PJSC Tatneft Annual Report 2016

FY2016 Annual Report · PJSC Tatneft

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2016

STEADY
DEVELOPMENT

TATNEFT COMPANY
ANNUAL REPORT

The annual report of TATNEFT Company for 2016 was prepared on a single integrated basis,
combining the requirements applied to annual reportы of public companies, and standards
for the preparation of corporate reporting in the field of sustainable development. The
integrated annual report takes into account Recommendations of the Corporate
Governance Code approved by the Government the Russian Federation and the letter
recommended by the Bank of Russia No. 06-52/2463 of 10/04/2014.

In terms of the information disclosure, the annual report corresponds to:
– Federal Law No. 208-FZ of 26.12.1995 «On Joint Stock Companies»;
– Federal Law No. 39-FZ of April 22, 1996 «On the Securities Market»;
– Regulations of the Central Bank of the Russian Federation «On disclosure of information
by issuers of securities» No. 454-P, approved on December 30, 2014, registered by the
Ministry of Justice of the Russian Federation on February 12, 2015;

– Information letter of the Bank of Russia dated February 17, 2016 No. IN-06-52/8 «On

disclosure of the compliance report with principles and recommendations of the
Corporate Governance Code in the annual report of the Public Joint Stock Company».

In terms of sustainability aspects, the Company’s integrated annual report is designed to
meet the following standards:
– Guidelines for reporting on sustainable development of the Global Reporting Initiative for

GRI G4;

– AA 1000 Stakeholder Engagement Standard;
– ISO Standard: 26000 «Guide to Social Responsibility»;
– Social Charter of Russian Business;
– International Standard of Integrated Reporting (Www.theiirc.org/international-ir-

framework/).

The Annual Report of the Public Joint-Stock Company TATNEFT for 2016 was preliminarily
approved by the Board of Directors of PJSC TATNEFT.
Protocol No. 13 of May 27, 2017.

STATEMENTS ON FUTURE DEVELOPMENT

In addition to actual data for the past period, this report present some statements concerning the future. Such
statements include, in particular, statements of the production plans’ future results, plans and / or forward-looking
statements with respect to future economic and financial indicators, the goals and objectives of the Company regarding
development plans, including those relating to products and services.

The statements regarding future results may also include the information about the projected or anticipated revenues,
profit (loss), net profit (loss) in respect of shares, dividends, capital structure and other financial matters.

The content of such statements is of a predictive nature and it is accompanied by the words «expected», “assumed»,
«planned», «intended», etc. By their nature, the statements about the future involve risks and uncertainties, both general
and private. There is a risk that future actual results may differ materially from plans, objectives, expectations, estimates
and intentions expressed in such statements or may not be realized.

CONTENT

Joint Address to Shareholders, Investors and Partners ......................................................................................................................... 02

ABOUT COMPANY

04
Steady Development .............................................................................................................................................................. 04
Business Model .................................................................................................................................................................... 08
Strategy 2025 ....................................................................................................................................................................... 10
Strategy by Business Segments.............................................................................................................................................. 12
Sustainability ......................................................................................................................................................................... 24
TATNEFT Group Structure ...................................................................................................................................................... 26
General Industrial Trends ....................................................................................................................................................... 28

BOARD OF DIRECTORS’ REPORT

30
Investment Policy .................................................................................................................................................................. 34
Financial Policy ...................................................................................................................................................................... 35
Operations ........................................................................................................................................................................... 36
Energy and Resource Efficiency Program ................................................................................................................................ 52
Technology and Innovation ..................................................................................................................................................... 54

CORPORATE MANAGEMENT

62
Company Management System .............................................................................................................................................. 64
General Shareholders’ Meeting .............................................................................................................................................. 66
Board of Directors ................................................................................................................................................................. 67
Corporate Secretary .............................................................................................................................................................. 76
PJSC TATNEFT Board of Director’s Committees ...................................................................................................................... 77
General Director .................................................................................................................................................................... 80
Management Board ............................................................................................................................................................... 81
Commitment to the Best Practice of Corporate Management .................................................................................................... 88
Interaction with Shareholders. Ensuring Sharehoders’ Rights .................................................................................................... 90
Ensuring the Rights of Shareholders for Receiving Income As Dividends .................................................................................... 92
Principles and the Information Disclosure Procedure ................................................................................................................ 94
Protection of Insider Information ............................................................................................................................................ 97
Management of Risks ............................................................................................................................................................ 98
System of Corporate Control and Internal Audit .......................................................................................................................104
Anti-Corruption Policy of PJSC TATNEFT ................................................................................................................................106
PJSC TATNEFT’s Report on Compliance with Principles and Recommendations of Corporate Governance Code .........................108
Information on Related Party Transactions Concluded by PJSC TATNEFT n.a. V.D. Shashin in 2016 ............................................126
Personnel Management ........................................................................................................................................................136

FINANCIAL RESULTS

142
Accounting Statements Prepared in Accordance with Russian Accounting Standards ................................................................144
Auditor’s Opinion .................................................................................................................................................................144
Accounting Reports of PJSC TATNEFT, FY 2016 ......................................................................................................................151
Balance Sheet Report ...........................................................................................................................................................152
Report on Financial Results in 2016 .......................................................................................................................................153
Essential Aspects of the Accounting Policy and Presentation of the Accounting Statements........................................................154
Consolidated Financial Statements in Accordance with International Financial Reporting
Standards as of and for the Year Ended December 31, 2016. ...................................................................................................164
Independent Auditor’s Report ................................................................................................................................................164
Consolidated Statements of Financial Position ........................................................................................................................172
Consolidated Statements of Profit or Loss and Other Comprehensive Income ...........................................................................174
Consolidated Statements of Changes in Equity .......................................................................................................................176
Consolidated Statements of Cash Flows .................................................................................................................................177
Notes to the Consolidated Financial Statements ......................................................................................................................179

SOCIAL RESPONSIBILITY

254
Social Investment ................................................................................................................................................................256
Informing on the Activity Related to Sustainable Development and Corporate Social Responsibility .............................................257
Corporate Standards and Regulations for Interaction with Stakeholders ...................................................................................258
Interaction with Stakeholders ................................................................................................................................................260
Social Responsibility .............................................................................................................................................................261
Collective Agreement ............................................................................................................................................................264
Charitable Activity .................................................................................................................................................................274

INDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

276
PJSC TATNEFT Environmental Activity ....................................................................................................................................278

List of Acronyms ..............................................................................................................................................................................290
Contact Information .........................................................................................................................................................................292

PJSC TATNEFT ANNUAL REPORT 2016ABOUT COMPANYBOARD OF DIRECTORS’ REPORTJOINT ADDRESS
TO SHAREHOLDERS, INVESTORS AND PARTNERS

DEAR SHAREHOLDERS, INVESTORS AND PARTNERS!

2016 was a qualitatively new stage in the Company’s activi-
ties. We started implementation of the Development Strate-
gy for the period until 2025. In the conditions of the industrial
market-changing environment and generally unstable world
macro economy, we had to assess our potential, identify key
tasks and growth points and focus on them.

Maintaining the continuity with the previous stages of devel-
opment, Strategy 2025 focuses on creating high added val-
ue on the capital invested by the shareholders and doubling
the shareholder value of the Company.

The launch of the Strategy demonstrated its timeliness and
relevance for a confident move forward and avoidance of
critical risks for the Company in the period of low oil prices.

In the difficult economic conditions of the reporting year, the
Company made successful steps to strengthen the resource
base, increase profitable oil and gas production, develop its
own refining and petrochemicals works, while maintaining
high financial stability.

The Company’s business model, based on vertical integra-
tion and the diversified structure of the assets, has proved
its effectiveness, demonstrating the ability to control opera-
tional and financial factors against the backdrop of the mar-
ket volatility.

Our well-considered actions in the reporting year resulted in the
Company’s rise to a new level of efficiency. High production and
financial indicators were achieved. The net profit of the Group’s
shareholders received amounted to RUB 107.4 billion, which
was RUB 8.5 billion more than the level of the previous year.

The Company’s capitalization grew by 35% and reached a his-
toric high of RUB 965 billion (US $16 billion) by the end of 2016.
This is another point of growth of the Company’s shareholder
capital value within the framework of our Strategy.

Following the results of 2016, the Board of Directors will rec-
ommend the Annual General Meeting of the Shareholders of
PJSC TATNEFT to take a decision on dividend payment on
common and preference shares in the amount of RUB 22.81
per share, which exceeds the dividends for the last year by
more than 2 times.

The Company increased production by 5.3% compared to
the last year up to 28.7 million tonnes of crude oil. We im-
prove the technologies and introduce innovative methods
and equipment to ensure the crude oil production profitabil-
ity. More than 40% of crude oil was produced through appli-
cation of tertiary and hydrodynamic methods of oil recovery
enhancement. The successful implementation of measures
to optimize costs in the reporting year resulted in decreasing
the cost of producing a barrel of oil by 4.2%.

The Company continues the successful development of
high-viscosity oil fields, considering this development area
as one of the strategically important in strengthening and di-
versifying the resource base.

Implementation of major investment projects was provided at
the expense of the Company’s own funds, as well as of bor-
rowed ones. The total volume of the investments in the TAT-
NEFT Group companies amounted to RUB 97.2 billion in 2016.

The key strategic project in the field of the Company’s own re-
fining is the TANECO Complex. In the reporting year, the TANE-
CO facilities yielded 9.1 million tonnes of oil products. A signifi-
cant event of the year was the launch of a delayed coking unit,
which allowed increasing the processing depth to 99.2% by
the end of the year, while the yield of light oil products reached
87%. Commissioning of the Complex in full capacity will enable
the transition to the maximum output of light oil products. Con-
currently with the stable operation of the existing facilities, the
construction of new production facilities was continued, as well
as a comprehensive testing of the already constructed facilities
of the Complex. The success of the TANECO Project reliably
strengthens the Company’s strategic position in the oil prod-
ucts market in Russia.

The geographically well-diversified TATNEFT’s retail sales
network is the fourth largest in the Russian Federation and it
is also represented in the Republics of Belarus and Ukraine.
Despite the overall decrease in the domestic market of pe-
troleum products retail consumption in the reporting year,
the total retail sales increased by 6% compared to the previ-
ous year, while the average daily sales per one filling station
increased by 9%.

Thanks to strong competitive advantages, we managed to
maintain key positions in the tire products market. The rev-
enues from sales of products and services of the Company’s
Petrochemical Complex in 2016 were generally higher than
in 2015 by 17%.

In the reporting year, the Company continued developing its
own heat and power generation complex, implementing a
program for modernization of generating capacities. This is
one of the key vectors of our Strategy.

The Company renders significant assistance to the develop-
ment of the social infrastructure within the territory of its core
activities and supporting health-care, education, culture and
sports.

In 2017, the Company shall implement the scheduled produc-
tion plans, paying special attention to reducing operational
costs for all production processes, optimizing working capital,
improving the efficiency at each site and workplace, as well as
to import substitution of technologies and equipment. The sys-
tem of interaction between the Company’s Corporate Center
and business blocks is in the process of improvement in ac-
cordance with the strategic goals and KPIs.

The accumulated production experience, development of
the technological base with application of modern methods
of the business process management and the advanced
corporate practice are the basis for ensuring the progres-
sive development of the Company as one of the largest ver-
tically integrated Russian oil and gas producers, oil refiners
and petrochemical products manufacturers.

The Company entered the year 2017 with a robust program
of action. Our strategy is built on the fundamental business
basis. All the key promising projects are provided with the
appropriate resources and competencies for further sus-
tainable growth of the Company’s shareholder value!

Dear shareholders and investors! Thank you for your trust
and fruitful cooperation! The successes and achievements
of the Company are our joint result!

R.N. Minnikhanov
President of the Republic of Tatarstan,
Chairman of the Board of Directors of PJSC TATNEFT

N.U. Maganov
General Director,
Chairman of the Management Board of PJSC TATNEFT

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RU
STEADY DEVELOPMENT

OPERATIONAL EFFICIENCY

TATNEFT IS A MAJOR RUSSIAN VERTICAL-INTEGRATED OIL AND GAS
PRODUCING COMPANY wITH OVER 65-YEAR ExPERIENCE IN THE INDUSTRY.
THE BUSINESS PROJECTS ARE CARRIED OUT IN THE DOMESTIC
AND FOREIGN MARkETS.

reSource baSe
expanSion and
replacement

Strong growth
of oil and gaS
production

Strengthening
of own oil refining
buSineSS

retail
buSineSS
efficiency

itS own
generating
capacitieS

petrochemical
blocK profitability
growth

balanced SaleS of
crude oil and petroleum
productS

Crude oil sales:

22.1 mln tonnes

Petroleum product sales:

10.9 mln tonnes

Proved reserves:

872.3 mln
tonnes of oil

Current proved oil reserve
replacement ratio

109%

Total oil production:

Oil product output:

28.7 mln tonnes
+5.3% against last year’s level

9.3 mln tonnes
+2.1% against last year’s level

Total gas production:

Gas product output:

12 mln m3
+4.0% against last year’s level

1.2 mln tonnes
+1.4% against last year’s level

Oil conversion rate at TANECO:

99.2%
+33.3% against last year’s level

Light product yield:

87.0%
+21.1% against last year’s level

Retail distribution network:

689 fuel
filling stations
16 tank farms

Sales volume:

2.6 mln tonnes
+6.0% against last year’s level

Electric power generation:

2.2 bln kwh
+74.9% against last year’s level

Thermal energy supply:

3.95 mln gcal
+20.1% against last year’s level

Tire sales:

12 mln pcs
+1.2% against last year’s level

Carbon black sales:

118.0 thous tonnes
+0.8% against last year’s level

INVESTMENT APPEAL

GEOGRAPHICAL REACH

BALANCED BUSINESS MODEL BASED ON DIVERSIFIED ASSET STRUCTURE
AND A STRICTLY ALIGNED STRATEGY ENSURES HIGHY OPERATIONAL
AND FINANCIAL EFFICIENCY OF THE COMPANY.

The PJSC TATNEFT’S securities are listed in the Russian and international stock markets.
The Company’s ordinary and preferred shares are traded on the Moscow Stock Exchange
and are quoted on the highest list of the first (I) level. 28.5% of the voting shares were
deposited to be converted to global American Depository Receipts (ADR). The Company’s
depositary receipts are included in the listing of the London Stock Exchange (ATAD).

The company pursues a progressive dividend policy distributing at least 30% of the net
profit based on RAS (Russian Accounting Standards) as dividend payments. According
to the results of 2016, the Board of Directors recommends that the annual general
shareholders’ meeting determine the dividends to be paid for the ordinary and preferred
shares of the Company in the amount of 22.81 rubles per share (2 281% of their nominal
value), which altogether amounts to 50.62% of the net profit based
on RAS or about 50% of the net profit based on IFRS.

322.1

299.8

263.2

201.7

114.6

Company capitalization, bln rub

0.5

5.5

18.5

3.6

22.1

34.1

53.3

70.6

85.9

965.0

+35%

716.6

513.4

475.0

471.6

344.6

307.6

aS at december 30, 2016
capitalization of the
company amounted to
964.965 bln rubleS

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

The company holds licenses for geological prospecting, exploration and production of oil and gas
within the Russian Federation. The main resource base is concentrated in the Republic
of Tatarstan, including one of the world’s largest Romashkinsky field. The business
infrastructure is featured by the geographical proximity
of oil production, its own refineries and power
generating capacities, and the high quality crude
oil and petroleum product marketing logistics.

Exploration

Oil and gas production

Downstream

Retail Network

Petrochemicals

Crude oil and petroleum
product sales:

Machinery

Equipment
and technology supply

*To date, the TATNEFT’s exploration program has been
suspended within its licensed areas in Libya and Syria since
2011 due to the political situation.

libya

ruSSia

republic of
tatarStan

belaruS

uKraine

KazaKhStan

turKey

turKmeniStan

china

Syria

iran

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

FINANCIAL SUSTAINABILITY

CONSOLIDATED EQUITY CAPITAL

REVENUE FROM NON-BANK OPERATIONS, NET, BLN
RUBLES (AS PER IFRS)

NET PROFIT PAYABLE TO THE GROUP’S
SHAREHOLDERS, BLN RUBLES (AS PER IFRS)

2016

2015

2014

580.1

552.7

+5.0%

476.4

2016

2015

2014

107.4

98.9

92.2

+8.6%

PROFITABILITY OF SALES, %

EBITDA, BLN RUBLES (AS PER IFRS)

2016

2015

2014

+0.6 p.p.

18,5

17.9

19.4

2016

2015

2014

165.6

155.6

+6.4%

127.7

INVESTMENTS

The accumulated potential of the financial sustainability ena-
bles to make investments in all key business projects using
the Company’s own funds as well as through borrowings.

The TATNEFT Group’s total investments amounted to 97.2 bln
rubles in 2016. A large proportion of investments was commit-
ted to oil and gas exploration, development and production
(more than 54 bln rubles) as well as to the construction of the
Complex of refineries and petrochemical plants (more than 34
bln rubles).

According to IFRS, EBITDA is defined as net revenue less costs and other deduc-
tions plus depreciation, depletion, amortization

TOTAL INVESTMENTS FOR THE TATNEFT GROUP,
BLN RUBLES

2016

2015

2014

97.23

97.22

+0.01%

68.99

4
.
5
8
3

2
.
6
4
4

9
.
3
0
5

7
.
7
5
6

9
.
8
0
7

2
.
2
8
5

EQUITY CAPITAL AS PER IFRS

385 427

446 233

503 982

582 244

657 658

708 904

2011

2012

2013

2014

2015

2016

CONSOLIDATED ASSETS

TATNEFT GROUP’S CONSOLIDATED ASSET COST AND STRUCTURE,
BLN RUBLES

11.1%

27.5%

13.8%

4.3%

628

bln rubles

26.2%

47.4%

1 095

bln rubles

Enterprises

2011

2016

Exploration and production

297.752

300.673

Refining and sale of crude oil
and petroleum products

216.432

356.191

Petrochemicals

27.215

29.977

Banking

286.421

Corporate and other

86.424

121.335

34.5%

2.7%

32.5%

Total assets at year-end, bln
rubles

627.823 1 094.597

2011

2016

TAxES (OTHER THAN PROFIT TAx)

EFFECIENCY

TAXES AND OTHER MANDATORY PAYMENTS FOR THE TATNEFT GROUP, MLN RUB

NET PROFIT PER BBL OF OIL PRODUCTION

Mineral Resource Recovery Tax

Property tax

Other

Total taxes other than profit tax

For the year ended
December 31, 2014

For the year ended
December 31, 2015

For the year ended
December 31, 2016

110 416

5 161

1 483

117 060

129 608

5 888

1 884

137 380

119 393

5 623

1 574

126 590

The lowered tax costs other than profit tax in 2016 as compared with 2015 are due to the lowered mineral recovery tax as a result
of lowered market oil prices, which the tax rates are dependent upon, as well as due to the increased base tax rate. The Group
gains savings from cutting down the amount of taxes per each percent of depletion of a particular subsoil area for the fields with
the depletion rate ranging from 80% to 100%. Thus, the lowered mineral recovery tax generated 23.2 bln rubles in savings. The
lowered mineral recovery tax savings gained for the production of super-viscous oil at Ashalchinsky field as well as at some other
fields totaled 7.1 bln rubles.

