proprietary
LNG technologies
• Integrated projects for production
and liquefaction of natural gas
STRATEGIC PRIORITIES
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04
05
06
2.9
MMT
66%
34%
Crude oil
Hydrocarbon
production
Liquefaction and processing
Sales of the main
products
End customers
Resources
NOVATEK’s business model covers the entire hydrocarbon production cycle,
including exploration, production, processing, and sales of finished products.
Business Model
Hydrocarbon Reserves
17,571
MMBOE
Total proved
hydrocarbons
reserves (SEC)
47
YEARS
proved and
probable reserve
to production
ratio (PRMS)
2,431
BCM
Natural gas
reserves (SEC)
83
SUBSOIL
LICENSES
26
PRODUCING
FIELDS
• Purovsky Plant
• Ust-Luga Complex
• Yamal LNG
• Cryogas-Vysotsk
• LNG plant in Magnitogorsk
Processing and
liquefaction assets
LNG CONSTRUCTION
CENTER – the world's first
facility for "mass production"
of natural gas liquefaction
trains on GBS.
(1) Including the Company’s share
in JVs. LNG production of Yamal
LNG is reported at 60%.
(2) According to the Corporate
Strategy presented in 2017.
LNG production
Cryogas-Vysotsk
707 mt of LNG
LNG plant
in Magnitogorsk
33 mt of LNG
For more details
about our
Hydrocarbon
Reserves please
see p. 34
LNG retail stations
NOVATEK has built retail
stations along major federal
highways, in cities and at
industrial sites, offering LNG
to commercial and municipal
transport as well as quarry
machinery that use LNG as
motor fuel.
Power generation
The heat generated by
burning the fuel (natural
gas) is used to move the
turbines that drive the power
generator, and thus converted
into electricity.
Steelmaking
Natural gas is used to
produce cast iron, steel, rolled
iron, plate glass, etc., as well
as to fire rolling-mill, forging,
heat-treatment and smelting
furnaces.
Residential gas
supply
LNG provides an off-grid
solution for supplying gas
to residential consumers
without direct access to gas
transmission grids.
Petrochemical
industry
Natural gas is not only
a fuel, but also as a valuable
feedstock to produce
ammonia, methanol,
acetylene, nitrogen
fertilizers and a wide range
of intermediate chemical
products and polymeric
materials.
Captive use
Natural gas is used to support
production, processing
and liquefaction operations
at NOVATEK’s sites and
assets.
Bunker and motor
fuel
Switching from fuel oil
and diesel to LNG as bunker
and motor fuel enables
emissions reduction.
Processing
Arctic LNG 2
19.8 mmt of LNG(2)
and other perspective
LNG projects
LPG
3.3
MMT
Production assets
Producing fields
13.0
MMT(1)
NATURAL GAS
UNSTABLE GAS
CONDENSATE
3.3
MMT
62%
38%
Stable gas condensate
76.6
BCM
89%
11%
Natural gas and LNG
Purovsky Plant
Nameplate capacity:
12 mmtpa
Stabilization
of gas
condensate
LEGEND
Perspective LNG projects
Sales within the Russia
Sales on international markets
Transportation
by rail
by pipeline
by tankers
by road
Petroleum products
Naphtha
Jet fuel
Fuel oil and gasoil
Yamal LNG
21 mmt of LNG
Petroleum products
Ust-Luga Complex
Nameplate capacity:
6 mmtpa
Fractionation of stable
gas condensate
Gas
537
MMBOE
84%
Separation
and treatment
639
MMBOE
3.3
MMT
LPG
94%
6%
61%
16%
23%
6.9
MMT
95%
5%
Petroleum products
CRUDE OIL
Liquid hydrocarbons
102
MMBOE
16%
13.2
MMT
6.9
MMT
9.9
MMT
SGC
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Continuously improve
governance practices.
Maintain high
transparency.
Combat corruption in all
its forms.
CONTINUOUS IMPROVEMENT IN CORPORATE
GOVERNANCE
Governance
Reduce LTIFR among the Company's
employees by 5%.
Provide good education
to employees.
Support educational institutions,
and implement educational
programs in the regions where
the Company operates.
Social
ENSURING SAFE WORKING CONDITIONS AND
CONTRIBUTING TO COMMUNITY DEVELOPMENT
Sustainable Development
Priorities
Reduce air pollutant emissions
per unit of production by 20%
by 2030.
Reduce greenhouse
gas emissions.
Increase the share of waste
directed to utilization and
disposal to 90% by 2030.
CLIMATE AND ENVIRONMENTAL IMPACT
MITIGATION
Environmental
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.
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 2022.
The Board of Directors and its committees actively engage
in sustainability management. At the level of the executive body,
all key aspects of sustainable development are supervised
by respective deputies of the Chairman of the Board.
Sustainability is integrated into the Company’s top management
KPIs. This makes for proper management of both strategic
and operational aspects of sustainability.
For more details about the Company's
Key business risks see p. 114
NOVATEK uses the Integrated Management System for
Environmental Protection, Occupational Health and Safety (IMS),
embracing environmental and climate aspects. In environmental
management, the system complies with international standards
ISO 14001:2015, and in industrial safety — with ISO 45001:2018.
The IMS follows the management model “Planning
Implementation—Follow-Up—Acting”, which is a continuous
and iterative process that allows to establish, implement
and maintain the HSE Policy, with the Company’s management
playing the leading role.
The IMS standardizes business processes related to health,
safety, and environment in the area of planning, identification
of environmental aspects, environmental risk assessment, roles
and responsibilities of personnel, reporting, internal audit, etc.
Sustainability management is an integral part of NOVATEK’s corporate
governance system.
Details on the progress towards our
Environmental and Climate Change Targets will
be presented in the Sustainability Report 2022.
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Review
of Operating
Results
34
Hydrocarbon Resource Base
36
Licenses
37
Hydrocarbon Reserves
39
Geological Exploration
42
Laboratory and Research Center
44
Field Development and Construction
45
Hydrocarbon Production
46
LNG Projects
58
Processing of Gas Condensate
60
Natural Gas Sales
63
Liquid Hydrocarbons Sales
03
2,431
BCM
Natural gas reserves (SEC)
639
MMBOE
Hydrocarbon production
76.6
BCM
Total natural gas sales
In 2022, we continued active development
of the Company’s strategic projects,
proving ourselves to the global community
as a responsible and reliable business partner,
employer, and supplier.
For more details about
Hydrocarbon Reserves see p. 37
/33
NOVATEK
Annual Report 2022
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02
03
04
05
06
32
69
5
1
79
22
27 13
9
18, 55
3
10
54
25
53
36
59 58 57
62
63
31
44
32
12
76
16
40
45
74
75
29
73
60
43
50
35
72
72
71
7
65
11
6
46
21
24
70
49
48
19
67
15
42
23
28
14
2
4
68
8
17
26
47
20
77
30
34
66
39
52
38
64
51
41
56
83
61
37
54
33
Arctic LNG 2
Purovsky Plant
Yamal LNG
Novy Urengoy
Yamal
peninsula
Gydan
peninsula
Yamal-Nenets
Autonomous
Region
Khanty-Mansiysk
Autonomous Region
Krasnoyarsk Territory
Kara Sea
Hydrocarbon Resource Base
25
Cenomanian layers
60
Valanginian layers
15
Achimov and Jurassic layers
100
NOVATEK’s gas reserves by producing depth(1)
%
PRODUCING FIELDS AND LICENSE AREAS
1.
Yurkharovskoye field
2.
East-Tarkosalinskoye field
3.
Khancheyskoye field
4.
Olimpiyskiy LA
5.
West-Yurkharovskoye field
6.
Samburgskiy LA
7.
North-Urengoyskoye field
8.
North-Khancheyskoye and
Khadyryakhinksoye fields
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(1)
17. South-Khadyryakhinskoye field
18. Dorogovskoye field
19. East-Tazovskoye field
27. Yevo-Yakhinskoye 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
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 fields
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. Nyakhartinskiy 1 LA
73. North-Gydanskiy LA
74. Neytinskoye field
75. Arkticheskoye field
76. Obskiy LA
77. Tadebyayakhinskiy LA
78. North-Vrangelevskiy LA(2)
79. North-Yarudeyskiy LA
80. Vologodskiy 2 LA(3)
81. Vologodskiy 3 LA(4)
82. Abalakskiy LA(5)
83. Yeniseyskiy LA
PROSPECTIVE FIELDS AND LICENSE AREAS
(1) Located in the KMAO-Yugra.
(2) Located in the eastern
part of the East Siberian
Sea and the western part
of the Chukchi Sea.
(3) Located in the Yaroslavl Region.
(4) Located in the Vologda Region.
(5) Located in the Tyumen Region.
CENOMANIAN LAYERS
VALANGINIAN LAYERS
1,000 M
"Dry" gas not containing liquid hydrocarbons
1,700 M
Gas containing liquid hydrocarbons — "wet" gas
ACHIMOV LAYERS
3,200 M
"Wet" gas with high share of liquid hydrocarbons.
The layers have low permeability and require special
development techniques
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
NOVATEK’s core fields and
license areas are located
in the Yamal-Nenets
Autonomous Region and the
Kransoyarsk Territory.
The YNAO is one of the world’s
largest natural gas producing regions
and accounts for approximately
80% of Russian 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
and production cost, and efficient
replacement of reserves.
17.6
BLN BOE
Total proved hydrocarbons
reserves (SEC)
83
Fields and license
areas
(1) Including NOVATEK’s proportionate share in joint ventures as of 31 December 2022.
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Licenses
Hydrocarbon Reserves
NOVATEK’s core fields and license areas are located in the Yamal-
Nenets Autonomous Region and in the Kransoyarsk Territory.
In 2022, we obtained new licenses in the Yamal-Nenets Autonomous
Region (YNAO) and in the Kransoyarsk Territory where the Company
operates, in close proximity to existing licenses.
The YNAO is one of the world’s largest
natural gas producing regions. It
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 and production cost,
and efficient replacement of reserves.
In the reporting year, NOVATEK added
several major licenses to its portfolio:
• following the results of auctions,
NOVATEK was awarded two new
exploration and production licenses for
the North-Yarudeyskiy and Yeniseyskiy
subsoil areas;
• within the decarbonization program,
three licenses were secured for
geological study and assessment
of the suitability of Abalakskiy (Tyumen
Region), Vologodskiy 2 (Yaroslavl
Region) and Vologodskiy 3 (Vologda
Region) subsoil areas for the further
construction and operation of
underground facilities not related
to hydrocarbon production.
The Company boasts a vast resource
base in the YNAO. With these new
licenses, NOVATEK will be able to further
expand its resource base to provide
feedstock to its LNG projects as well
as to maintain a stable production level
at its existing fields.
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.
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).
As of 31 December 2022, NOVATEK’s
SEC proved reserves(1), aggregated
17,571 mmboe, including 2,431 bcm
of natural gas and 194 mmt of liquid
hydrocarbons. Total proved reserves
increased by 7.1% as compared to year-
end 2021, representing a reserve
replacement ratio of 282% for the year.
At year-end 2022, the Company’s SEC
proved reserves life was 28 years.
(1) Including the
Company’s
proportionate share
in joint ventures.
The Company’s reserves are
estimated on an annual basis
under both SEC and PRMS
reserves reporting standards.
With more than 25 years of operational
experience in the region, NOVATEK is in a good
position to efficiently monetize its resource base.
282%
Reserve
replacement ratio
83
SUBSOIL LICENSES
NOVATEK’s subsidiaries and joint ventures held a total
83 subsoil licenses for areas within Russia(1)
Exploration and production of natural
resources in Russia is subject to federal
licensing regulations.
The Company holds long-term licenses
for its core fields. There is a standard
practice of license extension based
on design documents to reflect the
time it would take to develop the
respective field.
(1) As of 31 December 2022.
As of 31 December 2022, the Company’s PRMS proved and
probable reserves(1), aggregated 29,726 mmboe, including
4,069 bcm of natural gas and 359 mmt of liquid hydrocarbons,
with a reserves-to-production ratio of 47 years.
The 2022 reserves growth was driven by the successful
exploration at the Gydanskoye, South-Tambeyskoye,
Verkhnetiuteyskoye, and the North-Chaselskoye fields,
the production drilling at the Utrenneye, South-Tambeyskoye,
North-Russkoye fields and the Urengoyskoye field within
the Samburgskiy, Yevo-Yakhinskiy, Ust-Yamsoveyskiy,
and Olimpiyskiy license areas, acquisition of new licenses
in auctions (the Arkticheskoye and Neytinskoye fields), and
an increase of the ownership stake in Terneftegas to 100%.
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.
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SEC proved reserves as of 31 December 2022 and duration of licenses(1)
2,431
194
(1) Based on the Company’s equity ownership interest in joint ventures.
(2) 59.97% of reserves.
(3) 100% of reserves.
To achieve better efficiency in its
activities, the Company applies state-
of-the-art technology and leverages
the experience and expertise of its
geological teams. We employ modern
techniques for drilling and completion,
geophysical logging and data processing
and interpretation from as early as the
prospecting stage.
The Company’s scientific and
research center in Tyumen
is the focal point for analyzing
and compiling data and building
forecasts.
The Laboratory and Research
Center – tasked with testing
and studying core plugs, fluid
samples, drilling muds, frac fluids,
proppants, and the thermal and
physical properties of permafrost –
was inaugurated in May 2022
to enable even better research.
For more details about NOVATEK’s
Laboratory and Research Center
please see p. 42
(1) Including 2022’s production
In 2022, NOVATEK conducted the bulk of its geological
exploration on the Yamal and Gydan peninsulas to ensure
the resource base could be quickly and efficiently prepared
for future LNG projects.
On the back of a comprehensive campaign of seismic surveys,
prospecting and appraisal drilling, we expended the deposits
area, and the PRMS proved and probable Jurassic reserves
at the South-Tambeyskoye field increased by 186 mmboe(1)
to 607 mmboe. By exploring Jurassic deposits and bringing
Jurassic wells onstream, the South-Tambeyskoye field’s resource
base and production plateau could be further extended. Pilot
production of these Jurassic deposits is underway. As part
of our efforts to determine the production prospects of these
Jurassic deposits, five production wells were drilled, with tests
demonstrating producibility at four of the wells. With an initial
yield between 369 and 1,166 mcmpd, these wells also proved
to be commercially viable.
The Utrenneye field’s SEC proved reserves grew by 357 mmboe
to 590 bcm of natural gas and 23 mmt of condensate, while
its PRMS proved and probable reserves estimates currently
stand at 1,457 bcm of gas and 89 mmt of condensate.
Geological Exploration
NOVATEK takes a systematic and comprehensive approach to developing
hydrocarbon resources, from selecting methodologies for seismic surveys and
well tests to generating rationales for the most appropriate field development
system and actioning them.
The Company aims to expand its resource base
by conducting geological exploration at fields
and license areas not only in close proximity
to existing transportation and production
infrastructure, but also in new and promising
hydrocarbon areas. With this approach, we are
able to carry out prospecting, exploration and
production of hydrocarbons in a cost-effective
and environmentally prudent manner.
Natural gas
reserves, bcm
Field or license area /
Duration of license
Participating
interest, %
Liquids
reserves, mmt
12
14
47
1
7
1
5
6
3
0.4
2
8
14
8
5
3
4
6
12
3
2
7
17
1
0.2
1
1
1
3
385
354
208
200
178
139
133
92
71
64
59
55
53
50
42
41
41
37
33
29
28
28
18
16
16
9
6
5
41
Termokarstovoye / 2097
East-Urengoyskoye +
North-Yesetinskoye fields (ARCTICGAS) / 2130
Khancheyskoye / 2090
Other
Yaro-Yakhinskoye / 2119
North-Chaselskoye / lifetime of the field
Urengoyskoye (Yevo-Yakhinskiy LA) / 2149
Kharbeyskoye / 2036
North-Urengoyskoye / 2141
East-Tazovskoye / 2033
Urengoyskoye (Ust-Yamsoveyskiy LA) / 2198
Beregovoy LA / 2070
East-Tarkosalinskoye / 2113
Nyakhartinskoye / 2043
Olimpiyskiy license area / 2059
Yarudeyskoye / 2124
Samburgskoye / 2130
Neytinskoye / 2048
East-Urengoyskoye + North-Yesetinskoye
(West-Yaroyakhinskiy LA) / 2135
Soletsko-Khanaveyskoye / 2046
Gydanskoye / 2044
North-Russkoye / 2031
Yurkharovskoye / 2099
Arkticheskoye / 2048
Verkhnetiuteyskoye +
West-Seyakhinskoye / 2044
Geofizicheskoye / 2036
Urengoyskoye (ARCTICGAS) / 2130
Utrenneye / 2120
South-Tambeyskoye / 2045
50.1(2)
60
50
100
100
100
100
100
100
100
100
50
100
100
100
50
100
100
100
100
100
100
51 (3)
50
100
50
100
100
/39
38
Review of Operating Results
NOVATEK
Annual Report 2022
01
02
03
04
05
06
A large-scale exploration campaign is underway at the Arctic
LNG 1 fields. In 2022, all the preparations to develop the
Geofizicheskoye field’s Cretaceous deposits were completed,
and a necessary field development plan was produced. Further
reserve maturation efforts were made at the Gydanskoye
field, the Viktor Girya gas condensate field and the Soletsko-
Khanaveyskoye fields. Six prospecting and exploration
wells underwent testing to validate the productivity of the
Cretaceous deposits. The Gydanskoye field’s Achimov deposits
were demonstrated to be commercially viable, with yields
up to 230 mcmpd. The Company drilled an exploration well
with horizontal completion targeting the Achimov deposits.
Well tests are scheduled to be completed in 2023. 3D seismic
surveys at the Gydanskiy and the North-Gydanskiy license areas
covered 2,600 square km. Arctic LNG 1’s SEC proved reserves
now total 2,237 mmboe, while its PRMS proved and probable
reserves stand at 4,236 mmboe.
The Cretaceous reserves were matured at the
Verkhnetiuteyskoye and West-Seyakhinskoye fields. This helped
demonstrate the productivity of the Aptian-Albian and
Neocomian deposits and acquire data on fluid composition.
Development plans for the fields were produced. A prospecting
well was drilled and tested at the Verkhnetiuteyskoye
field, demonstrating its Jurassic deposits are highly
productive. During the test, yields of up to 1,156 mcmpd were
achieved, with a condensate content of up to 300 g/cm.
The Verkhnetiuteyskoye field’s SEC proved reserves currently
total 449 mmboe, while its PRMS proved and probable reserves
stand at 525 mmboe. As part of resource base maturation
efforts on the Yamal Peninsula, a high-
density 3D seismic survey covering
1,255 square km was completed
at the Arkticheskoye and Neytinskoye
fields. Preparation is now ongoing
for exploration drilling.
In order to maintain pipeline gas
production levels and the volumes sent
to the Purovsky Plant, we continued
geological exploration at the Nadym-Pur-
Taz region’s fields and license areas.
Efforts are underway to further explore
and launch production from the
Urengoyskoye field’s Achimov reservoirs.
Exploration showed the Urengoyskoye
field’s SEC proved Achimov reserves
grew by 265 mmboe (including 2022’s
production) to 3,920 mmboe.
With reserves maturation now complete
at the North-Chaselskoye field, its PRMS
proved and probable reserves reached
546 mmboe, and a field development
plan was prepared. Reserves at the
Nyakhartinskoye field were also matured,
pushing its PRMS proved and probable
reserves to 306 mmboe.
2021
2022
Change, %
2D seismic, linear km
2,090
0
n/a
Subsidiaries, linear km
275
0
n/a
Joint ventures, linear km
1,815
0
n/a
3D seismic, square km
3,996
4,908
23
Subsidiaries, square km
2,232
4,763
113
Joint ventures, square km
1,764
145
(92)
Exploration drilling, th m
61.6
23.2
(62)
Subsidiaries, th m
40.7
8.6
(79)
Joint ventures, th m
20.9
14.6
(30)
Geological Exploration
Technologies to develop deep layers
4,100 m
Achimov layers
Jurassic layers
> 4,000 m
600 m
1,500 m
3,700–3,950 m
3,500–4,100 m
Achimov layers
Jurassic layers
> 4,000 m
1,500–2,000 m
2,000 m
Increase in wells productivity,
Including increase in low permeable formations
Hydrofracking
New
technology
‹
Technology
previously used
/41
40
Review of Operating Results
NOVATEK
Annual Report 2022
01
02
03
04
05
06
Encompassing several laboratories,
the site unlocks unparalleled research
and development using cross-disciplinary
studies of core plugs, fluid samples,
materials, and substances.
