EXPLORING
NEW
HORIZONS
ANNUAL
REPORT
2013
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
2013 HAS BEEN A SUCCESSFUL YEAR FOR THE
COMPANY IN ALL THE AREAS OF THE ACTIVITIES.
THE MAJOR EVENT WAS THE START OF THE SYSTEM
OPERATION OF THE CORE PRODUCTION FACILITIES
OF THE TANECO REFINING COMPLEX – THE KEY
INVESTMENT PROJECT OF THE TATNEFT COMPANY
WHICH HAS BEEN REALIZED FROM 2005 YEAR AND
OF HIGH SIGNIFICANCE FOR THE WHOLE INDUSTRY
ATTAINMENT OF THE REFINING DESIGN CAPACITY
BY THE TANECO COMPLEX BECAME A START
OF THE NEW QUALITY PHASE OF THE COMPANY
DEVELOPMENT IN THE STATUS OF THE FULL-SCALE
VERTICALLY INTEGRATED OIL COMPANY.
THE ANNUAL REPORT OF OPEN JOINT STOCK COMPANY TATNEFT
FOR 2013 WAS PRELIMINARY APPROVED BY THE BORAD OF DIRECTORS.
MINUTES NO. 12 DATED MAY 27, 2014
2
CONTENTS
Joint Address of R.N. Minnikhanov,
President of the Republic of Tatarstan,
Chairman of the Board of Directors,
and N.U. Maganov, General Director
and Chairman of the Management Board
of JSC TATNEFT to Shareholders,
Investors and Partners
Composition of Board of Directors and
Management Board
Strategic Initiatives and Objectives
of the Company
2
4
9
Geography of the Company’s Activity
10
Main Indices of the Company’s
Activity by the Results of FY 2012
12
ABOUT THE COMPANY
16
The Company’s Activity Status
The Company’s Equity Structure
Dividends Policy
TATNEFT Group Structure.
Main Enterprises
The Basic Trends of Oil & Gas
Industry Development and Factors
Affecting the Competitiveness
of the Company
PRODUCTION
ACTIVITY
Oil and Gas Exploration
and Production
Processing and Sale of Oil
and Oil Products
Supply of Crude Oil
and Oil & Gas Products
Petrochemicals Production
Thermoelectric Power
22
23
24
26
44
48
50
52
52
85
88
94
96
98
102
104
106
107
112
118
154
156
157
CORPORATE
MANAGEMENT
Company’s Management System
Composition of the JSC TATNEFT
Board of Directors in 2013
Composition of the JSC TATNEFT
Management Board in 2013
List of Main Issues Reviewed
at the Meetings of the Board
of Directors in 2013
List of Main Issues Reviewed
at the Meetings of the Management
Board in 2013
Committees of the Board of Directors
Corporate principles of interaction
with the shareholders
Environmental Activity
Information about Compliance
with the Code of Corporate
Conduct in 2013
Registers of Compulsorily Disclosed
Information and Voluntarily Disclosed
Information in 2013
54
56
58
Main Corporate Events of 2013
Awards and Nominations
of JSC TATNEFT in 2013
60
61
62
FINANCIAL
RESULTS
Audit Opinion
64
Balance Sheet
Financial results of 2013
Essential Aspects of the Accounting
Policy and Information Representation
in Financial Statements for 2013
Consolidated fi nancial in accordance
with international fi nancial reporting
standard For the Year Completed
December 31, 2013
Notes to consolidated fi nancial
statements
List of Abbreviations
Forecast Comments
Annotation to the Report
on Sustainable Development
and Social Responsibility
of JSC TATNEFT for 2013
Corporate Interaction with Shareholders
of JSC TATNEFT in 2013
65
The Corporate Responsibility
of the Company on the Stock Exchange 66
Ensuring the Insider
Information Protection
Corporate Management Standards
Investment Policy
Financial Management
Assets Management
Corporate Control and Internal Audit
Program of Increasing Production
Management Effi ciency
and Strengthening of JSC TATNEFT
Financial and Economic Status
for 2008-2015
Energy and Resource Effi ciency
Program of JSC TATNEFT
for the Period till 2020
Logistics Management
Risk Management
Information Technologies
Management
HR Management
Social Policy
Ensuring Industrial Safety
and Labor Protection
67
67
68
70
72
73
74
76
76
78
80
82
83
84
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
The innovative and advanced technologies and equipment widely applied at the Company are of great
interest for the industry. Contracts were executed for provision of services and supply of equipment to
our partners in Turkmenistan and Kazakhstan.
A large amount of work was performed by the Tire Complex enterprises to improve the quality and
increase the competitive innovative products output. The factory for production of solid steel cord tires
produced more than one million new generation tires for trucks and passenger motor transport.
The Company paid special attention in the reporting year to improve the production organization and
management. There was a corporate Program developed to improve labor productivity in the whole
Company profi le by 2020. Introduction of new equipment and technologies, active application of lean
production, methods of process management, effective organization and rationalization of jobsites
were defi ned as main factors of the labor effi ciency growth.
Successful solving of strategic tasks to stabilize crude oil production and expand the resource base,
increase in the value and quality improvement of the assets involved in crude oil production and
refi ning, petrochemicals production and thermal power generation ensured TATNEFT’s high appraisal
by rating agencies. The Moody’s Rating Agency upgraded the Tatneft Group’s rating to «Baa3»
investment grade with “stable” outlook. The Interbrand Agency included TATNEFT’s brand into the TOP
10 most expensive Russian brands.
Special attention is paid in the Company to the social aspects, environmental safety, environmental
protection and environmental management. The Company ensures high environmental standards at all
the production sites. Social programs include support for education, health, culture and sports, as well
as improvement of the human settlements.
In 2013 we celebrated the 70th anniversary since the beginning of the Tatarstan’s oil fi elds
development. It was a milestone event for the whole industry of the Republic. This period witnessed
establishment and successful development of the full-scale petrochemical complex, creation of the
unique scientifi c and technical potential and accumulation of vast production experience. The oil
industry veterans have made invaluable contribution to the petroleum industry development. Today,
the result of all this is stable JSC TATNEFT’s development and successful implementation of strategic
plans along all the lines of the activities.
In 2014, the Company’s staff faces a number of serious ongoing tasks to ensure the stabilization of
crude oil production through application of advanced enhanced oil recovery technologies, increasing
the volume of horizontal drilling and implementation of the extra-viscous oil fi eld development project.
Dear Shareholders and Investors! Thank you for your confi dence vested and fruitful cooperation! We
express our sincere appreciation to all our partners and colleagues at the Republican, all-Russia and
international levels, as well as to our staff: managers at all the levels, professionals and workers for the
successful realization of the production and social programs of the Company!
R.N. Minnikhanov
President
of the Republic of Tatarstan,
Chairman of the Board of
Directors of JSC TATNEFT
Introduction of the innovative equipment and technologies, improvement of organization and
management of the production processes, harmonious team work of all employees of the Company
in the current year will ensure the implementation of the shaped plans. We are sure that 2014 will be a
year of new achievements and further growth!
N.U. Maganov
General Director,
Chairman of the Management
Board of JSC TATNEFT
70
YEARS
from the beginning
of the development
of the oil fi elds of Tatarstan
JOINT ADDRESS TO THE SHAREHOLDERS,
INVESTORS AND PARTNERS
DEAR SHAREHOLDERS, INVESTORS AND PARTNERS!
TATNEFT Company is consistently and successfully implementing strategic initiatives to expand the
resource base, stabilize the oil and gas production volumes, develop refi ning and petrochemicals
production and output high quality products.
During the reporting year the Company produced over 26 million tons of crude oil. Full-scale
development of Ashalchinskoye extra-viscous oil fi eld is underway. These achievements have been
promoted by widespread application of advanced technologies in drilling, crude oil production and
workover operations.
The volume of primary processing was increased to 8 million tons of oil per year at the TANECO
Refi ning and Petrochemical Plants Complex. The combined hydrocracking installation started
operation in the comprehensive testing mode. The complete commercial commissioning of this
installation will signifi cantly increase the output of desired petroleum products and provide for the
output of competitive Euro 5 standard products.
Considerable attention was paid last year to improving reliability of the power supply system and
performance of resource-saving activities. One of the key aspects in this area is to increase the
utilization level of associated petroleum gas through using gas powered electrical generators and
microturbine units. In the frame of further TATNEFT’s own generating complex development the
reconstruction of Nizhnekamsk CHP was continued, which will allow doubling the generating plant
capacity.
2
3
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
MEMBERS OF THE BOARD OF DIRECTORS
AND THE MANAGEMENT BOARD OF JSC TATNEFT
SHAFAGAT F. TAKHAUTDINOV
RAIS S.KHISAMOV
RINAT K. SABIROV
AZAT K. KHAMAYEV
MIRGAZIYAN Z. TAZIYEV
MARIYA L. VOSKRESENSKAYA
RENÉ STEINER
Member of the Board of
Directors, Chairman of the
Management Board (before
November 2013), General
Director of JSC TATNEFT
(before November 2013), since
November 2013 – Advisor
to Chairman of the Board of
Directors of JSC TATNEFT.
Member of the Board of
Directors. Deputy General
Director – Chief Geologist of
JSC TATNEFT. Member of the
Board of Directors’ Corporate
Management Committee of
JSC TATNEFT.
Member of the Board of
Directors. Assistant to the
President of the Republic
of Tatarstan. Member of the
Board of Directors’ Corporate
Management Committee of
JSC TATNEFT. Member of the
Board of Directors’ HR and
Remuneration Committee of
JSC TATNEFT.
Member of the Board of
Directors. Minister of Land
and Property Relations of
the Republic of Tatarstan.
Member of the Board
of Directors.
Head of Almetyevneft Oil
and Gas Production Division
of JSC TATNEFT.
Member of the Board of
Directors. Independent Director.
Director of Brentcross Co. LTD.
Member of the Board
of Directors’ Audit Committee
of JSC TATNEFT.
Member of the Board of
Directors. Independent
Director. Program Director
of Private Equity in FIDES
Business Partner AG.
Member of the Board of
Directors’ Audit Committee
and Chairman of the Board
of Directors’ HR and
Remuneration Committee
of JSC TATNEFT
(since June 2013).
NAIL G. IBRAGIMOV
VLADIMIR P. LAVUSHCHENKO
RADIK R. GAIZATULLIN
RENAT KH. MUSLIMOV
GHOSH SUSHOVAN
VALERY YU. SOROKIN
Member of the Board of
Directors, Member of the
Management Board. First
Deputy General Director for
Production - Chief Engineer
of JSC TATNEFT.
Member of the Board of Directors
and Member of the Management
Board. Deputy General Director
of JSC TATNEFT for Economics.
Chairman of the Board of
Directors’ Information Disclosure
Committee of JSC TATNEFT.
Member of the Board of
Directors. Minister of Finance
of the Republic of Tatarstan.
Member of the Board of
Directors’ Audit Committee
of JSC TATNEFT.
Member of the Board of
Directors. Advisor to the
President of the Republic
of Tatarstan on the issues of oil
and oil/gas fi elds development.
Member of the Board of
Directors. Independent Director.
Managing Director of SGI Group
LTD. Chairman of the Board of
Directors’ Audit Committee.
Member of the Board of
Directors’ HR and Remuneration
Committee of JSC TATNEFT.
Member of the Board
of Directors. General Director
of JSC Svyazinvestneftekhim.
4
5
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
FEDOR L. SHCHELKOV
NIKOLAY M. GLAZKOV
RUSTAM N. MUKHAMADEYEV
EVGENIY A. TIKHTUROV
VALERIY D. YERSHOV
VLADLEN A. VOSKOBOINIKOV
Member of the Management
Board. Deputy General Director
for General Issues
of JSC TATNEFT.
Member of the Management
Board. Deputy General Director
for Capital Construction
of JSC TATNEFT.
Member of the Management
Board. Deputy General Director
of JSC TATNEFT for HR
and Social Development.
Member of the Management
Board. Head of Financial
Department of JSC TATNEFT.
Member of the Board of
Directors’ Information
Disclosure Committee
of JSC TATNEFT.
Member of the Management
Board. Head of Legal Department
of JSC TATNEFT. Member of the
Board of Directors’ Corporate
Management Committee
of JSC TATNEFT.
Member of the Management
Board. Head of Department
for Consolidated Financial
Statements of JSC TATNEFT.
Member of the Board of
Directors’ Information
Disclosure Committee
of JSC TATNEFT.
RIFKAT M. RAKHMANOV
VIKTOR I. GORODNIY
ISKANDAR G. GARIFULLIN
RAFAIL S. NURMUKHAMETOV
ZAGIT F. SHARAFEYEV
ALEKSANDER T. YUKHIMETS
Member of the Management
Board. Deputy General Director
for Workover, Drilling and Oil
Recovery Enhancement
of JSC TATNEFT.
Member of the Management
Board. Head of Accounting
and Reporting Department –
Chief Accountant
of JSC TATNEFT.
Member of the Management
Board. Deputy General Director
of JSC TATNEFT – Head
of Property Department.
Chairman of the Board
of Directors’ Corporate
Management Committee,
Vice Chairman of the Board
of Directors’ Information
Disclosure Committee.
Member of the Management
Board. Head of Leninogorskneft
Oil and Gas Production Division
of JSC TATNEFT.
Member of the Management
Board. Deputy General
Director of JSC TATNEFT for
Petrochemical Production –
Director of UK OOO TATNEFT-
Neftekhim.
Member of the Management
Board. Secretary of
the Board of Directors
of JSC TATNEFT. Member
of the Board of Directors’
Information Disclosure
Committee of JSC TATNEFT.
6
7
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
MISSION
OF THE COMPANY
THE COMPANY’S MISSION CONSISTS IN
STRENGTHENING THE INTERNATIONALLY
RECOGNIZED POSITIONS AND
ENSURING THE COMPANY’S SUSTAINED
DEVELOPMENT IN THE STATUS OF ONE
OF THE LARGEST RUSSIAN VERTICALLY
INTEGRATED COMPANIES PRODUCING
OIL AND GAS, REFINED PRODUCTS,
PETROCHEMICALS AND THERMAL
AND ELECTRIC POWER BASED ON THE
EFFICIENT ASSET MANAGEMENT OF THE
SHAREHOLDERS, MANAGEMENT OF
NATURAL RESOURCES AND CORPORATE
SOCIAL RESPONSIBILITY.
STRATEGIC INITIATIVES
AND OBJECTIVES OF THE COMPANY
INCREASE OF THE SHAREHOLDER’S EQUITY
Ensure the increase of the long-term shareholder value and high dividend yield return on the
shareholders invested capital on the basis of the effi cient corporate management of natural,
industrial, human, intellectual and professional assets and resources.
• ENSURE FINANCIAL STABILITY AND ECONOMIC STABILITY
• STABILIZE THE VOLUMES OF PROFITABLE OIL & GAS PRODUCTION ON THE DEVELOPED
LICENSE FIELDS AND ACTIVE EXPLORATION OF NEW FIELDS INCLUDING HIGH VISCOSITY OIL
AND HARD TO RECOVER OIL IN THE TERRITORY OF THE REPUBLIC OF TATARSTAN
• EXPAND THE LICENSE PORTFOLIO OUTSIDE THE REPUBLIC OF TATARSTAN
AND RUSSIAN FEDERATION
• INCREASE THE PRODUCTION AND SALES VOLUMES OF HIGH COMPETITIVE FINISHED PRODUCTS
THROUGH DEVELOPMENT OF REFINERIES AND PETROCHEMICAL PLANTS
• FORMULATE AND IMPLEMENT THE INNOVATIVE ENGINEERING POLICY
• ENSURE A HIGH LEVEL OF THE CORPORATE SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
The corporate management of the Company covers all the aspects of the activities of the
TATNEFT Group and is aimed at strengthening of the fi nancial position of the joint stock
company and sustained development in compliance with its strategic initiatives and objectives
set by the shareholders.
In 2013 the Board of the Directors of JSC TATNEFT addressed the issues on prospective
and current development plans of each business segment, implementation of the investment
programs, provision of the internal audit, human resources, social and environmental policies,
improvement of the productivity, as well as fi nancial and business activities of subsidiaries and
affi liates. The special attention was paid to the Company’s capitalization and interaction with
shareholders.
9
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
GEOGRAPHY
OF THE COMPANY’S
ACTIVITY
RUSSIA
GREAT BRITAIN
CHINA
BELORUSSIA
TATARSTAN
UKRAINE
GERMANY
KAZAKHSTAN
TURKMENISTAN
LIBYA
SYRIA
PROVED OIL RESEVES AMOUNT OF JSC TATNEFT
847.3
million tons of oil
According to Miller & Lentz, Ltd
independent consulting fi rm, as of beginning of 2014
MAP OF MAJOR FIELDS OF JSC TATNEFT
WITHIN THE REPUBLIC OF TATARSTAN
IN TERMS OF AVAILABILITY OF HYDROCARBON RESOURCES
(THE RATIO BETWEEN THE CURRENT ANNUAL PRODUCTION
AND THE AMOUNT OF RESERVES) THE COMPANY IS A LEADER
IN RUSSIA, AS WELL AS IN THE WORLD.
THE AVAILABLE RESOURCE BASE OF THE COMPANY ALLOWS
IT TO MAINTAIN THE CURRENT PRODUCTION VOLUME
FOR OVER 32 YEARS.
KAZAN
Bondyuzhskoe
Pervomayskoye
NABEREZHNYE CHELNY
Romashkinskoye
Novo-Yelkhovskoye
ALMETYEVSK
Sabanchinskoye
Bavlinskoye
LEGEND
THE MAIN RESOURCE PORTFOLIO AND PRODUCTION FACILITIES OF THE COMPANY HAVE HISTORICALLY BEEN PLACED
IN THE TERRITORY OF THE REPUBLIC OF TATARSTAN.
THE SHARE OF THE TATNEFT GROUP ACCOUNTS FOR MORE THAN 80% OF THE OIL PRODUCED IN THE TERRITORY OF TATARSTAN,
AND ABOUT 8% OF THE TOTAL OIL PRODUCED IN THE RUSSIAN FEDERATION
Field
development
Oil
refining
Petrochemicals
production
Thermal
electric power
Supply
of equipment,
technologies
and services
Retail
Distribution
Network
International
stock exchanges
where the depositary
receipts for shares
of JSC TATNEFT
are listed on
THE RETAIL BUSINESS OF THE COMPANY IS FORMED BY THE DEVELOPING NETWORK OF TATNEFT BRANDED FILLING STATION
COMPLEXES IN THE TERRRITORIES OF RUSSIA, BELORUSSIA AND UKRAINE.
THE RUSSIAN NETWORK OD THE FILLING STATIONS IS THE FORTH LARGEST RETAIL NETWORK AND REPRESENTED IN 22 REGIONS
WITH HIGH POTENTIAL GROWTH INCLUDING THE CENTRAL FEDERAL DISTRICT AND VOLGA REGION.
10
11
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
JSC TATNEFT
KEY PERFORMANCE INDICATORS
OF THE COMPANY BASED ON THE RESULTS OF 2013
MAIN INDICES
INDICATORS OF THE COMPANY’S SHAREHOLDER VALUE
Market Capitalization as of December 31, 2013
Cost of an ordinary share as of December 31, 2013
Planned dividends by results of the Company's activity in 2013*
Total number of shares
Including:
ordinary shares
preferred shares
Number of depositary receipts issued for shares of JSC TATNEFT
(1 DR : 6 shares) as of December 31,2013
INDICATORS OF THE COMPANY’S PRODUCTION STATUS
Oil and Gas Production Complex
NATIONAL UNITS
OF MEASUREMENT
RUR 471.5 bln
RUR 208.2
RUR 19.155 bln
2,326,199,200
2,178,690,700
147,508,500
625,174,618
MAIN INDICES
Oil Refinery Complex
Refining volume of TANECO Complex:
Crude oil refining
Natural gas liquids refining
Daily refining throughput
Level of capacity utilization
Refining depth
Output of light petroleum products
Indicator of capabilities to process crude oil with sulfur content
Sulfur content in refined products - EURO-5 diesel fuel,
Amount of proved oil reserves as of January 1, 2014
(according to Miller & Lents Ltd. assessment) when using the average oil price for 12 months 2013
847.346 mln tons
Refining at the refinery of NGDU Elkhovneft
TATNEFT Group Oil production volume
JSC TATNEFT Oil production volume
Average daily production
Average oil production rate of active producing wells of JSC TATNEFT
Average oil production rate of new wells of JSC TATNEFT
Associated petroleum gas production (collection)
Liquefied petroleum gas production
Operational stock of producing wells
Active stock of producing wells
Total penetration meterage for JSC TATNEFT
Including:
production drilling
prospecting & exploratory drilling
26.419 mln tons
26.107 mln tons
0.72 mln tons
3.8 tons/day
9.3 tons/day
864.8 mln m3
275.3 thousand tons
22,289 wells
20,257 wells
450.1 thousand meters
430.4 thousand meters
19.747 thousand meters
Total core products output
Tatneftegazpererabotka Administration
Associated gas accepted for processing
LPG processing
Sour gas delivered to sweetening
Utilization coefficient of associated gas
Petrochemical Complex
Commercial carbon black production volume of JSC Nizhnekamsktehuglerod
Commercial commodity output of JSC Nizhnekamskshina
Total volume of produced commodity petrochemical products
Carbon black production volume
NATIONAL UNITS
OF MEASUREMENT
7,621.6 thousand tons
4.4 thousand tons
167.6 thousand bbls
108.8%
of designed capacity
73.54 %
annual average
depth of refining
48.16 %
Oil processing
with 1.8 % sulfur content
3 ppm
179.3 thousand tons
773.9 mln m3
276.0 thousand tons
125.4 mln m3
95.1 %
RUR 3,265 mln
RUR 5,509.85 mln
RUR 38,980.13 mln
108.9 thousand tons
12
13
Balance Sheet Data as of December 31, 2013
Fixed assets and incomplete construction
Long-term financial investments
Current assets
Equity capital
Total liabilities
FINANCIAL SOUNDNESS INDICATORS
Equity capital level
Net assets
Current liquidity (ratio)
INVESTMENT ACTIVITY INDICATORS
Total volume of investments for TATNEFT Group
Investments in the oil production in the territory of Tatarstan Republic
drilling
capital construction
equipment not included in the construction estimate-sheets
geological and technical activities
redemption of property, land, etc.
Investments into development of retail business
Investments into non-production sphere
Investments into oil production outside the Republic of Tatarstan
Investments of the petrochemical complex enterprises
Investments of service companies & other enterprises
including:
financing of Nizhnekamsk CHP reconstruction
Investments into foreign projects
Investments into construction of the Refining and Petrochemical complex
MAIN INDICES
Retail Network of Filling Stations.
Total number of filling stations,
Including:
Number of filling stations in Russia
Number of filling stations in Ukraine
Number of filling stations in the Republic of Byelorussia
Indicators on the Property Complex
NATIONAL UNITS
OF MEASUREMENT
MAIN INDICES
648
524
114
10
Number of real estate assets registered on the ownership right
RUR 8.1 bln
Human Resources
Number of employees of TATNEFT Group
Average headcount of the employees of JSC TATNEFT
PERFORMANCE INDICATORS OF THE COMMERCIAL ACTIVITY
Supply of Oil and Gas products
Oil export (far-abroad countries)
Oil export (near-abroad countries)
Supplies to the domestic market
Gas products supply to the domestic market, export
Sales of Oil and Gas Products
Volume of oil products sold in the markets of Russia, Ukraine, Byelorussia
Volume of gas products sold through TATNEFT retail networks of gas filling stations
Sales of Petrochemical Complex Products
Total tires shipped,
including:
Export
Domestic market
Tender shipments
FINANCIAL AND ECONOMIC PERFORMANCE INDICATORS
Revenues
Revenue of TATNEFT Group
Sales revenue of JSC TATNEFT, total
Oil sales revenues (incl. own and purchased oil)
Oil & gas products sales revenues
Other products sales revenues
Profit
Pre-tax profit of TATNEFT Group
Pre-tax profit of JSC TATNEFT
Net profit of JSC TATNEFT
Taxes and Payments to the Budget
Taxes and payments to the Budget from JSC TATNEFT:
including:
Minerals extraction tax (MET)
Income tax
14
77 thousand persons
20.78 thousand persons
11.3 mln tons
1.054 mln tons
13.408 mln tons
7.506 mln tons
1.52 mln tons
145.6 thousand tons
11.81 mln pcs
2.694 mln pcs
9.001 mln pcs
0.116 mln pcs
RUR 454.983 bln
RUR 363.531 bln
RUR 205.030 bln
RUR 133.112 bln
RUR 5.389 bln
RUR 101.291 bln
RUR 83.485 bln
RUR 63.850 bln
RUR 319.260 bln
RUR 104.850 bln
RUR 19.155 bln
* The Board of Directors of JSC TATNEFT made a decision to recommend to the Annual General Meeting of the Shareholders to approve payment of
dividends for 2013 in the amount of 823% for preferred shares, and dividends for ordinary shares – in the amount of 823% of the nominal value.
Comments:
JSC TATNEFT considers that the use of the average oil price for 12 months fairly reflects its oil reserves in the current economic conditions,
particularly in the environment of high volatility of the oil price that occurred during 2013.
ADDED VALUE
The volume of production of the value added of JSC TATNEFT increased by 0.9 billion rubles and amounted to 228 billion rubles in 2013. The
share of the added value in the total volume of the Company’s products output amounted to 66%.
In 2013 the added value in OJSC TANECO increased by 62% versus 2012 and amounted to 13.9 billion rubles. The share of the added value
in the output of products increased from 54% in 2012 to 67% in 2013.
15
NATIONAL UNITS
OF MEASUREMENT
RUR 105.624 bln
RUR 52.026 bln
RUR 301,405 bln
RUR 421,696 bln
RUR 111,621 bln
0.791
RUR 421.7 bln
4.434
RUR 84,813 bln
RUR 30,937 bln
RUR 12,996 bln
RUR 7,477 bln
RUR 2,485 bln
RUR 7,699 bln
RUR 0.280 bln
RUR 1,303 bln
RUR 0.754 bln
RUR 3,112 bln
RUR 0.861 bln
RUR 4,682 bln
RUR 1,837 bln
RUR 0.470 bln
RUR 42,694 bln
JSC TATNEFTANNUAL REPORT 2013EXPLORING NEW HORIZONS ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
ABOUT THE COMPANY
The consolidated assets of the TATNEFT Group form the following business segments: exploration and
production, oil refi ning and sales of crude oil and petroleum products, petrochemicals, as well as the
corporate segment.
By the end of 2013 in the asset structure of the TATNEFT Group the main shares are distributed between
the business segments of exploration and production - 281.4 billion rubles, and oil refi ning and sales
of crude oil and petroleum products - 259.9 billion rubles, indicating the high-quality proportion of the
asset diversifi cation. Over recent years within the framework of the vertical integration development of
the Company together with a steady growth of the recovery segment there was an intensive growth of the
assets value of refi ning and sales owing to the project of the construction of own refi ning facilities of the
TANECO Complex. Before this large-scale project was started in 2005, the segment share was 5% of the
all Company’s assets by the end of 2011, and with the completion of the main phase of this construction
and testing of the Complex’ facilities, this segment share increased to 34%, and after the Complex
reached its design capacity in 2013 the share became even 39%.
In total, over 10 years the consolidated assets grew more than in 2.5 times. (In 2003 - 262.7 billion
rubles.) As a result of this restructuring period, creation of a high-tech oil refi nery block, modernization
of the petrochemical production, expansion of a distribution network of fi lling stations, acquisition of heat
and power generating capacities the company achieved a high quality strengthening of the corporate
business structure together with increased operating profi tability.
The Revenue from sales of JSC TATNEFT in the reporting year was 363.5 billion rubles (net of VAT and
export duties), which was by 5.5% more than in 2012. The main reason is a price factor for crude oil
and petroleum products, as well as changes in the sales structure. The cost of sales in 2013 amounted
to 228.5 billion rubles. This is 9.7% higher than last year and associated mainly with the increased tax
burden for natural resources production (MET) and infl ationary developments.
The revenue of the TATNEFT Group amounted to 455 billion rubles in 2013. There is the following
distribution of shares in the consolidated revenue mix: the exploration and production - 45%, oil refi ning
and sales of crude oil and petroleum products - 44%, petrochemicals - 8%.
JSC TATNEFT realized the profi t before tax in the amount of 83.5 billion rubles. The after-tax profi t of the
parent company amounted to 63.85 billion rubles. The leverage ratio is 78% : 22% which is an indicator
of the fi nancial stability of the Company. The net assets increased by 11% to the level of 421.7 billion
rubles by the end of 2013.
The consolidated profi t before tax of the TATNEFT Group amounted to 101.3 billion rubles.
JSC TATNEFT provided timely payments to the budgets of all levels and off-budget funds. The total
amount of accrued taxes and payments to the budgets of all levels was 323 billion rubles.
Payables on all types of loans and credits for 2013 were reduced by 22.9 billion rubles. The main
part of the loans was previously engaged to meet the current production problems in connection
with the direction of signifi cant own funds for fi nancing the construction of the TANECO Refi ning and
Petrochemical Complex in Nizhnekamsk.
The fi nancial and economic potential gained over the years by the Company allows to continue the
implementation of major investment projects, both on account of the own funds and borrowed funds.
The total amount of investments by JSC TATNEFT and its subsidiaries and affi liated companies in 2013
amounted to 84.8 billion rubles. The top priority goals are as follows: strengthening of the oil and gas
production assets, including overseas projects and the refi ning business unit. The most signifi cant
investments were allocated and spent in these areas in the reporting year, which amounted to 37.4 billion
rubles in the production and 42.7 billion rubles in the construction of the Refi ning and Petrochemical
Complex in Nizhnekamsk.
471.6
BLN RUBLES
Market Capitalization
of the company
As of the end of 2013
In 2013 the Moody’s
Investor Services rating
agency announced the
rating upgrade of the
TATNEFT corporate
group up to investment
level “Baa3, with a stable
outlook”.
STATUS OF THE COMPANY’S
ACTIVITY IN 2013
JSC TATNEFT executes its business in the capital intensive industry of subsurface management and
reproduction of power resources demanding increased corporate responsibility for all the activities.
The organizational structure of the Company vertically integrates business processes, resources,
manufacturing facilities for exploration, production, refi ning, petroleum chemistry, thermal electric power
industry, as well as sales of oil and petroleum products, providing diversifi cation and quality interactions
of all the business segments starting from extraction of reserves to production and marketing of high
quality fi nal petrochemical products.
The Company strategic actions are based on the macroeconomic data of forecasted consumption of
hydrocarbons until 2030, prospects of development of the global and domestic markets, market trends
and market potential of petrochemical products.
In 2013 the Company successfully solved the strategic objectives and present-day challenges aimed at
strengthening the quality and profi tability of corporate assets, stabilization of the production and ensuring
replenishment of resources, development of refi neries and petrochemical facilities, formation of a new
value added by manufacturing high-quality and highly competitive products based on the integration
of resource and production potentials of oil production, refi ning and petrochemicals. The Company
implemented the activities in order to improve the operating effi ciency of the business segments and
create new points of revenue growth, strengthen the competitiveness and sustainable level of the
investment attractiveness.
The Company realized the target production volumes and provided positive indicators of the fi nancial and
economic activity.
674
BLN RUBLES
Consolidated asset value
of the TATNEFT Group
As of the end of 2013
323
BLN RUBLES
Total amount of the tax
payments to the budgets
of all levels and non-budgetary
funds by JSC TATNEFT in 2013
16
17
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
26.4
MLN TONS
Oil production volume
of the TATNEFT
Group in 2013
The Company provides
for a steady increase
of the annual production
which is 5.8 % for 10 years.
Despite the fact that most
of the deposits of the
Company are in their late
stage of development,
JSC TATNEFT is the only
oil company in Russia that
has managed to avoid any
signifi cant decline in the
production since 2000.
At the beginning of 2014 the proved developed, undeveloped and undrilled reserves of JSC TATNEFT
according to the estimates of the international independent consulting fi rm Miller & Lentz amounted
to 847.346 million tons of oil. In terms of availability of hydrocarbon resources (the ratio between the
current annual production and the amount of reserves) the Company is a leader not only in Russia but
also in the world.
The oil production of JSC TATNEFT totalled 26.419 million tons of oil in 2013, the Company reached
the maximum level of hydrocarbons production over last 20 years. The enterprises of JSC TATNEFT in
the Republic of Tatarstan and outside it produced 26 million 107 thousand tons of oil, the subsidiaries
and affi liated companies produced 312 thousand tons of oil.
The main part of the current oil production accounts for the conventional large deposits of the Republic
of Tatarstan. In accordance with the objectives on to expand the resource base and increase oil
reserves the Company forms a diversifi ed portfolio of oil and gas assets. Outside the Republic of
Tatarstan JSC TATNEFT holds the prospecting licenses for geological exploration and development
of oil, gas and condensate fi elds purchased through auctions as well as through the acquisition of the
business parts of the oil companies in the Samara, Orenburg, Ulyanovsk Regions, Nenets Autonomous
Okrug and the Republic of Kalmykia. In 2013 JSC TATNEFT jointly with its nine subsidiaries operating
in the territory of the Russian Federation possessed 97 licenses for exploration and development of the
hydrocarbons deposits. The Company continued the geological exploration programs in the territory
of license sites in Libya and Syria, which had been suspended in 2011 due to the complicated political
situation till the internal situation stabilization in these countries and guarantee the safety for the
Company’s specialists.
In accordance with the extra viscous fi eld development plans the EVO production amounted to
145.6 thousand tons in the Ashalchi oil fi eld in 2013. The total production of extra viscous oil from the
beginning of the commercial fi eld development reached 325.7 thousand tons of extra viscous by the
end of 2013. The total production rate for the site by the end of the year reached 480 tons per day.
In 2013 the Company started to implement the shale oil study program – there was a pilot well drilled at
the depth of about 1700 m and it is in operation now.
The drilling complex companies penetrated 450.1 thousand meters of rocks in the fi elds of JSC
TATNEFT in the reporting year and commissioned 266 new producing wells, The average fl ow rate of
new wells amounted to 9.3 tons per day. 248 wells were completed for water injection.
In order to achieve maximum economic returns and increase profi tability of the production assets,
rational use of natural and material resources the Company implements the target program activities
aimed at optimizing the infrastructure of mature fi elds, increasing the oil recovery factor, ensuring cost
control, resource saving, development and implementation of innovative technologies and equipment.
JSC TATNEFT achieved one of the highest industry levels of associated gas utilization, which exceeds
95 %. Application of the gas powered electrical generators and microturbine units for utilization
of associated petroleum gas contribute to increased reliability of the power supply systems of the
Company.
Thanks to implementation of a comprehensive resource saving program TATNEFT saved over 55.6
thousand tons of equivalent fuel in 2013, which allowed to reduce the fuel and energy resources
consumption of the Company by 4.9%. The main energy savings were obtained through energy saving.
95.1
%
level of associated
gas utilization
1.7
MLN TONS
of oil and gas products
have been sold through
TATNEFT retail network
of fi lling stations in 2013
The technological equipment and the level of implementation of innovative methods of operating
companies of the Company conform to the international standards and are unique in some aspects.
The Company actively develops the technology of dual completion production from two or more
layers of one well to ensure effective operation of the oil fi elds. At the beginning of the current year the
number of these dual completion and dual injection systems exceeded 1900 units, the cumulative oil
production amounted to 7.7 mln tons of oil.
TATNEFT Company is an absolute industry’s leader in terms of the average turnaround time for wells
among the major oil companies the Russian oil industry. The overall average turnaround time in JSC
TATNEFT was 1198 days in 2013. This has been achieved through the introduction of a large variety of
innovative technologies, high quality and timely maintenance of the oilfi eld equipment.
TATNEFT Company is a supplier of the advanced technologies, equipment and oilfi eld services to
external oil producing companies. The Company provided such supplies to Kazakhstan and provided
EOR oilfi eld services in Turkmenistan in 2013.
The oil refi ning assets include TANECO Refi ning and Petrochemical Complex in Nizhnekamsk, the
construction of which was started by the Company in 2005 in order to form the own facilities for oil
advanced processing and the refi ning facility of NPU Elkhovneft.
In 2013 the total refi ning throughput was about 8 million tons, including 7.6 million tons of crude oil and
4.4 tons of gas condensate processed at TANECO. Main products are as follows: straight-run gasoline,
stable natural gasoline, middle distillates, visbreaker tar, vacuum gas oil, commercial fuel oil. The level of
the capacity utilization of TANECO reached a record level - 108.8 % of designed capacity (the average
for Russia – 92.9 %). The processing volume amounted to about one-third of the Company’s annual
production. The average annual oil refi ning effi ciency was 73.54% (which is higher than the Russian
average level of 71.5%) light petroleum products output – 48.16%. Most sections of the integrated
hydrocracking unit are in the comprehensive testing mode.
In March 2014 OJSC TANECO completed commissioning works on the integrated hydrocracking unit and
hydrogen generation unit, and obtained the Rostekhnadzor certifi cate of conformity with requirements
of the technical regulations and design documentation. TANECO obtained permits for commissioning of
these facilities and the state registration of OJSC TANECO ownership of real estate assets. Further plans
for the current year are as follows: continue to increase the capacity utilization of the TANECO fi rst stage,
to exceed the achieved level which will enhance the positive effect for JSC TATNEFT as well as for the
whole Russian economy. In 2014 it is planned to ensure the refi ning throughput volume of 8.5 million tons
and to start the normal operation of the hydrocracking unit allowing production of high demand products
– high quality light petroleum products EURO-5 diesel fuel, jet aviation fuel, base oils. The pilot batches
of EURO-5 diesel fuel are characterized by a low sulfur content (3 ppm - this is signifi cantly less than the
upper limit for this emissions class which is 10 ppm).
TANECO Complex became the fi rst large-scale refi nery facilities built from scratch in the post-Soviet
countries over the last 30 years. The project was fi nanced by JSC TATNEFT on account of own and
borrowed funds. The mechanism of public-private partnership was also used in the construction of
transport infrastructure objects of the Complex. The commercial operation of the refi nery commenced on
December 2, 2011.
The sustainable development strategy of OJSC TANECO envisages further expansion of the volume and
range of the products, a signifi cant increase of the depth of processing, as well as the output of light
petroleum products. The technological level of the Complex is consistent with international standards,
both in the areas of ecological and industrial safety.
The production facilities of NPU Elkhovneft were operated at constant load.
18
19
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
7.6
MLN TONS
of crude oil processed
at TANECO Complex
in 2013
73.5
%
is the average annual
processing depth
at TANECO Complex
The development of the retail sales of petroleum products in 2013 was carried out in accordance
with the current priority to improve profi tability of fi lling stations complexes at high quality control and
extension of additional services. As of the end of 2013 the number of TATNEFT branded fi lling stations
totaled 648 units, among them 524 fi lling stations – in Russia, 114 fi lling stations – in Ukraine, 10 fi lling
stations – in Belorussia).
1.7 million tons of oil and gas products have been sold through TATNEFT retail network of fi lling stations
in the reporting year. In the coming years the retail network of JSC TATNEFT will be fully provided with
its own high-quality oil products produced at the TANECO Complex, which will signifi cantly increase the
operating earnings and strengthen the competitive positions of this business segment.
Power generating capacities of the Company supply the thermal electric power to the production
facilities of the TATNEFT Group, as well as the large industrial enterprises and social infrastructure
facilities in the South-East of the Republic of Tatarstan, providing JSC TATNEFT the status of a network,
power generating and power supply company in the region of its core activity.
In 2013 the total electric power output by the Company’s power generating enterprises was about 1.3
billion KWh. The total heat output increased by 15% owing to modernization of the facilities and totalled
to 4.8 million Gcal. The Company continued works to double the production capacities of Nizhnekamsk
CHP (Combined Heat & Power station) which provides the electric power to the largest petrochemical
enterprises of Nizhnekamsk city, including TANECO Complex. The optimal load distribution and
management of the most economical mode of operation at Nizhnekamsk thermal power station allowed
to reduce the specifi c fuel consumption for electricity supplied by 3.5% down to 288 g/kWh in 2013,
which is 11% less than the national average.
The Tire Manufacturing Complex of the Company covers 26% of this Russian industry segment in terms
of production volumes; it is a supplier of the domestic car manufacturers KAMAZ, GAS, AVTOVAZ, as well
as the car assembly plants of Volkswagen, Fiat and other foreign manufacturers.
The cumulative tire production amounted to 12.5 million tires in 2013. At the end of 2013 a new Product
& Marketing Strategy of the tire manufacturing complex was adopted for the period until 2018. The
Company objective is to strengthen the position in the strategic group of the leaders of the Russian tire
market and increase the Company’s combined market share in the Russian market of tire products. The
strategy is based on forming the growth in production and sales of the tire products with the maximum
use of the potential of the market conditions and the market capacity of OEM & Aftermarket markets,
especially in the markets of Russia and CIS countries ensuring the profi tability of the tire business
comparable to the level of the world manufacturers of tire products.
In 2013 after the
commissioning of the own
refi ning facilities of TANECO
the Company sent more
than 31% of the produced
crude oil for refi ning.
INCREASE OF THE RATIO OF VOLUMES OF PRIMARY OIL PROCESSING IN THE RF
AND AT TANECO COMPLEX IN 2012-2013
VOLUME OF PRIMARY OIL PROCESSING IN THE RF
7.0
MLN
TONS
2012
TANECO’s share
in the total volume
of crude oil processing
in RF in 2012
271.4
MLN TONS
2013
277.3
MLN TONS
7.6
MLN
TONS
TANECO share
in the total volume
of crude oil processing
in the RF in 2013
2.2%
10%
Growth of primary oil
TANECO share in the total
processing in the Russian
volume of crude oil processing
Federation in 2013 versus 2012
in the Russian Federation
RATIO OF AVERAGE ANNUAL PROCESSING DEPTH IN THE RF
AND AT TANECO COMPLEX IN 2012-2013
%
74
73
72
71
70
+2.00%
+0.25%
73.54%
RF
TANECO
71.25%
71.50%
71.54%
‘12
‘13
‘12
‘13
20
21
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
JSC TATNEFT EQUITY HOLDING STRUCTURE
THE DIVIDEND POLICY
As of December 31, 2013 according to the register of shareholders of JSC TATNEFT had 45,746
shareholders. Among them the largest owners (nominal holders) of the Company’s shares are as follows:
• Non-bank Credit Company, closed joint stock company National Settlement Depository owns
56.199649 % of shares;
• Joint Stock Company Central Depository of the Republic of Tatarstan owns 33.595570 % of shares.
The shares of JSC TATNEFT have been traded on the Russian and International stock markets 19
years, and they are among the most liquid and representative instruments in the securities markets.
The geography of the shareholders covers the territory of Russia (the main share of the shareholders),
America, Australia, Europe and Asia.
In terms of trading volumes on the Russian and London stock exchanges JSC TATNEFT ranks the
sustainable fourth place among the Russian oil companies. The ordinary and preference shares are listed
in the A1 Quotation List in the united JSC Moscow Stock Exchange. JSC TATNEFT shares are included in
the index calculation base of RTS and MICEX, which are the main indicators of the Russian stock market.
The current annual volume of trading on the Moscow stock exchange exceeds RUR 79 billion rubles
(USD 2.4 billion).
As of the end of 2013 the value of one ordinary share of JSC TATNEFT was RUR 208.2, the value of
one preferred share was RUR 121.7. The dividend yield based on the calculation of the market value of
the ordinary shares at the end of 2013 amounted to 4.13 %, the dividend yield of the preferred shares
amounted to 7.07 %.
625,174,618 ordinary shares or 29.9 % of the shareholders equity have been deposited for conversion
into global American Depositary Receipts (ADRs) (the conversion ratio of 1 DR = 20 shares, it was
changed in 2009 to 1 DR = 6 shares).
The Depositary Receipts of the Company are listed on the London Stock Exchange (Ticker symbol:
ATAD) and traded in the Xetra trading system of Deutsche Börse group. The annual trading volume of
JSC TATNEFT Depositary Receipts exceeds 2.5 billion pounds in the London Stock Exchange; and 8
million Euros – in the Xetra trading system.
EQUITY HOLDING STRUCTURE OF THE COMPANY
AS OF DECEMBER 31, 2013
TOTAL NUMBER OF SHARES
Ordinary shares:
JSC TATNEFT
Nonresident stockholders
Russian stockholders
Preferred shares:
JSC TATNEFT
Nonresident stockholders
Russian stockholders
* without ownership through the Russian nominee holders
2,326,199,200
2,178,690,700
541,160*
2,178,149,540
147,508,500
101,800*
147,406,700
The Company successfully ensures sustainable growth of the market capitalization as the basis for high
dividend yields on the capital invested by the shareholders. The Company invests in the production
development and commits 30% for dividends payment.
DIVIDEND HISTORY FOR 2010-2012
%
0
6
8
%
0
6
8
%
8
0
7
%
8
0
7
%
2
0
5
%
2
0
5
rubles
10
9
8
7
6
5
4
3
2
1
0
Preferred shares
Ordinary shares
Nominal value of one share
The decision of the dividend payment was made at the Annual General Meeting of the Shareholders based on the results of 2010, 2011, 2012.
‘10
‘11
‘12
According to the 2013 results the Board of Directors of JSC TATNEFT proposed the Annual General
Meeting of the Shareholders to approve the payment of dividends in the amount of 823 % for the ordinary
and preferred shares of the nominal value (RUR 8.23 per share) and commit 30% of the net profi ts of the
joint stock company, which in total exceeds RUR 19 bln.
DIVIDEND YIELD
return on equity
(shares)
share
for dividends
25
20
15
10
5
0
capitalization at the end of the reporting period
475.0
yield of preferred shares, %
yield of ordinary shares %
307.6
7.57%
4.52%
344.6
5.70%
3.17%
6.73%
3.25%
‘10
‘11
‘12
500
450
400
350
300
250
200
150
100
50
0
22
23
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
BOARD
OF DIRECTORS
OF JSC TATNEFT
EXECUTIVE BODY
OF JSC TATNEFT
TATNEFT GROUP STRUCTURE
MAIN ENTERPRISES CONSTITUTING THE TATNEFT GROUP
The Company implements its vertical integration strategy of the full production cycle including reservoir
geology, fi eld development, oil & gas production, oil & gas refi ning, sales of crude oil, petroleum and gas
products, including through the retail network, production and sales of petrochemical raw materials and
fi nished products, production and supply of thermal electric power.
1
2
3
4
5
6
7
8
OIL REFINING AND
CRUDE OIL & PETROLEUM
PRODUCTS SALES
Crude Oil & Oil Products
Sales Department
Construction Projects
Management Department
Tatneftegazpererabotka
Administration
OJSC TANECO
OOO Tatneft-AZS-Tzentr
OOO Tatneft-AZS-Zapad
OOO Tatneft-AZS-Sibir’
OOO Tatneft-AZS-Yug
OOO Tatneft-AZS Ukraina
OOO Tatneft-Trans
IOOO Tatbelnefteproduct
OOO Saymen
OOO Kharkov-Capital
OOO Poltava-Capital
OOO Processingovy Tzentr
OOO Tatneft-Tzentroresurs
OIL & GAS PRODUCTION
NGDU Almetyevneft
NGDU Aznakaevskneft
NGDU Bavlyneft
NGDU Jalilneft
NGDU Yelkhovneft
NGDU Leninogorskneft
NGDU Nurlatneft
NGDU Prikamneft
NGDU Yamashneft
SUBSIDIARIES AND
AFFILIATES FOR OIL
PRODUCTION
OOO Tatneft-Abdullino
OOO Tatneft-Severny
OOO Tatneft-Samara
ZAO Abdulinskneftegaz
ZAO KalmTatneft*
JSC Kalmneftegaz
ZAO Severgeologiya*
ZAO Severgaznefteprom*
ZAO Yambuloil*
24
PETROCHEMICAL WORKS
THERMAL ELECTRIC POWER
OOO Nizhnekamsk CHP
OOO Tatneft-Energosbyt
JSC Almetyevsk Heat Networks
OOO TATNEFT-Neftekhim
Management Company
JSC Nizhnekamskshina
JSC Nizhnekamsk
Mechanical Plant
OOO Nizhnekamsk Truck
Tire Plant
OOO Energoshinservis
OOO NZSh TzMK
ZAO Yarpolymermash-Tatneft
JSC Nizhnekamsktekhuglerod
OOO Tatneft-Neftekhimsnab
OOO Torgovy Dom Kama
MAIN PRODUCTION
SERVICES
Tatneftesnab Department
OOO UPTZH dlya PPD
Tatar Geological Administration
Bugulma Mechanical Plant
Motor Transport Enterprise
OOO Tatneft-URS
OOO Torgovo-Tekhnichesky
Dom Tatneft
SCIENTIFIC &
TECHNICAL SUPPORT,
ORGANIZATIONAL
MAINTENANCE
TatNIPIneft R&D Institute
Normative Research Station
R&D Centre
OOO NTTz Tatneft
(in Skolkovo)
OOO NPTz Neftegazovye
Tekhnologiyi
JSC TatNIIneftemash
BRANCHES AND
REPRESENTATIVE OFFICES
Representative Offi ce in Moscow
Representative Offi ce in Iraq
CORPORATE CENTER FOR
ASSET AND PROPERTY
CONSOLIDATION
Lease Relationship Department
Representative Offi ce in Ukraine
OOO TATNEFT-Aktiv
Branch Offi ce in Libya
Branch Offi ce in Turkmenistan
OOO IPT Ideya Yugo-Vostok
OOO P-D Tatneft-
AlabugaSteklovolokno
* Affi liates
25
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
THE BASIC TRENDS OF OIL & GAS
INDUSTRY DEVELOPMENT
The crude oil production in Russia totalled 523.5 million tons in 2013, which is 1% more than in 2012
(518 million tons). The increase in oil production was the result of outpacing growth rates in the “new”
oil-bearing areas as compared with the rates of oil production decline in the “old” fi elds.
In the near term it is expected to have a continuing global demand for liquid hydrocarbons at the
average growth rate within 1.2%.
Russia continues to maintain the world’s top position in gas export and shares the 1-2 positions with
Saudi Arabia in oil export.
The Russian oil companies with the support of the Government of the Russian Federation have
established their three important directions for development of domestic oil production:
• Involvement in the production of hard-to-recover reserves;
• Increase of the share of recoverable hydrocarbons in offshore fi elds;
• Development of reserves in new fi elds in hard-to-reach regions.
The activities of the Government of the Russian Federation on tax incentives for companies in
development of hard-to-recover reserves in 2013 resulted in increase of the base of economically
recoverable oil reserves in Russia from 12 billion tons up to 20 billion tons.
The most important event of the industry became the closing of M&A transaction – between the
Russian company ROSNEFT and TNK-BP, which resulted in the emergence of the largest public oil
producing company in the world. It is expected that this event will infl uence the oil and gas sector of
Russia and the trend towards consolidation and integration in the fuel and energy sector will increase
and as a result the competition will be reduced.
In 2013 the Russian oil companies continued a large-scale modernization of refi neries aimed
at increasing the oil refi ning depth, increasing the yield of gasoline components and improving
fuel environmental standards. Realization of many projects is performed in accordance with the
quadripartite agreement concluded with the State in October 2011 and is subject to regular monitoring
by the Russian Government.