333

9
5
.
6
8
1

4
0
1
2
6

2011

62 104

186.59

333

392

3
7
4
3
7

8
3
.
7
8
1

2012

73 473

187.38

392

376

8
1
.
8
8
1

2
3
8
0
7

2013

70 832

188.18

376

488

7
2
2
2
9

7
9
.
8
8
1

2014

92 227

188.97

488

510

526

0
3
9
8
9

9
0
.
4
9
1

2015

98 930

194.09

510

9
8
3
7
0
1

3
3
.
4
0
2

2016

107 389

204.33

526

Net profit, mln rubles

Oil production, mln bbls

Unit net profit, rubles per bbl

Comparison for the period of 2011 is substantiated by its own refinery development on the basis of TANECO Сomplex.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

BUSINESS MODEL

THE BUSINESS MODEL OF THE COMPANY INTEGRATES, ON THE BASIS
OF A UNIFIED STRATEGY, THE POTENTIAL OF THE DIVERSIFIED ASSETS IN
ExPLORATION AND PRODUCTION, REFINING, PETROCHEMICALS, OIL AND
PETROLEUM PRODUCT SALES, ENSURING VALUE CREATION AND CONDITIONS
FOR LONG-TERM SUSTAINABLE DEVELOPMENT, TAkING INTO ACCOUNT
ExTERNAL FACTORS AND RISk-MINIMIzATION MECHANISMS.

PJSC TATNEFT IS THE
TATNEFT GROUP’S
CORPORATE CENTER

RESOURCE BASE

OIL PRODUCTION

CRUDE OIL AND GAS REFINING

CRUDE OIL AND PETROLEUM PRODUCT SALES:
PETROLEUM PRODUCT RETAIL SALES NETWORK

VALUE
CREATION

UPSTREAM

Ensuring oil production addition and reserve
replacement

l Strengthening the resource base

l Producing assets geographical expansion

l Development hard-to-recover and super-viscous

oil fields.

DOWNSTREAM

A qualitative strengthening of the profile asset
structure and improved operational efficiency of
business segments in the areas

l Downstream

l Petrochemicals

l Crude oil and petroleum product sales:

l Petroleum Product Retail Sales Network

l Heat Power Energy

MANAGEMENT PROCESSES

The business structure enables the Company to make the most efficient use of its resource assets and production capacities
through project and process management within a single investment policy

l Consolidation of technological and intellectual capabilities;

l Monitoring the performance and quality of all processes;

l Creating business growth points and operating profit margin;

l Lowering intersegmental costs;

l Strengthening financial sustainability;

l Risk control

l Putting in place unified operating and corporate standards;

l Coordination of interactions with the external business environment.

EXTERNAL INFLUENCES

l Global and domestic prices for crude oil and

petroleum products

l Global crude oil and petroleum product demand

l Taxation and tariff policy

l Supply marginality redistribution

l Inflation rate

l Exchange rates

l Transport tariffs

l Technological and environmental standards

l Competitive environment

RETAIL DISTRIBUTION NETWORK

PETROCHEMICALS

HEAT ENERGY

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYSTRATEGY 2025

THE CORPORATE STRATEGY IS FOCUSED
ON LONG-TERM SUSTAINABLE DEVELOPMENT
OF THE COMPANY —

ensure the optimized balance of crude oil production, refining and
petrochemicals, marketing and sales of crude oil and petroleum products
on the domestic and export markets attaining the maximum operating profit
margin of all business segments based on natural resource management,
social and environmental responsibility.

STRATEGY 2025

Defines the goals and objectives for each business segment

Enables efficient planning of operational and financial activities

Provides for the estimation of the investments needed to support
and increase production output, develop human capital, improve
governance efficiency, create sustainable development factors and
implement all social commitments made by the Company

IN 2016, THE BOARD OF DIRECTORS ADOPTED THE
COMPANY STRATEGY UP TO 2025

The strategy continues to follow the previous stages of development strengthening the
capacity of the Company to create a high added value for the shareholders’ capital.

CORPORATE GOALS

Company’s capitalization growth – focusing on doubling its
shareholder value

Financial sustainability and risk control

High dividend yield

Creating long-term business model benefits and key success factors
for business segments

Ensuring sustainability factors taking into account environmental and
social aspects

The initiation of the Strategy 2025 proved its high-priority and timeliness for steadfast moving
ahead and avoiding critical risks for the Company in the current period of market volatility.

In the challenging economic conditions during the year under report, the Company, in line
with its strategic goals, had successfully taken the steps to strengthen its resource base,
increase profitable oil and gas production, develop its own oil refining and petrochemical
businesses, while maintaining high financial resilience.

RESOURCE BASE

Strategic goalS 2025

Expand and diversify the portfolio of hydrocarbon
resources, including outside the Tatarstan through
access to oil and gas reserves, including through
establishing strategic alliances.

Ensure proved reserve
replacement at least
100 per cent
annually

Key prioritieS

1
2
3

Strengthening the resource base

Replacement of hydrocarbon production with
the commercial reserves

Preparation of raw material resources base and
full-fledged bringing reserves into development

Sustaining hydrocarbon production in mature
fields through innovative technological solutions
and ensuring projected production growth rates
while reducing unit operating and investment
costs

reSultS 2016

competitive advantageS

As at 31.12.2016, the Company’s proved reserves in ac-
cordance with the PRMS-SPE classification were esti-
mated at 6 214 mln barrels (872.3 mln tonnes of oil). The
probable oil reserves were 2 518 mln barrels (353.5 mln
tonnes of oil). The total proved gas reserves were 1 623
839 mln ft3. The proved hydrocarbon reserves were 910.3
mln tonnes of oil equivalent.

As at the end of 2016, the license stock of the Company
comprised ninety-six (96) licenses for mineral exploration
and production, geological survey including prospecting
and appraisal of mineral deposits, mineral exploration and
production within the Russian Federation.

Most of the reserves are conventional and historically lo-
cated within Tatarstan, as well as the licensed hydrocar-
bon fields are prospected, explored and developed in the
Republic of Kalmykia, Orenburg, Samara, Ulyanovsk Re-
gions, and the Nenets Autonomous District.

See page 36 for details

The hydrocarbon reserve life index (current annual pro-
duction to reserves ratio) takes the Company to a lead-
ing position not only in Russia but worldwide as well. The
Company consistently offsets the production by adding
reserves.

The potential of hydrocarbon resources includes bitumen
and non-conventional oil reserves. In the testing sites
such as Domanik and Bitumen the Company are conduct-
ing experimental researches and experimental and pilot
test activities, starting from exploration to development
and production of the fields. The Company considers un-
conventional reserves as an opportunity for growth and
will develop this category of the resource assets as an im-
portant part of its portfolio.

PROVED OIL RESERVES, MLN TONNES-

109%

Current proved oil reserve
replacement rate

30 years

Proved reserve life at current
produciton level

2016

2015

2014

872.3

869.8

851.5

+0.3%

43 years

Reserve life including probable
reserves at current production level

Strategic goalS 2025

Focus on shifting from sustained
oil production to production
growth

Increase annual oil output up to
30 mln tonnes
Seek an upside potential up to
35 mln tonnes and higher in 2025

reSultS 2016

competitive advantageS

In 2016, the total production across the Group grew by
5.3% against the last year and amounted to 28.7 mln
tonnes of oil. More than 40 per cent of the total output is
contributed by the tertiary and hydrodynamic enhanced
oil recovery techniques. The superviscous oil (SVO) was
produced in the amount of 843 thous.tonnes. The SVO
production more than doubled as compared with last year.

The Company ranked third among the Russian vertically
integrated oil companies (VIOC) by incremental oil pro-
duction as at the end 2016.

In 2016, the production growth rate at mature fields was
4.0% against the 2015 level, which is the best perfor-
mance among the Russian VIOCs.

prioritieS 2016

The increased oil production
and enhanced oil recovery
in the licensed fields within
the Republic of Tatarstan
through deployment of new
technologies

Development of super
viscous oil deposits (SVO)
in the Ashalchinsky field

Growth of profitable
production outside the
Republic of Tatarstan and the
Russian Federation, including
within new regions

Realization of pilot program
for shale oil production

Cutting unit operating costs
and making investments in oil
production more efficient

prioritieS 2017
The target-oriented objectives of the year continue to be the strategic projects to improve oil production efficiency
and develop super viscous oil fields.

The company endeavours to maximize the produciton profitability with the current resource base through
commercialization of innovative technologies and lowering costs of proven technologies.

A significant result of the cost optimization activities as
part of the Business Segment Development Strategy is
4.2% reduction in the cost to produce a barrel of oil.

See page 38 for details

TATNEFT GROUP OIL PRODUCTION, MLN TONNES

2016

2015

2014

28.7

27.2

26.5

+5.3%

TERTIARY AND HYDRODYNAMIC EOR OIL
PRODUCTION SHARE

100%

>40%

2016

Total production output

Tertiary and hydrodynamic
eor oil production share

eXternal FactorS and marKet conditionS

OIL PRODUCTION IN RUSSIA (INCLUDING GAS
CONDENSATE), MLN TONNES

The energy demand and supply is still volatile on the global energy market and thus the oil prices. The global demand for oil is
projected to increase in 2017 in the context of the OPEC agreement to curtail oil production. Since January 2017, subject to the
agreement between Russia and OPEC, the Company has committed to cut down the current production output, while weighing
all the economic and technological aspects to ensure stable operation of the oil fields and maintain the production balance.

2016

2015

2014

547.5

534.0

526.7

+2.5%

With such an outpacing upward trend, the Company was
able to show the largest reduction in the unit cost of oil
production (in US Dollars) by 20 per cent against the 2015
level among the Russian VIOC. That was made it possible
as a result of implementation of new approaches to field
development in Tatarstan and of the SVO project intensifi-
cation as well as through a qualitatively different approach
to efficiency management, introduction of benchmark-
ing tools, implementation of procurement strategies for
goods and services.

Over a long period of time since 2000, TATNEFT has been
the only company among the Russian vertically inte-
grated oil companies (VIOC) that avoided oil production
decrease despite the fact that most of our oil fields are
developed at mature stage.

The Company’s operating stock of oil wells was account-
ed for about 13% in the Russian overall structure.

A significant advantage is the geographical proximity of
the oil produciton hub to the main oil and petroleum prod-
uct marketing and refining regions - the Company has the
lowest weighted average tariff to transport oil to the Euro-
pean markets among major Russia’s VIOC.

In 2016, the total oil and condensate production in Russia in-
creased by 2.5% to 547.5 mln tonnes. The crude oil exports
to the far abroad countries increased by 5.1% as compared
with 2015. In general, the current supply and demand trends
in the global oil market and the changes in oil producers’
tactics help reduce the risk of dramatic oil price volatility in
the short term.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY12
DOwNSTREAM

Strategic goalS 2025

Increased output and sales of highly com-
petitive finished products based on the
TANECO Complex’s capacities

Increased oil refining throughput up to
14 million tonnes in 2018 with
light product output of 90% and conversion rate
not less than 97%

prioritieS 2016

Increase refinery crude run
through efficient operation of
existing production facilities

Continue planned
construction and testing
of the Refinery Complex
capacities

Increase share of light oil
products

Enhance petroleum feedstock
conversion rate

Production of high-quality oil
products

prioritieS 2017
Startup of naphtha hydrotreatment, catalytic reforming, isomerization, heavy coker gasoil hydrotreatment, diesel fuel
hydrotreatment, kerosene hydrotreatment plants

Increase the Nelson index to 10.27 points.

reSultS 2016

competitive advantageS

Amid the sustained operation of the Complex, installation,
integrated testing and commissioning of new processing fa-
cilities continued at the TANECO Complex. The installation
of primary equipment of DU-VDU-6 was completed: atmos-
pheric, preflash and vacuum columns The work continued at
hydrotreatment plant, naphtha splitter, light naphtha isomeri-
zation and associated off-site facilities. A significant event of
2016 was the delayed coker unit startup, which made it pos-
sible to increase the conversion depth by the end of the year
to 99.2% and cease the fuel oil production completely. Once
the rated capacity is reached the DCU will start producing 700
thous tonnes of petroleum coke per annum. New oil products
were placed into production, particularly, the diesel technol-
ogy fraction among them.

See page 42 for details

The key competitive advantage of TANECO Refining and Pet-
rochemical Plants Complex is the high quality of petroleum
products, satisfying the highest world environmental stand-
ards, as well as promising market requirements.

The potential of TANECO Complex:

tion to demand difference;

• optimization of oil products portfolio, flexible adapta-
• refining cost reduction;
• High flexibility of refinery on quality of processed oil;
• Development of premium sales channels for petro-

leum products.

Commissioning of light naphtha isomerization unit, Catalytic
reformer, kerosene and diesel hydro treating units will lead to
double increase in the output of diesel fuel of Euro-5 class and
the start of production of Euro-5 gasoline.

PETROLEUM FEEDSTOCK REFINING AT TANECO,
MLN TONNES

PETROLEUM FEEDSTOCK CONVERSION RATE AT
TANECO COMPLEX OPERATING CAPACITIES

2016

2015

2014

+0.5%

8.71

8.66

8.52

2016

2015

2014

99.2%

74.4%

74.0%

Average for refineries
in Russia
79.0%

OIL PRODUCTS OUTPUT AT TANECO, MLN TONNES

LIGHT OIL PRODUCT YIELD

2016

2015

2014

+2.2%

9.09

8.89

8.52

2016

2015

2014

87.0%

71.87%

68.00%

Average for refineries
in Russia
61.1%

eXternal FactorS and marKet conditionS

Over the last 5-year period from 2012 to 2016 the global refining throughput levels rose by 3 % from 3.6 mln tonnes to
3.8 mln tonnes, refining throughput in Russia as a whole grew by 5.2 per cent from 265 mln tonnes in 2012 to 279 mln
tonnes in 2016. At the same time, there was a significant improvement in the quality of refined petroleum products which
is related to the modernization of production facilities made by the Russian VIOC. The TATNEFT’s share in the primary
crude oil processing structure in Russia is over 3%. By capacity utilization rate being 115% the TANECO Complex ranks
first among refineries in Russia.

PRIMARY PROCESSING OF PETROLEUM
FEEDSTOCK IN RUSSIA, MLN TONNES

2016

2015

2014

-1.1%

279

282

289

An important advantage of the TANECO Refinery is its
capability to process high sulphurous oil. Should an in-
centive mechanism for processing high sulfurous oil be
in place in Russia, this advantage will enable the TANE-
CO Refinery to get adapted to the new conditions with
minimum investments.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY12

RETAIL DISTRIBUTION NETwORk

Strategic goalS 2025

Improve efficiency and com-
petitive advantage of the retail
network in the long term

Increase the sales by 2.3 times.
Sales of gasoline and diesel fuel produced by the
Company’s Refinery through filling stations and
small wholesale over 50%

prioritieS 2016

Modernization of existing
fuel filling stations based
on renewed format brand-
concept

Expansion of fuel filling
station network within
geographic diversification
potential

Increase fuel filling station
network’s marginality
based on quality of selling
proposition and development
of related services

Increase daily flow capacity
of fuel filling stations

Create a new
loyalty program

prioritieS 2017
Develop the Company’s network in accordance with the investment plan and priorities to improve profitability and
marginality. Implementation of targeted loyalty programs.

A strategic project to test key development tools to further replicate successful development tools
across the network.

reSultS 2016

competitive advantageS

Increased profitability of the network through marginality
growth, modernization of the fuel filling complex formats,
efficiency of the marketing programs, and optimizing
costs by siphoning off low-margin filling stations.

The TATNEFT retailers demonstrate high performance and
are leaders in many regional markets of the country. The
Company’s filling stations use advanced energy saving and
environmentally friendly technologies.

Despite the lowered fuel sales in the Russian domestic
market in total, where the large part of the TATNEFT retail
network is located, by taking the effective measures the
Company was able to increase retail sales by 6% against
last year, exceeding 2.6 million tonnes, and revenue
amounted to more than 97 bln rubles before VAT.

The average daily sales per fuel station were up 9 %
against last year. As part of the non-fuel supply develop-
ment the income from related goods and services was up
2015 per cent as compared with 2015. High quality fuel is
assured by a multi-level control system using advanced
technologies and software packages.

See page 46 for details

PETROLEUM PRODUCT SALES THROUGH RETAIL
NETWORK OF TATNEFT FUELING COMPLEXES,
MLN TONNES

2016

2015

2014

2.575

2.435

+5.7%

2.059

The high quality of fuel and services are the major priorities
of the TATNEFT-branded filling stations. The high quality oil
products are guaranteed at the filling stations by selling mo-
tor fuels of its own production such as TANECO diesel fuel,
and by compliance with the technological discipline and re-
quirements of regulatory documents when accepting, stor-
ing, transporting and selling petroleum products. As alleged
by specialists based on independent expert examination
diesel fuel TANECO corresponds to the Euro-6 class.

The filling stations are being reconstructed using new for-
mats and interiors. It makes it possible to expand of the
range of goods and services offered to customers and de-
velop public catering. The filling stations offer full package
of services and the line of additional services is constantly
expanding as well.

Customer relationship services are considered as a sig-
nificant tool to improve competitiveness. The automated
customer complaint management system helps promptly
provide feedback to all requests. Sales representatives
maintain communication with their customers on up-to-date
and user-friendly communication sites, including through
on-line activities in social media.

eXternal FactorS and marKet conditionS

The main trends for the Russian retail oil product market are: The continued consolidation of retail networks carried out by the
vertically integrated oil companies, construction of new filling stations, tightening the state regulatory measures with regard to
technical specifications and environmental requirements for the petroleum product quality, the ban on sale of motor fuel below
the Euro-5 class from 1 July 2016. With this background, each and all the market players, including the TATNEFT Company, are
upgrading on a large-scale the retail networks to improve the selling proposition, both fuel and non-fuel ones.