The reservoirs found at NOVATEK Group’s
fields have low permeability, overpressure,
and formation fluids with a unique physical
and chemical composition.
Developing these reservoirs thus calls
for not only high-performance equipment
and upstream technology, but also
advanced methodologies for acquiring
the underlying geophysical data.
In 2019, NOVATEK decided to establish an
in-house unit for conducting experiments.
This led to the May 2022 inauguration
of NOVATEK’s Laboratory and Research
Center (the “Center”) in Tyumen, which
significantly expands the Company’s
scientific and technical capabilities.
Having in-house capacity to experiment paves the way for
developing new study methodologies and creating intellectual
property.
Our own in-house laboratory center will unlock faster access to
better quality input data for the geological structure of natural
reservoirs. Studies of core plugs and fluid samples are essential
to precisely estimating reserves, forecasting production,
and selecting technology that will ensure the most suitable
production processes.
The cutting-edge center comprises laboratories for:
• conducting comprehensive studies of core samples, fluids,
drilling muds and cement slurry, hydraulic fracturing fluids
and proppants, and permafrost.
• studies of operational reliability of oil and gas field
facilities; and
• environmental monitoring.
Apart from the laboratories, the facility has a warehouse for
storing core plugs and lab samples. Storing core plugs for the
long term is crucial for keeping the window open for future core
studies. The facility can accommodate 150 linear km of full-size
core plugs, which means it can support NOVATEK’s geological
exploration efforts for over 20 years.
NOVATEK’s Laboratory and Research Center boasts more than
200 pieces of world-class testing equipment. When coupled
with auxiliary equipment, this figure rises to over one thousand.
The equipment enables tests and studies at above 700 bar
and at over 150 degrees Celsius.
Certain items of equipment are
unique in Russia, with individual units
manufactured exclusively for us.
The Center also has a unique research
and development testing ground for
studying the efficiency and real-life
performance of soil thermostabilizers
under actual site conditions. Five
boreholes, 60 cm in diameter and 16 m
deep, are leveraged to compare insulation
methods used to ensure the stability
of wellheads and foundations.
The Center’s capabilities enable the analysis
of thermodynamic, physical and chemical
properties of a wide range of formation
fluids, from dry gas to heavy high-viscosity
oil and near-critical fluids.
Press release
about the Center's
inauguration
is published
on our website
www.novatek.ru/en/
Laboratory and
Research Center
Tyumen region
KMAO
YNAO
130
NEW JOBS
were created
in the Center
38
YEARS
average age of the
professional team
Its size and functionalities make
the Center one of the leading
research institutions both
nationally and globally.
>200
PIECES
of world-class
testing equipment
8
HA
land area
of the Center
>13
THOUSAND
SQ. M
area of all premises
KEY INDICATORS OF THE CENTER
The launched in 2022 new laboratory center empowers
NOVATEK to carry out a broad scope of studies in-
house at our Scientific and Technical Center in Tyumen.
It would also significantly contribute to the research
and technical capabilities of Russia’s oil and gas industry,
improve the economic efficiency, speed and quality
of studies performed.
Laboratory
and Research
Center
/43
42
NOVATEK
Annual Review 2022
Review of Operating Results
01
02
03
04
05
06
In the reporting
year, the
Company’s
subsidiaries
invested
RR 82.9
BILLION
in resource base
development
In 2022, production drilling(1) totaled
622,000 m, representing a 14% decrease
year on year. Production drilling was
conducted at the Beregovoye, East-
Tazovskoye, Samburgskoye, North-
Russkoye, North-Urengoyskoye,
Urengoyskoye (including the Olimpiyskiy,
Yevo-Yakhinskiy and Ust-Yamsoveyskiy
license areas), Utrenneye, Kharbeyskoye,
South-Tambeyskoye, Yurkharovskoye, and
Yarudeyskoye fields.
A total of 109 wells were put on stream,
including 100 gas and gas condensate
wells and nine crude oil wells.
Hydrocarbon Production
In 2022, NOVATEK carried out commercial
hydrocarbon production at 26 fields.
The Company’s production(1) amounted
to 638.7 mmboe, up 2.0% versus
2021. The key contributor to the
production increase was the launch
of new production capacities (at the
Kharbeyskoye field of the North-Russkiy
cluster in 4Q 2021 and fields of the Yevo-
Yakhinskiy block in 2Q 2022), as well as
the launch of the 4th train at the Yamal
LNG plant in 2Q 2021 and achieving
higher productivity of the first three
liquefaction trains.
(1) Including the share in production by joint ventures.
(2) In September 2022, NOVATEK increased its ownership stake in ZAO Terneftegaz, from 51% to 100%,
and began to consolidate this company as a subsidiary.
(1) Including joint ventures.
Field Development
and Construction
In 2022, NOVATEK continued to develop producing and prospective
fields as well as to build field infrastructure.
When constructing Jurassic wells at the South-
Tambeyskoye field, seven thousand tons
of proppant were injected in one well under
a massive 20-stage frac job for the first time
ever in Russia.
In 2022, an integrated gas treatment
facility started operation at the
Yevo-Yakhinskoye field. A methanol
recovery unit, a gas treatment
unit with gas coolers, and a 24-
MW power plant (4 x 6 MW power
generators) were commissioned
under the integrated gas treatment
facility development project at the
Kharbeyskoye field.
Under the program to promote LNG as a
motor fuel within the Russian Federation,
construction was launched to develop
integrated liquefaction facilities within
the special economic zones in Togliatti
and Kashira.
A new office building was constructed
in Moscow. Construction is ongoing
under NOVATEK Scientific and
Technical Center’s new office building
development project in Tyumen.
The production decline at mature fields of our subsidiaries and
joint ventures was mainly due to a natural drop in formation
pressure within the current gas producing horizons.
Total natural gas production including the Company’s share
in production of joint ventures aggregated 82.14 bcm, representing
84.1% 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 83.8%. Production of natural gas
increased by 2.8%, as compared to 2021 volumes.
Production of liquid hydrocarbons including the Company’s share
in production of joint ventures totaled 11,943 mmt. Marketable
production of liquid hydrocarbons decreased by 2.9%, as
compared to 2021.
In 2022, we continued to achieve some of the lowest lifting
costs in the industry(1). The Company’s lifting costs were RR 52.8
(USD 0.77) per boe this year.
mmcm
mt
22,972
↘7.7%
NOVATEK-
Yurkharovneftegas’ fields
(100%)
1,630
↗17.8%
19,054
↗15.4%
NOVATEK-
Tarkosaleneftegas’ fields
(100%)
2,748
↗11.1%
15,036
↘0.2%
Arcticgas’ fields
(50%)
4,375
↘2.1%
19,257
↗6.9%
South-Tambeyskoye
(59.97%)
547
↘9.6%
2,227
↘11.4%
North-Urengoyskoye
(50%)
173
↘16.0%
1,842
↗39.0%
Termokarstovoye
(100%)(2)
486
↗26.7%
1,670
↗13.0%
Yarudeyskoye
(100%)
1,984
↘28.6%
82
↘6.8%
Other
82,140
MMCM
11,943
MT
Hydrocarbon production breakdown in 2022(1)
mmboe
Hydrocarbon production(1)
537.2 ↗2.8% Gas
101.5 ↘2.9%
Liquid hydrocarbons
2021
2020
2019
2018
2022
626.3
608.2
589.9
549.1
638.7
↗ 2.0%
Gas
Liquid
hydrocarbons
/45
44
Review of Operating Results
NOVATEK
Annual Report 2022
01
02
03
04
05
06
Yamal LNG is NOVATEK’s first large-scale LNG project,
a top 4 plant by LNG production globally and
Russia’s largest LNG project.
5.5
Train 1
5.5
Train 2
Production trains
5.5
Train 3
0.9
Train 4
Nameplate capacity of the LNG plant
mmtpa
17.4
MMTPA
The project relies on resources of the South-Tambeyskoye
field, which is located at the North-East of the Yamal
Peninsula.
The field is being developed using horizontal wells with
drilled lengths of up to five thousand meters and horizontal
sections of up to 1.5 thousand meters.
The nameplate capacity of the LNG plant is 17.4 mmtpa
(with three 5.5 mmtpa trains and a 0.9 mmtpa train).
Three trains totaling 16.5 mmtpa were commissioned ahead
of the schedule and on budget, which is an outstanding
achievement in the global oil and gas industry.
The fourth train designed to produce 0.9 mmtpa commenced
operation in 2021. This train uses NOVATEK’s patented
liquefaction process called Arctic Cascade, and its main
equipment was manufactured in Russia. The Arctic Cascade
process offers high energy efficiency assisted by the cold
climate of the Far North. In 2022, the fourth train showed
stable operation in line with its at design parameters.
The first three trains’ actual availability of 99.5% in 2022 is one of the best
performances in the industry.
643
BCM
of gas
20
MMT
of liquid hydrocarbons
PROVED RESERVES OF THE FIELD (SEC)(1)
For more details
about the Project
please see
yamallng.ru/en/
Yamal LNG
Yamal
Peninsula
Gydan
Peninsula
South-Tambeyskoye
field
Kara Sea
21
MMT
LNG produced
0.8
MMT
SGC produced
120%
utilization rate of the
nameplate capacity
PLANT PERFORMANCE IN 2022
In 2022, the plant
showed its highest
technically achievable
production rate.
For more details about NOVATEK’s Arctic
Cascade technology please see p. 48
These vessels are capable of trading along
the Northern Sea Route (NSR) without
icebreaker assistance.
Since the project launch in 2017, over 85 mmt
of LNG or 1,174 tankers were dispatched.
In 2022, fifteen (15) ship-to-ship LNG
transshipment operations were completed
in the Kildin Strait of the Barents Sea in the
Russian Federation.
Fifteen
UNIQUE ARC7 ICE-CLASS
LNG CARRIERS
were designed and built specifically for the
Yamal LNG project.
Yamal LNG
LNG Projects
(1) Proved reserves of the South-Tambeyskoye field (SEC).
/47
46
NOVATEK
Annual Review 2022
Review of Operating Results
01
02
03
04
05
06
Arctic Cascade
(1) Nitrogen, methane, ethane, propane.
Nitrogen
compressor
Maintains the
requisite pressure in
the nitrogen cooling
loop (Liquefaction
Stage 2)
Air cooler
Cools the gas down to
ambient temperature
Turbine drive/electric
motor for compressors
Drives the compressors
Ethane cooling loop
Refrigerant: ethane
A throttle is a narrow point in the refrigerant
loop (pipeline) followed by an expansion.
As the refrigerant flows through the throttle,
the flow pressure is reduced and the flow
temperature decreases.
Turboexpander-compressor
Generates cold nitrogen
and utilizes expansion energy
to compress nitrogen
Process feedstock
Feed gas compressor
Builds the requisite pressure
for the process
Ethane compressor
Maintains the requisite pressure
in the ethane cooling loop
(Liquefaction Stage 1)
LNG tank
Stores marketable
LNG at –163 С⁰ until
offloading
Natural gas
LNG
Ethane loop heat exchangers
Natural gas is cooled down to –80°С in five
sequential ethane heat exchangers.
STAGE 1
LIQUEFACTION
Throttle
As natural gas flows through the
throttle, the flow pressure is reduced
and its temperature decreases.
Natural gas is cooled down to –163 °С.
The output is marketable LNG.
STAGE 3
LIQUEFACTION
Main cryogenic heat exchanger
Natural gas is cooled down to –137 ⁰С
using nitrogen.
LIQUEFACTION
STAGE 2
NOVATEK has developed and patented
a natural gas liquefaction technology
tailored for Arctic conditions that
enables high performance while driving
down energy consumption and capital
expenditures.
• better performance achieved by
leveraging the Arctic climate (low ambient
temperatures);
• a simpler design of heat exchangers and
compressors enabled by the use of single-
component refrigerants (ethane and
nitrogen);
• Russian manufacturers and design
institutes are familiar with the technology.
What makes the Arctic Cascade technology
stand out from the most widely-used
liquefaction processes:
Arctic
Cascade
Mixed-refrigerant
technology
processes(1)
COOLING
Ethane
down to
–80 ⁰С
down to
–35 ⁰С
down to
–155 ⁰С
down to
–137 ⁰С
down to
–163 ⁰С
down to
–163 ⁰С
Propane
Nitrogen
Mixed
refrigerant
Throttling
STAGE 1
STAGE 2
STAGE 3
LEGEND
Natural gas
Ethane
Nitrogen
LNG
A throttle
/49
48
Review of Operating Results
NOVATEK
Annual Report 2022
01
02
03
04
05
06
Cryogas-Vysotsk is our first medium-scale LNG
project. The project targets small- and medium-
scale LNG deliveries in LNG trucks and gas
carriers.
One of our LNG strategic initiatives is to develop
small- to medium-scale projects.
The plant with a nameplate capacity of 660 mt of LNG per annum
located in the North-West of Russia near the Gulf of Finland,
140 km away from St. Petersburg, comprises two 330 mtpa
liquefaction trains. The project’s infrastructure includes a jetty
that can handle 30 mcm LNG carriers and bunkering vessels, and
a truck loading bay. Commercial LNG loadings started in 2019.
The project’s infrastructure includes:
• a jetty that can handle 30 mcm LNG carriers and bunkering
vessels; and
• a truck loading bay.
660
MT OF LNG P/A
NAMEPLATE CAPACITY
OF THE LNG PLANT
For more details about
the Project please see
novatek.ru
Cryogas-Vysotsk
Leningrad Region
Saint-Petersburg
707
MT
LNG produced
107%
utilization rate of the
nameplate capacity
PLANT PERFORMANCE IN 2022
Cryogas-Vysotsk
In order to increase its design capacity
from the current 660 mt to 820 mt of
LNG per year, we begun the construction
of a booster compressor station with
a capacity of 2.5 MW. At the end of
2022, working documentation was being
developed, orders for basic equipment
were placed. In 2022, construction of the
second LNG truck loading bay for road
transport at the Cryogas-Vysotsk LNG
plant began.
Since the commencement of operation
in 2019, the project has shipped a total
of 2.34 mmt of LNG, with 446 LNG tankers
and over 6.3 thousand trucks loaded.
120 tankers and around 3.1 thousand
trucks were loaded in 2022 to deliver
a total of 682 mt of LNG.
Cryogas-Vysotsk
demonstrated strong
operating performance.
Since 2022, Cryogas-Vysotsk has been
using green electricity for its operations,
which is produced at wind farms located
within the Russian Federation. The
purchase of green electricity allows
NOVATEK to reduce its carbon footprint
of LNG produced at the plant (Scope 2).
The Cryogas-Vysotsk project
company is owned by NOVATEK (51%)
and Gazprombank (49%).
120 tankers and around
3.1 thousand trucks were
loaded in 2022 to deliver a total
of 682 mt of LNG.
As part of NOVATEK’s LNG supplies to the Group’s fueling
stations as well as to wholesale consumers in the Murmansk
Region and bus lines in St. Petersburg, around 2.1 thousand
truckloads were delivered to the domestic market.
We see vast prospects in using LNG as marine fuel and motor
fuel to substitute for fuel oil and diesel, thus contributing to
curbing emissions and improving the environment.
/51
50
NOVATEK
Annual Review 2022
Review of Operating Results
01
02
03
04
05
06
LNG Construction Center
The Center offers state-of-the-art
technical foundation for LNG technologies
in Russia, creates new jobs, and contributes
to the economic development of the
country.
The Center has two dry docks and
manufacturing facilities to fabricate GBS
and topside modules.
Yamal
Peninsula
Utrenneye field
Kara Sea
Arctic LNG 2 Project
LNG Construction
Center
Gydan
Peninsula
Barents Sea
KEY ADVANTAGES OF THE CENTER:
(1) Proved reserves of the Utrenneye field (SEC)
as of 31 December 2022.
As part of the dry dock #1, the world’s largest dock gate was
built, measuring 200 m in length, 20 m in width and in height.
The dock gate has passed the tests and is fully ready for operation
(GBS withdrawal from the dry dock).
All of the first train’s 14 topside modules have been installed
on the GBS and are now being integrated with the base structure.
Handover of completed module systems and GBS to commissioning
is also underway.
• 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
• Minimization of environmental impact
Arctic LNG 2 Project
NOVATEK’s second large-scale LNG
project involves the construction of three
natural gas liquefaction trains.
• The resource base of the project:
Utrenneye field in the Gydan Peninsula
• Reduce capex due to a new LNG train
concept on GBS
• Construction of three trains
in the Center in the Murmansk region
with subsequent sea towing to Gydan
Peninsula
• 3 trains with the capacity to produce
6.6 mmtpa of LNG each
• Low cost of development and
production
19.8
MMTPA
Nameplate capacity
of the LNG plant
590
BCM OF GAS
Proved reserves of the
Utrenneye field (SEC)(1)
73%
Overall Project
progress
In 2022, the Center’s final module assembly
workshop became fully operational.
This workshop, which is 93 m high, 280 m long
and 345 m wide, has larger internal space
than any manufacturing workshop in Russia.
GBS 2 has been fully concreted, with
mechanical outfitting of its top slab and
internal compartments now ongoing.
All 14 modules for the GBS #1 arrived
in February 2022.
The first two modules for the GBS #2
arrived in Murmansk in October 2022.
The world's first facility for "mass production"
of natural gas liquefaction trains on gravity-
based structures (GBS).
PERSPECTIVE LNG PROJECTS
/53
52
NOVATEK
Annual Review 2022
Review of Operating Results
01
02
03
04
05
06
Arctic LNG 2 Project
PERSPECTIVE LNG PROJECTS
Arctic LNG 2 is the second large-scale
LNG project.
The Utrenneye field — the resource base for the project — is located
in the Gydan Peninsula in the YNAO, approximately 70 km across the
Ob Bay from the Yamal LNG project.
ООО Arctic LNG 2 is the project operator and owner of all of the
assets and holds the LNG export license.
Utrenneye field
Arctic LNG 2 Project
LNG Construction
Center
Gydan
Peninsula
Kara Sea
Barents Sea
PROVED RESERVES OF THE FIELD (SEC)(1)
590
BCM
of gas
23
MMT
of liquid
hydrocarbons
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 created the LNG Construction Center in Belokamenka
near Murmansk to fabricate the GBSs, assemble and install topside
modules. It’s the world’s first facility for “mass production”
of natural gas liquefaction trains on GBS.
The Center has two dry docks and manufacturing facilities
to fabricate GBS and topside modules.
All of the first train’s 14 topside modules have been installed on the
GBS and are now being integrated with the base structure. Handover
of completed module systems and GBS to commissioning is also
underway. GBS 2 has been fully concreted, with mechanical outfitting
of its top slab and internal compartments now ongoing.
As of the end of 2022, a total of 79 wells
have been drilled at the Utrenneye field,
including 23 wells drilled in 2022. Enough
production wells have now been drilled
to ensure the loading of the project’s first
train during start-up. As of the end of 2022,
five drilling rigs were engaged in production
drilling.
All three sections of the Utrenniy terminal’s
quayside that will accommodate the
project’s three GBS platforms commenced
operation. One of the sections is currently
used for materials and equipment load-in.
Ice barriers construction was completed
in late 2022.
Construction has been completed and all
facilities of the GBS and topside modules
site has been launched. These facilities
are being operated, the modules of trains
2 and 3 of the LNG plant are being
assembled.
As part of the dry dock #1, the world’s largest
dock gate was built, measuring 200 m in length,
20 m in width and in height. The dock gate
has passed the tests and is fully ready for
operation (GBS withdrawal from the dry dock).
The Belokamenka site now has a residential
complex for up to 17 thousand beds.
The Utrenniy airport built specifically for the
Arctic LNG 2 project on the Gydan Peninsula
handled more than two thousand flights
in 2022. The airport enables efficient logistics
for the project’s rota-tional personnel
as airplanes can now be used instead
of helicopters.
For more details
about the Project
please see
arcticspg.ru
73%
Overall Project
progress(1)
95%
The first train
progress(1)
The plant’s first train is scheduled
to be launched in 2023, Train 2 – in 2024,
and Train 3 scheduled for launch in 2026.
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
of up to 1.6 mmtpa. The total LNG capacity
of the three trains will be 19.8 mmtpa.
(1) Proved reserves of the Utrenneye field (SEC) as of 31 December 2022.
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NOVATEK
Annual Review 2022
Review of Operating Results
01
02
03
04
05
06
Transshipment Complexes
in the Murmansk and Kamchatka Regions
PERSPECTIVE PROJECTS
Decarbonization Projects
In 2022, NOVATEK decided to develop a
Russian low-carbon ammonia production
technology. Carbon dioxide will be captured
and put into a long-term geological storage
(CCS).