Despite the development of projects aimed at reducing the output of fuel oil and other dark petroleum
products in anticipation of increasing export duties on dark petroleum products, the reverse of the
general trend of fuel oil production failed: - in 2013 its production increased by 4.3% (from 74.4 to
77 million tons). In many ways, this trend is due to the introduction of primary refi ning capacities and
increase of primary distillation which increased by 7.3 million tonnes and reached 277.3 million tons
per year in 2013.
Among the major development trends of the Russian retail market of petroleum products are the
following:
• Ongoing consolidation of the retail networks by vertically integrated oil companies: construction of
new fi lling stations and acquisition of the existing independent operators;
• Strengthening the role of the State that resulted from the acquisition of independent vertically
integrated oil companies by the state-owned companies;
• Improved environmental quality requirements for petroleum products: ban on sales of fuels below
EURO-3 grade.
THE EVENTS OCCURRED IN THE REPORTING YEAR
THAT SIGNIFICANTLY AFFECTED THE INDUSTRY
In 2013, the activities of Company were carried out in the conditions of the industrial competition amid
slowing growth rate of the industrial production index in all the sectors of the Russian Federation as
compared to the previous year (0.3 % vs. 2.6 %), while the production index in mining operation slightly
increased (1.2 % vs. 1.1 %). In 2013, the refi ning industries developed more slowly (up 0.1%) than the
resource industries (up 0.3%).
The state budget was funded to 50% owing to the successful activity of the oil and gas production
complex in 2013. The growth of oil production in Russia achieved in 2013 (523.5 million tons, 101% of
2012) has been provided mainly by commissioning of new fi elds in the Eastern Siberia – Vankorskoye,
Talakanskoye and Verkhnechonskoye.
The appreciable quantity of tax innovations have been developed and adopted by the Government of
the Russian Federation in 2010-2013 years, however, the bulk of oil revenues are taken in the form of
taxes, which seriously hinders development of the innovation-oriented investment activity of oil-and-
gas companies.
The Law on the use of incentives in production of extra viscous oil came into force in 2012: its volume is
90% of the export duty for 10 years period. The resulting benefi t will be extended to dozens of licensed
areas of the Company, which opens for JSC TATNEFT a real prospect of growth of oil production and
involvement in development of previously uneconomic reserves, primarily in the Republic of Tatarstan.
In general the year of 2013 has proven to be challenging for the tire manufacturing complex of
JSC TATNEFT. There is an observed trend of the demand shift of C-price segment products (low-
price segment) in favor of the mid-price segment tires and premium tires in the Russian tire market.
Reduction in demand for C-price segment products primarily affected the domestic manufacturers of
tire products.
Whereas the long-term tire market prospects in all remain encouraging, the competition among the tire
manufacturers in the market of the Customs Union is increasing year by year: the foreign producers
increase their production capacities in Russia, and import duties under WTO commitments will
gradually decrease.
As in previous years the State played a signifi cant role in the thermal power industry. In 2013 there
was continued consolidation of business entities by state-owned companies; the Government of the
Russian Federation took measures to limit the growth of electricity rates for end consumers.
Further the energy demand growth rates in 2013 were signifi cantly lower than those planned by the
RF Government. The large-scale introduction of new and upgraded generating capacities against
an overall economic slowdown in the Russian Federation and Republic of Tajikistan led to increased
competition in the industry.
The social electricity rates for the population were introduced in sixteen regions. This action has the
potential to reduce electricity consumption in case of expanded experience of social rates.
26
27
1 The Federal Law No. 239-FZ dated 03.12.2012 introduced alterations in Article 3.1
of the RF Law No. 5003-1 “About Customs tariff” dated 21.05.1993.
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
The key event in the power generation market was the decision of the President of the Russian
Federation to freeze electricity and heat tariffs in 2014 and limit their growth by the infl ation rate in the
next two years. In 2013, the Russian government paid attention to the problem of non-payments on the
wholesale electricity market. To solve this problem the rules were adopted to simplify the procedure
of withdrawing a status of the guaranteed power supplier, and introduce a mechanism of fi nancial
guarantees of payments for electricity through accredited banks. The measures taken will help to
increase a fi scal discipline of the retail companies and reduce the overdue indebtedness of the utilities.
The world prices for hydrocarbons (especially oil) are the main external factor affecting the activity
of JSC TATNEFT. A possible slowdown in the growth of the global economy, as well as development
of the technologies for production of hard-to-recover reserves (bitumen, shales) and technologies
for alternative energy production will inevitably lead to the decline in oil demand, and as a result, the
decline in world prices.
Among the factors that can negatively affect the Russian oil and gas industry as a whole, is the ever-
increasing importance of rapidly improving technologies for extracting shale hydrocarbons (especially
oil), which could lead to an increase in their supply on the world energy market. The «Shale gas
revolution» has already led to a decrease in prices and reduction of gas imports to the U.S., have an
impact on the global energy market as a whole, causing the downward correction in commodity prices.
The main uncertainty factor for the oil refi ning block of the Company is a frequently changing legislation
of the Russian Federation in the fi eld of the export taxation of oil and petroleum products, as well
as the lack of long-term plans or concepts of the Russian Government on the tax law changing. The
annual changes to the taxation system make it diffi cult to effectively plan long-term investments in the
refi neries and reliable assessment of their prospective profi tability.
Also in recent years in Russia there is a tendency of the tax burden shift from the oil production to the
oil refi ning industry. At the same time it is not applicable in Russia to provide the investment protection
practice of the Russian investments against unplanned and unfavorable changes in the tax legislation,
and therefore these changes lead to worsening economic performances of the investment projects
which have been already launched in the oil refi ning business.
Consolidation of the retail networks by the state-owned vertically integrated oil companies (JSC
Rosneft and JSC GazpromNeft) can have the negative impact on the retail business of JSC TATNEFT.
After JSC Rosneft purchased JSC TNK-BP, the market share (by sales volume) of the state-owned
vertically integrated oil companies in the regions of JSC TATNEFT’s region of operation has increased
from 22% to 33%.
Another factor hindering the development of the tire business of JSC TATNEFT in the coming years can
become the commitments adopted by Russia under the framework of the World Trade Organization
(WTO) to mitigate a number of barriers on the supply of tires of foreign producers to the Russian
market. This, in particular, concerns the reduction of import duties for passenger car tires from the
current 20% to 10% by 2017, and import duties for truck and bus tires will be reduced from 15% to
10% by 2015. Therefore, it is expected a substantial growth of the foreign tire supply to the Russian tire
market from the Asian region, whereas the Chinese manufacturers are already ready to supply their
products to the car plants of Russia at prices below the production cost of some Russian automotive
producers.
THE FACTORS AFFECTING THE COMPETITIVENESS OF JSC TATNEFT AND ITS SUBSIDIARIES
AND THE BASIC STEPS OF THE COMPANY TO IMPROVE ITS FUTURE COMPETITIVENESS
In the segment of oil & gas production and sales the key competitive advantage of the Company is,
above all, the highest hydrocarbon resource endowment in the industry: the available resource base of
the Company allows it to maintain the current production volume for over 35 years.
Despite the signifi cant depletion of reserves, the Company year after year increases the oil production
volumes while maintaining a competitive cost level through the use of the advanced innovative
technologies to improve oil recovery. With the general industrial trend of decrease in oil production
rates, JSC TATNEFT is the only company among the Russian vertically integrated oil companies, which
managed to avoid the decline in production over recent years.
JSC TATNEFT is a recognized leader in the fi eld of development and application of EOR methods
for development of hard to recover reserves. Through the application of tertiary recovery methods
(enhanced oil recovery) Company produced 6 million 192 thousand tons of oil in 2013 or 23.7%
of the total production. Achievement of such performance indicators is ensured by the scientifi c-
technological support provided by the research and development divisions include in the Company
structure. The Company’s developments are praised at the governmental level. In 2013 the collective
of authors was awarded the Prize of the Russian Federation Government in the fi eld of science and
technology for the scientifi c work «Creation and industrial introduction of the integrated technology for
development of extra-viscous oil fi elds».
At present OOO NTC Tatneft runs three large projects related to the core production activity of
the Company: development of Microbial Enhanced Oil Recovery methods (MEOR) for carbonate
reservoirs, deep water processing for steam generation in extra viscous oil production, methods
for determining the viscosity of heavy oils by NMR – relaxation. In order to achieve the objectives
given to the R&D Centre there were three laboratories created and equipped with state-of-the-art
equipment. The following experts are involved for working on the projects: the specialists of OOO
NTC Tatneft, TatNIPIneft Petroleum Institute, as well as leading Russian scientifi c institutions: Institute
of Microbiology, RAS (Russian Academy of Sciences), University of Chemical Technology of Russia
(RKhTU), Kazan (Volga Region) Federal University (K(P)FU). Some foreign oil corporations (France,
Kazakhstan) are already interested in the research and developments conducted in the R&D Centre,
they are currently negotiating for possible cooperation.
The improvement of bituminous oil recovery technologies in the favorable conditions of the incentives
given by the Government of the Russian Federation for development of extra-viscous oilfi elds provides
the Company with a signifi cant competitive advantage in terms of expanding the resource base and
increasing the oil production volumes.
In order to ensure the production profi tability the Company realizes has the comprehensive programs
of the activities to improve the economic effi ciency of the production processes of production, energy-
and resource saving. JSC TATNEFT works on conservation of non-commercial producing wells which
allows to allocate the released investments between the most promising production targets.
Another considerable advantage of JSC TATNEFT is the geographical proximity of the oil production
center to the major regions of sales and refi ning of crude oil and petroleum products. The Company
has the lowest average tariff of the crude oil transportation to the European markets among the major
vertically integrated oil companies of Russia.
28
29
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
The key competitive advantage in the segment of oil & gas processing and petrochemical business is
the technological level of a new refi nery of the Company in Nizhnekamsk - TANECO built on the basis
of application of the advanced proven international technologies and highest environmental standards,
with a potential to achieve the processing depth up to 97% and production of high value added
products after completion of the construction and commissioning in full production capacity.
Through the construction of this Complex the Company provided an opportunity of processing of the oil
produced in the territory of the Republic of Tatarstan very close to the production sites that optimizes
the operating costs and further logistics of refi ned products to the own network of fi lling stations
located in the surrounding areas but not limited to. Another important factor of the TANECO Complex
effi ciency is an access to the Sever product pipeline, which will allow signifi cantly to reduce the costs of
diesel fuel transportation to the European markets.
The concept of the complex integrates the refi ning and petrochemical plants with the output of 18
kinds of products from European quality standards motor fuels to raw materials components for
production of a wide range of high-demand petrochemicals, including import substituting products
in compliance with the high environmental quality standards and perspective requirements of the
market. It is scheduled from 2014 to start the market supplies of EURO-5 diesel fuel, base oils of II
and III groups, jet fuel, and from 2017 it is planned to start market supplies of EURO-5 motor gasoline,
aromatic hydrocarbons, etc. With the completion of the construction of the fi rst stage of the refi nery
it is planned to completely stop the fuel oil production and to minimize the output of dark petroleum
products. In circumstances when from January 1, 2015 it is planned to increase the export duties for
dark petroleum products, this confi guration of the refi nery will allow to achieve high effi ciency of oil
refi ning.
Unlike the most Russian refi neries the TANECO Complex has the capacity to process the oil with high
sulfur content. The refi nery currently processes the oil with 1.8% sulfur content which is higher than in
the system of OJSC AK Transneft, where the sulfur content is 1.4-1.6% (western directions). Therefore,
the redirection of sour crude oil from the pipeline system of OJSC AK Transneft to the TANECO
refi ning facilities improves the quality of the Urals export oil, as well as the oil supplied to other Russian
refi neries.
In this the conditions of quality deterioration of the oil supplied to the Russian refi neries through the
pipeline system of OJSC AK Transneft due to the industry-wide quality of raw materials stocks, the
Company has the advantage to process the oil with high sulfur content, which will allow to adapt to new
conditions with minimum investments.
The retail business of the Company is formed by a growing distribution network of service fi lling
stations operating under the TATNEFT corporate brand in the territory of Russia, Byelorussia and
Ukraine. The competitive advantage of the retail networks of JSC TATNEFT is its widespread scale and
breadth covering virtually all the most attractive regions in Russia, fi rst of all, the Volga region and the
Central Federal District having high growth prospects and attractive retail margin. The retail networks
of JSC TATNEFT is the fourth-largest fuel retailer ranked after Lukoil, Rosneft, GazpromNeft in terms of
the number of fi lling stations.
The Company has formed the basic part of the retail network based on the prospects of strengthening
its own power refi ning block and output of high standard motor fuels. The completion of the TANECO
complex will fully satisfy the needs of the TATNEFT network of fi lling stations with high quality fuel of
EURO-5 standard, which will signifi cantly strengthen the competitive position of JSC TATNEFT in the
retail market.
Generally successful logistics location of fi lling stations in the urban infrastructure highways provides
a high potential of enhanced economic effi ciency of the retail network. In order to improve the
competitiveness of this business segment against the background of consolidation of the retail market
by the state vertically integrated oil companies and strengthening of the positions of LUKOIL and
other brands of retail networks, the Company with guaranteed fuel quality assurance will continue
to modernize the retail fi lling stations extend and improve the quality of non-fuel offers, increase
the service levels, develop the target loyalty programs. Along with this the work will be continued to
improve the internal effi ciency of the retail business – business process optimization, cost optimization,
automation systems improvement.
The Tire Business of the Company has several competitive advantages, such as the proximity to the
supply source of synthetic rubber, availability of the own carbon black production, a signifi cant scale
plants of passenger car, truck tires and solid metal core tires, availability of the up-to-date production
lines meeting the highest market requirements and technical requirements, as well as geographical
proximity to the large clusters of the car assembly plants and a developed dealer network.
In order to increase the competitiveness of the tire business the Company will continue the works
on modernization of the tire production, improvement of the production effi ciency, development of
new innovative tire products and introduction of higher requirements for quality characteristics of
the products. Particular attention will be focused on strengthening the sales and marketing system:
product brand management, product range development and price positioning in the light of the
necessity to respond quickly to changing marketing conditions.
The important aspect of the Company’s development concept of the business segment of refi ning and
sales of crude oil and petroleum products is the capacity building to replace oil export with the export
and supplies of high-quality petroleum products to the domestic market, which correspond to the
strategic objective of Russia.
Power generating assets of the Company allow to improve reliability and profi tability of heat and
power supply of the production enterprises, refi neries and petrochemical facilities of the Company
and promote the growth of competitiveness of the whole Group. In the future, the Company associates
additional operating revenue with development of this business segment.
The key realizable levers of improving the TANECO competitiveness are currently as follows: increasing
the capacity utilization of primary oil processing and secondary refi ning processes at the refi nery
complex, which will allow to increase the labour productivity of the enterprise, as well as the approved
program of energy saving and energy effi ciency of TANECO, which aims at cost optimization and
reduction of the processing cost.
The implementation of the project of the Nizhnekamsk CHP modernization is continued with the plan
of increasing its capacity from 380 to 730 MW. The commissioning of the state-of-the-art turbine units
will allow using the excess thermal energy for generation of additional electric power. The project is
expected to increase the Company’s revenue, increase profi ts, as well as solve the problem of electric
power shortage at the largest petrochemical plants in Nizhnekamsk, including TANECO Complex.
Besides the power generating companies of JSC TATNEFT implement the activities on improvement of
the heat and electric power reliability and cost reduction of the energy resources as part of the relevant
corporate programs.
30
31
ANNUAL REPORT 2013
KEY INVESTMENT PROJECT OF JSC TATNEFT ‒
CONSTRUCTION OF TANECO REFINERY
AND PETROCHEMICAL COMPLEX IN 2005-2013
JSC TATNEFT
2005
DECISION OF THE CONSTRUCTION
OF THE TANECO REFINERY
AND PETROCHEMICAL COMPLEX
PRINCIPAL OBJECTIVES:
• Heavy sulfur crude oil processing
• Replacement of crude oil export by the export of high-quality petroleum products
• Import substitution of petrochemical products
• Improvement of the environmental situation
THE PROJECT IS IMPLEMENTED IN COMPLIANCE WITH:
• The main provisions of the Energy Strategy of Russia for the period till 2030
and the General Plan of the oil industry development until 2020
• The Directive of the President of the Russian Federation to increase
the domestic oil refi ning
• The Development Program of the Petrochemical Complex of the Republic
of Tatarstan for the periods of 2004-2008, 2010-2014
• The Decision of the Board of the Directors of JSC TATNEFT
ANNUAL REPORT 2013
KEY INVESTMENT PROJECT OF JSC TATNEFT ‒
CONSTRUCTION OF TANECO REFINERY
AND PETROCHEMICAL COMPLEX IN 2005-2013
JSC TATNEFT
2011
COMLETION OF INTEGRATED
COMPREHENSIVE TESTING OF
THE FIRST START-UP COMPLEX
CONSISTING OF THE PROCESSING
UNITS: ATMOSPHERIC
DISTILLATION UNIT CDU-AVT-7
AND NAPHTHA STABILIZATION UNIT.
TANECO OBTAINED THE PERMITS
FOR COMMISSIONING OF THESE
FACILITIES.
COMPLETION OF THE SUPPLY STAGE OF TANECO
WITH ALL THE NECESSARY ENERGY RESOURCES
ANNUAL REPORT 2013
KEY INVESTMENT PROJECT OF JSC TATNEFT ‒
CONSTRUCTION OF TANECO REFINERY
AND PETROCHEMICAL COMPLEX IN 2005-2013
EXPLORING NEW HORIZONS
JSC TATNEFT
2013
HYDROCARBONS PROCESSING,
PRODUCTION AND SHIPMENT
OF PETROLEUM PRODUCTS,
PERFROMANCE OF WORKS
RELATED TO THE COMPLETION
OF CONSTRUCTION AND
COMMISSIONING OF THE PLANNED
FACILITIES OF STAGE 1A1
AND HYDROCRACKING UNIT.
THE CONCLUSION FOR MAIN CONSTRUCTION AND COMMISSIONING
FOR VISBREAKING AND SULFUR PRODUCTION UNITS WAS OBTAINED.
THE STATE REGISTRATION OF TANECO OWNERSHIP RIGHTS FOR
REAL ESTATE UNIT OF TOTAL VALUE OF RUR 27,8 BLN IN APRIL 2013.
• As part of the investment program implementation there were 9,5 bln rubles have
been used in OJSC TANECO in 2013
• Since the beginning of realization of the construction project of the Refi ning
and Petrochemical Complex the investments amounted to 224 bln rubles.
Assets of THE TATNEFT
GROUP at the end of 2013
EXPLORATION
AND PRODUCTION
281,384
MLN RUBLES
42%
CRUDE OIL PROCESSING
AND SALES OF CRUDE
OIL & PETROLEUM
PRODUCTS
259,879
MLN RUBLES
39%
OTHER BUSINESS
SEGMENTS
132,826
MLN RUBLES
19%
ABOUT THE COMPANY
JSC TATNEFT
ASSETS OF THE TATNEFT GROUP
The consolidated assets value of Tatneft Group amounted to 674 billion rubles at the end of 2013.
The main shares in the structure of the assets are formed by the following business segments:
exploration and production accounts for 42%, crude oil processing and sales of crude
oil & petroleum products account for 39%, providing the principal intensive growth
of the consolidated assets. From 2005 (start of the construction of the TANECO Complex)
the consolidated assets increased by 2.4 times.
2013
674
BLN RUBLES
(ACCORDING TO IFRS)
260
BLN RUBLES
39%
TOTAL
ASSETS
OF TATNEFT
GROUP
CRUDE OIL
PROCESSING AND
SALES OF CRUDE
OIL & PETROLEUM
PRODUCTS
282
BLN RUBLES
(ACCORDING
TO US GAAP)
2005
5%
13
BLN RUBLES
39
Revenue of THE TATNEFT
GROUP in 2013
EXPLORATION
AND PRODUCTION
206,114
MLN RUBLES
45%
CRUDE OIL PROCESSING
AND SALES OF CRUDE
OIL & PETROLEUM
PRODUCTS
198,230
MLN RUBLES
44%
OTHER BUSINESS
SEGMENTS
50,639
MLN RUBLES
11%
ABOUT THE COMPANY
JSC TATNEFT
REVENUE OF THE TATNEFT GROUP
The Company implements a strategy for increasing the production and sales volumes of high
quality competitive fi nished products, through development of segments of refi ning, petrochemicals,
thermal energy, as well as tire manufacturing and retail sales of petroleum products. There was
qualitative redistribution of revenues by the business segments. By the end of 2013 the proportion
of shares of “the exploration and production” and “crude oil processing and sales of crude oil
and petroleum products” was 45% and 44% respectively of the total revenue.
2013
455
BLN RUBLES
(ACCORDING TO IFRS)
198
BLN RUBLES
44%
TOTAL
REVENUE
OF TATNEFT
GROUP
300
BLN RUBLES
(ACCORDING TO US GAAP)
2005
78
BLN RUBLES
26%
CRUDE OIL
PROCESSING AND
SALES OF CRUDE
OIL & PETROLEUM
PRODUCTS
41
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ABOUT THE COMPANY
JSC TATNEFT
DYNAMICS OF OIL PRODUCTION-OUTPUT
OF PETROLEUM PRODUCTS RATIO OF TATNEFT GROUP
2010
2011
2012
2013
OIL
PRODUCTION
26.1
MLN TONS
OUTPUT OF PETROLEUM
PRODUCTS
0.2
MLN TONS
OIL
PRODUCTION
26.2
MLN TONS
OUTPUT OF PETROLEUM
PRODUCTS
2.3
MLN TONS
OIL
PRODUCTION
26.3
MLN TONS
OUTPUT OF PETROLEUM
PRODUCTS
7.2
MLN TONS
OIL
PRODUCTION
26.4
MLN TONS
OUTPUT OF PETROLEUM
PRODUCTS
8.2
MLN TONS
0.8% 8.8%
OCTOBER 26, 2010 - THE OIL INTAKE
MADE AND START-UP OF CDU/VDU-7
IN COMMISSIONING MODE
NOVEMBER 01, 2011 – COMPLETION OF THE
COMPREHENSIVE TESTING OF CDU-AVT-7
AND NAPHTHA STABILIZATION UNITS
27.4% 31.0%
IN 2012 THE COMPLEX REACHED
ITS DESIGNED CAPACITY –
7 MILLION TONS PER YEAR
TANECO PROCESSED 7,621,631 TONS
OF PETROLEUM FEEDSTOCKS.
THE QUANTITY OF PROCESSED OIL –
108.8 % OF THE DESIGN CAPACITY
42
43
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
RODUCTION ACTIVITY
JSC TATNEFT
RODUCTION ACTIVITY
OIL & GAS EXPLORATION AND PRODUCTION
The Company provides for a steady increase of the production level. In 2013 JSC TATNEFT increased
the crude oil production by 0.4% as compared with 2012 and produced 26.107 million tons of crude oil.
707 thousand tons of crude oil produced over the plan.
The maximum level of crude oil production was achieved over the last 20 years. The level of 2012
was exceeded by 102 thousand tons. In general, the oil production in the Republic increased
to 32 million 869 thousand tons.
Savings on the reduced
energy consumption
and rational use of
material and natural
resources amounted
to 4.7 billion rubles
based on the results
of 2013. These
funds were spent to
compensate additional
costs connected
with maintaining the
economic oil production
of the Company in the
conditions of high fi eld
depletion.
CRUDE OIL PRODUCTION FROM THE LARGEST FIELDS IN 2013
(THOUSAND TONS)
NAME
Romashkinskoye
Novo-Yelkhovskoye
Bavlinskoye
Bondyuzhskoe
Pervomaiskoye
Sabanchinskoye
15,228
2,539
1,085
288
359
538
The average production rate of producing wells of JSC TATNEFT was 3.8 tons/day for 2013.
The aggregate oil production of TATNEFT Group amounted to 26.419 million tons in 2013
(26.307 million tons of oil in 2012). Incremental oil production was provided by geological
and technical activities.
CRUDE OIL PRODUCTION BY JSC TATNEFT GROUP OF COMPANIES
(MLN TONS)
COMPANIES
JSC TATNEFT
Oil companies in the Russian Federation controlled
companies by JSC TATNEFT
2011
25.928
2012
26.005
2013
26.107
0.266
0.302
0.312
JSC TATNEFT Group of companies
26.194
26.307
26.419
The Company aims to provide oil reserves increment in volumes compensating the current oil production.
According to Miller & Lents evaluation proven oil reserves amounted to 847,346 million tons as of the
beginning of 2014.
As of 01.01.2014 jointly with nine subsidiaries operating in the territory of the Russian Federation
possessed 97 licenses for exploration and development of hydrocarbon deposits.
The bulk of the current crude oil production is accounted by six major fi elds: Romashkinskoye,
Novo-Yelkhovskoye, Bavlinskoye, Bondyuzhskoe, Pervomaiskoye and Sabanchinskoye.
In 2013 deep drilling was introduced in 8 structures in the Republic of Tatarstan, 4 structures in Samara
region, 1 structure in Orenburg region and 1 structure in the Republic of Kalmykia.
KEY OPERATING PERFORMANCE INDICATORS FOR 2013
KEY PERFORMANCE INDICATORS
Oil production volume of JSC TATNEFT
Associated gas production volume
Liquefied Petroleum Gas production & delivery
Total meterage drilled for JSC TATNEFT, including
Production drilling by JSC TATNEFT
Exploration drilling by JSC TATNEFT
UOM
million tons
million cub.m
thousand tons
thousand m
thousand m
2013
26.107
864.8
275.3
450.147
430.4
19.747
33 structures in the Republic of Tatarstan, 4 structures in Samara region and 4 structures in Orenburg
region were prepared for deep drilling.
The main volumes of geological exploration works carried out in the Russian Federation licensed
territories in Tatarstan, Orenburg, Samara and Ulyanovsk regions as well as in the Republic of Kalmykia,
and Nenets Autonomous Okrug.
There are 9 subsidiaries having 29 license areas with participation of JSC TATNEFT capital in the Russian
Federation
23.7
%
Of the total oil production
was received through
the application of enhanced
oil recovery methods
(EOR) in 2013
44
45
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
RODUCTION ACTIVITY
JSC TATNEFT
CONSTRUCTION OF WELLS AND GEOLOGICAL
EXPLORATION TARGETS
289 producing wells were drilled and completed in 2013. 228 wells
were brought into operation after drilling with oil production rate
9.3 tons per day.
PRODUCING WELLS STOCK AS OF JANUARY 01, 2014
STOCK CATEGORY
Active producing stock
Idle producing stock
Operating producing stock
Producing stock in completion stage
and waiting for completion
NUMBER OF WELLS
20,257
2,023
22,289
9
OIL AND GAS PRODUCTION
UTSIDE TATARSTAN
Outside the Republic of Tatarstan JSC TATNEFT has prospecting
licenses for exploration and fi eld development of oil, gas and
condensate in the Samara and Orenburg regions, Nenets Autono-
mous Okrug and the Republic of Kalmykia. In these regions 21
oil fi elds were in operation in 2013. Oil production is in 104 wells,
including 98 wells in the Samara region and 6 wells in the Orenburg
region.
In the Samara region the previously drilled stock was equipped for
production and new wells were drilled. 18 new wells were brought
into production. The average daily production rate of new drilled
wells amounted to 8 tons/day.
OIL AND GAS PRODUCTION OUTSIDE
THE RUSSIAN FEDERATION
JSC TATNEFT and State Company «Turkmenneft» have signed the
service contract in 2010 for to enhanced oil recovery and crude
oil production in the Goturdepe fi eld in Turkmenistan. The work
schedule of the contract execution have been developed and
approved. Anticipated incremental oil production for the full-term
of the Contract is 321 thousand tons. Currently, the certifi cate
of JSC TATNEFT Branch registration in Turkmenistan has been
received. A residential township for workers of the JSC TATNEFT
Branch has been built. The budget of the JSC TATNEFT Branch in
Turkmenistan has been approved for 2014.Works are started on
a possible contract extension with subsequent conclusion of the
Supplementary Agreement to expand JSC TATNEFT activities in
Turkmenistan.
Performance of exploration programs has been suspended in the
territory of JSC TATNEFT license blocks in Libya and Syria due to the
political situation. On February 7, 2013 the force majeure period for
implementation of contractual obligations in Libya was announced to
be terminated. Currently, the negotiations are underway to resume
the works of the JSC Tatneft Branch in Libya.
OPERATIONS IN THE EXTRA-VISCOUS
OIL FIELDS
In 2013 the pilot operations were carried out in the Sheshminsky
horizon of the Ashalchi EVO fi eld within the framework of the
Company’s plans for development of extra-viscous oil fi elds.
56 horizontal wells were drilled in the Ashalchi EVO fi eld, including
5 single horizontal wells for huff-and-puff technology. 19 wells were
completed in 2013. 19 well pairs are in operation at present.
The daily oil production reached 480 tons by the end of the year.
145,616 thousand tons of oil is produced in 2013 which is 2 times
more than in the previous year. EVO total production from the
beginning of commercial development amounted to 325,683
thousand tons.
Achievement of these results is supported by a broad range of
administrative and technical measures on setting-up additional
capacities for water and gas supply, steam generation, EVO
production and processing, produced water injection. The boiler
house was reconstructed with the increased capacity up to 150 tons
of steam per hour, a new gas pipeline and water pipeline were put
into operation.
ENHANCEMENT OF OIL & GAS RECOVERY
AND ENERGY SAVING
The Company implements targeted program activities aimed at
enhancing effectiveness of performance indicators and monitoring
production profi tability through application of modern technologies
for optimization of the wells stock and fi eld development systems.
Improving the data processing performance in the search of
new deposits is provided by new technologies applied along
with traditional seismic methods. Prediction of oil prospective
targets is made with application of the artifi cial intelligence
method, identifi cation of prospective targets with application of
fi eld geophysics and geochemistry using a complex probability
parameter for defi ning oil bearing prospectivity. Passive adsorption
of hydrocarbons; low-frequency seismic sounding; geological and
geophysical technology for optimization of well drilling location
selection; electromagnetic sounding and a new 3D Stratimegic
software package for processing 3D seismic data are used in
application of geochemical method of oil and gas detection. NMR-
tomography sounding method is applied for identifi cation of extra-
viscous oil saturated layers at small depths.
53 technologies were applied in drilling in 2013. The most effective
technologies as related to cementing quality improvement are
silicate-based mud treatment in the pay interval; application of
grade G cement, collar cementing tools; and as related to high oil
production rates – construction of horizontal and multilateral wells.
46
The technology of slim-hole drilling proved to be effective. 38 slim
holes were drilled in JSC TATNEFT in 2013, among them 36 wells
were put on oil production (produced oil volume amounted to 44.726
thousand tons). The average production rate was 6.2 tons per day.
The total slim holes stock was 296 wells.
Application of advanced methods of enhanced oil recovery
provided for the Company’s incremental production of
6,192.5 thousand tons. The share of oil produced using EOR
methods accounted for 23.7% of the total oil production in 2013.
59 horizontal holes and12 multilateral wells were drilled in this year,
oil production on these wells amounted to 87.2 thousand tons.
The total number of horizontal wells drilled from the beginning of
activities amounted to 613 wells and the total number of multilateral
wells amounted to104 wells.
TATNEFT Company actively employs the dual completion
technology and oil production from two or several layers
of one well. The average increase in oil production per 1 well
achieved 4.4 tons per day resulting from dual completion
production/injection, and 1.9 tons per day resulting from dual
injection.
CRUDE OIL PRODUCTION OF JSC TATNEFT
Including through
tertiary EOR
6.192
MLN TONS
(23.7%)
DUAL INJECTION IN PAY BEDS
Total
26.107
MLN TONS
1,350
1,150
950
750
550
350
150
0
Cumulative oil production (thousand tons)
Well stock
0
7
1
7
2
1
3
0
61
6
01
1
22
1
6
8
8
1
8
5
2
1
6
6
1
3
5
2
4
4
8
3
6
2
2
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
7
4
1
,
1
47
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
RODUCTION ACTIVITY
JSC TATNEFT
CRUDE OIL PROCESSING
AND SALES OF CRUDE
OIL & PETROLEUM PRODUCTS
The Company develops the block of crude oil processing and sales
of crude oil and petroleum products, concentrating its efforts on
creation of its own refi ning base by the construction of the TANECO
Complex of the refi ning and petrochemical plants and modernization
of the refi nery facilities of «Yelkhovneft» in order to increase the
production and sales volumes of highly competitive fi nished
products.
The structure of the production facilities of the TANECO Complex
consists of fi ve core production units as of the end of 2013:
1. Production of primary oil refi ning.
2. Production of base oils and hydrocracking.
3. Production of elementary sulfur.
4. Production of commercial and raw materials.
5. Production unit of the industrial wastewater treatment,
energy supply, water supply and sewage facilities.
Production of primary oil refi ning
• The CDU/VDU-7 unit is designed for crude oil processing of
Devonian and Carboniferous and the blended crudes thereof to
get the desired petroleum products and semi-fi nished products,
which are commercial products or raw materials for other
installations. The design capacity of CDU-VDU-7 is 7 million tons of
oil per year.
• The Naphtha Stabilization unit is designed for stabilization of
straight-run naphtha delivered from atmospheric distillation unit of
CDU-VDU-7. The design capacity of the naphtha stabilization unit
is 1.1 million tons of unstabilized naphtha per year.
• The Visbreaking unit is designed for processing of vacuum residue
delivered from CDU-VDU-7 by primary thermal cracking. The
design capacity of the visbreaking unit is 2.4 million tons of vacuum
residue per year.
Production of base oils and hydrocracking
• The Integrated Hydrocracking plant is designed for hydrocracking
of sulfur-containing products (a mixture of vacuum gasoil and
heavy coker gasoil) to produce gasoline, kerosene and diesel
fractions purifi ed from sulfur and nitrogen compounds, followed by
separation of the products obtained in the fractionation sections
and production of lighter fractions.
• The design capacity is 2.9 million tons of raw materials per year.
The base oil production unit is designed for output of base oils
from the unconverted residue of the hydrocracker. The design
capacity is 250 thousand tons of raw materials per year.
• Three processing units for hydrogen production: two hydrogen
production units of 100 and 22 tons per year capacity and a
treatment unit of hydrogen-containing gas of 7 tons per year
capacity. The production is intended to produce hydrogen of
99.9% purity of natural gas and hydrogen-containing gases.
48
Combined Sulfur Recovery Unit
• The Dehydration & Amine Regeneration unit is designed for amine
treatment and LPG dehydration, amine treatment of fuel gas
and hydrogen-containing gas and hydrogen sulphide removal
by MDEA solution. The amine saturated with hydrogen sulfi de
is regenerated with sulfurous gas release and again routed to
purifi cation of gas fl ows in a closed cycle.
• The Sour Water Stripper is designed for hydrogen sulfi de stripping
from sour water delivered the refi nery installations. The stripped
water is used by the Complex consumers for balance-of-plant
needs, thus reducing the consumption of fresh river water.
• The Sulfur recovery plant is designed for processing of sulfurous
gas by thermal catalytic Claus process, with production of
elementary sulfur and its transfer into the sulfur pellets commodity
form. The design capacity of the elementary sulfur recovery unit is
278.8 thousand tons of sulfur per year.
• The storage and liquid sulfur granulation facility is designed for
block sulfur production, transportation and loading-unloading
operations.
• The sulfur storage and discharge facility is designed for sulfur
pellets bagging in big bags of 1000 kg and/or 50 kg bags,
shipment by road and rail transport.
Operations of reception, storage of crude oil and petroleum
products, pumping of raw materials and shipment of petroleum
products are provided by the own infrastructure of the Complex.
The TANECO Complex provides a major share of the Company’s
refi ning at the 108.8% level of capacity utilization in 2013. The fi xed
run of CDU / VDU -7, naphtha stabilization and visbreaking units
at 115% of CDU / VDU -7 plant capacity allowed to increase the
throughput of processed oil to 115% of design capacity.
The refi nery facilities of NGDU Yelkhovneft were provided with the
steady material supply and high load of the production capacities
in 2013. Within the framework of modernization they replaced the
catalyst of the hydrotreating unit which provided the change-over to
output of EURO-5 diesel fuel.
Based on the results of 2013 the 180.4 tons of the petroleum
products were sold, sales revenue amounted to 2.87 billion rubles
with the cost of products sold - 2.65 billion rubles.
GAS PROCESSING FACILITIES
In 2013 the gas processing facilities of Tatneftegazpererabotka
Administration collected 864.8 mln. m3 of associated petroleum gas,
which was 21.2 mln. m3 more than in 2012.
Utilization coeffi cient of associated gas for the reporting period
amounted to 95.1 %.
In 2013 there was about 773.9 mln. m3 of associated gas accepted
for processing, that was 14.2 mln. m3 more than the associated gas
throughput in the same period of the previous year. Processing of
Liquefi ed Petroleum Gas from UKPN amounted to 276.0 thousand
tons that was 9.6 thousand tons less than in 2012, which was
connected with the growth of gas processing volumes.
TARGET INDICATORS OF THE COMPLEX DEVELOPMENT
Achievement of the best technological parameters of the oil
refi ning depth, extraction of light petroleum products
Ensuring compliance of the commercial products with
the requirements of the modern world standards and statutory
Russian quality standards and technical regulations;
Minimization or complete exclusion of semi-fi nished
petroleum products;
Ensuring minimum dependence on supplies of auxiliary raw
materials required for the production of high-quality
commercial petroleum products
Ensuring optimum energy independence of the enterprise.
OUTPUT OF FINISHED PRODUCTS BY
TATNEFTEGAZPERERABOTKA ADMINISTRATION
IN 2012-2013
TARGET
INDICATORS
OF THE COMPLEX
DEVELOPMENT
OUTPUT OF PETROLEUM PRODUCTS IN 2013
(TONS)
PRODUCT DESCRIPTION
TANECO COMPLEX
2013
Total volume of crude oil refining
7,621,631
Output of core products:
Straight-run gasoline
Stable gas naphta
Middle distillates
Vacuum gas oil
Fuel oil.
Mazut 100
Sulfur
Output of light petroleum products, %
PRODUCT
DESCRIPTION
Stripped gas
561,975
536,544
2,344,146
1,926,530
1,912,558
7,684
48.16
Liquid products, total
Liquefied gas, including:
propane fraction
isobutane fraction
normal butane fraction
isopentane fraction
stable gas naphtha
Ethane
Output of desired petroleum products, %
73.4
Sulfur
REFINERY OF NPU YELKHOVNEFT
Total output of main products
Diesel fuel
Gasoline
Other middle distillates
Sulfur
Straight-run gasoline
Nitrogen
Oxygen
179,306
86,787
81,539
10,582
373
25
UOM
million m3
thousand tons
thousand tons
thousand tons
thousand tons
thousand tons
thousand tons
thousand tons
thousand tons
thousand tons
thousand m3
thousand m3
OUTPUT,
2013
275.4
642.8
414.4
245.7
46.3
122.5
22.4
205.9
160.7
4.9
804.8
306.8
49
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
RODUCTION ACTIVITY
JSC TATNEFT
SUPPLIES OF CRUDE OIL
AND OIL-AND-GAS PRODUCTS
SUPPLY DISTRIBUTION OF JSC TATNEFT
RESOURCES BY BASIC LINES OF SHIPMENT
IN 2012-2013
(THOUSAND
TONS)
In 2013 there were 25,638.2 thousand tons of resources treated
and delivered to the transportation system, including the balance
25,762.6 thousand tons, which was by 166.1 thousand tons or 0.7%
more than in 2012.
NAME
2012
2013
Export to far-abroad countries
11,759.6
11,275.4
Export to near-abroad countries
618.1
1,053.8
The oil crude produced by the Company was sold in three markets:
the Russian domestic market, far-abroad and near abroad countries.
One of the top delivery priorities in terms of effi ciency remains the oil
export to far-abroad countries, which amounted to 43.8% of the total
oil sales of the Company. In the domestic market the oil was supplied
to the Russian refi neries, the bulk was delivered to the refi neries of
TANECO and TAIF-NK to ensure raw materials input and optimal
loading of the production facilities.
Oil refineries in Russia:
including:
JSC TAIF-NK Refinery
OJSC TANECO
JSC Moscow Refinery
ZAO Ryazan Refinery
JSC Slavneft-YANOS
JSC LUKOIL-NORSI
In addition to its own resources the Company sold 1,106.0 thousand
tons of oil to the independent oil companies, including: for export
(far-abroad and near-abroad countries) - 734.7 thousand tons;
domestic market - 371.3 thousand tons.
JSC Novoshakhtinsk Refinery
Other supplies
13,184.7
13,408.9
5,789.0
7,000.0
5,367.0
7,674.8
50.0
99.9
79.9
99.3
64.1
2.6
81.0
23.5
–
173.4
52.7
36.4
Outside the Republic of Tatarstan the resources of oil-production
enterprises with participation of JSC TATNEFT in Orenburg region
were sold in the amount of 16.9 thousand tons by-passing the AK
Transneft system in 2013.
The following volumes of gas products were shipped to the
enterprise of the gas-petrochemical complex of the Republic of
Tatarstan in 2013:
24.5 tons of liquefi ed gas was delivered for the needs of the
population.
CRUDE OIL SUPPLY OF JSC TATNEFT
PRODUCT DESCRIPTION
THOUSAND TONS
Isobutane
NGL from UTNGP
Ethane
LPG from OJSC TANECO
Propane
21.2
6.2
160.7
104.7
11.8
SALES OF PETROLEUM PRODUCTS
OF THE TANECO REFINERY
(THOUSAND
TONS)
PRODUCT DESCRIPTION
Liquefied Petroleum Gas
Straight-run gasoline
Stable gas naphtha
Visbreaking naphtha
Middle distillates
Vacuum gas oil
Furnace oil
Granulated sulfur
EXPORT (NEAR-
ABROAD, FAR-ABROAD
COUNTRIES)
DOMESTIC
MARKET
–
104.7
564.7
522.6
83.5
–
–
–
144.4
2,250.2
1,943.4
1,759.8
5.0
–
229.5
3.2
SUPPLIES OF PETROLEUM PRODUCTS
OF THE TANECO COMPLEX
Export (near abroad & far abroad
countries) (66.1%)
Domestic market (33.9%)
Supply to the domestic market
(52.11%)
Export to near-abroad countries
(4.09%)
Export to far-abroad countries
(43.80%)
50
RETAIL NETWORK OF FILLING
STATION COMPLEXES
The development program of the own retail network is realized by the
construction of new fi lling stations, acquisition, modernization and
reconstruction of the current fi ling stations.
The TATNEFT retail network of fi lling stations sells all the grades of
gasoline and diesel fuels.
Guaranteed quality of the petroleum products at JSC TATNEFT fi lling
stations is ensured by the multilevel control system. To keeping in
pace with the current trend of vehicle conversion to gas fuel the Com-
pany annually put into operation 10-15 gas units or install additional
gas station dispensers at the gas fi lling stations.
The modern technologies and equipment (double-walled tanks,
imported fuel dispensers, automated systems for parameter measure-
ment of light petroleum products etc.) are applied during construction
and reconstruction of fi lling station. Automatic fi lling stations are also
put into operation.
Costs reduction of the retail distribution network is provided through
introduction of energy-saving technologies at the retail network facili-
ties. The pilot projects of vapor recovery units (VRU) are implemented
the fi lling stations with application of engineering developments
that will allow reducing the loss of petroleum products as a result of
«natural in and out breathing» in the tanks and signifi cantly improve the
environmental friendliness of the fi lling stations.
The TATNEFT retail network of fi lling stations complexes includes
648 stations in the territory of the Russian Federation and CIS
countries, 524 of them are located in Russia, 114 - in Ukraine,
10 - in Byelorussia.
SALES OF OIL-AND-GAS PRODUCTS
THROUGH THE FILLING STATIONS NETWORK
DESCRIPTION
TONS
THOUS.RUBLES*
2013
Russian Federation,
including:
oil products
gas products
Ukraine, including:
oil products
gas products
Byelorussia, including
oil products
gas products
Total
* including taxes
1,590,321
57,755,966
1,454,099
55,161,430
136,222
2,594,536
61,796
53,068
8,728
12,367
11,668
699
2,965,557
2,622,655
342,902
425,215
403,129
22,086
1,664,484
61,146,739
51
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
RODUCTION ACTIVITY
JSC TATNEFT
PETROCHEMICALS PRODUCTION
The segment of the petrochemical production activity of the
Company is formed by «Tatneft-Neftekhim» Management Company
and a complex of enterprises: «Nizhnekamskshina», Nizhnekamsk
Truck Tire Factory, Nizhnekamsk SSC Tire Factory, «Tatneft -
Neftekhimsnab», «Nizhnekamsktekhuglerod», Nizhnekamsk
Mechanical Plant, «Yarpolimermash - Tatneft», «Energoshinservis»,
«Kama» Research & Development Center and «Kama» Trading
House.
KEY PERFORMANCE INDICATORS OF PETROCHEMICAL
COMPLEX ENTERPRISES OF JSC TATNEFT
PERFORMANCE INDICATORS
Total Tire Production, thousand pieces
Carbon black output, thousand tons
Proceeds from sales, RUR bln
2013
12,511.52
108.9
33.7
The Tire Manufacturing Complex of the Company covers 26% of
this Russian industry segment in terms of production volumes; it is a
supplier of the domestic car manufacturers KAMAZ, GAS, AVTOVAZ,
as well as the car assembly plants of Volkswagen, Fiat and other
foreign manufacturers.
JSC “Nizhnekamskshina” completed the project realization on
increased production capacities of KAMA EURO and Viatti up to 1.3
mln pieces per year In 2013. The Nizhnekamsk Truck Tire Factory
reconstructed the electric drive of the MX-7 rubber mixing line.
The KAMA Scientifi c & Technological Centre developed 97 designs
of new tire sizes. The enterprise mastered the serial production of
30 sizes of tires. In 2014 it is planned to master the production of
78 tires.
One of the top priorities of JSC TATNEFT tire business is an
environmental responsibility and environmental protection.
The operating effi ciency in the fi eld of environmental safety of the
production is certifi ed by the results of the inspection environmental
audits carried out in all the three tire plants: “Nizhnekamskshina»,
Nizhnekamsk Truck Tire Factory, Nizhnekamsk SSC Tire Factory,
THERMOELECTRIC POWER
INDUSTRY
NIZHNEKAMSK COMBINED HEAT & POWER PLANT (CHP)
The Nizhnekamsk Combined Heat & Power Plant is one of the largest
generating companies of electric and thermal energy in the Republic
of Tatarstan. The current installed capacity is 380 MW for electricity
and 1,580 Gcal/h for heat.
The thermal energy consumers are as follows: JSC
«Nizhnekamskneftekhim», JSC TANECO and the city of
Nizhnekamsk.
The Nizhnekamsk CHP produced 1,323 million kWh of electric power
in 2013.
The internal electric power consumption amounted to 169 million
kWh, while the power supply network released 1,154 million kWh of
electric power.
The thermal energy was sold in the amount of 4,140 thousand Gcal
in 2013. The total delivery of thermal energy increased by 15% as
compared to 2012.
The enterprise achieved effective results on specifi c indicators in
2013:
• specifi c fuel consumption for the supplied electricity was 288.3 g/
kWh, which was 1.3 g/kWh below the standard;
• specifi c fuel consumption for the supplied heat power was 140.4
kg/Gcal, which was 0.7 kg/Gcal below the standard.
The enterprise saved 2,740 TFOE owing to reduction of specifi c fuel
consumption against the regulatory values of 2013.
Proceeds from sales of the core products amounted to 4,145.5
million rubles in 2013. Gross proceeds of thermal power sales
amounted to 2,546.6 million rubles (61.4 % of core products sales),
including:
• sales proceeds of thermal power – 2,293.1 million rubles.
• sales proceeds of heat-carrying agent – 253.5 million rubles.
Gross sales of electric energy and power exercised at the wholesale
electricity and power market totalled 1,598.9 million rubles (38.6 %
of the core product sales) including sales of the purchased electric
power for securing execution of free contracts. Including:
• sales proceeds of electric energy —1,426.4 million rubles,
• sales proceeds of power —172.5 million rubles.
In 2013 OOO “Nizhnekamsk CHP” supplied to OJSC TANECO over
13 ata (technical atmosphere) steam – 578,126 Gcal, 140 ata
(technical atmosphere) steam – 518,953 Gcal.
ALMETYEVSK HEAT SUPPLY NETWORKS (APTS)
The thermal power output amounted to 714.3 thousand Gcal as
of the end of 2013. Sales of thermal power amounted to 603.0
thousand Gcal.
To improve the energy security the enterprise plans to commission
independent power supply units (mini heat & power plants or co-
generating plants) which will allow to improve energy effi ciency and
reduce the rise in tariffs of thermal energy.
In order to reduce thermal energy costs, reduce energy losses the
frequency-regulated drives are installed on the draft equipment
and pumping systems, and non-metallic pipes are actively applied
to increase the service life and reduce energy losses in case of
ruptures.
In 2013 the air emissions were reduced from 1,115 tons to 867 tons.
The current installed capacity is 537.79 Gcal/h.
In the current year:
• output of thermal energy – 714.3 thousand Gcal,
• supply of thermal energy to the network amounted to – 694.1
thousand Gcal,
• specifi c fuel consumption per supplied thermal energy amounted
to 161.52 kg/ Gcal.
Pursuant to Federal Law No.261-FZ dtd 11.11.2009 «On Energy
Saving and Improving Energy Effi ciency» and for the purpose of
implementing the uniform technological policy in the fi eld of energy
effi ciency improvement of energy resources utilization the energy
saving and energy effi ciency improving program for 2010-2013
years was developed at OJSC «APTS». Business event costs of this
program amounted to 7.7 million rubles in 2013. The economic
effect of the realized program totalled to 10.8 million rubles.
THE REVENUE MIX FROM SALES OF CORE PRODUCTS OF THE NIZHNEKAMSK CHP
Gross sales of electric
energy and power
1,598.9
million rubles
(38.6%)
Sales proceeds of
heat-carrying agent
253.5
million rubles
(9.95%)
Sales proceeds
of thermal power
2,293.1
million rubles
(90.05%)
Sales proceeds
of power
172.5
million rubles
(10.78%)
Sales proceeds
of electric energy
1,426.4
million rubles
(89.21%)
Gross proceeds
of thermal power sales
2,546.6
million rubles
(61.4%)
52
53
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CORPORATE
MANAGEMENT
THE COMPANY’S MANAGEMENT SYSTEM
The organizational structure of the Company integrates business-processes, resources and production
facilities for oil exploration and production, refi ning, petrochemicals production, heat and power
generation, as well as crude oil and petroleum products sale, providing for diversifi cation and qualitative
interaction of all business segments from recovering the reserves to obtaining an sale of desired
petrochemical products.
The Company carries out its business in a capital-intensive industry of subsoil usage and reproduction
of energy resources requiring greater corporate responsibility in all areas of activity, including social
aspects.
The Company follows the highest standards of corporate management and consistently introduces all
newly generated requirements and recommendations on corporate management, including the ones
in the frame conditions integrating the Russian equity capital in the international fi nancial and stock
markets.
The Company’s corporate management is based on the constructive interaction of shareholders, the
Board of Directors and executive bodies and are supported by appropriate distribution mechanisms of
competence, authority and responsibility among the responsible offi cials.
The management principles are defi ned by the Articles of JSC TATNEFT, as well as regulated by the
internal documents: Provision on the General Meeting of the Company’s Shareholders, Provision on the
Board of Directors, Provision on the Management Board, Provision on the General Director, Provision
on the Audit Commission and Provisions on the Committees of the Board of Directors, as well as the
Corporate Governance Code.