At the end of 2016, there were 24 000 active filling stations in Russia. During the year, 170 filling stations were renovated including
construction of new facilities and rebranding of existing ones. These were mainly the city filling stations (45%) and independent
filling station networks (58 per cent). The highest share of reconstructed filling stations accounts for the Central Federal District
- 34%, the Siberian Federal District - 26%, the Volga Federal District - 19%. Full-scale work was carried out in the Moscow Re-
gion (25 facilities) as well as in the Tula Region (16 facilities). The changes took place in the Volga Federal District with respect to
the Nizhni Novgorod Region and Samara Region. The count of mothballed filling stations at the end of 2016 was 640 (facilities)
throughout Russia, most of which are concentrated in Siberian FD - 27%, Central FD - 21% and Volga FD -12%. These are mainly
regional filling stations (43%) and facilities of the independent members (63%). Twenty-three (23) filling stations were disman-
tled in 2016, and this figure has been the same for the last three years.

(According to OMТ-CONSULT data)

Strategic goalS 2025

Develop new market niches through
efficient marketing programs, improved
quality and product line expansion

Hold leadership positions on the Russian
tire market, increased tire sales
up to more than
16 mln pieces per year

prioritieS 2017

Develop a brand-
communication strategy

Increase marginality of sales
through marketing activities
and cost cutting

Introduction of Quality
Extended Warranty Program
in aftermarket

Updating research base
for R and D

Significant expansion of
variety of B-segment tires for
passenger cars and trucks

prioritieS 2017
Develop a brand-communication strategy

Complete renewal of the Tire Complex’s corporate brand.

Procurement optimization.

Improve the system efficiency for distribution and promotion of sales on the Russian aftermarket.

Complete renovation of the PJSC Nizhnekamskshina preproduction.

eXternal FactorS and marKet conditionS

The Russian tire market is characterized by a high percentage of imported products. However, due to the devaluation of
the Russian currency, foreign producers seek to localize their production within the Russian Federation. The barrier anti-
dumping duties imposed on Chinese truck tires are positive points for the Russian tire market. For the time being, these
factors curtain the return of Chinese products to the Russian market, but the stronger ruble trends might have a negative
impact on sales plans, most of all that involves the all-steel tire market, where the more expensive Chinese brands have
previously competed directly with Kama Tires.

reSultS 2016

competitive advantageS

Holding key positions in total domestic market output at
last year’s level. In the reporting year, the Company’s Pet-
rochemical Complex manufactured 11.5 mln tires, including
more than 1 mln all- steel tires (more than 55% of the total
Russian all-steel tire output). The Company’s tire products
are mainly delivered to the largest automotive manufacturers
on the domestic market The tire product exports span over
40 countries. The total tire output amounted to 12 mln pcs in
the reporting year.

See page 48 for details

The tire business of the TATNEFT Group has a number of
competitive advantages:

sembly plants;

• Proximity to the supply source of synthetic rubber;
• own production of carbon black;
• Large-scale production;
• High-tech production facilities;
• Geographical proximity to large clusters of car as-
• Modern production lines satisfying the highest mar-
• Its own established tire development centre “KAMA
• Its own logistics and marketing center for tire product
• Developed distribution network.

Research and Development Center”;

ket and technical requirements;

sales;

TIRE SALES, THOUS PCS

2016

2015

2014

+1.1%

11 955

11 820

12 083

Strong competitive advantages of the tire business are
wide popularity and experience in operating the “KAMA”
and “Viatti” branded tires, optimal tire product line and
range, development of potential models based on coop-
eration with automakers.

COMPANY SHARE IN TOTAL TIRE OUTPUT IN
RUSSIA IN 2016

100%

23%

Total tire output in russia

2016

Company share

DYNAMICS OF TIRE OUTPUT IN RUSSIA,
MLN PCS

2016

2015

2014

50.1

46.0

+8.9%

41.9

At the end of 2016 there was a trend towards upsurge in pric-
es of tire production feedstock (first of all for rubber - both in
dollars and in rubles). This trend is likely to continue in 2017,
which could have a negative impact on the financial perfor-
mance of tire producers.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY12

HEAT POwER ENERGY

Strategic goalS 2025

Reliability growth of energy supply
TATNEFT Group’s enterprises;
Increase in the supply of Nizhnekamsk
industrial hub

Diversification of feedstock sources
of Nizhnekamsk CHP

prioritieS 2016

Complete the “Construction
of electric power generation
facilities using low-
grade steam turbines in
Nizhnekamsk” project.

Improve operational ef-
ficiency of energy capacities
by choosing the best fuel type
according to market condi-
tions

Diversify sources of
feedstock for Nizhnekamsk
CHP (natural gas, fuel oil,
petroleum coke)

Implement corporate
improved effeiciency
programs

Reduce power and heat
failure risks

prioritieS 2017
Implement the reconstruction project to shift the power boilers to burning
of petroleum coke produced at the TANECO refinery.

Increase the competitiveness of Nizhnekamsk CHP in the electrical
and thermal power market.

reSultS 2016

competitive advantageS

During the reporting year, the company continued to devel-
op its own electricity and thermal power complex.

The power energy was supplied to the TATNEFT Group’s en-
terprises in quantity of 5 034 646 thous kWh, that was 338
842 thous kWh or 7.2% more than in the same period of
last year. On average, the annual increase in electricity con-
sumption by the Company’s enterprises was 7% over the
period of 2011 to 2016.

Nizhnekamsk CHP
In the 1st Quarter of 2016 the project “Construction of
power generation facilities using low-grade steam tur-
bines in Nizhnekamsk” was completed, which made it
possible to increase the installed capacity of the power
plant from 380 to 730 MW and to bring the equipment
back into operation which had been earlier taken out of
the service and put on standby or in mothballs.

See page 50 for details

ELECTRICAL POWER PRODUCTION, BLN KWH

2016

2015

2014

1.28

1.33

2.24

+75%

The Company has its own generating assets enabling to
improve energy supply sustainability of the production
divisions and TANECO as well as boosting competitive
edges of the Group in general.

Programs to diversify of raw material sources (natural gas,
oil fuel, oil coke) for the Nizhnekamsk CHP are developed
and implemented which will make it possible to improve
operating efficiency of the plant through optimum fuel
type selection according to the market situation as well as
reduce power and heat delivery disruption risks.

In addition, at the Company’s generating facilities carry
out the activities under the relevant corporate programs
to improve reliability and efficiency of heat and power pro-
duction, as well as to reduce energy costs and losses.

The reconstruction project was initiated to shift the pow-
er boilers to burning of petroleum coke produced at the
TANECO refinery. This will partially substitute natural gas
with a new and cheaper fuel, thereby increasing the com-
petitiveness of the station on the electrical and thermal
energy market. Meanwhile, the Company has been de-
veloping the Almetyevsk Heat Networks (APTS) to supply
heat to the regional infrastructure facilities. It should be
noted that the electricity market is weak amidst the Rus-
sian economic growth slowdown.

eXternal FactorS and marKet conditionS

In 2016, there was a trend towards old generation decommissioning (3.75 GW was decommissioned). In previous years,
on average no more than 1 GW power output was shut down per year. This is largely associated with critical overabun-
dance of obsolete capacity in the system, as well as with complicated procedure to obtain the forced generator status and
tightened minimum specifications for power take-off. The large-scale commissioning of new and upgraded generating
capacities (4.6 GW in 2016) with lowered consumption trend has led to fiercer competition in the industry.

No acceleration with regard to growth in electric power demand in Russia is expected in the coming years, which could
eliminate power surplus, and as such, the power joint market will remain unfavourable. The electric power industry will be
influenced by the principle of equal profitability of natural gas deliveries to the domestic and foreign markets, set out in the
updated Energy Strategy of Russia up to 2035. Stepwise convergence of domestic gas prices with export parity means
an accelerated rise in natural gas prices for Russian consumers, including for power generating capacities. Moreover, the
electricity market is generally weak driven by an economic recession in Russia and Tatarstan and ongoing installation of
generating capacities. All these factors are likely to hold back profitability of the Company’s energy generating business.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY12

SUSTAINABILITY

THE COMPANY’S STRATEGY IMPLEMENTATION INCLUDES SUSTAINABLE GROWTH AND A FAVOURABLE
ECONOMIC AND SOCIAL ENVIRONMENT FOR BUSINESS DEVELOPMENT BASED ON MAXIMIzED
USE OF ALL TYPES OF RESOURCES AND CREATING VALUE FOR STAKEHOLDERS
AT EVERY STAGE OF THE BUSINESS ACTIVITY

Corporate social responsibility is an integral part of the Company’s strategy. The social responsibility principles are integrated
into business plans. The Company is looking to its long-term outlook and current plans for operating activities, such as devel-
opment of its own resource and produciton capacity and growth of financial results, tied together with social and environmental
dimensions.

The Company realizes that long-term business sustainability cannot be developed in isolation from social progress and strong
development of society as a whole, and it makes a significant contribution to the social and economic development of the re-
gions of its operations and society in general. All key decisions are made taking into account social, environmental and other
possible implications. The Company implements its targeted social, infrastructural and environmental programs through vol-
untary corporate initiatives based on commitment to its employees, local community and the environment.

Development and implementation of sustainability programs and activities are carried out with involvement of stakeholders
including the Company’s staff, authorities, representatives of local communities and non-governmental organizations through
an open dialogue.

ADDED VALUE

The value added output in the TATNEFT Group’s parent company taking into account production of petroleum products
totaled 329.6 bln rubles in 2016, up 7.0% against 2015.

In 2016, added value portion in overall output accounted for 71.8%.

The added value has grown as high as 167.1% in the course of vertical integration consolidation and its own refinery
development over the period since 2005.

ADDED VALUE OUTPUT GROWTH, BLN RUBLES

2016

2015

2014

2005

123.4

329.6

308.1

+7.0%

+167.1%

264.2

ADDED VALUE PORTION IN OVERALL
PRODUCTION OUTPUT

100%

71.8%

2016

Comparison for the period from 2005 is substantiated by its own refinery
project development (TANECO Complex) initiated in 2005.

overall production
output

Added value
portion

2016
330 bln rubles
value added production

economicS

Added value creation
Job creation
Innovation development and implementation
Supporting of local economies
Contribution to social infrastructure
development

SuStainability

2016
1.2 mln rubles
Investment in fixed assets
committed to environmental
protection and sustainable use
of natural resources.

iSo 14001:2004
ohSaS18001:2007

ecological Sphere

Environmental protection
Utilizaton of recycled materials
Utilization of clean energy sources
Energy savings
Waste recycling

iSo 26000

Social

Law compliance
Observance of human rights
Positive public opinion
Quality assurance of goods
Good working conditions

2016
5.2 mln rubles
Expenditures for social
infrastructure maintenance,
including construction and
maintenance of housing, schools,
cultural and recreational
facilities.

The Company is aware of its responsibility to shareholders, investors, partners, employees and society as a whole and seeks
to maximize its potential for sustainable development.

SOCIETY

ECONOMICS

ECOLOGY

• Assistance in social and economic

development of the regions of its
business activity.

sports.

groups.

• Assistance in education, culture and
• Support for vulnerable social
• Provision of high-quality goods and
• Continuous improvement of product
• Commitment to keep up with chang-
• Reporting of true information about

ing requirement of consumers.

services.

quality.

the Company’s products.

• Participation in domestic infra-

structure development of fuel and
energy complex.

• Job creation
• Added value creation
• Supporting of local economies
• Innovation
• Ensuring financial stability and

economic sustainability of the
Group’s enterprises.

• Development of its own research

and production base integrated
with leading industry research
centers.

• Ensuring safe working conditions,

protection of health of personnel
and people living in the Company’s
operating areas.

• Mitigation of technological environ-
• Sustanable use of natural

mental impact

resources.

The Company implements a set of meas-
ures aimed at maintaining the state of the
environment in the regions of its business
activity at a regulatory-permissible level,
corresponding to potential capabilities for
self-recovery of natural ecosystems.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

TATNEFT GROUP STRUCTURE

TATNEFT GROUP

MAIN SEGMENT-FORMING ENTERPRISES

PJSC TATNEFT (hereinafter referred to as the “Company”) and its subsidiaries (collectively referred to as the “Group”) is one of
the largest vertically integrated oil companies in Russia in terms of oil production and proved oil reserves.

The Company is a public joint-stock company, established in accordance with the Russian Federation legislation, with the
headquarters located in the city of Almetyevsk, Republic of Tatarstan.

The main business activities of the Group are as follows: exploration and development of oil fields, crude oil production, of pe-
troleum products and subsequent sales of crude oil and petroleum products. The Group is also engaged in production and sale
of petrochemical products, mainly tires, in equipment manufacturing for oil production, oil and gas treatment and processing,
as well as in engineering design, supply and construction services for oil, gas and petrochemical projects, and, from the fourth
Quarter of 2016, in banking.

MATERIAL OWNERSHIP STRUCTURE CHANGES IN 2016

On 1 January 2016, a number of companies the Group companies fall out of compliance with the control power existence criteria
under IFRS 10 “Consolidated Financial Statements” and were deconsolidated at that date. Although the Group had no direct or indirect
ownership interest the deconsolidated companies in previous years, it was able to contol their activities. The deconsolidation of these
companies resulted in a one-time loss of 8 745 mln rubles recognized in profit/(loss) from disposal of subsidiaries and investments
in associates and joint ventures in the consolidated statement of profit or loss and other comprehensive income for 2016. The non-
controlling interest in the consolidated statement of financial position decreased by 29 878 mln rubles as compared with the non-
controlling interest as at 31 December 2015.

In June, 2016 The Group increased its ownership in PJSC Bank ZENIT through the repurchase of a portion of the issue of the Bank’s
new shares in the amount of 6 700 mln rubles. As a result of the deal, the Group increased its interest in PJSC Bank ZENIT from 24.56%
as at December 31, 2015 to 48.79% as at June 30, 2016. After the deal, the Group continued to account for its ownership interest in
PJSC “Bank ZENIT” using the equity method.

In October 2016, as a result of the mandatory offer procedure carried out by the Company in accordance with the Federal Law “On
Joint Stock Companies”, the Group acquired an additional 1.64% stake in the authorized capital of PJSC Bank ZENIT for 327 mln rubles
increasing its ownership to 50.43% and gaining control over PJSC Bank ZENIT.

Realization of the additional issue, enhancement of the Bank’s reliability and providing an opportunity for the Bank’s business
development in the crisis situation will allow TATNEFT to protect its investments in the Bank’s capital and to remove the risk of default of
its obligations to a large number of enterprises and a significant number of individuals in the Republic of Tatarstan as well. The Bank’s
business volumes are very significant for the economy of the Republic of Tatarstan as well as socially significant for its people.

The additional capitalization of ZENIT Bank will help increase its value in the medium and long term, which will be possible for TATNEFT
to gain a return on investment, incl. Through the payment of dividends.

heat power energy
OOO Nizhnekamsk TEC
OOO Tatneft-Energosbyt
AO Almetyevsk Heating Net-
works

petrochemical
production
OOO UK Tatneft-Neftekhim
PJSC Nizhnekamskshina
OOO Nizhnekamsk Truck Tire
Factory
OOO NZSh CMK
JSC Nizhnekamsktehuglerod
JSC Nizhnekamsk Mechanical
Plant
OOO Tatneft-Neftekhimsnab
OOO Trading House KAMA
JSC Yarpolimermash-Tatneft

oil and gaS
production
NGDU Almetyevneft
NGDU Aznakayevskneft
NGDU Bavlyneft
NGDU Jalilneft
Ngdu Yelkhovneft
NGDU Leninogorskneft
NGDU Nurlatneft
NGDU Prikamneft
NGDU Yamashneft

SubSidiarieS and
affiliated oil-
producing companieS
OOO Tatneft-Abdulino
OOO Tatneft-Severny
OOO Tatneft-Samara
OAO Kalmneftegaz
ZAO Severgeologia
ZAO Severgaznefteprom
ZAO KalmTatneft*
ZAO Yambuloil*

oil and gaS refining
and Sale of crude
oil and petroleum
productS
Sale of crude oil and petroleum
products
Tatneftegazpererabotka Division
Elkhovskoye NPU of JSC
TANECO
OOO Tatneft-AZS Center
OOO Tatneft-AZS-Zapad
OOO Tatneft-AZS-Siberia
OOO Tatneft-AZS-Yug
OOO Tatneft-AZS-Ukrain
OOO Tatneft-Trans
IOOO Tatbelnefteprodukt
OOO Saimen
OOO Kharkov-Capital
OOO Poltava-Capital
OOO Processing Center
OOO Tatneft-Resurs Neft-
eprodukt
OOO Tatneft-Aviaservice

pJSc tatneft iS the corporate center of the group

pJSc tatneft
board of directorS

executive management committee
Executive Office

main production Support
Tatneftesnab Department
OOO UPTZh dlya PPD
Tatar Geological Exploration Department
Bugulma Mechanical Plant
Automobile Transportation Enterprise
OOO Tatneft-Samara
OOO Trade-Technical House Tatneft
OOO Tatneft-Neftekhimservice

Science and technology
and organizational Support
TatNIPIneft
Normative and Research Station
Engineering Center
Construction Project Delivery Department
Business Service Center
OOO NTC Tatneft (in Skolkovo)
OOO NPC Oil and gas technologies
AO TatNIIneftemash
OOO TatITneft

brancheS and
repreSentation officeS
Representation Office in Moscow
Representation office in the Republic of Iraq
Representation office in Ukraine
Branch in Libya
Branch in Turkmenistan

In 2016, Brent crude had hit the lowest price over the last 12
years with average annual price as low as $US43.7 a barrel,
or down 16.5% against the previous year, whereas average
price of Urals had fallen to US$42.1 a barrel. Despite low
oil prices, production of oil and condensate in the Russian
Federation rose as high as 2.6% against 2015, up to 547.5
mln tonnes. Crude oil exports to the far abroad countries in-
creased by 5.1%.