PERSPECTIVE PROJECTS
EACH OF THE
TERMINALS
INCLUDES
A FLOATING LNG
STORAGE WITH
A VOLUME
360
MCM
with two
transshipment
points “ship-to-
ship”
In order to optimize the Arctic LNG
transportation, OOO Arctic Transshipment
is implementing a project for the
construction of two LNG transshipment
complexes in Kamchatka and in the
Murmansk Region.
The terminals are designed to ensure
efficient transportation of LNG from Arctic
LNG 2 and other NOVATEK’s projects by
transshipment from LNG tankers of the
Arc7 ice class to conventional vessels.
Transshipment complexes will ensure
optimal use of the ice tanker fleet and
reduce the cost of transportation to the
markets of consumer countries for the
Company’s existing and perspective LNG
projects.
(1) Smooth variability of wind speed, low turbulence, air density increase at negative temperatures.
NOVATEK frequently monitors changes in legislation on decarbonization
matters, assesses the implications of such changes and updates its plans
accordingly. In addition, the Company takes an active role in elaborating
proposals on improving legislation and communicates its position, including
on decarbonization and the achievement of climate change targets.
Obskiy LNG Project
PERSPECTIVE PROJECTS
THE PROJECT
WILL COMPRISE
TWO LNG TRAINS
WITH A CAPACITY
OF AT LEAST
2.5
MMTPA
each
Obskiy LNG is another large-scale LNG
project of NOVATEK to be developed on the
resource base of the Verkhnetiuteyskoye,
West-Seyakhinskoye, Arkticheskoye, and
Neytinskoye fields in the YNAO.
As of the end of 2022, pre-FEED studies were
ongoing to select the most appropriate
design. The LNG plant to be built under the
project will use NOVATEK’s patented gas
liquefaction technology, Arctic Cascade, and
Russia-made equipment.
In 2022, the Company also signed a Memorandum
of Understanding with Rosatom on decarbonization.
The subject matter of the memorandum is cooperation
in reducing the carbon footprint of products, as well as carbon
footprint per unit of energy produced. The memorandum provides
for the purchase by the Company’s enterprises of electricity
produced at Rosatom’s wind power plants, implementation
of joint hydrogen power projects, and construction and
operation of wind farms in the Arctic conditions, thus ensuring
uninterrupted power supply for the Company’s needs.
In 2022, we continued to explore various options to cooperating
on joint decarbonization projects.
Specifically, the Company signed an agreement of intent with
PAO Gazprom Neft, which prioritizes the review of conditions for
joint implementation of projects aimed at producing low-carbon
products from natural gas while capturing the carbon dioxide and
putting it into an underground storage. As part of its partnership
projects development, NOVATEK obtained exploration and
production licenses for subsoil areas in the Vologda Region and
the Khanty-Mansi Autonomous Region. These areas are intended
to become underground storage sites for CO2 from steelmaking
and petrochemical plants.
complex. The infrastructure is fit for utilizing
CO2 from the Yamal LNG plant as well.
The CO2 will be stored underground the
Obskiy license area located 50 km away
from Sabetta. The exploration license was
obtained in 2022. The infrastructure includes
a CO2 treatment plant (compression and
dehydration), a CO2 pipeline, and a disposal
wells site.
In 2022, NOVATEK completed a wind
measurement program and explored
technical solutions for a wind power plant
(WPP) in Sabetta, achieving the installed
capacity factor of 50%, which is well above
In 2022, as part of a pre-FEED with
international engineering companies,
NOVATEK developed a concept of CCS
infrastructure for utilization of CO2 from its
planned low-carbon ammonia production
the average for WPPs in Russia (about 30–35%). The Company
developed requirements to the wind turbines design which take
into account specific wind parameters(1). The WPP will supply power
to the existing and planned facilities in Sabetta, thus reducing the
carbon footprint of their products (LNG and ammonia).
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Review of Operating Results
NOVATEK
Annual Report 2022
01
02
03
04
05
06
Processing
of 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.
In the reporting period, the Purovsky Plant
processed 13,247 mt of de-ethanized gas
condensate, representing a 3.3% increase
compared to 2021. The processing capacity
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 2022 output mix included
9,857 mt of stable gas condensate, 3,302 mt
of NGL and LPG, and 23.5 mt of regenerated
methanol.
Purovsky Plant
Our subsidiaries and joint ventures are producing natural gas with
a significant content of liquid hy-drocarbons (gas condensate).
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.
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).
The Ust-Luga Complex also allows for
transshipment of stable gas condensate to
the export markets. After launching in 2013,
the complex has improved our logistics and
reduced transportation costs.
In the reporting year, the Ust-Luga
Complex processed 6,943 mt of stable gas
condensate into 6,825 mt of end products,
including 4,208 mt of light and heavy
naphtha, 1,052 mt of jet fuel and 1,487 mt
of ship fuel component (fuel oil) and gasoil,
78 thousand tons of LPG.
The Ust-Luga Complex is implementing
construction of 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.
In 2022, the main construction works were
completed and commissioning (individual
tests of equipment and hydrostatic tests
of pipelines) began.
Ust-Luga Complex
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.
As the Ust-Luga Complex reached full processing capacity,
we transshipped stable gas condensate to the export markets
by sea.
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.
Processing volumes and output of the Ust-Luga Complex
mt
2021
2020
2019
2018
2022
6,957
7,007
6,902
6,949
6,943
↘ 0.2%
2,286 ↗1.5%
Heavy naphtha
1,922
↘8.1%
Light naphtha
1,052
↘0.9%
Jet fuel
826
↗13.9%
Fuel oil
661
↗2.0%
Gasoil
78
↗32.2% LPG
mt
Processing volumes and output of the Purovsky Plant
2021
2020
2019
2018
2022
12,820
11,786
10,802
11,017
13,247
↗ 3.3%
9,857
↗5.4%
Stable gas condensate
3,302 ↘2.6%
NGL and LPG
23.5
↘1.3%
Regenerated methanol
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Review of Operating Results
NOVATEK
Annual Report 2022
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06
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.
In 2022, natural gas sales volumes,
including volumes of LNG sold, aggregated
76.56 bcm, representing an increase of 1%
as compared to 2021. Our natural gas sales
in the Russian Federation totaled 68.09
bcm, which is a 0.3% increase year on
year. Our international LNG sales totaled
8.46 bcm, which is a 6.5% increase year
on year. This growth in international sales
was driven by higher LNG production at our
joint venture Yamal LNG.
95.7%
Share of end
customers
in domestic gas
sales in 2022
Sales in the Russian Federation
40
REGIONS
The Company
supplied natural
gas to 40 regions
within the Russian
Federation
In 2022, the total volume of natural gas
sold in the Russian Federation amounted
to 68.09 bcm, increasing by 0.3% compared
to the previous year.
During 2022, 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, Khanty-Mansiysk
Autonomous Region, Moscow and Moscow
Region, Lipetsk Region, Perm Territory, Yamal-
Nenets Autonomous Region, Vologda Region,
Tula Region, Stavropol Territory, Tyumen
Region, Nizhny Novgorod Region, Leningrad
Region, Belgorod Region, and Kostroma
Region. The above regions accounted for
more than 92.4% of our total pipeline gas
sales in the Russian Federation.
In order to manage seasonal gas demand,
historically 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 2022, our inventories
of natural gas amounted to 0.82 bcm.
NOVATEK’s strategy as a natural gas and
LNG producer implies greater involvement
in the promotion of natural gas as a 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.
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, 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 2022, 33 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
Cryogas-Vysotsk. In 2022, sales volumes amounted to approximately
38 thousand tons.
In addition to the existing LNG plants, we started construction
of two facilities (14.2 mt per year each) in the Kashira and Togliatti
special economic zones in the Moscow Region and the Samara
Region, respectively. Once launched, these facilities will supply motor
fuel to the Central and Volga Federal Districts with a shorter LNG
transportation distance.
At the end of 2022, 13 LNG refueling stations for automobile
transport were in operations in the Urals, North-Western, Central
and Volga Federal Districts of Russia (one of them was built
in the reporting year in the city of Petushki in the Vladimir Region).
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 2022, the volume of sales at filling
stations more than doubled, reaching 51 mt.
NOVATEK has a key role in ensuring pipeline natural gas
supplies to the domestic market.
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 Cryogas-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.
mmcm
Natural gas sales
2021
2020
2019
2018
2022
75,817
75,620
78,452
72,134
76,555
↗ 1.0%
8,462
↗6.5%
International sales
68,093 ↗0.3%
Sales within the
Russian Federation,
including:
End customers
Traders
65,153
2,940
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Annual Report 2022
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In 2022, NOVATEK sold 8.5 bcm of gas
(6.0 mmt of LNG). We sold 80 large-scale
LNG tanker cargos from the Yamal LNG
plant (including regasified LNG) totaling
7.9 bcm of gas (5.6 mmt of LNG), which
is a 6.9% increase year on year, as well
as 0.1 bcm of boil-off gas. In the small-scale
and mid-scale LNG markets, the Company
sold 73 tanker cargos of LNG(1) as well
as more than 600 truckloads aggregating
0.5 bcm of gas (0.4 mmt of LNG).
In view of the major structural changes on
global gas markets amid the geopolitical
situation and unprecedented volatility
of global gas prices, NOVATEK is using
its best endeavors to avoid production
turndowns and secure uninterrupted
LNG sales from its large-scale projects.
The Company is negotiating additional
supplies with both existing and new
customers, including those from friendly
countries, seeking new market areas, and
considering ramping up LNG transshipment
To cater to the requests for information
on greenhouse gas emissions associated
with LNG shipping, the Yamal LNG project
company and NOVATEK collaborated
to develop corporate GHG accounting
guidelines(2) in November 2022.
Sales on International Markets
8.5
BCM
International
sales in 2022
Based on the experimental early and late
eastbound voyages via the NSR in 2021
and the shipping expertise gained, LNG
was also delivered to Asia-Pacific outside
the traditional navigation season in 2022.
In 2022, fifteen (15) ship-to-ship
transshipment operations were completed
at the LNG transshipment point near
the Kildin Island in the Murmansk Region.
In late 2022, similar ship-to-ship facilities
commenced operation at the LNG
transshipment terminal in the Kamchatka
Territory. Transshipment development
projects enable the Company to gain
in-house expertise as well as the ability
to transship LNG in Russia and streamline
the operation of its unique fleet of Arctic-
class carriers.
Liquid Hydrocarbons Sales
In 2022, NOVATEK’s liquids sales volumes
reached 15.9 mmt, or 4.2% less than in 2021.
NOVATEK sells liquid hydrocarbons(1) 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.
Our successful LNG sales in the leading
international markets, flexible and optimized
logistics solutions helping reduce the already
low carbon footprint of our LNG demonstrate
that LNG produced in the Arctic can be highly
competitive anywhere in the world.
(1) Including regasified LNG.
(2) Based on GIIGNL's recommended methodologies and ISO standards.
(1) Stable gas condensate, petroleum products, light hydrocarbons, LPG and crude oil.
The Company is further ramping up cargo
turnover via the Northern Sea Route (NSR)
and is working to extend the navigation
window for eastbound LNG deliveries from
our Arctic projects via this route. In 2022,
the port of Sabetta shipped 32 LNG cargoes
via the NSR’s eastern sector to Asia-Pacific
both under long-term contracts and as part
of spot optimizations.
High-value added petroleum
products from the Ust-Luga
Complex accounted for a 39%
share of our overall liquids sales
volumes.
We sold a total of 6.2 mmt of stable
gas condensate products, including
3.8 mmt of naphtha, 1.0 mmt of jet fuel,
and 1.4 mmt of fuel oil and gasoil. The
majority of petroleum products (95%)
were exported.
Export and domestic sales of stable gas
condensate continued in 2022. Total stable
gas condensate sales volumes amounted
to 3.3 mmt.
Liquid hydrocarbons sales
mt
2021
2020
2019
2018
2022
16,555
16,387
16,355
15,822
15,858
↘ 4.2%
6,227
↘8.2%
Petroleum
products
(Ust-Luga)
2,909
↘25.6%
Crude oil
3,323
↗41.9%
Stable gas
condensate
2,355
↗8.0%
Light
hydrocarbons
1,026
↘22.6%
LPG
18
↗28.6%
Other
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
are sold to SIBUR. We sold 2.4 mmt of light hydrocarbons in 2022.
Marketable LPG sales volumes totaled 1.0 mmt in 2022, representing
a 23% decrease compared to 2021.
The sale of LPG in small wholesale and retail was carried
out through a network of filling stations and gas filling stations
located mainly in the Chelyabinsk, Volgograd, Rostov and Astrakhan
regions, and the Republic of Bashkortostan.
As of the end of the year, sales were carried out from 85 retail
gas stations and seven gas filling stations.
Sales of crude oil in 2022 totaled 2.9 mmt, which is 26% lower
compared with 2021. We sold 66% of our crude oil volumes
in the domestic market, with the remaining volumes exported
to international markets.
For more
details about
the Yamal LNG
please see
p. 46
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Annual Report 2022
01
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04
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06
Sustainable
Development
04
BB 2.6
BILLION
Environmental expenses
15,718
PEOPLE
received health and safety training
and were certified in industrial safety
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.
Best Sustainability
Disclosure
66
Environmental Protection
68
Occupational Health and Safety
74
Human Resources
79
Social Policy and Charity
For more details about Sustainable
Development priorities see p. 30
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Annual Report 2022
01
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06
Environmental
Protection
In 2020, NOVATEK's Board of Directors
approved the Company’s environmental
and climate targets for the period
until 2030, encompassing reductions
in emissions intensity; methane emissions
in upstream, midstream and LNG; and
greenhouse gas emissions in upstream
and LNG. The plans also include improving
associated petroleum gas utilization and
increasing the percentage of waste sent
for recycling or neutralization.
In 2022, a number of activities to cut
pollutant and greenhouse gas emissions,
as well as to improve APG utilization,
took place under the comprehensive
environmental target program. The
Company’s 2022 Sustainability Report will
offer extensive details about what has
been achieved.
As part of its efforts as a member of
the initiative, the Company continued
methane leak surveys at its industrial
sites in 2022. In the reporting period,
The Company actively contributes to the
work of environmental charities. In 2022,
a number of NOVATEK subsidiaries
supported the Green Spring 2022
environmental cleanup day, an annual
event organized by the V.I. Vernadsky
Non-Governmental Ecological Foundation.
Another important environmental
awareness highlight was our employees
volunteering on the removal of an illegal
dump on Marra Island (Olgin Island),
95 km away from the Taz River.
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 all its operations.
In 2022, the
Company’s overall
spending on
environmental
protection and
sustainable nature
management
amounted to
RR 2.6
BILLION(1)
(1) Including NOVATEK’s share in joint ventures.
Biodiversity conservation
Furthermore, a number of key biodiversity conservation activities
undertaken in 2022 were first envisaged as part of a cooperation
agreement signed in 2021 with Kronotsky State Reserve to
conserve biological diversity in the Kamchatka Territory:
• studies and drafted action plans to maintain and restore
the wild reindeer population;
• population accounting of threatened sea otters along
the South-East coast of Kamchatka; and
• a range of activities to study marine mammals and
their habitats near Cape Shipunsky.
Creation of a nature trail
In 2022, an initiative to create a nature trail in the Vyborgsky State Nature Reserve
(the Cape Kiperort nature trail) launched by NOVATEK subsidiary managing the
Cryogas-Vysotsk project gained public recognition. The Cape Kiperort nature trail
won the Eco-Tourism prize at Ecological Culture: Peace and Harmony, an international
competition organized by the V.I. Vernadsky Non-Governmental Ecological Foundation.
In 2020, NOVATEK joined the Methane Guiding
Principles (MGP), a global oil and gas initiative
that targets climate neutrality and a low-
carbon economy.
Detailed information
on the activities will
be presented in the
Sustainability Report
2022
In all its operations, NOVATEK abides by
the requirements of Russian environmental
legislation as well as international practices,
standards, and conventions.
integrated aerial methane leak detection
using drones was successfully deployed at
a pilot site. Acoustic and thermal cameras
were also tested for their remote leak
detection capability. These efforts helped
demonstrate that these methods could
be feasible and powerful tools in future.
The Company recognizes its responsibility
for preserving natural ecosystems
in all regions where it operates,
actively cooperating with scientific
and environmental organizations and
embedding the principles of rational and
efficient use of natural resources into all
operational levels.
With the majority of the Company’s industrial sites located in the
Russian Arctic, the front-end engineering, design, construction, and
operation of buildings and facilities is performed with a particular
focus on researching, evaluating, forecasting, and monitoring the
permafrost and cryogenic processes. Throughout each project’s
lifecycle, forecasting the evolution of permafrost hazards amid
regional and global climate trends remains top of mind. Advanced
engineering technologies combined with thermal calculations, which
are subsequently verified against real-world geotechnical monitoring
data, enable an unparalleled assessment of the permafrost and
the condition of our engineering facilities. Moreover, the local
environmental monitoring program includes actions to identify
areas with intensifying cryogenic processes. In 2022, the Company
continued its cryogenic monitoring.
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NOVATEK
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Occupational Health
and Safety
Given the scale of the Company’s business,
including operations in the challenging
Arctic climate, and the significant scope
of work associated with developing major
projects, NOVATEK strives to maintain
an adequate level of monitoring at all levels
of operation and continues to implement
its industrial safety and occupational
health action plan.
The Company continuously improves
its industrial safety and occupational
health management system and makes
a significant effort to boost employee,
manager, and service contractor
engagement at all levels. We endeavor
to build and foster a zero injury culture,
where every employee assumes personal
responsibility both for their own safety
and the safety of their co-workers.
Pursuant to effective legislation,
workplaces undergo special certification
of working conditions. As at 31 December
2022, 10,650 workstations were covered
by assessments. The assessment
concluded that 9,513 workstations (89.3%)
meet or exceed the applicable standards.
NOVATEK is fully committed to putting the life and health of its
employees above its bottom line, and is aware of its responsibility
for ensuring accident-free operations and safe labor conditions,
as well as for protecting the health of the local population in the
areas of its operation.
9,513
WORKSTATIONS
meet or exceed
the applicable
standards based
on the results
of a special
assessment
of working
conditions
At workplaces with harmful working
conditions, a set of measures to eliminate
or mitigate harmful factors has been
implemented. No workplaces with hazardous
working conditions were identified.
NOVATEK places an emphasis on safety
culture, ensures prompt and efficient
responses to incidents, and records
and discloses incidents in accordance with
applicable laws, regulations, and internal
standards, which enables timely root cause
analysis and the development of a corrective
action plan to prevent their recurrence.
The Company is engaged in the exploration,
production, transportation, processing, and
sale of natural 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 line with industrial safety
laws. The Group’s entities have licenses to
operate Hazard Class I, Class II, and Class
III fire-, explosion-, and chemical-hazardous
production facilities.
In 2022, regional branches of the Federal
Environmental, Industrial, and Nuclear
Supervision Service registered
276 hazardous production facilities that
are in operation, including:
• Class I (extremely high hazard) –
14 facilities;
• Class II (high hazard) – 59 facilities;
• Class III (medium hazard) – 176 facilities;
and
• Class IV (low hazard) – 27 facilities.
For Class I and Class II hazardous
production facilities, industrial safety
management systems, and industrial
safety declarations were developed,
providing estimates and specifying
actions for:
• identifying, assessing, and forecasting
accident risks;
• planning and implementing accident
risk mitigation measures;
• coordinating accident and incident
prevention measures;
• supervising the production; and
• involving employees in the development
and implementation of accident risk
mitigation measures.
To provide compensation in the event
of fatality, injury or damage inflicted to
third parties resulting from accidents
at hazardous production facilities, all
hazardous production 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 at subsidiaries and affiliates that
are subject to the Federal Environmental, Industrial, and Nuclear
Supervision Service supervision undergo certification on industrial
safety rules on a regular basis.
Industrial safety assessment commissions are
set up within the entities to evaluate staff and
permit them to work independently at hazardous
production facilities using the Unified Testing
Portal.
Occupational health training is mandatory for all employees
and is offered at all entities. In accordance with Russian law,
chief executives, their deputies, and workplace managers
receive safety training and undergo knowledge checks
at licensed training centers. 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 occupational health requirements.
There are training classes at each entity, equipped with process
flow diagrams, dummies to practice first-aid skills, information
boards, and training materials.