The sole executive body (Chief Executive Offi cer) of the Company is General Director, who is. The colle-
gial executive body of the Company is the Management Board headed by General Director. The General
Director and the Management Board are accountable to the Board of Directors and the General Meeting
of Shareholders. The Control of fi nancial and economic activities of the Company is performed by the
Audit Commission.
There are Committees under the Board of Directors on Corporate Management, Human Resources and
Remuneration, Audit Committee and Information Disclosure. The Board of Directors also established
the Insider Information Protection Committee in 2012. The Committees carry out their activities in
close cooperation with the Board of Directors, Director General and the Company’s executive bodies:
Management Board, Executive Directorate, Internal Audit, Department, Corporate Control and other
departments and divisions of the Company.
JSC TATNEFT GROUP MANAGEMENT
JSC TATNEFT is a parent company of TATNEFT Group. Organization of the management of subsidiaries
and affi liated companies is carried out with prevailing participation in the authorized and other capitals
of the mentioned companies through managing bodies of the subsidiary with an appropriate indication
in the founding documents; the Management Companies within the Group through the conclusion of
agreements between these companies and other economic entities - members of the Group on the
transfer of the Executive Management Board functions to the Management Companies, as well as
through other ways provided by the legislation of the Russian Federation subject to equitable interests of
all participants of the Group. The planning and control of business processes by segment of activities are
provided for through uniform standards and regulations.
The Company publishes annual and quarterly consolidated fi nancial statements in accordance with the
international fi nancial reporting standards (IFRS).
INFORMATION POLICY
JSC TATNEFT is in the top 10 highest ranking information openness Russian energy sector companies.
The Company complies with all legal requirements and regulations on information disclosure, and
ensures timely and complete information provision to all interested parties on all aspects of its activities
(except when the information is commercially classifi ed). Furthermore to ensure better understanding of
the current situation and prospects by all stakeholders the Company additionally provides on a voluntary
basis complete information in the format of press conferences, corporate media, and also through
distribution of press releases via Russian and republican news agencies and the media.
The Company provides full and timely disclosure of information to the shareholders about all aspects of
its business (except when the information is commercially classifi ed).
The main channel of information disclosure is the site of JSC TATNEFT, which contains information
about essential facts, events, the Company’s management structure, fi nancial and economic activity.
The portal displays founding documents, the Articles, provisions on the Company’s activities, annual
reports and reports on sustainable development and social liability of the Company, quarterly reports,
quarterly fi nancial statements under IFRS, press releases about affi liates and other information that
may essentially affect the value of securities, as well as other information.
The Company regularly organizes meetings of analysts and investors with top managers and
specialists, as well as offering the opportunity to visit the facilities. The systematic meetings with
shareholders and investors are arranged at international stock grounds.
54
55
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
JSC TATNEFT BOARD OF
DIRECTORS IN 2013
Rustam N. MINNIKHANOV, born in 1957. 1978 – graduated
from Kazan Agricultural Institute, specialty – mechanical engineer.
1986 – graduated from the correspondence Institute of Soviet
Trade. 1996-1998 – Minister of Finance of the Republic of
Tatarstan. From July 1998 till March 2010 headed the Government
of the Republic of Tatarstan. President of the Republic of Tatarstan
since March 2010. Doctor of Science, Economics.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
David W. WAYGOOD , born in 1950. He has an education
certifi cate issued in the United Kingdom of Great Britain and
Northern Ireland; graduated from the banking courses of the Bank
Institute. Director of ICDS Ltd. since August 2001.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Mariya L. VOSKRESENSKAYA, born in 1955. 1977 – graduated
from Moscow Financial Academy. Has a US CPA certifi cate, and
she is a certifi ed Russian auditor. Director of Brentcross Ltd.
since 2004. Member of the Board of Association of Independent
Directors of Russia.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Radik R. GAIZATULLIN, born in 1964. 1985 – graduated from
Kazan Agricultural Institute, specialty – accounting and analysis
of economic activity in agriculture. Head of the Ministry of Finance
of the Republic of Tatarstan since June 2002. Doctor of Science,
Economics.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Sushovan GOSH, born in 1957. Graduated from the college
of Queen Maria, London University of Electric and Electronic
Developments and Institute of Accountants-Experts in England and
Wales. Managing Director of SGI Group Ltd. since 2002.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Nail G. IBRAGIMOV, born in 1955. 1977 – graduated with
honors from Moscow Institute of Petrochemical and Gas Industry
n.a. I.M. Gubkin. First Deputy General Director for Production –
Chief Engineer of JSC TATNEFT since 2000. Doctor of Science,
Engineering.
Share in the Authorized Capital of the Company, % – 0.019586
Portion of ordinary shares of the Company, % – 0.020673
Vladimir P. LAVUSHCHENKO, born in 1949, graduated from
Moscow Institute of Petrochemical and Gas Industry n.a.
I. M. Gubkin in 1972, and the postgraduate course of VNIIOENG in
1984. 1997 – appointed Deputy General Director for Economics of
JSC TATNEFT. Doctor of Science, Economics.
Share in the Authorized Capital of the Company, % – 0.045465
Portion of ordinary shares of the Company, % – 0.048194
Nail U. MAGANOV, born in 1958. 1983 – graduated from Moscow
Institute of Petrochemical and Gas Industry n.a. I.M. Gubkin. From
July 2000 to November 2013 – the First Deputy General Director –
Head of Crude Oil and Petroleum Products Sales Department of
JSC TATNEFT. Appointed General Director of JSC TATNEFT in
November 2013
Share in the Authorized Capital of the Company, % – 0.000176
Portion of ordinary shares of the Company, % – none
Renat Kh. MUSLIMOV, born in 1934. 1957 – graduated from
Kazan State University, specialty – geology and exploration of oil
and gas fi elds. From June 2007 – appointed State Consultant to
President of the Republic of Tatarstan on development of crude oil
and gas fi elds, Professor of the Crude Oil and Gas Geology Chair
of Kazan State University. Doctor of Geological and Mineralogical
Sciences.
Share in the Authorized Capital of the Company, % – 0.065734
Portion of ordinary shares of the Company % – 0.069624
Azat K. KHAMAEV, born in 1956. Graduated from Kazan Aviation
Institute, specialty – mechanical engineer. 2000 – graduated
from the Law Faculty of Kazan State University. Appointed First
Deputy Minister of Land and Property Relations of the Republic of
Tatarstan in December 2008. Appointed Head of the Ministry of
Land and Property Relations of the Republic of Tatarstan in March
2009.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Rais S. KHISAMOV, born in 1950. 1978 – graduated from the
evening department of Moscow Institute of Petrochemical and
Gas Industry n.a. I.M. Gubkin. Appointed Chief Geologist – Deputy
General Director of JSC TATNEFT in October 1997. Doctor of
Geological and Mineralogical Sciences, Professor.
Share in the Authorized Capital of the Company, % – 0.01876
Portion of ordinary shares of the Company, % – 0.019746.
RENÉ STEINER, was born in 1964. He has a degree in economics
and graduated from Technical High School in Zurich in 1989.
Bachelor of Swiss Banking – Zurich, 1992. Since 2011, co-founder,
Program Director of the Private Equity FIDES Business Partner AG,
Switzerland.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Rinat K. SABIROV, born in 1967. 1991 – graduated from the
physics faculty of Kazan State University; 1994 – graduated from
the postgraduate course of Kazan State Technological University.
1998 – had a training course under the President’s program for
managerial staff. In 2012 he completed the course in the program
“Master of Business Administration” of Colorado State University
(USA). Since 2006 headed the Division of Oil and Gas Complex of
the Cabinet of Ministers of the Republic of Tatarstan. In June 2010
he was appointed Assistant to the President of the Republic of
Tatarstan. PhD, Chemical Science.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Valery Yu. SOROKIN, born in 1964. 1986 – graduated from Kazan
State University. General Director of JSC Svyazinvestneftekhim
since 2003.
Share in the Authorized Capital of the Company, % – none
Portion of ordinary shares of the Company, % – none
Mirgaziyan Z. TAZIYEV, born in 1947. 1972 – graduated from
Moscow Institute of Petrochemical and Gas Industry n.a. I.M.
Gubkin. Head of NGDU Almetyevneft since January 2005. PhD,
Engineering.
Share in the Authorized Capital of the Company, % – 0.006448
Portion of ordinary shares of the Company, % – 0.006541
Shafagat F. TAKHAUTDINOV, born in 1946. 1971 – graduated
from Moscow Institute of Petrochemical and Gas Industry n.a.
I.M. Gubkin. From 1999 to November 2013 – General Director of
JSC TATNEFT. Starting November 2013 he performs the duties
of Assistant to the President of the Republic of Tatarstan, Advisor
to Chairman of JSC TATNEFT’s Board of Directors. Doctor of
Science, Economics.
Share in the Authorized Capital of the Company, % – 0.116503
Portion of ordinary shares of the Company, % – 0.123914
56
57
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
JSC TATNEFT MANAGEMENT
BOARD IN 2013
Nail U. MAGANOV, born in 1958. 1983 – graduated from Moscow
Institute of Petrochemical and Gas Industry n.a. I.M. Gubkin. From
July 2000 to November 2013 – the First Deputy General Director –
Head of Crude Oil and Petroleum Products Sales Department of JSC
TATNEFT. Appointed General Director of JSC TATNEFT in November
2013
Share in the Authorized Capital of the Company, % – 0.000176
Portion of ordinary shares of the Company, % – none
Victor I. GORODNY, born in1952. In 1978 he graduated
from Moscow Institute of Petrochemical and Gas Industry
n.a. I.M. Gubkin. 1995 to present time – Deputy General Director –
Head of Property Department JSC TATNEFT. Doctor of Science,
Economics.
Share in the Authorized Capital of the Company, % – 0.000254%.
Portion of ordinary shares of the Company, % – None.
Shafagat F. TAKHAUTDINOV, born in 1946. 1971 – graduated
from Moscow Institute of Petrochemical and Gas Industry n.a.
I.M. Gubkin. From 1999 to November 2013 – General Director of
JSC TATNEFT. Starting November 2013 he performs the duties of
Assistant to the President of the Republic of Tatarstan, Advisor to
Chairman of JSC TATNEFT’s Board of Directors. Doctor of Science,
Economics.
Share in the Authorized Capital of the Company, % – 0.116503
Portion of ordinary shares of the Company, % – 0.123914
Vladlen A. VOSKOBOYNIKOV, born in1965, in 1993 he graduated
from the Technical Institute of Southern Alberta Calgary. From 2005
to present time – Head of Consolidated Financial Accenting of JSC
TATNEFT.
Share in the authorized capital of the Company% – none.
Portion of ordinary shares of the Company% – none.
Iskander G. GARIFULLIN, born in1960 . In 1981 he graduated from
Kazan Financial and Economic Institute named after V.V. Kuibyshev.
1997 to present time – Chief Accountant – Head of Accounting and
Reporting Department, JSC TATNEFT.
Share in the Authorized Capital of the Company, % – 0.009806%.
Portion of ordinary shares of the Company, % – 0.010396%.
Nikolay M. GLAZKOV, Born in1960. In 1988 he graduated from
Kazan Institute of Civil Engineering. 2008 to 2010 – Head of Capital
Construction JSC TATNEFT. 2010 to present time – Deputy General
Director for Capital Construction, JSC TATNEFT.
Share in the Authorized Capital of the Company, % – None.
Portion of ordinary shares of the Company, % – None .
Valery D. ERSHOV, born in1949. In 1978 he graduated from Kazan
State University named after V.I. Ulyanov-Lenin. 2002 to present time
– Head of Legal Department, JSC TATNEFT.
Share in the Authorized Capital of the Company, % – None.
Portion of ordinary shares of the Company, % – None.
Nail G. IBRAGIMOV, born in 1955. 1977 – graduated with
honors from Moscow Institute of Petrochemical and Gas Industry
n.a. I.M. Gubkin. First Deputy General Director for Production –
Chief Engineer of JSC TATNEFT since 2000. Doctor of Science,
Engineering.
Share in the Authorized Capital of the Company, % – 0.019586
Portion of ordinary shares of the Company, % – 0.020673
Portion of ordinary shares of the Company, % – None.
Vladimir P. LAVUSHCHENKO, born in 1949, graduated from
Moscow Institute of Petrochemical and Gas Industry
n.a. I. M. Gubkin in 1972, and the postgraduate course of VNIIOENG
in 1984. 1997 – appointed Deputy General Director for Economics of
JSC TATNEFT. Doctor of Science, Economics.
Share in the Authorized Capital of the Company, % – 0.045465
Portion of ordinary shares of the Company, % – 0.048194
Zagit F. SHARAFEEV, born in1956. In 1980 he graduated from
Kazan Chemical Technological Institute named after S.M. Kirov.
In 1991 he graduated from the All-Union Correspondence Financial
and Economic Institute. From 2010 to April 2014 – Deputy General
Director of JSC TATNEFT for Petrochemicals Production – Director
of OOO «Tatneft-Neftekhim», Phd, Economics.
Share in the Authorized Capital of the Company, % – None.
Portion of ordinary shares of the Company % – None .
Fedor L. SHCHELKOV, born in1948. In 1972 he graduated from
Moscow Institute of Petrochemical and Gas Industry n.a. I.M.
Gubkin. 1996 to present time – Deputy General Director of JSC
TATNEFT, General Issues.
Share in the Authorized Capital of the Company, % – 0,029929%.
Portion of ordinary shares of the Company, % – 0,031524%.
Alexander T. YUKHIMETS, born in1949. In 1972 he graduated
from Moscow Institute of Petrochemical and Gas Industry
n.a. I.M. Gubkin. From 1995 to present time – Board of Directors
Secretary, JSC TATNEFT.
Share in the Authorized Capital of the Company, % – 0,000284%.
Portion of ordinary shares of the Company, % – None.
Rustam N. MUKHDMADEEV, born in1952. In 1977 he graduated
from Moscow Institute of Petrochemical and Gas Industry n.a. I.M.
Gubkin. 2001 to present time – Deputy General Director of JSC
TATNEFT for HR and Social Development.
Share in the Authorized Capital of the Company, % – 0.004204%.
Portion of ordinary shares of the Company, % – 0.004264%.
Rafael S. NURMUKHAMETOV, born in1949. In 1974 he graduated
from Ufa Petroleum Institute. 1989 to present time – Head of NGDU
«Leninogorskneft», JSC TATNEFT.
Share in the Authorized Capital of the Company, % – 0.010465%.
Portion of ordinary shares of the Company, % – 0.010107%.
Rifkat M. RAKHMANOV, born in1948. In1970 he graduated from
Ufa Petroleum Institute. 2010 to present time – Deputy General
Director of JSC TATNEFT for Workover and EOR.
Share in the Authorized Capital of the Company, % – 0.020604%.
Portion of ordinary shares of the Company, % – 0.021678%.
Yevgeny A. TIKHTUROV, born in1960. In 1982 he graduated from
Moscow Institute of Management n.a. S. Ordzhonikidze. 1999 to
present time – Head of Finance Department, JSC TATNEFT.
Share in the Authorized Capital of the Company, % – None.
58
59
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
LIST OF MAIN ISSUES REVIEWED AT THE MEETINGS
OF THE BOARD OF DIRECTORS IN 2013:
LIST OF MAIN ISSUES REVIEWED AT THE MEETINGS
OF THE MANAGEMENT BOARD IN 2013:
1. Financial performance of JSC TATNEFT in 2012.
2. Results of the Internal Audit Department operation for 2012 and approval of the Department work plan for
2013
3. Annual General Meeting of Shareholders of JSC TATNEFT on the results of 2012.
4. Candidates to the Board of Directors and the Audit Commission of JSC TATNEFT and proposals for the
agenda of the annual general meeting of shareholders on the results of 2012.
5. Implementation of a business-project for development of Ashalchinskoye fi eld.
6. About the program of improving reservoir pressure maintenance system in JSC TATNEFT.
7. Outcome of the labor collective conference of JSC TATNEFT in 2012 and the results of social programs
implementation.
8. Results and objectives of the TATNEFT Production Group work on the growth of labor productivity.
9. Results of operations and development prospects of the «Heat Power» sector business enterprises of
TATNEFT Group.
10. Progress in introducing new technologies for the development and production of JSC TATNEFT’s fi elds.
11. Performance outcome of the JSC TATNEFT’s petrochemical complex enterprises.
12. Plans for crude oil production and geological/technical activities of JSC TATNEFT in 2014-2015.
13. About Environmental Control system at JSC TATNEFT.
14. About the current system of personnel management at JSC TATNEFT.
15. Implementation progress and strategy and of the «TANECO» project further development
16. Application of modern technologies and equipment to improve effi ciency in the construction of wells at
OOO «Tatburneft» Management Company.
17. Condition and development of the corporate media at JSC TATNEFT.
18. Effectiveness of fi nancial and economic activities of subsidiaries and affi liates of JSC TATNEFT.
19. Program of equipping fi lling stations with petroleum products hydrocarbon vapor recovery systems.
20. Support of small and medium-sized businesses in the south-eastern part of the Republic of Tatarstan.
1. Crude oil production for December and twelve months of 2013.
2. Comparative evaluation of the JSC TATNEFT’s Oil and Gas Production Divisions’ operation for 2012.
3. On the status of using drilled wells stock by the Oil and Gas Production Divisions of JSC TATNEFT.
4. Implementation of the JSC TATNEFT’s investment program in crude oil production in the territory of
the Republic of Tatarstan for 2012.
5. Analysis of energy consumption and energy costs for the year 2012.
6. Current fi nancial and economic condition and results of JSC TATNEFT fulfi lling the indicators of Orders
No. 1, 2 and 3 for 2012 and 9 months of 2013.
7. On the status of geological exploration works and reserves growth of the TATNEFT Group of
Companies in 2012-2013.
8. Analysis of the formation pressure profi le by the targets of operation. Measures aimed at improving the
reservoir pressure maintenance system.
9. Progress in obtaining governmental authorities’ permission for construction and commissioning of
wells completed.
10. Implementation progress of the «Ashalchinskoye extra-viscous oil fi eld development» project.
11. Application of the bottom-hole cleaning technology through self-fl owing method at NGDU
«Leninogorskneft» and NGDU «Aznakaevskneft».
12. Implementation progress of the JSC TATNEFT’s program of chain drives operation.
13. Implementation progress of the «Reconstruction of OOO «Nizhnekamsk CHP» project with
installation of low-grade steam turbines.
14. Operation results of NGDU «Nurlatlatneft» and NGDU «Prikamneft» to reduce the growth rate of
individual tariffs for purchasing of electricity for the 1st quarter of 2013.
15. Organizing well repair and drilling at NGDU «Elkhovneft» and NGDU «Yamashneft»
16. Progress of the construction of «TANECO» facilities.
17. Progress of «TANECO» operation.
18. Implementation of the JSC TATNEFT’s investment program of crude oil production in the territory of
the Republic of Tatarstan for the Ist half of 2013.
19. Outcome of labor collectives’ meetings and implementation progress of the Collective Agreement for
the Ist half of 2013.
20. Status of reserves development and crude oil production rates from carbonate reservoirs.
21. Operation of intelligent wells at deposits 301-305 of NGDU «Leninogorskneft».
22. Work on improving the pipeline system reliability (oil and water pipelines) and increasing the period
of their operation.
23. Financial and economic state of JSC TATNEFT and the credit market situation.
24. Work progress for the transfer of land areas from the category of agricultural land into the category of
industrial land for well drilling.
25. Plans and norms of crude oil, liquid production and water injection for 2014 by the Oil and Gas
Production Divisions. Results of selecting geological and technical measures to be included in the
investment program.
26. Utilization of petroleum associated gas for electric power generation using Capstone microturbine
plants at JSC TATNEFT’s facilities.
27. Current industrial safety situation at JSC TATNEFT.
28. Work results of clearing power line routes to exclude possible damage resulting from trees’ falling.
60
61
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
COMMITTEES OF THE BOARD
OF DIRECTORS
CORPORATE MANAGEMENT COMMITTEE
The Corporate Management Committee has been a standing commit-
tee of the Board of Directors since 2004 and it is authorized to render
assistance to the Board of Directors of JSC TATNEFT in improving the
Corporate Management system and mechanisms in the Company and
provide for interaction of the concerned parties on the corporate issues.
Composition of the Corporate Management Committee in 2013:
CHAIRMAN
Viktor I. Gorodny, member of the Management Board
of JSC TATNEFT, Deputy General Director, - Head of Property Depart-
ment of JSC TATNEFT, Deputy Chairman of the Information Disclosure
Committee, Doctor of Economics.
MEMBERS OF THE COMMITTEE
Rais S. Khisamov, member of the Board of Directors of JSC TAT-
NEFT, Deputy General Director – Chief Geologist of JSC TATNEFT,
Doctor of Geological and Mineralogical Sciences;
HR AND REMUNERATION COMMITTEE
The HR and Remuneration Committee has been established since
2004 to assist the Board of Directors in creating conditions to attract
highly skilled professionals to the management of the Company and
ensure necessary incentives for their effi cient work.
The Committee carries out its activities in close cooperation with the
Committees of the Board of Directors: Audit Committee, Corporate
Management Committee, Information Disclosure Committee and
the Company’s Executive Bodies: Management Board, Executive
Directorate, Internal Audit Department, Corporate Control
Department and others.
Composition of the HR and Remuneration Committee in 2013:
CHAIRMAN
David William Waygood , member of the Board of Directors of JSC
TATNEFT, Independent Director, Director of ICDS Ltd. (till June 2013).
Rinat K. Sabirov, member of the Board of Directors of JSC TATNEFT,
Assistant to President of the Republic of Tatarstan, member of the HR
and Remuneration Committee, Candidate of Chemical Sciences;
René Frederic STEINER, Member of the JSC TATNEFT’s Board of
Directors, Independent Director, Program Director of the Private Equity
FIDES Business Partner AG, Switzerland (headed the Committee
since June 2013).
MEMBERS OF THE COMMITTEE
Sushovan Ghosh, member of the Board of Directors of JSC TAT-
NEFT, Managing Director of SGI Group LTD.
Rinat K. Sabirov, member of the Board of Directors of JSC TATNEFT,
Assistant to President of the Republic of Tatarstan, member of the
Corporate Management Committee.
Main Activity Areas of the HR and Remuneration
Committee in 2013:
1. Consideration of the work results aimed at strengthening labor and
production discipline at structural divisions of JSC TATNEFT.
2. Consideration of the professional standards development, such as
the formation of the Company’s personnel training and development,
and the formation of the personnel reserve pool.
3. Preparation of recommendations on the personnel remuneration
by the results of FY 2013.
Valery D. Ershov, member of the Management Board,
Head of Legal Department of JSC TATNEFT;
Rustam M. Khisamov, Head of Securities Offi ce
of the Property Department of JSC TATNEFT, PhD, Economics;
Vasiliy A. Mozgovoy, Assistant to General Director
of JSC TATNEFT, Corporate Finances;
Denis V. Tsovma, Deputy Head of Securities Offi ce
of the Property Department, JSC TATNEFT.
Main Activity Areas of the Corporate Management
Committee in 2013:
1. Stock market situation analysis.
2. Monitoring of JSC TATNEFT’s market capitalization and analysis of
the capitalization profi le key factors.
3. Formation and coordination of implementation of the plan of works
with shareholders and investors for 2013.
4. Control of use of the Insider Information.
5. Assistance to the Insider Information Protection Committee.
6. Monitoring adherence to the rights and interests of shareholders.
7. Control of the information disclosure.
8. Assistance to the Board of Directors and interaction with the
Information Disclosure Committee to ensure the information
disclosure in accordance with applicable law and the stock market
regulators requirements.
9. Formulation of proposals to the Executive Bodies to improve the
system of corporate standards.
62
AUDIT COMMITTEE
The Audit Committee has been a standing committee of the
Board of Directors of JSC TATNEFT since 2004. The mission of
the Committee is rendering assistance to the Board of Directors
in exercising control of authenticity of JSC TATNEFT’s fi nancial
statements, providing independent audit, functioning of the internal
audit system of the Company, as well as compliance with regulatory
and legal requirements.
Composition of the Audit Committee in 2013
INFORMATION DISCLOSURE COMMITTEE
The Information Disclosure Committee has been a standing
committee of the Board of Directors since 2004.
Composition of the Information Disclosure Committee in 2013:
CHAIRMAN
Vladimir P. Lavushchenko, member of the Board of Directors,
member of the Management Board, Deputy General Director
of JSC TATNEFT on Economics, Doctor of Economics
CHAIRMAN
Sushovan Ghosh, member of the Board of Directors of JSC
TATNEFT, Independent Director. Managing Director of SGI GROUP
LTD. Member of the HR and Remuneration Committee of JSC
TATNEFT.
DEPUTY CHAIRMAN
Viktor I. Gorodny, member of the Management Board, Deputy
General Director, Head of the Property Department of JSC TATNEFT,
Head of the Corporate Management Committee, Doctor of Science,
Economics
MEMBERS OF THE COMMITTEE
René Frederic STEINER, Member of the JSC TATNEFT’s Board
of Directors, Independent Director, Program Director of the Private
Equity FIDES Business Partner AG, Switzerland member of the
Committee since June 2013
Mariya L. Voskresenskaya, member of the Board of Directors of
JSC TATNEFT, Independent Director, Director of Brent Cross Ltd.
Radik R. Gayzatullin, member of the Board of Directors, Minister of
Finance of the Republic of Tatarstan.
David William Waygood, member of the Board of Directors,
Independent Director, Director of ICDS Ltd (till June 2013);
Main Activity Areas of the Audit Committee in 2013:
1. Activities coordination of external auditors and the Internal Audit
Department, as well as regular review of their reports.
2. Review and analysis of quarterly fi nancial statements.
3. Review and application of independent auditors’ reports on the
condition of the JSC TATNEFT’s internal control systems.
4. Discussing the scope, areas of emphasis and timing of audits with
the independent auditors and the Internal Audit Department.
5. Verifi cation of the external auditors’ independence.
6. Provision of recommendations to the Board of Directors regarding
selection of the JSC TATNEFT auditors.
7. Issue of fi nancial statements by the external auditors in
accordance with IFRS.
MEMBERS OF THE COMMITTEE
Vladlen A. Voskoboynikov, member of the Management Board,
Head of Consolidated Financial Reporting Department of
JSC TATNEFT
Yevgeny A. Tikhturov, member of the Management Board,
Head of the Financial Department of JSC TATNEFT
Vasiliy A. Mozgovoy, Assistant to General Director of
JSC TATNEFT, Corporate Finances
Aleksander T. Yukhimets, member of the Management Board,
Secretary of the Board of Directors of JSC TATNEFT
Nuriya Z. Valeyeva, Head of Technical and Economic Information
and Advanced Experience Extension Offi ce, JSC TATNEFT
Denis V. Tsovma - Securities Offi ce Deputy Head, Property
Department of JSC TATNEFT
Main Activity Areas of the Information Disclosure
Committee in 2013:
1. Control of the information disclosure procedures.
2. Coordination of the activities on formulation of essential
facts, quarterly and annual reports of the Company, as well as
consolidated fi nancial statements and RAS reports.
3. Coordination of the activities for information support of the current
Company’s activity
4. Control and coordination of the corporate mass media activity on
development of web-resources of TATNEFT Group.
5. Ensuring a unifi ed information policy of TATNEFT Group.
63
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CORPORATE PRINCIPLES
OF INTERACTION WITH
SHAREHOLDERS AND INVESTORS
Guaranteed equal ensuring and observance of legal rights and
interests of all the the Company’s shareholders regardless of the
number of shares they own, as set out by applicable laws of the
Russian Federation, requirements and recommendations of stock
markets regulators, where the shares of the Company circulate.
The Company’s shareholders exercise their rights and
responsibilities and participate in the activities of the Company
under the applicable law, as well as on the basis of voluntary
initiatives aimed at improving the management and operations of
the Company. The shareholders should proceed in their actions
taking into account the interests of the Company and shall not
take any actions that are contrary to the interests of the Company.
Execution of all their duties in a timely manner and in full volume by
the shareholders will enable the Company to ensure implementation
of all legal rights of the shareholders.
CORPORATE INTERACTION WITH SHAREHOLDERS
OF JSC TATNEFT IN 2013
The Company provides for prompt review of all the shareholders’
appeals received in the written or electronic form or made personally
and respond in a timely and appropriate manner.
In case of the shareholders’ problems identifi cation (violations of the
shareholders’ rights and confl ict emergence), the Company shall
take immediate measures to address these problems, analyze the
circumstances that led to their emergence and organize effi cient
mechanisms to resolve them.
The Company makes no exceptions in reviewing all facts regarding
violations of the shareholders’ rights and taking necessary steps to
address them, as well as measures to prevent re-emergence of such
violations in the future.
The Company has an authorized unit that coordinates the whole
system of JSC TATNEFT’s interaction with its shareholders: the
Securities Operation Offi ce of the Company’s Property Department.
The Company strives to ensure the most reliable and effective
methods and forms of communication, including advanced
information technologies application for reaching the highest
possible quality of interaction with the shareholders.
The Company provides the shareholders with an access to
documents in accordance with the applicable law.
Continuous interaction of the Company’s management with all
the shareholders in order to manage the Company effectively and
ensure its sustainable and dynamic development.
Continuous improvement of existing and development of new
mechanisms and forms of interaction with the shareholders and
potential investors, which would increase effi ciency and quality of
interaction with the shareholders, taking into account emergence
of new shareholders and formulation of further goals by the
shareholders.
Identifi cation and resolution of all possible general and specifi c
issues related to exercising of the shareholder rights.
Taking all necessary and possible measures in case of a confl ict
between the Company’s bodies and its shareholder(s), as well as
between the shareholders, if the confl ict affects the interests of the
Company, to fully settle the confl ict and to create an environment
that would prevent the confl ict arising in the future.
PROCEDURE OF ENSURING INTERACTION
WITH SHAREHOLDERS
The Company provides equal opportunities for shareholders through:
1. Procedure of holding the General Meeting of Shareholders, which
guarantees equal opportunities to all the participants of the meeting
to take part in discussing the meeting issues and expressing their
opinions.
2. Developing and improving corporate mechanisms aimed at
informing the shareholders of all signifi cant events of the Company
in full volume in accordance with all applicable requirements of the
information disclosure.
3. Election of the Board of Directors members, General Director
and the Company’s Management Board members in accordance
with the transparency policy stipulating provision of the relevant
information on each nominee to the shareholders.
4. Prohibition of transactions with the use of insider and confi dential
information.
5. Providing the information to the Board of Directors members,
General Director and members of the Management Board
on transactions in which can be recognized as related party
transactions.
6. Application of all available modern communicative means to
ensure the most effective and effi cient communication with all the
shareholders, regardless of any remoteness of the shareholders
from the Company’s location.
64
CORPORATE CENTER
FOR OPERATION
WITH SECURITIES
AND INTERACTION
WITH SHAREHOLDERS
OF JSC «TATNEFT»
GUARANTEED EQUAL
ENSURING AND
OBSERVANCE OF LEGAL
RIGHTS AND INTERESTS
OF ALL SHAREHOLDERS
PROMP REVIEW
OF APPEALS OF
THE SHAREHOLDERS
PAYMENT OF DIVIDENDS
BY THE DECISION
OF THE GENERAL MEETING
OF THE SHAREHOLDERS
STRICT COMPLIANCE
WITH ALL STANDARDS
AND REQUIREMENTS
OF STOCK EXCHANGES
THE STABLE STRUCTURE OF JSC TATNEFT SHAREHOLDERS REFLECTS HIGH CONFIDENCE LEVEL
OF THE KEY INVESTORS TO LONG-TERM DEVELOPMENT OF THE COMPANY
65
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CORPORATE RESPONSIBILITY OF THE COMPANY
ON THE STOCK MARKET
COMPANY’S
COMMITMENTS
ENSURING THE INSIDER
INFORMATION PROTECTION
CORPORATE MANAGEMENT
STANDARDS
The Company provides all the necessary procedures to protect
the insider information by relevant internal regulatory documents,
including the Rules of compliance monitoring on the insider
information of JSC TATNEFT, the Practices governing access
to the insider information and control rules of protection of its
confi dentiality based on the List of the information related to the
insider information.
The most important component of the TATNEFT Company’s
corporate management is a system of uniform corporate standards
aimed at ensuring the effi ciency of business processes, their
quality control, minimizing all types of corporate risks and generally
maintaining transparent corporate relations between the parent
Company, structural divisions, subsidiaries and affi liates.
STATUTORY
REQUIREMENTS
STOCK EXCHANGE REQUIREMENTS
ON GROUP A1 LISTING
FOR THE LARGEST ISSUERS
2,349 notifi cations of transactions with the Company’s securities
were received from the insiders during 2013.
The system of corporate standards includes 22 areas covering all
components of the Company’s activity, and applies to the parent
Company, as well as its subsidiaries and affi liates.
Preparation and holding of the
General Meeting of the Shareholders
Governmental authorities
Availability of independent directors
in the Board of Directors of the Company
Central Bank of Russia
Activities of the Committees
of the Board of Directors
Stock Exchanges
Availability of Collegial
Executive Body (Management Board)
Preparation and disclosure of the
annual reports of the Company
Provision of annual and quarterly
fi nancial statements according to the
international standards
Submission of the quarterly reports
of the Issuer
Prompt disclosure of essential facts
Maintenance and disclosure of the
list of affi liated entities
Informing the company management
about transactions with interested
parties
Ensuring the order of protection of
the insider information
Availability of the internal
audit department accountable
to the Audit Committee
Reporting on the compliance
with the requirements for
maintaining the listing
VOLUNTARY
COMMITMENTS
Press releases
and other information
Investment companies
Rating Agencies
Corporate institutes and
associations of independent
directors
PROTECTION OF
THE CORPORATE
INTERESTS
INSIDER INFORMATION PROTECTION COMMITTEE
CHAIRMAN
Denis V. Tsovma, Deputy Head of Securities Offi ce of the Property
Department: person overseeing the implementation of the Law on
the Prevention of Unlawful Use of Insider Information.
MEMBERS OF THE COMMITTEE
Valery D. Ershov, member of the Management Board,
Head of Legal Department of JSC TATNEFT;
Alexey P. Bespalov, Head of the Information Technologies
Department – Deputy Chief Engineer;
Ildar A. Rakhmatullin, Head of Internal Control Department;
Rustam M. Khisamov, Head of the Property Department
Securities Offi ce of JSC TATNEFT, PhD, Economics;
Rimaz Sh. Yamilov, Head of New Structures Offi ce,
Property Department of JSC TATNEFT;
Vasily A. Mozgovoy, Assistant to General Director
of JSC TATNEFT, Corporate Finance;
Petr A. Glushkov, Head of International Law Offi ce,
Consolidated Statements Department;
The corporate standards are approved by General Director of JSC
TATNEFT and registered under individual serial numbers in a special
register. The register is updated annually. As of January 1, 2014 the
register of corporate management standards included 77 entrees.
The current standards’ performance is supported by taking
appropriate management decisions and approval of additional
regulations.
For the purpose of maintaining and developing a unifi ed regulatory
base of JSC TATNEFT there was a corporate information system of
the unifi ed regulatory base (KIS ERB) implemented. By the end of
2013 there were 2,024 internal regulatory documents and 35,584
external documents placed in the KIS ERB.
The major new corporate management standards of TATNEFT
Group formed in 2013:
• Corporate management standard «On registration procedure of
suppliers of goods (works, services) at JSC TATNEFT
• Tender regulations of for procurement of goods, works and
services by the branch of JSC TATNEFT in Libya required for the
implementation of agreements on exploration and production
sharing between the National Oil Corporation of Libya and JSC
TATNEFT
• Regulations of the contractual work organization at JSC TATNEFT
n.a. V.D. Shashin
• Standard to ensure the performance effi ciency of associated
petroleum gas driven power generating plants at JSC TATNEFT
Corporate Governance Code
Rifdar R. Khamadyarov, Head of Personnel Offi ce.
66
67
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
COMPANY’S INVESTMENT
POLICY IN 2013
The investment activity of the Company is carried out in accordance
with the development strategic plans and current priorities of
decision of production and social tasks based on the principle of the
maximum investment effi ciency and increased profi tability in each
areas of the Company’s activity.
MAIN INVESTMENT PROJECTS OF 2013
Crude Oil Production Program
The actual performance of investments was 22% higher than the
planned fi gure.
In order to enhance oil recovery the amount of RUR 637 million
was invested in the technology of dual completion/operation and
injection with development of various equipment modifi cations and
combinations of installations.
The pilot project was continued at Ashalchinskoye natural bitumen
fi eld. Total investments for the project amounted to RUR 5.7 billion
including RUR 2.8 billion in the reporting year.
There were projects implemented in the Company on the use of gas
turbines to increase useful utilization of associated petroleum gas, as
well as increase energy independence of production facilities at the
expense of generating their own energy. The government support
in the form of tax property tax exemptions was granted under these
projects. In 2013, in the frame of associated petroleum gas utilization
project the Company started to operate Capstone microturbine
based power plants at four sites of JSC TATNEFT: UPS- 102k of Tat-
Kandyzskoye oilfi eld, NGDU «Bavlyneft»; DNS-21 of Sokolkinskoye
oilfi eld, NGDU «Elkhovneft»; GZNU-1331 of Yamashinskoye oilfi eld,
NGDU «Yamashneft» and GZNU 206 Shegurchinskoye oilfi eld,
NGDU «Yamashneft».
A strategic area for JSC TATNEFT is expansion of the resource base
and crude oil production outside the Republic of Tatarstan. Assimilation
of investment by companies and own areas of JSC TATNEFT, located
outside the Russian Federation in the Republic of Tatarstan amounted
to RUR 3.1 billion in 2013 with 70 % of this amount invested in drilling
of production and exploration wells, 3% in capital construction, about
20% were spent for seismic exploration methods and case works
under the fi eld geological exploration program, while 4% of the amount
were spent for geological production enhancement operations.
Construction of the TANECO Refi ning and Petrochemical
Plants Complex in Nizhnekamsk
The investments in OJSC TANECO amounted to RUR 9.5 billion
in 2013, including RUR 1.3 billion spent for engineering design,
construction, commissioning and other works. RUR 8.2 billion
was spent for acquisition of Phase 1B facilities. OJSC «TANECO»
received the opinions of Rostekhnadzor of the Russian Federation
on compliance with requirements and the following process facilities
were commissioned: the visbreaking unit, combined sulfur recovery
unit and sour gas fl are.
68
During the reporting year, the construction projects management
department carried out a signifi cant amount of construction works
at the hydrocracking installation site, completed delivery of basic
technological equipment, including long lead items. Currently
there are commissioning operations underway at the combined
hydrocracking installation. The investments for the construction
management department project totaled RUR 33.2 billion during
2013.
Reconstruction of Nizhnekamsk CHP with installation of Low-
Grade Steam Turbines
Investments for reconstruction amounted to RUR 973 million in
2013. A signifi cant amount of R&D and construction and installation
works was performed. The infrastructure improvement of the new
facility was completed, communications arrangement were made
with laying new underground network. The works on sealing the main
building were completed as well as the force plate and foundations
for two new turbine units were also completed. Delivery of the turbine
and generator for the fi rst starting block was made.
Development of Petrochemical Complex
The amount of RUR 861 million was invested in 2013 for the
development of the petrochemical complex. The project «Increasing
the production of high-performance tires by 1.3 mln pieces per year»
was completed at JSC «Nizhnekamskshina». This project is the fi rst
stage (stage 1A) of the project «Bringing production capacity to 18
million tires per year”. As a result of this project implementation the
high-performance tires production volume will increase to 4.5 million
tires per year. The project cost amounted to RUR 1.1 billion. The
project «Modernization of carbon black production» is still underway
at JSC “Nizhnekamsktekhuglerod». Implementation of the whole
project will allow increasing the output volume to 134.0 thousand
tons.
Glass Fiber and Glass Fiber Based Products Manufacturing
Implementation of the project is carried out on the basis of «PD
Tatneft-Alabuga Steklovolokno» established by OOO «Tatneft-Aktiv»
and German company PD Glasseiden GmbH Ochatz. In 2013, the
company smelted 26.1 thousand tons of glass, produced 21.3
thousand tons of marketable products, including 54.2% of direct
roving and multifi lament yarn, 17.3% of the assembled roving, 13.7%
- glass fi ber mats, 4.1% - glass fi ber mesh, 4.0% - roving fabrics and
6.7% - chopped glass fi ber.
Retail Business Development
The JSC TATNEFT’s distribution infrastructure investment program
amounted to RUR 1.3 billion. Sales of petroleum products in the
Russian Federation for 2013 amounted to 1.59 million tons. 2013
witnessed commissioning of 18 fi lling stations, 1 automatic fi lling
station, 7 automatic gas fi lling stations and 7 gas terminals at
existing stations on the territory of the Russian Federation. In 2013,
the works were continued on the implementation of energy saving
technologies. Pellet boilers were installed at 36 fi lling stations.
INVESTMENT PORTFOLIO STRUCTURE
In 2013, the total investment for the Group TATNEFT totaled
RUR 84,813 million.
In accordance with the investment strategy of the Company:
• 50.3% of investments were sent to the construction of Refi ning and
Petrochemical Complex in Nizhnekamsk;
• 39.8% of investments were sent to the maintenance and expan-
sion of the production capacity in the oil fi elds of the Republic of
Tatarstan;
• 4.3% of investments were sent to oil production outside
the Republic of Tatarstan and Russia;
• 4.7% of investments were sent to the development of petrochemi-
cal complex, heat and power generation and retail business;
• 0.9% of investments were sent to social projects.
INVESTMENT COMMITTEE
The Investment Committee works under the leadership
of the General Director of JSC TATNEFT and provides
the procedures for the review, verifi cation, risk assessment
and decision-making on investment projects. According to
the decision of the Investment Committee it appoints the leader,
responsible for the effective execution of the project and
the achievement of stated targets.
During the reporting year the Company’s investment committee
reviewed more than 100 investment issues and assessed
the results of 13 projects implementation.
STRUCTURE OF INVESTMENT PORTFOLIO IN 2013
(%)
MAIN FIELDS OF INVESTMENT ACTIVITIES IN 2013
TANECO Complex (50.3%)
Oil production
in the territory of Tatarstan (36.5%)
Petrochemicals (1.0%)
Foreign projects (0.6%)
Oil production outside Tatarstan (3.7%)
Retail business (1.5%)
Oil service (3.3%)
Funding for Nizhnekamsk CHP (2.2%)
Non-industrial activities (0.9%)
NO.
DESCRIPTION
1.
Investments into crude oil production
in the territory of Tatarstan
Drilling
Capital construction
Equipment not included in construction
estimate-sheets
Geological engineering activities
Redemption of property, land, etc.
Investments into crude oil production
outside the Republic of Tatarstan
Investments into construction
of the Oil Refining and Petrochemical Complex
in Nizhnekamsk
Investments of the Petroleum Chemical
Complex enterprises
Investments into development
of the retail business
Investments of service companies
and other enterprises
2.
3.
4.
5.
6.
6.1
Funding for reconstruction of Nizhnekamsk CHP
(net of VAT)
7.
8.
Financing of the foreign projects
Investments into development
of the social area
RUR MLN
30,937
12,996
7,477
2,485
7,699
280
3,112
42,694
861
1,303
4,682
1,837
470
754
TOTAL for the Company
84,813
69
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
FINANCIAL MANAGEMENT
The corporate policy priorities in fi nancial management have to
ensure fi nancing of production, investment, and social activities of
the Company and the effective use of fi nancial resources.
All obligations to pay for works and services for the delivered
products, payment of taxes and payments to non-budgetary funds
were performed by JSC TATNEFT in full and in a timely manner.
Activities of the Company in 2013 were carried out under conditions
of considerable instability expressed by drastic fl uctuations in oil
prices and changes in the national currency exchange rate.
In 2013 JSC TATNEFT placed temporarily idle funds in the fi nancial
market. When placing the funds the Company prefers reliability, so
investments are made only in the largest banks. Such placements
resulted in the income from deposits and other placements in the
amount of RUR 2.3 billion.
The work to reduce rates on loans raised, reduction
of loans debt level, optimal placement of temporarily
free funds, fl exible policy of short-term debt management
allowed the interest income exceed the interest expense
by the results of work in 2013.
In 2013, the Company operated in the mode of repayment loans
raised earlier. As a result, the debt was decreased by USD 522.4
million and three-year exchange bonds were promptly repaid in the
amount of RUR 5.0 billion.
Taking into account the uneven nature of revenues and expenses
during the month the Company, when it necessary to cover
cash gaps uses short-term loan mechanism (1 to 30 days) with
SDBO (e-banking system) with VTB Bank, Unicredit, Bank of
Moscow, Rosbank and ZENIT Banking Group. In 2013, this group
also included Sberbank with a limit of RUR 20 billion, while VTB
increased the amount of the limit from RUR 10 to 20 billion and
the period from 30 days to 1 year. A contract was concluded with
the Agricultural Bank. Such a wide choice range of banks allows
obtaining short fi nancing at the best rates.
In November 2013, the Moody’s Investor Services rating
agency announced that it upgraded the corporate group
rating and the default probability of JSC TATNEFT
n.a. V.D. Shashin to “Baa3” investment grade, forecast -
“stable”. It was for the fi rst time in history that JSC TATNEFT
n.a. V.D. Shashin received an investment grade rating
from a leading rating agency.
To prevent diversion of funds the Company actively uses bank
guarantees for excise tax payments to the budget. During the year,
the cost of providing guarantees was reduced from 0.15% to 0.12%.
To solve the problem of funds shortage the Financial Department
carried out a large amount of work on optimizing payments to
counterparties. This will be continued in future. In view of reducing
distractions from the Company’s turnover and accelerating
settlements with permanent counterparties reciprocal obligations
are redeemed through the Mutual Claims Set-Off Center (MCSC).
BUDGET PLANNING SYSTEM
BUDGET ALLOCATION BY CCAS
(CENTERS OF CONTROL AND ACCOUNTABILITY)
Great importance is attached to improving the methodological
framework. In order to improve the management of the Company’s
cash fl ows new documents have developed and amendments have
been introduce into the existing regulatory documentation.
The JSC TATNEFT’s balanced budget of payment means movement
was executed in 2013. The budget funds of the Company are
planned and distributed between 13 Control and Accountability
Centers. Each CCA is guided by a Deputy General Director or Head
of Department for respective activity, which provides operative
fi nancial management and responsibility for purposeful and effective
use of funds.
70
ALLOCATION OF THE COMPANY’S COSTS BY CENTERS OF CONTROL AND ACCOUNTABILITY (2012-2013)
NO.
CCA
ADMINISTRATOR
AREAS OF FUNDS SPENDING
2012,%
2013,%
Tax payments
19
19
1.
2.
URNiN
(Oil and Oil Products
Sales Department)
Service of Deputy
General Director,
Economics
Head of URNiN (Oil and Oil
Products Sales Department)
Business expenses related to sale of oil, petroleum
products, gas products and petrochemical products;
funding of the investment program for development of
selling infrastructure
Deputy General Director,
Economics
Expenses for salaries; travel allowance; expenses for
introduction of SAP R/3 and other information systems;
expenses from profit
3.
Financial Department
Head of Financial
Department
4.
Accounting & Reporting
Department
Head of Accounting and
Reporting Department –
Chief Accountant
5.
Production
Department
Head of Production
Department
Capital
Construction
Department
Deputy General Director for
Capital Construction
Repayment of credits and interests on credits, granting
of loans, redemption of own bills, commissions of banks,
expenses for investment activity (in terms of financing
construction and revamping of the Petrochemical
Complex, foreign projects and projects outside the
Republic of Tatarstan), payments for services of
monopolists in the power sector and other services
Expenses for the main production (in terms of capital
repair of other fixed assets and services of production
nature); other production payments (in terms of
communication services, software, rational proposals and
inventions, participation in exhibitions, etc.); research and
development; ecological payments
Expenses for capital construction of production and non-
production facilities, capital repair, liquidation of facilities,
landfill operations for temporary access roads, water lines
and power lines (during drilling)
Service of Logistics
and Transport
Deputy General Director for
General Issues
Purchase of materials and equipment; payment for
transport services, maintenance of roads and roadsides
Service of Chief
Geologist
Deputy General Director –
Chief Geologist
Geophysical services and hydrodynamic survey of wells,
topographic and geodetic works, scientific and technical
services and exploration works
9.
Property Department
10.
Service of Deputy
General Director
for HR and Social
Development
Deputy General Director,
Head of Property
Department
Expenses for property matters, lease payments,
securities servicing, participation in other organizations:
contributions to authorized capitals of third companies,
acquisition of shares
Deputy General Director for
HR and Social Development
Expenses for social area issues and HR, expenses for
mass media, image of the Company, advertizing
11.
Reserve of General
Director
General Director
Distributed between other Centers of Control and
Accountability acc. to the results of actual application of
budget funds
12. Structural Divisions
13.
Service of Deputy
General Director
for Well Workover,
Drilling and EOR
Managers of Structural
Divisions
Decentralized expenses for current activities
of structural divisions
R.M. Rakhmanov, Deputy
General Director for Well
Workover, Drilling and EOR
Expenses for well workover and drilling and oil recovery
enhancement, production services during well workover
6.
7.
8.
42
42
2
2
15
14
3
2
2
1
4
1
1
5
3
4
2
2
1
4
1
1
4
4
100
100
71
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
ASSETS MANAGEMENT
Formation of the Company’s assets structure is made in accordance
with the Company’s development strategy in its capacity as a
vertically integrated oil and heat/power generating holding with
the priorities of consolidating production assets (expansion of the
resource base), crude oil refi ning, petrochemical production and
heat/power generating capacities.
There is a unifi ed corporate center functioning in the Company to
consolidate the assets and manage the property within the Property
Department of JSC TATNEFT, which ensures the functions of
maintaining records, legal protection and control of movable and
immovable property.
Ownership of registered immovable property was registered for 464
items amounting to RUR 8.1 billion in 2013.
In accordance with the corporate program of increasing the
effi ciency of the Company’s assets package the structural divisions
sold (including deferred payment deals) unclaimed property valued
at RUR 690 million in the reporting year.
Selling of little used and non-used property provides for additional
cash fl ow, helps reducing the cost of maintaining the property
complex, and as a result reduces the production cost of products
sold by JSC TATNEFT.
JSC TATNEFT has built a single, integral, fl exible lease relations
system that allows responding to the changing dynamics of the rent
payments taking into account the economic situation and solvency
of entities taking the property on lease. The rent payments in the
amount of RUR 1.15 billion were received in 2013.
INTANGIBLE ASSETS, INTELLECTUAL PROPERTY
Intangible Assets Management System
As part of long-term corporate priorities for managing intangible
assets and intellectual property of JSC TATNEFT the work
was continued in the reporting year on the procedures for
commercialization of intellectual property items, a commercial
portfolio of the JSC TATNEFT’s intellectual property and the most
promising patents was built up to identify opportunities for their
promotion on the Russian and international markets. During the
period since 2004 the share of intangible assets in the currency
balance sheet of the Company doubled.
The inventory of inventions and utility models useful service life,
which are on the balance of the JSC TATNEFT’s structural divisions
is annually made according to the provisions of the accounting
standard (PBU 14/2007) in order to optimize and reduce costs in
the production area. Revision of useful service life and depreciation
rates of intangible assets is related to the duration of the future
profi ts receiving period and increasing the profi tability of JSC
TATNEFT in general.
To ensure effi cient use of the intellectual property items the
Company maintains on an ongoing basis a single register of
intangible assets, the basis of which are technological assets that
are essential for current operations.