A significant development of the year was the OPEC deci-
sion to cut production by 1.2 mln barrels to 32.5 mln barrels
per day beginning from January 2017. The deal was backed
up by the major oil-producing countries (Saudi Arabia, Iraq
and Qatar). The non-OPEC countries that joined the global
deal agreed to cut production by 0.6 mln barrels per day.
Russia expressed its readiness to curb its production by 300
thousand barrels per day in a phased manner according to
schedule. Under this deal, OPEC will have to cut its produ-
citon by 66% with the largest contribution in output curbs
that will made by Saudi Arabia (0.5 mln barrels per day), Iraq
(0.2 mln barrels per day) and UAE (0.1 mln barrels per day).
Among the non-OPEC countries, the Russian oil produc-
ers have pledged the maximum oil output reductions. The
concerted actions of oil producing countries boosted crude
oil prices amidst expected contraction of crude supply and
progressive market balancing. In December of 2016, Brent
crude oil quotes rose to a peak in the year, exceeding US$55
a barrel. The yearly average rubles/US dollar exchange rate
that was affected by the crude price trends weakened by 9%
to 67.0 rubles/US dollar, which favoured the oil prices in ru-
ble equivalent. In the first half of 2017, the joint output curbs
made it possible to balance the global oil market.

In 2016, the primary crude oil processing in Russia fell by
1.2% against 2015, amounting to 279.4 mln tonnes as a re-
sult of modernization of production facilities and improved
quality structure of the output. The main trend of the past
year in refining has been a significant decrease in the output
and proportion of dark oil products in product lines of the
Russian refineries. In 2016 fuel oil output was down 20% to
51.6 mln tonnes. In 2016 motor gasoline output rose as high
as 2.5% against 2015 amounting to 39.9 mln tonnes. Diesel
fuel output totaled 76.3 mln tonnes being in line with 2015.
Jet kerosene was produced 9.6 mln tonnes in 2016 down
1.1% against last year.

BRENT AND URALS OIL PRICE TRENDS FOR 2016,
RUB PER BBL

Brent Crude Oil

Urals Crude Oil

60
Rub.

DEMAND AND SUPPLY BALANCE IN OIL MARKET IN
2015-2016, MLN BBL PER DAY

2016

0.38

Other

-0.32

OPEC Produciton Growth

+1.18

US Production Decline

-0.47

Demand growth

-1.62

2015

Deficit

Surplus

1.61

Data source: International Energy Agency

USD AND EUR EXCHANGE RATE TREND FOR 2016

100
rubles

US Dollar

Euro

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PRIMARY DRIVERS THAT INFLUENCED THE
GLOBAL OIL MARKET IN 2016

1. Stable growth of consumption
2. Oil production decline in US
3. Oil production growth in Iran
4. Agreement of oil producers to cut oil production

KEY ANTICIPATED FACTORS THAT MAY ADVERSELY
AFFECT THE GROWTH PACE OF THE COMPANY IN
THE COMING YEARS

The main external force that will have an impact on the op-
erations of the Company is crude oil price trends.

With increased energy efficiency of the global economy, lag-
ging working-age population and lowered total consumption
while increasing oil production efficiency, the world has been
challenged with a structural crisis of crude overproduction.
A possibility to recover from the crisis in the short run is hin-
dered by the following fundamental factors:
1. Shale oil production growth in North America;
2. Conventional oil production growth in the Middle East;
3. Economic slowdown in India and China (hence, oil de-

mand contraction);

4. Decrease in able-bodied population growth rates (15-
64 years of age) all over the world - the main engine of
economic growth

5. Global energy efficiency growth and development of al-

ternative energy sources.

The oil market is expected to start balancing (oil demand ex-
ceeding its produciton output) no sooner than the beginning of
2018, as the commercial oil reserves, that have been stocked
up over the last three years, start running out of slowly. Accord-
ingly, taking into consideration all the above-mentioned con-
straints the market will be very likely exposed to the short-term
hikes in oil prices followed by price slump and stabilization at
30 to 50 dollars a barrel until a new market equilibrium is found.

Another important driver for global oil prices is exchange-trad-
ed oil futures. At the end of 2016, fluctuations in the number of
open positions were gaining a higher amplitude, which could
lead to another significant downward price movements.

The successful development of the TATNEFT business and
all the oil industry cannot be achieved without stable taxation
rules. Given the raw material base specificity, it is the priority for
the Company to continue the incentive tax treatments for the
depleted fields as well as for the super viscous oil fields.

Another factor that could adversely affect the Tatneft develop-
ment pace in the near future may be a possibility of detaching a
high-sulfurous crude stream towards the Ust-Luga port, where
part of the Company’s export volumes may be directed to,
which is considered by the Ministry of Energy.

The main uncertainty for the refining block of the Company is the
changing Russian legislation on taxation of crude oil and petro-
leum product exports. There is a risk related to changes in tax leg-
islation (the “large tax manoeuvre” adjustment) and alignment of
export duties on crude oil and petroleum products (including light
oil products), which complicates efficient planning of long-term
investment projects in the Refinery, and increases the payback
period (due to the increased discount rate).

Currently, the Working Group including the TATNEFT repre-
sentatives that was set up by the Ministry of Energy monitors
the crude oil quality in the Transneft’s trunk oil pipeline system
and the final decision on the feasibility of this project will be ac-
cepted not until the second half of 2017. The lower quality feed-
stock in Ust-Luga (about 2.5% of sulfur content) will inevitably
lead to the Urals price discount, which may cause a decrease in
the Company’s export earnings, and, as a consequence, a de-
crease in tax proceeds to the budgets of the Russian Federa-
tion and the Republic of Tatarstan. In order to avoid such losses
TATNEFT was reviewing a number of scenarios to respond to
possible implementation of this initiative liaising with respon-
sible state authorities and other interested parties in order to
completely eliminate or minimize possible losses.

WORLD OIL CONSUMPTION, MLN. BARRELS PER DAY

2021

2016

2011

2006

2001

Data source: International Energy Agency

102,8

96,6

89,6

85,7

77,3

28.7 mln tonnes - Total oil production for TATNEFT Group in 2016

In the reporting year, in the context of declining demand
and low hydrocarbon prices, currency market volatility, the
Company took well-targeted actions to strengthen financial
stability and operating efficiency for the long term.

While maintaining continuity with previous stages of
development, the Strategy 2025 focuses on creating a
high added value for the share capital and doubling the
shareholder value of the Company.

The targets have been set to secure a high-quality resource
and production and engineering base, financial discipline,
risk control, effective cash flow management and a sound
investment policy.

As a result of our committed activities during the year
under report we managed to increase the total value of the
Company’s consolidated assets by 295.9 bln rubles up to
1094.6 bln rubles.

In the difficult circumstances of the volatile industry market
conditions and unstable global macroeconomics in general,
we have made a lot of efforts to accomplish the detailed
analysis and assessment of our potential, and we identified
key challenges and growth points for the business segments
of the Company.

TOTAL VALUE OF THE COMPANY’S
CONSOLIDATED ASSETS, BLN RUBLES

2016

2015

2014

1094.6

+37.0%

798.7

732.9

UNIFORM EXTERNAL SCENARIO
CONDITIONS FOR ALL BUSINESSES
OF THE TATNEFT GROUP

Analysis and monitoring of potential
changes in market conditions at the
global and country levels.

The strategy is designed in three
scenarios with assessing the risks
of missing the targets and failing to
meet the requirements for additional
scenario initiatives.

INTEGRATED FINANCIAL
AND ECONOMIC MODEL

The plans for all business activities are
interlinked and synchronized.

Business contributions to the
Company’s value are evaluated
on a fair market basis.

TATNEFT GROUP
CORPORATE
STRATEGY
UP TO 2025

TATNEFT GROUP BUSINESS STRATEGIES

The Group’s business portfolio was analyzed
(SWOT, value chain).

The choice of strategy was based on
an analysis of alternative development options.

The key activities were developed for each business-
block to implement the strategy objectives.

ROAD MAPS

A high level plan of activities of the Corporate Centre
was formed to ensure the strategy implementation.

OUR STRATEGY IS BUILT ON FUNDAMENTAL BUSINESS BASICS AND EFFECTIVE
APPROACHES TO MANAGING ALL kINDS OF CORPORATE RESOURCES

The internal strategic potential of the Company is based
on the development and the consolidation of the vertical
integration balance of the business model, high-quality
asset addition, sustainable use of natural resources and
corporate social responsibility.

The Company’s management gives a high profile for
improving the corporate governance and the interaction
mechanisms of the Corporate center with the business
segments in line with strategic objectives. In 2016, the
Company’s businesses were formalized in the specialized
blocks, the Development and Production Block and the
Exploration Block underwent reorganizations, and the
operating models were updated. As part of the improved
reservoir management efficiency and
improved well
interventions the relevant competencies are combined
in the specialized Centers. The work continued to build
the complex of operating divisions based on the Business
Servicing Center to provide a centralized support to the
business-blocks of the Company.

We use «road maps» for each segment of our business
taking into account changes in the market conditions and
price volatility of the industry market. The managers have
the task to develop business and functional strategies.

A balanced approach to investment program and continuous
monitoring of their effectiveness, control of key operational
factors enables us to monitor and minimize risks in both the
short and long term periods.

The Company keeps improving the efficiency of all operating
processes through most advanced technologies, profitability
control, benchmarking tools, qualitative development of
goods and services procurement mechanisms.

The projects, which are currently in its active phase,
include the KPI system development and implementation
for decision making personnel, improving management
business processes, annual and medium-term business
planning, further adjustment of the management accounting
and monitoring system.

STRATEGY IMPLEMENTATION
TOOLS 2025

Further adjustment
of the operational
accounting and
control system

System of key
performance
indicators

Corporate Strategy
up to 2025

Road maps
by directions

Risk control

Implemented

Pending items

Further adjustment
of the Group
management
organizational structure

Improved planning
systems for
1 and 3 years

Functional Strategies
of the Group

FINANCIAL POLICY

In 2016, the Company carried out its investment activities in accordance with its strategic development plans and current
priorities in meeting the production and social objectives. The Corporate investment policy is based on the principles of
maximizing investment efficiency and increasing profitability of each of the Company’s business activities.

INVESTMENT PORTFOLIO STRUCTURE FOR THE PERIOD
OF 2010 THROUGH 2016.

In 2016, the Company’s investments amounted to 97 230 mln rubles and 567 720 mln rubles for the period of 2010 through 2016.

MAIN INVESTMENT ACTIVITIES DURING 2010 THROUGH 2016, MLN RUBLES

Investment program

Exploration and Production

-Tatneft within Republic of Tatarstan

-TATNEFT and subsidiaries within Russia

- Foreign projects

SVO field development

Crude oil and gas refining

Retail distribution network of fuel filling stations

Heat and Power Generation

Petrochemical Complex

Machinery

Service Subsidiaries

Social sphere

TOTAL

2016

54 175

29 609

3 891

240

20 435

36 071

791

2 908

1 553

700

1 017

97 230

2010 - 2016

258 369

177 688

18 307

6 611

55 763

251 179

11 961

14 547

10 079

617

14 802

6 167

567 720

TOTAL INVESTMENT FOR TATNEFT GROUP,
BLN RUBLES

2016

2015

2014

97.23

97.22

+0.01%

68.99

3.0%

1.0%

3.2%

2.6%

1.1%

6.6%

37.1%

2016

55.7%

2010-2016

45.5%

44.2%

Exploration and
Production

2016

2010-2016

55.7%

45.5%

Crude oil and gas refining

37.1%

44.2%

Development of
petrochemical complex,
retail business, machinery
and service subsidiaries

3.2%

6.6%

Thermal power
development

Social projects

3.0%

2.6%

1.0%

1.1%

The corporate policy priorities in financial management are
focused on ensuring financing of the Company’s operational,
investment and social activities as well as efficient use of
financial resources.

All the payment obligations for work, services, delivered
goods, taxes and fees to the PJSC TATNEFT extra-budgetary
funds were promptly and fully fulfilled.

In 2016, The Company made several foreign currency
hedging transactions using a currency forward.

The deals closed yielded the revenue which compensated
for the USD exchange rate depreciation in the given period.
In 2016, in order to execute the TATNEFT Group’s treasury
operations subject to efficient use of current liquidity ratio
and minimization of operating risks the Corporate Finance
Center of the TATNEFT Group was created. There are
eleven (11) companies of the Group operating in the single
treasury. The work was completed to optimize the number of
settlement accounts and reduce the commission expenses
of the TATNEFT Group with regard to banking services. The
liquidity functionality centralization made it possible to cover
the cash gaps of the entities without external borrowing,
earn additional revenues through optimizing the amounts
and timing of the free cash allocation and to reduce the bank
guarantees commission charges.

Over 2016, the bank deposits with the temporarily disposable
monetary resources placed on and the interests accrued on
the PJSC TATNEFT account balances generated the income
in excess of 4 bln rubles.

A well-balanced policy of the Company enables it to operate
amid repaying the borrowed loans. In 2016, the loans were
repaid in the amount of $32.9 million US dollars. In 2017, the
debts owed to banking institutions are expected to be fully
repaid.

For the best use of funds the Finance Office fulfilled a great
deal of work in optimizing the settlements with counterparties.
This work will be done in the future. In order to reduce the
Company’s working capital diversion and to expedite the
settlement payments with permanent counterparties the
cross liabilities are discharged through the Mutual Liability
Offset Centre. The settlements made through the Mutual
Liability Offset Centre amounted to over 25.2 bln rubles.

BUDGET PLANNING SYSTEM

The 2016 PJSC TATNEFT balanced cash flow budget had
been executed. The Company’s budget structure comprises
14 Control and Responsibility Centers (CRC). Each CRC
headed by Deputy General Director or the Company’s
Department Head oversees the respective business activity
and manages its funding as well as is responsible for a
proper and efficient use of funds.

FINANCIAL RESULTS

At the end of 2016, the consolidated revenue increased to 580.1
bln rubles exceeding the 2015 level by 5.0%. The free cash flow
amounted to 45.7 bln rubles.

According to the results of the year under report the net profit of
the Group’s shareholders amounted to 107.4 bln rubles that was
up 8.5 bln rubles or 8.6% as compared with 2015.

The EBITDA growth against the last year was 7% reaching 166.6
bln rubles in absolute value. EBITDA is not a financial indicator.
However, we believe that this indicator provides investors with
useful information, since it reflects the effectiveness of our
activities including our ability to finance capital expenditure,
make investments, raise and maintain credit and loans. It is also
used by analysts to assess and forecast the efficiency and value
of oil and gas companies. Over the recent period the Company’s
EBITDA has shown a strong dynamic growth rate.

The Company’s consolidated equity capital grew by 51.2 bln
rubles in the reporting year and was valued at 708.9 bln rubles
at the end of 2016.

The net assets of the parent company increased by 14.5% to
624.5 bln rubles during the reporting period. In the reporting
year, PJSC TATNEFT generated 486 bln rubles in sales revenue
(excluding VAT, excise and export duties), which is above the
2015 target by 5%; the net profit amounted to 104.8 bln rubles.
This reflects improved asset and capital profitability ratios.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYOPERATIONS

RESOURCE BASE

The hydrocarbon reserve life index takes the Company to the
leading positions not only in Russia but worldwide as well. The
proved reserves of the Company make it possible to sustain
the current production for more than 30 years and including
the probable reserves – 43 years. As at 1 January 2017
according to the Miller and Lents’ independent evaluation the
Company’s proved reserves were estimated at 6213.737 mln
barrels (872.348 mln tonnes of oil).

Most of the reserves are conventional and historically located
within Tatarstan, where our main production volumes are
concentrated.

Creating the long-term high-quality producing asset portfolio,
the Company, concurrently with producing the historical oil
fields within the Republic of Tatarstan as well as developing
the ultra-viscous oil reservoirs, has been expanding its
geographic reach carrying out its oil search and exploration
operations within the licensed areas in the Republic of
Kalmykia, Orenburg, Samara and Ulyanovsk Regions, Nenets
Autonomous District and beyond the Russian Federation.

Our plans are aimed at expanding and diversifying the portfolio
of hydrocarbon resources, including outside Tatarstan and
Russia through access to oil and gas reserves, including
through establishing strategic alliances.

The activities are underway to define the Domanikovian oil
production prospects.

The strategic and current goals of operations are
focused on strengthening the resource base, replacing
hydrocarbon production with commercial reserves,
creating a raw material base and efficient bringing
into development, sustaining production
reserves
at mature fields through application of
innovative
technology solutions and ensuring planned rates of
production growth while reducing specific operating
and capital expenditures.

The Company steadily offsets its oil production by oil reserves
addition. The Company has been implementing the programs
targeted at a rapid building up its producing assets and their
diversification including exploration activities using advanced
oil prospecting techniques as well as ensuring increased
efficiency and improved practices to develop producing fields
with cost control.

109%

Current proved oil reserve
replacement rate 109%

TATNEFT GROUP RESOURCE POTENTIAL

TATNEFT Group Resource Potential

Unit of measure

2012

2013

2014

2015

2016

Proved oil reseves, incl.

Probable oil reserves

Possible oil reserves

unconventional oil reserves

mln tonnes

869.2

313.6

30.9

22.9

847.3

310.5

33.8

28.0

851.5

323.7

28.9

20.3

869.8

346.4

55.1

41.1

872.3

353.5

55.4

59.8

LICENSING

The hydrocarbon exploration and production operations
are carried out under the Russian Federation legislation in
compliance with license for the right to use subsurface mineral
resources. As at the end of 2016, the TATNEFT Group’s
license stock incorporated 96 licenses granting the mineral
exploration and production right, geological survey right,
including prospecting and appraisal of mineral deposits and
geological survey right, including prospecting and appraisal
of mineral deposits, mineral exploration and production within
the Russian Federation.

In Tatarstan, the Company holds five (5) geological survey
licenses for exploration areas including prospecting and
appraisal of mineral deposits, mineral exploration and
production in the north-eastern part of the Republic of
Tatarstan on the western and northern slopes of the South
Tatar Arch, on the south-eastern slope of the North Tatar
Arch, on the eastern flank of the Melekessky Depression.
In addition, one (1) Geological survey license including
prospecting and appraisal of mineral deposits, mineral
exploration and production for the Apastovsky area located
in the west of the Republic of Tatarstan. Also, the Company
holds one (1) geological prospecting license to explore for
and appraise hydrocarbons within the Agbyazovsky area
located in west of Tatarstan. In 2016, two new licenses were
granted for testing sites particularly the geological survey
license
including prospecting and appraisal of mineral
deposits, mineral exploration and production in the Elaursky
area for the Bitumen Testing Site and another geological
survey license including prospecting and appraisal of mineral
deposits, mineral exploration and production in the Bulgarsky
site for the Domanik Testing Site.

LICENSE STOCK AS OF DECEMBER 31, 2011,
LICENSE COUNT

Total

Development, exploration and
production of minerals

Geological survey including
prospecting and assessment of
mineral deposits

«на геологическое изучение, включа-
ющее поиск и оценку месторожде-
ний полезных ископаемых, разведку
и добычу полезных ископаемых»

2014

2015

2016

ExPLORATION

In the reporting year, eight (8) structures were brought
into deep drilling, and twenty-seven (27) structures were
prepared for deep drilling.