BELOW ARE THE KEY PRINCIPLES THAT EACH AND EVERY COMPANY EMPLOYEE MUST FOLLOW.
Responsible attitude to the
residents and the area where
the Company operates through
compliance with all safety
requirements.
1
Continuous development
of industrial safety expertise
throughout their career.
2
Engaging in identifying hazards
and reducing operational risks.
3
Acknowledgment
of the right to refuse
to perform work that
is unsafe or dangerous.
4
Prioritizing prevention
over reaction.
5
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Healthcare management is an integral part of the industrial safety and occupational
health management system.
Employee Health Protection
We constantly seek to improve
the healthcare management system
used to safeguard the health of
NOVATEK employees, which includes
employee wellbeing and disease
prevention. The functioning of the system
is facilitated by the management teams
of NOVATEK, its subsidiaries and affiliates,
and controlled entities, as well as
by occupational health teams with
healthcare responsibilities, the medical
staff at health stations, and healthcare
service providers. In residential and
production areas at the fields, controlled
entities and contractors set up around-
the-clock healthcare stations.
The Group’s entities have regulations in place to ensure
emergency medical assistance and medical evacuation are
always available, as well as emergency medical standards and
other documents stipulating procedures and requirements
for first aid and emergency medical assistance at production
facilities. These documents describe what should be done by
witnesses (employees, contractors, subcontractors or third
parties) and medical professionals of the local health station,
and provide guidance for cooperation with other structural units
of an entity that participate in medical emergency response
in accordance with statutory obligations to provide timely and
adequate first aid to employees.
There are also action plans for medical emergency response
at fields designed to mitigate the impact of accidents and
acute diseases on employees’ health based on workplace risk
assessment and employee health risks inherent to a particular
site. These plans are instrumental in ensuring first aid, urgent
medical care, and medical evacuation of an injured or infected
employee to the most suitable medical facility offering
specialized medical services, as soon as possible. Training
sessions and drills are held to test the effectiveness and
relevance of these plans.
To secure sanitary and epidemiological welfare at the Company’s
facilities, we monitor the water supply and sewage; the sanitation
and hygiene standards at catering facilities, accommodation
and industrial premises; and waste disposal. In the reporting year,
there were no cases of contagious diseases related to catering
services or water supply recorded among employees.
Epidemic monitoring takes place at the Company’s industrial sites
to enable a rapid reinstatement of the above restrictions should
the COVID-19 situation deteriorate.
15,718
PEOPLE
received health
and safety training
and were certified
in industrial safety
in 2022
Pursuant to Directive of Russia’s Chief Public Health Officer No. 18 dated 20 June
2022, some restrictions (i.e. testing and quarantining before a rotation shift,
isolating close contacts, and mask mandates) were lifted in light of lowering
COVID-19 infection rates.
An integrated management system
for environmental protection and
occupational health and safety
is in place at controlled entities.
In accordance with the international standard
ISO 45001:2018, the integrated management system
also includes provisions on employee healthcare
management. Policies on occupational, industrial,
fire, and environmental safety have been approved
by corporate orders, which place the onus
on individual entities to preserve the lives and health
of all personnel, whether employed by the entity
or a contractor.
In 2022, 15,718 employees received health
and safety training and were certified in
industrial safety, which is in line with the
established training plan. In 2022, standing
safety and occupational health control
commissions carried out 722 compliance
checks at controlled entities. The results
were documented in relevant reports,
and special measures were developed to
eliminate the identified gaps. Employees in
charge of these activities submit monthly
remedial action reports to their respective
health and safety units for further analysis
of hazards.
In 2022, NOVATEK continued its targeted
audits of controlled entities for compliance
with occupational health, industrial, fire,
and environmental safety requirements
by a Company committee.
Over the reporting year, two integrated and 18 target audits were
completed at the following entities: Sabetta International Airport,
NOVATEK-Murmansk, NOVATEK-Purovsky Plant, NOVATEK-Yurkharovneftegas,
Terneftegaz, NOVATEK-Energo, NOVATEK-AZK (Chelyabinsk and Zlatoust
offices), NOVATEK-Tarkosaleneftegas, Yargeo, NOVATEK-Ust-Luga, Nortgas,
Arcticgas, Yamal LNG, and Cryogas-Vysotsk. A report was drafted based
on the findings, and remedial actions were developed.
At the Company level, we collect and analyze data regarding
the remediation of all findings of both scheduled and
unscheduled audits carried out by the government supervisory
authorities and of integrated and targeted audits by the
Company’s committee.
The Company takes the following steps to prevent accidents
and incidents at hazardous production facilities:
• Each year, the Company develops and rigorously implements
technical inspection, certification, and test schedules
for various types of equipment (e.g. external and internal visual
inspection, hydrostatic and pneumatic tests, and industrial
safety audits). In 2022, the Company performed industrial
safety audits of 1,182 items of equipment, thereby extending
their safe operating life.
• The Company runs drills and exercises on accident
containment and response scenarios and actions for the
personnel involved in maintaining equipment, buildings,
and structures at hazardous production facilities.
A total of 7,302 drills and exercises were run in 2022.
In 2022, there were:
• 12 work-related accidents; and
• two emergencies:
- on 17 April 2022, a wellhead loss
of containment event occurred
at Arcticgas’ well No. 5302 on well pad
U53 at the Urengoyskoye field, resulting
in the collapse of the X-mas tree and
master valve, and an uncontrolled
release of gas and condensate,
- on 11 September 2022, a wellhead
loss of containment event occurred
at NOVATEK-Tarkosaleneftegas’
well No. 9201 on well pad 92 at
the Urengoyskoye field, resulting
in formation gas blowout and damage
to the casing nipple below the casing
head.
In accordance with the law, an
investigation of the causes and
circumstances of accidents was
performed. Based on the findings,
preventive measures were taken on
similar equipment, and additional safety
measures were added to the entities’
internal regulations. One of the key
priorities when developing action plans
is to mitigate the risks of workplace
accidents, as well as emergencies and
incidents involving equipment in operation.
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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 Russian law. The system’s
objective is to prevent fires and protect
people and property in the event of a fire
or an emergency.
In 2022, ten controlled entities held active
licenses to service firefighting equipment
and six controlled entities were licensed
to perform firefighting, emergency
response, and rescue operations. A large
portion of licensed fire safety services
is outsourced to contractors. A total
of 29 professional emergency response
and rescue teams operate to ensure
the safety of 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
as part of prospective field development
and field infrastructure projects.
In 2022, the headcount of fire and
emergency brigades serving the facilities
on a 24-hour basis stood at 1,310.
Fire Safety, Civil Defence
and Emergency Response
There were 103 engineers at controlled
entities who directly monitored and
supervised 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 rescue
teams. In 2022, 22,029 patrols took
place around facility areas in order
to continuously monitor for safe
operation conditions, and 1,160 checks
of outdoor fire water supply sources
were carried out. Professional emergency
response and rescue teams performed
37,270 supervisory activities for safe
hot work and fire- and gas-hazardous
operations. Controlled entities’ facilities
are fully compliant with oil, petroleum
product, and other hydrocarbon spill
response requirements. The materials
and equipment available to emergency
response and rescue teams comply with
all existing requirements. The Company
1,310
PEOPLE
Headcount of fire
and emergency
brigades serving
on a 24-hour basis
We continue to monitor the activities
prescribed by epidemic and sanitary rules
set forth in SP 3.1.3597-20 Prevention
of the Novel Coronavirus Infection
(COVID-19), and Directive of Russia's
Chief Public Health Officer No. 13 dated
14 April 2022, including:
• rapid identification of infection
and isolation;
• setting up adequate testing; and
• enforcing anti-COVID measures in high-
occupancy spaces.
NOVATEK’s comprehensive efforts
to protect employee health, including
preventive and containment efforts,
enabled industrial facilities to operate
uninterrupted and helped prevent work-
related diseases and epidemics.
ensures the timely replacement
of its fleets of general and specialist fire
vehicles.
Fire safety, civil defense, and emergency
response training, as well as fire and
emergency drills, are an important
element of the overall fire safety and fire
and emergency response preparedness
system. In 2022, the Company organized
33,104 fire safety briefings offering
guidance materials and visual aids,
as well as hands-on demonstrations.
A total of 3,999 people received basic
fire safety training, as well as refresher
and additional training related to fire
safety. The number of fire safety
training sessions and exercises totaled
1,993, and 767 evacuation drills were also
arranged. To improve the preparedness
of the Company’s governing bodies, employees, and equipment
to respond to potential accidents and emergencies,
12 comprehensive training exercises were arranged in 2022,
including exercises covering procedures under oil spill response
plans.
In 2022, one fire occurred at a Company facility, but it was not
related to production processes. The fire caused no casualties
and no property damage.
NOVATEK fully complies with fire safety, civil defense,
and emergency regulations, and all of its facilities are equipped
with automatic fire detection, alarm, and extinguishing systems.
3,999
PEOPLE
received basic fire
safety training,
refresher
and additional
related trainings
NOVATEK Group’s controlled entities are ready
to respond to, contain, and mitigate fires and
emergencies.
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In 2022, 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 71.5% of employees upgraded their
skills. In 2022, the Corporate System for the Evaluation of Technical Competencies
tested 1,172 employees across the Group, including 44 persons tested at recruitment
and 122 persons tested at promotion.
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 2022, the primary
activities of training and professional
development included:
• implementing the 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;
• the Professional Skills Contest;
• engaging the Company’s young
specialists to take part in research
and practice conferences;
• cooperating with higher education
institutions to usher in new LNG talents.
The average age
of the Company’s
employees is
41
YEARS
Human Resources
The Company’s human resource
management system is based on
the principles of fairness, respect,
equal opportunities for professional
development, dialogue between the
management and employees, as well
as continuous, comprehensive training
and personal development opportunities
at all levels.
Employees are NOVATEK’s most valuable resource, allowing
the Company to grow rapidly and effectively.
Personnel Training and Development
In 2022, 87 young specialists participated
in the Steps in Discovering Talents
program. In this edition, the program’s
tenth, 15 young specialists completed
the on-the-job adaptation and
professional development program,
while 22 young specialists coached
by 17 mentors completed the first
step of the program. In autumn 2022,
50 mentors were assigned to a new
batch of 50 young specialists joining the
program. Both young specialists and
mentors received the Mentoring Culture
training courses. A total of 44 mentors
completed this training.
31.8
Exploration and production
26.5
LNG production
11.7
Marketing
8.0
Processing
7.7
Power supply
6.0
Administrative personnel
5.4
Transportation
2.9
Engaged in ancillary services
NOVATEK’s Headcount(1) by line of work as of 31 December 2022
%
19,570
EMPLOYEES
NOVATEK’s Scientific and Technical Center (NOVATEK STC) has
been hosting the In-House Training program since 2016.
In 2022, NOVATEK STC’s experts delivered classroom training
courses on the following subjects: Introduction to Seismic
Wave Propagation Theory; Seismic Petrophysics, Logging
Basics; Basics of Well Flow Studies, Course 1: Introduction.
Types of Well Flow Studies; Basics of Well Flow Studies, Course
2: Filtration Theory Basics; Basics of Well Flow Studies, Course
3: Flow Conditions. A total of 24 of the Company’s employees
received training under this program in 2022.
71.5%
EMPLOYEES
upgraded their
skills
1,172
PEOPLE
were tested under
the Corporate
System
for the evaluation
of technical
competencies
51
PROJECTS
were presented at the
17th Interregional
Research-to-Practice
conference for the
Company’s young
specialists
87
YOUNG SPECIALISTS
participated in the Steps
in Discovering Talents program
In December 2022, the Moscow
office hosted the 17th Interregional
Research-to-Practice Conference
for the Company’s young specialists,
which was attended by 64 employees
from 15 subsidiaries and joint ventures.
The contest’s committee received
51 applications. All winners and runners-up
received cash prizes.
(1) Including its
subsidiaries and joint
ventures.
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Social Programs
Voluntary medical insurance for employees
Our policy includes full outpatient care, dental care, and
emergency and scheduled hospital treatment.
6,633
EMPLOYEES
took advantage
of the program
Health resort treatment
We offer subsidized health resort vouchers to employees
and their families. Under this program, NOVATEK employees
may spend their vacations at any of 53 health resorts
located in Russia’s most picturesque places. In 2022, 6,633
NOVATEK Group employees took advantage of the program.
In 2023, the program will be expanded to include ten more
resorts in locations such as Lake Baikal in the Irkutsk Region,
the Republic of Karelia, Kazan, and Krasnaya Polyana in Sochi.
The Company’s Management
Board made a number of key
changes to the housing program.
The amount of money allocated
to the housing program will
increase from 2023 onwards;
the program will expand to include
the subsidiaries in Kostroma,
Chelyabinsk, and Moscow; and the
terms of the program have been
amended.
Repayable financial aid program
Our special-purpose loan program has two focus areas:
• short-term special-purpose loans intended for employees
experiencing economic difficulty;
• special-purpose, interest-free home loans for employees
residing in Tarko-Sale, Novy Urengoy, Moscow, Nadym, Sosnovy
Bor, Tyumen, and Vysotsk.
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:
In 2022, NOVATEK STC and Yamal LNG
were awarded Certificates of Merit
under the 1st and the 2nd prize of the
International Contest of Scientific,
Technical and Innovative Developments
for the Development and Exploitation of
the Arctic and Continental Shelf.
In September 2022, the Group concluded
its 6th Interregional Professional Skills
Contest. A total of 110 contestants
from 11 entities took part in the contest.
The contest, spanning seven areas
of expertise, was hosted by NOVATEK-
TARKOSALENEFTEGAS and included
a theoretical stage and a practical stage,
following which the winners were chosen.
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.
In addition to the university’s faculty, invited professors
from the Bauman Moscow State Technical University and
NOVATEK’s experts with hands-on experience also teach
in the program. Successful graduates get the opportunity
to join the Company and take part in large-scale LNG
projects in Russia. During the training, "A" students and
"B" students also receive an additional scholarship from
the Company.
Following the two-year training course, 11 out
of 20 graduates (enrolled in 2020) joined the Group
in 2022:
• six graduates joining Arctic LNG 2;
• two graduates joining Yamal LNG;
• two graduates joining Obskiy GCC; and
• one graduate joining NOVATEK.
Ten students (enrolled in 2021) were invited to get hands-
on learning experience:
• Yamal LNG (four persons);
• Arctic LNG 2 (six persons).
In December 2022, 20 first-year students (enrolled in 2022)
visited the LNG plant in Sabetta and the LNG Construction
Center in Belokamenka on introductory tours.
In 2017, the Innovator Corporate Idea
Management System was launched
in NOVATEK. Currently, 22 Group entities
are connected to the system.
The Innovator System is an automated platform
for collecting and processing employees’
proposals on improving and developing the
Company’s business.
In 2022, our employees shared 737 ideas
on how to streamline operations, reduce
production costs and implement new
work methodologies. The total number
of applications over six years of the
system’s life now stands at 2,526, with
595 ideas approved for implementation
and 313 ideas already implemented.
These generated a positive economic
effect of RR 5.9 bln.
To reduce the risk of occupational
diseases at the Company’s
subsidiaries located in the Far North,
we run comprehensive medical
examinations of employees once every
two years.
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Social Policy and Charity
The 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.
Cooperation with the Regions
Pursuant to its cooperation agreements
with various regions, the Company
was investing in the Yamal-Nenets and
Khanty Mansi Autonomous Regions,
and Tyumen, Chelyabinsk, Leningrad,
Murmansk and Kostroma Regions
throughout 2022. The Company
allocated funds to implement the
social policy, educational, cultural and
sports initiatives, as well as to extend
support to kindergartens and indigenous
minorities of the North. The elderly,
veterans, children and people with
disabilities, as well as people who faced
hardships received aid.
Supporting educational initiatives is one
of the key elements of NOVATEK’s social
policy.
Together with the Government of the YNAO, the Company
continued its participation in the “Teacher for Russia” program
in 2022. The program’s purpose is to train young professionals
to become teachers as well as to offer those graduating
from Russia’s leading universities a job as a teacher in regional
schools to enable equal access to education for children living
in different regions and localities across Russia.
The Company supported programs for the education and
development of gifted children on the basis of secondary
educational school No. 2 in Tarko-Sale, Purovsky District
of the YNAO, Tyumen Lyceum No. 81, secondary educational
school No. 2 in Salekhard, secondary educational school No. 36
in Murmansk. Programs for schoolchildren and teachers of the
Purovsky District have been further developed in the following
areas: “Grants for schoolchildren” and “Grants for teachers”.
(1) Including NOVATEK’s share in joint ventures.
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.
NOVATEK-Veteran social protection foundation
The NOVATEK-Veteran social protection foundation was established in 2005 to provide social assistance
to ex-employees of the oil and gas sector with a significant employment history in the Russian Far North.
The foundation provides pensioners with quarterly financial assistance, allocates lump-sum benefits,
pays for medical treatment and medicines, organizes health resort treatment and rehabilitation, and
provides other types of assistance needed.
The Company’s Management
Board decided that, starting from
2023, children of employees aged
8–16 will also qualify for a 50%
subsidy of health resort vouchers
to government-certified children’s
camps.
Targeted compensation and social
support payments
This program provides targeted, free support to Company
employees under specific circumstances, including the following
payments: to employees who have just had a child, to employees
with large families, to employees affected by natural disaster or
fire, compensation for the care of a child up to three years of
age, financial aid for the care of children with disabilities, financial
aid for a burial, compensation for sports and recreational
activities, and milestone anniversary payments.
As of 31 December 2022,
the program covered
a total of
1,325
PEOPLE
Pension program
We keep in touch with the people who helped build NOVATEK and
continue to take care of them after their retirement. In 2007,
the Regulations on Social Benefits for Retired NOVATEK Group
Employees came into force. The Company calculates monthly
social benefits according to the Regulations, taking into account
the employee’s average salary, employment track record, and
location. The Company’s Management Board decided to extend
the benefit calculation period to 20 years starting from 2023.
Rehabilitation of children with disabilities
The program is aimed at supporting families of Group
employees who are raising children with disabilities.
AS PART
OF THE PROGRAM,
the children undergo individual
rehabilitation courses and receive
qualified medical care
In 2022, NOVATEK’s, its subsidiaries’
and its joint ventures’ social spending
and reimbursements to support charitable,
cultural, educational and healthcare
initiatives aggregated(1)
RR 3.3
BLN
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In 2022, financial aid was extended to:
• kindergartens in the regions where the Company operates for
maintenance and procurement;
• remote education programs for underfilled schools
in the Leningrad Region;
• a boarding school in the Tazovky District’s Gyda locality
to build campus housing for 600 beds;
• residents of the Murmansk Region to purchase two
ambulances with relevant equipment;
• the Tarko-Sale Central District Hospital to purchase medical
equipment;
• a project to develop a medical cluster in Salekhard;
• the “YAMINE” charitable foundation to arrange medical
examination and healthcare services to critically ill children,
children with disabilities living in the YNAO, special care
and rehabilitation;
• purchase stair climbers to create accessible environment
in the YNAO to make mobility comfortable for wheelchair users
both inside and outside, as well as in the airport, to use the
boarding stairs and move around inside the aircraft;
• children and youth with disabilities, whose families cannot
afford high-tech customized rehabilitation equipment,
or healthcare, examination, rehabilitation services in the
Leningrad Region.
Importance is placed on providing
finance for activities aimed at preserving
and developing cultural heritage. The
Company participates in a project
to reconstruct the “Rodina” cinema
theatre in the Murmansk Region, which is
considered cultural heritage. The works
began in 2022.
Finance was provided to develop
designs for the project to preserve
and contemporize the cultural heritage
site Priory Park in Gatchina (Leningrad
Region).
As part of the efforts to support
environmental projects, the Company
aided environmental initiatives
and studies of marine mammals
in Kamchatka and on the northern
Kuril Islands, as well as activities
aiming to preserve, record and study
Kamchatka's wild reindeer population.
In the Leningrad Region, support
was extended to the development
of nature trails and conservation areas.
Finance was provided for engineering
surveys and design development for
an automated waste sorting facility
with a landfill in Salekhard, Novy Urengoy,
Muravlenko for the purposes of creating
a comprehensive solid domestic waste
management system in the YNAO.
The Company is also focused
on conserving the biodiversity of the
YNAO unique nature by supporting
the projects to restore fish population
in bodies of water.
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
preservation projects, e. g. the “Choree,
a Literary Map of Yamal” project.
Educational Programs
For years, NOVATEK has been building its continuing education program, which enables the Company to
recruit highly qualified and educated young people from the regions of our operation.