Over
5,000
intellectual property items
are in the register of intangible
assets of the Company as
of the end of 2013
Being a high-tech company, JSC TATNEFT provides its research
and development works and production technologies to outside
companies on a commercial basis, and also makes the contribution
of intangible assets to the authorized capital of the newly established
enterprises.
The work was continued in 2013 on the management of the
Company’s trademark, as one of the property assets involved
in production activities (crude oil production, processing, sale,
promotion of technologies) that provide for additional income and
strengthens the image of the Company. The major component of
the program is the management the corporate brand (trademark) of
TATNEFT registered in all areas of the Company’s activity, including
registration under the Madrid Agreement, and it is included in the
international ranking of the most expensive brands. The program of
strengthening the TATNEFT corporate brand is aimed at increasing
its market value. As a result of this work TATNEFT brand joined the
top 10 most valuable brands in the Russian rating of 2013 published
by the International Agency, which is an authoritative expert in the
management and evaluation of brands. The TATNEFT brand value
was RUR 53.8 billion (RUR 17.6 billion in 2006).
2013 witnessed completion of the work to create a single intellectual
property register of the JSC TATNEFT’s subsidiaries.
CORPORATE CONTROL
AND INTERNAL AUDIT
The Unifi ed Intellectual Property Register of TATNEFT Group is
designed to consolidate intellectual property data at the disposal
of the subsidiaries and affi liates of JSC TATNEFT, created and
registered objects, their current use and the economic effect.
Application of the unifi ed register will allow the Company to handle
the intellectual property in the most effi cient way through intensive
involvement in the internal economic turnover, as well as through
its commercialization. The greater part of the TATNEFT Group
intellectual property refers to segments of crude oil production,
refi ning and related activities and is subject to protection under the
patent law, copyright and confi dentiality provisions (commercial
confi dentiality).
In the course of forming the unifi ed intellectual property register of
TATNEFT Group specifi cally selected items potentially attractive in
terms of commercialization, i.e. possibility of rights transfer for their
use. Their number amounted to 43% of the total number of scientifi c/
technical activity results.
11,635 rationalization proposals, inventions, utility models were put
into production in 2013 with the economic effect of introducing the
inventions, utility models and rationalization proposals amounting
to RUR 5,665.1 million and 200 patent applications were fi led for
inventions.
The operational system of the internal control audit of the Company
provides for submission of independent and objective information
aimed at improving economic activity to the Board of Directors
and the Executive Directorate. The internal audit function helps
achieving targets through application of a systematic and consistent
approach to evaluating and improving the effectiveness of the risks
management, control and the corporate management systems.
The audit is performed within the frame of the annual plan approved
by the Board of Directors.
The internal control system for operational effectiveness of
processes, legal compliance and property security are focus areas
of the audit. The audit is performed based on the risk-oriented
approach. Report on results of the internal audit is directed to the
Company’s management and to the Audit Committee.
Further on the Internal Audit Department monitors performance of all
measures and informs the Company’s management and the Audit
Committee on the progress of revealed shortcomings elimination.
Main functions of the internal audit are as follows:
• Evaluating the effectiveness of the internal control and the
corporate management systems;
The Company carries out extensive work to ensure availability of
advanced methods and equipment for the overall production, as well
as high-performance information technologies of the Companies
management and control processes. The company resorts to the
world’s best practices in technologies area, but the Company also is
a supplier of technological services with high market demand for.
• Advising the management of the Company on internal control,
risk management and corporate management.
• Evaluating the effectiveness of control over the completeness
and authenticity of fi nancial and managerial information.
• Evaluating abidance by internal policies and procedures
of the Company, as well as the ones of the legislation.
The corporate TatNIPIneft based Research Center is one of the
most competent in the industry. The Company develops its own
base of intangible assets, which include advanced technologies and
know-how to strengthen the production/technology and information
platforms of the Company and qualitatively involved in shaping the
Company’s value.
• Elaboration of recommendations for improving the systems of
internal control, risk management and corporate management.
• Monitoring implementation of measures (corrective steps)
elaborated by the management on the basis of the audit results.
11 audits were performed in 2013 as scheduled. In addition to this,
as per the orders of the Company’s management, 15 non-planned
internal audits were carried out on various aspects of fi nancial and
economic activities.
In 2013, monitoring of the planned events execution was performed
on the audit results of 2009-2013. The information on the implemen-
tation of the action plan was presented to the Audit Committee.
72
73
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
PROGRAM OF INCREASING PRODUCTION MANAGEMENT
EFFICIENCY AND STRENGTHENING OF JSC TATNEFT FINANCIAL
AND ECONOMIC STATUS FOR THE PERIOD OF 2008-2015
DESCRIPTION
RESULTS OF 2013
1. SOLVING THE TASK OF CRUDE OIL PRODUCTION INCREASE AND RESERVES STOCK GROWTH
WAS ACHIEVED THROUGH THE FOLLOWING ACTIVITIES
Maintaining the achieved crude
oil production level
Volume of crude oil produced by JSC TATNEFT in 2013 amounted to 26,107 thousand tons
accounting for an increase in the amount of 102 thousand tons versus the level of 2012.
Maintaining the annual meterage drilled
Volume of production and exploration drilling amounted to 450.1 thousand meters.
Geological survey and field development
in new territories outside the Republic
of Tatarstan
Production of bituminous oil
(development of extra-viscous oil fields)
Volumes of crude oil production from deposits outside the Republic of Tatarstan in the Russian
Federation amounted to 312 thousand tons in 2013, which was 3.4% above the level of 2012.
18 new wells were drilled.
Crude oil production from new wells amounted to 410.8 thousand tons.
The amount of 145.6 thousand tons of extra-viscous oil was produced from Ashalchinskoye field
in 2012. Total production rate for the area amounted to 480 tons of oil per day by the end of 2013.
325.7 thousand tons of oil were produced from the beginning of the pilot field development
operations.
2. IMPLEMENTATION OF THE COMPLEX PROGRAM TO FURTHER INCREASE ASSOCIATED PETROLEUM GAS UTILIZATION
Engineering design of associated petroleum gas
gathering and utilization facilities
The volume of associated petroleum gas in the reporting period amounted
to 865 million cubic meters.
Reconstruction of the Minnibaevo Gas Refinery
for the purpose of increasing the ethane
production to 140 thousand tons per year
According to the «Action Program” of JSC TATNEFT for utilization of associated petroleum gas in
2009-2013» the following projects were implemented:
• putting in operation crude oil heating furnaces operated with associated petroleum gas at
Bastryk and Novo-Suksinskaya crude oil treatment.
• construction of gas engine generator plant at the Yelabuga crude oil treatment plant of NGDU
Prikamneft.
• reconstruction of Minibaevo sulfur removal unit for expanding gas purification capacity
• construction of the associated petroleum gas gathering system from the facilities of NGDU
Almetyevneft and NGDU Aznakaevskneft and NGDU Bavlyneft.
3. DEVELOPMENT AND APPLICATION OF NEW EQUIPMENT AND TECHNOLOGIES IN DRILLING AND CRUDE OIL PRODUCTION
Drilling of horizontal wells, downhole splitters,
side tracking jobs with drilling of laterals and
horizontal wellbores, drilling of slim hole wells
Implementation of sucker-rod pumps chain
drives and implementation of dual production of
two and more layers system, implementation of
M1-X packers, etc.
266 new production wells were commissioned with an average rate of 9.3 tons/day.
73 side tracking jobs and horizontal wellbore side tracking jobs were performed with the average
production rate amounting to 7.4 tons per day.
38 slim holes with an average production rate of 6.2 tons per day were drilled.
59 horizontal and 12 multilateral wells were commissioned.
16 horizontal wells were drilled in the target horizons «D0» and «D1A» with an average rate of
11.3 tons per day.
103 water/oil swellable TAM packers were installed in 68 wells.
Well stock equipped with chain drives amounted to 1,786 wells as of the end of 2013.
Over 1,900 wells are equipped with dual production systems.
Additional oil production from the beginning of dual completion, production and injection units
operation amounted to 7.7 million tons, the average increase in oil production per 1 well achieved
4.4 tons per day resulting from dual completion production/injection, and 1.9 tons per day
resulting from dual injection.
М1-X packers were installed in more than 4,000 injection wells.
Hydraulic fracturing operations were performed in 605 wells.
20 hydraulic fracturing operations were performed at new wells just after drilling.
274 operations were performed using the new hydrofracking fleet. Resulting production rate
increase from hydrofracking operations amounted to 4.9 tons per day.
Well MTBF index reached 1,198 days.
4. STRATEGY OF MANAGING VERTICAL INTEGRATION AND DEVELOPMENT OF CRUDE
OIL REFINING AND JSC TATNEFT’S FILLING STATIONS NETWORK
Construction of the Refining and Petrochemical
Plants Complex
The amount of 7.6 million tons of crude oil was refined at TANECO. The refining depth amounted
to 73.5%, which is higher than the average all-Russia value (71.5 %).
Development of the filling stations network
Total number of filling stations amounted to 648 units.
DESCRIPTION
RESULTS OF 2013
5. PETROCHEMICALS PRODUCTION DEVELOPMENT PROGRAM
Organization of the tire production
Total output is 12.5 million tires, including SSC tires – 653.7 thousand pieces.
The production of 39 tire models were developed and accepted for serial production.
Carbon black production
Output of carbon black is 108.9 thousand tons, 14 grades.
6. INTRODUCTION OF INFORMATION TECHNOLOGIES
Improvement of the integrated control
system on the basis of SAP products
Development of the motor transport
navigation system
7. RESOURCE SAVING PROGRAM
“Energy saving» program
The following SAP product based systems were put into commercial operation in 2013:
• system of planning, adjusting and monitoring expenditures of JSC TATNEFT in all structural
divisions;
• program of structural divisions switchover to the integrated SAP system was completed as part
of the TATNEFT’s consolidated accounting statements system formation;
• use of the electronic digital signature technology in the electronic system of planning
applications for payment.
Put to pilot operation:
• Generation of JSC TATNEFT’s consolidated financial statements;
• «Investment Management» system by activity areas;
• TATNEFT’s subsystem of projects monitoring and analysis for capital construction.
Over 8.6 thousand motor transport vehicles were equipped with the satellite navigation system.
Implementation of the navigation system on the motor transport provided for reducing the number
of groundless machinery orders and reducing the average daily machinery run by 9%.
Fulfillment of the “Energy saving program” in 2013 allowed saving about 56 thousand tons of
reference fuel.
Capstone microturbine plants operated with APG generated over 29 million kWh electricity.
Optimization of the electricity payment expenses
resulting from switchover to hourly planning
Economic effect resulting from implementation of the hourly planning system for a day ahead
amounted to RUR 385 million in 2013.
Implementation of corrosion-resistant tubing
8. ENVIRONMENTAL SAFETY
Corrosion protected tubing with polymer coating was installed in 382 injection wells in 2013.
Corrosion protection of injection wells since the tubing protection program start was implemented
in 6,656 injection wells. Protection of the active well stock operating with effluent water reached the
level of 87.4%.
Air protection
Emissions of harmful (polluting) substances into the air are within admissible limits.
Protection and rational use of land and water
resources, conservation of mineral resources
923.9 km of corrosion protected pipes were manufactured. 25.9 thousand m2 of the vertical tanks
and horizontal settlers internal surface were protected with application of paint and varnish.
Casing string cathode protection was applied in 986 wells.
The environment condition in the areas of new deposits development is consistently maintained at
the standard acceptable level.
9. CAPITALIZATION INCREASE AND STRENGTHENING OF THE TRADEMARK
Capitalization increase and strengthening
of the trademark
The Company’s market capitalization amounted to RUR 471.6 billion by the results of 2013.
According to the Interbrand International Agency TATNEFT joined the TOP-10 most expensive
brands. The Company’s brand value amounted to RUR 53.8 billion.
10. INVESTMENT BUSINESS PROJECTS
Implementation of projects in OEZ “Alabuga“.
The joint Russian-German venture “P-D TATNEFT-Alabuga Steklovolokno“ produced 26.1
thousand tons of liquid glass melts, which was 12% above the level of 2012. 21.3 thousand tons of
commercial products were produced.
Expertise of individual design and construction
documents for well drilling and construction
Since 2012 the transition has been made to the contractual pricing of well construction on the
basis of individual cost estimates for all areas. Such a transition allowed making settlements with
drilling companies at a fixed price.
11. SOCIAL DEVELOPMENT PROGRAM
Program of mortgage crediting
Implementation of social projects
638 apartments with total area of 45.25 thousand square meters were built under the mortgage
crediting system for the employees of TATNEFT Group of Companies in 2013.
The seventh stage of the ponds cascade was commissioned in Almetyevsk and a new school n.a.
the 70th anniversary of oil in Tatarstan was opened in Almetyevsk in 2013, as well a kindergarten
and a «Tennis Hall» sports complex in Leninogorsk.
Water tower was built and water lines were repaired in Almetyevsk and Leninogorsk areas.
74
75
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
ENERGY AND RESOURCE
EFFICIENCY PROGRAM
OF JSC TATNEFT
FOR THE PERIOD TILL 2020
JSC TATNEFT attaches particular importance to resource saving. In
order to reduce production costs and, accordingly, the product cost,
improve competitiveness in the situation of permanently escalating
tariffs of natural monopolies (for energy resources, transport services)
and increase hydrocarbon production costs resulting from complicat-
ing subsurface usage conditions the Company is taking integrated
efforts to create a maximum allowance savings in all business areas,
including energy conservation.
In 2011 the Company started the third phase execution of the resource
saving program, which involved 25 entities of the TATNEFT Production
Group of Companies. The main objective of the program is to reduce
the absolute consumption of energy resources through the implemen-
tation of program activities by at least 7.4 % in the fi rst stage (2015) and
by 13.5% in the second stage (2020) versus 2007. In accordance with
the approved resource conservation program there were 594 activities
executed during the period considered with 232 of them aimed at sav-
ing electric energy. Implementation of the resource conservation pro-
gram activities resulted saving more than 55,600 tons of reference fuel
in 2013, which accounted for 4.9 % reduction in the Company’s need
for fuel and energy resources. The major part of the energy resources
savings falls on the electric power consumption savings.
The savings from measures aimed at reducing the consumption and ra-
tional use of material and natural resources amounted to RUR 4.7 billion
in 2013. These funds were spent for compensation of additional costs
associated with maintaining economic Company’s crude oil production
under the conditions of high fi elds’ depletion. Successful performance
of TATNEFT Company in the fi eld of resource saving and environment
protection were distinguished by multiple awards of Republican «Re-
source Effi ciency. Energy Saving» and «ECOleader» contests.
594
ACTIVITIES
were executed in accordance with the resource
conservation program from 2011, among them
232
ACTIVITIES
aimed at saving electric energy
76
LOGISTICS AND PROCUREMENT
DEPARTMENT (MTO)
The Logistics and Procurement Department to support production
operates on the principles of transparency and maximum effi ciency.
In 2013, the Group continued centralization and further development
of the consignment warehouses network, implementation of the
Electronic Store project, and automation of procurement and supply
processes.
CONSIGNMENT WAREHOUSING
Smooth logistics for the Companies and service entities is provided
through consignment warehouses.
JSC TATNEFT operates 63 consignment warehouses. The volume
of inventory items (inventory holdings) sales through consignment
warehouses amounted to RUR 2,485 million in 2013 (2,315 million in
2012).
The inventory holdings cost at the Tatneftesnab storage remaining
in the ownership of the consignee until the delivery of goods to a
structural unit amounted to RUR 270 million in the reporting year
(RUR 233 million in 2012), which prevented diversion of working
capital for creation and storage of the Company’s own reserves for
this amount.
ELECTRONIC TRADING PLATFORM
In order to improve procurement activities of the TATNEFT Group
of Companies, a complex electronic trading platform has been in
operation since December 2009. Performance of procurement in
the electronic form allows complying with fundamental principles
of openness, transparency and equal competitive opportunities
for suppliers, and selecting the winner for the best combined
performance (quality, delivery terms and price). Starting from the
second half of 2010, virtually all service subsidiaries of the TATNEFT
Group of Companies carried out competitive bidding procedures
through the electronic trading platform in terms of procurement. In
future, the electronic trading platform will integrate all enterprises of
the TATNEFT Group of Companies.
The Procurement and Logistics Department held 1,897 two-stage
procurement procedures for a total of RUR 9,486 million in 2013
(1,508 procedures for RUR 8,779 in 2012). The fi rst stage was the
request for quotations, while the second stage was the auction for
price reduction among participants who put the price on the whole
lot. 1,237 auctions were held successfully for the amount of RUR
4,409 million (865 procedures for RUR 3,660 million in 2012) with
additional savings on the price determined at the fi rst stage in the
amount of RUR 285.8 million (RUR 231 million in 2012).
During 2013 the Company’s subsidiaries and oil service enterprises
performed 2,678 procurement procedures in the amount of RUR
6,858 million (1,750 procedures for RUR 3,760 in 2012).
E-STORE
The fundamental solution for the Company’s logistics management
was establishment of the E-Store, which is a tool of implementing
the corporate technological policy in organizing procurement within
the allocated budgets and funding in accordance with the supply
calendar.
More than 80,000 applications (goods’ items) were placed through
the E-Store from the structural divisions of the Company, its
subsidiaries and affi liated companies in 2013.
CENTRALIZED SHIPMENT
The inventory worth RUR 19.5 billion (RUR 18.4 billion in 2012) was
shipped according to the scheme of centralization in 2013, which
was 6% more than in 2012.
The share of transport costs for centralized delivery in the cost of
goods was reduced from 1.11% to 1.06%.
TRADE & TECHNICAL HOUSE OF JSC TATNEFT
The Company sells its production for external consumers via
the TATNEFT Trade and Technical House. In 2013, these sales
amounted to RUR 2,423 million, which was RUR 807 million more
than in 2012.
Out of the total sales volume external companies purchased
inventory for RUR 1,705 million (RUR 1,073 million in 2012), whereas
“internal” group deliveries accounted for RUR 718 million (RUR 543
million in 2012).
In the bulk sales structure the main areas were as follows:
• Pipes for various purposes: in the amount of RUR 804 million (RUR
421 million in 2012);
• Chain drives: in the amount of RUR 378 million (RUR 382 million in
2012);
• Oilfi eld equipment: in the amount of RUR 929 million (RUR 382
million in 2012);
• Other products: in the amount of RUR 312 million.
TATNEFTESNAB ADMINISTRATION
In 2013, it concluded more than 4.34 thousand of contracts and
specifi cations in the amount of RUR 25.7 billion.
42 % of all orders were placed in the enterprises of the Republic of
Tatarstan.
During 2013, work was conducted on the operational performance of
the contract terms. Tatneftesnab Administration brought 422 claims
against contractors for non-compliance with contractual obligations in
the amount of RUR 1,802 million. RUR 1,536 million worth of products
was collected or delivered as a result of the claiming procedure
(including the remaining claims as of January 01.2014).
ACCUMULATED DYNAMICS OF VOLUMESPRESENTED FOR TENDERS
AND EFFECT FROM ADDITIONAL REDUCTION
(RUR MILLION)
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77
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
RISK MANAGEMENT
There is an integrated system of risk management operating in the
Company based on the analysis and evaluation of possible factors that
could affect indicators of production, fi nancial and economic activities
of JSC TATNEFT and the Group’s enterprises, as well as cause direct
or indirect impact on the current activity and/or strategic plans of the
Company. The risk management also includes control over compli-
ance with uniform corporate standards regulating the main processes
of production and fi nancial and economic activity of JSC TATNEFT and
the Group’s enterprises
The corporate risk management system is designed to identify
potential risks in order to take prompt measures to eliminate or
minimize them, which allows adjusting business planning, investment
activity and social policy of the Company. External, as well as internal
factors are taken into account, when analyzing the risks. The internal
corporate factors include management, production, HR, social,
environmental and other aspects.
The external factors include market, industry, socio-economic,
political, fi nancial, as well as competitive and other environment of
the Company, its subsidiaries and affi liates activity
INDUSTRY RISKS
The Company has a comprehensive program of measures to over-
come adverse situations related to industry risks. This program pro-
vides for continuous monitoring, analysis and forecasting of oil prices
with an appropriate adjustment of the strategic development plans, as
well as it contains a range of technical and organizational measures
that minimize the impact of technical and environmental risks.
Risk of oil and oil products prices:
Revenues, profi tability and future growth rates largely depend on
existing prices for crude petroleum products. In the past year, oil
prices varied widely with respect to changes of many factors. The
factors causing this swing in particular include:
• international and regional supply and demand (as well as
expectations about future supply and demand) for oil and
petroleum products;
• uncertainty of the market;
• weather conditions;
• macroeconomic policy;
• international and regional economic situation;
• national and foreign governmental regulation;
• prices and availability of alternative fuels;
• prices and availability of new technologies;
• ability of members of the Organization of Petroleum Exporting
Countries (OPEC) and other oil-producing countries to establish
and maintain certain levels of crude oil production and prices;
• political and economic developments in the oil producing regions
and in particular in the Middle East;
• normative acts and actions of the governments of Russia and
other countries and international organizations, including export
restrictions and taxes;
Technical risks:
Exploration, development and equipping of new fi elds, maintenance
of existing wells operational condition, drilling of new wells, as
well as oil transportation are a very complex and capital-intensive
processes. Enhanced oil recovery also requires additional
investments. In the future, as the depletion of the old fi elds grows,
the role of special methods of oil recovery will increase. Accordingly,
the cost of the fi elds’ development material and technical base
the will also increase. The Company’s capability to maintain and
increase crude oil production in the license areas are is dependent
on the access to the technologies of oil recovery and technologies of
enhanced oil recovery as well as success in their application. There
is a Tatar Research and Design Institute of Oil (TatNIPIneft) in the
composition of the Company, which is one of the leading scientifi c
centers of Russia in the fi eld of prospecting and exploration,
technology development for oil and gas exploration, production,
oil treatment, oil facilities protection against corrosion, design and
construction of oil fi elds, as well as construction of wells. TatNIPIneft
activity allows the Company maintaining and strengthening
the Company’s technological potential in the fi eld of crude oil
production.
Environmental Risks:
The oil and gas sector of the economy is subject to a high
degree of environmental risks. Even when operating under
current environmental standards of the Russian Federation and
the Republic of Tatarstan there is a risk of penalties due to their
violation. In addition, there is a risk of possible revision of the federal
and regional environmental standards in the direction of further
tightening.
The Company has a comprehensive program of measures to
overcome adverse situations related to industry risks. The Company
successfully implements a set of environmental measures aimed at
minimizing the impact of industrial activity on the environment, and is
one of the recognized leaders in Russia in this area.
COUNTRY AND REGIONAL RISKS
The Company has been registered as a taxpayer and conducts its
main business activity in the Russian Federation.
The main production assets of the Company are located in and
the main production activities are carried out in the territory of
the Republic of Tatarstan, which is a constituent of the Russian
Federation.
The political situation in the Russian Federation and the Republic of
Tatarstan in particular is stable.
The risks of a possible military confl ict, a state of emergency or a
major strike in the region of the Company are rated as low. At the
same time, the Company approved procedures that may be applied
in the case of an emergency to reduce the impact of this situation on
the life, health and safety of workers as well as the production activity
of the Company.
Effects of Infl ation:
The current infl ation rate has no signifi cant effect on the fi nancial
position of the Company. In line with predicted infl ation, it should not
have a material impact on the solvency of the Company, in particular,
payments on the securities.
It is not possible to predict the critical rate of infl ation for the
Company since in addition to the consumer price level it is necessary
to take into account changes in the real purchasing power of the
ruble, the situation on the Russian and international oil markets and
future government policy on tariffs.
In recent years, the prices of crude oil and petroleum products used
to remain continuously high. Prices for crude oil and petroleum
products may not further increase and even might decrease.
Falling prices for oil and peroleum products could adversely affect
the results of operations and fi nancial condition of the Company.
Falling prices may lead to a decrease in the volume of commercial
oil produced by the Company, which will lead to a decrease in the
effective development of the Company’s reserves and will reduce
the cost-effectiveness of exploration programs.
It should be noted that at the moment, in the opinion of the
Company, a signifi cant deterioration of the situation in the industry is
not expected, given the stable level of oil consumption and the lack
of alternative fuel sources on a mid-term horizon that could replace
crue oil and petroleum products to any signifi cant extent. Therefore,
the effect of possible deterioration of the situation in the industry
on the fi nancial statements of the Company and the fulfi llment of
obligations under the Company’s securities is unlikely.
LEGAL RISKS
The main activities of TATNEFT Group are performed within the
Russian Federation. The legislation of the Russian Federation
(including tax, corporate and use of natural resources) is undergoing
changes, some of which may cause additional costs, diversion of
resources, changes in the procedure of the Company’s and its
divisions’ managing bodies formation and functioning. Responsible
services of the Company carry out continuous monitoring of changes
in the legislation, and take steps to comply with regulations and
requirements, as well as take part in the consultative councils and
other associations on legislative changes affecting the operations
of TATNEFT Group of Companies. The Company is not a defendant
in any action or claims, which proceedings could cause the
Company to incur liability, which could have a material impact on the
Company’s fi nancial position or performance
Geographical features of the region, major activities of the Company
are not characterized by increased risk of natural disasters, which
may have a signifi cant impact on normal production activities. In
planning and execution of production, treatment, transportation and
storage of crude oil and gas production, oil and gas products, as
well as the materials involved in the production thereof, the Company
takes into account geographical, including climate, specifi cs in the
region of activity. In case of a negative impact on the activities of the
Company, which may be caused by natural disasters, such as fl oods,
earthquakes, mudslides, etc., the Company approved procedures
and policies aimed at the prompt remedy of such effects. The
Company has established procedures for monitoring with the use of
modern technologies to prevent the possibility of adverse effects of
natural phenomena and to inform people of the Company’s region of
activity about the possibility of such damages.
The Company’s region of core business is not remote from the
viewpoint of transport and other infrastructure.
FINANCIAL RISKS
Signifi cant changes of the foreign currency exchange rates affect
the Company’s liabilities denominated in such foreign currency.
Signifi cant fl uctuations in the foreign currency exchange rates may
cause changes, including unfavorable ones, in the Company’s
liquidity ratio.
The macroeconomic situation deterioration and the increase in
interest rates may result in changing the value of the Company’s
interest expense on debt obligations. In particular, in the case of
borrowings in the form of bank loans with a «fl oating» interest the rate
rise in the general level of interest rates at the international market
will increase the amount of funds to be paid as the interest that will
adversely affect the Company’s fi nancial standing. Reduction of
the interest rates, ceteris paribus, may reduce the effectiveness
of the Company’s current borrowings at a fi xed interest rate. The
Company continuously monitors the macroeconomic situation and
takes necessary decisions to reduce the adverse macroeconomic
developments impact on the Company’s activity and fi nancial
standing.
Currency Risk:
The Company is exposed to risks of adverse changes in exchange
rates, the main of which is the strengthening of the ruble fl uctuation
against the U.S. dollar. This is due to the fact that a signifi cant
share of the Company’s revenues is denominated in U.S. dollars,
while most of its expenses are denominated in RUR. Therefore,
strengthening of the ruble against the dollar leads to a decrease in
revenues of the Company in ruble terms, while the RUR weakening
with maintaining other macroeconomic parameters, implies an
increase in revenues in ruble terms.
As a whole the Company’s currency ineptness structure refl ects
the structure of the Company’s revenues, which also reduces the
dependence on the currency fl uctuations.
78
79
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
INFORMATION TECHNOLOGY
MANAGEMENT
The strategy of JSC TATNEFT in fi eld of IT is aimed at creating
competitive advantages of the Company in the production, sales,
administrative, economic, social and other Company’s activities.
As of today there are information systems at JSC TATNEFT provided
for virtually at all levels and stages of production, starting with
automation systems at the level of a crew and production shop
to the Company’s corporate top management level. The existing
complexes have been integrated into a unifi ed information space.
The information systems provide for real time recording, acquisition
and analysis of tens of thousands readings, including information
for decision making at the highest level, as well as generation of
accounting documents. Information/analytical and situational
centers have been created to provide for such working conditions,
having in its composition competitive telecommunications, high-
quality information display facilities, multiple integrated data sources:
from the remote control systems to analytical systems. Such centers
have been established under the motto: Accurate information at the
right time in the right place and in a convenient format.
The information technologies development level at JSC TATNEFT
and the business maturity level allow speaking about an «intellectual
fi eld». Attributes of such a fi eld include suffi cient automation of
oilfi eld equipment, real time acquisition and delivery of telemetry
data, as well as complex of automated systems to maintain control
over the fi eld development based on monitoring key indicators
and manage fi eld development processes. The «intellectual fi eld»
development is always based on the ongoing hydrodynamic model.
Currently, there is a unique large-scale software and hardware
solution applied at TATNEFT Group of Companies that provide for
satellite technology based system of transport movement control.
The problem was solved within this solution of monitoring the path,
speed, mileage of vehicles.
CORPORATE INFORMATION SYSTEMS IN ENSURING
PRODUCTION AND MANAGEMENT SYSTEM:
Information Analysis Portal of Well Construction
The system ensures a single information space providing for
consolidation of data required in the process of wells construction
from different information systems used in production activities for
the well construction ordering customer. The data provided from the
corporate information and telemetry systems allow the monitoring of
the well drilling process general parameters, drilling direction control
(geonavigation), control of technological surface drilling parameters
and cementation process control.
ASU «Production Drilling Performance»
Processes of preparing main sections in elaborating the design of
cluster projects for well construction, supervision of implementing
design solutions for drilling fl uids, schedule maintenance for the
preparation of design estimates, engineering calculations for
bituminous and multilateral wells were automated last year.
Functionality of components «terms of reference», «well construction
program”, “drilling work order”, «well construction cost estimates»,
«construction timing control», «cost estimate element administration
standards» was extended and that allowed reducing the time of
preparation of the design estimates and calculations, as well as the
integration support.
The component «schedule for the preparation of drilling units” as
well as the tool of preparing the actual order were upgraded.
Integration with CIS «ARMITS» was made in terms of the actual
operation data, structuring and systematizing data for NGDU
«Almetyevneft» were carried in terms of «well case» component
The TEP tool was developed for the comparative analysis of drilling
during a period of time.
Intellectual Management Tools for Development of the
Berezovskaya Area 3rd Block
The expert-analytical system based on the data analysis of the
satellite monitoring system, geographic information systems, waybill
data and the video surveillance system allowed solving the problem
of misusing electronic fuel cards.
Development of an analytical tool capable of identifying abnormal
objects’ functionality of measurement systems and crude oil
production facilities, as well as obtaining statistical similarity
coeffi cient of processes at the well sites in order to increase the
measurement coeffi cient accuracy.
The information community and the current dynamics of business
lead to hyper-growth of data volumes that are very diffi cult to
process. Thousands of patents and hundreds of pilot projects lead
to knowledge acquisition. The Company has started a project of
generating a knowledge bank implementing the concept of «from
data to knowledge».
Procedures of statistical and neural network analysis were
implemented in 2013. The system web portal is capable of
identifying substandard performance of measurement systems
and oil facilities, calculate statistical similarity of measurement
coeffi cients by wells and identify phenomena of date streams
interrelation and interference on the basis of their analysis.
ARM «APG Accounting and Control»
An accounting system “APG Control” was developed and implemented
for monitoring and reporting on APG with the possibility of obtaining an
automated report for accounting and control the APG utilization with
regard to payments for emissions of harmful substances formed during
APG fl aring at structural divisions’ installations of JSC TATNEFT. The sys-
tem adaptation was carried out in accordance with the RF Government
Decree No. 1154 in terms of calculation methods and algorithms applied.
Information Support and Automated Control of
Ashalchinskoye Field Process Facilities for Optimal
Development of Extra-Viscous Oil
An integrated information environment (IIE) was developed and put
into commercial operation for the Ashalchinskoye extra-viscous oil
project. Flowsheets presentation (web SCADA) were implemented
for targets of Ashalchinskoye fi eld allowing for process monitoring
with display of operational information on wells and boiler rooms, as
well as matrix information representation was implemented on daily
production of the wells with indication of a well production share in
the total production of by the wells according to the ICC USOI data
and the telemetry system data. A spread of specialized graphical
modules and representations was developed to display production
processes information in the fi eld to ensure prompt information for
the interaction organization of the project participants.
Automation System Development
for Engineering Design Projects
Expansion of “SAPP” information system functionality intended for
automation, accounting and control of the process of creation,
execution and completion of the project development works carried
out by structural divisions and external contractors.
In 2013, integration of «SAPP» with the CIS «Tatneft-Oil Production»
completed in terms of implementing the possibility of transferring
to «SAPP» the project status change information and project
support of the wells, as well as a mechanism was worked out to
connect to the «SAPP» third party general contractors and sub-
project organizations. File storage was organized with access rights
restriction and possibility to distribute by sections (projects).
SAP Products Based Integrated Corporate Management
System of JSC TATNEFT
Creation of a fully functional and integrated management SAP
products based system is being carried out in accordance with
the strategic initiatives and objectives of JSC TATNEFT. Active
development and implementation of solutions is designed to provide
the Company’s management with complete and reliable information
to make effective management decisions, improve the planning
quality, optimize and reduce operating costs, provide for reduce time
required for data acquisition, processing, retrieval and transmission
and minimize errors mobile access to corporate systems’ data.
In 2013, the works were completed on standardization of the system
operation in all business units of the Company, including planning,
monitoring and adjustment expenses of JSC TATNEFT, unifi cation
and standardization of reporting forms, variability of forecasting
calculations for rapid response to changes in the internal and
external factors.
In 2013, in order to implement recommendations for the formation
of direct costs of production and sale of crude oil, associated gas,
petroleum products, other fi nished goods (works, services) of
JSC TATNEFT in the tax records in accordance with the Tax Code
requirements changes were introduced into existing SAP solutions
in terms of tax accounting. Cost calculations of fi nished products,
works (services) taking into account the new scheme of closing of for
tax purposes were made in the test system.
As part of automating labor protection processes and their
integration with the process of maintaining the employment contract
the solutions of medical examinations, accidents registration and
occupational diseases were transferred in pilot operation category
with arrangement of training activities on labor protection and
industrial safety.
ENSURING INFORMATION SECURITY
Information security of all kinds of the Company’s resources is one of
the main factors of stability and minimization of the various corporate
risks.
Information systems’ security updates were incorporated in 2013.
Digital certifi cates of 287 users of information resources were
reissued. «Information Security Policy» document was updated.
Monthly monitoring of TATNEFT KSPD end-user workstation anti-
virus software media coverage was provided. From 69 to 123 million
requests over HTTP are processed every month with 11 to 23 million
queries locked, as the ones violating the information security policy.
10 to 21 thousand spam emails are monthly blocked.
Following the action plan the work was carried out in TATNEFT to
maintain the protection level of personal data in accordance with the
legislation requirements.
The work was carried out on the protection of JSC TATNEFT’s portal
solution from threats in the form of cross-site scripting. The works
were carried out to improve the information security level of network
printers located in the structural divisions of JSC TATNEFT. The
works were also carried out to improve the security level of certain
JSC TATNEFT’s portal solutions.
80
81
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
Training of the top management staff is performed by the non-state
educational Institute of Oil and Gas Business (Moscow), where JSC
TATNEFT annually sends prospective employees of TATNEFT Group
Companies for training after competitive selection.
In 2013, the training at the TATNEFT Personnel Training Center
and its branches was arranged for 307 occupations, including 140
occupations controlled by Rostekhnadzor of Russia. Experts of
the Company have been for 15 years participating in the program
of the management staff training for national economy of Russia
(«Presidential Program»). More than 150 persons got training during
this time period.
CORPORATE UNIVERSITY
The Company continues developing an innovative resource in
the fi eld of personnel training and development: the Electronic
Corporate University of JSC TATNEFT, which simulator trainings
were attended by more than 7 thousand persons during the past
year.
The «Lean Production» course was attended by 3,476 persons:
heads of enterprises, their deputies, as well as heads of
departments’ offi ces and foremen.
The «Young Specialist Course» was attended by 895 newly hired
workers, allowing them to adapt faster to the production process.
The courses «Corporate Culture» and «Internal Labor Regulations
for Employees of JSC TATNEFT” were attended and tested by 621
employees of the JSC TATNEFT’s Executive Offi ce.
In 2013, JSC TATNEFT commissioned the «Center of Excellence»
simulator, which was used by 1,000 employees to train for working
with the website.
An important event in the development of the ECU was launching
of “V-FRD» training simulator, which may help the workers learning
the techniques of safe work practices in the workplace, as well as to
identify errors entailing loss of working time.
The project “Students’ Labor Exchange” was actively developing in
2013. The “Students’ Labor Exchange” site was visited by 47,069
persons, while 2,620 of them registered as job seekers, including
1,374 graduates with full higher education. 114 companies
placed their vacancies with a total number of published vacancies
amounting to 573. 553 applicants got employment based on the
results of interviews with employers.
A large scope of work carried out by the Company in the fi eld
of personnel management has been highly commended by the
Government of the Republic of Tatarstan.
HR MANAGEMENT
Ensuring a highly professional level of specialists and workers at all
levels of the production and management personnel is realized by
the HR policy of training, professional development and motivation
of the employees. The social programs are aimed at improving the
quality of life of the employees, as well as their families. In total this
allows to provide the personnel responsibility and interest in high
performance of the Company.
The Company has a comprehensive system of personnel
management aimed at maintaining a high professional level of
workers and professionals involved in all areas of the Company
activities, including: maximally effi cient involvement of human
resources, development of the employees’ skills on an ongoing
basis, as well as strengthening motivation of the Company’s
employees in general and ensuring a decent standard of living of
each employee. The Company’s personnel management policy is
aimed at maintaining the status of the best employer of choice at the
regional market for workers with the skills and motivation to bring the
maximum benefi t to the Company.
STAFF HEADCOUNT
The average headcount of staff working in JSC TATNEFT amounted
to 20.8 thousand persons in 2013. Total number of personnel for the
Group amounted to 77 thousand persons.
The main income gained by the staff is formed by the salary and
employment benefi ts. The salary includes a rated (permanent) part
according to the uniform wage rate schedule, and a bonus (variable)
part. The employment benefi ts provide workers with an appropriate
volume of medical and other social guarantees.
Social payments accounted for 11% in the structure of the
personnel’s aggregate income in 2011.
RECRUITMENT, TRAINING, SKILL DEVELOPMENT
AND RETRAINING OF STAFF
The Company considers its employees as a key resource in
the implementation of the corporate strategy, therefore their
development and training is the most important area of the
personnel management policy aimed at creating an integrated
system of ongoing education with continuous improvement and
development of employees.
Training of workers for JSC TATNEFT is performed by the non-
governmental educational institution TATNEFT Personnel Training
Center and its eight branches located in the south-eastern part of
the Republic of Tatarstan.
Training and professional development for mid-level managers is
arranged in accordance with the program of training managers and
professionals of JSC TATNEFT approved by General Director of JSC
TATNEFT, as well as with skill development programs for divisions
and it are conducted on the basis of specialized universities in the
region and in the Russian Federation.
82
SOCIAL POLICY
The corporate social policy is based on the principles of creating
together with all the stakeholders the environment of the Company
for maintaining favorable living conditions and development of the
social infrastructure in the regions of the subsoil use and business
activities of TATNEFT Group enterprises and implementation of
targeted corporate programs to improve the quality of life of the local
population, including support for health, education, culture, sports
and children’s creativity.
THE COLLECTIVE AGREEMENT
The Company’s obligations to the staff are put on paper in the
Collective Agreement of JSC TATNEFT. The Collective Agreement
signifi cantly expands safeguards established by law, and
provides additional benefi ts for employees, social protection of
young workers, and support for veterans and retirees. In 2013,
all commitments stipulated by the Collective Agreement were
completed. Salaries were paid on time twice a month in the full
amount.
INFORMATION ABOUT THE STRUCTURE
OF JSC TATNEFT’S EMPLOYEES’ INCOME FOR 2013
DESCRIPTION
JSC TATNEFT - for 2013
Salary share
including:
permanent part
variable part
Share of social payments
VALUE
100%
89%
60%
40%
11%
14.7 thousand
EMPLOYEES OF THE COMPANY
went through professional training and skills development in 2013
Over
149
MILLION RUBLES
were spent for professional development
of the Company’ employees.
NON-GOVERNMENTAL PENSION FUND
One of the most important areas of the Company’s social policy
is provision of the non-governmental pension for its employees. A
Non-Governmental Pension Provision Program has been run at the
Company for more than 16 years covering practically all employees
through application of various pension provision schemes.
VOLUNTARY HEALTH INSURANCE
The VHI program for the staff of JSC TATNEFT includes four areas:
Outpatient Services, Inpatient Services, Rehabilitation and Remedial
Treatment, and Integrated Health Care.
In accordance with the Voluntary Health Insurance of Employees
Agreement concluded with “Chulpan” Insurance Company
the number of insured employees amounted to 21,474.The
total amount of the VHI contracts was RUR 223.9 million. The
Company’s employees are entitled to receive free medical care
and spa vouchers through implementation of VHI programs. 3,898
employees improved their health during 2013, including 410 persons
in spas and resorts of RT and RF.
The amount of RUR 69.9 million was allocated in 2013 for the
sanatorium rehabilitation of retired pensioners of the Group of
Companies divisions and enterprises. 2,741 non-working pensioners
improved their health in the spas of JSC TATNEFT.
MORTGAGE CREDITING
The Company operates a social mortgage program aimed at
improving living conditions through providing access to housing by
purchasing housing units on the installment payment basis. Support
is also provided for young families in obtaining housing.
In 2013, ten residential buildings were commissioned as part of
this program in the cities of Almetyevsk, Nurlat, Nizhnekamsk and
Yelabuga. Employees of the Company received 638 apartments with
the total area of 45.2 thousand square meters, with young families
receiving 30% of the commissioned apartments. TATNEFT allocated
RUR 6.1 million for acquisition of furniture in these residential units.
In the year viewed JSC TATNEFT made the initial payment in the
amount of RUR 89.7 million for the employees of structural divisions,
which was 24.3% of the cost of allocated housing. The size of the
lump-sum loan for young families was 30%.
SMALL AND MEDIUM-SIZED BUSINESS
DEVELOPMENT SUPPORT PROGRAM
JSC TATNEFT continued implementation of a special corporate
project of to support the development of small and medium sized
businesses in the south-eastern part of the Republic of Tatarstan.
This project aims at developing prospective production facilities and
creating new jobs in the regions of TATNEFT activity.
83
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
INDUSTRIAL SAFETY
AND LABOR PROTECTION
The industrial and ecological safety activities and the activities on
the labor protection were performed at JSC TATNEFT according to
ISO 14001:2004 international ecological safety standard and the
standard of industrial safety and health OHSAS 18001:2007 under
the integrated management system of industrial safety, labor and
environmental protection.
The Company’s integrated system of industrial safety, labor and
environmental protection management successfully passed the
regular re-certifi cation audit in August (September) of 2012 of and
received new certifi cates and the Company successfully passed
supervisory audit in 2013 for compliance with the international
standards ISO 14001 and OHSAS 18001.
The Company continued elaboration of relevant industrial
safety standards in 2013 for the purpose of establishing unifi ed
requirements to the components of the integrated management
system of industrial, fi re, electric power, radiation safety and
labor protection such as «The system of personal liability of JSC
TATNEFT’s employees for safety», «Regulation on industrial safety
management at JSC TATNEFT”, “Procedure for participation in a
panel of the scientifi c and technical council of the Federal Service
for Ecological, Technological and Nuclear Supervision development
and revision of normative-technical documents used in the fi eld of
industrial safety of the oil and gas industry», corporate management
standard «Programs and lectures of induction training for workers
and professionals coming to work in the divisions and subsidiaries of
JSC TATNEFT.
In order to meet requirements of the international standard OHSAS
18001 the Company developed a «Program (action plan) of JSC
TATNEFT in the fi eld of industrial safety and labor protection to
prevent injuries, reduce the risk of accidents and unplanned losses
for 2013-2015», which aims at preserving life and health, as well
as improving working conditions, reducing accidents, signifi cant
production risks, increasing equipment operation safety, improving
the facilities fi re safety. The plans provide for spending about RUR 7
billion to implement activities under the mentioned program. In 2013,
structural divisions of TATNEFT spent over RUR 3.7 billion.
The Labor Safety Committee works in order to maintain the labor
safety and preventive measures to reduce industrial accidents
and injuries in the Company, its structural business units and
subsidiaries. This Committee controls the compliance with the labor
protection requirements, prevention of occupational accidents and
diseases.
INDUSTRIAL INJURIES PROFILE IN 2006-2013
YEAR
2006
2007
2008
2009
2010
2011
2012
2013
NUMBER OF
ACCIDENTS
18
9
5
7
2
5
4
1
PROFILE OF LABOR PROTECTION COST
INCLUDING PER EMPLOYEE
YEAR
2006
2007
2008
2009
2010
2011
2012
2013
AMOUNTS SPENT FOR
LABOR PROTECTION,
RUR MILLION
SPENDING FOR LABOR
PROTECTION ACTIVITIES PER
EMPLOYEE, RUR THOUSAND
313.7
298.7
212.4
200.5
207.1
265.8
319.8
329.7
7.4
7.5
8.0
8.6
9.7
12.6
15.1
15.9
PROFILE OF INDUSTRIAL ACCIDENTS
29
23
5
3
18
1
30
25
20
15
10
5
0
Total Injuries
Fatalities
9
2
5
1
7
0
5
1
4
1
2
0
1
0
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
‘12
‘13
ENVIRONMENTAL ACTIVITY
The environmental activities of the Company are performed in
accordance with current laws and they meet all environmental
regulations, and take into account international, federal and regional
environmental standards. The Company passed certifi cation
of management systems ensuring environmental safety, labor
protection and industrial safety in accordance with the requirements
of ISO14001:2004 and OHSAS 18001:2007 international standards.
Environmental activities are based on:
• careful handling of natural resources and ensuring industrial and
environmental safety;
• complying with all requirements and standards in the area
of subsoil use, process safety of refi ning and petrochemical
industries and control of possible risks associated with these
activities, ensuring protection measures of water, land and
atmospheric air resources in the Company’s activities territory;
• contributing to the preservation of the natural balance and
strengthening of the eco system through reproduction and
improving the quality of and natural resources: forests, water
bodies, land areas and atmosphere protection;
• applying resource saving and environmentally friendly
technologies, including sources of solar energy;
• expanding limits of the corporate environmental management at
the level of interaction with partners, governmental agencies and
public institutions, as well as with local communities.
INDICES OF ECOLOGICAL SAFETY
AND ENVIRONMENTAL IMPACT
Air protection
39.4 km of gas pipelines were replaced in 2013, including 25.7 km
after major repair and 23.7 km after patch repair. Diagnostics of
253 km of pipelines was performed.
The following works were performed at the facilities of crude oil
gathering and crude oil treatment of the Oil and Gas Production
Divisions: major repair of 29 tanks, 28 vessels, 13 heat exchangers,
1 process furnace, 13 km of process pipelines were renovated,
91 vertical steel tanks and 1 concrete tank were diagnosed were
subjected to diagnostics/ as well as 148 horizontal settlers and
vessels and 6 process furnaces.
As a result of carrying out air protection measures the total emissions
in the Company over the last 20 years were reduced by 1.6 times.
Specifi c emissions per one ton of produced oil amounted to 3.557
kg in 2013.
The introduction of the technology to trap light hydrocarbon fractions
(LHF) allowed to reduce carbon emissions by more than 3.5 times
in comparison with 1991. At present, the number of active LHF
capturing units at JSC TATNEFT facilities is 44 units.
In order to comply with established standards of maximum
permissible emissions (MPE) of pollutants into the air 1,281 tests
were performed in 2013.
The Company performs its activity in accordance with the
JSC TATNEFT policy of industrial, occupational and environmental
safety and in the framework of the special Environmental Corporate
Program of JSC TATNEFT designed for the period from 2000
to 2015.
Monitoring of the air condition was done in 110 communities located
in the area of the Company’s operations and buffer zones of 53
production facilities. When performing these tests, 11,749 analyses
were made to determine the current condition of the atmospheric air.
The program is aimed at supporting the environment of the TATNEFT
region of activity at the regulatory acceptable level consistent with
self-healing potential of natural ecosystems. The program envisages
further improvement of process equipment reliability and reduction
of production activities’ negative impact on the environment,
lowering of stress based on the continuing renovation of the main
assets, as well as construction of special nature protection facilities.
As part of this program the Company provides for performance
of complex organizational and technical measures, including
introduction of a broad industrial environmental control in the area of
the Company’s divisions operation.
Survey of the air basin was carried out for 33 ingredients
(hydrocarbons, hydrogen sulfi de, nitrogen dioxide, carbon
monoxide, etc.) along with meteorological observations, such as
measurements of wind speed and direction, temperature, and
relative humidity.
84
85
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
Protection and Management of Water Resources
In 2013 the Company to ensure stable and uninterrupted
operation of the oilfi eld facilities, and increase their industrial and
environmental safety produced 923.9 km of corrosion resistant
pipes (metal/plastic, polymer coated), 5,934.17 tons of corrosion
inhibitors, 986 wells are equipped with cathodic casing protection
and electrochemical protection (ECP) is provided for 662.17 km of
oil pipelines and waterlines. Diagnostics of 2,915 km of pipelines and
water conduits were performed. Diagnostic survey of 2,984.885 km
of pipelines was carried out.
The inner surface of 22 process vessels (vertical steel tanks and
horizontal settlers) were protected with application of paint/varnish
coating at the facilities of crude oil gathering and crude oil treatment
of the Oil and Gas Production Divisions with the total area of paint/
varnish coating amounting to 25.9 thousand.
According to the results of laboratory chemical analysis in 2013
the water quality in major rivers of the Company’s operations area
was stable. Chloride content, crude oil and petroleum products
in the dissolved and emulsifi ed condition in rivers and springs in
the vast majority of cases did not exceed the approved standards
of maximum permissible concentrations of harmful substances in
the waters of fi shery water bodies and sanitary standards for the
maximum permissible concentration (MPC). Currently, there is a
process of steady decline of their concentration in the groundwater.
Protection and Management of Land Resources
Optimal placement of oil facilities and prevention of violations in soil
fertility are the top priorities for land conservation.
The Company performs scientifi c research, develops regulatory
documentation, improves its equipment and technology, and takes
special actions to reduce the anthropogenic impact on the soil.
168.1 km of oil pipelines and 95.8 km of waterlines were overhauled
with the purpose of protecting the land, surface water and
groundwater. Works were carried out using corrosion resistant
pipes.
During the year the Company applied extensive efforts to reduce
the areas of agricultural land allocation for the construction of oil
facilities and restore fertility of disturbed land that has been achieved
through the introduction of cluster drilling and well construction
Treatment of Industrial Waste
The Company continuously applies a lot of effort to reduce and
utilize the waste generated during oil production processes through
recycling, reuse and disposal.
The total amount of waste generated by the production decreased
by 11.9 thousand tons versus 2012 and amounted to 69.5 thousand
tons. The specifi c waste generation per 1 ton of oil was 2.66 kg in
2013.
In 2013, JSC TATNEFT collected and sent for recycling 40.55 tons of
metal scrap / which was 14.7 thousand tons more than in 2012.
A network of local observation points over water bodies operates
within JSC TATNEFT’s license areas.
The observation system currently consists of 2,688 sampling points.
This includes 564 observation points of surface bodies (springs,
rivers, water pools) and 2,124 observation points of underground
water bodies (artesian boreholes and wells).