The Company’s exploration drilling (across the Group)
accounted for 38.8 thous. m in the reporting year; the 2D
and 3D seismic data were acquired for 135 running km and
717 sq. km, respectively. The production drilling meterage
accross the Group exceeded 900 thous. m.

In order to discover hydrocarbon fields, along with seismic,
the Company applies the following technologies:

• predicting hydrocarbon prospects using the artificial
• defining leads using field seismic and geochemical

intelligence techniques;

methods using a complex probability parameter (CPP)
for hydrocarbon potential;

passive hydrocarbon adsorption.

• Geochemical survey to search for oil and gas utilizing
• low-frequency seismic sounding (LSS);
• GTO LS geological-geophysical technology to optimize
• electromagnetic sounding (EMS);
• “Stratimegic” new software package for 3D seismic data

selection of well drilling locations;

processing.

NMR tomographic logging tool is used to identify shallow
reservoirs saturated with ultra-viscous oil.

TATNEFT GROUP OIL PRODUCTION,
MLN TONNES

OIL PRODUCTION BY LARGEST FIELDS WITHIN
REPUBLIC OF TATARSTAN IN 2016

Pursuing its Strategy, the Company was ramping up its
crude oil production in the reporting year. In 2016, the total
production across the Group grew by 5.3% against the last
year and amounted to 28.7 million tons of oil. It was the
highest oil production level achieved over the last twenty-four
24 years. Over a long period since 2000, TATNEFT has been
the only company among other Russian vertically integrated
oil companies (VIOC) which avoided oil production decrease
despite the fact that most of our oil fields are developed at
mature stage.

In 2016, the Company’s operating well stock included 22
626 oil wells (about 13% in the total Russian structure), and
515 new producing wells were put into operation during the
reporting year.

Average daily production rate across the Group was 9.1 tonnes
per day, average daily production rate of active producing wells
was 4.1 tonnes per day. Average recovery factor across the
Company was > 0.43.

2016

2015

2014

28.7

27.2

26.5

+5.3%

OIL PRODUCTION ACROSS GROUP, MLN TONNES

Enterprises

PJSC TATNEFT

Oil companies within RF, controlled
by the PJSC TATNEFT, including

OOO Tatneft-Samara

OOO Tatneft-Severny

ZAO Severgaznefteprom

2014

2015

2016

26.223

26.927

28.333

0.307

0.322

0.353

0.287

0.020

0.304

0.018

0.338

0.015

0.00017

TATNEFT Group

26.529 27.249 28.686

257
thous.
tonnes

KAZAN

Bonduzhskoye

Pervomaiskoye

NABEREZHNYE CHELNY

Romashkinskoye

Novo-Yelhovskoye

ALMETYEVSK

Sabanchinskoye

Bavlinskoye

2 814
thous. tonnes

339
thous. tonnes

15 888
thous.
tonnes

546
thous. tonnes

1 268
thous. tonnes

TATNEFT GROUP OIL PRODUCTION,
THOUS. BBLS

GEOGRAPHIC REACH IN EXPLORATION
AND PRODUCTION OUTSIDE REPUBLIC
OF TATARSTAN

1.8

mln tonnes

Total production of super viscous
oil (SVO) at the end of 2016 since
pilot development start

2016

2015

2014

204.3

194.1

189.0

+5.3%

The Company’s investments in the Development and
Production Business-Block amounted to 54.2 bln
rubles, including 20.4 bln rubles invested in the SVO
development, in 2016.

NEW PRODUCING WELL COMMISSIONING, WELLS

2016

2015

2014

352

255

515

+46.6%

AVERAGE DAILY OIL PRODUCTION RATE, THOUS.
BBLS PER DAY

2016

2015

2014

558.3

531.8

517.7

+5.0%

TATNEFT GROUP GAS PRODUCTION, MLN M3

2016

2015

2014

997.8

959.3

929.8

+4.0%

WELL STOCK AS OF 1.01.2017

Well Category

Active producing well stock

Inactive producing well stock

Testing or waiting on testing

producing wells

Operating producing well stock

Well Count

20 460

2 142

22 626

AVERAGE DAILY GAS PRODUCTION RATE,
THOUS. BBLS PER DAY

2016

2015

2014

+3.2%

16.0

15.5

15.0

ZAO Severgaznefteprom,
Nenets AD

0.17 thous. tonnes

OOO Tatneft-Samara
Samara Region

337.8 thous. tonnes

OOO Tatneft-Severny
Orenburg Region

15.4 thous. tonnes

Republic of Tatarstan

Total
for Subsidiaries

353.4 thous. tonnes

Since 2017, subject to the agreement between Russia
and OPEC to cut down crude oil production, the
Company has taken the commitments to reduce its
oil production in the short-term period. The Company
takes a balanced approach to this step action,
thoroughly analyzing all economic and technological
aspects to ensure stable operation of our fields as well
as to sustain production balance in the conditions of the
current crude oil output constraints.

SVO FIELD DEVELOPMENT

The Company continued to successfully develop the super
viscous oil (SVO) fields (Sheshminsky horizon) considering that
as a strategic priority in strengthening and diversifying its
resource base. Over the reporting period the SVO production
output totaled 843 thous.tonnes. As compared with the last year
the SVO production more than doubled in 2016. By the end of
the year the daily production had reached 3 361 tonnes. Overall,
since the commercial field development start, production had
reached 1 million 781.7 thousand tonnes. Currently, seven (7)
super viscous oil deposits of Sheshminsky horizon (four (4)
deposits of the Ashalchinsky field, one (1) deposit of Languevsky
field, one (1) deposit of the Karmalinsky field and one (1) deposit
of Lower Karmalinsky field) are being developed.

As at 01.01.2017 there were 601 horizontal wells drilled
(including 159 wells in 2016) and 1 782 appraisal wells drilled
(including 185 wells in 2016) in the SVO fields. 27 Cyclic-Steam
Stimulation (CSS) wells and 213 Steam Assisted Gravity
Drainage (SAGD) wells were in operation. 157 wells were
operated in steam injection, including 220 steam injecting
wells,17 CSS wells and 36 new pair wells and CSS wells
(formation primary heating up).

The Company gains savings from the reduced tax rate for super
viscous oil production in some of its fields, as well as other
certain tax incentives related to the production and sales of
super viscous oil.

The super viscous oil is treated with the process of «hard»
thermo-chemical heat dehydration at the heating temperature
of 90° C using coalescers and electrical dehydrators which
ensures the super viscous oil upgrading to the 1-st quality group
while reducing capital costs for sedimentation equipment.

SUPER VISCOUS OIL PRODUCTION, THOUS. TONNES

2016

2015

2014

376

237

843

+124.2%

A significant result of the successful cost-optimization activities
as part of the development strategy for the exploration
and production business-segment in the reporting year as
compared with 2015 became lowering the cost to produce a
barrel of oil by 4.2%.

The Company’s production costs (for the Group) consist of
oil production costs incurred by the Company’s divisions and
subsidiaries producing oil and gas, including costs associated
with operated services, maintenance and insurance of equipment
facilities, wages, formation stimulation costs to improve oil
recovery, fuel and electric power costs, goods and materials used
in production of crude oil, and other similar costs.

The costs
incurred by the oil producing divisions and
subsidiaries of the Company associated with the purchase
of goods and services that are not related to the main line of
business activity, as well as changes to oil and petroleum
product reserves are excluded from oil production costs and
are included in other operating expenses.

AVERAGE OIL PRODUCTION COSTS
(ACROSS THE GROUP)

2016

2015

258.6 rubles per barrel

269.9 rubles per barrel

-4.2%

The production growth was attained mainly thanks to the
ongoing improved oil production and enhanced oil recovery
technologies.

The tertiary and hydrodynamic EOR production accounted
for more than 40% of the Company’s total oil output.

Oil field exploration and production
Petroleum prospects and leads are predicted by artificial
intelligence, field seismic and geochemical methods using
a complex probability parameter (CPP) for hydrocarbon
potential;

Geochemical survey to search for oil and gas utilizes passive
hydrocarbon adsorption, low-frequency seismic sounding
(LSS), geological-geophysical
to optimize
selection of well drilling locations (GTO LS), electromagnetic
sounding (EMS), “Stratimegic” new software package for
3D seismic data processing. NMR tomographic logging tool
is used to identify shallow reservoirs saturated with ultra-
viscous oil.

technology

Reservoir characterization, modeling and simulation
for development targets based on updated estimate of
remaining reserves is the primary method to identify residual
oil reserves for mature fields, which enable with the highest
degree of accuracy to analyze and predict areas with
unlocked reserves and calculate efficiency rate of planned
activities.

Drilling
Application of new drilling technologies continues to be
a matter of great consideration. In order to improve well
cementing quality the Company utilize the silicate baths
within the productive intervals as well as using G-grade
cement and stage cementing collars. The horizontal and
multilateral completions are constructed to achieve prolific
oil flow rates.

In 2016, 131 horizontal wells (horizontals) and 4 multilateral
wells (multilaterals) were drilled with the oil production of
156.02 thousand tonnes. Altogether, since the beginning of
the program the count of horizontals and multilaterals had
reached 967 and 115 wells, respectively.

In 2016, the tertiary EOR was the key driver in oil production,
with the additional production amounting to 7.7 million
tonnes (113.1 per cent of 2015), which represents more
than 27 per cent of total production.

274 slim hole wells (slim holes) were brought into production,
of which 269 producers were placed into operation with the
average daily production rate of 6.2 tonnes per day. The
cumulative oil production was 181.8 thous. tonnes.

Along with conventional methods used to prospect and
develop oil fields new technologies are applied which
enhance productivity and profitability of all oil and gas
production processes.

ASSOCIATED PETROLEUM GAS UTILIzATION RATE

The Company’s associated petroleum gas (APG) utilization
rate exceeded 96% in the reporting year. This is one of the
highest rate throughout the industry against 95% regulatory
value set by the Russian Federation government.

The Company intends to bring this level to 98% through the
activities carried out under the project «Gas Gathering Network
from NGDU Yamashneft and NGDU Yelkhovneft facilities».

APG is a valuable feedstock for production of a wide range of
gas products of the highest quality, which are further used in
petrochemicals and power generation.

ASSOCIATED PETROLEUM GAS
UTILIzATION RATE, %

2016

2015

2014

96.44

95.17

+1.2 pp

Well Workovers
In 2016, well servicing operations performed in the Company’s
licensed areas within and outside of the Republic of Tatarstan
amounted to 10 198 and 71 jobs, respectively, with the
workovers performed on 2 287 wells outside Tatarstan. 790
wells were hydrofractured.

Hydraulic fracturing is an effective technology for oil well
stimulation and well injection capacity increase. In total, 4 809
fracs had been performed since the frac method introduction.
In 2016, 790 frac jobs were done with 54 new wells fractured
immediately after drilling. As a result of fracturing the flow rate
increased by 4.5 tonnes per day. The incremental oil production
amounted to more than 13 mln tonnes.

APRS-40N Workover Rigs are designed to perform workover
jobs on ultra-viscous oil wells: running tubing for steam
injection (1 and 2 lifting string assemblies), installation of
downhole pumps (ESP and PCP units), conversion of CSS
wells to production/steam
injection, well servicing (ESP
replacement, preparing for well logging). These workover rigs
were purchased as part of import substitution program (as
substitute for Canadian workover rigs К-54).

The Company keeps showing one of the best Mean Time
Between Repairs (MBTR) performance for well operations
among large companies in Russia’s oil industry.

The Mean Time Between Repair for well operation was 1
074 days. This high performance was attained thanks to
implementing highly efficient and innovative technologies
to provide high-quality and timely maintenance of oilfield
equipment.

In order to increase the production and sales of highly
competitive finished goods the Company is strengthening
its own oil refining business-segment based on the TANECO
Complex in Nizhnekamsk. This is the key strategic downstream
project of the Company. The success of the TANECO project
has solidly consolidated the Company’s strategic positions on
the petroleum product market in Russia. A significant event of
the year was the delayed coker unit commissioning, enabling
to enhance the petroleum feedstock conversion rate at the
TANECO refinery to 99.2% by the end of the year (the average
conversion depth in 2016 was 84.7%). The Nelson index was
7.12 points in 2016. After the Complex has been put into
commission on a full scale, the Nelson index will be no less
than 12 which will ensure shifting to the maximum output of
light oil products. In the reporting year, the TANECO Refinery
processed more than 8.7 mln tonnes of petroleum feedstock,
produced 9.1 mln tonnes of petroleum products, including
1.6 mln tonnes of Euro-5 diesel fuel and more than 130 thous.
tonnes of jet kerosene.

In 2016, the following new oil products were put into production
at the TANECO Refinery:

STO 78689379-02-2016;

STO 78689379-03-2016;

• Distillate of sulfurous gas condensate as per
• Anode grade petroleum coke as per
• Coking naphtha as per STO 00151638-006-2015;
• Light and heavy coker gasoils as per
• DTf (Diesel technology fraction) as per

TU 38.401-58-423-2015;

STO 78689379-04-2016.

All the international and Russian environmental standards
and regulations are complied with in the course of the
refinery construction process. In particular, the hydrogen
sulfide that is recovered during crude oil refining process
runs to the sulfur regeneration unit, the sulphur recovery
rate reaches 99.6%.

The investments of the Company in the TANECO
Complex construction exceeded 34 bln. rubles in 2016.

In December 2016 the TANECO Complex became the
winner of the Republican competition «Ecoleader»
in
the nominated category «Oil Producing and
Petrochemical Industry».

In 2016, the TANECO Refinery products were awarded
in the Russian competitions:

• «All-Russian Mark (III Millennium). Quality Mark of

XXI Century» - the products of the enterprise (TC-
1Jet Fuel , TATNEFT VHVI -4 and HVI-2 Isoparaffinic
Base Oils, EURO Diesel fuel) were highly appraised
by the expert commission and were awarded with
the Golden Quality Marks «All-Russian Mark (III
Millennium). Quality Mark of XXI Century»;

• Jet A-1 Aviation Fuel produced by the TANECO

Refinery was highly appreised at the International
Air Transport Association (IATA) Forum in Prague.
The management of the IATA Working Group on
the basis of the submitted materials and the British
Petroleum report that had been received earlier,
sent the letter confirmation to PJSC TATNEFT with
regard to the possibility of the Jet A-1 Aviation Fuel
export sales. PJSC TATNEFT became the first oil
company in Russia to hold such a certificate;

• TS-1 aviation fuel for

jet engines became a
prize winner of the «Best Goods and Services
of Tatarstan» and «100 Best Goods of Russia»
competitions;

• By the RF Government Decision of 15 November

2016, No. 1190 the JSC TANECO was awarded
with
for
the 2016 RF Government Prize
achieving the significant results in the quality of
products and services, ensuring their safety,
and for implementation of high effective quality
management techniques.

TANECO REFINERY PROCESS UNIT RATED AND ACHIEVED CAPACITIES

Process Unit

CDU-VDU-7

Naphtha Stabilization Unit (s.1300)

Visbreaker

Amine Regeneration Unit:

LPG amine scrubbing assembly

Fuel gas amine scrubbing assembly - Hydrogen-bearing gas scrubbing assembly

Hydrogen-bearing gas scrubbing assembly

Elemental Sulphur Recovery Unit

Hydro cracker unit

Hydrogen production unit

Lube base oil production unit

Delayed Coker Unit

Naphtha Splitter Stabilization Unit (s.1700)

Average daily gas production rate, thous. bbls per day

Rated capacity,
thous. tonnes per year

Achieved capacity,
thous. tonnes per year

7 000.0

1 101.6

2 400.0

170.5

121.6

35.9

139.4

2 900.0

99.77

250.0

2 000.0

600.0

15.0

8 710.1

1 321.8

1 039.4

93.8

141.9

24.7

81.8

2 974.6

87.9

246.9

947.6

167.5

16.0

PETROLEUM PRODUCT OUTPUT SINCE OPERATION START OF TANECO COMPLEX, TONNES

Primary feedstock for processing

431 642 7 018 741 7 622 920 8 520 904 8 658 594 8 710 075

40 962 877

2011

2012

2013

2014

2015

2016

Since start

Crude oil

Gas condensate

REFINED PETROLEUM PRODUCTS, TONNES

431 642 7 018 741 7 618 569 8 511 288 8 649 710 8 697 385

40 927 334

4 351

9 617

8 884

12 690

35 543

Derived from feedstock:

Natural Gas Liquids (LNGs)

Straight run gasoline

Stable natural gasoline

Diesel fuel

Commercial kerosene

Aviation Kerosene

Household furnace oil

Straight run kerosine-gasoil fraction

Low-viscosity marine fuel

Distillate of gas condensate middle (sulfurous), type I

Distillate of gas condensate middle (sulfurous), type III

DSf (Diesel technology fraction)

Vacuum gasoil/hydrotreated oil fuel/ lubricant
compound/unconverted hydrocracked residues

Process-derived export-grade fuel

Visbreaking naphtha

Coking naphtha

Heavy coker gasoil

Isoparaffinic base oil TATNEFT HVI-2

Isoparaffinic base oil TATNEFT VHVI-4

49 985

104 672

169 039

108 870

114 851

547 418

57 435

980 563

561 975

1 599 973

536 544 1 672 467 1 826 518 1 789 992

5 825 522

1 027 767 1 378 345 1 583 342

3 989 454

12 337

38 890

199 500

146 529

99 079

115 588 2 250 309

836 427

328 171

8 248

45 441

51 918

47 935

136 984

431 542

14 499 1 179 548 2 603 089 2 537 588

496 335

197 150

3 727 242

328 171

6 334 724

1 864 299

416 814

171 660

416 814

171 660

58 577 1 642 332 1 926 530

515 750

367 438

425 033

4 935 661

36 637

84 525

61 396

5 350

6 135

83 952

13 841

9 400

51 784

55 544

102 445

80 250

22 795

135 736

251 943

102 445

80 250

37 545

12 608

113 661

132 403

Fuel oil/visbreaking residue/vacuum tower bottoms

195 131 1 919 212 1 920 693 2 152 966 2 250 430 1 270 106

9 708 537

Hydrogen

B-grade anode petroleum coke

Sulphur

Hydrocarbon gas for furnaces

1 768

6 385

1 069

278 782

2 613

25 945

7 684

50 001

59 420

81 821

48 922

223 626

288 834

365 064

9 225

278 782

201 540

952 391

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

CRUDE OIL SALES

GROUP’S CRUDE OIL SALES, THOUS. TONNES

PETROLEUM PRODUCT SALES

The total sales of petroleum products to the domestic and
foreign markets in 2016 for the Tatneft Group amounted to
10.9 mln tonnes of petroleum products. 4.9 mln tonnes of
petroleum products were exported (as compared with 5.4 mln
tonnes in 2015). The total revenue from sales of petroleum
products in the reporting year amounted to 212.3 bln rubles
(excluding export duties and excises).