Recruitment and career guidance for potential future employees
start with the Gifted Children program, currently running at School
No. 8 in Novokuybyshevsk, School No. 2 in Tarko-Sale, School No. 81
in Tyumen, and Secondary School No. 2 in Salekhard. In 2021, School
No. 36 in Murmansk joined the program.
Special classes are run at the schools, with places allocated
competitively to the most talented grade 10 and 11 students with
above-average test results.
We support traditional trades by purchasing satellite phones,
snow mobiles, delivering firewood, financing tundra monitoring
from air. In 2022, the Company provided finance to purchase
diesel generators for trading posts. To help maintain reindeer
stocks, we purchase animals, deliver reindeer food and
veterinary drugs. As always, the Company extended finance
to procure motor fuel for indigenous communities, air and rail
passenger travel for nomads.
We support activities aiming to preserve traditional lifestyles,
culture and language of indigenous minorities of the North,
provide finance for targeted training initiatives to have
indigenous minorities employed with energy sector companies
and local governments of the YNAO, help young talents from
among the indigenous communities. The Company delivers
humanitarian aid to those in need because of hardships from
among the indigenous minorities of the North.
For more details about Cooperation
with Indigenous Peoples of the Far
North please see p. 10
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In 2017, a resource center for industry-
specific student training — the Natural
Science Center — was built and fully
equipped in Tarko-Sale, the YNAO.
The Center opened in 2018. At year-end
2022, 682 students from Tarko-Sale
and 16 students from the settlement
of Kharampur, all aged five to 18 years,
attended the Center, which offers
31 additional education programs
(79 groups of students) and 37
individual learning paths focusing
on the natural sciences, technology,
tourism, and regional natural history.
The programs challenge the students
to solve advanced-level problems
and prepare them for national contests
and competitions. The students also
research projects on topics relevant
for the YNAO.
Our grant program for schoolchildren
is aimed at fostering academic success
and creativity, and encourages students
to take their studies seriously. Under this
program, the Company awards grants
to schoolchildren in grades five through
eleven. In 2022, the Company awarded
48 grants. Our grant program for teachers
is intended to raise the profile of the
teaching profession and help new and
talented teachers to flourish. In 2021,
seven teachers from the Purovsky District
received grants under this program.
In an effort to make more effective
use of university and college resources
to better prepare students for their
future work, the Company has developed
and successfully implemented the
NOVATEK-University program. The program
is an action plan for focused, high-
quality training in key areas of expertise
for students specializing in relevant
fields. This investment should translate
to Company growth and foster young
talent to meet the Company’s needs.
NOVATEK-University program participants
comprise the most motivated and
gifted graduates of the Gifted Children
program in Novokuybyshevsk, Tarko-Sale,
Tyumen, Salekhard, as well as children
of employees of NOVATEK’s subsidiaries
located in the North and graduates
from schools in the Purovsky District who
received grants from NOVATEK.
High-performing students who pass their
exams with good or excellent grades
receive additional monthly stipends.
In 2022, as part of an agreement
between NOVATEK and the Higher School
of Economics, students were given
the opportunity to use an online school
to better prepare for their final-year
exams in Russia: specialized mathematics,
physics, and computer science.
At the end of April 2022, Tyumen Lyceum
No. 81 again, after a two-year break,
hosted a physics and mathematics
school for students from Tarko-Sale,
Tyumen, Novokuybyshevsk, Salekhard,
and Murmansk.
A total of 63 tenth graders participating
in the Gifted Children study program
spent several days in engineering
competitions and classes with instructors
from the regional School of Physics
and Mathematics and the Kvantorium
children’s technology park.
At the end of October 2022,
schoolchildren participating in the Gifted
Children program from Tarko-Sale,
Tyumen, Novokuybyshevsk, Salekhard,
and Murmansk traveled with their
teachers to take part in the NOVATEK
Intellectual Club in Murmansk.
698
STUDENTS
attended the
Natural Science
Center
A total of 124 students and 15 teachers visited the LNG
Construction Center in Belokamenka on the western coast of
the Kola Bay. The children saw with their own eyes how an LNG
plant is built on gravity-based structures, then they had a tour
around Europe’s largest assembly shop and learned about
new and exciting professions in the oil and gas industry. In a
meeting with the Chairman of NOVATEK’s Management Board,
they talked about their studies in the specialized classes, their
hobbies outside school and impressions from what they saw at
Belokamenka.
Besides that, the Company covers commuting costs while
on internships. In 2022, the Company’s Management Board
decided to increase compensation and scholarships starting
from 2023, meaning during their studies, students are offered
paid internships. In 2022, 63 students of the NOVATEK-University
program interned at Company subsidiaries.
.
In 2022, NOVATEK continued its cooperation with Russia’s leading museums, including the State Russian Museum,
the Tretyakov Gallery, and the Moscow Museum of Modern Art (ММОМА).
Preserving Cultural Heritage
In 2022, NOVATEK supported the Tretyakov
Gallery’s exhibition Thing. Space. Man,
which was dedicated to Russian art from
the 1960s to the early 2000s. It covered
abstractions and kinetic experiments
stemming from the discoveries of the
Russian avant-garde, to painted objects
by the first Moscow conceptualists and
large-scale projects and installations
by contemporary artists. The exhibition
featured works by Mikhail Roginsky,
Ilya Kabakov, Viktor Pivovarov, Vladimir
Yankilevsky, Eduard Steinberg, Leonid
Sokov, Boris Orlov, Dmitry Prigov, and
other talented artists. In breaking with
tradition, the exhibits were not arranged
chronologically or grouped depending
on style. Man, Space, World, and other
artistic themes served as the basis
for selecting particular pieces for the
exhibition.
In the reporting year, History in Fine Arts: 19th Century
exhibitions were held in Chelyabinsk, Kostroma, Novy Urengoy,
and Murmansk as part of the State Russian Museum’s
educational initiatives for children and young people, which
the Company has been supporting since 2021. The project
aims to promote Russian history through the most important
events captured in Russian art. The project also encompassed
a workshop to share information and discuss different
methodologies through a series of lectures, consultations,
and round tables for teachers, as well as seminars and master
classes for school students.
NOVATEK also worked with the MMOMA Education Center to
launch Faces and Figures: The Journey of Images. The exhibition
springboards off portraiture. The museum’s collection shows
how the method of portraiture has changed over the 20th and
21st centuries and how different meanings have been attributed
to the image of a person. The curators challenge the idea that
the portrait is a familiar and conservative genre of flat drawings
or paintings. They broaden the understanding of portraiture with
a palette of new media to depict a person’s likeness, including
sculptures, installations, and videos.
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In 2022, NOVATEK continued to promote
children and youth sports in its regions
of operation by providing competing indoor
football, acrobatic rock’n’roll and student
basketball teams with equipment, official
competition balls, uniforms, prizes, cups,
and medals.
Sports Projects
As part of the efforts promoting
corporate sports, the All-Russian
Federation of DanceSport and Acrobatic
Rock’n’Roll has continued to run its
Corporate Clubs for Acrobatic Rock’n’Roll
project with NOVATEK. The project
currently covers five Russian cities:
Moscow, Kostroma, Murmansk, Tyumen,
and Chelyabinsk. More than 220 boys
and girls, including children of NOVATEK
employees, are involved in the clubs.
In April and October 2022, talents from our
corporate clubs participated in regional
acrobatic rock’n’roll competitions as well
as in November’s Central Federal District
competition. In early December, corporate
club members participated in the Russian
National Championship and Competition
in Moscow, and later in the month, talents
from Kostroma participated in the
Kostroma City Cup competition.
The Company also supported the
MMOMA’s White Cube: August exhibition.
The name of the exhibition – simple yet
enigmatic – functions as a kind of a
cipher. A recurring motif of the exhibition
is the sense of wandering within a
“picture of the world”. In the selected
works, created by artists of different
generations (Viktor Alimpiev, Evgeniya
Buravleva, Valentin Gerasimenko, Aleksey
Dubinsky, Vyacheslav Koleichuk, Nikolay
Nasedkin, Nikola Ovchinnikov, and others),
this idea acquires a manifold expression:
from the archaic symbols of the labyrinth
and the playing field, topographic maps
and three-dimensional drawings, to the
images of optical devices, panoramic
landscapes, visionary compositions, and
digital environments. Together, they serve
as waypoints to meanings that lie beyond
the visible and evident.
In 2022, NOVATEK became a partner
of the Golden Mask festival’s regional
events in Samara and Novokuybyshevsk.
In 2022, festival events were held in
13 Russian cities. The Samara Region
welcomed events for the second time.
Samara’s Academic Opera and Ballet
Theater hosted a night of one-act
ballets, including Naples, Brahms Party,
and Salieri Variations by Yekaterinburg’s
Ural Opera Ballet theater. The Russian
State Academic Youth Theatre’s play The
Son was also performed.
The Theatre of Nations’ puppet show
Nasreddin Hodja, the first of its kind
for the theatre, was performed in
Novokuybyshevsk.
In 2022, NOVATEK remained the general
partner of the Moscow Soloists Chamber
Ensemble under the direction of Yuri
Bashmet.
During the year, an indoor football
championship was run for school teams
in the Chelyabinsk and Kostroma Regions.
More than 16 thousand boys and girls
take part in the championship every
year, and indoor football pitches are built
for the schools of the championship’s
winning teams. In 2022, two were built
in the Chelyabinsk Region and two were
built in the Kostroma Region. All in all,
since 2013, 48 football grounds have
been built for championship-winning
schools under the Step to Bigger Football
project. In the reporting year, the school
gym of the Kamchatka Territory’s
competition-winning team was upgraded.
16
THOUSAND
BOYS AND
GIRLS
take part in the
mini-football
championship
every year
10
THOUSAND
PEOPLE
participated in the
Student Basketball
Association’s
competitions across
the country
In 2022, the Company continued
its cooperation with the Student
Basketball Association. With the support
of NOVATEK, the association held
competitions for student basketball
teams across the country, with more
than 800 teams and ten thousand
athletes participating from over
70 regions of Russia. Since 2017, the
Kostroma Region has hosted the Student
Basketball Association regional division
competition, in which about nine
teams participate annually. In 2022,
women’s teams participated in the
Student Basketball Association’s 3x3
tournament for the first time. In a major
step for women’s university basketball,
the 2022–2023 Student Basketball
Association Championship will welcome
women’s teams from universities in
the Kostroma, Ivanovo and Yaroslavl
Regions thanks to NOVATEK’s support.
In addition to these competitions, various
regions hosted acrobatic rock’n’roll
and university basketball workshops
and showcases.
In the reporting year, NOVATEK continued
supporting Russian national football
teams, Russian Football Cup matches,
Dinamo women’s volleyball team
and NOVA Volleyball Club and its affiliate
children and youth clubs.
The Golden
Mask festival
is a performing arts
festival that brings
the most important
plays from different
Russian cities
to Moscow every
spring.
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Help to Children in Desperate Need
In 2022, pursuant to NOVATEK’s corporate
charity policy, the Company continued
to run projects aimed at helping
children in desperate need in its regions
of operation.
The Health Territory project saw
leading doctors from the Russian
Children’s Clinical Hospital (RCCH) visit
eight cities: Tarko-Sale, Novy Urengoy,
Kostroma, Chelyabinsk, Magnitogorsk,
Petropavlovsk-Kamchatsky, Murmansk,
and Tyumen. In total, 14 surgeries were
performed, 721 severely ill children
received expert help, and 151 children
were admitted to the RCCH and
other federal hospitals. In addition to
providing medical assistance to children,
RCCH doctors have held research-
to-practice conferences for regional
specialists and case conferences,
including with leading experts on rare
pathologies. Since project launch in 2018,
a total of 2,923 children have received
assistance on 21 medical specialties, and
619 children have been admitted to the
RCCH and other federal medical centers
where 19 surgeries were performed.
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 genetic tests to help
inform individual courses of treatment,
which significantly increases their
chances of recovery. A total of 366
children received medical assistance
since the start of the project in 2018.
As part of the Internships project,
16 doctors from seven regional clinics
in Murmansk, Chelyabinsk, Magnitogorsk,
Kostroma, Tyumen, Novy Urengoy, and
Tarko-Sale completed individual in-person
professional development courses in rare
medical specialties at Moscow’s Pirogov
Russian National Research Medical
University.
The High-Tech Equipment project
involved the Company financing the
purchase of modern medical equipment
for five functional therapy departments
and the Medical Rehabilitation Center
of the Kostroma Regional Children’s
Hospital, as well as Kostroma Children’s
Polyclinic No. 5. Ophthalmic equipment
and medical supplies used to treat
and rehabilitate children with visual
impairments were purchased for the
Children’s Development Center —
Kindergarten No. 132 — in Magnitogorsk.
Financial support for the treatment,
rehabilitation, social adjustment, and
training of visually impaired and deaf-
blind children is traditionally channeled
through Con-nection, a deaf-blind
support foundation.
Targeted donations to help treat
critically ill children were provided in
response to multiple private requests
received by the Company, as well as to
the children at the Gorodok Neznaiki
foster home in Moscow. The Company
made a donation to procure a year’s
worth of medical supplies and pay
for medical services for the children
at the Kolomna (Schurovo) Most Holy
Trinity Church’s Center for the Social
Rehabilitation of Children, and provided
financing to rebuild the administrative
building of the foster home’s petting zoo
after a fire.
In 2022, the key activities of the
Company’s volunteer movement
All Together remained unchanged:
providing support for orphans and
Other Charitable Activities
In 2022, the Company provided financial
assistance to restore memorials in eight
municipalities of the Chelyabinsk Region,
as well as a free gas supply across the
region for Eternal Flame memorials under
the Fire of Victory project. The Company
helped restore and repair a total
of 65 Great Patriotic War memorials.
Under the Childhood Protection project,
the Company financed Boarding School
No. 13 and the Aistenok Child Care
Center in the Chelyabinsk Region, helping
to repair their classrooms, living quar-ters
and studio theater, while also sending
the boarding school children on a holiday
to a children’s health resort in Anapa.
A regional children’s drawing contest,
in which over 400 girls and boys took
part, was run by NOVATEK-Kostroma
in conjunction with the Department
of Education and Science as part
of the Company’s social projects.
The Company awarded winners
and medalists with certificates,
prizes, and gifts.
NOVATEK subsidiaries — including NOVATEK-Tarkosaleneftegas,
NOVATEK-Yurkharovneftegas, and NOVATEK-Kostroma — also took
part in a Memory Garden initiative in 2022. Our employees, local
schoolchildren and volunteers planted trees to commemorate those
who died in the Great Patriotic War..
In the Kostroma Region, events are organized under the national
#TogetherBrighter competition for creativity, design, and
research, including open days to introduce NOVATEK-Kostroma
and NO-VATEK to young people. .
In late September 2022, NOVATEK and the GES-2 House
of Culture arts center arranged an Our Festival event
in a park near the State Philharmonic of the Kostroma
Region. In a first for Kostroma, the GES-2 House of Culture
launched one of its regional initiatives aiming to enable
networking and the exchange of experience between cultural
professionals in the regions, develop local artists’ potential,
and actively involve local residents in cultural projects.
By running the projects under the Company’s
charity policy, we were able to boost both
the quality of support given and the number
of children to receive targeted aid and social
and psychological assistance in the regions
where the Company operates.
children with various illnesses and gifting New Year’s presents
from the Company and its subsidiaries’ employees to more
than 200 care recipients at the Noginsk boarding school
in the Moscow Region.
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Management
and Corporate
Governance
05
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.
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/
90
Corporate Governance System
92
General Meeting of Shareholders
92
Board of Directors
95
Board Committees
98
Management Board
98
Remuneration to the Board of Directors
and the Management Board
99
Risk Management and Internal Control System
106
Revision Commission
107
Corporate Ethics and Compliance
109
External Auditor
109
Share Capital
110
Dividends
111
Information Transparency
9
MEETINGS
of the Board of directors were held
during the 2022 corporate year
105.58
RR
dividends per share for 2022(1)
For more details
about the Board
of directors' activities
please see p. 92
(1) Recommendation of the Board of Directors.
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Management
and Corporate
Governance
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.
NOVATEK strives to consider
the principles of corporate governance
outlined in the Corporate Governance
Code recommended by the Central Bank
of Russia (Letter No. 06-52/2463 dated
10 April 2014). The Company follows
the recommendations of the Code,
as well as offers to our shareholders
and investors other solutions that
are intended to protect their rights
and legitimate interests.
The Company adheres to its Code
of Business Conduct and Ethics approved
by the Board of Directors in 2022
(Minutes No. 258 dated 20 December
2022). The Code sets forth overall
provisions and principles governing
the conduct of members of the Board
of Directors, the Management Board
and the Revision Commission, as well
as managers and employees of NOVATEK,
which were drafted according
to our moral and ethical values,
professional standards, and sustainability
best practice.
The Code also outlines
the rules governing relationships
inside the Company and NOVATEK’s
relationships with its subsidiaries
and joint ventures, shareholders,
investors, the government and the public,
consumers, suppliers, and other
stakeholders.
In December 2021, NOVATEK’s Board
of Directors approved the Company’s
Human Rights Policy, which formalizes
the Company’s stance on human rights
and encompasses all fundamental
principles, including respect for human
dignity, providing a safe working
environment, non-discrimination,
as well as respect for the rights,
distinctive culture, and customs of local
communities and indigenous peoples.
The Company tracks any changes
in current legislation and the Listing Rules
of the Moscow Exchange and the London
Stock Exchange and harmonizes its
internal documents to reflect such
changes.
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.
NOVATEK’s corporate governance practices allow its executive bodies to manage
day-to-day operations effectively, prudently and in good faith — all to the benefit
of the Company and its shareholders.
NOVATEK's Code
of Business Conduct
and Ethics is available
at our website
in Section Charter
and Corporate
Documents
NOVATEK’s current regulations on the Company’s
corporate governance and executive 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 do
not require any amendments.
Board Committees
Collegial
executive body
Financial and business activity
control bodies
Supreme governing body
Strategic governance body
BOARD OF DIRECTORS
CORPORATE SECRETARY
GENERAL MEETING
OF SHAREHOLDERS
REVISION COMMISSION
Audit
Committee
Remuneration
and Nomination
Committee
Management
Board
Strategy
Committee
Subdivisions
Subcommittee
on Climate
and Alternative Energy
Internal Audit Division
CHAIRMAN OF THE
MANAGEMENT BOARD (CEO)
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Annual Report 2022
General Meeting
of Shareholders
Regulations
on the General
Meetings approved
by NOVATEK’s
General Meeting
of Shareholders
in 2005 are available
at our website
The General Meeting of Shareholders
is responsible for:
• approving annual reports and annual
financial statements;
• distributing profit (including dividends);
• electing the Board of Directors
and the Revision Commission;
• approving the Company’s External
Auditor, and other corporate
and business matters.
The General Meeting of Shareholders is NOVATEK’s
highest governance body.
On 21 April 2022, the Annual General
Meeting of Shareholders approved
the 2021 Annual Report, accounts,
and financial statements prepared
under the Russian Accounting Standards
(RAS), voted to distribute the profit,
and agreed on the size of the year-
end dividend for 2021. The meeting
also elected the Board of Directors
and the Revision Commission, approved
the remuneration payable to the Board
of Directors and the Revision Commission,
and approved the external auditor
for 2022.
On 28 September 2022, the Extraordinary
General Meeting of Shareholders
approved the size of the interim dividend
for the first half of 2022.
Board of Directors
Regulations
on the Board
of Directors approved
by NOVATEK’s General
Meeting of Shareholare
are available at our
website
Regulations
on the Corporate
Secretary approved
by NOVATEK’s
Board of directors
are available at our
website
(1) Approved by the Board of Directors, Minutes No. 168
dated 28 April 2014 with subsequent alterations and
amendments
(2) From the Annual General Meeting of Shareholders
on 21 April 2022 until 21 April 2023.
The Board carries out
the overall strategic management
of the Company’s activities on behalf
and for the benefit of all its stakeholders
and ensures the Company delivers strong
performance to increase shareholder
value in a prudent and responsible
manner.
The Board determines the Company’s
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 remit,
including optimizing corporate structure,
approving major transactions, making
decisions on investment projects
and recommendations on the size
of dividend and its payment procedure,
and convening the General Meeting
of Shareholders. The General Meeting
of Shareholders elects the Board
of Directors.
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 dated 28 March 2005)
with subsequent alterations and amendments.