Water analysis is performed for the following parameters, which are
characteristic for crude oil production: chloride ions, sulfate ions,
total hardness, hydro-carbonates, pH, calcium, anionic surface-
active agents (surfactants), oil and oil products in the dissolved and
emulsifi ed condition.
In 2013, the central chemical analytical laboratory of the
Administration for Preparation of Process Liquid performed 11,094
tests of selected water samples.
Total number of natural water analyses performed in the Company
amounted to more than 120,000 of in 2013.
86
KEY PERFORMANCE INDICATORS OF THE COMPANY
FOR ECOLOGICAL SAFETY AND REDUCTION OF ENVIRONMENTAL IMPACT
DESCRIPTION
Production volume
Gross emission of harmful substances into the air
Total harmful substances recovered and neutralized
Associated petroleum gas utilization
Associated petroleum gas utilization level
Fresh water intake for own needs
Contaminated land area
Failure induced ecological damage
Commissioning of facilities for recovery
and neutralization of waste gas harmful substances
Investments into the main capital, used for environmental protection purposes:
Planned
Actual, total:
including
water bodies protection
atmospheric air protection
land resources protection from production waste and consumption
land recultivation
Current environmental protection expenses
Repair costs of fixed assets used for environmental protection, total
MEASUREMENT
UNIT
thousand tons
thousand tons
tons
million cubic meters
%
million cubic meters
hectare
thousand RUR
thous.cub.m/hour
million RUR
million RUR
million RUR
million RUR
million RUR
million RUR
million RUR
million RUR
million RUR
2013
26,107
92.9
210.5
864.8
95.1
28.1
0
0
0.4
404.6
407.4
407.4
3.5
289.4
0
114.5
4,338.2
1,677.6
87
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
INFORMATION ABOUT COMPLIANCE
WITH THE CODE OF CORPORATE CONDUCT IN 2013
COMPLIANCE
OR NON-COMPLIANCE
NOTE
CORPORATE CONDUCT CODE
PROVISIONS
NO.
COMPLIANCE
OR NON-COMPLIANCE
NOTE
CORPORATE CONDUCT CODE
PROVISIONS
NO.
GENERAL SHAREHOLDERS MEETING
1
2
3
4
5
6
7
Informing shareholders on holding the General shareholders meeting at
least 30 days prior to the meeting holding date regardless of the issues
included in the agenda, unless the law provides for a longer period
Compliance
Section 5, i.i. 5.1, 5.3 of Provision on
General Shareholders Meeting
art.7 i.7.1 of Articles
Availability of the opportunity for shareholders to get familiarized with
the list of persons entitled to participate in the General meeting of
shareholders, starting from the notice date of the General shareholders
meeting holding until closing of the General shareholders meeting, and in
the case of an absentee General shareholders meeting: until the ballots
acceptance deadline
Availability of the opportunity for shareholders to get familiarized with
the information (materials) to be provided in preparation for the General
shareholders meeting through electronic communication means,
including the Internet
Availability of the opportunity for shareholders to add an issue to the
agenda of the General shareholders meeting or demand calling the
General shareholders meeting without an extract from the shareholder
register, if the shareholder’s rights to shares are maintained in the
register of shareholders, and if the mentioned rights to shares are
maintained in the custody account, then the custody account extract is
sufficient for the above rights execution
Compliance
Section 4,
i. 4.3 of Provision on General
Shareholders Meeting
Compliance
Section 5, i.i. 5.1, 5.4-5.8 of Provision
on General Shareholders Meeting
Compliance
Availability of the requirement in the Articles or internal documents of the
Joint Stock Company about obligatory attendance of General Director,
Management Board members, Board of Directors members, members of
the Audit Committee and the Company's Auditor at the General meeting
of shareholders
Compliance
Section 9,
i. 9.2 of Provision on General
Shareholders Meeting
Obligatory attendance of the candidates at the General meeting of
shareholders when considering the issues about election of Board of
Directors members, General Director, Management Board members,
Audit Committee members, as well as the issue of approving the
Company's Auditor
Compliance
Section 9,
i. 9.2 of Provision on General
Shareholders Meeting
Availability in the internal documents of the Company of the registration
procedure for the participants of the General shareholders meeting
Compliance
art. 10 i. 10.3
of Provision on General Shareholders
Meeting of
JSC TATNEFT
BOARD OF DIRECTORS
Availability in the Articles of the Joint Stock Company of the Board of
Directors authority to approve the annual financial and business plan of
the Joint Stock Company
Compliance
art. 8.4, i. 25 of Articles
Availability in the Joint Stock Company of the risk management
procedure approved by the Board of Directors
Availability of the provision in the Company’s Articles on the Board of
Directors’ right to decide on suspending the powers of General Director
appointed by the General shareholders meeting
Compliance
Availability of the provision in the Company’s Articles on the Board of
Directors’ right to establish the requirements for qualification and the
remuneration amount of General Director, Management Board members
and heads of the main divisions of the Joint Stock Company
Compliance
Being formed
art.8.4, i. 9
art.9, i. 9.2
of Articles
art.8.4, i.23
of Articles
8
9
10
11
88
12
13
18
19
20
21
22
23
Availability in the Articles of the Joint Stock Company of the Board of
Directors’ right to approve terms of the contracts with General Director
and Management Board members
Compliance
art. 9
i. 9.1.
of Articles
Availability of the requirement in the Articles or internal documents of the
Joint Stock Company that when approving the contracts with General
Director (managing organization, manager) and Management Board
members the votes of the Board of Directors members, who are General
Director and Management Board members shall not be taken into
consideration when counted
14
Availability of at least three independent directors in the composition of
the Company’s Board of Directors, who meet the requirements of the
Corporate Conduct Code
Compliance
Absence of the persons in the composition of the Board of Directors
of the Joint Stock Company, who were found guilty for committing
economic crimes or crimes against the State, interests of public service
and local government service or persons subjected to administrative
penalties for offenses in the field of entrepreneurial business or in the
field of finance, taxes and dues and securities market
Absence of the persons in the composition of the Board of Directors
of the Joint Stock Company, who are participants, General Director
(manager), members of the managing body or employees of a legal
entity competing with the Joint Stock Company
15
16
Compliance
Compliance
17
Availability of the requirement in the Joint Stock Company’s Articles on
the election of the Board of Directors by cumulative vote
Compliance
Availability of the provision in the internal documents of the Joint Stock
Company on the members of the Board of Directors obligation to refrain
from any action that will or may result in a conflict between their interests
and those of the Company, and in the case of such a conflict arising
the obligation to disclose information about this conflict to the Board of
Directors
Compliance
The relevant supplement to the Articles
of Association is being prepared
art. 4.2
of Provision on the Board of Directors,
art. 2.3, i.i. 2.3.9, 2.3.9.1, 2.3.9.2
of JSC TATNEFT Corporate
Governance Code
art. 8, i. 8.2, 8.3 of Articles
art. 3, i. 3.7 of Provision on the Board
of Directors
art.3, i. 3.1.10, i. 3.1.11, art. 5, i. 5.2
of Provision on the Corporate Management
Committee of JSC TATNEFT Board of
Directors
Ch. 4, i. 4.8 of JSC TATNEFT Corporate
Governance Code
Availability of the provision in the internal documents of the Joint Stock
Company about the members of the Board of Directors obligation
to notify the Board of Directors in writing of their intention to perform
transactions with the Company’s securities, which members of the
Board of Directors they are, or its subsidiary (affiliate) companies, and to
disclose the information on transactions with such securities
Compliance
art. 4, i.4.1of Provision on the Board of
Directors, art. 2.3, i. 2.3.11
of JSC TATNEFT Corporate
Governance Code
Availability of the requirement in the Company’s internal documents for
holding meetings of the Board of Directors at least once every six weeks
Compliance
art. 8.5 of Articles, art. 5, i. 5.1
of Provision on the Board of Directors
Holding meetings of the Board of Directors of the Joint Stock Company
during the year, for which the annual report of the Joint Stock Company
is made, with frequency of at least once every six weeks
Compliance
art. 8.5of Articles, art. 5, i. 5.1
of Provision on the Board of Directors
Availability of the procedure for holding meetings of the Board of
Directors in the internal documents of the Joint Stock Company
Compliance
art. 5 of Provision on the Board of
Directors
Availability of the provision in the internal Company’s documents on
the necessity for approval by the Board of Directors of the Joint Stock
Company the transactions in the amount of 10 or more percent of the
Company's assets, except the transactions made in the normal course of
business
Compliance
art. 8 i. 8.4, of i. 14 of Articles
89
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CORPORATE CONDUCT CODE
PROVISIONS
NO.
COMPLIANCE
OR NON-COMPLIANCE
NOTE
Availability of the provisions in the Company’s internal documents on
the Board of Directors members’ right to receive information from the
Executive Bodies and heads of the main divisions of the Joint Stock
Company needed to perform their functions, as well as the responsibility
for the failure to provide such information
Compliance
Availability of the Board of Directors’ Committee on Strategic Planning
or imposition of the mentioned Committee’s functions on another
Committee (except the Audit Committee and HR and Remuneration
Committee)
Availability of the Board of Directors’ committee (Audit Committee), which
recommends to the Board of Directors the Auditor of the Joint Stock
Company and interacts with the Auditor and the Audit Commission of the
Joint Stock Company
Compliance
Availability of independent and non-executive directors only in the
composition of the Audit Committee
Compliance
Management of the Audit Committee shall be performed by an
independent director
Compliance
Availability of the provision in the Company’s internal documents on the
Audit Committee’s all the members right of access to any documents
and information of the Joint Stock Company provided that they shall not
disclose confidential information
Compliance
Establishment of the Board of Directors’ Committee (HR and
Remuneration Committee), which function shall be to determine the
criteria for selecting candidates for the members of the Board of
Directors and elaboration of the Joint Stock Company's remuneration
policy
Compliance
Management of the HR and Remuneration Committee shall be performed
by an independent director
Compliance
Absence of the Joint Stock Company’s officials in the composition of the
HR and Remuneration Committee
Compliance
Establishment of the Board of Directors’ Committee for risks
management or delegation of the mentioned Committee’s functions
to another Committee (except the Audit Committee and the HR and
Remuneration Committee)
The functions are exercised by the
Strategic Planning Department
art. 8 i. 8.4 of Articles,
art. 5, i.5.1 of Provision
on the Board of Directors
art. 2.4 of JSC TATNEFT Corporate
Governance Code
art. 2 of Provision on the Audit
Committee of the JSC TATNEFT Board
of Directors
art. 2 of Provision on the Audit
Committee of the JSC TATNEFT Board
of Directors
art. 8. i. 8.4 of Articles,
art. 5, i.5.1 of Provision on the Board of
Directors
art. 3 i. 3.1 of Provision on the HR
and Remuneration Committee of
the JSC TATNEFT Board of Directors
art. 4 i. 4.2 of Provision on the HR
and Remuneration Committee of
the JSC TATNEFT Board of Directors
art. 4 i. 4.2 of Provision on the HR
and Remuneration Committee of
the JSC TATNEFT Board of Directors
The functions are exercised by the
Corporate Management Committee
Establishment of the Board of Directors Committee for corporate
conflicts settlement or delegation of the mentioned Committee’s
functions to another Committee (except Audit Committee and HR and
Remuneration Committee)
Compliance
art. 3 i.i. 3.1.10, 3.1.11
of Provision on the Corporate
Management Committee of the
JSC TATNEFT Board of Directors
Absence of the Joint Stock Company’s officials in the composition of the
Corporate Conflicts Settlement Committee
Compliance
art. 4 i.i. 4.2 of Provision on the
Corporate Management Committee of
the JSC TATNEFT Board of Directors
Management of the Corporate Conflicts Settlement Committee shall be
performed by an independent director
Availability of the approved by the Board of Directors internal documents
of the Joint Stock Company covering the procedure of establishment and
function of the Board of Directors’ Committees
Compliance
art. 2 of Provision on
the Board of Directors,
art. 8, i. 8.14 of Articles,
Provision on Committees
Availability in the Joint Stock Company’s Articles of the procedure for
determining a quorum of the Board of Directors allowing for ensuring
mandatory participation of independent directors in the Board of
Directors meetings
Compliance
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
90
CORPORATE CONDUCT CODE
PROVISIONS
NO.
EXECUTIVE BODIES
COMPLIANCE
OR NON-COMPLIANCE
NOTE
39
Availability of the collegial executive body (Management Board) of the Joint
Stock Company
Compliance
art. 9, i. 9.1 of Articles,
art. 2.5 of the JSC TATNEFT Corporate
Governance Code
40
41
42
43
44
45
46
47
48
Availability in the Articles or internal documents of the Joint Stock
Company of provisions requiring the Management Board approval of real
estate transactions, loans raised by the Joint Stock Company, if such trans-
actions are not major transactions and they are not part of normal business
activities of the Joint Stock Company
Availability in the internal documents of the Joint Stock Company of proce-
dures for approval of transactions that are beyond the financial and busi-
ness plan of the Joint Stock Company
Compliance
It is provided by the internal regulations
Compliance
It is provided by the internal regulations
Absence of the persons in the composition of the Executive Bodies, who
are participants, General Director (manager), members of the Management
Board or an employee of a legal entity competing with the Company
Compliance
Absence in the composition of the Executive Bodies of the Joint Stock
Company of the persons who were found guilty of committing economic
crimes or crimes against the State, interests of public service and local
government service or persons subjected to administrative penalties for
offenses in the field of entrepreneurial business or in the field of finance,
taxes and dues and securities market. If the functions of the sole executive
body are performed by the managing organization or manager, then the
General Director and the Management Board members of the managing
organization or the manager shall comply with the requirements specified
to General Director and members of the Management Board of the Joint
Stock Company
Compliance
Availability in the Company’s Articles or internal documents of prohibition
for the managing organization (manager) to perform similar functions in
a competing joint stock company or to be in any other property relations
with the Joint Stock Company, except providing services of the managing
organization (manager)
Compliance
Availability of the obligation in the Company’s internal documents for the
Executive Bodies to refrain from any actions that will or may result in a
conflict between their interests and those of the Joint Stock Company, and
in the event of such conflict arising the obligation to inform the Board of
Directors
Compliance
art. 3, i. 3.1.10, i. 3.1.11, art. 5, i.
5.2 of Provision on the Corporate
Management Committee of the
JSC TATNEFT Board of Directors,
Ch. 4 of JSC TATNEFT Corporate
Governance Code
Availability of the eligibility criteria for the managing organization (manager)
in the Articles or internal documents of the Company
Compliance
It is provided by the internal regulations
Presentation by the Executive Bodies of monthly reports on the work car-
ried out by them to the Company’s Board of Directors
Compliance
Determination of the liability for breach of the provisions on the use of
confidential and proprietary information in the contracts concluded by the
Company with General Director (managing organization, manager) and the
Management Board members
Compliance
art. 2.5, i. 2.5.2
of JSC TATNEFT Corporate
Governance Code
art. 3.9, art. 3.10
of JSC TATNEFT Corporate
Governance Code
SECRETARY OF THE JOINT STOCK COMPANY
Availability of a special officer (Joint Stock Company Secretary) in the
Company, whose task is to ensure that Executive Bodies and officials of
the Joint Stock Company comply with the procedural requirements guar-
anteeing the rights and legitimate interests of the Company’s shareholders
Availability of the procedure for appointment (election) of the Joint Stock
Company’s Secretary and the Secretary's duties in the Company’s Articles
or internal documents
Availability of the requirements to the candidate for the Company’s
Secretary position in the Articles of the Joint Stock Company
49
50
51
It is provided by the interaction of the
Secretary of the Board of Directors and
Securities Office of the property Department
It is provided by the interaction of the
Secretary of the Board of Directors and
Securities Office of the property Department
It is provided by the interaction of the
Secretary of the Board of Directors and
Securities Office of the property Department
91
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CORPORATE CONDUCT CODE
PROVISIONS
NO.
ESSENTIAL CORPORATE ACTIONS
COMPLIANCE
OR NON-COMPLIANCE
NOTE
CORPORATE CONDUCT CODE
PROVISIONS
NO.
COMPLIANCE
OR NON-COMPLIANCE
NOTE
CONTROL OVER FINANCIAL AND ECONOMIC ACTIVITIES
52
53
54
55
56
57
Availability of the requirement to approve any major transaction
prior to its carrying out in the Company’s Articles or internal documents
Compliance
art. 7 i. 7.3 of Articles
Mandatory involvement of an independent appraiser to determine the
market value of the property that is the subject of a major transaction
Compliance
Availability in the Articles of the Joint Stock Company of the ban to take
any actions during acquisition of large blocks of shares of the Joint Stock
Company (takeover), aimed at protecting the interests of the Executive
Bodies ( their members) and members of the Board of Directors of the
Joint stock Company, as well as worsening the position of the shareholders
as compared to the existing one (in particular, the prohibition for the Board
of Directors to make a decision to issue additional shares and to issue
securities convertible into shares or securities granting the right to acquire
the Company’s shares before the end of the expected deadline of the
shares acquisition, even if such right of making a decision is granted by
the Articles)
Availability of the requirement in the Articles of the Company for
mandatory involvement of an independent appraiser to determine the
current market value of shares and possible changes in their market
value as a result of a take-over
Compliance
Lack of the provision in the Company’s Articles to release the purchaser
from the obligation of proposing to the shareholders to sell their ordinary
shares of the Company (issuance securities convertible into ordinary
shares) in event of a take-over
Availability of the requirement in the Articles or internal documents of
the Joint Stock Company for mandatory involvement of an independent
appraiser to determine the share conversion ratio in the event of
reorganization
Compliance
Compliance
The relevant supplement to the Articles
of Association is being prepared
INFORMATION DISCLOSURE
Availability of the internal document approved by the Board of Directors
determining the policies and procedures of the information disclosure by
the Joint Stock Company (Provisions on Information Policy)
Compliance
Ch. 3
of JSC TATNEFT Corporate
Management Code
Availability of the requirement in the internal documents of the Company
to disclose the information about the purpose of placing shares and the
persons who are going to buy these shares, including a large parcel of
shares, as well as whether senior officials of the Joint Stock Company will
participate in the acquisition of the shares being placed
Compliance
Ch. 3
of JSC TATNEFT Corporate
Management Code
Availability in the internal documents of the Joint Stock Company of the
list of information, documents and materials that must be provided to the
shareholders to address the issues brought to the General shareholders
meeting
Compliance
61
Availability of the Joint Stock Company’s Internet web site and regular
information disclosure about the Joint Stock Company on this website
Compliance
art. 5, i.i. 5.1, 5.2., 5.4 of Provision
on JSC TATNEFT General Shareholders
Meeting,
art. 5.4 of Provision on JSC TATNEFT
Information Policy
http://www.tatneft.ru,
http://disclosure.skrin.ru/
disclosure/1644003838
Availability of the requirement in the Company’s internal documents
to disclose the information about the transactions of the Joint Stock
Company with persons that are in accordance with the Articles top
officials of the Joint Stock Company, as well as the transactions of the
Joint Stock Company with organizations, in which top officials of the Joint
Stock Company directly or indirectly own 20 percent and more of the
Company’s authorized capital or which such persons may otherwise have
a material impact on
Compliance
art. 4, i. 4.1, 4.2
of Provision on the JSC TATNEFT
Board of Directors
Availability of the requirement in the internal documents of the Company
to disclose the information about all the transactions that may affect the
market value of the Joint Stock Company’s shares
Compliance
art. 3, of JSC TATNEFT Information
Policy Provision,
Order No. 70 of Feb. 27, 2012
62
63
92
58
59
60
65
66
67
68
69
70
71
72
73
74
75
Availability of the approved by the Board of Directors the procedures of
internal control over the financial and economic activities of the Joint Stock
Company
Compliance
art. 12, i.i. 12.1 of Articles
Availability of the Joint Stock Company’s special division ensuring compli-
ance with the internal control procedures (supervision and auditing service)
Compliance
art. 12, i.i. 12.1 of Articles
Availability of the requirement in the internal documents of the Joint Stock
Company that the structure and composition of the supervision and audit-
ing service of the Joint Stock Company shall be defined by the Board of
Directors
Absence in the composition of the supervision and auditing service of the
persons who were found guilty of committing economic crimes or crimes
against the State, interests of public service and local government service
or persons subjected to administrative penalties for offenses in the field
of entrepreneurial business or in the field of finance, taxes and dues and
securities market
Absence in the composition of the supervision and auditing service of the
persons, who are members of the Company’s Executive Bodies, as well as
the persons, who are participants, General Director (manager), members
of the Management Board or employees of the entity competing with the
Joint Stock Company
Availability in the internal documents of the Joint Stock Company of the
deadline for submission of documents and materials for assessment of the
financial and business operations to the supervision and auditing service,
as well as the liability of the officers and employees of the Joint Stock
Company for failure to submit them within the specified period
Availability in the internal documents of the Joint Stock Company of the
duty of the supervision and auditing service to report the detected viola-
tions to the Audit Committee, and in case of its absence, to the Board of
Directors of the Joint Stock Company
Availability in the Articles of the Joint Stock Company of the requirement
for preliminary assessment by the supervision and auditing service of the
practicality of performing operations not envisaged by the financial and
economic plan of the Joint Stock Company (non-standard transactions)
Availability in the internal documents of the Joint Stock Company of the
procedure of coordinating non-standard transactions with the Board of
Directors
Availability of the internal document approved by the Board of Directors
describing the procedure of performing audits of the Company’s financial
and economic activities by the Audit Commission
Compliance
art. 12, 12.2.
of Articles
Compliance
art. 12, 12.3.
of Articles
Compliance
art. 12, 12.2.
of Articles
Compliance
art. 12, 12.5.
of Articles
Compliance
art. 12, 12.5.
of Articles
Compliance
Compliance
Compliance
Assessment of the Auditors' Opinion by the Audit Committee prior to its
presentation to the shareholders at the General shareholders meeting
Compliance
DIVIDENDS
76
77
78
Availability of the internal document approved by the Board of Directors,
which the Board of Directors is guided by in accepting recommendations
on the amount of dividends (Dividend Policy Provision)
Compliance
Ch. 2, i. 2.1.6,
Ch. 6.
of TATNEFT Company Corporate
Governance Code
Availability in the Dividend Policy Provision of the procedure for determining
the minimum portion of the net profit of the Joint Stock Company, allocated
to the payment of dividends, and the conditions under which the dividends
are not paid or not paid in full on the preferred shares with the amount of
dividends thereon determined in the Articles of the Joint Stock Company
Partial
Compliance
Ch. 6.
of TATNEFT Company Corporate
Governance Code
Publication of the information on the dividend policy of the Joint Stock
Company and any amendments thereto in a periodical prescribed by the
Articles of the Joint Stock Company for publication of the notices on hold-
ing general meetings of shareholders, as well as placing this information on
the Joint Stock Company’s Internet website
Compliance
93
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
CRITERIA FOR DETERMINING THE AMOUNT OF REMUNERATION PAID
TO THE MEMBERS OF THE COMPANY’S MANAGEMENT BODIES IN 2013
The remuneration to the members of the Board of Directors of JSC TATNEFT is paid on the basis
of «Regulations on payment of remuneration to members of the Board of Directors and the Audit
Commission of JSC TATNEFT”.
The remuneration amount is formed of a fi xed and a variable part.
The fi xed part of the remuneration is defi ned by the Regulations and indexed simultaneously with the
change in tariffs and salaries of JSC TATNEFT employees.
The variable part of the remuneration of the Board of Directors members is formed according to the
following key indicators: the ratio of the Company’s capitalization level by the year end results versus the
previous year, the ratio of the expenses for dividends to net income (as compared to the previous year)
and the additional profi t margin amount in relation to the baseline profi tability.
The total remuneration amount paid out by the results of the reporting year to the Members of the
Company’s Collegial Executive Body and to the Board of Directors Members paid out by the results of
the year under review*
The total remuneration amount of all members of the Board of Directors for 2013 was RUR
522,529,119.53.
Remuneration of all other persons belonging to the Board of Directors and the Collegial Executive Body
(Management Board) is taken into account in the amount of remuneration of all members of the Board of
Directors.
The total remuneration sum paid out to all the members of the Collegial Executive Body for 2013
amounted to RUR 201,512,503.66.
REGISTER OF COMPULSORILY DISCLOSED INFORMATION IN 2013*
ITEM
#
CONTENT OF MESSAGE
DATE OF DISCLOSED INFORMATION
ACCORDING TO RUSSIAN STANDARDS(IN THE FORM OF A MESSAGE ABOUT AN ESSENTIAL FACT OR MESSAGES
ABOUT THE INFORMATION WHICH CAN ESSENTIALLY AFFECT THE COST OF THE JOINT-STOCK COMPANY’S SECURITIES)
ACCORDING TO ORDER OF FFMS OF RUSSIA 11-46/PZ-N DTD OCTOBER 04, 2011
1.
Notice of the date of preparing a list of holders of Issuer’s equity securities or documentary Company's
equity securities with mandatory centralized custody for the purposes of implementation (realization) of the
rights vested by such equity securities
2. Message about the procedure of accessing the information contained in the quarterly report.
3. Message about disclosure of affiliated entities list of the Joint Stock Company on the Internet site.
4.
5.
6.
Notice on the meeting of the Board of Directors (Supervisory Board) of the Company and its agenda, as
well as about individual decisions taken by the Board of Directors (Supervisory Board) of the Company.
On the General Meeting of Participants (Shareholders) of the Company and its agenda, as well as on
decisions taken by the General Meeting of Participants (Shareholders) of the Company.
Notice of the date of compiling a list of holders of equity securities of the Company or documentary
Company's equity securities with mandatory centralized custody for the purposes of implementation
(realization) of the rights vested by such equity securities
7.
Notice on accrued and/or paid revenues for the Company’s securities
8.
Notice of disclosure of the annual (interim) accounting (financial) reporting of the Joint-Stock Company
9.
Notice of making an interested party transaction by the issuer
10. Notice on decisions taken by the General Meeting of participants (shareholders) of the Issuer
11. Notice on the procedure of accessing information contained in the Annual Report for 2012.
12. Notice of the quarterly report text changes
13.
Information about redemption of the issuer’s securities
14. Notice on paid revenues for the Company’s securities
15. Notice on default of the Issuer fulfilling the commitments to the Issuer’s securities holders
16. On refutation or correction of information previously published in the News Line
17.
19.
Notice on awarding the rating for the Company’s securities and (or) for the Company or on changes of the rating
by a rating agency based on the contract signed with the Company
Notice of the Joint Stock Company’s acquisition of more than 20 percent of the voting stock belonging to
another joint stock company
ACCORDING TO INTERNATIONAL STANDARDS (IN THE FORM OF PRESS RELEASES
AND PUBLICATION OF REPORTS AS PER THE LONDON STOCK EXCHANGE REGULATIONS)
February 28, 2013
By the 15-th day of the month
following the quarter under
review
By the 2-nd day of the month
following the quarter under
review
Monthly
February 28, 2013
March 13, 2013,
September 11, 2013
March 22, 2013
September, 20, 2013
March 28, 2013, April 30, 2013
July 29, 2013, October 30, 2013
April 30, 2013, May 30, 2013,
September 02, 2013,
October 01, 2013,
November 01, 2013,
July 02, 2013
July 02, 2013
August 15, 2013
September 20, 2013
September 25, 2013
September 25, 2013
October 01, 2013
November 25, 2013,
December 27, 2013
19. Publication of the annual consolidated financial statements of JSC TATNEFT in accordance with IFRS for 2012.
April 08, 2013
20.
21.
22.
Publication of the consolidated interim financial statements of JSC TATNEFT in accordance with IFRS for the
first quarter of 2013 (unaudited).
Publication of consolidated interim financial statements of JSC TATNEFT in accordance with IFRS for the six
months of 2013 (unaudited).
Publication of the consolidated interim financial statements of JSC TATNEFT in accordance with IFRS for the
nine months of 2013 (unaudited).
* main facts and events, including major interested party transactions performed by the Company during the year
June 25, 2013
September 09, 2013
November 29, 2013
As part of the voluntary provision of information the Company published on a systematic and regular basis the detailed information of the current production,
corporate and social activity of enterprises of JSC TATNEFT and the Group in 2013. Total number of press releases on the ongoing activities of the Company
distributed as voluntarily disclosed information amounted to 225 messages in 2013.
94
95
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
MAIN CORPORATE
EVENTS OF 2013
The TANECO Refi ning and Petrochemical Plants Complex received
certifi cates of the integrated management system compliance with
requirements of international standards ISO 9001:2008,
ISO 14001:2004 and OHSAS 18001:2007.
JANUARY
JSC TATNEFT’s labour collective conference summed up the results
of fi nancial and economic activities of the TATNEFT Production
Group in 2012.
The Tire manufacturers of TATNEFT supplied the millionth
KAMA EURO tire to the assembly conveyor of Volkswagen Group
factory in Kaluga.
The Collective Agreement was signed between the Company’s
management and employees of JSC TATNEFT for 2013.
The tire manufacturing plants of JSC TATNEFT successfully passed
the compliance audit with requirements of ISO 9001 and ISO/TS
16949.
Active implementation of the program to improve environmental
safety at oil production facilities is continued at JSC TATNEFT.
The 13 millionth tire rolled off the conveyor of
JSC «Nizhnekamskshina» .
FEBRUARY
The Research and Development Center of JSC TATNEFT was
assigned the full-fl edged resident status of the «Skolkovo»
Innovation Center.
APRIL
Rustam Minnikhanov, President of the Republic of Tatarstan,
visited entities of JSC TATNEFT Production Group of Companies
in Nizhnekamsk
Scientifi c and practical conference «History and prospects of oil
fi elds development in Tatarstan» was held.
A meeting of RAN (Russian Academy of Natural Science) discussing
prospects of extra-viscous oil (EVO) development was held at
the premises of NGDU «Aznakaevskneft».
MAY
NGDU «Almetyevneft» of JSC TATNEFT was visited by
representatives of Accenture International Company providing
services to companies in the area of managerial consulting and
information technologies implementation.
The specialists of JSC TATNEFT took part in the end-of-year board
meeting of the Ministry of Ecology and Natural Resources of the
Republic of Tatarstan.
NGDU «Almetyevneft» of JSC TATNEFT produced the 600 millionth
ton of oil.
Two new models of solid steel cord tires for long-haul tractors and
buses were brought to the market by Nizhnekamsk SSC Tire Factory.
The representatives of the Committee on Environment, Natural
Resources and Agrarian Affairs of the RT State Council visited the
Company’s sites.
The specialists of JSC TATNEFT were named winners of the XIIth
«Engineer of the Year” All-Russian contest.
The fi rst in the Company’s history multistage interval acid fracturing
in the horizontal section of Yaurkinskoye fi eld well No.15 was
performed.
MARCH
Shafagat Takhautdinov, General Director of JSC TATNEFT (current
Adviser to the Chairman of the Board of Directors of JSC TATNEFT),
and Nikolay Merkushkin, Governor of the Samara Region, signed an
additional agreement on close cooperation development.
JUNE
TatNIPIneft innovative project «Method of oilfi elds development via
wells communicating through the producing formation» was included
in the state order of the Republic of Tatarstan.
The Company completed a project to modernize the corporate
information system (ARMITS) architecture based on Microsoft SQL
Server.
The training seminar on new drilling technologies and workover was
held.
200,000 tons of extra-viscous oil (EVO) were produced at
Ashalchinskoye fi eld.
The on-site meeting of JSC TATNEFT’s Council of Veterans
was held.
Representatives of the production enterprises of JSC TATNEFT
Group took part in the Olympic torch relay in Almetyevsk.
The Bugulma Mechanical Plant started coating works on
73»E»-tubing intended for delivery to Turkmenistan, at the
corrosion–resistance coating shop No. 2.
Unique multilevel «Tatneft-Ak Bars” Euro-class car parking was
opened in Kazan.
JULY
JSC TATNEFT hosted the Traditional Oil Summit in the Karabash
working township.
OCTOBER
XIIth Annual International Exhibition «Oil. Gas. Energy. Ecology» and
«Industrial safety» was held in Almetyevsk.
The delegation of the Ministry of Energy of the Russian Federation
visited the production facilities of JSC TATNEFT.
Meeting of the JSC TATNEFT’s Board of Directors and meeting
with heads of small oil companies with participation of Rustam
Minnikhanov, President of Tatarstan, were held in Almetyevsk.
The Supervisory audit of the integrated industrial safety, labor and
environmental management system for compliance with international
standards ISO 14001:2004 and OHSAS 18001:2007 was started at
JSC TATNEFT.
AUGUST
Integrated industrial safety, labor and environmental management
system audit for compliance with international standards
ISO 14001:2004 and OHSAS 18001:2007 was completed
at JSC TATNEFT.
The fi rst professional Tyre & Service Center was opened in Tatarstan.
The Rostechnadzor carried out a comprehensive scheduled
inspection of particularly hazardous production facilities of the
Company.
NOVEMBER
Workers of the Kazan Branch of OOO «Tatneft-AZS Center» and
NGDU «Almetyevneft» took part in the Republican «Green record»
environmental action.
300,000 tons of extra-viscous oil were produced at Ashalchinskoye
heavy oil fi eld.
The Delegation of leading experts from JSC «Ozemunaygas» visited
JSC TATNEFT.
Results of springs’ contest were summed up. The winners
among the structural steel divisions were NGDU «Jalilneft»,
NGDU «Elkhovneft» and NGDU «Aznakaevskneft».
Traditional professional skills contest was held at JSC TATNEFT.
Bugulma mechanical plant started manufacturing a new product:
scrubber unit (DK1007).
SEPTEMBER
The Delegation of the Ministry of Energy of the Russian Federation
headed by the Kirill Molodtsov, Deputy Minister, visited the
production facilities of JSC TATNEFT.
The Environmental audit was successfully completed at
Nizhnekamsk Truck Tire Plant. The Environmental management
system was declared compliant with the requirements of GOST R
ISO 14001-2007.
The ninth fi lling station under the brand of JSC TATNEFT was open in
the Republic of Belarus.
JSC TATNEFT participated in the XVIIIth International Specialized
Exhibition «Oil & Gas of Turkmenistan-2013».
The Government delegation of the Republic of Tatarstan visited
the Petrochemical and Refi ning facilities of JSC TATNEFT in
Nizhnekamsk.
JSC TATNEFT presented a large-scale composition dedicated to
the 70th anniversary of Tatarstan oil at the Tatarstan Petrochemical
Forum.
DECEMBER
The specialists of the Normative Research Station of JSC TATNEFT
actively participated in the conference «Process Management:
Today and Tomorrow» (Moscow).
There was a press briefi ng held at the Cabinet of Ministers of the
Republic of Tatarstan on implementation of the comprehensive
action plan timed to the 70th anniversary since the beginning of the
commercial oil fi elds development in the Republic of Tatarstan.
The professionals of JSC TATNEFT participated in the IVth All-
Russian Congress of Environmental Protection at the «Crocus City
Hall» International Exhibition Centre in Moscow.
XIVth Report and Election Conference of JSC TATNEFT’s young
employees was held.
96
97
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
AWARDS AND NOMINATIONS OF JSC TATNEFT IN 2013
7. «Nizhnekamskshina» was named an excellent manufacturer and OOO «Trade House» - an excellent
supplier in the ranking of suppliers and manufacturers in Togliatti.
INTERNATIONAL AWARDS AND NOMINATIONS
1. The International Conference of students, post-graduates and scientists «Lomonosov-2013» awarded the
silver medals for engineering developments: «Well construction method» (NGDU «Almetyevneft»), «Method
of monitoring the oil fi eld through listening to inter-well intervals» NGDU «Aznakaevskneft»), «Method of
developing a multi-target oil fi eld» (NGDU «Jalilneft»), «Method of well operation» (NGDU «Nurlatneft»),
«Method of controlling oil reservoirs fl ood front» (TatNIPIneft). Bronze medals were awarded for engineer-
ing developments «Method of well cluster construction» (NGDU «Almetyevneft»), «Process of limiting the
formation water fl ow to the production well» NGDU «Aznakaevskneft»), «Well development with application
of «OSMUD» controlled depression method” NGDU «Bavlyneft») «Method of equipment delivery to horizon-
tal or inclined wellbores» (NGDU «Nurlatneft»), «Solid-phase composition to neutralize hydrogen sulfi de»
(NGDU «Yamashneft») and «Water separation and treatment unit for water produced with oil» (TatNIPIneft).
2. TATNEFT Company was honored appreciation of the organizing committee and diplomas for relevancy
and professionalism of the provided exposure at the exhibition «Oil and Gas” MIOGE in Moscow.
3. TATNEFT Company was awarded the Grand Prix at the XXth International Exhibition “Oil, Gas,
Petrochemicals - 2013”:
• for development and introduction into production of acid stimulation compositions «KSK-Tatneft»
in the category «Enhanced Oil recovery»;
• for development and introduction into production of technologies to improve production of oil
reservoirs through application of silica gel based compositions (SSG-VUKSZHS technology)
in the category of “Innovative environmentally sound technologies”.
4. The fi rst prize of the «PEGAZ» International Media Contest Moscow in the category «Internet edition
premium» was awarded to the electronic publication «Oil newspaper», Honorary Diploma in the
nomination «A series of TV programs/fi lms» was conferred to the «Time of TATNEFT» studio.
ALL-RUSSIAN AWARDS AND NOMINATIONS
1. Awards named after Academician I.M. Gubkin were presented to TATNEFT Company for four
engineering developments in the fi eld of oil and gas industry.
2. Honorary badge «Environmentalist of the Year» was awarded to R.F. Burganov, Executive Director
of «Nizhnekamskshina», A.S. Belyaev, Head of Environmental Service of «Nizhnekamskshina», was
recognized as the best environmental service manager in the category and A.M. Akhmetzyanova,
environmental practices expert engineer of «Nizhnekamskshina» was recognized the best in the contest
«100 Best Russian organizations. Ecology and Environmental Management».
Diploma of the contest winner in the additional category was awarded «For disposal and processing of
accumulated waste and achievements in the fi eld of production and consumption wastes handling» was
received by OOO «Nizhnekamsk Truck Tire Factory» in the contest «100 Best Russian organizations.
Ecology and Environmental Management»,.
3. N.G. Ibragimov, First General Director Deputy for Production - Chief Engineer of JSC TATNEFT, joined
“Top 100 industrial managers - 2013» in the «Top 100» ranking in the «Industrial Elite of Russia: top 100
industrial managers in 2013».
4. High level of JSC TATNEFT’s information transparency in April 2013 was marked by the information
openness rating of the Russian fuel and energy sector companies.
5. Corporate electronic publication «Oil newspaper» ranked the third in the VIth All-Russian contest BEST
INTRANET RUSSIA - 2013.
8. Managers of JSC TATNEFT were included in the list of the top managers of Russia in the XIVth annual
ranking «Top - 1000 Russian Managers».
Shafagat Takhautdinov, General Director of JSC TATNEFT (from November, 2013 - Advisor to the
Chairman of the JSC TATNEFT’s Board of Directors) joined the Top Ten business leaders of the fuel
sector.
Nail Maganov, First Deputy General Director of JSC TATNEFT - Head of Crude Oil and Petroleum
Products Sales Department (from November, 2013 - General Director of JSC TATNEFT) was named
among the Top Three Commercial Directors of energy and fuel sector.
Vladimir Lavushchenko, Deputy General Director of JSC TATNEFT for Economics was named the Best
CFO of the rating.
Victor Gorodny, Deputy General Director - Head of JSC TATNEFT Property Department: the Best
Corporate Management Director of the energy and fuel sector.
Fedor Schelkov, Deputy General Director for General Affairs, joined the Top Three Marketing Directors.
Rustam Mukhamadeyev, Deputy General Director for Human Resources and Social Development: the
Best HR Director.
Azat Yagafarov, Deputy General Director - Director of JSC TATNEFT Representation Offi ce in Moscow
was among the Best Directors of the energy and fuel sector for interaction with authorities.
9. JSC TATNEFT Annual Report for 2012 was awarded a diploma of the «Sochi - 2013» at the XIIth
International Investment Forum.
JSC TATNEFT Annual Report for 2012 was the winner of the contest in the nomination «For contribution
to the development and implementation of best practices in corporate management and accountability»
of the XVth Annual Reports’ contest.
10. JSC TATNEFT was a prize winner of the «Leader of competitive procurement - 2013». JSC TATNEFT
was awarded a diploma and commemorative sign in the nomination «The Best system of working with
suppliers» at the Second Annual Conference «Corporate procurement».
11. OJSC TANECO was awarded the honorary title of the environmentally responsible company in the
region of the All-Russia contest «The Best Environmentally Responsible Company of the region».
12. JSC TATNEFT was awarded the Certifi cate of Merit for the contribution to the sustainable
development of the country and the high social and environmental responsibility in the environment
protection (The National Environmental Prize of Russia).
Vladimir Fadeev, Head of Production Department - Deputy Chief Engineer of JSC TATNEFT, was
awarded the badge of «V.I. Vernadsky Order».
Ravil Gareev, Head of Technical Corrosion and Nature Protection Offi ce of the Production Department
of JSC TATNEFT; Radik Mukhametgaleev, Chief Technologist - Head of Oil and Gas Treatment Offi ce;
Ravil Ibatullin, Director of «TatNIPIneft»; Z. Valisheva, Head of «TANECO» Environment Offi ce, and Renat
Nugaybekov, Director of OOO «TMS Group», were awarded commemorative medals for the 150th
anniversary of V.I. Vernadsky.
6. TATNEFT Brand joined the top 10 valuable Russian 2013 brands of the rating of the International
INTERBRAND agency.
13. The Collective Agreement of JSC TATNEFT named among the Top Ten Best Collective Agreements
of Neftegazstroy Trade Union of Russia in the contest «Best NGCP of Russian Collective Agreement».
98
99
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
CORPORATE MANAGEMENT
JSC TATNEFT
AWARDS AND NOMINATIONS OF THE REPUBLIC OF TATARSTAN
1. Ten projects of JSC TATNEFT were recognized as the best at the VIIIth Republican contest
«50 best innovative ideas for the Republic of Tatarstan».
2. Specialists of JSC TATNEFT were awarded the Ist degree diploma for technology of water dumping
and cleaning water produced at the well cluster and the IInd degree diploma in the category «Energy
effi cient production» for the hot separation technology providing fuel gas for own installations of the
contest «Resource Effi ciency. Energy saving» in the nomination «Fuel industry», Kazan.
3. Collectives of NGDU «Almetyevneft» and TatNIPIneft were awarded small cups of the Innovators
and Inventors Society of the Republic of Tatarstan of the review contest for the best arrangement of
invention, rationalization and patent/licensing work among enterprises, organizations and institutions of
the Republic of Tatarstan.
4. Nine projects of JSC TATNEFT became winners of the VIIIth Republican contest «50 Best Innovative
ideas for the Republic of Tatarstan».
GOVERNMENT AWARDS OF TOP MANAGERS AND PROFESSIONALS OF JSC TATNEFT
1. In accordance with the RF Government Decree the following top managers of JSC TATNEFT were
awarded the Prize of the Russian Federation Government in the fi eld of science and technology and
«RF Government Prize Laureate in Science and Technology» titles for creation and implementation
commercial of the integrated technology for development of extra-viscous oil fi elds:
• Shafagat Takhautdinov, General Director (from November, 2013 - Adviser to the Chairman of the
JSC TATNEFT’s Board of Directors);
• Nail Ibragimov, First Deputy General Director for Production - Chief Engineer;
• Rais Khisamov, Chief Geologist - Deputy General Director;
• Ravil Ibatullin, Director of TatNIPIneft;
• Nakip Gatiyatullin, Head of TGRU, JSC TATNEFT;
• Ilgiz Salikhov, Head of NGDU «Nurlatneft»;
• Azat Zaripov, Deputy Offi ce Head - Head of the Laboratory, TatNIPIneft,
• Rinat Sabirov, Assistant to President of the Republic of Tatarstan.
2. Raphael Nurmukhametov, Head of NGDU «Leninogorskneft» was awarded the Badge of Honor Order.
6. Shafagat Takhautdinov, General Director of JSC TATNEFT (from November, 2013 - Advisor to the
Chairman of the JSC TATNEFT’s Board of Directors) topped the rating of the business elite of the
Republic of Tatarstan.
3. The group of authors of JSC TATNEFT was awarded the Government of the Russian Federation prize
in the fi eld of science and technology for the work «Creation and commercial implementation of the
integrated technology for development of extra-viscous oil fi elds».
7. OOO CHOP «Tatneft-Security» was awarded prizes in the Republican contest «Territory of the Law».
8. The specialists of JSC TATNEFT won the fi rst place in invention and 12 winning places for innovative
activities in the contest «Young Innovator and Inventor of the Republic of Tatarstan».
9. 13 employees of JSC TATNEFT became winners in the nominations of the 50 Best innovative ideas for
the Republic of Tatarstan» in the Annual Republican contest.
10. OOO «Tatneft-AZS Center», OOO «Tatspetstransport” Management Company, «NOU «CPC
- Tatneft» were named the prize winners of the IXth Republican contest for the quality award of the
Government of Tatarstan.
11. The following representatives of JSC TATNEFT were recognized as winners of the «Manager of the
Year - 2013» contest:
• Nail Ibragimov, First Deputy General Director for Production - Chief Engineer of JSC TATNEFT
in the category «High Competitiveness»;
• Rustam Khalimov, Head of NGDU «Elkhovneft» in the nomination «For high social responsibility»;
I. Sattarov, Director of «PD Tatneft - AlabugaSteklovolokno» in the nomination «For achievements
in innovation activities».
Shafagat Takhautdinov, President of «Ak Bars» Hockey Club, was awarded the title «The Honored
Physical Culture Worker of the Republic of Tatarstan» for public activities and support.
12. «Oil News» Newspaper was awarded the fi rst place in the nomination «The Best Publication in
periodicals» of the “Companies’ media group”, «Time of Tatneft» TV studio was awarded the second
place in the category «Best TV story» of the “Companies’ media” group of the Republican «Man and
Nature» journalist contest.
13. «Oil and Life» corporate magazine joined the top 10 in the rating of corporate industrial companies in
Russia and ranked No. 7 in the rating of «Production Management» Business Portal.
4. Boris Kashcheev, oil & gas production foreman of NGDU «Jalilneft» was awarded the Order of
Friendship by the Presidential Decree.
5. Ramil Magasumov, oil, gas & condensate production foreman was conferred Gratitude of the
Government of the Russian Federation.
6. TATNEFT awarded the Top departmental awards of the building complex of the Russian Federation
instituted by the Russian Union of Builders. JSC TATNEFT was awarded a diploma of the Russian Union
of Builders. Shafagat Takhautdinov, General Director (from November, 2013 - Advisor to the JSC
TATNEFT’s Chairman of the Board of Directors), Mirgaziyan Taziev, Head of NGDU «Almetyevneft», Ghali
Ganiev, General Director of OOO «TagraS Holding» were awarded the Order «For Merit in construction».
7. Sirin Gubaidullin, manual electric welder was awarded the medal «For Valorous Labor».
8. The collective of authors-oilmen was awarded the State Prize of the Republic of Tatarstan in the fi eld
of science and technology for the work «Scientifi c basis and commercial implementation of methods and
technologies complex for the development of the resource base of JSC TATNEFT”.
100
101
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
FINANCIAL
RESULTS
AUDIT OPINION
AUDIT OPINION OF ACCOUNTING (FINANCIAL) STATEMENTS
for the period from January 01 till December 31, 2013
AUDIT OPINION OF ACCOUNTING (FINANCIAL) STATEMENTS
for the period from January 01 till December 31, 2013
AUDIT OPINION
To Shareholders of Open Joint Stock CompanyTATNEFT named after V.D.Shashin
Audited Entity
Full name: Open Joint Stock Company TATNEFT named after V.D. Shashin (hereinafter referred to
as the Company).
Abbreviated name: JSC TATNEFT n.a. V.D. Shashin.
State Registration Number 1021601623702.
Location: 75, Lenin Street, Almetyevsk 423450, Republic of Tatarstan, Russian Federation
Auditor
Name: ZAO ENERGY CONSULTING/Audit
State Registration Number: 1047717034640.
Location: 7 Pavlovskaya Street, Moscow 115093, Russia.
Postal address: 7 Pavlovskaya Street, Moscow 115093, Russia.
Member of NP “Institute of Professional Auditors of Russia” (IPAR)
Basic State Registration Number: 10202014620.
We have audited the enclosed financial statements of the Company comprising the balance sheet as
of December 31, 2013, profit and loss statement, attachments to the balance sheet and profit and loss
statement (the statement of changes in equity and cash flow statement for the year of 2013), other
attachments to the balance sheet and profit and loss statement (notes to the accounts) for 2013.
Responsibility of the Audited Entity for Financial Statement
The Company management is responsible for accounting and authenticity of the specified financial
statements in accordance with the accounting rules in the Russian Federation and for the internal
control system necessary for preparation of financial statements free of material misstatement due to
fraud or errors.
Responsibility of the Auditor
Our responsibility is to express an opinion on authenticity of the financial statements based on our
audit results. We have carried out the audit in accordance with the federal auditing standards of the
Russian Federation. These standards require that we comply with relevant ethical requirements and
perform the audit to obtain reasonable assurance that the financial statements are free of any material
misstatement.
The audit included performance of audit procedures aimed at obtaining audit evidence supporting the
numerical indicators of the financial statements and disclosure of the information contained therein.
The choice of the audit procedures is the subject of our judgment, which is based on the assessment of
the risk of material misstatements, made due to fraud or errors. In assessing this risk, we considered
the system of internal control, providing for compiling and authenticity of the financial statements in
order to select the relevant conditions for setting the auditing procedures, but not for the purpose of
expressing an opinion on the effectiveness of the internal control system.
The audit also included the assessment of appropriateness of the accounting policies applied and the
reasonableness of the estimated figures received by the management of the audited entity as well as
the overall assessment of the financial statements presentation in general.
We believe that the audit evidence provides a reasonable basis for expressing an opinion on the
authenticity of the financial statements.
Opinion
In our opinion, the financial statements authentically present in all material respects the financial
position of JSC TATNEFT named after V.D. Shashin as of December 31, 2013, the results of
its financial and business performance and cash flows for the year 2013 in accordance with the
established rules of compiling financial statements in the Russian Federation.