In 2016, the Delayed Coker Unit came on stream, which
resulted in a qualitatively new structure of petroleum product
production at the TANECO Complex facilities. Shifting to the full
refining of vacuum tower bottoms eliminated black oil fuel
realization. The output of middle distillates, naphtha and gases
was increased. The residual product such as coke was in
demand across the industry on the domestic market.

In 2016, there was a general decline in petroleum product
exports from Russia by 10 per cent to 156 million tonnes
against 2015 (172 mln tonnes). This is primarily related to the
output structure changes and fuel oil production reduction in
the Russian Federation. In 2016 the TATNEFT’s petroleum
product sales accounted for 2.8% of the total Russian export of
petroleum products (4.4 million tonnes).

All that led to overall growth in the petroleum product deliveries
to the domestic market.

The revenue net of taxes was affected by the increased duties
on the dark oil products up to 100% and excise indexation on
light products taken place since January 1 and April 1, 2016.

In the reporting year, crude oil sales totaled 22.1 million tonnes,
which was 10.8% more than the sales in 2015. The delivery
directions were distributed in the following ratio: far abroad
export - 55.8%; near abroad export - 5.1%; domestic market
deliveries - 39.1%. In 2016, the crude oil sale revenues
(excluding export duties) were up 10.7% to 298.1 bln rubles as
compared with 269,2 bln rubles in 2015. The crude production
growth led to higher crude oil sales across the Group.

In 2016 and 2015, The Group exported approximately 61% of
all crude oil sold. The Group transports crude oil for export
utilizing the services of the PJSC AK Transneft (Transneft), the
state monopoly and the operator of the Russian trunk oil
pipeline system. In 2016, The Company transported about
63% (46% in 2015) of all its oil for export through the Friendship
pipeline owned by Transneft (mainly to Poland, Germany and
Slovakia); 5% (14% in 2015) of exported oil was shipped
through the Russian Black Sea ports (mainly Novorossiysk)
and 32% (40% in 2015) of exported oil was shipped through
the Russian Baltic Sea ports (mainly Primorsk).

The export oil sale channel is significant for Russia. Over the
period from 2012 through 2016 oil exports increased from 240
mln tonnes to 255 mln tonnes, respectively. The TATNEFT’s
share in the Russian exports over 2012 to 2016 remained
almost the same at about 5 % level.

Crude oil deliveries to far abroad countries are a traditional
sales market for the Russian oil companies due to the industry-
wide balance of production and processing. For resources
over 2015 to 2016 the overall structure of oil supplies by
directions stayed balanced. Higher sales volumes resulted in
oil sales revenue growth, respectively. Fall in the world oil prices
in 2016 were offset by rise in the dollar exchange rate.

The ratio of oil sale revenue shares for 2015 to 2016 is Identical
to the share ratio of oil sales by directions, which confirms the
TATNEFT’s formed oil sales structure balance.

2016

2015

2014

22 117

19 959

18 024

+10.8%

SHARES OF CRUDE OIL SALES ACROSS
THE GROUP BY DELIVERY DIRECTIONS

2016

2015

2014

39.1%

5.1%

38.9%

6.6%

46.9%

3.9%

domestic market

CIS countries

export to far-abroad countries

55.8%

54.5%

49.2%

REVENUES FROM CRUDE OIL SALES EXCLUDING
EXPORT DUTIES AND EXCISE TAXES, BLN RUBLES

2016

2015

2014

298.1

269.2

+10.7%

212.1

SHARES OF REVENUES FROM CRUDE OIL SALES
EXCLUDING EXPORT DUTIES AND EXCISE TAXES BY
DELIVERY DIRECTIONS

2016

2015

2014

33.9%

5.5%

33.1%

7.2%

41.4%

4.2%

domestic market

CIS countries

export to far-abroad countries

CRUDE OIL DISTRIBUTION

Produced

Procured

Total

Realization (sales)

Processing and NGL recovery

Other (mainly oil residue increase)

Total

60.6%

59.7%

54.4%

Mln tonnes

28.7

2.8

31.4

22.1

9.2

0.1

31.4

GROUP’S PETROLEUM PRODUCT SALES,
THOUS. TONNES

2016

2015

2014

-1.8%

10 940

11 135

11 087

SHARE OF PETROLEUM PRODUCT SALES BY
DELIVERY DIRECTIONS

2016

2015

2014

55.1%

2.3%

51.4%

5.9%

55.0%

4.6%

42.6%

42.7%

40.4%

domestic market

CIS countries

export to far-abroad countries

SHARES OF REVENUES FROM PETROLEUM PRODUCT
SALES EXCLUDING EXPORT DUTIES AND EXCISE
TAXES, BLN RUBLES

2016

2015

2014

212.3

215.2

201.4

-1.3%

SHARES OF REVENUES FROM PETROLEUM PRODUCT
SALES EXCLUDING EXPORT DUTIES AND EXCISE
TAXES BY DELIVERY DIRECTIONS

2016

2015

2014

58.3%

3.3%

59.3%

7.2%

63.0%

6.0%

38.4%

33.5%

31.0%

domestic market

CIS countries

export to far-abroad countries

The supply structure optimization had a positive impact on
the financial results of the year

The Company’s retail distribution network, operating under
the TATNEFT corporate brand, at the end of 2016 included
689 fuel filling stations (FFS) and 16 tank farms, of which 567
FFS located in Russia, 105 FFS in Ukraine and 17 FFS in the
Republic of Belarus.

In 2016, three (3) new fuel stations were put into service within
the RF as well as one (1) LPG autogas station and two (2) fuel
stations were commissioned in the Republic of Belarus. Four
LPG terminals are also installed in the existing fuel stations.

It is the fourth largest fuel filling network in Russia encompassing
24 regions. About 50 % of the fuel stations are located in
the Central, Northwestern and Volga Federal Districts, the
Company’s main operating regions.

In accordance with the retail business development strategy,
the efforts are made to increase the fueling network profitability
by increasing the fuel supply attractiveness and marginality of
related services, modernizing the fuel filling station formats,
the effectiveness of marketing programs, and optimizing costs
through the disposal of low-efficiency fuel filling stations. As a
result of these actions the Company succeeded in scaling up
its retail sales despite the overall decline in retail petroleum
product consumption in Russia.

Total retail sales over the reporting year rose by 6% against
last year and amounted to 2.6 million tonnes with more than 97
bln rubles in revenues. The average daily sales per fuel station
were up 9 % against last year. As part of the non-fuel supply
development the income from related goods and services
was up 25 per cent as compared with 2015. High quality fuel
is guaranteed by a multi-level control system using advanced
technologies and software packages.

As at the end of 2016, 398 stores were operated at the
Company’s filling stations (2015 - 2424 stores) and 217
cafeterias (2015 - 53 cafeterias). Revenues from related goods
and services significantly increased as compared with 2015.

In 2016, high-potential roadside services provided at the
Company’s filling stations continued to develop (at the year-
end, the revenues from this business activity grew by 80% as
compared to 2015), and a chain of self-service car washes was
expanding as well.

The Company intends to develop its related business by
continually introducing new customer services to improve the
quality of service and increase revenue.

RETAIL SALES

2016

Ukraine

Belarus

Total

2015

Ukraine

Belarus

TOTAL

2014

Ukraine

Belarus

TOTAL

Qty., tonnes

Retail

Revenue,
thous. rubles

Qty., tonnes

Small wholesale

Revenue,
thous. rubles

Qty., tonnes

Total

Revenue,
thous. rubles

1 440 003

61 584 650

1 044 662

30 395 468

2 484 665

91 980 119

34 773

30 490

2 269 881

1 504 451

24 313

939

1 338 311

41 550

59 086

31 429

3 608 192

1 546 001

1 505 266

65 358 982

1 069 914

31 775 329

2 575 180

97 134 312

1 325 395

55 545 909

1 030 508

28 384 530

2 355 903

83 930 438

33 599

17 319

2 223 402

872 845

28 014

1 573 704

61 613

17 319

3 797 106

872 845

1 376 313

58 642 155

1 058 522

29 958 234

2 434 835

88 600 389

1 193 429

47 432 511

41 242

15 600

2 233 670

680 350

785 137

23 453

18 158 328

1 157 052

1 978 566

65 590 839

64 695

15 600

3 390 722

680 350

1 250 271

50 346 530

808 590

19 315 380

2 058 861

69 661 910

TATNEFT FUEL FILLING STATION COUNT, PCS.

RELATED SERVICES FACILITIES, PCS.

2016

2015

2014

-0.4%

689

692

667

2016

2015

2014

860

753

684

+107

PETROLEUM PRODUCT SALES THROUGH RETAIL
NETWORK OF TATNEFT FUELING COMPLEX,
MLN TONNES

RELATED SERVICE REVENUE SHARE IN TOTAL FUEL
FILLING STATIONS REVENUE

2016

2015

2014

2,575

2,435

+5.7%

2,059

2016

2015

2014

4,7%

+1.0 pp

3,7%

3,0%

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPETROCHEMICAL

TIRE PRODUCTION

The unstable economic situation on the domestic market in
2016 (locking of access to international credit resources,
reduction in purchasing power, deferred demand as a result
of continued economic crisis expectation) had affected the tire
market. Overall, the Russian tire market shrank by 3% against
the previous year. In spite all of that, the Company managed to
retain its key positions at last year’s level that was 20% in the
total domestic tire output. In the reporting year, the Company’s
Petrochemical Complex manufactured 11.5 mln tires, including
more than 1 mln all- steel tires (more than 55% of the total
Russian all-steel tire output). The Company’s tires are mainly
supplied on the domestic market and delivered to the largest
manufacturers of the automotive vehicles such as AvtoVAZ,
KAMAZ, UK GAZ Group, Volkswagen Group Rus, Ford Sollers
Holding, and others. During 2016, our tires were supplied to
30 automobile manufacturers. Strong competitive advantages
of the tire business are high-tech production facilities, wide
popularity and experience in operating the «KAMA» and «Viatti»
branded tires, optimal tire product line and range, development
of potential models based on cooperation with automakers, a
well-developed distribution network. Tire export supplies span
over 40 countries. In the reporting year, total tires sales made
about 12 mln pieces that was up 1.2% against 2015.

TIRE PRODUCTION IN RUSSIA

11 522

Tire output

Total for Russia, including:

From PJSC TATNEFT:

50 099

thous. pcs.

50 099

100%

11 522

23.0%

END MARKETS FOR PJSC TATNEFT’S TIRE
PRODUCTS, THOUS. PCS.

23%

64%

end market

11 955

10%

Aftermarket

Component
parts

Far abroad

CIS

total

thous.
pcs.

7 688

1 181

306

2 780

11 955

TIRES SALES, THOUS. PCS.

2016

2015

2014

+1.1%

11 955

11 820

12 083

POSITIONS OF PETROCHEMICAL COMPLEX (PCC)
PRODUCTS ON RUSSIAN TIRE MARKET BY SEPARATE
GROUPS

TIRES, TOTAL

8 869

43 709

Tire output

2014

2015

2016

PCC sales, thous. pcs.

9 447

9 164

8 869

Russian tire market, thous. pcs.

55 716

45 052

43 709

PCC's market share, %

17.0

20.3

PASSENGER CAR TIRES

Tire output

PCC Sales

5 707

32 096

17.8

thous. pcs.

5 707

Russian passenger car tire market

32 096

100%

CARBON BLACK PRODUCTION

In addition to the tire business the Company’s Petrochemical
Complex produced 118 thous. tonnes of carbon black. The
carbon black products are on a par with high quality foreign
counterparts and is highly demanded on both the internal
and export markets 28% sales came from exports with
the main markets of Turkey, Poland, Bulgaria and other
countries.

The carbon black export geography has expanded into
19 countries.

CARBON BLACK PRODUCTION, THOUS. TONNES

2016

2015

2014

+0.8%

118.0

117.1

120.5

CARBON BLACK SALES BY YEARS, TONNES

Carbon black sales

2014

2015

2016

In Russia

Export

Total sales

86 085

34 416

91 336

25 794

85 174

33 629

120 501

117 130

118 803

Revenue from the sales of products and services of the
Company’s Petrochemical Complex in 2016 totaled 44.7
bln rubles that was more than in 2015 for 6.5 bln rubles
(up 17.1%).

LCV TIRES

Tire output

PCC Sales

Russian LCV Tire Market

HCV TIRES

Tire output

PCC Sales

Russian HCV Tire Market

ALL STEEL TIRES

Tire output

PCC Sales

1 206

4 408

27.4

100%

1 057

2 075

50.9

100%

791

3 447

23.0

thous. pcs.

1 206

4 408

thous. pcs.

1 057

2 075

thous. pcs.

791

All Steel Tire Russian Market

3 447

100%

AGRICULTURAL AND INDUSTRIAL TIRES

Tire output

PCC Sales

Russian Agricultural And Industrial Tire
Market

107

1 683

thous. pcs.

107

6.4

1 683

100%

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

ELECTRIC POWER GENERATION,
BLN KWH

SPECIFIC FUEL CONSUMPTION FOR THERMAL
ENERGY SUPPLY, KGOE PER GCAL

2016

2015

2014

1.28

1.33

2.24

+74.9%

2016

2015

2014

+0.0%

160.89

161.41

HEAT SUPPLY, MLN GCAL

2016

2015

2014

3.95

+20.1%

3.29

3.93

SPECIFIC WATER CONSUMPTION FOR THERMAL
ENERGY GENERATION, M3 PER GCAL

2016

2015

2014

0.88

0.92

0.95

-4.3%

GENERATING ASSETS

In the reporting year, the Company continued to develop
its own heat and power complex implementing the program
to modernize its generating capacities using cutting-edge
technologies and advanced production equipment. This
is one of the key vectors of our strategy. The Complex
incorporates the following enterprises: Tatneft-Energosbyt
Management Company, Nizhnekamsk CHP and Almetyevsk
Heating Networks.

Tatneft-Energosbyt
Tatneft-Energosbyt is the PJSC TATNEFT’s wholly-owned
subsidiary.

The main activities of the subsidiary include: Purchase and
sale of electricity in the wholesale and retail electrical energy
and power markets, organization of supply of gaseous fuels
transmitted through gas distribution networks, as well as
carrying out other works and rendering other services which
are not prohibited and do not contradict the current legislation.

In 2016, Tatneft-Energosbyt supplied 5 034 646 thous
kWh energy to the TATNEFT Group’s enterprises, that was
338 842 thous. kWh or 7.2% more than in the same period
of last year. On average, the annual increase in electricity
consumption by the Tatneft Group’s enterprises (in physical
terms) was 7% over the period 2011 through 2016.

Our own generating assets that we have ensure reliability of
energy supply to oil refining and petrochemical capacities
of the Company as well as to the main production facilities
of the Nizhnekamsk industrial hub. The Nizhnekamsk CHP
modernization made it possible to increase power energy
supply and improve the operating efficiency of the plant.

Nizhnekamsk CHP
The «Construction of electric power generation facilities
using low-grade steam turbines in Nizhnekamsk» project
was completed in the first quarter of 2016.

Commissioning of the new power generation train enabled
to increase the installed electrical capacity of the station
to 730 MW, thanks to which the main production facilities
of the Nizhnekamsk industrial hub would be supplied with
electricity in the required quantities. The Nizhnekamsk CHP
modernization allows to generate some part of the power
energy in a condensing mode i.e. regardless of the amount
of heat supplied to heat consumers.

The reconstruction project was initiated to shift the power
boilers to burning of petroleum coke produced at the
TANECO refinery. This will partially substitute natural
gas with a new and cheaper fuel, thereby increasing the
competitiveness of the station on the electrical and thermal
energy market.

In 2016, the Company’s enterprises generated 2.24 bln kWh
and delivered 3.95 million Gcal of thermal energy.

Almetyevsk Heating Networks
The Company has been developing the Almetyevsk Heat
Networks (APTS) to supply heat to the regional infrastructure
facilities. «APTS» operates three mini-CHP plants with 24
MW of total electric output, where the MWM TCG2020V20
gas piston generating units (GPGU) with 2.0 MW of single
electric output are installed.

The launching mini-CHP plants in 2016 made it possible
to reduce the purchased electricity needed for the district
boiler houses No. 2,3,1 and 4 by 24.17 mln kWh per year. The
current programs are moving ahead with regard to capacity
optimization, cost control, energy saving and efficiency,
lean production and setting up of system monitoring of heat
losses in the heat supply networks.

In the context of constantly growing tariffs of natural
monopolies on energy resources, transportation services
and
increase of hydrocarbon production costs, the
Company makes the comprehensive efforts to create
maximum reserves for resource saving in all its business
activities, including energy saving.

Over the period from 2011 to 2016 as a result of the
measures taken under Resource Saving Program the fuel
and energy consumption relative to the base year was
reduced by 35.2% with more than 380 thous. tonnes of fuel
equivalent saved. This allowed to reduce the Company’s
need for fuel and energy resources by 6.3%

In 2011, the TATNEFT
initiated the resource-saving
program for the period up to 2020 was initiated as part of
which the energy saving program is being implemented.
In addition to the PJSC TATNEFT’s oil and gas production
divisions (NGDU) the service companies are involved in
the new program. Altogether 25 enterprises participate in
the program.

The goal of the energy saving program is saving the fuel
and energy resources through their rational use and
improved energy efficiency of the production. According
to the program, by 2016, energy savings are expected to
reach 8.6% (against baseline), and by 2020 - 13.5%.

The program implements the measures aimed at reducing
the absolute consumption of fuel and energy resources,
saving material and natural resources and cutting down
the Company’s energy costs.