The Board of Directors’ (the “Board”) activity
is governed by the laws of the Russian Federation,
the Company’s Articles of Association
and the Regulations on the Board of Directors
first approved by NOVATEK’s General Meeting
of Shareholders in 2005 (Minutes No. 96 dated
17 June 2005) with subsequent alterations
and amendments.
The Board of Directors were elected
at the Annual General Meeting
of Shareholders on 21 April 2022.
The elected Board is comprised of nine
members, of which eight are non-
executive directors, including three
independent directors. The Board
is chaired by Alexander Natalenko.
The Chairman is responsible for leading
the Board and ensuring it operates
efficiently.
The members of NOVATEK’s Board
have a wide range of expertise as well
as a solid track record in strategic,
operational, financial, and commercial
activities in oil and gas. The Board
members hold regular meetings
with NOVATEK’s top management to gain
a detailed understanding of NOVATEK’s
business activities and strategy
as well as its key risks. The directors
also have access to the Company’s
middle management for both formal
and informal discussions to ensure
the information needed for Board
meetings flows freely and informs
decision making.
The Corporate Secretary also plays a key
role in the Board’s work. The Corporate
Secretary is sufficiently independent
(they are appointed and dismissed
by the Board of Directors) and is endowed
with the necessary powers and resources
to carry out their role in accordance
with the Regulations on the Corporate
Secretary(1).
The following key issues were discussed and decisions made:
• the Company’s 2022 full-year operating and financial results
were reviewed and approved;
• an interim dividend was proposed for the first half of 2022
based on interim financial results for the period, as well
as a final dividend for 2022 based on the full-year financial
results;
• Extraordinary and Annual General Meetings
of Shareholders were convened. During the meetings
in 2022, telecommunications facilities were used to allow
the shareholders to vote via electronic ballots;
• the main parameters of NOVATEK’s business plan for 2023
were reviewed and approved;
To ensure the Company’s efficient performance, Board meetings are convened
on a regular basis at least once every two months.
Board Activities during the 2022
Corporate Year(2)
9
MEETINGS
of the Board were
held during the
corporate year 2022
4
MEETINGS
were held in the
form of joint
attendance
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Attendance of Board and Committee Meetings in the Corporate Year 2022
(1) Excluding Arnaud Le Foll and Dominique Marion who resigned from the Board.
• NOVATEK’s Sustainability Report 2021 was approved;
• the revised Occupational Health, Industrial and Fire Safety,
and Environmental Policy of NOVATEK Group was approved;
• NOVATEK’s revised Code of Business Conduct and Ethics was
approved;
• a work plan and budget for NOVATEK’s Internal Audit Division
was approved for 2023.
In order to improve the efficiency of corporate governance
and meet the recommendations of the Russian Corporate
Governance Code, the Company carries out external
assessments of the Board of Directors’ and the Board
committees’ activities by engaging an external independent
consultant once every three years, and conducts a self-
assessment annually.
The results of an annual self-assessment carried out
by NOVATEK’s Board of Directors in March 2022 were reviewed
at the Board meeting.
The assessment covered the following areas:
• the Board’s overall performance;
• each Board committee’s performance;
• the Board Chairman’s performance;
• the Corporate Secretary’s performance.
The self-assessment methodology involves a survey of members
of the Board of Directors.
The activities of NOVATEK’s Board
of Directors and its committees
were reviewed and assessed
for compliance with the recommendations
of the Russian Corporate Governance
Code; the Moscow Exchange Listing Rules;
the recommendations of the Central
Bank of the Russian Federation on risk
management, internal control, internal
audit, and the board of directors
(supervisory board) audit committee’s
activities in public joint stock companies;
the recommendations of the Central
Bank on the formation and succession
of the board of directors; as well
as international and Russian best practices.
During the self-assessment process,
key activities of the Board of Directors
and its committees were reviewed,
including strategy definition, supervisory
and monitoring functions, interaction
with top management, risk management,
remuneration, succession, and development
of key managers.
The self-assessment helped identify
the areas for improving the Board’s
performance.
Board Committees
The Company has three Board committees: the Audit Committee, the Remuneration
and Nomination Committee and the Strategy Committee.
In 2021, the Board of Directors made
decision to create a Subcommittee
on Climate and Alternative Energy
under the Strategy Committee.
The committees play a vital role in ensuring
that high standards for corporate
governance are maintained throughout
the Company and that a broad number
of issues are investigated and necessary
recommendations are made prior
to general Board discussions.
In order to discharge their duties, the committees may request
information or documents from members of the Company’s
executive bodies or heads of the Company’s relevant structural
units. For the purpose of considering matters within their remit,
the committees may also engage experts and advisers
with specialist professional knowledge and skills.
Following previous assessments, workshops were requested
for Board members. Two workshops were run in 2022 covering
sustainability and the LNG market, with leading experts in these
areas invited as speakers.
The Audit Committee interacts
with the Company’s Revision Commission,
external auditor and executive
bodies. NOVATEK executives charged
with preparing accounts and financial
statements are invited to the Committee’s
meetings.
The committees’ activities are governed
by the specific Committee Regulations
approved by the Board of Directors
and are available on our website.
Audit Committee
THE PRIMARY ROLE
To monitor the Company’s
financial and business activities.
In order to support
the Board’s monitoring functions,
the committee’s remit includes,
but is not limited to, evaluating
the reliability of the Company’s annual
financial statements, the nominated
auditor, the auditor’s report,
and the efficiency of the Company’s
internal control system and risk
management system.
In the corporate year 2022, the committee met five times,
including four meetings in the form of joint attendance, to:
• discuss the Audit Plan and review the audit report covering
the Company’s activities for the year across two meetings
with the Company’s external auditor;
• review NOVATEK Group’s risk register;
• review reports on compliance with the Information Policy
and the Anti-Corruption Policy;
• review the Company’s quarterly financial performance;
• approve six-month and full-year reports on the activities
of the Company’s Internal Audit Division;
• make a recommendation to the Board of Directors
to approve the Company’s Annual Report and Internal Audit
Plan and Budget;
• make a recommendation on the Company’s nominee auditor
and the size of their remuneration;
• review the Internal Audit Division’s report on the reliability
and efficiency of the risk management system, the internal
control system, and corporate governance;
• consider other matters within the Audit Committee’s remit.
Joint attendance
In absentia
О
З
Board meetings
9 meetings / attendance, %
Remuneration and Nomination
Committee
6 meetings /
attendance, %
Audit Committee
5 meetings /
attendance, %
Strategy Committee
4 meetings /
attendance, %
1st / 100
1st / 100
1st / 100
1st / 100
2nd / 100
2nd / 100
2nd / 100
2nd / 100
3rd / 100
3rd / 100
3rd / 100
3rd / 100
4th / 77
4th / 100
4th / 100
4th / 100
5th / 100
5th / 100
5th / 100
6th(1) / 100
6th / 100
7th / 100
8th / 100
9th / 100
О
З
О
З
З
О
З
З
О
О
О
О
О
З
О
З
О
О
О
О
З
О
О
О
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Remuneration and Nomination Committee
In order to assist the Board,
the Committee performs the following
functions:
• developing and regularly reviewing
the Company’s remuneration policies
for the Board of Directors, executive
management and the sole executive
body of the Company overseeing
their adoption and implementation;
• conducting a preliminarily assessment
of the Company Management Board’s
performance for the year in line
with the Company’s remuneration
policy;
• conducting detailed and formalized
annual performance self-assessments
or commissioning external assessments
for the Board, its members
and committees; setting priority
areas for strengthening the Board
of Directors;
THE PRIMARY ROLE
To develop an efficient
and transparent compensation
practice for members
of the Company’s management,
boost the professional
expertise and performance
of the Board of Directors, and make
recommendations for the Company’s
Board of Directors on priority areas
in sustainability, industrial safety,
environmental protection, climate
impact, corporate governance,
and social activities.
• interacting with shareholders, which shall not be
limited to major shareholders, with a view to generate
recommendations prior to the election of nominees
to the Company’s Board of Directors;
• planning appointments of members of the executive body
and the sole executive body to ensure business continuity;
• supervising the disclosure of Board of Directors
and Management Board member shareholdings, as well
as those of other key executives; and
• reviewing reports on industrial safety, environmental
protection, climate impact, corporate governance, and social
activities, as well as reviewing the Company’s sustainability
reports on an annual basis.
In the corporate year 2022, the Remuneration and Nomination
Committee met six times, including four meetings in the form
of joint attendance, to:
• review NOVATEK’s 2021 Sustainability Report and recommend
it for approval by the Board of Directors;
• review NOVATEK Group’s 2021 HSE performance report;
• make recommendations in accordance with NOVATEK Group’s
Executive Bodies and Other Key Employees Remuneration
and Reimbursement Policy;
• review NOVATEK’s 2022 HR management report;
• review the 2022 report on NOVATEK’s social performance
in the regions where the Company operates;
• make recommendations to the Board of Directors
to form committees in line with the recommendations
of the Corporate Governance Code and the profile of each
Board member;
• make recommendations to the General Meeting
of Shareholders with respect to remuneration payable
to the Board of Directors;
• review the self-assessments of NOVATEK’s Board of Directors
and Board committees;
• preliminarily review and recommend the approval
of the revised Occupational Health, Industrial and Fire Safety,
and Environmental Policy of NOVATEK Group;
• consider other matters within the committee’s remit.
Strategy Committee
In discharging its responsibilities
and assisting the Board members
in discharging their duties, the committee
is tasked with, among other things:
• evaluating the long-term performance
of the Company’s business;
• preliminarily reviewing and making
recommendations on the Company’s
participation in other entities;
• assessing voluntary and mandatory
offers for the Company’s securities;
• considering the financial model
and business valuation of the Company
and its business segments
in order to make recommendations
to the Board of Directors
on the Company’s business priorities;
THE PRIMARY ROLES
Setting strategic business
objectives and following up
on strategy implementation,
as well as developing dividend policy
recommendations.
• making recommendations to the Board of Directors
on transactions subject to Board approval; and
• making recommendations to the Board of Directors
with respect to the Company’s policy on the use of its non-
core assets.
In the corporate year 2022, the Strategy Committee met four
times, including three meetings in the form of joint attendance,
to:
• make recommendations regarding the size and form of the six-
month and full-year dividend payout;
• review progress updates on NOVATEK’s Corporate Strategy up
to 2030, including:
- the analysis of domestic and international markets, logistics,
risks and risk evaluation, and performance targets,
- the status of key projects,
- the mineral resource base status and maturation,
- the NSR development;
• preliminarily review and make recommendations to approve
the main parameters of NOVATEK’s consolidated business plan
for 2023, including analysis of the Company plan’s sensitivity
to macro factors in 2023;
• consider other matters within the committee’s remit.
Subcommittee on Climate and Alternative Energy
(under the Strategy Committee)
THE PRIMARY ROLES
Reviewing the Company’s business
and developing recommendations
to the Board on matters
related to NOVATEK’s climate
and decarbonization strategy,
renewables, and the production
of low-carbon fuels.
In July 2021, the Board of Directors passed a resolution
to establish a Subcommittee on Climate and Alternative
Energy under the Strategy Committee. Having a dedicated
subcommittee promotes regular in-depth reviews of NOVATEK’s
climate strategy performance and the timely submission
of climate-related proposals to the Board of Directors.
In the corporate year 2022, the Subcommittee on Climate
and Alternative Energy met four times, including three meeting
in the form of joint attendance.
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Management Board
NOVATEK’s Management Board is a collective executive
body responsible for the day-to-day management
of the Company’s business
Members of the Management Board
are elected by the Board of Directors
from among the Company’s key
employees. The Management Board
is accountable to the Board of Directors
and the General Meeting of Shareholders.
The Chairman of the Management Board
is responsible for leading the Board
The Management Board’s activities are 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.
The procedure for calculating the remuneration
and compensation paid 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 dated 24 April
2015) with subsequent amendments pursuant
to the resolution of the Annual General Meeting
of Shareholders dated 23 April 2019.
The Management
Board’s remit is
detailed in NOVATEK’s
Articles of Association
and ensuring its efficient performance
as well as organizing 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 dated 25 August
2017) with subsequent changes in its
composition pursuant to the resolutions
of the Board of Directors dated 12 July
2018; 21 September 2018; 14 November
2018; 14 December 2018; 19 March 2019;
2 November 2020; 17 December 2021;
and 25 August 2022.
Remuneration to the
Board of Directors and
the Management Board
According to the Regulations,
remuneration consists of the following:
• a fixed part;
• remuneration for attending Board
meetings; and
• remuneration for attending Board
committee meetings.
The fixed part of a Board member’s
remuneration stands at RR 15 mln
per corporate year. The fixed part
for the Chairman of the Board
of Directors totals RR 30 mln per
corporate year. Members of the Board
of Directors are also paid remuneration
for attending Board meetings
to a maximum amount of RR 4.5 mln per
corporate year, as well as remuneration
for attending committee meetings
to a maximum amount of RR 3 mln per
corporate year.
Board members are also compensated
for travel and accommodation
expenses related to the performance
Regulations
on Remuneration
and Compensations
Payable to Members
of Board of Directors
approved by
NOVATEK’s
General Meeting
of Shareholders
are available at our
website
of their functions as members
of NOVATEK’s Board of Directors.
The procedure and criteria for calculating
the level of remuneration paid
to the Chairman and members
of NOVATEK’s Management Board, as well
as the compensation of their expenses,
are prescribed in the Regulations
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 impact of risks in a timely
manner contribute a lot to achieving
the Company's operational and strategic
goals.
The Company's RMICS operates continuously and covers all
levels of corporate governance and each area of activity
and business process across NOVATEK's structural
and standalone units.
Its model of operation implies the involvement
of all levels of corporate governance in timely identification
and management of risks and discrepancies and includes
aligning RMICS elements at strategic and tactical management
levels as well as ensuring independent evaluation and oversight
over the RMICS functioning.
on the Management Board, NOVATEK
Group’s Executive Bodies and Other Key
Employees Remuneration and Expense
Reimbursement Policy (approved
by the Board of Directors on 17 December
2019, Minutes No. 226 dated 17 December
2019), and the employment contracts
they sign with the Company.
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Management and Corporate Governance
NOVATEK
Annual Report 2022
For the purposes of implementing the Regulations on NOVATEK RMICS, the Company
developed internal documents governing various aspects of the RMICS functioning,
including risk management, internal audit, combating corruption, compliance
with business ethics, control over insider information, processing and use of personal
data, etc., most of which are publicly available and can be accessed through
the Company's official website.
(1) The above list
includes key RMICS
policies and does
not include internal
regulations
developed
to implement
the policies.
The Company has adopted best
international and Russian practices
of risk management and internal control,
including:
• COSO 2017 "Enterprise Risk
Management – Integrating
with Strategy and Performance" (COSO
ERM);
• COSO 2013 "Internal Control –
Integrated Framework";
• Concept of the Institute of Internal
Auditors — IIA's Three Lines Model.
Updated Three Lines of Defense model
(2020);
• GOST R ISO 31000-2019 National
Standard of the Russian Federation —
Risk management. Principles
and Guidelines (2020), and other
standards;
• recommendations on organizing risk
management, internal control, internal
audit, work of the audit committee
of the board of directors (supervisory
board) in public joint stock companies
(as recommended by information letter
of the Bank of Russia No. IN-06-28/143
dated 1 October 2020).
Regulations on Risk
Management and
Internal Control
System approved
by NOVATEK’s
Board of directors
are available at our
website
The main principles and approaches, goals
and objectives, the list of participants
of the RMICS as well as their obligations
and cooperation procedure are governed
by the Regulations on NOVATEK Risk Management
and Internal Control System approved
by the Board of Directors (Minutes No. 247 dated
27 August 2021).
In order to assist the Company's Board
of Directors and executive bodies
in preserving and increasing the value
of NOVATEK Group, NOVATEK's Internal
Audit Division (the "Division") performs
objective internal audits based mainly
on the risk-oriented approach.
The internal audit function in NOVATEK
is centralized.
In its activities, the division is guided
by the applicable laws of the Russian
Internal Audit Division
Organizational independence
Internal Audit
Policy approved
by NOVATEK’s
Board of directors
is available at our
website
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 approved
by the Board of Directors, which
defines the internal audit's goals,
objectives, functions and powers,
as well as the internal audit's place
in the Company's organizational
structure.
The Internal Audit Division is:
• functionally subordinated to the Board
of Directors which, among other
things, approves the Internal Audit
Policy and the division's work plan
and budget;
• 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.
• Risk management in structural
units and at facilities by business
functions
• Coordination and operational control
over risk management, assessment
of efficiency of the risk management
activities
• Development of RMIC methodology,
compliance, training
• Assessment of RMICS reliability
and efficiency
KEY DOCUMENTS REGULATING RMICS IN NOVATEK(1)
Regulations on Risk
Management and Internal
Control System
1
Internal Audit Policy
6
Insider Information Access
and Distribution Policy
7
Human Rights Policy
8
Risk Management
Procedure
2
Code of Business
Conduct and
Ethics
3
Supplier Code
of Conduct
4
Anti-Corruption Policy
5
NOVATEK’s RMICS model
Owners of business processes
and controls
Risk Control Division
and Controlling Units
Revision Commission,
Internal audit
MANAGEMENT BOARD
Chairman
of the Management Board
BOARD OF DIRECTORS
• Approval of RMICS policy
• Recommendations on RMICS improvement
• 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
1ST LINE
Day-to-day risk management
2ND LINE
Internal control and support
3RD LINE
Internal audit
Audit
Committee
Other
Committee
Oversight over RMICS reliability
and efficiency
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Functional reporting
1
Set objectives
2
Define risk appetite
3
Identify risks
4
Evaluate risk impacts
5
Determine actions
6
Monitor and evaluate action
results
Activities in the reporting period
Internal and external quality assessment
Coordination of activities with other parties
In 2022, the division carried out
its activities based on the annual
plan prepared using a mainly risk-
based approach and approved
by the Board of Directors after preliminary
review by the Audit Committee.
The division monitored the implementation
of recommendations to eliminate the risks
identified during internal audits as well
as to improve the internal control system.
As the third line of the RMICS, the Internal
Audit Division evaluates the system's
reliability and efficiency on an annual
basis. Based on the 2022 performance,
The division has a program to assess
and improve the quality of the internal
audit function, whereunder:
• internal quality assessment
is performed on an annual basis;
• independent external quality
assessment is performed every five
years.
The Internal Audit Division cooperates
with the external auditor in sharing
information related to working plans
and other matters of relevance
the Internal Audit Division issued
an opinion on the reliability and efficiency
of the RMICS, which pursuant
to the Federal Law "On Joint Stock
Companies" is included in information
(materials) to be provided to those
entitled to participate in General Meetings
of Shareholders.
The results of NOVATEK's Internal Audit
Division in 2022 were reviewed by the Audit
Committee comprised of independent
directors. NOVATEK's internal audit
activities in 2022 were recognized
as efficient.
In 2018, the division initiated the first
independent external assessment.
The initiative was supported
by the executive management
and the Audit Committee.
The assessment by Ernst and Young –
Evaluation and Consulting Services
LLC validated the compliance
of NOVATEK’s internal audit activities
with the International Standards
for the Professional Practice of Internal
Auditing (Opinion dated 22 March 2019).
to the parties. To improve the efficiency
and reduce the costs, the Internal Audit
Division employees serve on revision
commissions of the Company's affiliates.
To ensure sustainable development in the context of uncertainty and ever-
changing environment, NOVATEK has built a risk management system which
involves systemic assessment and response to all risks that may hinder the
achievement of the Company's goals.
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 set
forth in the Regulations on NOVATEK
RMICS, the Risk Management Regulations,
and other internal regulations which detail
all the aspects of the risk management
process.
The Company has established
a standalone Risk Control Division which
is responsible for coordinating risk
management activities and maintaining
a centralized approach to securing
insurance coverage for the Company.
Risk Management System
The Company's risk management
system involves:
• risk identification and quantitative
assessment vis-a-vis the Board-
approved risk appetite;
• development of action plans
to prevent or mitigate any adverse
effect from risk materialization
and ongoing follow-up on the action
plans during the year.
The Company describes its risks through risk maps that provide
a systematic view across the Company's business processes
and lines of activities for the risks that could threaten
the achievement of the Company's goals in the next one–three
years.
NOVATEK’s key risks and respective risk management activities
are listed in the section dedicated to Key Business Risks.
While the Company endeavors to mitigate the adverse effect
of risks materialization, it also strives to identify and evaluate
opportunities in a timely manner as well as to take action
to generate upside from their materialization.