March 28, 2014
General Director
ZAO ENERGY CONSULTING/Audit
L.A. Antonenko
Auditor’s qualification certificate of Sept.08, 2011
No. 02-000014, ORNZ 29702011544
102
103
JSC TATNEFT named after V.D. Shashin
JSC TATNEFT named after V.D. Shashin
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
BALANCE SHEET
INDICATOR DESCRIPTION
ASSETS
I. FIXED ASSETS
Intangible assets
Research and development results
Intangible exploration assets
Tangible exploration assets
Fixed assets
incl. incomplete capital investments
Income-bearing investments in tangible assets
Financial investments
Deferred tax assets
Other non-current assets
incl. advance payments given for procurement and construction of
fixed assets
Assets retirement obligations
TOTAL for section I
II.CURRENT ASSETS
Reserves
incl. raw materials and supplies
Work in progress costs
Finished products and goods for resale
Goods shipped
Other reserves and expenses
Input value added tax on acquired assets
Accounts receivable
incl. noncurrent nondelinquent accountsreceivable(that are due
beyond 12 monthsafter the reporting date)
incl. buyers and customers
Advances paid
Other debtors
incl. current nondelinquent accounts receivable (that are due in the
next 12 months after the reporting date)
incl. buyers and customers
Advances paid
Other debtors
Financial assets (except for cash equivalents)
Cash and cash equivalents
Other current assets
TOTAL for section II
BALANCE
(RUR THOUSAND)
BALANCE SHEET
(RUR THOUSAND)
LINE CODE
AS OF DECEMBER 31,
2013
AS OF DECEMBER 31,
2012
AS OF DECEMBER 31,
2011
1110
1120
1130
1140
1150
1151
1160
1170
1180
1190
1191
1192
1100
1210
1211
1212
1213
1214
1215
1220
1230
1231
1232
1233
1234
1235
1236
1237
1238
1240
1250
1260
1200
1600
209,755
183168
199,857
140,440
201,468
90,875
4,254,890
4,239,122
4,275,474
749,309
765,985
868,591
105,623,595
84,545,165
71,612,606
24,089,675
13,059177
2,346,536
6,170,187
6,344,080
6,418,316
52,026,776
41,341,354
41,567,542
–
–
–
66,517,371
58,667,903
41,518,025
12,236,117
17,222,336
7,063,062
29,507,230
30,057,677
30,624,585
231,911400
196,070,013
166,552,897
27,532,219
25,967,668
20,095,622
1,691,393
7,124,819
1,196,405
7,038,008
1,379,951
6,836,399
15,449,610
15,259,334
10,003,092
2,546,366
1,673,416
720,031
800,505
986,580
889,600
4,209,301
3,667,200
3,830,658
78,283,414
75,807,078
85,864,316
3,500,446
5,091,597
9,700,501
1,535,471
2,952,290
6,276,669
–
539
2,825
1,964,975
2,138,768
3,421,007
74,782,968
70,715,481
76,163,815
51,062,327
44,701,410
53,598,749
13,427,574
14,980,295
12,368,493
10,293,067
11,033,776
10,196,573
170,528,846
195,409,775
208,374,862
20,649,731
7,396,963
7,817,038
202,354
301,640
332,158
301,405,865
308,550,324
326,314,654
533,317,265
504,620,337
492,867,551
INDICATOR DESCRIPTION
LIABILITIES
III. CAPITAL AND RESERVES
Authorized capital (share capital, registered fund,
contributions of partners)
Repurchased shares
Revaluation of noncurrent assets
Capital surplus (without revaluation)
Reserve capital
Undistributed profit (uncovered loss)
TOTAL for Section III
IV.LONG-TERM LIABILITIES
Borrowings
Deferred tax liabilities
Estimated liabilities
Other liabilities
TOTAL for Section IV
V. SHORT-TERM LIABILITIES
Borrowings
Accounts payable
incl. suppliers and contractors
Liabilities to the state non-budgetary fund
Taxes and dues payable
Advances received
Dividends payable
Other creditors
Deferred revenues
Estimated liabilities
Other liabilities
TOTAL for Section V
BALANCE
LINE CODE
AS OF DECEMBER31,
2013
AS OF DECEMBER 31,
2012
AS OF DECEMBER 31,
2011
1310
1320
1340
1350
1360
1370
1300
1410
1420
1430
1450
1400
1510
1520
1521
1522
1523
1524
1525
1526
1530
1540
1550
1500
1700
2,326,199
2,326,199
2,326,199
( )
( )
( )
8,753,243
9,548,876
9,638,151
30,813
10,353
(9,231)
1,144,326
1,265,940
1,197,142
409,441,456
365,305,770
315,721,541
421,696,037
378,457,138
328,873,802
7,067,728
34,026,859
58,831,609
7,808,535
7,433,542
6,865,859
29,554,090
29,854,065
30,409,912
–
17,931
121,813
44,430,353
71,332,397
96,229,193
29,855,108
25,831,964
37,977,561
33,729,497
25,390,863
27,947,958
11,027,550
9,903,302
8,138,832
294,098
11,295,169
3,222,161
102,707
276,771
9,106,492
1,859,202
101,477
220,044
9,657,722
3,727,482
95,551
7,787,812
4,143,619
6,108,327
5,389
1,494,557
2,106,324
6,433
1,625,372
1,976,170
7,714
1,439,204
392,119
67,190,875
54,830,802
67,764,556
533,317,265
504,620,337
492,867,551
104
105
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
PROFIT AND LOSS STATEMENT FY 2013
(THOUSAND RUR)
INDICATOR DESCRIPTION
Revenues
Cost of goods sold
Gross profit (loss)
Selling expenses
Administrative expenses
Mineral exploration and evaluation expenses
Profit (loss) on sales
Participation capital
Interest receivable
Interest payable
Other income
Other expenses
Profit (loss) before taxation
Current income tax
incl. permanent tax liabilities (assets)
Changes in deferred tax liabilities
Changes in deferred tax assets
Miscellaneous
Adjusted tax on the profit for the consolidated group of taxpayers
Net profit (loss)
INFORMATIONAL
Surplus on revaluation of fixed assets not included
in the net income (loss) for the period
Result from other operations not included in the net income (loss) for theperiod
Total profit/loss for the period
Basic earnings (loss) per share
Diluted earnings (loss) per share
LINE CODE
JANUARY-DECEMBER
2013
JANUARY-DECEMBER
2012
2110
2120
2100
2210
2220
2230
2200
2310
2320
2330
2340
2350
2300
2410
2421
2430
2450
2460
2465
2400
2510
2520
2500
2900
2910
363,531,273
344,563,268
(228,539,354)
(208,369,224)
134,991,919
136,194,044
(37,252,177)
(35,083,893)
–
(2,026)
–
(59,806)
97,737,716
101,050,345
179,295
3,282,143
214,560
3,891,121
(4,337,004)
(5,386,623)
26,372,397
10,489,195
(39,749,600)
(23,367,851)
83,484,947
86,890,747
(19,712,285)
(20,606,585)
(3,390,289)
(3,796,119)
(374,993)
(567,683)
(117,095)
569,566
693,426
254,783
63,850,140
66,664,688
423,247
20,460
405,484
19,584
64,293,847
67,089,756
28.75
–
30.02
–
ESSENTIAL ASPECTS OF THE
ACCOUNTING POLICY AND
PRESENTATION OF FINANCIAL
STATEMENTS FOR 2013
MAIN APPROACHES TO PREPARATION
OF ANNUAL FINANCIAL STATEMENTS
Financial accounting in the Company is performed in accordance
withFederal Law No.402-FZ of December 06, 2011 “On Accounting”,
Provision on Accounting and Reporting in the Russian Federation approved
by Order of the Russian Federation Ministry of Finance No.34n dated July
29, 1998,current accounting regulations (RAS), as well as the accounting
policy of the Company.Financial statements of the Company for 2013were
prepared in compliance with mentioned Law, accounting regulations and
policy, as well as the assumption of the organization activity continuity.
Annual fi nancial statements for 2013 were compiled according to the
forms developed and approved by the Company in accordance with the
Order of the Ministry of Finance No. 66n of July 02, 2010 «About formats
for corporate fi nancial statements». The data in fi nancial statements is
presented in thousands of rubles.
ASSETS AND LIABILITIES DENOMINATED
IN FOREIGN CURRENCY
Accounting for assets and liabilities denominated in foreign currencies
is carried out in accordance withRAS 3/2006, «Accounting of Assets and
Liabilities Denominated in Foreign Currencies», and approved by Order
No. 154n of November 27, 2006of the FinanceMinistry of the Russian
Federation.
The exchange rate difference is refl ected in the accounting and fi nancial
statements for the concerned reporting period with the due date of
payment or which the fi nancial statements were executed for.
The exchange rate difference arising from conversion of the organization’s
assets and liabilities denominated in foreign currency used for performing
activities outside the Russian Federation into rubles is credited to the
organization’s capital surplus.
The exchange rate difference on other activitiesis credited to fi nancial
results of the organization as other income and expenses. The currency
exchange rate gains and losses are recognized in the Profi t and Loss
account in the «Other income» or «Other expenses».
For accounting business transactions in foreign currencies there was the
offi cial exchange rateappliedof the foreign currency to the ruble valid on
the date of transaction. Cash on foreign currency accounts in banks and
on hand, fi nancial investments (except shares), and settlement funds in
foreign currencies (except the funds received and paid advances and
pre-payment or earnest money) are refl ected in the fi nancial statements
as amounts calculated on the basis of the currency offi cial exchange rates
valid on December 31, 2013. The currency exchange rates on this date
amounted to RUR 32.7292to USD 1.00 (RUR 30.3727 as of December
31, 2012;RUB 32.1961 as of December 31, 2011); RUR 44.9699to
EURO1.00(RUR 40.2286 as of December 31, 2012, RUR 41.6714as of
December 31, 2011).
INTANGIBLE ASSETS
As a part of intangible assets there are software programs for
computersrefl ected; inventions; useful models; production secrets (know-
how); trademarks and service marks, licenses for mineral geological
exploration and production, and licenses for mineral production.
Intangible assets are refl ected in the accounting records at historic cost
in that reporting period when received the documents confi rming the
Company’s exclusive rights to the results of intellectual activity or means
of individualization irrespective of intangible assets used in production,
performance of works or rendering of services, for administrative purposes.
The original cost of intangible assets acquired under the contracts
providing for execution of non-monetary obligations, is determined
based on the value of the assets transferred or subject to transfer by the
organization. The cost of the assets transferred or subject to transfer is
set on the basis of the price, at which the value of similar assets is usually
determined in comparable circumstances.
If it is impossible to establish the value of assets transferred or subject to
transfer by the organization, then the value of obtained intangible assets
is determined based on the price, at which similar intangible assets are
usually purchased.
The value of intangible assets shall be repaid by the straight-line
depreciation method at the rates specifi ed on the basis of the due date of
the useful life.
Depreciation is not charged for intangible assets with an indefi nite period of
the useful life.
Depreciation charging is performed through accumulation of appropriate
amounts in a separate account. Depreciation on intangible assets is
refl ected in the accounting period, which they refer to and is charged
regardless of the organization’soperating results in the reporting period.
The useful life of intangible assets is annually verifi ed for the purpose
of clarifi cation. In case of substantial change of the period duration (by
more than twenty percent) within which the asset is intended to be used,
its useful life is defi ned. The resulting adjustments are refl ected in the
accounting and fi nancial reporting at the beginning of the year as changes
in the estimated values.
Value adjustment of intangible assets of homogeneous groups is not
performed.
EXPENSES FOR RESEARCH& DEVELOPMENT,
DEVELOPMENT AND ENGINEERING WORKS
Expenses for the research & development, development and engineering
worksare accounted in the amount of actual expenses incurred during
performance of these works.
The expenses for the research & development, development and
engineering works which have produced positive results and started to be
used in the work are expensed written off as expenses of ordinary activities
starting with the month following the month when the company started
the actual application of the mentioned works results in the production
manufacturing (work performance, service rendering) or for administrative
needs of the organization.
Writing off the costs of each performed research & development,
development and engineering workwhich have produced positive results
is made during the useful life of R & D results (which should not exceed 5
years).
The expenses for the research & development, development and
engineering workswhich have not produced positive results are written off
to the fi nancial result as miscellaneous expenses in the reporting period.
106
107
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
EXPLORATION ASSETS
The Company considers the following to be exploration assets as a part of
tangible exploration assets:
• expenses for acquisition and construction of prospecting, exploration and
When confi rming the commercial feasibility of oil production in the licensed
block of mineral resources the Company performs reclassifi cation of
exploration assets:
• tangible exploration assets are included in the category of fi xed assets at
advance producing wells, as well as other oilfi eld facilities;
residual value;
• expenses for acquisition and rig-up of the equipment for prospecting,
• intangible exploration assets are included in the category of intangible
exploration and advance producing operation wells.
assets at residual value.
According to the Company the intangible exploration assets include the
following types of exploration costs:
• acquisition costs of licenses for geological study of subsurface, licenses
for geological exploration and production of mineral resources;
• costs of prospecting, evaluation and exploration of mineral resources:
expenses for geological, geochemical, geophysical works, as well as
expenses for acquiring geological information on the subsurface from
the third parties, including state authorities, and expenses for drilling key,
appraisal and structure wells.
The Company considers the following exploration costs as expenses
for regular types of activity: expenses for maintenance of the structural
divisions organized solely for or performance and coordination of works on
exploration, evaluation and prospecting of mineral resources, as well as
expenses for maintenance and repair of tangible exploration assets.
Tangible exploration assets are depreciated by straight-line depreciation
method during the period of their useful life.
Depreciation costs for targets of tangible exploratory assets are included in
the costs of prospecting, evaluation and exploration of mineral resources
for relevant license blocks.
Intangible exploration assets as licenses for geological subsurface study
are depreciated by straight-linemethod during the period of their useful
application.Depreciation costs for aforementioned targets are included in
the costs of prospecting, evaluation and exploration of mineral resources
for relevant subsurface areas.
Acquisition costs incurred for exploration and mininglicenses, as well as
the costs of prospecting, evaluation and exploration of mineral resources
are not depreciated until the commercial feasibility of oil production is
confi rmed in the relevant license block of mineral resources and approval
of the order of commercialfi eld development.
The commercial feasibility of oil production is considered to be confi rmed
at the moment of approval of the reservoir management plan in the license
area of mineral resources.
The Company performs annual verifi cation of exploration assets
depreciation as of December 31 of the calendar year, as well as in the case
of cessation of their recognition when confi rming commercial feasibility of
oil production in the relevant license block.
JSC TATNEFT writes off the exploration assets to other expenses,if they are
not able to provide economic benefi ts in the future.
FIXED ASSETS
Land plots, buildings, facilities, machinery, equipment, transport vehicles
and other relevant assets of over 12 months asset life and cost over 40,000
rubles are refl ected in the fi xed assets.
The Company annually revaluates fi xed assets based on the current value
(replacement asset value) at the end of the reporting period.
Fixed assets put into operation before January 1, 2002 are depreciated
at uniform depreciation rates approved by Decree No.1072 of the
USSRCouncil of Ministers dated October 22, 1990 «On Uniform
Depreciation Rates of Full Cost Recovery of Fixed Assets of the USSR
National Economy»; and those assets put into operation from January 1,
2002 are depreciated at the rates calculated on the basis of useful life. The
classifi cation of fi xed assets included in depreciation groups approved by
the Order No. 1 of the Government of Russian Federation dated January
01, 2002 is used as one of the informationsources about the useful life
periods.
Forthispurposethe following usefullife periodsare specifi ed forfi xedassets
(put into operation starting from January 1, 2002) by depreciation groups:
1 group
2 group
3 group
4 group
5 group
6 group
7 group
8 group
9 group
10 group
13 months
30 months
48 months
72 months
96 months
132 months
192 months
252 months
312 months
372 months
For the purposes of verifying exploration assets for depreciation the
aforementioned assets are categorized by mineral resource blocks
indicated in the licenses.
The straight line depreciation method is used for depreciation calculations.
Depreciation is not charged on land plots and natural resources sites.
Impairment loss of exploration assetsis refl ected in the profi t-and-loss
statement in line code «Other expenses». Furthermore the Company
applies the reversal of impairment lossto exploration assets.
Changingthe original value offi xed assets as they were included for
accounting purposes is allowed in cases of completion, retrofi t, renovation,
modernization, partial liquidation and revaluation of the fi xed assets.
The Company ceases recognition of exploration assets in relation to a
certain licensed block of mineral resources when confi rming commercial
feasibility of oil production in the relevant licensed block or recognizing lack
of prospects of mineral resources production in this area.
In accordance with Article 11 of RAS 6/01 «Accounting of Fixed Assets»
there are the following methods of estimation of objects of fi xed assets
received under contracts providing for execution of obligations (payment)
by non-monetary assets:
• at the cost of goods (values) transferred or transferable. The cost of goods
(values) transferred or transferableis determined on the basis of the price,
which under comparable circumstances usually determines the cost of
similar goods (values);
• if impossible to establish the cost of goods (values) transferred or
transferable, then the cost of fi xed assets received under contracts
providingfor execution of obligations (payment) by non-monetary assetsis
determined on the basis of the price, which is paid to acquire similar fi xed
assetsunder comparable circumstances.
Repair expenses of fi xed assets items are included at actual costs and
referred to the reporting period in which they were done.
The line of «Construction in progress» includes the costs of construction
and erection works, acquisition of buildings, facilities, equipment and other
tangible objects of long-term use, other capital works and expenses. This
line refl ects the cost of capital construction projects before their putting
into operation, after which the structures are transferred into fi xed assets.
In addition to this, the «Construction in progress» line refl ects the costs
associated with the lease of land for construction of future wells.
Leased fi xed assets are refl ected in the line «Income-bearing Investments
in Tangible Assets».
FINANCIAL INVESTMENTS
Financial investments are accepted for accounting at original cost.
Financial investments defi ning the fair market value are refl ected in the
fi nancial statements as of the end of the reporting year at current market
value by adjusting their evaluation on the previous reporting date.
Financial investments for which there is no defi nition of the fair market value
are refl ected in fi nancial statements as of the reporting date at original cost
after deduction of the reserve amount formed for their depreciation.
Financial investments are refl ected as part of the current assets if the
expected duration of their possession is less than 12 months after the
reporting date. Other fi nancial investments are included in fi xed assets.
The costs of information, advisory services, valuation services and other
similar services related to taking a decision on acquisition of fi nancial
investments made prior to the acquisition of fi nancial investments are
recorded in the line of «Other Current Assets» (if the decision to acquire the
investments is made within 12 months from the date of the expenditure). In
other cases they are included in the line of «Other Non-Current Assets».
On disposal of fi nancial investments for which the current market value
cannot be determined, their value is formed on the basis of the assessment
determined by:
• on disposal of shares or bonds - at original cost of the fi rst-time fi nancial
investments acquisition (FIFO method);
• on disposal of bills - at original cost of each unit of fi nancial investments
accounting.
The cost of information, advisory services, valuation services and other
similar services related to the disposal of fi nancial investments made prior
to the fi nancial investments disposal are refl ected in the line of «Other
Current Assets».
On disposal of fi nancial investments, for which the current market value is
not determined, their value is determined by the organization on the basis
of the last assessment.
Gains and losses of fi nancial investments disposal are refl ected in the profi t
and loss statement as part of other income and expenses.
REPO transactions are refl ected in the fi nancial statements as giving or
receiving a loan against securities.
INVENTORIES
«Raw Materials and Supplies» line of the balance sheet refl ects raw
materials, basic and auxiliary materials, purchased semi-fi nished products
and components, fuel, packaging, spare parts, construction and other
materials.
The line of the inventories also refl ects the assets, which meet the
conditions necessary for the recognizing them as fi xed assets of the cost
no more than 40,000 rubles per unit.
The inventories are recorded at the actual cost of their acquisition with the
exception of VAT and other recoverable taxes (except as provided by the
legislation of the Russian Federation). Disposal of the inventories is carried
at the average cost.
The inventories, which are obsolete, wholly or partially have lost their
original quality, or which current market value is decreased, are refl ected in
the balance sheet less the reserve provision for impairment of the material
values.
WORK IN PROGRESS, FINISHED PRODUCTS,
GOODS AND SALES EXPENSES
Expenditures incurred for performance of activities under the Agreement
for the exploration and production sharing with Libya during the exploration
period are refl ected as part of the production in progress. The plans provide
that the mentioned expenditures for petroleum operations will be offset
through delivery of fi nished products (crude oil, liquid hydrocarbon by-
products and natural gas), which JSC TATNEFT will receive as a result of
production sharing during the operational period.
Finished products are refl ected in the balance-sheet at the full actual
production cost (including management expenses).
In shipment of oil, petroleum products and gas products assessment is
carried out by the average cost method for each group of products.
Sales expenditures are written off to the results of the Company’s fi nancial
and economic activities without differentiating between the sold and unsold
products.
108
109
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
GOODS SHIPPED
The accounting item “Goods Shipped” refl ects shipped products, the title for
which was not transferred to buyers.
This line also refl ects the real estate property transferred to the buyer by
the delivery-acceptance act before the moment of state registration of the
transfer ownership.
ACCOUNTS RECEIVABLES
Indebtedness of buyers and customers is determined on the ground of
prices established by contracts concluded between the Company and
buyers (customers) taking into account all discounts (extra charges).
Indebtedness unrealistic to be recovered is written off from the balance if it is
proved to be such.
The indebtedness not paid within the time limits stipulated in contracts
and not secured with respective guarantees is shown after deduction of
accrued reserves for bad debts. These reserves constitute a conservative
assessment carried out by the Company with regard to the part of debts
which is likely not to be paid. The reserve is created for each doubtful
debt outstanding (depending on the financial condition (solvency) of the
debtor and an estimated probability of debt repayment in whole or in part)
on the basis of the receivables inventory, made for the last day of the
reporting month.
Income and expenses generated in the creation and recovery of
allowance for doubtful debts in one financial year are reflected in
the profit and loss statement in the lines «Other Income» or «Other
Expenses».
CASH AND CASH EQUIVALENTS
In accordance with the regulations on accounting, «Report of Cash Flows,»
approved by Order No. 11n of the Ministry of Finance of Russia dated
February 02, 2011 the cash equivalents include highly liquid investments
that can easily be converted into the known in advance amount of cash and
are subject to an insignifi cant risk of value change.
In accordance with the legislation the Company established a reserve
fund in the amount to 5% of the authorized capital formed out of net profi ts
of the Company. The reserve fund is intended to cover the losses of the
Company for bonds redemption and repurchase of the Company’s shares
if unavailable other funds.
In accordance with the constituent documents the Company establishes
the Employee share ownership fund which is formed out of net profi ts
of the. Contributions to this fund are made in accordance with the
methodology approved by “Regulations on Bonus Certifi cates of
JSC TATNEFT”.
ESTIMATED LIABILITIES
The Company acknowledges its estimated liability for remuneration
payment based on the results of the year.
The amount of monthly payments under the estimated liability is
determined based on the monthly deduction payments and the actual
expenses amount of the labor costs. Percentage of contributions under
the estimated liability is calculated by the ratio of the annual planned
expenditure for the labor payment to the planned total labor costs.
Based on the Provision «Estimated Liabilities, Contingent Liabilities and
Contingent Assets (RAS 8/2010)» becoming effective the Company
introduced amendments in terms of recognizing estimated liabilities to the
employees for unused vacations.
The estimated liability value of unused employees’ vacation for accrual
of relevant allowance is determined based on the total number of days of
the unused vacation for each employee of the average daily earnings and
insurance premiums accrued on the specifi ed reserve.
The actual amount of the vacation allowance (including the compensation
amount for unused vacation) accrued to the employee in the accounting is
ascribed due to the acknowledged amount of the estimated liability to the
unused vacation payment.
The Company refers the bank deposits placed for maximum 3 months
period under the contracts the terms of which provide for acceleration
possibility to the cash equivalents.
An inventory of the estimated liability for unused vacation payment is
carried out as of the last day of each quarter, which results are refl ected by
the estimated liability adjustments.
In the Statement of Cash Flows:
• cash balances and cash equivalent balances in a foreign currency
at the beginning and at the end of the reporting period are refl ected
in the rubles amount, which is determined in accordance with RAS
3/2006. Differences arising in connection with the conversion of the
organization’s cash fl ows and cash equivalents in foreign currency
exchange rates on different dates are refl ected in the cash fl ows
statement as the impact of foreign currency exchange rate changes
against the ruble.
• indirect taxes (VAT and excise duties) as part of the proceeds from
buyers and customers, payments to suppliers and contractors
and payments to the budget system of the Russian Federation or
reimbursement of out of it are refl ected as balanced result in the line of
«Other Income» («Other Payments»).
AUTHORIZED CAPITAL AND CAPITAL SURPLUS
The authorized capital is refl ected in the amount of the face value of
ordinary and preferred shares purchased by the shareholders.
The surplus capital of the Company includes exchange differences
arising from the conversion of the organization’s assets and liabilities
value expressed in foreign currency used to perform activities outside
the Russian Federation into rubles. In addition, the revaluation surplus of
fi xed assets resulting from revaluation classifi ed in the additional capital is
refl ected in the «Revaluation of Fixed Assets» line. Revaluation surplus in
case of the fi xed asset item disposal is transferred from the capital surplus
to the undistributed profi t of the Company.
LOANS AND BORROWINGS
In accordance with RAS 15/01 «Accounting of expenses on loans and
borrowings» approved by Order No.107n of the Ministry of Finance of
Russia dated October 06, 2008 the principal amount of the loan (credit)
received from the lender is accounted in accordance with the terms of
the loan agreement (credit agreement) in the amount of actually received
monetary assets or in cost estimate of other items stipulated by the
contract.
Indebtedness under received loans and borrowings as well as accrued
interest is refl ected in the balance sheet line of «Borrowings».
Indebtedness under received loans and borrowings as well as accrued
interest for accounting is divided into short-term indebtedness (which
repayment period does not exceed 12 months under the terms of contract)
and long-term indebtedness (the repayment period of which is over 12
months under the terms of contract).
The long-term indebtedness is transferred to short-term indebtedness at
the moment when there are 365 days left before repayment of the principal
amount.
Interest on received loans and borrowings is recognized as other expenses
of that period in which they were made, except for the part to be included in
the value of the investment asset.
Expenses of received loans and credits directly attributable to acquisition
and/or creation of the investment asset are included in the cost of the asset
and are repaid through depreciation except where charging of the asset
depreciation is not provided by the accounting rules.
Inclusion of expenses on received loans and borrowings in the original
value of the investment asset is terminated on the fi rst day of the month
following the month of accepting the asset for accounting as a fi xed asset,
intangible asset or R & D expenses.
SALES REVENUE RECOGNITION
Revenue from sales of goods, products and service rendering (execution of
works) is recognized when the products are shipped to the buyers (services
are rendered to customers).
Revenue from the sales under contracts providing for fulfi llment of
obligations (payment) by non-monetary assets is determined at the cost
of the values received or receivable by the Company calculated on the
basis of the prices which are usually used by the Company in comparable
circumstances to determine the cost of similar values.
According to hydrocarbons sales contracts the settlement documents
should be mainly submitted to the buyers no later than 15 days after the
month of shipment, while the price of raw materials is determined by the
settlement method based on the market quotations or it is fi xed in the
contract as agreed by the parties.
EXPENSES
Administrative expenses are written off for production in full on a monthly
basis.
Administrative expenses in the oil-and-gas production divisions are
distributed between the calculation items for production of oil, associated
petroleum gas, production of other goods (works, services) on a pro rata
basis to their total production expenses net of deductions, taxes and other
obligatory payments. Administrative expenses in other structural divisions
are distributed on a pro rata basis to the actual expenses of the direct labor
costs.
ACCOUNTING OF PROFIT TAX CALCULATIONS
In preparation of the fi nancial statements the balanced (net) amounts of
deferred tax asset and deferred tax liability are refl ected in the balance
sheet refl ects.
CORRECTION OF ERRORS IN THE ACCOUNTING AND REPORTING
An error identifi ed in the accounting and fi nancial statements is recognized
to be essential if the ratio of the error to the numerical indicator of the
relevant group of balance sheet items of JSC TATNEFT, or item of the
fi nancial statement of JSC TATNEFT for the reporting period is minimum
fi ve percent. Otherwise the error is insignifi cant.
110
111
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
IFRS CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2013
112
113
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN MILLIONS OF RUSSIAN ROUBLES)
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
NOTE
31 DECEMBER 2013
31 DECEMBER 2012
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Short-term financial assets
Inventories
Prepaid expenses and other current assets
Total current assets
Long-term accounts receivable, net
Long-term financial assets
Investments in associates and joint ventures
Property, plant and equipment, net
Deferred income tax assets
Other long-term assets
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt and current portion of long-term debt
Accounts payable and accrued liabilities
Taxes payable
Income tax payable
Total current liabilities
Long-term debt, net of current portion
Other long-term liabilities
Decommissioning provision, net of current portion
Deferred income tax liability
Total non-current liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Preferred shares (authorized and issued at 31 December 2013 and 2012 – 147,508,500 shares; nominal value
at 31 December 2013 and 2012 – RR1.00)
Common shares (authorized and issued at 31 December 2013 and 2012 – 2,178,690,700 shares; nominal
value at 31 December 2013 and 2012 – RR1.00)
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Less: Common shares held in treasury, at cost
(55,592,000 shares and 55,543,000 shares at 31 December 2013 and 2012, respectively)
Total Group shareholders’ equity
Non-controlling interest
Total shareholders’ equity
Total liabilities and equity
114
6
7
8
9
10
7
11
12
13
18
14
15
16
18
15
17
13
18
19
19
19
29,535
917
52,098
16,693
29,538
23,217
151,998
1,016
25,814
7,778
481,883
2,049
3,551
522,091
674,089
36,561
28,444
16,706
1,462
83,173
12,785
3,839
54,511
15,799
86,934
170,107
13,083
1,369
53,553
14,931
28,590
28,806
140,332
1,530
25,782
6,711
448,903
2,633
4,716
490,275
630,607
32,096
31,019
13,234
201
76,550
37,991
3,710
51,089
15,034
107,824
184,374
746
746
11,021
87,482
889
384,376
(3,102)
481,412
22,570
503,982
674,089
11,021
87,482
726
333,072
(3,093)
429,954
16,279
446,233
630,607
Sales and other operating revenues, net
COSTS AND OTHER DEDUCTIONS
Operating
Purchased oil and refined products
Exploration
Transportation
Selling, general and administrative
Depreciation, depletion and amortization
Gain/(loss) on disposals of property, plant and equipment, investments and impairments
Taxes other than income taxes
Maintenance of social infrastructure and transfer of social assets
Total costs and other deductions
OTHER INCOME/(EXPENSES)
Foreign exchange (loss)/gain
Interest income
Interest expense, net of amounts capitalized
Earnings from equity investments
Other income, net
Total other (expenses)/income
Profit before income taxes
INCOME TAXES
Current income tax expense
Deferred income tax expense
Total income tax expense
Profit for the year
OTHER COMPREHENSIVE INCOME:
Items to be reclassified subsequently to profit or loss:
Foreign currency translation adjustments
Unrealized holding (losses)/gains on available-for-sale securities, including share of associates, net of tax
Items that will not be reclassified to profit or loss:
Actuarial loss on employee benefit plans
Other comprehensive income/(expenses)
Total comprehensive income for the year
Profit attributable to:
Group shareholders
Non-controlling interest
Total comprehensive income is attributable to:
Group shareholders
Non-controlling interest
Basic and diluted net earnings per share (RR)
Common
Preferred
Weighted average shares outstanding (millions of shares)
Common
Preferred
(IN MILLIONS OF RUSSIAN ROUBLES)
NOTE
22
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
454,983
444,099
20
20
13
18
21
21
12
18
19
(89,634)
(50,312)
(1,839)
(30,388)
(44,123)
(19,323)
1,209
(111,336)
(4,828)
(350,574)
(438)
3,365
(6,924)
350
529
(3,118)
101,291
(21,645)
(1,302)
(22,947)
78,344
530
(43)
(324)
163
78,507
70,832
7,512
78,344
70,995
7,512
78,507
31.19
31.16
2,123
148
(86,675)
(53,900)
(1,740)
(29,108)
(40,910)
(17,770)
(1,997)
(106,293)
(4,031)
(342,424)
1,665
3,872
(6,978)
739
845
143
101,818
(21,816)
(1,554)
(23,370)
78,448
(430)
151
(990)
(1,269)
77,179
73,473
4,975
78,448
72,204
4,975
77,179
32.35
32.33
2,123
148
115
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(IN MILLIONS OF RUSSIAN ROUBLES)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS OF RUSSIAN ROUBLES)
ATTRIBUTABLE TO GROUP SHAREHOLDERS
UNREALIZED
HOLD-
ING GAIN/
(LOSSES) ON
AVAILABLE-
FOR-
SALE
SECURITIES,
INCLUDING
SHARE OF
ASSOCI-
ATES, NET
OF TAX
FOREIGN
CURRENCY
TRANSLA-
TION AD-
JUSTMENTS
TOTAL
SHARE-
HOLDERS’
EQUITY
NON-CON-
TROLLING
INTEREST
RETAINED
EARNINGS
TOTAL
EQUITY
NUMBER
OF SHARES
(THOU-
SANDS)
SHARE
CAPITAL
ADDITIONAL
PAID-IN
CAPITAL
TREASURY
SHARES
ACTUARIAL
LOSS ON
EMPLOYEE
BENEFIT
PLANS
2,270,643
11,767
87,482
(3,094)
496
1,184
315
275,675
373,825
11,602
385,427
–
–
–
73,473
73,473
4,975
78,448
(990)
(430)
151
–
(1,269)
–
(1,269)
–
–
–
13
(80)
93
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(15)
16
–
–
–
–
–
(49)
(175)
126
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9)
(36)
27
–
–
(990)
(430)
151
73,473
72,204
4,975
77,179
Changes in operational working capital, excluding cash:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(15)
16
–
–
–
1
(15)
16
–
267
267
(16,076)
(16,076)
(565)
(16,641)
2,270,656
11,767
87,482
(3,093)
(494)
754
466
333,072
429,954
16,279
446,233
–
–
–
70,832
70,832
7,512
78,344
(324)
530
(43)
–
163
–
163
Net cash provided by operating activities
(324)
530
(43)
70,832
70,995
7,512
78,507
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9)
(36)
27
–
–
–
(9)
(36)
27
(19,528)
(19,528)
(984)
(20,512)
–
(237)
(237)
Change in restricted cash
2,270,607
11,767
87,482
(3,102)
(818)
1,284
423
384,376
481,412
22,570
503,982
OPERATING ACTIVITIES
Profit for the year
Adjustments:
Depreciation, depletion and amortization
Income tax expense
(Gain)/loss on disposals of property, plant and equipment, investments and impairments
Transfer of social assets
Effects of foreign exchange
Equity investments earnings net of dividends received
Change in provision for impairment of financial assets
Change in fair value of trading securities
Interest income
Interest expense
Other
Accounts receivable
Inventories
Prepaid expenses and other current assets
Trading securities
Accounts payable and accrued liabilities
Taxes payable
Notes payable
Other non-current assets
Net cash provided by operating activities before income tax and interest
Income taxes paid
Interest paid
Interest received
INVESTING ACTIVITIES
Additions to property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investments
Purchase of investments
(Purchase)/proceeds from certificates of deposit, net
Repayment/(issuance) of loans and notes receivable, net
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
78,344
78,448
19,323
22,947
(1,209)
23
3,282
(350)
633
(351)
(3,365)
6,924
736
1,094
(1,630)
4,733
3,159
(1,659)
3,490
256
674
137,054
(19,634)
(2,636)
3,365
118,149
(56,827)
1,539
564
(17)
(5,034)
1,457
452
17,770
23,370
1,997
4
(4,830)
(724)
655
(392)
(3,872)
6,978
461
8,550
(6,929)
(684)
37
(6,397)
(439)
(78)
(399)
113,526
(23,503)
(3,258)
3,872
90,637
(50,795)
1,798
1,809
(2,192)
1,554
(502)
(191)
Net cash used in investing activities
(57,866)
(48,519)
FINANCING ACTIVITIES
Proceeds from issuance of debt
Repayment of debt
Dividends paid to shareholders
Dividends paid to non-controlling shareholders
Purchase of treasury shares
Proceeds from sale of treasury shares
Proceeds from issuance of shares by subsidiaries
Net cash used in financing activities
Net change in cash and cash equivalents
Effect of foreign exchange on cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
30,258
(53,820)
(19,526)
(984)
(27)
27
–
(44,072)
16,211
241
13,083
29,535
42,278
(71,458)
(16,070)
(565)
(15)
16
9
(45,805)
(3,687)
(131)
16,901
13,083
117
Balance
at 1 January 2012
Profit for the year
Other comprehensive
(loss)/income for the
year
Total comprehensive
(loss)/income for the
year
Treasury shares
Acquisitions
Disposals
Acquisition of non-
controlling interest
in subsidiaries
Dividends declared
Balance
at 31 December 2012
Profit for the year
Other comprehensive
(loss)/income for the
year
Total comprehensive
(loss)/income
for the year
Treasury shares
Acquisitions
Disposals
Disposal of non-
controlling interest
in subsidiaries
Dividends declared
Balance
at 31 December 2013
116
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(in millions of Russian Roubles)
NOTE 1:
ORGANISATION
OAO Tatneft (the “Company”) and its subsidiaries (jointly referred to as “the
Group”) are engaged in crude oil exploration, development and production
principally in the Republic of Tatarstan (“Tatarstan”), a republic within the
Russian Federation. The Group also engages in refi ning and marketing
of crude oil and refi ned products as well as production and marketing of
petrochemicals (see Note 22).
The Company was incorporated as an open joint stock company effective
1 January 1994 (the “privatization date”) pursuant to the approval of the
State Property Management Committee of the Republic of Tatarstan
(the “Government”). All assets and liabilities previously managed by the
production association Tatneft, Bugulminsky Mechanical Plant, Menzelinsky
Exploratory Drilling Department and Bavlinsky Drilling Department were
transferred to the Company at their book value at the privatization date in
accordance with Decree No. 1403 on Privatization and Restructuring of
Enterprises and Corporations into Joint-Stock Companies. Such transfers
were considered transfers between entities under common control at the
privatization date, and were recorded at book value.
The Group does not have an ultimate controlling party.
As of 31 December 2013 and 2012 OAO Svyazinvestneftekhim, a company
wholly owned by the government of Tatarstan, together with its subsidiary,
holds approximately 36% of the Company’s voting stock. These shares
were contributed to OAO Svyazinvestneftekhim by the Ministry of Land and
Property Relations of Tatarstan in 2003. Tatarstan also holds a “Golden
Share”, a special governmental right, in the Company (see Note 19). The
exercise of its powers under the Golden Share enables the Tatarstan
government to appoint one representative to the Board of Directors and
one representative to the Revision Committee of the Company as well as
to veto certain major decisions, including those relating to changes in the
share capital, amendments to the Charter, liquidation or reorganization of
the Company and “major” and “interested party” transactions as defi ned
under Russian law. The Golden Share currently has an indefi nite term. The
Tatarstan government, including through OAO Svyazinvestneftekhim, also
controls or exercises signifi cant infl uence over a number of the Company’s
suppliers and contractors.
The Company is domiciled in the Russian Federation. The address of its
registered offi ce is Lenina St., 75, Almet’evsk, Tatarstan Republic, Russian
Federation.
NOTE 2:
BASIS OF PRESENTATION
The accompanying consolidated fi nancial statements have been prepared
in accordance with International Financial Reporting Standards (“IFRS”). The
Group fi rst adopted IFRS for the fi scal year ended 31 December 2012, with a
date of transition to IFRS on 1 January 2011.
These consolidated fi nancial statements have been prepared on a historical
cost basis, except certain fi nancial assets and liabilities measured at fair
value.
The entities of the Group maintain their accounting records and prepare their
statutory fi nancial statements principally in accordance with the Regulations
on Accounting and Reporting of the Russian Federation (“RAR”). The
accompanying consolidated fi nancial statements have been prepared from
these accounting records and adjusted as necessary to comply with IFRS.
The principal differences between RAR and IFRS relate to: (1) valuation
(including indexation for the effect of hyperinfl ation in the Russian Federation
through 2002) and depreciation of property, plant and equipment; (2)
foreign currency translation; (3) deferred income taxes; (4) valuation
allowances for unrecoverable assets; (5) consolidation; (6) share based
payment; (7) accounting for oil and gas properties; (8) recognition and
disclosure of guarantees, contingencies and commitments; (9) accounting
for decommissioning provision; (10) pensions and other post retirement
benefi ts and (11) business combinations and goodwill.
The preparation of fi nancial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are signifi cant to the consolidated
fi nancial statements are disclosed in Note 4.
RECLASSIFICATIONS
Certain reclassifi cations have been made to previously reported balances to
conform to the current year presentation; such reclassifi cations had no effect
on net income profi t for the year, shareholders’ equity or cash fl ows.
NOTE 3:
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
FUNCTIONAL AND PRESENTATION CURRENCY.
The presentation currency of the Group is the Russian rouble.
Management has determined the functional currency for each
consolidated subsidiary of the Group, except for subsidiaries located
outside of the Russian Federation, is the Russian Rouble because the
majority of its revenues, costs, property and equipment purchased, debt
and trade liabilities are either priced, incurred, payable or otherwise
measured in Russian Roubles. Accordingly, transactions and balances not
already measured in Russian Roubles (primarily US Dollars) have been re-
measured into Russian Roubles in accordance with the relevant provisions
of IAS 21 The Effects of Changes in Foreign Exchange Rates.
Under IAS 21 revenues, costs, capital and non-monetary assets and
liabilities are translated at historical exchange rates prevailing on the
transaction dates. Monetary assets and liabilities are translated at
exchange rates prevailing on the reporting date. Exchange gains and
losses arising from re-measurement of monetary assets and liabilities that
are not denominated in Russian Roubles are recognized in the profi t or loss
for the year.
For operations of subsidiaries located outside of the Russian Federation,
that primarily use US Dollar as the functional currency, adjustments
resulting from translating foreign functional currency assets and
liabilities into Russian Roubles are recorded in a separate component of
shareholders’ equity entitled foreign currency translation adjustments.
Revenues, expenses and cash fl ows are translated at average exchange
rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions).
The offi cial rate of exchange, as published by the Central Bank of
Russia (“CBR”), of the Russian Rouble (“RR”) to the US Dollar (“US $”)
at 31 December 2013 and 2012 was RR 32.73 and RR 30.37 to US $,
respectively. Average rate of exchange for the years ended 31 December
2013 and 2012 were RR 31.85 and RR 31.09 per US $, respectively.
CONSOLIDATION
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group has the power to direct relevant activities
of the investee that signifi cantly affect their returns, exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for
business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Acquisition – related costs are
expensed as incurred. Identifi able assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition
basis at the non-controlling interest’s proportionate share of the acquiree’s
net assets.
The excess of the consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair value of the identifi able
net assets acquired is recorded as goodwill. If the total of consideration
transferred, non-controlling interest recognised and previously held
interest measured is less than the fair value of the net assets of the
subsidiary acquired in the case of a bargain purchase, the difference is
recognised directly in the profi t and loss for the year.
Inter-company transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated.
ASSOCIATES AND JOINT VENTURES
Associates and joint ventures are entities over which the Group has
signifi cant infl uence (directly or indirectly), but not control, generally
accompanying a shareholding of between 20 and 50 percent of the voting
rights. Investments in associates and joint ventures are accounted for
using the equity method of accounting and are initially recognised at cost.
Dividends received from associates and joint ventures reduce the carrying
value of the investment in associates and joint ventures. Other post-
acquisition changes in Group’s share of net assets of an associate and joint
ventures are recognised as follows: (i) the Group’s share of profi ts or losses
of associates or joint ventures is recorded in the consolidated profi t or loss
for the year as share of result of associates or joint ventures, (ii) the Group’s
share of other comprehensive income is recognised in other comprehensive
income and presented separately, (iii); all other changes in the Group’s
share of the carrying value of net assets of associates or joint ventures are
recognised in profi t or loss within the share of result of associates or joint
ventures.
However, when the Group’s share of losses in an associate or joint venture
equals or exceeds its interest in the associate or joint venture, including
any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of
the associate or joint venture.
Unrealised gains on transactions between the Group and its associates
and joint ventures are eliminated to the extent of the Group’s interest in
the associates and joint ventures; unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset
transferred.
The Group reviews equity method investments for impairment on an annual
basis, and records impairment when circumstances indicate that the
carrying value exceeds the recoverable amount.
CURRENT/NON-CURRENT PRESENTATION
Group presents current and non-current assets, and current and non-
current liabilities, as separate classifi cations in its Consolidated Statement of
Financial Position.
Group discloses for each asset and liability line item that combines
amounts expected to be recovered or settled in period no more than 12
months after the reporting period are disclosed as current; and more than
12 months after the reporting period as non-current.
CASH AND CASH EQUIVALENTS
Cash represents cash on hand and in bank accounts, which can be
effectively withdrawn at any time without prior notice. Cash equivalents
include highly liquid short-term investments that can be converted to a
certain cash amount and mature within three months or less from the date
of purchase. They are recognized based on the cost of acquisition which
approximates fair value.
118
119
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
RESTRICTED CASH
Restricted cash represents cash deposited under letter of credit
arrangements, which are restricted under various contractual agreements.
Letters of credit are used to pay contractors for materials, equipment and
services provided. Restricted balances are excluded from cash and cash
equivalents for the purposes of the consolidated statements of fi nancial
position and of the consolidated statement of cash fl ows and disclosed
separately.
FINANCIAL ASSETS
All fi nancial assets are initially recognised when an entity becomes a party
to the contract, they recognised at fair value plus, in the case of investments
not at fair value through profi t or loss, directly attributable transaction costs.
The Group‘s fi nancial assets include cash and cash equivalents, deposits,
securities, trade and other receivables, loans issued.
Financial assets have the following categories: (a) loans and receivables;
(b) available-for-sale fi nancial assets; (c) fi nancial assets at fair value
through profi t or loss.
LOANS AND RECEIVABLES
Loans and receivables is a category of fi nancial assets with fi xed or deter-
minable payments that are not quoted in an active market. Subsequent to
initial recognition loans and receivables are measured at amortised cost
using the effective interest method, less any impairment losses. The accrued
interest is included in the profi t and losses for the year.
Allowances are provided for estimated losses and for doubtful debts
based on estimates of uncollectible amounts. These estimates require the
exercise of judgment and the use of assumptions.
The losses arising from impairment are recognized as selling, general and
administrative expenses in the consolidated statements of profi t or loss and
other comprehensive income.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
A fi nancial asset is classifi ed at fair value through profi t or loss category if it is
classifi ed as held for trading or is designated as such upon initial recognition.
Financial assets are designated at fair value through profi t or loss if the
Group manages such investments and makes purchase and sale decisions
based on their fair value in accordance with the Group’s documented risk
management or investment strategy. Financial assets at fair value through
profi t or loss are measured at fair value, and changes therein are recognized
in profi t and loss for the year.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale fi nancial assets are non-derivative fi nancial assets that
are designated as available-for-sale or are not classifi ed in any of the above
categories of fi nancial assets. Available-for-sale fi nancial assets include
investment securities which the Group intends to hold for an indefi nite period
of time and which may be sold in response to needs for liquidity or changes
in interest rates, exchange rates or equity prices.
Subsequent to initial recognition, they are measured at fair value and chang-
es therein, other than impairment losses and foreign currency differences on
available-for-sale debt instruments, are recognized in other comprehensive
income and presented within equity. Unquoted equity instruments whose fair
value cannot be measured reliably are carried at cost less any impairment
losses. When an investment is derecognized the cumulative gain or loss in
equity is also reclassifi ed to profi t and loss for the year.
The Group assesses at each reporting date whether there is objective
evidence that a fi nancial asset or a group of fi nancial assets is impaired.
Prolonged decline in the fair value of the security below its cost is
considered as an indicator that the securities are impaired. If any such
evidence exists for available-for-sale fi nancial assets, the cumulative loss
(measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that fi nancial asset previously
recognized in the other comprehensive income) is recognized in the
profi t and loss for the year as a reclassifi cation adjustment from other
comprehensive income.
120
FINANCIAL LIABILITIES
All fi nancial liabilities are recognised initially at fair value and in the case
of loans and borrowings, net of directly attributable transaction costs. The
Group’s fi nancial liabilities include trade and other payables, loans and
borrowings.
Financial liabilities are recognised initially at fair value. Subsequent to initial
recognition, these fi nancial liabilities are measured at amortised cost using
the effective interest method.
A fi nancial liability is derecognised when the obligation under the liability
is discharged or cancelled or expired. When an existing fi nancial liability
is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modifi ed, such
an exchange or modifi cation is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in the profi t and loss for the
year.
The Group does not use derivative fi nancial instruments.
The Group does not offset assets and liabilities unless required or
permitted to by an IFRS.
INVENTORIES
Inventories of crude oil, refi ned oil products, materials and supplies, and
fi nished goods are valued at the lower of cost or net realizable value. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated cost of completion and selling expenses. The
Group uses the weighted-average-cost method. Costs include both direct
and indirect expenditures incurred in bringing an item or product to its
existing condition and location.
PREPAID EXPENSES
Prepaid expenses include advances for purchases of products and services,
insurance fees, prepayments for export duties, VAT and other taxes.
Prepayments are carried at cost less provision for impairment.
Prepayments to acquire assets are transferred to the carrying amount
of the asset once the Group has obtained control of the asset and it is
probable that future economic benefi ts associated with the asset will fl ow to
the Group. Prepayments for services such as insurance, transportation and
others are written off to profi t or loss when the goods or services relating to
the prepayments are received.
If there is an indication that the assets, goods or services relating to a
prepayment will not be received, the carrying value of the prepayment
is written down accordingly and a corresponding impairment loss is
recognised in the profi t or loss for the year.
MINERAL EXTRACTION TAX
Mineral extraction tax (MET) on crude oil is defi ned monthly as an amount
of volume produced per fi xed tax rate (RR 470 and RR 446 per ton in 2013
and 2012, respectively) adjusted depending on the monthly average market
prices of the Urals blend and the RR/US $ exchange rate for the preceding
month. The base tax rate formula for MET is modifi ed by benefi t for fi elds
whose depletion rate exceeds 80% of proved reserves as determined under
Russian resource classifi cation. The Company receives a benefi t of 3.5% per
fi eld for each percent of depletion in excess of the 80% threshold.
The ultimate amount of the MET on crude oil depends also on geographic
location of the oil fi eld (for certain regions zero tax rate may be applied
depending on the volume of crude oil produced and period of fi eld
development). Also a zero MET tax rate applies to the production of highly
viscous crude oil (defi ned as crude oil of more than 200 Megapascal
second in reservoir conditions).
MET is recorded within Taxes other than income tax in the Consolidated
Statements of Profi t or Loss and Other Comprehensive Income.
VALUE ADDED TAX
Value added tax (VAT) at a standard rate of 18% is payable on the difference
between output VAT on sales of goods and services and recoverable input
VAT charged by suppliers. Output VAT is charged on the earliest of the
dates: either the date of the shipment of goods (works, services) or the
date of advance payment by the buyer. Input VAT can be recovered when
purchased goods (works, services) are accounted for and other necessary
requirements provided by the tax legislation are met.
Export of goods and rendering certain services related to exported goods
are subject to 0% VAT rate upon the submission of confi rmation documents
to the tax authorities.
VAT related to sales and purchases is recognized in the Consolidated
Statements of Financial Position on a gross basis and disclosed separately
as Prepaid expenses and other current assets and Taxes payable.
OIL AND GAS EXPLORATION AND DEVELOPMENT COST
Oil and gas exploration and development activities are accounted for
using the successful efforts method whereby costs of acquiring unproved
and proved oil and gas property as well as costs of drilling and equipping
productive wells, including development dry holes, and related production
facilities are capitalized.
Other exploration expenses, including geological and geophysical
expenses and the costs of carrying and retaining undeveloped properties,
are expensed as incurred. The costs of exploratory wells that fi nd oil and
gas reserves are capitalized as exploration and evaluation assets on a
“fi eld by fi eld” basis pending determination of whether proved reserves
have been found. In an area requiring a major capital expenditure before
production can begin, exploratory well remains capitalized if additional
exploration drilling is underway or fi rmly planned. Exploration costs not
meeting these criteria are charged to expense.
Individual assets are grouped for impairment purposes at the lowest level
for which there are identifi able cash fl ows that are largely independent
of the cash fl ows of other groups of assets - generally on a fi eld-by-fi eld
basis for exploration and production assets, at an entire complex level for
refi ning assets or at a site level for service stations. Impairment losses are
recognised in the profi t or loss for the year.