LOWER FUEL AND ENERGY CONSUMPTION AGAINST
BASE YEAR

2016
2014

2015
2014

2014
2014

2013
2014

2012
2014

2011
2014

2010

35.2%

28.7%

20.1%

13.3%

8.6%

3.8%

basic consumption

FUEL AND ENERGY USE INFORMATION

Energy Resource

Electric power energy

Including industrial consumption

Thermal energy

Including industrial consumption

Gasoline

Diesel fuel

GAS

Consumed in 2016

in physical terms

in monetary terms, rubles
(excluding VAT)

4 083 mln kWh

10 324 mln rubles

4 083 million kWh

10 051 mln rubles

4 077 thous. Gkal

4 644 mln rubles

4 031 thous. Gkal

4 578 mln rubles

2 937.4 tonnes

132 mln rubles

1 709.4 tonnes

68 mln rubles

48.2 tonnes

1.4 mln rubles

IMPROVED OIL AND GAS OIL PRODUCTION TECHNOLOGIES

8. Application of PDC bits with enlarged nozzles to drill through lost circulation zones

INNOVATIVE WELL CONSTRUCTION TECHNOLOGIES

1. Pumping high-viscosity pills at 100-150 m intervals during wellbore conditioning before running a casing in more than 50
degrees deviated borehole.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Cuttings transport

Cutting bed removal out of wellbore

0.121

13 wells

2. In horizontal wells with long horizontal sections or complex profiles before pulling a drilling tool out of hole for running liner in
open hole, sweep a mud pill with mechanical lubricant in 5 kg/m3 concentration. Mud pill swept in balanced pressure condition.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Mechanical lubricant

Running liner to bottomhole

0.161

3 wells

3. Prepare a wellbore for primary completion in order to bring cement up to surface during production casing cementing
without setting a packer and by injecting sealing and lost circulation materials, etc. into drilling pipe at closed BOP as the well
is drilled deeper.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Reduction of material
time costs for wellbore
preparation

Reduction of material time costs for
wellbore preparation

0.201

35 Wells

4. Application of high water-loss slurries to plug thief zones

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Lost-circulation zone
elimination

Lost-circulation zone elimination

0.255

10 Wells

Brief Summary

Brief Technology Efficiency

Possibility to drill through thief zones with
inactive filler injecting

ROP increase

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

0.201

9. To optimize MWD costs we realized drilling of stabilization intervals under beneath of surface casing from the bottom of the
Bashkirian horizon to the top of Tournaisian stage using stabilizing BHA without MWD system employed.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Drilling of stabilization intervals using
stabilizing BHA without MWD system
employed.

MWD cost saving

0.550

10. Using nipple centralizers to create an effective wellbore size and smooth running logging tools, production casing, core
retrieving barrels in combination with screw bottomhole motors.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Create an effective wellbore size

No (less) borehole reaming trips due to
nonpassage of logging tools, production
casing, core retrieving barrels

0.161

11.Using dual stabilizer assembly for wellbore reaming in order to prepare wellbore for running liner with installed screens and
packers, etc.

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Wellbore preparation for running liner with
installed screens and packers, etc.

Low risk of failure to run liner with
installed screens and packers, etc.

0.141

INNOVATIVE OIL AND GAS PRODUCTION TECHNOLOGIES

5. Application of sealing solutions RTS

Introduction of positive displacement pumps in oil gathering system

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Brief Summary

Technology Challenge
Description

Brief Technology Efficiency

Brief Economic Efficiency, including
in mln rubles per facility unit, or
others.

Deployment in
2016

Lost-circulation zone
elimination

Lost-circulation zone elimination

0.189

11 Wells

6. Drilling with simultaneous borehole reaming to set expandable casing (local casing lining equipment)

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Lost-circulation zone
elimination

Lost-circulation zone elimination

0.34

6 wells

7. Gypsum-lime drilling mud application for directional well construction

Brief Summary

Brief Technology Efficiency

Brief Economic Efficiency, including in mln rubles
per facility unit, or others.

Deployment in 2016

Lost-circulation zone
elimination

Lost-circulation zone elimination

0.213

Replacement of Sectional Centrifugal
Pumps with Progressive Cavity Pumps
at Booster Pump Stations (Group
Metering Pump Stations) to reduce
energy intensity in oil gathering system.

High energy intensity
of oilfield equipment

Power consumption saving
- 17 000 thous. kWh per
year for deployment rate (40
Booster Pump Stations (Group
Metering Pump Stations).

NPV for project duration = 92
mln rubles for deployment rate
(40 Booster Pump Stations
(Group Metering Pump
Stations)

6 pumps

3. Running metal-to-metal progressive cavity pumps manufactured by OOO Spectechnika-Almetyevsk in SVO cyclic steam
stimulation (CSS) wells.

1. Borehole washing with aerated fluid drilling

Brief Summary

ESP units get stuck and fail because of presence of
drilling mud in wellbore and deposition of calcium
carbonate СаСО3 and solids on borehole walls during
well operation.

Technology
Challenge
Description

Improved
downhole
pumping
equipment
reliability

Brief Technology Efficiency

Brief Economic Efficiency, including
in mln rubles per facility unit, or
others.

Deployment
in 2016

108 wells

To solve this problem, a
wellbore is flushed before
installing pumping unit to
ensure the circulation and
transport of mechanical
impurities and sediments
with aerated fluid.

Wellbore circulating with the
aerated fluid helps avoid
early failures of downhole
pumping units due to it
sticking with deposition of
calcium carbonate, clay and
solids. The economic benefit
gained as a result of the idea
implementation amounted to
0.620 million rubles per well.

2. Replacing 12 kW and 16 kw downhole motors (DHM) with 22 kW DHM results in less SVO well servicing jobs required.

Brief Summary

Currently, the cyclic steam stimulation (CSS) wells are
produced at the SVO fields. The concept of the wells is
cyclic steam injection after the wellbore temperature
cool-down. It requires to pull out downhole pumping
equipment and run injecting tubing. The high content
of steam-gas mixture which is present in cyclic steam
stimulation (CSS) well often causes pump starvations.
It is also necessary to rig up a workover rig and pull out
the downhole pumping equipment (DHPE) which entails
additional costs.

Technology
Challenge
Description

Improved
downhole
pumping
equipment
reliability

Brief Technology Efficiency

Brief Economic Efficiency, including
in mln rubles per facility unit, or
others.

Deployment
in 2016

In order to reduce SVO
well repair services to be
performed to convert the
wells to steam injectors it is
recommended running the
progressive cavity sucker-
rod pumps manufactured
by OOO Spectechnika-
Almetyevsk in the SVO
cyclic steam stimulation
(CSS) wells and convert
wells to steam injectors
retrieving rotor from stator
using a crane.

4 wells

Implementation of this
solution will help reduce SVO
well repair services to convert
wells to steam injectors, revise
downhole units in a servicing
company, number of well
servicing crews The economic
benefit gained as a result
of the idea implementation
amounted to 0.707 million
rubles per well.

Technology
Challenge
Description

Improved
downhole
pumping
equipment
reliability

Brief Summary

Over 30% of all well services carried out on SVO wells
are well repairs caused by pump clogging with solids
which mainly consist of clay and carbonate particles.
Fine particles getting in between pump moving elements
cause pump shaft jamming and all kinds of pump
shimming efforts (direct washing, rotation direction
change, etc.) most often do not provide any good result.
For this reason, a regular well servicing job usually
includes a full range of costly and time-consuming
efforts to clean a wellbore which do not ensure continued
trouble-free. Almost all of the producing well stock using
ESP-125 and 160 with pressure head of 300 and 400
meters, are equipped with 16 kw DHM. The practice
shows that DHM load averages 80 per cent of its power
capacity at the average frequency of 41.4 Hz. This value
does not ensure a reliable operation when solids get into
the pump.

Brief Technology Efficiency

Brief Economic Efficiency, including
in mln rubles per facility unit, or
others.

Deployment
in 2016

4. Application of thermal-gel composition for enhanced oil recovery in SVO reservoirs (setting of «gel plug»)

In order to reduce amount
of SVO well repair services
due to pump plugging
with solids it is proposed
to substitute 22 kW DHM
for 12 kW and 16 kW DHM
ensuring sustainable
operation in harsh
operating conditions.

Implementation of this
solution will help reduce SVO
well repair services, revise
downhole units in a servicing
company, number of well
servicing crews and down-
hole pumping equipment
costs. The economic benefit
gained as a result of the idea
implementation amounted to
0.498 million rubles per well.

43 wells

Brief Summary

Technology designed to block transitional (water-oil)
zones of reservoir using thermal-gel compositions
help prevent (reduce) cooling down the fluid produced
from the wells and stimulate establishing pressure
communication between steam injector and oil producer
in the SVO field produced by SAGD method.

*- 4 wells were stimulated repeatedly.

EOR INNOVATIVE TECHNOLOGIES

Technology
Challenge
Description

Kazanian,
Ufimian stages

Brief Technology Efficiency

Brief Economic Efficiency, including
in mln rubles per facility unit, or
others.

Deployment
in 2016

The technological effect
is achieved thanks to
establishing a quality
pressure communication
between a pair of SAGD
wells and shutting off
water-saturated zone.

0.6989 mln rubles per well

35 wells
(39 well
treat-
ments*)

1. Enhanced Oil Recovery Technique using polymer-clay compositions and surfactants (PGK-M Technology)

Brief Summary

Technology Challenge
Description

Deployment in 2016

Better reservoir sweep efficiency to displace oil from lower permeable zones by applying sequential injection
of polymer-clay compositions and surfactants. Recommended for zones with the highest watercut, medium
and high injectivity at any salinity.

Development of high-
efficiency EOR for
watered out reservoirs

50 well treatments

2.2.

Enhanced Oil Recovery Technique using alkaline–polymer compositions (Technology ShchPK-N)

Brief Summary

Better reservoir sweep efficiency with alkaline–polymer compositions, improved wettability and oil
displacement from lower permeable oil saturated zone. Recommended for reservoirs with high
heterogeneity, for zones to be flooded with mineralized waters.

Technology Challenge
Description

Development of high-
efficiency EOR for
watered out reservoirs

Deployment in 2016

30 well treatments

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY3. Formation stimulation technology for terrigenous and carbonate reservoirs with modified biopolymer compositions (Technology
RBK-M)

9. Technology for application of high-strength cross-linked compositions to enhance oil recovery efficiency of water-flooded
heterogeneous reservoirs (VPSK Technology).

Brief Summary

Improved sweep and oil displacement efficiency by injecting alkaline solutions and biopolymer compositions
with surfactants Gels are formed when using crosslinkers, which depending on the component
concentrations can act as blocking and/or displacement agents. For terrigenous and carbonate reservoirs,
at any salinity.

Technology Challenge
Description

Development of high-
efficiency EOR for
watered out reservoirs

Deployment in 2016

53 well-treatments

Brief Summary

Conformance control; eliminating water breakthrough into producing wells; shutting off of washed out
zones and fractures; eliminating (control) injection water leak off in adjacent reservoirs; restricting water
intake capacity of wells. Terrigenous and carbonate reservoirs with heterogeneous permeabilities with
medium and high water intake capacities.

Technology Challenge
Description

Terrigenous Devonian
Strata

Tula, Bobrikovian
horizons

Tournaisian stage
(Kizelovian horizon)

Bashkirian stage

Deployment in 2016

4.Enhanced Oil Recovery Technique through complex reservoir stimulation based on microdispersed silica gel (MDC Technology)

Brief Summary

Technology Challenge
Description

Deployment in 2016

Better reservoir sweep efficiency to displace oil from lower permeable zones by applying sequential injection
of microdispersed silica gel and surfactant solution. Silicate micron-size particles help isolate of water
saturated intervals in remote zones of the reservoir. For terrigenous reservoirs, at any salinity.

Development of high-
efficiency EOR for
watered out reservoirs

38 well treatments

5.Polymer gel-forming and micro-gel injection technology (MGS-K Technology)

Brief Summary

Technology Challenge
Description

Deployment in 2016

Improved sweep and oil displacement efficiency, main acting reagent is micro-gel Depending on application
area conditions gel-forming and surfactant-polymer compositions can be pumped. For terrigenous
reservoirs, at any salinity, for any field development stage.

Development of high-
efficiency EOR for
watered out reservoirs

177 well treatments

6.Water-flooding control technology for highly permeable reservoirs using composition system based on cellulose-polymer complex
(CPK technology)

Brief Summary

Technology is designed to improve reservoir sweep efficiency which is achieved by stimulating drainage
of layers with lower permeability through changing local pressure gradients while reducing conductivity of
layers with higher permeability by injecting composition system based on cellulose-polymer complex. For
high and medium water-intake capacity wells, at any salinity and high heterogeneity.

Technology Challenge
Description

Development of high-
efficiency EOR for
watered out reservoirs

Deployment in 2016

10 well treatments

7.Improved technology for low concentrated polymer composition injection for low water intake capacity wells (NKPS-M technology)

Brief Summary

Technology Challenge
Description

Deployment in 2016

Improved oil displacement efficiency technology based on surfactant-polymer solutions for low-permeability
reservoirs in low water intake capacity well conditions and low-thickness reservoirs. For terrigenous and
carbonate reservoirs, at any salinity, for any field development stage.

Development of high-
efficiency EOR for
watered out reservoirs

31 well treatments

8.Technology for application of hydrophobic (invert) emulsion systems to enhance oil recovery efficiency of water-flooded
heterogeneous reservoirs (MGES-M technology).

Brief Summary

The technology is designed for water conformance control of wells. Terrigenous reservoirs with
heterogeneous permeabilities with medium and high water intake capacities.

Technology Challenge
Description

Tula, Bobrikovian
horizons

Terrigenous Devonian
Strata

Deployment in 2016

10.Technology for application of high-strength polymer systems to control water flow to producing wells (VPSD (APA) Technology
version).

Brief Summary

Water flow control both injected to maintain reservoir pressure as well as invading into producing wells
either from the bottom section of oil-saturated reservoir or from underlying water saturated reservoir that
is directly adjacent to oil-saturated one. Near-wellbore area of terrigenous or carbonate reservoir with low,
medium and high injectivities.

Technology Challenge
Description

Terrigenous Devonian
Strata

Tula, Bobrikovian
horizons

Tournaisian stage
(Kizelovian horizon)

Deployment in 2016

11. Technology for application of high-strength cross-linked compositions to enhance oil recovery efficiency of water-flooded
heterogeneous reservoirs (VPSK Technology).

Brief Summary

Technology Challenge
Description

Terrigenous Devonian
Strata

Tula, Bobrikovian
horizons

Tournaisian stage
(Kizelovian horizon)

Vereiskian horizon

Bashkirian stage

Protvino

Deployment in 2016

12. Technology for application of high-strength polymer systems to restrict water flow to producing wells (VPSD (PAA+CM)
Technology version).

Brief Summary

Deployment in 2016

Technology Challenge
Description

Tula Horizon

Terrigenous Devonian
Strata

INTELLECTUAL PROPERTY

1.Using smartphones with the CIS ARMITC (Corporate Information System Automated Engineering and Technological Service
Workplace) application to provide operational control oil well pumpers and receive work performance reports

Brief Summary

Technology Challenge
Description

Brief Technology Efficiency

Furnishing oilfield pumpers with
smartphones integrated with
CIS ARMITC which enables to
control a well site check-up route,
promptly transmit photo and video
information about any failures or
breakdowns.

Introduction of
a system for
determining the
optimum quality and
completeness of
information to ensure
a minimum risk in
field development
and production
process

- Monitoring oilfield pumper’s working time,
location, movement according to well site
check up maps;

- Monitoring designated well-site check-ups

according to the well-site check-up schemes;

- Ensuring on-site safety and security
- Prompt transmittal of tasks to oilfield pumpers

Brief Economic Efficiency,
including in mln rubles per
facility unit, or others.

Effect time, three (3)
years
NPV, thous. rubles 47
IDD, fr.unit 5. 000

Deployment
in 2016

584 pcs.

2. Operational Control and Management System for oil metering units (OMU) in NGDU

Brief Summary

Technology Challenge
Description

Brief Technology Efficiency

Operational Control and
Management System for oil
metering units enables to upgrade
oil production measuring process
in a quality manner, promptly
receive and validate the data so
that the NGDU's specialists could
make adequate decisions.

Introduction of
a system for
determining the
optimum quality and
completeness of
information to ensure
a minimum risk in
field development
and production
process

- On-line monitoring of oil production

measuring units

- Obtaining full information on mass flow-

meters (breakdowns);

- Obtaining live data on water and oil specific

gravity inputs.

- Automatically determine water specific gravity

and enter this parameter in transmitter of
mass flow meter;

- Archive emergency signals with accident type

decoding.

Brief Economic Efficiency,
including in mln rubles per
facility unit, or others.

Effect time - 5 years,
NPV, thous. rubles 213
IDD, fr. unit 2.735

Deployment
in 2016

Deployed
at seven
(7)
Booster
Pumping
Stations

RESERVOIR PRESSURE MAINTENANCE INNOVATIVE TECHNOLOGIES

1. Implementation of Russian-made positive displacement pumping units to optimize power consumption in Reservoir Pressure
Maintenance System

Brief Summary

Technology Challenge
Description

Brief Technology Efficiency

Utilization of Russian-made
positive displacement pumps as
an alternative for centrifugal ones
will help reduce specific power
consumption by 2 to 2.5 times (per
pump) with the price which is half
of that of foreign counterparts.

Optimization of
power consumption
in Reservoir Pressure
Maintenance System

Optimization of specific consumption by 66
million kWh when implementing 54 pumps

Brief Economic Efficiency,
including in mln rubles per
facility unit, or others.

NPV - 248.2 million
rubles as a result of
implementation of 54
pumping units

Deployment
in 2016

7 pumping
units,
Plan for
2017 - 18
pumping
units

Since 2014, the «Procedures and Regulations for the EDISON+
Complex Automated System (CAS Edison+) users have been
in place, incorporating the following modules: AIS «Innovator’s
Study Room», AIS «Rationalization», AIS «Patents», AIS «R&D
Agreements», AIS «Experimental and Pilot Operations», AIS
«Best Practices».

The CAS Edison+ is designed to meet the current production
improve the cost-effectiveness of
challenges and helps
rationalization,
inventive and experimental activities (pilot
operations), R and D, best practices. Its use makes it possible
to carry out continuous monitoring the introduction of new
technology,
rationalization proposals, best
practices, maintain the commercial register of enterprise’s
intangible assets, provide more objective assessment of the
efficiency of investments in experimental and pilot operations,
R and D activities and make substantiated and well-grounded
management decisions. The system is a highly effective tool for
managing the TATNEFT employees’ intellectual activity.

inventions,

TATNEFT RANKS AMONG TOP 10 LEADERS IN
THE WORLD AND IT IS THE ABSOLUTE LEADER IN
EUROPE AND IN THE MIDDLE EAST BY QUANTITY
OF OIL AND GAS PRODUCTION INVENTIONS.
(DATA SOURCE: THOMSON REUTERS).