To efficiently perform the internal audit
function:
• the division is free to access any
assets, documents, accounting
entries and other information related
to NOVATEK Group's business;
• the division head is allowed to directly
communicate with the Chairmans
of the Board of Directors, the Audit
Committee and the Management
Board.
Administrative reporting
NOVATEK’s risk management process
Internal Audit Division
BOARD OF DIRECTORS
Audit Committee
Chairman
of the Management
Board
1
2
5
6
3
4
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Management and Corporate Governance
NOVATEK
Annual Report 2022
The Company develops and implements risk management action plans, including
insurance programs, business continuity plans and stress-testing exercises.
Risk insurance
NOVATEK's insurance programs involve
major Russian insurance companies
with good reputation and high rating. Due
to sanctions, in 2022 the Company had
to switch from international reinsurance
companies to the Russian National
Reinsurance Company established
by the Bank of Russia.
Given the scale and complexity of its
projects, NOVATEK widely uses compulsory
and voluntary insurance plans.
Risk Management Activities
PROPERTY DAMAGE AND BUSINESS
INTERRUPTION (PD/BI) INSURANCE
PROGRAM
An insurance covering property,
including the risk of mechanical
failures and loss of production
across key industrial sites,
to mitigate negative consequences
for the Group's business
1
LIABILITY INSURANCE PROGRAM FOR
OWNERS OF HPF AND VEHICLES
An insurance covering liability
associated with operating
the Company's hazardous production
facilities and vehicles, including
fatalities, injuries and property
damage resulting from industrial
accidents and road accidents
2
PROPERTY DAMAGE INSURANCE
PROGRAM
An insurance covering non-
production facilities (administration
buildings, accommodation camps
and other social infrastructure)
3
In 2022, no insured major accidents
or incidents occurred.
The Company's Management Board
and the Board of Directors receive reports
on risk and opportunity management
activities on a regular basis.
The Company develops and implements
action plans to improve its risk
management system on a regular basis.
The following efforts helped improve
NOVATEK's risk management system
in 2022:
• Approval of NOVATEK's Risk Management
Regulations (an internal framework
for risk identification, evaluation
and mitigation planning);
• For the first time ever, the Company
conducted an opportunity identification
exercise resulting in action plans,
which could contribute towards
the Company's business objectives
as well as help identify new revenue
streams until 2030;
• Update of the Company's 2023–2025
Risk Map.
Expanding the production of LNG as a low-emission hydrocarbon fuel
Developing proprietary technological solutions to enable the achievement
of the Company's long-term goals
Studying and producing new low-carbon energy products
Developing decarbonization and renewable energy projects
Using new logistical channels, including expanding navigation via the Northern
Sea Route
Digitalizing the Company's business processes
1
2
3
4
5
6
The Company describes its opportunities in its Opportunities
Map. NOVATEK intends to leverage the following opportunities
by 2030.
NOVATEK's risk management system
development objectives for 2023–2025:
• Improve risk management awareness
and create a training course
on risk management practicalities
in the Company;
• Improve risk management
communication between
the Company's business units
and affiliates;
• Update the Company's risk maps
and opportunities maps as may be
relevant given the context and based
on risk management best practices.
DIRECTORS AND OFFICERS (D&O) LIABILITY INSURANCE
PROGRAM
An insurance covering liability of senior executives
and the Group in case of third-party claims related to faulty
actions or decisions by senior executives and governing
bodies
INVESTMENT PROJECTS RISKS INSURANCE PROGRAM
Comprehensive insurance programs covering major projects
(such as Yamal LNG, Arctic LNG 2, etc.) across their lifecycle
(engineering, exploration and production, construction,
operation, transportation of finished products)
THIRD-PARTY AND ENVIRONMENTAL LIABILITY INSURANCE
PROGRAM
A third-party liability insurance covering fatalities, injuries
and damage to property of third parties and to environment
in the course of the Group's operations
WELL INSURANCE PROGRAM
The Group's subsidiaries and affiliates involved in petroleum
production procure an insurance covering well control events
as well as damage to drilling equipment
MARINE RISKS INSURANCE PROGRAM
An insurance covering finished products and project cargoes
during transportation, marine hull and machinery, ship owner's
and charterer's liability
4
5
6
7
8
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Compliance with anti-corruption laws
Corporate Ethics
and Compliance
Revision Commission
Business continuity plans
In addition to Russian legislative
requirements for regular identification
and control of risks at hazardous
production facilities, the Company has
been developing business continuity
plans for major production facilities
on a regular basis since 2018. The purpose
of developing the continuity plans
is to secure rapid recovery of production
processes by implementing previously
developed action plans and procedures
for personnel cooperation to mitigate
the consequences of accidents
at the Company’s key process
facilities. The development of business
continuity plans covers all of the Group's
subsidiaries and affiliates and continued
on a systematic basis in 2022.
NOVATEK believes that strict compliance
with applicable anti-corruption laws
is one of the most important conditions
for sustainable business development.
The Company's Anti-Corruption Policy has
been in place since 2014. It was approved
by the Board of Directors (Minutes No. 170
dated 1 September 2014). The Company
declares that it rejects unlawful business
practices and assumes anti-corruption
obligations in all areas of its activities
and in its interaction with partners.
In performing its operations
and cooperating with partners,
NOVATEK focuses on complying
with ethical standards and ensuring
that its activities comply with the laws
of the countries where the Company
operates. The commitment to adhering
to leading legal and ethical practices
is the Company's corporate governance
standard, which applies both
to the Company's employees and to all
of its partners.
NOVATEK's revised Code of Business
Conduct and Ethics approved
by the Board of Directors in 2022 (Minutes
No. 258 of 20 December 2022), together
with the Company's Human Rights Policy,
Anti-Corruption Policy, and Supplier Code
of Conduct form a corporate document
framework related to ethics and business
conduct.
The Revision Commission consisting
of four members is elected at the Annual
General Meeting of Shareholders
for a period of one year.
Stress testing
NOVATEK runs stress tests to assess
the Company’s resilience to potential
impact of the more significant risks using
various tools:
• insurance stress testing;
• sensitivity analysis for financial
planning;
• scenario modeling of climate change.
as any other period as may be decided
by its members or other persons having
the respective authority pursuant
to the Russian law and the Company's
Articles of Association. The results
are reported by the Revision Commission
in the form of opinions.
In March 2023, the Revision Commission
completed an audit of financial
and business activities of the Company
for the year 2022. The resulting
opinions to be submitted to the Annual
General Meeting of Shareholders
validate the reliability of information
contained in the Company’s 2022
Financial Statements (under the Russian
Accounting Standards), 2022 Annual
Report and 2022 Report on Related-party
Transactions.
Regulations
for Revision
Commission approved
by NOVATEK’s
General Meeting
of Shareholders
in 2005 are available
at our website
Revised Code
of Business Conduct
and Ethics approved
by the Board
of directors in 2022
is available at our
website
Anti-Corruption Policy
approved by the
Board of directors
is available at our
website
NOVATEK's Human Rights Policy
formalizes the Company's stance
on human rights and incorporates all
the fundamental principles, including
respect for human dignity, providing safe
working environment, non-discrimination,
as well as respect for the rights,
distinctive culture, and customs of local
communities, including indigenous
minorities.
NOVATEK Group's Supplier Code
of Conduct contains recommendations
and principles of open and honest
business conduct, business ethics,
and sustainable development that
NOVATEK expects its suppliers to follow.
The Company has developed
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 of an honest and reliable
partner, NOVATEK makes its employees
undergo training in the Anti-Corruption
Policy standards and the Company's
ethical values on a regular basis.
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 by NOVATEK's Articles
of Association and Regulations for the Revision
Commission approved by the General Meeting
of Shareholders in 2005 (Minutes No. 95 dated
25 March 2005) for anything beyond the contents
of the aforementioned law.
The Revision Commission is an internal
control body overseeing the Company’s
financial and business activities.
The Revision Commission performs audits
of the Company’s financial and business
performance for the given year as well
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Management and Corporate Governance
NOVATEK
Annual Report 2022
External Auditor
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 Directors regarding
the nomination of external auditors
and the price of their services. Based
on the committee’s recommendations,
the Board nominates an auditor
for the Annual General Meeting
of Shareholders to consider
and approve. Joint Stock Company
“Technologies of Trust – Audit”(1)
was selected as the Company’s
external auditor to conduct the audit
of the annual financial statements
under the Russian Accounting Standards
as well as the audit of the annual
consolidated financial statements,
reviews of the Company’s quarterly
financial statements under IFRS, as well
as the Company's sustainability report.
When an auditor is to be nominated, attention is given
to the level of its professional qualifications, independence,
potential risk of any conflict of interest, terms of the contract,
and remuneration.
The Audit Committee oversees the external auditor’s
independence and objectivity as well as the quality of the audit
conducted. The committee updates the Board of Directors
on the results of review and evaluation of the audit opinion
regarding the Company’s financial statements on an annual basis.
In 2022, the Audit Committee had two meetings with the auditor.
NOVATEK’s management acknowledges and accepts
the recommendations on the external auditor's independence
by restricting such auditor's engagement for provision of any non-
audit services.
In accordance with auditing standards, in order to maintain
the independence, the Company’s external auditor rotates its
key audit partner at least once every seven years. The external
auditor's partner changed in 2022.
Share Capital
Our shares are traded in Russian roubles on the Moscow
Exchange and have a first grade listing (ticker
symbol: NVTK).
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 2022, NOVATEK did not have
preference shares.
Business ethics compliance
Compliance with law requirements
To ensure compliance with the Code
of Business Conduct and Ethics,
the Human Rights Policy, and the Supplier
Code of Conduct, any concerned
party may report any known facts
of misconduct to a dedicated email
ethics@novatek.ru. No message
is ignored. NOVATEK guarantees
NOVATEK's activities
are based on the fundamental principle
of full compliance with the standards
and requirements set forth in the Russian
legislation, international law and all
international treaties and agreements.
confidentiality and no retaliation
or repression to anyone reporting such
violations in good faith.
The Company ensures that the Board
of Directors is updated on the results
of the ethics hotline functioning
on a regular basis.
As part of its RMICS, the Company
continuously implements control
procedures to ensure compliance
with applicable laws across
the Company's lines of activities as well
as statutory disclosure of information
about the Company's business.
The Company has a security hotline,
which any employee, counterparty
or other concerned party can
contact to report facts or signs
of corruption in relation to any aspect
of the Company's activities. Following
each report, the Company launches
an internal investigation and takes
relevant corrective action.
The Company ensures that its Board
of Directors is continuously updated
on the results of activities aimed
at compliance with the Anti-Corruption
Policy and operation of the security
hotline.
The Company has
a security hotline
(1) Until June 2022 known as Joint Stock Company “PricewaterhouseCoopers Audit”.
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Dividends
Information Transparency
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,
NOVATEK complies with the best practices for information disclosure
while adhering to a maximum level of 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’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 the investment community
about its activities. The main channels
of communication with the investment
community are through the Chairman
of the Management Board, the Deputy
Chairman and the Investor Relations
department. The Company’s
representatives are available to market
participants to discuss any matters
of interest.
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 17 March 2023, the Board of Directors
of PAO NOVATEK recommended
to the Annual General Meeting
of Shareholders to pay dividends for FY
2022 in the amount of RR 60.58 per
ordinary share, exclusive of RR 45.00
of interim dividends per ordinary share
paid for the first six months of 2022.
Thus, should the General
Meeting of Shareholders approve
the recommended dividend, the dividends
for 2022 will total RR 105.58 per ordinary
share. This will represent a 47.8% increase
in dividend per share compared to 2021.
Regulations on
Dividend Policy
approved by the
Board of directors
are available at our
website
Regulations for
Information Policy
approved by the
Board of directors
are available at our
website
Accrued dividends on NOVATEK shares for the period from 2017 to 2022
Dividend accrual period
Amount of dividends, RR per share
2017
14.95
2018
26.06
2019
32.33
2020
35.56
2021
71.44
First half 2022
45.00
In 2022, the Regulations on NOVATEK
Information Policy that the Company
efficiently implements helped NOVATEK
maintain a steady goodwill as Russia’s
largest independent natural gas
producer and a global leader in LNG
production implementing its projects
without disruptions.
Pursuant to the information policy
principles, NOVATEK is actively involved
in interfaces with federal, foreign
and regional media. In 2022, more
than 91.5 thousand publications were
made about the Company, which
is an 18% increase year on year.
The federal business press and news
agencies traditionally accounted
for the bulk of NOVATEK's media coverage
with 60% of publications, while the share
of materials in the regional media slightly
decreased to 22%. The Company news
coverage in foreign media doubled to 18%
of the total number of publications.
MORE THAN
91.5
↗ 18%
THOUSAND
PUBLICATIONS
about the Company
were made in 2022
60%
OF PUBLICATIONS
accounted for the
federal business press
and news agencies
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 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.
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Management and Corporate Governance
NOVATEK
Annual Report 2022
The Company coverage on television
increased in 2022. The increase
was driven by additional relevant
efforts in response to the growing
popularity of news programs among
the target audience. During
the year, domestic and foreign TV
channels aired over 600 news pieces
about the Company's activities.
The shares of coverage in other
media remained at the same level
as in the previous reporting period.
LNG equipment manufacturing
localization and R&D in Russia became
the key highlight of 2022. To cover
this topic, we organized an information
campaign to demonstrate how Russian-
sourced technology and equipment
are applied under NOVATEK's projects.
The Offshore Superfacility Construction
Center (OSCC) and the Arctic LNG 2
project development were in the media
spotlight, including equipment delivery
along the NSR, GBS 1 and GBS 2
completion, installation, integration
and commissioning of modules
for Arctic LNG 2, as well as completion
of OSCC construction in Belokamenka,
the Murmansk Region.
A lot of attention was given
to the performance achieved
by Yamal LNG, which celebrated
its fifth anniversary in 2022. Yamal
LNG's highlights included LNG output
and delivery destinations, extension
of the NSR navigation window, Train 4
operation based on the Arctic Cascade
process, which is a unique proprietary
liquefaction technology.
The Kamchatka and Murmansk
transshipment terminals construction,
the prospective Obskiy LNG project»,
the development of domestic small-
scale LNG market and LNG retail
network, as well as the Company's
social and environmental initiatives
at the federal and regional levels also
enjoyed wide coverage.
In the past year, NOVATEK's
representatives and speakers attended
many public events. For instance, a panel
discussion on Foreign Competency
Substitution in the Industrial Support
of Russian LNG Projects that was
organized at SPIEF-22. The Company
also participated in major Russian
congress and exhibition events: Eastern
Economic Forum, Russian Energy Week,
Arctic: Today and the Future, Industrial
and Energy Forum (Tyumen Oil and Gas
Forum), as well as in industry events.
600
NEWS ITEMS
about the Company’s
activities were
released on domestic
and foreign TV
channels
For more details about
Arctic LNG 2 p. 54
For more details about
Yamal LNG p. 46
For more details about
Arctic Cascade p. 48
To prevent any potential spreading
of inaccurate information, an external
perimeter, including a system
for monitoring the information field
and responding to emerging threats,
was engaged.
The Company publishes its eponymous
newsletter and a corporate magazine
called NOVATEK Plus to position
the Company and inform employees,
their families, and third parties
about the Company’s operational plans
and performance, cultural, sports,
and charitable initiatives and projects.
The contents of these publications
are also available on NOVATEK's
corporate portal.
VK
Telegram
Youtube
Rutube
In 2022, our Chairman
of the Management Board attended
a series of public events, including
briefings, media scrums, public
statements, and signing ceremonies
with partners. As part of press tours,
journalists from foreign, federal
and regional media visited
the Company's industrial sites
in Murmansk, Yamal and Gydan.
NOVATEK uses modern channels
to communicate information
and interact with the general public
through social media. The Company
has social medial accounts in Russian
language on VK, Telegram, Youtube,
and Rutube that help promptly update
the subscribers on the Company's
activities and projects.
Around 1,050 publications were posted in the Company's
accounts in 2022. The number of subscribers at the end
of the year was 32,540. Over 28,731 posts and comments
with references to the Company were published in social
media in the reporting period.
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Management and Corporate Governance
NOVATEK
Annual Report 2022
Key Business Risks(1)
Additional Information
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.
Each risk’s criticality in terms of its
impact on the Company's operations and
achievement of strategic goals is also given.
(1) NOVATEK’s risk management framework is outlined in the section dedicated to the Risk Management & Internal Control System.
(2) Risk criticality is a comprehensive measure of a risk's impact on the Company's business, including the combined effect of current risk
probability forecast and quantitative assessment of risk consequences. It is calculated based on an in-house risk assessment methodology
used within NOVATEK taking into account the risk mitigation action plans that are currently put in place.
Risk and its impact
on strategic goals(1)
Risk causes and consequences
Current risk status / Actions to mitigate risk impact
OPERATIONAL RISKS
Process risks
• Risks of property damage
and business interruption due
to accidents at key production
facilities
• 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
All sites undergo inspections for compliance with OHS laws
as well as planned preventative maintenance on a regular basis
in accordance with relevant schedules. No major emergencies
occurred at the Company's process sites in 2022.
1. Using equipment and technologies which are highly reliable
and safe.
2. Arranging activities as prescribed by NOVATEK's Integrated
Management System for Environmental Protection,
Occupational Health and Safety in consistency with ISO
45001:2018 with regular regulatory inspections (by the Federal
Service for the Supervision of Environment, Technology and
Nuclear Management and other authorities).
3. Arranging prompt incident reporting across all sites through
the Central Dispatch Office.
4. Implementing action plans to prevent and respond
to accidents and emergencies (emergency containment
and management plans, oil spill response plans, etc.),
developing business continuity plans.
5. Setting up an OHS Coordination Council within NOVATEK Group
to build a uniform risk identification and de-risking system,
develop corporate standards for training and knowledge
checks, revise occupational health incentives and the action
tracking system across the Company's subsidiaries.
6. Securing insurance against property damage and business
interruption in case of emergencies, etc.
Environmental risks
• Risks of impact on (damage to)
the environment and biodiversity
in the course of the Company's
operations and as a result of
accidents at production facilities
• Risks of incremental costs due to
changes in environmental laws
The approved action plan to mitigate the environmental
impact of the Company's operations was implemented in 2022.
No emergencies resulting in environmental impact occurred
in 2022.
1. Making considerations for the approved 2030 environmental
goals in the Company's operations.
2. Developing and implementing action plans to prevent
potential impact of operations on local ecosystems in the
regions where the Company operates.
3. Arranging activities as prescribed by NOVATEK's Integrated
Management System for Environmental Protection,
Occupational Health and Safety in consistency with ISO
45001:2018 and ISO 14001:2015 with regular regulatory
inspections (by the Federal Service for Supervision of Natural
Resources and other authorities).
4. Setting up a corporate GHG emissions monitoring system.
5. Securing insurance against environmental impact in case
of emergencies.
4
3
2
6
4
3
(1) These are the strategic goals that are affected the most by each respective risk group.
Risk criticality(2)
High
Medium
Low
Expanding the resource base
Maintaining a low-cost structure
Developing sustainably
Increasing hydrocarbon production
Streamlining marketing channels
Building competitive and scalable LNG
facilities
1
2
3
4
5
6
NOVATEK's strategic goals
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NOVATEK
Annual Report 2022
Risk and its impact
on strategic goals(1)
Risk causes and consequences
Current risk status / Actions to mitigate risk impact
Climate risks
• Risks of damage/business
interruption due to Far North
weather conditions and climate
change (physical risks)
• Risks of incremental costs due to
the global Energy Transition and
the global community's efforts
to combat climate change
(transition risks)
The Company practices weather monitoring for prompt
response. Project development involves permafrost
surveys. The Company implements action plans to mitigate
the climate impact as part of the efforts to achieve
the 2030 environmental goals.
1. Implementing the annual action plan to mitigate man-
made climate impact in consistency with the Company's
approved 2030 environmental goals, including developing
decarbonization projects, wind power generation, etc.
2. Practicing continuous weather monitoring during operations,
including ice conditions considerations for delivery of cargoes
to project sites and finished products.
3. Ensuring that production sites are protected from exposure
to climate (lightning, floods, wind, low temperatures, etc.).
4. Analyzing scenarios of climate change impact on the
Company's business (engineering and operational
considerations for production sites).
5. Securing insurance against damage and business interruption
as well as liability in case of any negative climate events.
Risks of force-
majeure events (acts
of terrorism, large
epidemics, etc.)
Risks of business interruption/
damage to the Company's assets
due to:
• terrorist attacks on production
sites;
• large epidemics and emergencies
Across 2022, actions were taken to ensure compliance with
anti-terrorist security laws (evacuation drills, simulation
exercises, regulatory inspections, etc.) and with epidemiological
safety laws. No acts of terrorism or large disease outbreaks
were recorded at the Company's sites in 2022.