Impairments are reversed as applicable to the extent that the events or
circumstances that triggered the original impairment have changed. The
reversal of impairment would be limited to the original carrying value
less depreciation which would have been otherwise charged had the
impairment not been recorded.
Long-lived assets committed by management for disposal within one year,
and meet the other criteria for held for sale, are accounted for at the lower
of amortized cost or fair value, less cost to sell. Costs of unproved oil and
gas properties are evaluated periodically and any impairment assessed is
charged to expense.
The Group calculates depreciation expense for oil and gas proved
properties using the units-of-production method for each fi eld based upon
proved developed oil and gas reserves, except in the case of signifi cant
asset components whose useful life differs from the lifetime of the fi eld, in
which case the straight-line method is applied.
Oil and gas licenses for exploration of unproved reserves are capitalised
within property, plant and equipment; they are depreciated on straight-line
basis over the period of each license validity.
Depreciation of all other property, plant and equipment is determined
on the straight-line method based on estimated useful lives which are as
follows:
Exploration and evaluation costs are subject to technical, commercial and
management review as well as review for impairment at least once a year to
confi rm the continued intent to develop or otherwise extract value from the
discovery. When indicators of impairment are present, resulting impairment
loss is measured.
Buildings and constructions
Machinery and equipment
YEARS
30-50
10-35
If subsequently commercial reserves are discovered, the carrying value,
less losses from impairment of respective exploration and evaluation
assets, is classifi ed as development assets. However, if no commercial
reserves are discovered, such costs are expensed after exploration and
evaluation activities have been completed.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at historical cost of acquisition
or construction less accumulated depreciation, depletion, amortization and
impairment.
Proved oil and gas properties include the initial estimate of the costs
of dismantling and removing the item and restoring the site on which it
is located. The cost of maintenance, repairs and replacement of minor
items of property are expensed when incurred within operating expenses;
renewals and improvements of assets are capitalised and depreciated
during the remaining useful life. Cost of replacing major parts or
components of property, plant and equipment items are capitalised and the
replaced part is retired.
Advances made on property, plant and equipment and construction in
progress are accounted for within Construction in progress.
Long-lived assets, including proved oil and gas properties at a fi eld
level, are assessed for possible impairment in accordance with IAS 36
Impairment of assets, which requires long-lived assets with recorded
values that are not expected to be recovered through future cash fl ows to
be written down to their recoverable amount which is the higher of fair value
less costs to sell and value-in-use.
Gains and losses on disposals of property, plant and equipment are
determined by comparing proceeds, if any, with the carrying amount. Gains
and losses are recorded in Gain/(loss) on disposals of property, plant and
equipment, investments and impairments in the Consolidated Statements
of Profi t or Loss and Other Comprehensive Income.
CAPITALISATION OF BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial time to get ready for
intended use or sale (qualifying assets) are capitalised as part of the costs of
those assets.
The Group capitalises borrowing costs that could have been avoided
if it had not made capital expenditure on qualifying assets. Borrowing
costs capitalised are calculated at the Group’s average funding cost
(the weighted average interest cost is applied to the expenditures on the
qualifying assets), except to the extent that funds are borrowed specifi cally
for the purpose of obtaining a qualifying asset. Where this occurs, actual
borrowing costs incurred less any investment income on the temporary
investment of those borrowings are capitalised.
Capitalisation of borrowing costs includes capitalising foreign exchange
differences relating to borrowings to the extent that they are regarded as an
adjustment to interest costs. The gains and losses that are an adjustment
to interest costs include the interest rate differential between borrowing
costs that would be incurred if the entity borrowed funds in its functional
currency, and borrowing costs actually incurred on foreign currency
borrowings.
121
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
The portion of the foreign exchange movements is estimated based on
interest rates on similar borrowing in the Group’s functional currency. The
foreign exchange gains and losses eligible for capitalisation are assessed
on a cumulative basis.
Capitalisation of borrowing costs continues up to the date when the assets
are substantially ready for their use or sale.
EMPLOYEE BENEFITS, PENSION
AND OTHER POST-RETIREMENT BENEFITS
Wages, salaries, contributions to the social insurance funds, paid annual
leave and sick leave, bonuses, and non-monetary benefi ts (such as health
services and kindergarten services) are accrued in the year in which the
associated services are rendered by the employees of the Group. The Group
has various pension plans covering substantially all eligible employees
and members of management. The pension liabilities are measured at the
present value of the estimated future cash outfl ows using interest rates of
government securities, which have the same currency and terms to maturity
approximating the terms of the related liability. Pension costs are recognised
using the projected unit credit method.
The cost of providing pensions is accrued and charged to staff expense
within operating expenses in the Consolidated Statements of Profi t or Loss
and Other Comprehensive Income refl ecting the cost of benefi ts as they are
earned over the service lives of employees.
Actuarial gains and losses with regard to post employment benefi t plans are
recognised immediately in other comprehensive income. Actuarial gains and
losses related to other long-term benefi ts are recognised immediately in the
profi t or loss for the year.
Past service costs are recognised as an expense immediately.
Plan assets are measured at fair value and are subject to certain limitations.
Fair value of plan assets is based on market prices. When no market price
is available the fair value of plan assets is estimated by different valuation
techniques, including discounted expected future cash fl ow using a discount
rate that refl ects both the risk associated with the plan assets and maturity or
expected disposal date of these assets.
In the normal course of business the Group contributes to the Russian
Federation State Pension Fund on behalf of its employees. Mandatory
contributions to the Fund are expensed when incurred and are included
within staff costs in operating expenses.
STOCK-BASED COMPENSATION
The Company has a share-based compensation plan (the “Plan”) for senior
management and directors of the Company. Under the provisions of the
Plan, share-based bonus awards (“Awards”) are issued on an annual basis to
the Company’s directors and senior management as approved by the Board
of Directors. Each Award provides a cash payment at the settlement date
equal to one of the Company’s common shares multiplied by the difference
between the lowest share price for the preceding three years as of the grant
date and the highest share price for the preceding three years as of each
year-end. Share prices are measured based on the weighted average
daily trading price as reported on the Moscow Exchange MICEX-RTS
(MOEX). Awards are subject to individual annual performance conditions
and are generally settled within 90 days after the Company’s Management
Committee approval.
The liability at 31 December 2013 and 2012 is determined based on the fi nal
expected bonus payments. The Awards are recognized as expense over
the annual service period, net of forfeitures, with a corresponding liability to
accounts payable and accrued liabilities.
DECOMMISSIONING PROVISIONS
The Group recognizes a liability for the fair value of legally required or
constructive decommissioning provisions associated with long-lived assets
in the period in which the retirement obligations are incurred. The Group has
numerous asset removal obligations that it is required to perform under law
or contract once an asset is permanently taken out of service. The Group’s
fi eld exploration, development, and production activities include assets
related to: well bores and related equipment and operating sites, gathering
and oil processing systems, oil storage facilities and gathering pipelines.
Generally, the Group’s licenses and other operating permits require certain
actions to be taken by the Group in the abandonment of these operations.
Such actions include well abandonment activities, equipment dismantlement
and other reclamation activities. The Group’s estimates of future
abandonment costs consider present regulatory or license requirements,
as well as actual dismantling and other related costs. These liabilities are
measured by the Group using the present value of the estimated future costs
of decommissioning of these assets. The discount rate is reviewed at each
reporting date and refl ects current market assessments of the time value
of money and the risks specifi c to the liability. Most of these costs are not
expected to be incurred until several years, or decades, in the future and will
be funded from general Group resources at the time of removal.
The Group capitalizes the associated decommissioning costs as part of the
carrying amount of the long-lived assets. Changes in obligation, reassessed
regularly, related to new circumstances or changes in law or technology, or
in the estimated amount of the obligation, or in the pre-tax discount rates,
are recognised as an increase or decrease of the cost of the relevant asset
to the extent of the carrying amount of the asset; the excess is recognised
immediately in profi t and loss.
The Group’s petrochemical, refi ning and marketing and distribution
operations are carried out at large manufacturing facilities. The nature of
these operations is such that the ultimate date of decommissioning of any
sites or facilities is unclear. Current regulatory and licensing rules do not
provide for liabilities related to the liquidation of such manufacturing facilities
or of retail fuel outlets. Management therefore believes that there are no
legal or contractual obligations related to decommissioning or other disposal
of these assets.
INCOME TAXES
Income taxes have been provided for in the consolidated fi nancial
statements in accordance with legislation enacted or substantively enacted
by the end of the reporting period. The income tax charge comprises current
tax and deferred tax and is recognised in profi t or loss for the year, except if
it is recognised in other comprehensive income or directly in equity because
it relates to transactions that are also recognised, in the same or a different
period, in other comprehensive income or directly in equity.
Current tax is the amount expected to be paid to, or recovered from, the
taxation authorities in respect of taxable profi ts or losses for the current and
prior periods.
Deferred income tax is provided using the balance sheet liability method
for tax loss carry forwards and temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts for fi nancial
reporting purposes. Deferred income tax assets and liabilities are recognised
for all deductable or taxable temporary differences, except:
• Where the deferred tax liability arises from the initial recognition of goodwill
or of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting nor
taxable profi t or loss;
• In respect of taxable temporary differences associated with investments in
subsidiaries, where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future; and
• Where it is not probable that future taxable profi t will be available against
which the deductible temporary differences and the carry forward of
unused tax credits and unused tax losses can be utilised.
Deferred tax balances are measured at tax rates enacted or substantively
enacted at the end of the reporting period, which are expected to apply to
the period when the temporary differences will reverse or the tax loss carry
forwards will be utilised. Deferred tax assets and liabilities are netted only
within the individual companies of the Group.
Income tax penalties expense and income tax penalties payable are
included in Taxes other than income tax in the Consolidated Statements
of Profi t or Loss and Other Comprehensive Income and Taxes payable in
the Consolidated Statement of Financial Position, respectively. Income
tax interest expense and payable are included in Interest expense in the
Consolidated Statements of Profi t or Loss and Other Comprehensive Income
and other accounts payable and accrued expenses in the Consolidated
Statement of Financial Position, respectively.
SHARE CAPITAL
Ordinary shares and non-redeemable preference shares with discretionary
dividends are both classifi ed as equity.
Dividends paid to shareholders are determined by the Board of directors and
approved at the annual shareholders’ meeting.
TREASURY SHARES
Common shares of the Company owned by the Group at the reporting
date are designated as treasury shares and are recorded at cost using the
weighted-average method. Gains on resale of treasury shares are credited
to additional paid-in capital whereas losses are charged to additional paid-in
capital to the extent that previous net gains from resale are included therein
or otherwise to retained earnings.
EARNINGS PER SHARE
Preference shares are not redeemable and are considered to be
participating shares.
Basic and diluted earnings per share are calculated by dividing profi t or
loss attributable to ordinary and preference share holders by the weighted
average number of ordinary and preferred shares outstanding during the
period. Profi t or loss attributed to equity holders is reduced by the amount
of dividends declared in the current period for each class of shares. The
remaining profi t or loss is allocated to common and preferred shares to the
extent that each class may share in earnings if all the earnings for the period
had been distributed. Treasury shares are excluded from calculations. The
total earnings allocated to each class of shares are determined by adding
together the amount allocated for dividends and the amount allocated for a
participation feature.
REVENUE RECOGNITION
Revenues from the production and sale of crude oil, petroleum and
petrochemical products and other products are recognized when title has
transferred and collectability is reasonably assured. Revenue is measured at
the fair value of the consideration received or receivable taking into account
the amount of any discounts and other incentives. Purchases and sales of
inventory with the same counterparty that are entered into in contemplation
of one another are combined, considered as a single arrangement and
netted against each other in the Consolidated Statements of Profi t or Loss
and Other Comprehensive Income. Revenue includes only economic
benefi ts which fl ow to the Group. Taxes and duties arising on the sale of
goods to third parties do not form part of revenue.
TRANSPORTATION EXPENSES
Transportation expenses recognised in the Consolidated Statements of
Profi t or Loss and Other Comprehensive Income represent all expenses
incurred by the Group to transport crude oil and other products to end
customers (they may include pipeline tariffs and any additional railroad costs,
handling costs, port fees, sea freight and other costs). Compounding fees
are included in Selling, General and administrative expenses.
NOTE 4:
CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES
The Group makes estimates and assumptions that affect the amounts
recognised in the consolidated fi nancial statements and the carrying
amounts of assets and liabilities within the next fi nancial year. Estimates
and judgements are continually evaluated and are based on management’s
experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
Management of the Group also makes certain judgements, apart from
those involving estimations, in the process of applying the accounting
policies. Judgements that have the most signifi cant effect on the amounts
recognised in the consolidated fi nancial statements and estimates that
can cause a signifi cant adjustment to the carrying amount of assets and
liabilities within the next fi nancial year include:
• Estimation of oil and gas reserves;
• Useful life of property, plant and equipment;
• Decommissioning provisions;
• Impairment of long-lived assets;
• Consolidation.
ESTIMATION OF OIL AND GAS RESERVES
Oil and gas development and production assets are depreciated on a
unit-of-production (UOP) basis for each fi eld or group of fi elds with similar
characteristics at a rate calculated by reference to proved or proved
developed reserves. Estimates of proved reserves are also used in the
determination of whether impairments have arisen or should be reversed.
Also, exploration drilling costs are capitalized pending the results of further
exploration or appraisal activity, which may take several years to complete
and before any related proved reserves can be booked.
Proved and proved developed reserves are estimated by reference to
available geological and engineering data and only include volumes for
which access to market is assured with reasonable certainty. Estimates of
oil and gas reserves are inherently imprecise, require the application of
judgment and are subject to regular revision, either upward or downward,
based on new information such as from the drilling of additional wells,
observation of long-term reservoir performance under producing
conditions and changes in economic factors, including product prices,
contract terms or development plans. The Group estimates its oil and
gas reserves in accordance with rules promulgated by the Oil and Gas
Reserves Committee of the Society of Petroleum Engineers (SPE) for
proved reserves.
Changes to the Group’s estimates of proved and proved developed
reserves affect prospectively the amounts of depreciation, depletion and
amortization charged and, consequently, the carrying amounts of oil
and gas properties. It is expected, however, that in the normal course of
business the diversity of the Group’s portfolio will limit the effect of such
revisions. The outcome of, or assessment of plans for, exploration or
appraisal activity may result in the related capitalized exploration drilling
costs being written off in the profi t and loss for the year.
USEFUL LIFE OF PROPERTY, PLANT AND EQUIPMENT
Based on the terms included in the licenses and past experience,
management believes hydrocarbon production licenses will be extended
past their current expiration dates at insignifi cant additional costs. As a result
of the anticipated license extensions, the assets are depreciated over their
useful lives beyond the end of the current license term.
122
123
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
Management assesses the useful life of an asset by considering the
expected usage, estimated technical obsolescence, residual value,
physical wear and tear and the operating environment in which the asset is
located. Differences between such estimates and actual results may have a
material impact on the amount of the carrying values of the property, plant
and equipment and may result in adjustments to future depreciation rates
and expenses for the period.
Other property, plant and equipment are depreciated on a straight-line
basis over their useful economic lives. Management periodically, at the
end of each reporting period, reviews the appropriateness of the assets
useful economic lives and residual values. The review is based on the
current condition of the assets, the estimated period during which they will
continue to bring economic benefi t to the Group and the estimated residual
value.
DECOMMISSIONING PROVISIONS
Management makes provision for the future costs of decommissioning oil
and gas production facilities, wells, pipelines, and related support equipment
and for site restoration based on the best estimates of future costs and
economic lives of the oil and gas assets. Estimating future decommissioning
provisions is complex and requires management to make estimates and
judgments with respect to removal obligations that will occur many years in
the future.
Changes in the measurement of existing obligations can result from
changes in estimated timing, future costs or discount rates used in
valuation.
The amount recognized as a provision is the best estimate of the
expenditures required to settle the present obligation at the reporting
date based on current legislation in each jurisdiction where the Group‘s
operating assets are located, and is also subject to change because of
revisions and changes in laws and regulations and their interpretation. As
a result of the subjectivity of these provisions there is uncertainty regarding
both the amount and estimated timing of such costs.
The Group’s petrochemical, refi ning and marketing and distribution
operations are carried out at large manufacturing facilities. The nature
of these operations is such that the ultimate date of decommissioning of
any sites or facilities is unclear. Current regulatory and licensing rules do
not provide for liabilities related to the liquidation of such manufacturing
facilities or of retail fuel outlets. Management therefore believes that there
are no legal or contractual obligations related to decommissioning or other
disposal of these assets.
SENSITIVITY ANALYSIS FOR CHANGES IN RATES,
AND OTHER ESTIMATES
Discount rate
CHANGE IN
AT 31 DECEMBER
2013
AT 31 DECEMBER
2012
+1%
-1%
(11,436)
(22,437)
15,384
4,814
Information about decommissioning provision is presented in Note 13.
IMPAIRMENT OF LONG-LIVED ASSETS
The recoverable amounts of cash-generating units and individual assets
have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of
estimates and assumptions, including future oil prices, expected production
volumes and refi ning margins appropriate to the local circumstances and
environment. It is reasonably possible that these assumptions may change
and may then require a material adjustment to the carrying value of the
Group’s assets.
CONSOLIDATION
The Company made signifi cant judgements related to signifi cant subsidiaries
which are controlled by the Group, even though the Group holds less than
half of the voting rights of these subsidiaries.
The Company considers that the Group has control over several entities
even though it has less than 50% of the voting rights. This is because the
Company has power over the investee, has rights to variable returns of the
investee, and has the power to affect variable returns.
Additional information is disclosed in Note 25.
NOTE 5:
ADOPTION OF NEW OR REVISED
STANDARDS AND INTERPRETATIONS
The following new standards and interpretations became effective for the
Group from 1 January 2013:
Amendments to IAS 1, Presentation of Financial Statements (issued June
2011, effective for annual periods beginning on or after 1 July 2012),
changes the disclosure of items presented in other comprehensive income.
The amendments require entities to separate items presented in other
comprehensive income into two groups, based on whether or not they may
be reclassifi ed to profi t or loss in the future. The suggested title used by IAS
1 has changed to “Statement of Profi t or Loss and Other comprehensive
income”.
The following other new pronouncements did not have a material impact on
these consolidated fi nancial statements.
• IFRS 13, Fair value measurement (issued in May 2011 and effective for
annual periods beginning on or after 1 January 2013), aims to improve
consistency and reduce complexity by providing a revised defi nition of
fair value, and a single source of fair value measurement and disclosure
requirements for use across IFRSs.
• Amended IAS 19, Employee Benefi ts (issued in June 2011, effective
for periods beginning on or after 1 January 2013), makes signifi cant
changes to the recognition and measurement of defi ned benefi t pension
expense and termination benefi ts, and to the disclosures for all employee
benefi ts.
• Disclosures—Offsetting Financial Assets and Financial Liabilities -
Amendments to IFRS 7, Financial Instruments: Disclosures (issued in
December 2011 and effective for annual periods beginning on or after
1 January 2013). The amendment requires disclosures that will enable
users of an entity’s consolidated fi nancial statements to evaluate the
effect or potential effect of netting arrangements, including rights of set-
off.
• Improvements to International Financial Reporting Standards (issued in
May 2012 and effective for annual periods beginning 1 January 2013)
- IAS 16, Property, Plant and Equipment, was amended to clarify that
servicing equipment that is used for more than one period is classifi ed as
property, plant and equipment rather than inventory.
Certain new standards and interpretations have been issued that are
mandatory for the annual periods beginning on or after 1 January 2014 or
later, and which the Group has not early adopted.
IFRS 9 Financial Instruments: Classifi cation and Measurement.
Key features of the standard issued in November 2009 and amended in
October 2010, December 2011 and November 2013 are:
• Financial assets are required to be classifi ed into two measurement
categories: those to be measured subsequently at fair value, and those to
be measured subsequently at amortised cost. The decision is to be made
at initial recognition. The classifi cation depends on the entity’s business
model for managing its fi nancial instruments and the contractual cash fl ow
characteristics of the instrument.
• An instrument is subsequently measured at amortised cost only if it is a debt
instrument and both (i) the objective of the entity’s business model is to hold
the asset to collect the contractual cash fl ows, and (ii) the asset’s contractual
cash fl ows represent payments of principal and interest only (that is, it has
only “basic loan features”). All other debt instruments are to be measured at
fair value through profi t or loss.
• All equity instruments are to be measured subsequently at fair value. Equity
instruments that are held for trading will be measured at fair value through
profi t or loss. For all other equity investments, an irrevocable election can be
made at initial recognition, to recognise unrealised and realised fair value
gains and losses through other comprehensive income rather than profi t or
loss. There is to be no recycling of fair value gains and losses to profi t or loss.
This election may be made on an instrument-by-instrument basis. Dividends
are to be presented in profi t or loss, as long as they represent a return on
investment.
• Most of the requirements in IAS 39 for classifi cation and measurement
of fi nancial liabilities were carried forward unchanged to IFRS 9. The key
change is that an entity will be required to present the effects of changes in
own credit risk of fi nancial liabilities designated at fair value through profi t or
loss in other comprehensive income.
• Hedge accounting requirements were amended to align accounting
more closely with risk management. The standard provides entities with
an accounting policy choice between applying the hedge accounting
requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because
the standard currently does not address accounting for macro hedging.
The amendments made to IFRS 9 in November 2013 removed its mandatory
effective date, thus making application of the standard voluntary. The Group is
considering the implications of the standard, the impact on the Group and the
timing of its adoption by the Group.
Offsetting Financial Assets and Financial Liabilities - Amendments
to IAS 32 (issued in December 2011 and effective for annual periods
beginning on or after 1 January 2014). The amendment added application
guidance to IAS 32 to address inconsistencies identifi ed in applying some of
the offsetting criteria. This includes clarifying the meaning of “currently has a
legally enforceable right of set-off” and that some gross settlement systems
may be considered equivalent to net settlement. The Group is considering
the implications of the standard, the impact on the Group and the timing of its
adoption by the Group.
IFRIC 21 - Levies (issued on 20 May 2013 and effective for annual
periods beginning 1 January 2014). The interpretation clarifi es the
accounting for an obligation to pay a levy that is not income tax. The obligating
event that gives rise to a liability is the event identifi ed by the legislation that
triggers the obligation to pay the levy. The fact that an entity is economically
compelled to continue operating in a future period, or prepares its fi nancial
statements under the going concern assumption, does not create an
obligation. The same recognition principles apply in interim and annual
fi nancial statements. The application of the interpretation to liabilities arising
from emissions trading schemes is optional. The Group is currently assessing
the impact of the amendments on its consolidated fi nancial statements.
Amendments to IAS 36 - Recoverable amount disclosures for non-
fi nancial assets (issued on 29 May 2013 and effective for annual
periods beginning 1 January 2014; earlier application is permitted if
IFRS 13 is applied for the same accounting and comparative period).
The amendments remove the requirement to disclose the recoverable amount
when a CGU contains goodwill or indefi nite lived intangible assets but there
has been no impairment. The Group is currently assessing the impact of the
amendments on the disclosures in its consolidated fi nancial statements.
Amendments to IAS 19 – Defi ned benefi t plans: Employee
contributions (issued in November 2013 and effective for annual
periods beginning 1 July 2014). The amendment allows entities to
recognise employee contributions as a reduction in the service cost in the
period in which the related employee service is rendered, instead of attributing
the contributions to the periods of service, if the amount of the employee
contributions is independent of the number of years of service. The Group
is currently assessing the impact of the amendments on its consolidated
fi nancial statements.
Annual Improvements to IFRSs 2012 (issued in December 2013
and effective for annual periods beginning on or after 1 July 2014). The
improvements consist of changes to standards:
• IFRS 2 was amended to clarify the defi nition of a “vesting condition” and to
defi ne separately “performance condition” and “service condition”;
• IFRS 3 was amended to clarify that (1) an obligation to pay contingent
consideration which meets the defi nition of a fi nancial instrument is classifi ed
as a fi nancial liability or as equity, on the basis of the defi nitions in IAS 32,
and (2) all non-equity contingent consideration, both fi nancial and non-
fi nancial, is measured at fair value at each reporting date, with changes in fair
value recognised in profi t and loss.
• IFRS 8 was amended to require (1) disclosure of the judgments made by
management in aggregating operating segments, including a description
of the segments which have been aggregated and the economic indicators
which have been assessed in determining that the aggregated segments
share similar economic characteristics, and (2) a reconciliation of segment
assets to the entity’s assets when segment assets are reported.
• The basis for conclusions on IFRS 13 was amended to clarify that deletion
of certain paragraphs in IAS 39 upon publishing of IFRS 13 was not made
with an intention to remove the ability to measure short-term receivables and
payables at invoice amount where the impact of discounting is immaterial.
• IAS 24 was amended to include, as a related party, an entity that provides
key management personnel services to the reporting entity or to the parent
of the reporting entity (“the management entity”), and to require to disclose
the amounts charged to the reporting entity by the management entity for
services provided.
The Group is currently assessing the impact of the amendments on its
consolidated fi nancial statements.
Annual Improvements to IFRSs 2013 (issued in December 2013
and effective for annual periods beginning on or after 1 July 2014). The
improvements consist of changes to standards:
• IFRS 3 was amended to clarify that it does not apply to the accounting for
the formation of any joint arrangement under IFRS 11. The amendment also
clarifi es that the scope exemption only applies in the fi nancial statements of
the joint arrangement itself.
• The amendment of IFRS 13 clarifi es that the portfolio exception in IFRS 13,
which allows an entity to measure the fair value of a group of fi nancial assets
and fi nancial liabilities on a net basis, applies to all contracts (including
contracts to buy or sell non-fi nancial items) that are within the scope of IAS
39 or IFRS 9.
• IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually
exclusive. The guidance in IAS 40 assists preparers to distinguish between
investment property and owner-occupied property. Preparers also need to
refer to the guidance in IFRS 3 to determine whether the acquisition of an
investment property is a business combination.
The Group is currently assessing the impact of the amendments on its
consolidated fi nancial statements.
Unless otherwise described above, the new standards and interpretations
are not expected to affect signifi cantly the Group’s consolidated fi nancial
statements.
124
125
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 6:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following:
Cash on hand and in banks
Term deposits with original maturity of less than three months
Total cash and cash equivalents
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
8,012
21,523
29,535
7,814
5,269
13,083
As of 31 December 2013 the majority of cash and cash equivalents are held in Bank Zenit and its subsidiaries, Ak Bars Bank, Credit Europe Bank and
Sberbank. As of 31 December 2012 the majority of cash and cash equivalents are held in Bank Zenit and its subsidiaries. Bank deposits represent deposits
with original maturities of less than three months. The fair value of cash and term deposits approximates their carrying value.
The credit quality of cash and cash equivalents balances may be summarised as follows:
Investment grade rating
Non-investment grade rating
No external rating
Total
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
CASH ON HAND
AND IN BANKS
TERM DEPOSITS
CASH ON HAND
AND IN BANKS
TERM DEPOSITS
1,056
5,026
1,930
8,012
4,825
15,537
1,161
21,523
496
4,470
2,848
7,814
2,862
2,039
368
5,269
Investment grade ratings classifi cation referred to as Aaa to Baa3 for Moody’s Investment Services, as AAA to BBB- for Fitch Rating and as AAA to BBB for
Standard and Poor’s Rating, respectively.
NOTE 7:
ACCOUNTS RECEIVABLE
Short-term and long-term accounts receivable comprise the following:
SHORT-TERM ACCOUNTS RECEIVABLE:
Trade receivables
Other financial receivables
Less provision for impairment
Total short-term accounts receivable
LONG-TERM ACCOUNTS RECEIVABLE:
Trade receivables
Other financial receivables
Less provision for impairment
Total long-term accounts receivable
Total financial assets within trade and other receivables
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
Provision for impairment at 1 January
60,395
4,259
(12,556)
52,098
251
835
(70)
1,016
53,114
60,940
3,813
(11,200)
53,553
757
777
(4)
1,530
55,083
In accordance with the Group’s policies for recorded provision for impairment the Group fully provided for receivables from ChMPKP Avto of US $334
million as of 31 December 2013 and 2012, relating to the sale of crude oil to Ukraine (Kremenchug refi nery) (Note 24).
The estimated fair value of short-term and long-term accounts receivable approximates their carrying value.
Analysis by credit quality of trade and other receivables is as follows:
Not over due and not impaired
46,686
4,484
50,582
3,714
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
TRADE RECEIVABLES
OTHER FINANCIAL
RECEIVABLES
TRADE RECEIVABLES
OTHER FINANCIAL
RECEIVABLES
PAST DUE BUT NOT IMPAIRED
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total past due but not impaired
INDIVIDUALLY DETERMINED TO BE IMPAIRED (GROSS)
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total individually impaired
Less provision for impairment
Total
1,652
200
–
1,852
–
–
12,110
12,110
(12,110)
48,538
19
26
47
92
–
–
517
517
(517)
4,576
296
156
13
465
–
–
10,637
10,637
(10,637)
51,047
158
106
58
322
–
–
567
567
(567)
4,036
Movements in the provision for impairment for trade and other receivables are as follows:
Provision for impairment
Amounts written off during the year as uncollectible
Foreign exchange (loss)/gain
Change in Group structure
TRADE RECEIVABLES
(10,637)
(850)
–
(788)
165
2013
2012
OTHER FINANCIAL
RECEIVABLES
TRADE RECEIVABLES
OTHER FINANCIAL
RECEIVABLES
(567)
(13)
–
–
63
(10,998)
(358)
109
610
–
(161)
(431)
25
–
–
Provision for impairment at 31 December
(12,110)
(517)
(10,637)
(567)
126
127
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 8:
SHORT-TERM FINANCIAL ASSETS
Short-term fi nancial assets comprise the following:
NOTE 10:
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are as follows:
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
LOANS AND RECEIVABLES:
Notes receivable
Other loans (net of provision for impairment of RR 18 million and RR 24 million as of 31 December 2013 and
2012)
Certificates of deposit
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS:
Held-for-trading
Total short-term financial assets
2,178
2,026
8,973
3,516
16,693
2,564
1,752
4,251
6,364
14,931
During the year ended 31 December 2013 purchases of certifi cates of deposit and cash proceeds from certifi cates of deposit were RR 13,024 million
and RR 8,302 million, respectively.
During the year ended 31 December 2012 purchases of certifi cates of deposit and cash proceeds from certifi cates of deposit were RR 21,542 million
and RR 29,738 million, respectively.
During the year ended 31 December 2013 cash issuance of notes receivable and other loans and cash proceeds from notes receivable and other loans were
RR 2,569 million and RR 5,213 million, respectively.
During the year ended 31 December 2012 cash issuance of notes receivable and other loans and cash proceeds from notes receivable and other loans were
RR 1,878 million and RR 2,954 million, respectively.
The estimated fair value of loans and receivables approximates their carrying value.
Financial assets at fair value through profi t and loss comprise the following:
HELD-FOR-TRADING
Russian government debt securities
Corporate debt securities
Equity securities
Total financial assets at fair value through profit and loss
Information on trading securities issued by related parties is disclosed in Note 23.
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
18
1,762
1,736
3,516
185
2,315
3,864
6,364
Prepaid export duties
VAT recoverable
Advances
Prepaid transportation expenses
Other
Prepaid expenses and other current assets
NOTE 11:
LONG-TERM FINANCIAL ASSETS
Long-term fi nancial assets comprise the following:
LOANS AND RECEIVABLES
Notes receivable (net of provision for impairment of RR 318 million
as of 31 December 2013 and 2012)
Loans to employees
Other loans
Certificates of deposit
Available-for-sale investments
Total long-term financial assets
8,311
5,728
5,626
668
2,884
23,217
11,729
7,536
5,613
551
3,377
28,806
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
1,019
2,493
3,197
14,445
4,660
25,814
1,909
2,305
2,749
14,133
4,686
25,782
The fair value of long-term fi nancial assets is estimated by discounting the future contractual cash outfl ows at the market interest rate available to the Group
at the end of the reporting period.
The carrying amounts and fair values of long-term fi nancial assets are as follows:
Notes receivable
Loans to employees
Other loans
Certificates of deposit
Total long-term financial assets
CARRYING AMOUNTS
FAIR VALUES
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
1,019
2,493
3,197
14,445
21,154
1,909
2,305
2,749
14,133
21,096
1,122
2,493
3,156
15,163
21,934
2,100
2,305
2,713
14,835
21,953
NOTE 9:
INVENTORIES
Materials and supplies
Crude oil
Refined oil products
Petrochemical supplies and finished goods
Total inventories
128
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
During the year ended 31 December 2013 purchases of long-term certifi cates of deposit were RR 312 million.
11,354
5,657
6,495
6,032
29,538
12,152
5,332
6,291
4,815
28,590
During the year ended 31 December 2012 purchases of long-term certifi cates of deposit were RR 6,642 million.
During the year ended 31 December 2013 cash issuance of long-term notes receivable and other loans and cash proceeds from long-term notes receivable
and other loans were RR 2,582 million and RR 1,395 million, respectively.
During the year ended 31 December 2012 cash issuance of long-term notes receivable and other loans and cash proceeds from long-term notes receivable
and other loans were RR 2,077 million and RR 499 million, respectively.
129
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 12:
INVESTMENTS IN ASSOCIATES
AND JOINT VENTURES
Investments in associates and joint ventures comprise the following:
NOTE 13:
PROPERTY, PLANT AND EQUIPMENT
OIL AND GAS
PROPERTIES
BUILDINGS AND
CONSTRUCTIONS
MACHINERY AND
EQUIPMENT
CONSTRUC-TION IN
PROGRESS
TOTAL
NAME OF AN INVESTEE
2013
2012
2013
2012
2013
2012
OWNERSHIP PERCENTAGE AT
NET BOOK VALUE AS
31 DECEMBER
31 DECEMBER
GROUP’S SHARE OF PROFIT/(LOSS) FOR
ASSOCIATES
AND JOINT VENTURES
Bank Zenit
Other
Total
25
20-75
25
20-50
6,984
794
7,778
6,455
256
6,711
555
(205)
350
653
86
739
The country of incorporation or registration is also their principal place of business. For all major associates and joint ventures the country of incorporation
is the Russian Federation.
The table below summarises the movements in the carrying amount of the Group’s investment in associates and joint ventures:
Net book value at 1 January
Share of profit of associates and joint ventures
Share of result of associates and joint ventures
Share of other comprehensive income of associates and joint ventures
Dividends received from associates and joint ventures
Reclassification on loss of control/disposal of associates
(reclassification on obtaining control)
Others
Net book value at 31 December
The condensed fi nancial information of the Group’s equity basis investments is as follows:
2013
6,711
350
350
(21)
–
801
(63)
7,778
2012
7,419
739
739
106
(15)
(1,660)
122
6,711
Sales/interest income
Net income
Total assets
Total liabilities
YEAR ENDED 31 DECEMBER 2013
YEAR ENDED 31 DECEMBER 2012
BANK ZENIT
23,425
2,258
299,856
270,685
OTHER
3,107
(473)
7,736
7,060
BANK ZENIT
20,738
2,659
260,902
233,918
OTHER
3,412
(208)
3,028
966
COST
As of 31 December 2011
Additions
Disposals
Changes in Group structure
Transfers
Changes in decommissioning provision
As of 31 December 2012
DEPRECIATION, DEPLETION
AND AMORTISATION
As of 31 December 2011
Depreciation charge
Disposals
As of 31 December 2012
NET BOOK VALUE
As of 31 December 2011
As of 31 December 2012
COST
As of 31 December 2012
Additions
Disposals
Changes in Group structure
Transfers
Changes in decommissioning provision
As of 31 December 2013
DEPRECIATION, DEPLETION AND
AMORTISATION
As of 31 December 2012
Depreciation charge
Disposals
Changes in Group structure
As of 31 December 2013
NET BOOK VALUE
As of 31 December 2012
As of 31 December 2013
311,999
51
(2,143)
–
18,717
(5,995)
322,629
146,013
7,763
(2,053)
151,723
322,629
163
(1,990)
–
21,674
(1,751)
340,725
151,723
8,437
(1,633)
–
158,527
134,582
315
(829)
1,176
12,926
–
95,842
386
(2,776)
1,949
12,815
–
148,170
108,216
16,089
4,640
(252)
20,477
20,477
3,898
(355)
(361)
23,659
45,418
5,367
(707)
50,078
50,424
58,138
50,078
7,164
(1,045)
(448)
55,749
58,138
62,765
165,986
170,906
118,493
127,693
148,170
108,216
1
(596)
(1,574)
7,769
–
1
(1,078)
(2,193)
13,568
–
92,166
59,730
(1,835)
(241)
(43,011)
–
153,770
118,514
106,809
82,970
56,396
(2,742)
–
(44,458)
–
92,166
–
–
–
–
625,393
57,148
(8,490)
3,125
–
(5,995)
671,181
207,520
17,770
(3,012)
222,278
82,970
92,166
417,873
448,903
671,181
59,895
(5,499)
(4,008)
–
(1,751)
719,818
222,278
19,499
(3,033)
(809)
237,935
–
–
–
–
–
170,906
182,198
127,693
130,111
92,166
106,809
448,903
481,883
130
131
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
For the years ended 31 December 2013 and 2012 the Group recorded RR 1,248 million and RR 606 million of capitalized borrowing cost as property, plant
and equipment additions, respectively. The capitalisation rate was 3.5% (2012: 3.5%).
As stated in Note 3, the Group calculates depreciation, depletion and amortization for oil and gas properties using the units-of-production method over proved
or proved developed oil and gas reserves depending on the nature of the costs involved. The proved or proved developed reserves used in the units-of-
production method assume the extension of the Group’s production license beyond their current expiration dates until the end of the economic lives of the
fi elds as discussed below in further detail.
The Group’s oil and gas fi elds are located principally on the territory of Tatarstan. The Group obtains licenses from the governmental authorities to explore
and produce oil and gas from these fi elds. The Group’s existing production licenses for its major fi elds expire, after their recent extension, between 2026 and
2038, with other production licenses expiring between 2014 and 2043. The economic lives of many of the Group’s licensed fi elds extend beyond these dates.
Under Russian law, the Group is entitled to renew the licenses to the end of the economic lives of the fi elds, provided certain conditions are met. Article 10 of
the Subsoil Law provides that a license to use a fi eld “shall be” extended at its scheduled termination at the initiative of the subsoil user if necessary to fi nish
production in the fi eld, provided that there are no violations of the conditions of the license. The legislative history of Article 10 indicates that the term “shall”
replaced the term “may” in August 2004, clarifying that the subsoil user has the right to extend the license term so long as it has not violated the conditions of
the license. In August 2006, the term of the Group’s license to produce oil and gas from the Group’s largest fi eld, Romashkinskoye, was extended through
2038. And the license to produce oil and gas from the Group’s second largest fi eld, Novo-Elkhovskoe, was extended through 2026. The Group’s right to
extend licenses is, however, dependent on the Group continuing to comply with the terms of the licenses, and management has the ability and intent to do so.
Management plans to request the extension of the licenses that have not yet been extended. The Group’s current production plans are based on the
assumption, which management considers to be reasonably certain, that the Group will be able to extend all existing licenses.
These plans have been designed on the basis that the Group will be producing crude oil through the economic lives of the fi elds and not with a view to
exploiting the Group’s reserves to maximum effect only through the license expiration dates.
Management is reasonably certain that the Group will be allowed to produce oil from the Group’s reserves after the expiration of existing production licenses
and until the end of the economic lives of the fi elds. “Reasonable certainty” is the applicable standard for defi ning proved reserves under the SEC’s Regulation
S-X, Rule 4-10.
SOCIAL ASSETS
During the years ended 31 December 2013 and 2012 the Group transferred social assets with a net book value of RR 23 million and RR 4 million, respectively,
to local authorities. At 31 December 2013 and 2012 the Group held social assets with a net book value of RR 5,276 million and RR 3,700 million, respectively,
all of which were constructed after the privatization date.
The social assets comprise mainly dormitories, hotels, gyms and other facilities. The Group may transfer some of these social assets to local authorities in the
future, but does not expect these to be signifi cant. The Group incurred social infrastructure expenses of RR 4,805 million and RR 4,027 million for the years
ended 31 December 2013 and 2012, respectively, for maintenance that mainly relates to housing, schools and cultural buildings.
DECOMMISSIONING PROVISIONS.
The following tables summarize the Group’s decommissioning provisions and decommissioning costs activities:
Balance, beginning of period
Unwinding discount
New obligations
Release of existing obligations
Changes in estimates
Balance, end of period
Less: current portion of decommissioning provisions (Note 16)
Long-term balance, end of period
2013
52,450
4,503
350
(166)
(2,100)
55,037
(526)
54,511
2012
55,098
4,790
439
(1,443)
(6,434)
52,450
(1,361)
51,089
Exploration and evaluation assets included in Oil and Gas assets above, net book value:
Key assumptions used for evaluation of decommissioning provision were as follows:
At 31 December 2013
Additions
Reclassification to development assets
Charged to expense
At 31 December 2012
Additions
Reclassification to development assets
At 1 January 2012
For the years ended 31 December 2013 and 2012, operating and investing cash fl ows used for exploration and evaluation activities amounted
to RR 1,839 million and RR 1,363 million and RR 1,740 million and RR 1,764 million, respectively.
12,230
1,363
(351)
(67)
11,285
1,764
(1,108)
10,629
Discount rate
Inflation rate
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
7.99%
4.70%
7.88%
4.83%
NOTE 14:
OTHER LONG-TERM ASSETS
Other long-term assets are as follows:
Prepaid computer programs
Prepaid license agreements
Other long-term assets
Total other long-term assets
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
2,347
124
1,080
3,551
2,544
379
1,793
4,716
132
133
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 15:
DEBT
SHORT-TERM DEBT
Foreign currency denominated debt
Current portion of long-term debt
Other foreign currency denominated debt
Rouble denominated debt
Current portion of long-term debt
Other rouble denominated debt
Total short-term debt
LONG-TERM DEBT
Foreign currency denominated debt
US $2.0 bln 2010 credit facility
US $1.5 bln 2009 credit facility
US $550 mln 2011 credit facility
US $75 mln 2011 credit facility
US $144.5 mln 2011 credit facility
EUR 55 mln 2013 credit facility
Other foreign currency denominated debt
Rouble denominated debt
Bonds
Other rouble denominated debt
Total long-term debt
Less: current portion of long-term debt
Total long-term debt, net of current portion
Foreign currency debts are primarily denominated in US Dollars.
Long-term debt had the following maturity profi le (based on the discounted contractual cash fl ows):
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
31,595
–
36
4,930
36,561
14,771
2,328
17,961
1,529
2,762
2,018
2,122
–
925
44,416
(31,631)
12,785
18,259
2,328
5,002
6,507
32,096
27,619
4,551
16,582
1,562
2,165
–
3,167
4,941
665
61,252
(23,261)
37,991
LONG-TERM FOREIGN CURRENCY DENOMINATED DEBT
In October 2009, the Company entered into a dual (3 and 5 year) tranches secured syndicated pre-export facility for up to US $1.5 billion arranged by
WestLB AG, Bayerische Hypo-und Vereinsbank AG, ABN AMRO Bank N.V., OJSC Gazprombank, Bank of Moscow and Nordea Bank. This credit facility is
collateralized with the contractual rights and receivables under an oil export contract between Tatneft and Tavit B.V. under which Tatneft supplies no less than
360,000 metric tons of oil and refi ned products in a calendar quarter. The loan agreement requires compliance with certain fi nancial covenants including, but
not limited to, minimum levels of consolidated tangible net worth and interest coverage ratios. The 3-year tranche was fully repaid. The 5-year tranche bears
interest at LIBOR plus 4.10%.
In June 2010, the Company entered into a triple (3, 5 and 7 year) tranches secured credit facility for up to US $2 billion arranged by Barclays Bank PLS, BNP
Paribas (Suisse) SA, Bank of Moscow, Bank of Tokyo-Mitsubishi UFJ LTD Citibank N.A., Commerzbank Aktiengesellschaft, ING Bank N.V., Natixis SA, Nordea
Bank, The Royal Bank of Scotland N.V., Sberbank, Société Générale, Sumitomo Mitsui Finance Dublin LTD, Unicredit Bank AG, VTB Bank and WestLB AG.
The loan is collateralized with the contractual rights and receivables under an export contract between Tatneft and Tatneft Europe AG under which Tatneft
supplies no less than 750,000 metric tons of oil in a calendar quarter. The loan agreement requires compliance with certain fi nancial covenants including, but
not limited to, minimum levels of consolidated tangible net worth and interest coverage ratios. The 3-year tranche was fully repaid. The 5-year tranche has the
margin of LIBOR plus 3.40%, while the 7-year tranche bears the interest of LIBOR plus 5%.
In June 2011, the Company entered into a US $550 million unsecured fi nancing with a fi xed rate of 3.50% per annum with bullet repayment in three years. The
loan was arranged by BNP Paribas (Suisse) SA, The Bank of Tokyo Mitsubishi UFJ LTD., Commerzbank Aktiengesellschaft, ING Bank N.V., Natixis, Open Joint
Stock Company Nordea Bank, Sumitomo Mitsui Banking Corporation and WestLB AG London Branch. The loan agreement requires compliance with certain
fi nancial covenants including, but not limited to, minimum levels of consolidated tangible net worth and interest coverage ratios.
In November 2011, TANECO entered into a US $75 million credit facility with equal semi-annual repayments during ten years. The loan was arranged by
Nordea Bank AB (Publ), Société Générale and Sumitomo Mitsui Banking Corporation Europe Limited. The loan bears interest at LIBOR plus 1.1% per annum.
The loan agreement requires compliance with certain fi nancial covenants including, but not limited to, minimum levels of consolidated tangible net worth and
interest coverage ratios.
In November 2011, TANECO entered into a US $144.5 million credit facility with equal semi-annual repayments during ten years with the fi rst repayment date
on 15 May, 2014. The loan was arranged by Société Générale, Sumitomo Mitsui Banking Corporation Europe Limited and the Bank of Tokyo-Mitsubishi UFJ
LTD. The loan bears interest at LIBOR plus 1.25% per annum. The loan agreement requires compliance with certain fi nancial covenants including, but not
limited to, minimum levels of consolidated tangible net worth and interest coverage ratios.
In May 2013, TANECO entered into a EUR 55 million credit facility with equal semi-annual repayment during ten years. The loan was arranged by The Royal
Bank of Scotland plc and Sumitomo Mitsui Banking Corporation Europe Limited. The loan bears interest at LIBOR plus 1.5% per annum. The loan agreement
requires compliance with certain fi nancial covenants including, but not limited to, minimum levels of consolidated tangible net worth and interest coverage
ratios.
LONG-TERM RUSSIAN ROUBLE DENOMINATED DEBT
In September 2010, the Group issued Rouble exchange bonds in the amount of RR 5,000 million due in September 2013 at an interest rate of 7.25% per
annum. The bonds were fully repaid in September 2013.
Management believes that for the year ended 31 December 2013 and 2012 the Group was in compliance with all covenants required by the above loan
agreements.
Loan arrangements on short-term and long-term debt have both fi xed and variable interest rates that refl ect the currently available terms for similar debt. The
carrying value of debt is a reasonable approximation of its fair value. The carrying amounts of long-term debt are as follows:
Due for repayment:
Between one and two years
Between two and five years
After five years
Total long-term debt, net of current portion
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
5,535
3,554
3,696
12,785
27,728
7,486
2,777
37,991
US$ denominated fixed rate
US$ denominated floating rate
EUR denominated floating rate
RR denominated fixed rate
Total long-term debt
The Group does not apply hedge accounting and has not entered into any hedging arrangements in respect of its foreign currency obligations or interest rate
exposures.
SHORT-TERM FOREIGN CURRENCY DENOMINATED DEBT
In December 2003 the Group entered into a US $35 million one month revolving credit facility with Credit Suisse Zurich. In December 2011 this agreement
was replaced with a new loan agreement totalling up to the US $70 million under the same conditions. The monthly revolving loan bears interest at one month
LIBOR plus varying margin of about 1.8% per annum and is collateralized by crude oil sales.
SHORT-TERM RUSSIAN ROUBLE DENOMINATED DEBT
Russian Rouble denominated short-term debt is primarily comprised of loans with Russian banks. Short-term Rouble denominated loans of RR 4,930 million
and RR 6,507 million bear contractual interest rates of 1.1% to 9.25% per annum as of 31 December 2013 and 2012.
134
CARRYING AMOUNTS
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
20,083
21,390
2,018
925
44,416
20,350
35,296
–
5,606
61,252
135
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 16:
ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES
Trade payables
Dividends payable
Other payables
Total financial liabilities within trade and other payables
Salaries and wages payable
Advances received from customers
Current portion of decommissioning provisions (Note 13)
Other accounts payable and accrued liabilities
Total non-financial liabilities
Accounts payable and accrued liabilities
NOTE 17:
OTHER LONG-TERM LIABILITIES
Other long-term liabilities are as follows:
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
Present value of defined benefit obligation (DBO)
14,260
103
980
15,343
4,109
1,045
526
7,421
13,101
28,444
16,715
101
1,071
17,887
4,093
1,109
1,361
6,569
13,132
31,019
Management has assessed that reasonable changes in the principal signifi cant actuarial assumptions will not have a signifi cant impact on the consolidated
statements of profi t of loss and other comprehensive income or the liability recognized in the consolidated statement of fi nancial position.
Amounts recognized in the consolidated statement of fi nancial position:
Less: Fair value of plan assets
Net defined benefit liability
Change in the defi ned benefi t obligation amount:
Defined benefit obligation (DBO) at beginning year
Effect of exchange rate changes
Current service cost
Interest cost
Benefits paid
Remeasurement (gains)/losses:
Actuarial losses arising from changes in financial assumptions
Actuarial losses/(gains) arising from changes in demographic assumptions
Actuarial (gains)/losses - Experience
Past service cost
Curtailment/settlement gain
Other
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
5,598
(1,830)
3,768
5,441
(1,819)
3,622
2013
5,441
8
181
392
(487)
58
6
(3)
-
-
2
2012
4,054
(7)
128
342
(399)
328
(6)
744
47
(5)
215
The fair value of each class of fi nancial liabilities included in short-term trade and other payables at 31 December 2013 and 2012 approximates
their carrying value.
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
The amounts recognized in profi t or loss are as follows:
Defined benefit obligation at the end of the year
5,598
5,441
Pension liability
Other long-term liabilities
Total other long-term liabilities
3,768
71
3,839
3,622
88
3,710
PENSION LIABILITIES
The Group has various pension plans covering substantially all eligible employees and members of management. The amount of contributions, frequency
of benefi t payments and other conditions of these plans are regulated by the “Statement of Organization of Non-Governmental Pension Benefi ts for OAO
Tatneft Employees” and the contracts concluded between the Company or its subsidiaries, management, and the non-profi t organization “National Non-
Governmental Pension Fund”. In accordance with these contracts the Group is committed to make certain contributions on behalf of all employees and
guarantees a minimum benefi t upon retirement. Contributions or benefi ts are generally based upon grade and years until offi cial retirement age (age 60
for men and 55 for women), and in the case of management are based upon years of service. In accordance with the provisions of collective agreements
concluded on an annual basis between the Company or its subsidiaries and their employees, the Group is obligated to pay certain post-employment benefi ts,
the amounts of which are generally based on salary grade and years of service at the time of retirement.