1. Developing and implementing action plans to ensure anti-
terrorist security at the Company's sites and compliance with
Russian regulatory requirements.
2. Arranging a monitoring system for prompt response
to epidemic emergencies at the Company's sites.
3. Arranging efforts to ensure epidemic safety at the
Company's sites (PPE, remote work, checks for symptoms,
regulatory compliance, etc.).
Vendor and
contractor risks
• Risks of cost increase due to
rising prices of materials and
equipment, works and services
• Risks of defaults on the
Company's obligations towards
its customers due to contractors'
failure to deliver products on time
• Risks of incremental costs/
failure to secure access to
infrastructure of transportation
service monopolists (Gazprom,
Russian Railways, Transneft)
The Company has zero tolerance to corruption and takes
action to comply with the Anti-Corruption Policy. The Company
performed all obligations towards its customers in accordance
with existing agreements.
1. Using uniform standards and approaches to arranging
procurement across the Company.
2. Following up on counterparties' performance under purchase
orders, contracts and service agreements.
3. Entering into long-term agreements and ensuring constant
follow up on shipment schedules and transportation fees.
4. Entering into long-term agreements with reliable vendors
and contractors.
Geological risks
• Risks of losses due overestimated
commercial hydrocarbon reserves
• Risk of losses due to
overestimated original reserves
in place and recoverable reserves
in place
In 2022, the Company performed its annual reserves estimation
validated by independent expert determinations. The
Company's reserves are growing.
1. Performing annual estimation and securing independent
validation for commercial reserves in accordance with
recognized reserves estimation methodologies.
2. Performing comprehensive review of G&G data using
advanced software and methodologies.
3. Engaging proficient experts and contractors, using state-
of-the-art equipment and technology across the exploration
process.
4. Assessing and controlling the quality of exploration results
in the in-house Scientific and Technical Center (NOVATEK STC).
4
3
1
4
3
2
6
4
4
1
Risk and its impact
on strategic goals(1)
Risk causes and consequences
Current risk status / Actions to mitigate risk impact
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
In 2022, efforts were made to ensure the security of the
Company's critical infrastructure in accordance with the
Russian law, approved schedules and service intervals.
1. Arranging a multi-level system for protection of IT
infrastructure with the use of advanced software and
specialized equipment.
2. Checking the reliability of security systems through external
attack and threat simulation.
3. Arranging an information security system to protect NOVATEK
Group's critical infrastructure.
4. Arranging prompt response as part of online support across
the whole range of IT issues.
Project risks
Risks of project execution delays
and/or incremental project costs
due to:
• revised technical legislation
relating to engineering,
construction and operation;
• increased cost of relevant
materials, equipment, services
and works;
• contractors' failure to maintain
the schedule and quality of the
work;
• delays in project financing;
• changes in the market
environment, etc.
During 2022, despite the sanctions, which included a restriction
on the supply of foreign technology and equipment and the
withdrawal of foreign vendors and contractors, the Company
took a range of actions to withstand the pressure. No major
delays are foreseen in the execution of the Company's projects
(Arctic LNG 2, etc.).
1. Analyzing and building forecasts for all stages of future
projects, including risk identification and assessment as well
as development of action plans to manage the identified
risks.
2. Using a monitoring system for prompt response to delays
in project execution schedules across the project phases
covering calendar planning, project financing and purchase
order placement.
3. Only engaging pre-qualified vendors and contractors to
perform work/services.
4. Following up on the project execution status on a regular basis
at the Company's top management level.
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 of losses due to state
regulation of natural gas tariffs
in Russia
• Risks of increased costs due to
rising consumer prices in Russia
and rising inflation rate
The Company compensates the effect of sanctions imposed in
2022 on energy supplies from Russia by promptly adapting its
sales strategy (redirecting the products to other market areas,
entering into long-term agreements, scouting for new markets
and customers). Domestically, the gas is sold in accordance
with the process regulated by Russian state authorities for
natural monopoly holders in the energy and transportation
sectors.
1. Tracking the evolution of price environment on a regular basis
and building forecasts for price situation in the international
oil, petroleum products, gas and LNG markets.
2. Simulating different scenarios and analyzing the sensitivity of
the contracts portfolio to global price fluctuations and other
macroparameters.
3. Promptly redirecting the quantities to market areas offering
better marketing conditions for the Company's products.
4. Entering into efficient sales and purchase agreements where
pricing mechanisms include various protections, using hedging
against low price risks.
5. Diversifying the natural gas sales portfolio, including
commodity trading, etc.
4
3
2
6
4
2
6
2
Expanding the resource base
Maintaining a low-cost structure
Developing sustainably
1
2
3
NOVATEK's strategic goals
Increasing hydrocarbon production
Streamlining marketing channels
Building competitive and scalable LNG facilities
4
5
6
Risk criticality
High
Medium
Low
(1) These are the strategic goals that are affected the most by each respective risk group.
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Additional Information
NOVATEK
Annual Report 2022
Risk and its impact
on strategic goals(1)
Risk causes and consequences
Current risk status / Actions to mitigate risk impact
FX risks
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
During 2022, the Central Bank of Russia used a number
of measures to keep the exchange rate of the Russian Ruble
to major foreign currencies in check. The Company followed
every requirement with respect to FX transactions and
promptly responded to any changes in the FX market.
1. Tracking the evolution and forecasts of FX rates on a regular
basis as part of short-term and long-term planning.
2. Leveraging the possibilities to use alternative currencies
to make payments to and receive payments from customers
and vendors in case of a global FX crisis.
3. Analyzing the sensitivity of the Company's key financial
performance indicators to exchange rate evolution as part
of short-term business planning and long-term strategic
planning.
Credit risks
• Risks of increased debt burden
in case of growth of interest
rates on the Company's external
borrowings
• Risk of the Company's liquidity
deterioration due to customers’/
vendors' failure to perform
their obligations (past-due
receivables)
The Company's centralized approach to managing funds allows
it to promptly adjust the level of its consolidated debt burden
and meet its subsidiaries' financing needs, which contributes
significantly to the reduction of the Company's sensitivity to
the volatility of external lending interest rates, notwithstanding
the existing restrictions.
1. Tracking the situation in the lending and bank financing
market to identify more favorable conditions.
2. Adhering to a well-balanced policy to maximize long-term
liabilities with fixed interest rates and maintain flexibility under
the Company's investment plans.
3. Using refinancing at better interest rates in case benchmark
rates increase significantly.
4. Using various tools to drive down the risk of payment delays
and past-due debts, including selling the Company's products
under pre-payment conditions, using security mechanisms,
etc.
REGULATORY AND STRATEGIC RISKS
Legislative and
regulatory risks
Risks of legislative impact on the
Company's business in the following
areas:
• taxes, excises, duties, mandatory
payments;
• control over hydrocarbon
production, processing, storage
and sales activities (industrial and
environmental safety, etc.);
• licensing requirements for natural
resource extraction;
• state regulation of Russian gas
prices and tariffs of natural
monopolies;
• operations in certain economic
zones (the Arctic)
During 2022, changes in legislative requirements were
constantly monitored to promptly react with appropriate
measures.
1. Following up on compliance with legislative requirements set
forth by the Russian Government and other state authorities
supervising individual domains in which the Company is active.
2. Continuously tracking legislative initiatives and predicting
their future impact on the Company's business.
3. Arranging input and assistance to dedicated committees on
energy under the Russian Government and the Russian State
Duma, industrial associations on a wide range of matters
related to the energy sector development.
4. Ensuring compliance with license agreements during
operations related to natural resources extraction, arranging
joint revision of license agreements as necessary.
Litigation risks
• Risk of potential losses in case
of awards against the Company
under claims raised by its
counterparties
• Risk of potential losses
in case of awards against
the Company under claims
raised by the Company against
its counterparties
The Company was not involved in any major legal proceedings
in 2022.
1. Entering into cooperation agreements only after pre-
qualifying the potential counterparties.
2. Arranging claim and litigation management in a timely manner
in case a counterparty violates the agreement.
3. Referring disputes to courts only if amicable resolution
cannot be achieved.
4. Using the directors & officers liability insurance (D&O)
to mitigate the impact of litigation risks.
6
2
6
2
3
2
1
3
Risk and its impact
on strategic goals(1)
Risk causes and consequences
Current risk status / Actions to mitigate risk impact
Political risks
• Risk of losses/adverse effect
on the Company's business
due to sanctions imposed
on Russian companies by foreign
governments
• Risk of impact on the Company's
business because of political
and economic situation in Russia
and other countries where
the Company operates
Amid the sanctions imposed in 2022, the Company's
management does everything necessary to mitigate the
adverse effect of the sanctions on the Company's business,
including by sourcing equipment and services from Russia,
scouting for alternative markets and customers, etc.
1. Seeking partnerships, engineering solutions and financing
sources for the Company's projects.
2. Adhering to the policy of import substitution and localization
of manufacturing of equipment and software in Russia.
3. Seeking alternatives in view of the existing restrictions:
reverse engineering (Russian manufacturing, etc.), parallel
imports, supplies from/to friendly nations (APAC, Middle East,
etc.).
4. Creating an emergency stock of foreign equipment, software
and IT components.
5. Developing and using in-house engineering solutions for LNG
production and gas processing.
6
5
4
Expanding the resource base
Maintaining a low-cost structure
Developing sustainably
1
2
3
NOVATEK's strategic goals
Increasing hydrocarbon production
Streamlining marketing channels
Building competitive and scalable LNG facilities
4
5
6
Risk criticality
High
Medium
Low
(1) These are the strategic goals that are affected the most by each respective risk group.
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Additional Information
NOVATEK
Annual Report 2022
This Corporate Governance Code Compliance Report (hereinafter, the “Report”) was reviewed at the meeting
of PAO NOVATEK’s Board of Directors on 17 March 2023 (Minutes No. 261).
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 2022.
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.
Corporate Governance Code Compliance Report
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
1.1
The company should ensure equitable and fair treatment of every shareholder exercising their right to take part in managing
the company.
1.1.1
The company 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. The company 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.
This principle is
complied with.
–
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.
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.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
1.1.3
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.
This principle is
complied with.
–
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 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 includes 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.
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. The company's articles of
association determine 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.
This principle is
complied with.
–
1.1.5
Each shareholder was able
to freely exercise their voting
right in the simplest and most
convenient way.
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.
–
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.
Report on major, and interested-party transactions that
the Company did in the reporting year
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Additional Information
NOVATEK
Annual Report 2022
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
This principle is
complied with.
–
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.
This principle is
complied with.
–
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.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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 are approved
by the board of directors and
disclosed through the company's
website.
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).
This principle is
complied with.
–
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 identify,
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.
–
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.
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
complied with.
–
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Additional Information
NOVATEK
Annual Report 2022
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
1.3
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.
1.3.1
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
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.
1.4.1
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.
–
2.1
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.
2.1.1
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.
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 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
Management Board is 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’s
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.
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
This principle is
complied with.
–
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.
–
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.
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.
This principle is
complied with.
–
2.1.3
The board of directors
defines the company's risk
management and internal
control principles and
approaches.
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.
This principle is
complied with.
–
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.
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).
This principle is
complied with.
–
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.
1. The board of directors plays a key
role in preventing, identifying and
resolving internal conflicts.
2. The company set up mechanisms
to identify transactions leading
to a conflict of interest and to
resolve such conflicts
This principle is
complied with.
–
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Additional Information
NOVATEK
Annual Report 2022
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
1. The company's internal
documents identify persons
responsible for implementing the
information policy.
This principle is
complied with.
–
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.
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.
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.
This principle
is not fully
complied with.
–
2.2.2
The chairman of the Board
of Directors is available
to communicate with the
Company’s shareholders.
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.
–
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.
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.
–
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.
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.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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 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.
–
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.
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.
–
2.4
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.
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.
–
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, 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.
This principle is
complied with.
–
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.
This principle is
complied with.
–
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Additional Information
NOVATEK
Annual Report 2022
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
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 eight out of
nine 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.
2.5
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 chairperson 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.
2. The role, rights and duties
of the chairperson of the board
of directors (and, if applicable,
of the senior independent
director) are duly set out in the
company’s internal documents.
This principle
is not fully
complied with.
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 chairperson 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 chairperson
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 chairperson 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 chairperson 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.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
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.
This principle is
complied with.
–
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.
2.6.2
The rights and duties
of directors are clearly
stated and incorporated
in the company’s internal
documents.
1. The company adopted and
published an internal document
that clearly defines the rights
and duties of directors.
This principle is
complied with.
–
2.6.3
Directors have sufficient time
to perform their duties.
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.
This principle is
complied with.
–
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. 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.
This principle is
complied with.
–
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.
1. The board of directors held
at least six meetings in the
reporting year.
This principle is
complied with.
–
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No.
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Compliance criteria
Compliance
status
Reasons for non-compliance
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 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.
This principle is
complied with.
–
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 provide 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 the Company's liquidation,
appointment of a winding up
commission and approval of
the interim and final liquidation
balance shall be made by the
General Meeting of Shareholders
by the three-fourths majority
of the votes of shareholders
holding the voting shares and
taking part in the meeting.
The Company considers the
established procedure to be
balanced, not bearing any risks,
and does not plan to change the
existing approach.
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
1. The board of directors has set up
an audit committee comprised
solely of independent directors.
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.
This principle is
complied with.
–
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 chairperson of the
board of directors.
1. The board of directors has set
up a remuneration committee
comprised solely of independent
directors.
This principle is
complied with.
–
2. The remuneration committee
is headed by an independent
director who is not the
chairperson 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.
This principle is
complied with.
–
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Compliance criteria
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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 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
complied with.
The tasks listed in
Recommendation 186 of the
Code are implemented within
the framework of another
committee – the Remuneration
and Nomination Committee
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.
This principle is
complied with.
–
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.).
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.
–
2.8.5
Committees are composed so
as to enable comprehensive
discussions of matters under
preview, taking into account
the diversity of opinions.
1. The audit committee, the
remuneration committee,
the nomination committee
(or a 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 a
relevant committee with
combined functions) and the
remuneration committee may
attend committee meetings only
by invitation of the chairperson
of the respective committee.
This principle is
complied with.
–
2.8.6
Committee chairpersons
inform the board of directors
and its chairperson on the
work of their committees on a
regular basis.
1. During the reporting period,
committee chairpersons
reported regularly to the board
of directors on the work of
committees.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
2.9
The board of directors ensures performance assessment of the board of directors, its committees and members of the
board of directors.
2.9.1
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.
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.
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.
–
3.1
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.
3.1.1
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 five most recent years
are published on the corporate
website and in the company’s
annual report.
This principle is
not 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.
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.
This principle is
complied with.
–
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Compliance criteria
Compliance
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Reasons for non-compliance
4.1
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.
4.1.1
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.
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.
–
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.
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.
–
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.
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.
This principle is
complied with.
–
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.
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.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
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.
This principle is
complied with.
–
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.
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.
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.
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. 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
an efficient ratio of the fixed and
variable parts of remuneration.
3. In order 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.
This principle is
complied with.
–
/135
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Compliance criteria
Compliance
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Reasons for non-compliance
4.3.2
The company put 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 (options and other
derivative instruments where
the company’s shares are the
underlying asset).
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.
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).
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.
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.
This principle is
complied with.
–
5.1
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.
5.1.1
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.
This principle is
complied with.
–
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.
–
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.
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.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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. In the reporting period, the board
of directors (audit committee
and/or risk committee (if any))
arranged an 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.
This principle is
complied with.
–
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.
1. To perform internal audits, the
company set up a separate
business unit — an 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.
–
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. In the reporting period, an
assessment of the reliability
and efficiency of the risk
management and internal
controls was made as part of the
internal audit.
2. In the reporting period, an
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.
This principle is
complied with.
–
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.
1. The company’s board of directors
approved an information policy
developed in accordance with the
Code’s recommendations.
2. In the reporting period, the
board of directors (or one of
its committees) considered
efficiency of the exchange of
information of the company,
shareholders, investors and other
stakeholders and the feasibility
(necessity) to revise the
company's information policy.
This principle is
complied with.
–
/137
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No.
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principles
Compliance criteria
Compliance
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Reasons for non-compliance
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 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 the
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.
This principle
is not fully
complied with.
The Company does not disclose
information about the composition
of the executive bodies and
the Board of Directors, the
independence of the members of
the Board and their membership in
the Board committees.
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.
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.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
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.
1. The company's information policy
sets out approaches to disclosing
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.
This principle
is not fully
complied with.
The Company discloses its capital
structure to the extent required
by the applicable laws.
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 сompany’s
annual performance results.
1. The сompany’s annual report
contains information on the
audit committee's assessment
of third-party and internal audit
process efficiency.
2. The сompany’s annual report
contains information on the
сompany's environmental policy
and social policy.
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.
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 relevant
company-controlled entities as
requested by a shareholder.
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.
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Additional Information
NOVATEK
Annual Report 2022
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
6.3.2
When providing information to
shareholders, the company
shall ensure a 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.
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.
–
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.
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
authorized 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.
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.
7.1.2
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.
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.
7.1.3
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.
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.
This principle is
complied with.
–
No.
Corporate governance
principles
Compliance criteria
Compliance
status
Reasons for non-compliance
7.2
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.
7.2.1
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 not fully
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.
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.
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.
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, the 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.
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Additional Information
NOVATEK
Annual Report 2022
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;
• the effects of domestic and international oil and gas price volatility and changes in regulatory conditions,
including prices and taxes;
• the effects of competition in the domestic and export oil and gas markets;
• our ability to successfully implement any of our business strategies;
• 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 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.
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
billion cubic meters
BOE
barrels of oil equivalent
KM
kilometer(s)
MBOE
thousand boe
MCM
thousand cubic meters
MT
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
metric ton
BTU
British thermal unit
CCS
Carbon capture and storage
CDP
Carbon Disclosure Project
ESG
Environmental, Social, Governance
GBS
Gravity-based structures
GDR
Global Depositary Receipts
GHG
Greenhouse gases
LA
License area
LPG
Liquified petroleum gases
LNG
Liquified natural gas
MGP
Methane Guiding Principles
NGL
Natural gas liquids
OAO
Open joint-stock company
OHS
Occupational health and safety
OOO
Limited liability company
NSR
Northern Sea Route
PAO
Public joint-stock company
PRMS
Petroleum Resources Management System
RR
Russian rouble
SEC
United States Securities and Exchange Commission
SGC
Stable gas condensate
TCFD
Task Force on Climate-related Financial Disclosures
TTF
Title Transfer Facility
UGSS
Unified Gas Supply System
UN
United Nations
YNAO
Yamal-Nenets Autonomous Region
Conversion Factors
1,000 cubic meters of gas = 6.54 boe.
To convert crude oil and gas condensate reserves from tons to barrels we used various coefficients depending
on the liquids density at each field.
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Additional Information
NOVATEK
Annual Report 2022
Contact Information
Office in Tarko-Sale
22-A, Pobedy Street, 629850, Tarko-
Sale, Purovsky district, Yamal-Nenets
Autonomous Region, Russia
Office in Moscow
90/2, Leninsky prospect, Moscow,
119313, Russia
Independent Auditor
Joint Stock Company “Technologies of Trust – Audit”
White Square Office Center, Butyrsky Val 10,
Moscow, 125047, Russia
+7 495 967-6000
+7 495 967-6001
Central Information
Service
+7 495 730-6000
+7 495 721-2253
novatek@novatek.ru
Press Service
+7 495 721-2207
press@novatek.ru
Investor Relations
+7 495 730-6013
+7 495 730-6000
ir@novatek.ru
Registrar
АО IRC – R.O.S.T.
18/5B office IX, Stromynka Street, Moscow,
Russia 107076
+7 495 989-7650
+7 495 780-7367
info@rrost.ru
Independent Reserves Auditor
OOO Advantage Energy
Bryanskaya str., 5, floor 12, room I/16,
Moscow, 121059, Russia
+7 495 660-7275
ceo@advantage-en.com
Website
www.novatek.ru/eng
(English version)
www.novatek.ru
(Russian version)
Approved
by a resolution of the annual
General Meeting of Shareholders
of PAO NOVATEK
on 21 April 2023
Minutes No.140
Pre-approved
by a resolution
of the Board of Directors
of PAO NOVATEK
on 17 March 2023
Minutes No.261
Data accuracy certified
by PAO NOVATEK’s Revision Commission
on 3 March 2023
Additional Information