Service cost
Net interest expense
Remeasurement (gains)/losses:
Actuarial losses arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Actuarial gains – Experience
Other
Total included in ‘employee benefits expense’
Principal actuarial assumptions (expressed as weighted averages) are as follows:
The amounts recognized in other comprehensive income are as follows:
Discount rate
Rate of increase in salary levels
Actuarial rate of NPF
Statutory insurance contributions rate
136
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
8.0%
7.2%
3.0%
7.2%
6.2%
3.0%
30.85%
30.20%
Remeasurement losses:
Actuarial losses arising from changes in financial assumptions
Actuarial losses/(gains) arising from changes in demographic assumptions
Actuarial losses – Experience
Effect of exchange rate changes
Total included in other comprehensive income
2013
181
261
17
2
(91)
2
372
2013
224
4
88
8
324
2012
175
227
-
-
-
207
609
2012
252
(6)
744
-
990
137
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
Reconciliation of the opening and closing balances of plan assets’ fair value:
Deferred income taxes refl ect the impact of temporary differences between the amount of assets and liabilities recognized for fi nancial reporting purposes and
such amounts recognized for statutory tax purposes. Deferred tax assets (liabilities) are comprised of the following:
Plan assets at beginning of year
Interest income
Contributions
Benefits paid
Actuarial (loss)/gain
Other
Plan assets at year end
2013
1,819
131
230
(167)
(183)
-
1,830
2012
1,531
115
220
(131)
76
8
1,819
The annual contributions made by the Group are managed by the Fund. The primary investment objectives of the Fund are to achieve the highest rate of total
return within prudent levels of risk and liquidity, to diversify and mitigate potential downside risk associated with the investments, and to provide adequate
liquidity for benefi t payments and portfolio management.
Plan assets structure:
Russian corporate bonds and equity securities of Russian issuers
Russian government and regions bonds
Bank deposits
Other
Total plan assets
Expected contributions to be paid during the next annual reporting period are RR 434 million.
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
51.74%
11.61%
33.12%
3.53%
100%
46.22%
19.01%
30.91%
3.86%
100%
Accounts receivable
Tax loss carry forward
Decommissioning provision
Other
Deferred income tax assets
Property, plant and equipment
Inventories
Accounts receivable
Long-term investments
Undistributed Earnings
Other liabilities
Deferred income tax liabilities
Net deferred tax liability
Deferred income taxes are refl ected in the consolidated statement of fi nancial position as follows:
Deferred income tax asset
Deferred income tax liability
Net deferred tax liability
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
-
3,824
11,007
624
15,455
(24,146)
(1,847)
(152)
(95)
(1,044)
(1,921)
(29,205)
(13,750)
155
3,924
10,490
547
15,116
(22,690)
(2,152)
-
(238)
(862)
(1,575)
(27,517)
(12,401)
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
2,049
(15,799)
(13,750)
2,633
(15,034)
(12,401)
NOTE 18:
TAXES
Income tax expense comprises the following:
Current income tax expense
Deferred income tax expense
Income tax expense for the year
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
21,645
1,302
22,947
21,816
1,554
23,370
Deferred tax assets are recognized for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that taxable profi ts will be
available against which the unused tax losses/credits can be utilized.
TAX LOSSES CARRY FORWARD
At 31 December 2013, the Group had recognized deferred income tax assets of RR 3,824 million (RR 3,924 million at 31 December 2012) in respect of
unused tax loss carry forwards of RR 19,119 million (RR 19,620 million at 31 December 2012). Tax losses can be carried forward for relief against taxable
profi ts for 10 years after they are incurred, subject to certain limitations. In determining future taxable profi ts and the amount of tax benefi ts that are probable in
the future management makes judgments including expectations regarding the Group’s ability to generate suffi cient future taxable income and the projected
time period over which deferred tax benefi ts will be realized.
The Group doesn’t have any unrecognised potential deferred tax assets in respect of deductible temporary differences.
The Group is subject to a number of taxes other than income taxes, which are detailed as follows:
Presented below is reconciliation between the provision for income taxes and taxes determined by applying the statutory tax rate 20% (for the year ended 31
December 2012: 20%) to income before income taxes:
Profit before income taxes and non-controlling interest
Theoretical income tax expense at statutory rate
Increase due to:
Non-deductible expenses, net
Income tax expense
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
101,291
20,258
2,689
22,947
101,818
20,364
3,006
23,370
No provision has been made for additional income taxes of RR 17,958 million on undistributed earnings of certain subsidiaries. These earnings have been and
will continue to be reinvested. These earnings could become subject to additional tax of approximately RR 1,161 million if they were remitted as dividends.
Mineral extraction tax
Property tax
Penalties and interest
Other
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
105,302
102,813
4,518
40
1,476
2,248
(214)
1,446
Total taxes other than income taxes
111,336
106,293
138
139
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
For mineral extraction tax for fi elds whose depletion rate exceeds a certain threshold the Group received a benefi t of approximately RR 24.4 billion and RR
21.4 billion for the years ended 31 December 2013 and 2012, respectively.
EARNINGS PER SHARE
Preference shares are not redeemable and are considered to be participating shares.
At 31 December 2013 and 2012 taxes payable were as follows:
Mineral extraction tax
Value Added Tax on goods sold
Other
Total taxes payable
NOTE 19:
SHAREHOLDERS’ EQUITY
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
9,485
2,205
5,016
16,706
8,457
2,107
2,670
13,234
AUTHORIZED SHARE CAPITAL
At 31 December 2013 the authorized share capital consists of 2,178,690,700 voting common shares and 147,508,500 non-voting preferred shares; both
classes of shares have a nominal value of RR 1.00 per share. The nominal value of authorised share capital differs from its carrying value due to effect of the
hyperinfl ation of capital contributions made before 2003.
GOLDEN SHARE
OAO Svyazinvestneftekhim, a company wholly owned by the government of Tatarstan, as of 31 December 2013 holds approximately 33.59% of the
Company’s capital stock (approximately 36% of voting stock). These shares were contributed to Svyazinvestneftekhim by the Ministry of Land and Property
Relations of Tatarstan in 2003. Tatarstan also holds a “Golden Share” – a special governmental right – in the Company. The exercise of its powers under the
Golden Share enables the Tatarstan government to appoint one representative to the Board of Directors and Revision Commission of the Company and to
veto certain major decisions, including those relating to changes in the share capital, amendments to the Charter, liquidation or reorganization and “major”
and “interested party” transactions as defi ned under Russian law.
The Golden Share currently has an indefi nite term. The Tatarstan government also controls or exercises signifi cant infl uence over a number of the Company’s
suppliers, contractors and customers (see also Note 1).
RIGHTS ATTRIBUTABLE TO PREFERRED SHARES
Unless a different amount is approved at the annual shareholders meeting, preferred shares earn dividends equal to their nominal value. The amount of a
dividend for a preferred share may not be less than the amount of a dividend for a common share. Preferred shareholders may vote at meetings only on the
following decisions:
• the amendment of the dividends payable per preferred share;
• the issuance of additional shares with rights greater than the current rights of preferred shareholders; and
• the liquidation or reorganization of the Company.
The decisions listed above can be made only if approved by 75% of preferred shareholders.
Holders of preferred shares acquire the same voting rights as holders of common shares in the event that dividends are either not declared, or declared but
not paid, on preferred shares. On liquidation, the shareholders are entitled to receive a distribution of net assets. Under Russian Joint Stock Companies Law
and the Company’s charter in case of liquidation, preferred shareholders have priority over shareholders holding common shares to be paid declared but
unpaid dividends on preferred shares and the liquidation value of preferred shares, if any.
AMOUNTS AVAILABLE FOR DISTRIBUTION TO SHAREHOLDERS
Amounts available for distribution to shareholders are based on the Company’s non-consolidated statutory accounts prepared in accordance with RAR, which
differ signifi cantly from IFRS (see Note 2). The statutory accounts are the basis for profi t distribution and other appropriations. Russian legislation identifi es
the basis of distribution as the current period net profi t calculated in accordance with RAR. However, this legislation and other statutory laws and regulations
dealing with distribution rights are open to legal interpretation. For the years ended 31 December 2013 and 2012, the Company had a statutory current profi t
of RR 63,850 million and RR 66,707 million, respectively.
Basic and diluted earnings per share are calculated by dividing profi t or loss attributable to ordinary and preference shareholders by the weighted average
number of ordinary and preferred shares outstanding during the period. Profi t or loss attributed to equity holders is reduced by the amount of dividends
declared in the current period for each class of shares. The remaining profi t or loss is allocated to common and preferred shares to the extent that each class
may share in earnings if all the earnings for the period had been distributed. Treasury shares are excluded from calculations. The total earnings allocated to
each class of shares are determined by adding together the amount allocated for dividends and the amount allocated for a participation feature.
Profit attributable to Group shareholders
Common share dividends
Preferred share dividends
Income available to common and preferred shareholders, net of dividends
Basic and diluted:
Weighted average number of shares outstanding (millions of shares):
Common
Preferred
Combined weighted average number of common and preferred shares outstanding
Basic and diluted earnings per share (RR)
Common
Preferred
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
70,832
(18,260)
(1,268)
51,304
2,123
148
2,271
31.19
31.16
73,473
(15,032)
(1,044)
57,397
2,123
148
2,271
32.35
32.33
NON-CONTROLLING INTEREST
Non-controlling interest is adjusted by dividends paid by the Group’s subsidiaries amounting to RR 984 million and RR 565 million at 31 December 2013 and
2012, respectively.
NOTE 20:
EMPLOYEE BENEFIT EXPENSES
Wages and salaries
Statutory insurance contributions
Bonus certificates granted to directors and employees
Pension costs – defined benefit plans (Note 17)
Other employee benefits
Total employee benefit expense
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
32,479
9,045
1,038
372
2,655
45,589
28,635
8,142
1,107
609
2,257
40,750
Employee benefi t expenses are included in operating expenses, selling, general and administrative expenses and Maintenance of social infrastructure and
transfer of social assets and other expenses in the Consolidated Statements of Profi t or Loss and Other Comprehensive Income.
140
141
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
For the year ended 31 December 2013, revenues of RR 88,807 million or 20% and RR 51,424 million or 11% of the Group’s total sales and operating revenues
are derived from two external customers, respectively.
For the year ended 31 December 2012, revenues of RR 93,877 million or 21% and RR 55,960 million or 13% of the Group’s total sales and operating revenues
are derived from two external customers, respectively.
These revenues represent sales of crude oil and are attributable to the exploration and production segment and refi ning and marketing segment.
Management does not believe the Group is dependent on any particular customer.
SEGMENT SALES AND OTHER OPERATING REVENUES
Reportable operating segment sales and other operating revenues are stated in the following table:
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
NOTE 21:
INTEREST INCOME AND INTEREST EXPENSE
Interest income comprises the following:
Interest income from loans and receivables
Unwinding of the present value discount of long-term financial assets
Total interest income
Interest expense comprises the following:
Bank loans
RR denominated non-convertible bonds
Unwinding of the present value discount of decommissioning provision
Unwinding of the present value discount of long-term financial assets
Total interest expense
Less capitalised interest costs
Total interest costs recognised in profit or loss
NOTE 22:
SEGMENT INFORMATION
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
3,315
50
3,365
3,807
65
3,872
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
2,204
261
4,494
590
7,549
(625)
6,924
3,063
362
4,159
-
7,584
(606)
6,978
Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly
reviewed by the Board of Directors and the Management Committee and for which discrete fi nancial information is available.
Segments whose revenue, result or assets are ten percent or more of all the segments are reported separately.
The Group’s business activities are conducted predominantly through three main operating segments:
• Exploration and production consists of exploration, development, extraction and sale of own crude oil. Intersegment sales consist of transfer of crude oil
to refi nery and other goods and services provided to other operating segments,
• Refi ning and marketing comprises purchases and sales of crude oil and refi ned products from third parties, own refi ning activities and retailing
operations,
• Petrochemical products include production and sales of tires and petrochemical raw materials and refi ned products, which are used in production of
tires.
Other sales include revenues from ancillary services provided by the specialized subdivisions and subsidiaries of the Group, such as sales of oilfi eld
equipment and drilling services provided to other companies in Tatarstan, revenues from the sale of auxiliary petrochemical related services and materials
as well as other business activities, which do not constitute reportable business segments.
The Group evaluates performance of its reportable operating segments and allocates resources based on segment earnings, defi ned as profi t before
income taxes and non-controlling interest not including interest income, expense, and earnings from equity investments, other income (expenses) and
foreign exchange loss or gain. Intersegment sales are at prices that approximate market. Group fi nancing (including interest expense and interest income)
and income taxes are managed on a Group basis and are not allocated to operating segments.
EXPLORATION AND PRODUCTION
Domestic own crude oil
CIS own crude oil
Non – CIS own crude oil
Other
Intersegment sales
Total exploration and production
REFINING AND MARKETING
Domestic sales
Crude oil purchased for resale
Refined products
Total Domestic sales
CIS sales
Crude oil purchased for resale
Refined products
Total CIS sales(1)
Non – CIS sales
Crude oil purchased for resale
Refined products
Total Non – CIS sales(2)
Other
Intersegment sales
Total refining and marketing
PETROCHEMICALS
Tires - domestic sales
Tires - CIS sales
Tires - non-CIS sales
Petrochemical products and other
Intersegment sales
Total petrochemicals
Total segment sales
Corporate and other sales
Elimination of intersegment sales
Total sales and other operating revenues
142
(1) - CIS is an abbreviation for Commonwealth of Independent States (excluding the Russian Federation).
(2) - Non-CIS sales of crude oil and refined products are mainly made to Germany, Switzerland, the Netherlands and the United Kingdom based traders.
57,262
7,057
137,495
4,300
90,628
296,742
394
98,623
99,017
-
7,176
7,176
14,999
73,542
88,541
3,496
3,487
61,748
6,783
141,743
3,952
77,189
291,415
1,313
73,637
74,950
-
28,114
28,114
17,578
51,473
69,051
4,058
3,547
201,717
179,720
24,395
6,714
1,321
2,359
846
35,635
534,094
15,850
(94,961)
454,983
27,910
7,388
1,185
2,412
880
39,775
510,910
14,804
(81,615)
444,099
143
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
SEGMENT EARNINGS
SEGMENT EARNINGS
Exploration and production
Refining and marketing
Petrochemicals
Total segment earnings
Corporate and other
Other (expenses)/income
Profit before income tax
SEGMENT ASSETS
ASSETS
Exploration and production
Refining and marketing
Petrochemicals
Corporate and other
Total assets
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
92,746
16,321
338
109,405
(4,996)
(3,118)
101,291
96,955
9,110
2,105
108,170
(6,495)
143
101,818
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
281,384
259,879
29,830
102,996
674,089
271,998
233,994
29,912
94,703
630,607
As of 31 December 2013 and 2012 corporate and other segment comprised RR 7,778 million and RR 6,711 million, respectively, investments in associates
and joint ventures.
The Group’s assets and operations are primarily located and conducted in the Russian Federation.
SEGMENT DEPRECIATION, DEPLETION AND AMORTISATION AND ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT.
DEPRECIATION, DEPLETION AND AMORTIZATION
Exploration and production
Refining and marketing
Petrochemicals
Corporate and other
Total segment depreciation, depletion and amortization
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Exploration and production
Refining and marketing
Petrochemicals
Corporate and other
Total additions to property, plant and equipment
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
11,424
4,203
1,682
2,014
19,323
25,696
23,791
942
7,715
58,144
11,022
3,397
1,300
2,051
17,770
19,689
24,428
317
6,719
51,153
For the years ended 31 December 2013 and 2012 additions to property, plant and equipment of exploration and production segment include a reduction of
RR 1,751 million and RR 5,995 million, respectively, associated with changes in the decommissioning provision.
144
NOTE 23:
RELATED PARTY TRANSACTIONS
Parties are generally considered to be related if the parties are under common control or if one party has the ability to control the other party or can exercise
signifi cant infl uence or joint control over the other party in making fi nancial and operational decisions. In considering each possible related party relationship,
attention is directed to the substance of the relationship, not merely the legal form.
Transactions are entered into in the normal course of business with affi liates, joint ventures, government related companies, key management personnel and
other related parties. These transactions include sales of crude oil and refi ned products, purchases of electricity and banking transactions.
ASSOCIATES, JOINT VENTURES AND OTHER RELATED PARTIES
The amounts of transactions for each year and the outstanding balances at each year end with affi liates and other related parties are as follows:
REVENUES AND INCOME
Sales of refined products
Other sales
COSTS AND EXPENSES
Purchases of crude oil
Other services
Other purchases
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
15
226
124
629
1,105
17
461
4,687
1,194
1,567
For the years ended 31 December 2013 and 2012, the Group sold crude oil on a commission basis from related parties for RR 124 million and RR 5,075
million, respectively.
For the year ended 31 December 2013 and 2012 the Group has entered into transactions with related parties for purchases of equipment in the amount of RR
1,986 million and RR 0 million, respectively, which is included in our property, plant and equipment.
At 31 December 2013 and 2012 the outstanding balances with related parties were as follows:
ASSETS
Cash and cash equivalents
Accounts receivable
Notes receivable
Short-term certificates of deposit
Trading securities
Loans receivable
Prepaid expenses and other current assets
Due from related parties short-term
Long-term accounts receivable
Long-term certificates of deposit
Long-term loans receivable
Due from related parties long-term
LIABILITIES
Accounts payable and accrued liabilities
Short-term debt
Due to related parties short-term
Long-term debt
Due to related parties long-term
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
11,342
332
2,164
4,300
7
310
107
18,562
-
14,341
2,366
16,707
(162)
(1,991)
(2,153)
(66)
(66)
8,605
222
1,973
550
307
8
83
11,748
2
14,132
2,569
16,703
(503)
(2,130)
(2,633)
(23)
(23)
145
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
As of 31 December 2013 and 2012, the Group had RR 3,879 million and RR 4,542 million, respectively, in loans and notes receivable due from Bank Zenit or
its wholly-owned subsidiary Bank Devon Credit. These loans and notes mature between 2014 and 2017, bearing interest between 2.9% and 8.5%. As of 31
December 2013 and 2012, the Group has short and long-term certifi cates of deposit of RR 18,641 million and RR 14,682 million, respectively, held with Bank
Zenit or its wholly-owned subsidiary Bank Devon Credit.
In March 2009 the Group placed a long-term deposit with Bank Zenit for RR 2,140 million payable in 10 years bearing interest 10.85%. The Group entered into
a subordinated deposit agreement with Bank Zenit in January 2013 in the amount of RR 3,600 million payable in 10 years bearing interest of 9% per year.
RUSSIAN GOVERNMENT BODIES AND STATE ORGANIZATIONS
The amounts of transactions for each year with Government bodies and state organizations are as follows:
Sales of refined products
Other sales
Purchases of refined products
Purchases of electricity
Purchases of transportation services
Other services
Other purchases
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
1,848
304
8,771
10,115
22,489
4,067
136
3,486
267
8,349
9,232
21,623
3,271
-
COMPENSATION TO KEY
MANAGEMENT PERSONNEL
As of 31 December 2013 and 2012 total remuneration, including pension
cost, for key management personnel was RR 1,625 million and RR 1,339
million, respectively.
CAPITAL COMMITMENTS
As of 31 December 2013 and 2012 the Group has outstanding capital
commitments of approximately RR 23,180 million and RR 16,823 million,
respectively, for the construction of the TANECO refi nery complex. These
commitments are expected to be paid between 2014 and 2016.
For the year ended 31 December 2013, the Company issued 10,138,230
Awards to senior management and directors, all of which are expected
to be settled at a price of RR 102.4 per Award. Final settlement is subject
to approval at the Company’s Management Committee meeting in July-
September 2014. For the year ended 31 December 2012, the Company
issued 6,740,800 Awards to senior management and directors, all of which
were settled at a price of RR 168.19 per Award. The amount of related
compensation expense recognized in Selling, General and administrative
expenses of the Consolidated Statements of Profi t or Loss and Other
Comprehensive Income for the years ended 31 December 2013 and 2012
was RR 1,038 million and RR 1,107 million, respectively.
Management believes the Group’s current and long-term capital
expenditures program can be funded through cash fl ows generated from
existing operations as well as lines of credit available to the Company. The
TANECO refi nery project has been funded from the Company’s cash fl ow
with the support of the bank facilities (Note 15). Management believes the
Company has the ability to obtain syndicated loans and other fi nancings
as needed to continue funding the TANECO refi nery project, refi nance
any maturing debts as well as fi nance business acquisitions and other
transactions that may arise in the future.
TAXATION
NOTE 24:
CONTINGENCIES
AND COMMITMENTS
OPERATING ENVIRONMENT OF THE GROUP
The Russian Federation displays certain characteristics of an emerging
market. Tax, currency and customs legislation is sometimes subject to
varying interpretations and contributes to the challenges faced by companies
operating in the Russian Federation.
The ongoing uncertainty and volatility of the fi nancial markets and other
risks could have signifi cant negative effects on the Russian fi nancial and
corporate sectors. Management determined provisions for impairment by
considering the economic situation and outlook at the end of the reporting
period.
The future economic development of the Russian Federation is dependent
upon external factors and internal measures undertaken by the government
to sustain growth, and to change the tax, legal and regulatory environment.
Management believes it is taking all necessary measures to support the
sustainability and development of the Group’s business in the current
business and economic environment.
146
Russian tax and customs legislation is subject to varying interpretations, and
changes, which can occur frequently. Management’s interpretation of such
legislation as applied to the transactions and activity of the Group may be
challenged by the relevant authorities. The Russian tax authorities may be
taking a more assertive position in their interpretation of the legislation and
assessments, and it is possible that transactions and activities that have not
been challenged in the past may be challenged.
Tax authorities are currently reviewing the operations of the Company and
its subsidiaries for the years ended December 31, 2011 and 2012. While
the results of that review have not been fi nalized, management expects the
ultimate outcome will not have a material effect on the Group’s results of
operations or cash fl ows.
Amended Russian transfer pricing legislation took effect from 1 January
2012. The new transfer pricing rules appear to be more technically elaborate
and, to a certain extent, better aligned with the international transfer pricing
principles developed by the Organisation for Economic Cooperation and
Development (OECD). The new legislation provides the possibility for tax
authorities to make transfer pricing adjustments and impose additional tax
liabilities in respect of controlled transactions (transactions with related
parties and some types of transactions with unrelated parties), provided that
the transaction price is not arm’s length.
Management believes that its pricing policy is arm’s length and it has
implemented internal processes to be in compliance with the new transfer
pricing legislation.
Given that the practice of implementation of the new Russian transfer pricing
rules has not yet developed, the impact of any challenge of the Group’s
transfer prices cannot be reliably estimated; however, it may be signifi cant to
the fi nancial conditions and/or the overall operations of the Group.
ENVIRONMENTAL CONTINGENCIES
The Group, through its predecessor entities, has operated in Tatarstan
for many years without developed environmental laws, regulations and
the Group’s policies. Environmental regulations and their enforcement
are currently being considered in the Russian Federation and the Group
is monitoring its potential obligations related thereto. The outcome of
environmental liabilities under proposed or any future environmental
legislation cannot reasonably be estimated at present, but could be material.
Under existing legislation, however, management believes that there are
no probable liabilities, which would have a material adverse effect on the
operating results or fi nancial position of the Group.
LEGAL CONTINGENCIES
The Group is subject to various lawsuits and claims arising in the ordinary
course of business. The outcomes of such contingencies, lawsuits or other
proceedings cannot be determined at present. In the case of all known
contingencies the Group accrues a liability when the loss is probable and the
amount is reasonably estimable. Based on currently available information,
management believes that it is remote that future costs related to known
contingent liability exposures would have a material adverse impact on the
Group’s consolidated fi nancial statements.
SOCIAL COMMITMENTS
The Group contributes signifi cantly to the maintenance of local infrastructure
and the welfare of its employees within Tatarstan, which includes
contributions towards the construction, development and maintenance of
housing, hospitals and transport services, recreation and other social needs.
Such funding is periodically determined by the Board of Directors after
consultation with governmental authorities and recorded as expenditures
when incurred.
GUARANTEES
The Group has no outstanding guarantees at 31 December 2013 and 2012.
TRANSPORTATION OF CRUDE OIL
The Group benefi ts from the blending of its crude oil in the Transneft pipeline
system since the Group’s crude oil production is generally of a lower quality
than that produced by some other regions of the Russian Federation (mainly
Western Siberia) which supply through the same pipeline system. There is
currently no equalization scheme for differences in crude oil quality within
the Transneft pipeline system and the implementation of any such scheme
is not determinable at present. However, if this practice were to change, the
Group’s business could be materially and adversely affected.
UKRTATNAFTA
The Group holds 49.6% investment in AmRUZ Trading AG (“AmRUZ”) and
100% investment in Seagroup International Inc. (“Seagroup”). These entities
primary activities are ownership interests in Closed Joint Stock Company
Ukrtatnafta (“Ukrtatnafta”), the owner of the Kremenchug refi nery, and their
holdings constitute 8.34% and 9.96% of the outstanding common shares in
Ukrtatnafta, respectively. Historically, and in particular during the course of
2007, there have been a number of attempts by Ukraine to challenge AmRUZ
and Seagroup’s acquisition of shares in Ukrtatnafta, and in particular, by the
State Property Fund and NJSC Naftogaz of Ukraine (“Naftogaz”). Naftogaz is
100% owned by the Ukrainian Government and also owner of record of 43%
Ukrtatnafta’s common shares.
The challenges were suspended in April 2006 when the Supreme Court
of Ukraine ruled the payment for Ukrtatnafta shares made with promissory
notes issued by AmRUZ and Seagroup was lawful. However, in May 2007 the
Ministry of Fuel and Energy of Ukraine (“MFEU”) resumed its attempts and,
as a result, succeeded in obtaining alleged and doubtful court decisions,
after which it announced the transfer into Naftogaz’s custody the 18.3%
of Ukrtatnafta’s shares, representing the entire holdings of AmRUZ and
Seagroup in Ukrtatnafta. Subsequent to these actions, MFEU effectively
began to exclude the Group from exercising their shareholder rights related
to Ukrtatnafta.
In October 2007 the existing management of Ukrtatnafta, as appointed by
its shareholders, was forcibly removed based on an alleged court order.
Subsequently, individuals who obtained the ability to manage Ukrtatnafta
took certain actions effectively assisting MFEU in taking control over
the shares in Ukrtatnafta owned by SeaGroup and AmRUZ. In addition,
Ukrtatnafta subsequently refused to settle its payables to ChMPKP Avto
(Note 3), a Ukrainian intermediary that previously purchased crude from
the Group for deliveries to Ukrtatnafta. Following this forced change of
control of Ukrtatnafta, the Company (originally the key crude supplier to the
Kremenchug refi nery) suspended its crude oil deliveries to Ukrtatnafta.
Subsequently, the Ukrainian courts also invalided direct purchase of the
shares in Ukrtatnafta by Tatneft.
In May 2008, Tatneft commenced international arbitration against Ukraine
on the basis of the agreement between the Government of the Russian
Federation and the Cabinet of Ministries of Ukraine on the Encouragement
and Mutual Protection of Investments of November 27, 1998 (“Russia-
Ukraine BIT”). The arbitration concerns losses suffered by Tatneft as a
consequence of the forcible takeover of Ukrtatnafta and seizure of shares
of the Group in Ukrtatnafta. Tatneft requested the arbitral tribunal declare
Ukraine has breached the Russian-Ukraine BIT and to order Ukraine to pay
compensation in excess of US$ 2.4 billion. In March 2013 the arbitral tribunal
held the hearing on the merits with the award expected in the course of 2014.
As a result of the ongoing legal dispute over shareholding interests, as of
31 December 2013 the Company has fully provided for its investments in
Ukrtatnafta.
LIBYA
As a result of the political situation in Libya, in February 2011 the Group
had to entirely suspend its operations there and evacuate all its personnel.
From February 2013 the Group has started the process of resuming its
activities in Libya, including the return of some of its personnel to a branch
in Tripoli and carrying out negotiations with subcontractors. As of the date of
this report the Group expects to return to operational activity in Libya in the
course of 2014. As of 31 December 2013 the company had approximately
RR 5,673 million of assets associated with its Libyan operations of which
RR 5,455 million is related to capitalized exploration costs, RR 210 million
of inventories and RR 8 million of cash. As of 31 December 2012 the
company had approximately RR 5,681 million of assets associated with its
Libyan operations, correspondingly, of which RR 5,451 million are related to
capitalized exploration costs, RR 208 million of inventories and RR 22 million
of cash.
147
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
NOTE 26:
FINANCIAL RISK MANAGEMENT
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The accounting policies for fi nancial instruments, as described in Note 3, have been applied to the fi nancial statements line items below:
NOTE 25:
PRINCIPAL SUBSIDIARIES
Set out below are the Group’s principal subsidiaries at 31 December 2013. Unless otherwise stated, the subsidiaries as listed below have share capital
consisting solely of ordinary shares, which are held directly by the Group and the proportion of ownership interests held equals to the voting rights held by
Group. The country of incorporation or registration is also their principal place of business. For all principal subsidiaries the country of incorporation is the
Russian Federation, except for Tatneft Europe AG, which is incorporated in Switzerland.
NAME OF ENTITY
Tatneft Europe AG
Taneco OAO
TMS group UK OOO
Burenie OOO
Nizhnekamskshina OAO
PRINCIPAL ACTIVITY
Export oil sales
Oil refinery
Oil lifting services
Drilling services
Tires production
Nizhnekamskiy zavod shin CMK OOO
Tires production
Trade House Kama OOO
Tatneft AZS-Centr OOO
Tatneft AZS-Zapad OOO
Tires sales
Oil products sales
Oil products sales
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
% OF OWNERSHIP
INTEREST HELD BY
THE GROUP
% OF OWNERSHIP
INTEREST HELD BY
THE NCI
% OF OWNERSHIP
INTEREST HELD BY
THE GROUP
% OF OWNERSHIP
INTEREST HELD BY
THE NCI
100
91
-
-
61
100
100
100
100
-
9
100
100
39
-
-
-
-
100
91
-
-
76
100
100
100
100
-
9
100
100
24
-
-
-
-
FINANCIAL ASSETS
Current
Cash and cash equivalents
Restricted cash
Accounts receivable
Short-term financial assets
Non-current
Long-term accounts receivable
Long-term financial assets
Total financial assets
FINANCIAL LIABILITIES
Current
The total non-controlling interest for the year ended 31 December 2013 is RR 7,512 million, of which RR 3,167 million is attributed to TMS group UK OOO
and Burenie OOO. The total non-controlling interest for the year ended 31 December 2012 is RR 4,975 million, of which RR 2,091 million is attributed to TMS
group UK OOO and Burenie OOO. As of 31 December 2013 and 2012 accumulated non-controlling interest in TMS group UK OOO and Burenie OOO was RR
8,571 million and RR 5,770 million, respectively.
The summarised fi nancial information relating to the subsidiaries with material non-controlling interest was as follows:
Trade and other payable
Short-term debt and current portion of long-term debt
Non-current
Long-term debt, net of current portion
Total financial liabilities
Year ended 31 December 2013
Taneco OAO
TMS group UK OOO
Nizhnekamskshina OAO
Burenie OOO
Total
Year ended 31 December 2012
Taneco OAO
TMS group UK OOO
Nizhnekamskshina OAO
Burenie OOO
Total
CURRENT ASSETS
ASSETS CURRENT LIABILITIES
NON-CURRENT
NON-CURRENT
LIABILITIES
REVENUE
PROFIT/
LOSS
8,920
380
2,500
499
144,521
28,302
2,891
797
148,193
1,384
5,692
1,144
6,779
4,225
751
1
12,299
176,511
156,413
11,756
9,617
3,537
2,112
2,808
149,888
27,121
2,479
1,227
160,905
5,026
5,451
5,205
18,074
180,715
176,587
4,464
3,470
329
-
8,263
20,620
23,862
16,256
14,943
75,681
16,217
21,952
17,763
13,403
69,335
3,607
2,060
218
1,329
7,214
703
1,274
200
1,014
3,191
The Group‘s activities expose it to a variety of fi nancial risks: market risk (including foreign currency risk, interest rate risk and commodity price risk), credit risk
and liquidity risk. The Group‘s overall risk management program focuses on the unpredictability of fi nancial markets and seeks to minimize potential adverse
effects on the Group‘s fi nancial performance. The Group has introduced a risk management system and developed a number of procedures to measure,
assess and monitor risks and select the relevant risk management techniques.
MARKET RISK
Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business.
The Group takes on exposure to market risks. Market risks arise from open positions in (a) foreign currencies, (b) interest rate risk and (c) commodity price
risk.
a) Currency risk
The Group operates internationally and is exposed to currency risk arising from various currency exposures primarily with respect to the US dollar and the
Euro. Foreign exchange risk arises from assets, liabilities, commercial transactions and fi nancing denominated in foreign currencies.
148
149
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
29,535
917
52,098
16,693
1,016
25,814
126,073
(15,343)
(36,561)
(12,785)
(64,689)
13,083
1,369
53,553
14,931
1,530
25,782
110,248
(17,887)
(32,096)
(37,991)
(87,974)
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
The table below summarises the Group’s exposure to foreign currency exchange rate risk at the end of the reporting period:
AT 31 DECEMBER 2013
FINANCIAL ASSETS
Current
Cash and cash equivalents
Restricted cash
Accounts receivable
Short-term financial assets
Non-current
Long-term accounts receivable
Long-term financial assets
Total financial assets
FINANCIAL LIABILITIES
Current
Trade and other payable
Short-term debt and current portion of long-term debt
Non-current
Long-term debt, net of current portion
Total financial liabilities
AT 31 DECEMBER 2012
FINANCIAL ASSETS
Current
Cash and cash equivalents
Restricted cash
Accounts receivable
Short-term financial assets
Non-current
Long-term accounts receivable
Long-term financial assets
Total financial assets
FINANCIAL LIABILITIES
Current
Trade and other payable
Short-term debt and current portion of long-term debt
Non-current
Long-term debt, net of current portion
Total financial liabilities
EFFECT ON PRE-TAX PROFIT
US $/RR loss
US $/RR gain
150
RUSSIAN ROUBLE
US DOLLAR
OTHER
TOTAL
26,121
20
24,443
13,934
1,016
22,305
87,839
(13,450)
(4,966)
(890)
(19,306)
3,346
106
25,841
2,759
-
3,509
35,561
(1,798)
(31,387)
(10,086)
(43,271)
68
791
1,814
-
-
-
2,673
(95)
(208)
(1,809)
(2,112)
29,535
917
52,098
16,693
1,016
25,814
126,073
(15,343)
(36,561)
(12,785)
(64,689)
RUSSIAN ROUBLE
US DOLLAR
OTHER
TOTAL
9,400
941
19,729
12,389
1,052
22,755
66,266
(14,096)
(11,509)
(605)
(26,210)
3,585
113
33,091
2,542
-
3,027
42,358
(3,549)
(20,355)
(36,150)
(60,054)
98
315
733
-
478
-
1,624
(242)
(232)
(1,236)
(1,710)
13,083
1,369
53,553
14,931
1,530
25,782
110,248
(17,887)
(32,096)
(37,991)
(87,974)
INCREASE/DECREASE IN
EXCHANGE RATE
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
+10%
-10%
(771)
771
(1,770)
1,770
b) Interest rate risk
The majority of the Group’s borrowings is at variable interest rates (linked to the LIBOR rate). To mitigate the risk of signifi cant changes in the LIBOR rate, the
Group’s treasury function performs periodic analysis of the interest rate environment. The Group does not have a formal policy of determining how much of the
Group’s exposure should be to fi xed or variable rates. However, the Group performs periodic analysis of the current interest rate environment and depending
on that analysis at the time of raising new debts management makes decisions whether to obtain fi nancing on fi xed-rate or variable-rate basis would be more
benefi cial to the Group over the expected period until maturity.
EFFECT ON PRE-TAX PROFIT
Increase by 100 basis points
Decrease by 100 basis points*
* - floating rate decrease capped at zero.
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
(372)
25
(617)
115
The sensitivity analysis is limited only to variable rate loans and borrowings
and is conducted with all other variables held constant. The analysis is
prepared assuming the amount of variable rate liability outstanding at the
reporting date was outstanding for the whole year. Interest rate on variable
rate loans and borrowings will effectively change throughout the year in
response to fl uctuations in market interest rates.
of credit and prepayments are used, especially with respect to accounts
receivables from non-CIS sales of crude oil. The Group operates with various
customers and a substantial part of its sales relate to major customers.
Although collection of accounts receivable could be infl uenced by economic
factors affecting these customers, management believes there is no
signifi cant risk of loss to the Group beyond the provisions already recorded.
The impact measured through the sensitivity analysis does not take into
account other potential changes in economic conditions, which may
accompany the relevant changes in market interest rates.
c) Commodity price risk
Commodity price risk is the risk or uncertainty arising from possible
movements in prices for crude oil and related products, and their impact
on the Group’s future performance and results of the Group’s operations. A
decline in the prices could result in a decrease in net income and cash fl ows.
The Group’s overall strategy in production and sales of crude oil and related
products is centrally managed. Substantially all the Group’s crude oil export
sales to Europe are sold under long-term contracts.
The Group assesses on a regular basis potential scenarios for future
fl uctuation in commodity prices and their impacts on operational and
investment decisions.
However, in the current environment management estimates may materially
differ from actual future impact on the Group’s fi nancial position. Actual
results, and the impact on the Group’s operations and fi nancial position, may
differ from management’s estimates of potential scenarios.
CREDIT RISK
Credit risk refers to the risk exposure that a potential fi nancial loss to the
Group may occur if a counterparty defaults on its contractual obligations. The
Group’s exposure to credit risk is limited to the carrying amount of fi nancial
assets recognized in the Consolidated Statement of Financial Position.
Credit risk arises from cash and cash equivalents, certifi cates of deposits,
loans and notes receivables, as well as credit exposures to customers
including outstanding trade and other receivables.
Credit risks related to accounts receivable are systematically monitored
taking into account the customer’s fi nancial position, past experience
and other factors. Management systematically reviews ageing analysis
of receivables and uses this information for calculation of provision for
impairment. A signifi cant portion of the Group’s accounts receivable is due
from domestic and export trading companies. The Group does not always
require collateral to limit the exposure to loss; however, in most cases letters
The Company performs an ongoing assessment and monitoring of the risk of
default.
In addition, as part of its cash management and credit risk function, the
Company regularly evaluates the creditworthiness of fi nancial and banking
institutions where it deposits cash.
The Group deposits available cash mostly with fi nancial institutions in the
Russian Federation. To manage this credit risk, the Group allocates its
available cash to a variety of Russian banks. Management periodically
reviews the credit worthiness of the banks in which it deposits cash. As of
31 December 2013 and 2012 the majority of loans and receivables (Note 8,
Note 11) are held in Bank Zenit which is related party to the Group (Note 23)
and other non-investment grade entities with credit rating not less than BB-
according to Standard and Poor’s.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its fi nancial
obligations as they fall due. The Group’s approach to managing liquidity
is to ensure that it will always have suffi cient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group‘s reputation. In
managing its liquidity risk, the Group maintains adequate cash reserves and
debt facilities, continuously monitors forecast and actual cash fl ows and
matches the maturity profi les of fi nancial assets and liabilities.
The Group prepares various fi nancial plans (monthly, quarterly and annually)
which ensures that the Group has
suffi cient cash on demand to meet expected operational expenses, fi nancial
obligations and investing activities for a period of 30 days or more. To fund
cash requirements of a more permanent nature, the Group will normally raise
long-term debt in available international and domestic markets.
All of the Group’s fi nancial liabilities represent non-derivative fi nancial
instruments.
151
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
FINANCIAL RESULTS
JSC TATNEFT
The following tables summarise the maturity profi le of the Group‘s fi nancial liabilities based on contractual undiscounted payments,
including interest payments:
Available-for-sale fi nancial assets, comprise of RR 3,677 million (11.661%) AK Bars Bank shares which are not quoted in any Stock Exchange and the fair
value are measured on AK Bars Bank Group per IFRS Financial Statements (Net assets value).
AT 31 DECEMBER 2013
Short-term debt, current portion of long-term and long-term debt
Trade and other payable
LESS THAN 1 YEAR
BETWEEN
1 AND 2 YEARS
BETWEEN
2 AND 5 YEARS
OVER 5 YEARS
37,971
15,343
6,174
-
4,506
-
4,271
-
AT 31 DECEMBER 2012
Short-term debt, current portion of long-term and long-term debt
Trade and other payable
LESS THAN 1 YEAR
BETWEEN
1 AND 2 YEARS
BETWEEN
2 AND 5 YEARS
OVER 5 YEARS
34,509
17,887
29,001
-
8,654
-
3,643
-
TOTAL
52,922
15,343
TOTAL
75,807
17,887
As the amounts included in the table are contractual undiscounted cash fl ows which include future interest payments, these amounts will not reconcile to the
amounts disclosed in the consolidated statement of fi nancial position for borrowings.
FAIR VALUE HIERARCHY
Fair values
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the
measurement date. The estimated fair values of fi nancial instruments are determined with reference to various market information and other valuation
techniques as considered appropriate.
The different levels of fair value hierarchy have been defi ned as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to assess at the measurement date. For the
Group, Level 1 inputs include held-for-trading fi nancial assets that are actively traded on the Russian domestic markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For the Group, Level 2
inputs include observable market value measures applied to available for sale securities.
Level 3 – Unobservable inputs for the asset or liability. These inputs refl ect the Company‘s own assumptions about the assumptions a market participant would
use in pricing the asset or liability.
RECURRING FAIR VALUE MEASUREMENTS
The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows:
Held-for-trading investments
Available-for-sale investments
Total
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
LEVEL 1
LEVEL 2
LEVEL 3
2,522
-
2,522
-
4,660
4,660
994
-
994
TOTAL
CARRYING
VALUE
3,516
4,660
8,176
LEVEL 1
LEVEL 2
LEVEL 3
6,067
-
6,067
-
4,686
4,686
297
-
297
TOTAL
CARRYING
VALUE
6,364
4,686
11,050
The description of valuation technique and description of inputs used in the fair value measurement for Level 2 and Level 3 measurements at 31 December 2013:
Held-for-trading investments
994
Net assets valuation
Available-for-sale investments
4,660
Net assets valuation
Publicly available IFRS
Financial statements
Publicly available IFRS
Financial statements
FAIR VALUE
VALUATION TECHNIQUE
INPUTS USED
Total
152
5,654
There were no changes in valuation technique for Level 2 and Level 3 recurring fair value measurements during the year ended 31 December 2013 (2012:
none).
There have been no transfers between Level 1, Level 2 and Level 3 during the period.
ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE BUT FOR WHICH FAIR VALUE IS DISCLOSED
Fair values analysed by level in the fair value hierarchy and carrying value of assets and liabilities not measured at fair value are as follows:
AT 31 DECEMBER 2013
AT 31 DECEMBER 2012
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
CARRYING
VALUE
LEVEL 1
LEVEL 2
LEVEL 3
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable
Financial assets
Total assets
LIABILITIES
Debt
Trade and other payable
Total liabilities
29,535
917
-
-
30,452
-
-
-
-
-
-
-
-
-
-
-
-
-
53,114
35,112
29,535
917
53,114
34,332
13,083
1,369
-
-
88,226
117,898
14,452
(49,346)
(49,346)
(15,343)
(15,343)
(64,689)
(64,689)
-
-
-
-
-
-
-
-
-
-
-
TOTAL
CARRYING
VALUE
13,083
1,369
55,083
29,663
99,198
-
-
55,083
30,521
85,604
(70,087)
(70,087)
(17,887)
(17,887)
(87,974)
(87,974)
The fair values in Level 3 of fair value hierarchy were estimated using the discounted cash fl ows valuation technique. The fair value of fl oating rate instruments
that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fi xed interest rate instruments was
estimated based on estimated future cash fl ows expected to be received discounted at current interest rates for new instruments with similar credit risk and
remaining maturity.
MANAGEMENT OF CAPITAL
The primary objective of the Group‘s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its
business and increase shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.
The Group considers equity and debt to be the principal elements of capital management. In order to maintain or adjust the capital structure, the Group may
adjust the dividend payment to shareholders, revise its investment program, attract new or settle existing debt or sell certain non-core businesses.
The Group monitors capital on the basis of its gearing ratio.
DESCRIPTION
Consolidated total borrowings:
Short-term debt and current portion of long-term debt
Long-term debt, net of current portion
Notes payable
Consolidated shareholders’ equity
Debt to capital employed ratio, % (Consolidated total borrowings / Consolidated shareholders’ equity)
YEAR ENDED
31 DECEMBER 2013
YEAR ENDED
31 DECEMBER 2012
49,607
36,561
12,785
261
481,412
10%
70,092
32,096
37,991
5
429,954
16%
153
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ПРИЛОЖЕНИЯ
JSC TATNEFT
LIST OF ABBREVIATIONS
JSC TATNEFT
Open Joint Stock Company named after V. D. Shashin
ZAO
OOO
NGDU
PNP
MUN
GTM
RNO
EPU
Close Joint Stock Company
Limited Liability Company
Oil and Gas Production Division (structural division of JSC TATNEFT)
Oil recovery enhancement
Oil recovery enhancement methods
Geological and engineering measures
Oil field equipment repair
Electrical submergible unit
NIOKR
Scientific research and design works
OPR
PPD
Pilot operations
Reservoir pressure maintenance
TatNIPIneft
Tatar R&D Institute of Petroleum Industry (structural division of JSC TATNEFT)
DZO
UTT
ST
Subsidiaries and affiliated companies
Technological transport administration
Specialized vehicles
UPTZh dlya PPD
Administration of process liquid treatment for reservoir pressure maintenance (structural division of JSC TATNEFT)
RTS
MMVB
UK
NPZ
NOU
IT
KIS
BZ
DZ
Russian Trading System
Moscow Inter-Banc Currency Exchange (MICEX)
Management Company
Crude oil refinery
Non-governmental educational establishment
Information technologies
Corporate information system
Near-abroad countries
Far-abroad countries
ONVSS
Equipment not included in the construction estimate
UTNS
TMTs
TTD
NDPI
NPU
MPT
NS
GIS
Tatneftesnab Administration
Commodity stocks and supplies
Trade and technical house of JSC TATNEFT
Minerals extraction tax
Crude oil refining plant
Metal/plastic pipes
Accidents
Geological information systems
Standardizing Research Station (structural division of JSC TATNEFT)
ASU TP i PSP
Automated process control system of delivery and acceptance point
NIS
TGRU
ASK
TNG
Tatar geological exploration Administration
Joint stock insurance Company
Tatneftegeophizika Company
TsDNG
Oil and gas production shop
BMZ
UKPN
AZS
Bugulma Mechanical Plant
Integrated crude oil treatment plant
Filling station
SPE
LKS
KPE
TsOD
Т.u.t
TsKO
TsZVT
Society of Petroleum Engineers of the USA
Local well casing equipment
Key performance indicators
Data processing center
Ton of reference fuel
Control and Accountability Center
Claims Set-Off Center
154
155
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ПРИЛОЖЕНИЯ
JSC TATNEFT
FORECAST COMMENTS
All the statements, other than the actual data for the period reported in this document, are forward-looking
statements with regard to the future results. Such forward-looking statements include:
• statements of plans, goals and objectives of the Company
• statements about future results of operations
The forward looking statements may also include information on projected or anticipated income, profi t
(loss), net profi t (loss) in respect of shares, dividends, capital structure and other fi nancial matters.
By its nature the forward-looking statements involve risks and uncertainties, both general and specifi c.
There is a risk that predictions, forecasts, plans and other forward-looking statements will not match
the reality. It should be borne in mind that due to a number of important factors the actual results may
materially differ from the plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements. Such factors include the following:
• infl ation, fl uctuation of interest rates and currency exchange rates;
• price of oil;
• impact of contest in the geographic territories and in the areas of the Company’s activities;
• effects of changes in laws, standard-setting instruments, standards or taxation and accounting procedures;
• technological changes;
• weather conditions, etc.
This list of factors is not an exhaustive one. Simultaneously with the above factors it is necessary to take into
account political, economic, social and legal environment, which the Company operates in. The forward
looking statements are relevant only as of the date, which they are made on and subject to any continuing
obligations under the listing rules of the UK Listing Authority and other applicable laws. The Company
assumes no obligation with regard to updating or introduction of amendments into any of these statements,
whether on the basis of new information, future events or otherwise.
The forward-looking statements presented in this document shall not be construed as inducement to
engage in investment activity and as a basis for making investment decisions.
ANNOTATION TO THE REPORT ON
SUSTAINABLE DEVELOPMENT
AND SOCIAL RESPONSIBILITY OF
JSC TATNEFT FOR 2013
The Report on Sustainable Development and Social Responsibility of
JSC TATNEFT for 2013 is the tenth report prepared in order to inform
a wide range of stakeholders about the Company’s contribution
to sustainable development. The Report provides information on
the Company’s activities in the fi eld of securing economic stability,
improving environmental protection and maintaining of social welfare
of the Company’s staff and residents of the Company’s activity
regions.
This Report of the Company has been prepared on the basis of
the Guide to reporting on sustainable development of the Global
Reporting Initiative (GRI), version G 3.1 and the Standard of
interaction with concerned parties AA1000 taking into account the
principles of International standard ISO 26000 «Guidance on social
responsibility» and the Social Charter of Russia’s Business (RSPP).
The report has been certifi ed by an independent party ZAO «Bureau
Veritas Certifi cation Rus» and passed the procedure of public
assurance by the RSPP Board of non-fi nancial reporting.
The Report on Sustainable Development and Social Responsibility
complements the Company’s Annual Report detailing the
Company’s social aspects and areas of its corporate activities. The
Report on Sustainable Development and Social Responsibility and
Annual Report offer to the interested parties complete information
for in-depth and comprehensive analysis of the Company’s activities
taking into account long-term prospects.
Electronic versions of the Report on Sustainable Development and
Social Responsibility are available on the Company’s Internet portal
www.tatneft.ru.
156
157
ANNUAL REPORT 2013
EXPLORING NEW HORIZONS
ПРИЛОЖЕНИЯ
JSC TATNEFT
REPORT CONCEPT
V.P. Lavushchenko
V.I Gorodny
N.E. Dorpeko
WORKING GROUP FOR REPORT PREPARATION
I.G. Gariffulin
E.A. Tikhturov
V.A. Voskoboinikov
R.M. Khisamov
D.V. Tsovma
V.A. Mozgovoy
D.V. Kurochkin
R.R. Gaifullina
A.T.Yukhimets
R.I. Khaziev
O.A. Sharagina
DESIGN AND GRAPHIC ART
DDVB
CONTACT INFORMATION
OF JSC TATNEFT
INFORMATION FOR SHAREHOLDERS
75, Lenin Street,
Almetyevsk 423450,
Tatarstan, Russia
Phone: (+7 8553) 31 97 53
MOSCOW REPRESENTATIVE OFFICE
17, Tverskoy Boulevard,
Moscow 123104, Russia
Phone: (+ 7 495) 937 55 78
Fax: (+ 7 495) 937 55 79
OOO EUROASIAN REGISTRAR
(THE COMPANY’S REGISTRAR)
10, Mira Street,
Almetyevsk 423450,
Tatarstan, Russia
Phone: (+7 8553) 22 10 88
Fax: (+ 7 8553) 22 08 40
ZAO ENERGY CONSULTING/AUDIT
(AUDITOR OF THE COMPANY’S REPORTS BY RSBU)
7, Pavlovskaya Street,
Moscow 115093, Russia
Phone: (+7 495) 980 90 81
Fax: (+ 7 495) 980 9082
www.ec-group.ru
e-mail:info@energy-consulting.ru
159
www.tatneft.ru