As part of the efforts made to reorganize the TATNEFT’s
intellectual property and intangible asset management to
increase their efficiency and to further improve the Company’s
in asset management activities the Innovation Development
Department was established at the Engineering Center
with centralized management functions for the TATNEFT’s
intellectual property, intangible assets and innovations.

In order to set up the automated management of intellectual
activity results the Integrated Automated system EDISON+ has
been put in place and developed since 2004.

In line with the approved concept of the Company’s strategy of
doubling the value by 2025, one of the activity directions is the
management of the Company’s intangible assets.

At present, according to the external audit results the
TATNEFT’s share of intellectual property in the total assets
testifies to the available potential for its overall value increase.
Enhancing the intangible asset (IA) share is one of the tools for
growth of the Company’s credit rating and investment lure. The
optimal model to increase the IA share in the TATNEFT’s asset
total value is being created within the project.

In 2016, 233 documents of title protecting the intellectual
property items were granted and 179 applications for patents
were filed. 13 250 rationalization proposals, 51 inventions,
25 useful models, 15 computer programs, 17 720 ideas for
improvement (Kaizen proposals) have been introduced into
production. The economic effect of the use of intellectual
activity results (including rationalization proposals) amounted
to 18 998 million rubles, including the use of inventions and
useful models for 17 699 million rubles.

improvement
Centralization of corporate accounting and
of effective use of
intangible assets as the TATNEFT’s
property complex objects are realized in accordance with the
Corporate Governance Standard «TATNEFT Intangible Asset
Management», «Regulations for Safeguarding and Legal
Protection of Intellectual Property Objects» and «Regulations
for relationship when transferring the IA use rights to TATNEFT’s
subsidiaries and third-party legal entities».

RUB 965 BLN is the Company’s Capitalization as of Dec. 30 2016

MANAGEMENT STRUCTURE

GENERAL MEETING
OF SHREHOLDERS

Audit Commission

Independent Auditor

BOARD OF
DIRECTORS
Chairman of the Board
of Directors

Committees of the Board of
Directors

Corporate Secretary

Corporate Management
Committee

Internal Audit
Department

Audit Committee

A General Shareholders’ Meeting is a supreme managing
body of the Company. The General Shareholders’ Meeting
delegates overall management of the Company’s activities
to the Company’s Board of Directors.

There are three committees under the Board of Directors:
the Corporate Management Committee, the Audit Commit-
tee and the HR and Remuneration Committee.

A position of the Corporate Secretary was introduced in
2016, and the Office of the Corporate Secretary was estab-
lished.

General Director of PJSC TATNEFT is the Company’s Chief
Executive Officer. The collegial executive body of the Com-
pany is the Management Board, headed by the General
Director. General Director and Management Board are ac-
countable to the Board of Directors and to the General
Shareholders’ Meeting..

Areas of responsibility are distributed among members of
the Board of Directors and the Management Board, includ-
ing the Deputies of the General Director.

HR & Remuneration
Committee

General control over the financial and economic activities of
the Company is carried out by the Audit Commission.

GENERAL
DIRECTOR,
Chairman of the
Management Board

MANAGEMENT
BOARD

Corporate Center for Business
Segment Management

Investment Committee

Personnel Committee

Committee for Ethics &
Corporate Culture
Development

Current activities of the Company are provided by the
services of the Executive Office services, structural
subdivisions, curators of business segments, as well
as by authorized representatives in the managing bod-
ies of subsidiaries and affiliates.

PJSC TATNEFT is the corporate center of the Group, which
coordinates the activities of enterprises that form busi-
ness segments of the Company. The status of the TATNEFT
Group, the management forms and the procedure for the
relationship of the parent company and the members of the
Group are governed by the Regulations for the TATNEFT
Group approved by the PJSC TATNEFT Board of Directors.
The system of the officials’ authorities and responsibilities
distribution by the areas of activity and ensuring the perfor-
mance of business segments is based on KPI’s.

There are the Investment Committee, the HR Committee,
the Ethics and Corporate Culture Development Committee
at the level of executive bodies in the Company.

The management of the TATNEFT Group is based on a uni-
fied mission and development priorities, while respecting
fair interests of all the participants of the Group. In order to
ensure unified management principles and transparency
of the activities of subsidiaries and dependent companies,
the Company develops appropriate policies and regulations
that form the mechanisms of corporate relations, and there
is also a system of unified corporate standards in operation.

INTERNAL DOCUMENTS THAT DETERMINE THE SYSTEM OF CORPORATE MANAGEMENT

• Articles of PJSC TATNEFT
• Regulation on the General Meeting of Shareholders of PJSC TATNEFT
• Regulation on the Board of Directors of PJSC TATNEFT
• Regulation on the Corporate Management Committee of the Board of Directors of PJSC TATNEFT
• Regulation on the Audit Committee of PJSC TATNEFT Board of Directors
• Regulation on the HR and Remuneration Committee of the Board of Directors of PJSC TATNEFT
• Regulation on the General Director of PJSC TATNEF
• Regulation on the Management Board of PJSC TATNEFT
• Regulation on the Corporate Secretary of PJSC TATNEFT
• Regulation on the Internal Audit Department of PJSC TATNEFT
• Corporate Management Code of PJSC TATNEFT
• Regulation on the Information Policy of PJSC TATNEFT
• Regulation on the Information Provision to shareholders of PJSC TATNEFT
• Internal documents that determine the executive bodies’ distribution of the authority and responsibility of managers

and employees by the areas of activity

• Regulation on payment of remuneration to members of the PJSC TATNEFT Board of Directors
• Regulation on payment of remuneration to members of the Audit Commission of PJSC TATNEFT
• Register of unified corporate standards of PJSC TATNEFT
• Remuneration policy for members of PJSC TATNEFT management bodies

MAIN AREAS OF THE CORPORATE MANAGEMENTPOLICIES

• Ensuring implementation of the Company’s strategy and current operations of the Company
• Improvement of the organizational structure and introduction of unified corporate standards of the TATNEFT Group
• Improvement of the motivation system and KPI of the Company’s management
• Constructive interaction with investors, business partners, public authorities and public organizations interested in
• Implementation of the information openness and transparency principles

the Company’s activities

THE TATNEFT COMPANY IS
IN THE TOP FIVE WORLD LEADERS
AMONG OIL COMPANIES
in terms of creating shareholder profitability by the
rating «Creating value through active management of
Portfolio of assets» (according to The Boston
Consulting Group version).

TATNEFT BRAND
IS INCLUDED IN THE TOP TEN
MOST EXPENSIVE BRANDS
IN RUSSIA WITH AA RATING
(ACCORDING TO THE VERSION OF
BREND FINANCE).

The Company complies with the principles of information openness, ensuring the timely provision of material information to its
shareholders, the investment community and other interested parties.

TATNEFT IS INCLUDED IN THE TOP-10 RATING OF RUSSIAN ENTERPRISES OF THE FUEL AND
ENERGY COMPLEX WITH THE HIGHEST LEVEL OF INFORMATION OPENNESS.

BOARD OF DIRECTORS

The General Meeting is a Supreme Management Body of PJSC TATNEFT and it operates in accordance with the regulatory legal acts
of the Russian Federation, the Company’s Articles and this Regulation. The General Meeting of Shareholders delegates the overall
management of the Company’s activities to the Board of Directors. The procedure for holding the General Meeting of Sharehold-
ers fully ensures respect for the rights of shareholders. The procedure for preparing, convening, conducting and summarizing the
results of the General Meeting of the Company Shareholders is defined by the Regulation on the General Meeting of Shareholders of
PJSC TATNEFT. The Company holds the Annual General Meeting of Shareholders once a year not earlier than two and no later than
six months after the end of the fiscal year. In addition to the General Meeting of the Shareholders, extraordinary meetings of share-
holders may be convened. The Company provides to the shareholders the information on the issues on the agenda of the General
Meeting of Shareholders in the amount and time that allows them choosing an informed position on the issues under consideration,
as well as taking decisions on participation in the meeting and the manner of such participation. The annual General Meeting nec-
essarily considers the of issues of electing members of the Board of Directors and the Audit Commission, approval of the auditor,
approval of the annual report, annual financial statements, distribution of profits, including payment (declaration) of dividends, and
losses based on the operation results of the reporting year. Each shareholder has the right to participate in the work of the meeting
personally or through proxies. At the General Meeting of Shareholders, the shareholders receive from the Board of Directors and ex-
ecutive bodies a detailed and reliable report on the Company’s corporate policy and the Company’s production and operations. The
Board of Directors of the Company prepares reports for shareholders on each issue of the agenda reflecting his position, as well as
special opinions of the members of the Board of Directors, if any. Shareholders make decisions on the most important issues of the
Company’s activities. During the election of the Board of Directors, the Company provides shareholders with detailed information on
the biography, experience and skills of each candidate, and seeks to ensure the personal presence of candidates. The decisions on
the agenda of the General Meeting of Shareholders shall be made by ballot voting in the manner prescribed by the current legisla-
tion and the Company’s Articles. When formulating the decisions of the meeting, it is necessary to indicate by what majority of votes
the decisions were taken and special opinions were introduced. The authenticity of the Minutes is certified by the signatures of the
Chairman of the meeting and the Secretary.

The General Shareholders’ Meeting was held on June 24, 2016 in the reporting year.

Decisions taken by the General Meeting of Shareholders:
1. Approve the Annual Report of the Joint Stock Company for 2015.
2. Approve the annual accounting (financial) statements, including the profit and loss account (profit and loss accounts) for

2015.

3. Approve distribution of profit based on financial year results.
4. Perform payment of dividends for 2015:

а) for preferred shares of PJSC TATNEFT in the amount of 1096% of the shares’ face value;
b) for ordinary shares of PJSC TATNEFT in the amount of 1096% to the shares face value.
Set July 8, 2016 as the date on which the persons entitled to receive dividends shall be determined. Determine the divi-
dends’ payment period in accordance with applicable law. Dividends shall be paid in cash.

5. Elect the composition of the Board of Directors of PJSC TATNEFT
6. Elect the members of the Audit Commission of the Company.
7. Approve JSC PricewaterhouseCoopers Audit as the auditor of PJSC TATNEFT for the implementation of the mandatory
audit of the annual financial statements for 2016, prepared in accordance with Russian accounting rules, for a period of
one year.

8. Approve a new version of the Articles of PJSC TATNEFT.
9. Approve a new version of the «Regulations on the General Meeting of Shareholders of the Public Joint-Stock Company

TATNEFT n.a. V.D. Shashin.

10. Approve a new version of the «Regulations on the Board of Directors of the Public Joint Stock Company TATNEFT n.a.

V.D. Shashin.

11. Approve a new version of the «Regulations on the General Director of the Public Joint-Stock Company TATNEFT n.a. V.D.

Shashin.

12. Approve a new version of the «Regulations on the Management Board of the Public Joint Stock Company» TATNEFT n.a.

V.D. Shashin.

The Board of Directors of PJSC TATNEFT carries out general management of the Company’s activities in order to increase the
Company’s profits and ensure its stable financial and economic condition, as well as the risk management system, determines
the main parameters of the budget and the control over its implementation, facilitate the timely disclosure of complete and reli-
able information on the Company’s activities, as well as takes decisions on key projects and significant transactions.

The procedure of forming, the status, composition, functions, goals and tasks and powers of the Board of Directors, as well
as the procedure of the Board operation and interaction with other management bodies of the Company are defined by the
Articles and the Regulation on the Board of Directors.

The Board of Directors operates within the competence established by the current legislation, the Company’s Articles and in
accordance with the Regulation.

The competence of the Board of Directors of the Company includes resolving issues of general management of the Company’s
activities, with the exception of issues that are referred to the competence of the General Meeting of Shareholders by the cur-
rent legislation and the Company’s Articles.

The main task of the Board of Directors is to determine the development strategy of the Company in order to increase its
shareholder value, ensure the Company’s stable financial and economic condition and control the effective management of
the Company.

COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors includes 15 directors, including three independent directors*, seven non-executive directors and five
executive directors.

Participation of independent and non-executive directors the work of the Board of Directors ensures the maintenance of a bal-
ance between the interests of different groups of shareholders, which contributes to the objectivity of the decisions made, as
well as to strengthening the trust of investors and shareholders to the Company. The annual General Meeting of Shareholders
held on June 24, 2016 elected the Board of Directors numbering of 15 persons.

In June 2016, there were changes in the Board of Directors changed: R.S. Nurmukhametov was elected to the Board of Direc-
tors replacing M.Z. Taziyev, a retired member of the Board of Directors.

board of directorS

number of the board of directorS memberS
by the termS of Stay in the board of directorS

Independent Direc-
tors

Executive
Directors

Non-Executive
Directors

Less than

From to
seven years

Over
seven years

* Independence criteria have been defined by listing rules of ZAO «MICEX

Stock Exchange»

Quantitative compoSition of the committeeS
of the board of directorS, perSonS:

Yu.L Levin. was recognized by an independent director by
the unanimous decision of the Board of Directors in con-
nection with a formal relationship with a material counter-
party (Minutes No. 2 of the Board of Directors Meeting of
PJSC TATNEFT of June 24, 2016).

Corporate Manage-
ment
Committee

Audit
Committee

HR and Remunera-
tion
Committee

Rustam N. MIN-
NIKHANOV

Nail U.
MAGANOV

Radik R. GAIzAT-
ULLIN

Laszlo
GERECH

Nail G. IBRAGI-
MOV

Yuri L.
LEVIN

Renat Kh. MUSLI-
MOV

Rinat K.
SABIROV

Chairman of the Board of
Directors of PJSC TATNEFT

General Director of PJSC
TATNEFT
PJSC TATNEFT’s Board of
Directors’ Member
Chairman of the PJSC
TATNEFT’s Management
Board

PJSC TATNEFT’s Board of
Directors’ Member
Audit Committee Member of
the PJSC TATNEFT’s Board
of Directors.

Independent member of the
PJSC TATNEFT’s Board of
Directors
Member of the PJSC
TATNEFT’s Board of Directors
Audit Committee
Member of the PJSC
TATNEFT’s Board of Directors
HR and Remuneration
Committee

Member of PJSC TATNEFT’s
Board of Directors
First Deputy General Direc-
tor for Production – Chief
Engineer of PJSC TATNEFT.
PJSC TATNEFT’s Manage-
ment Board Member.

Independent member of the
Board of Directors
Chairman of the PJSC
TATNEFT’s Board of
Directors Audit Committee
Member of the PJSC
TATNEFT’s Board
of Directors HR and
Remuneration Committee

Member of PJSC TATNEFT’s
Board of Directors’

Member of PJSC TATNEFT’s
Board of Directors
Member of the PJSC TAT-
NEFT’s Board of Directors
Corporate Management Com-
mittee. Member of the PJSC
TATNEFT’s Board of Directors
HR and Remuneration Com-
mittee

Non-executive director

Executive Director

Non-executive Director

Independent Director

Executive Director

Independent Director

Non-executive Director

Born in 1957.

Born in 1958.

Born in 1964.

Born in 1953.

Born in 1955.

Born in 1953.

Born in 1934.

Born in 1967.

1978 – graduated from
Kazan Agricultural Institute,
specializing as a mechanical
engineer.
1986 – Institute of Soviet
Trade.
1996-1998 – Minister of
Finance of the Republic of
Tatarstan.
From July 1998 until March
2010 headed the Government
of the Republic of Tatarstan.
President of the Republic of
Tatarstan since March 2010.

1983 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

1985 – graduated from Kazan
Agricultural Institute special-
izing in «Accounting and busi-
ness analysis in agriculture”.

Head of the Ministry of Finance
of the Republic of Tatarstan
since June 2002.

From July 2000 to November
2013 – First Deputy General
Director – Head of Crude Oil
and Petroleum Products Sales
Department of PJSC TATNEFT.
He was appointed General
Director of PJSC TATNEFT in
November 2013.

1977 – graduated from the
Moscow Institute of Petro-
chemical and Gas Industry
named after Academician
I.M. Gubkin specializing in
Development and Complex
Mechanization of oil fields.

1995 – graduated from the
Oxford Business University.
Since 2015 – Managing
Director of MOL Oman, Oman
Branch Office in Muscat
Since 01.01.2017 – Managing
Director of G Petroconsulting Ltd

1977 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

First Deputy General Direc-
tor for Production – Chief
Engineer of PJSC TATNEFT
since 2000.

1975 – graduated from the
Moscow Finance Institute
1979 – post-graduate stud-
ies at the Institute of World
Economy and International
Relations.

Managing Partner of BVM
Capital Partners Ltd since
2001.

В 1957 – graduated from Kazan
State University.

State Consultant to President
of the Republic of Tatarstan on
development of crude oil and
gas fields since June 2007,
Professor of the Crude Oil and
Gas Geology Chair of Kazan
(Volga) State University.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,000176.
% share of the Joint Stock
Company’s ordinary shares

owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,019831.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,02873.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,057136.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,060445.

1991– graduated from the
physics faculty of Kazan State
University. 1994 – gradu-
ated from the post-graduate
course of the Kazan State
Technological University.
1998 – had a training course
under the President’s program
for managerial staff.
2006 until June 2010 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.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

Valery Yu. SO-
ROKIN

Shafagat F.
TAKHAUTDINOV

Rustam Kh. KHAL-
IMOV

Azat K.
KHAMAEV

Rais S.
KHISAMOV

René
STEINER

Rafael S. NUR-
MUKHAMETOV

Alexander T.
YUKHIMETS

Member of the PJSC
TATNEFT’s Board of
Directors

Member of the PJSC
TATNEFT’s Board of
Directors
Advisor to Chairman of the
PJSC TATNEFT’s Board of
Directors

Member of PJSC TATNEFT’s
Board of Directors
Deputy General Director
of PJSC TATNEFT for
Development and Production
of Oil and Gas

PJSC TATNEFT’s Board of
Directors’ Member

Member of the PJSC
TATNEFT’s Board of
Directors
Deputy General Director –
Chief Geologist of PJSC
TATNEFT

Member of the PJSC
TATNEFT’s Board of
Directors (since 24.06.16)
Head of NGDU
Leninogorskneft

Independent Member of
the PJSC TATNEFT’s Board
of Directors.
Chairman of the PJSC
TATNEFT’s Board
of Directors HR and
Remuneration Committee
Audit Committee Member of
the PJSC TATNEFT’s Board
of Directors

Secretary of the PJSC
TATNEFT’s Board of
Directors (until 03.08.2016)

Since 04.08.2016 the func-
tions of the Secretary of the
Board of Directors of PJSC
TATNEFT were transferred to
the competence of the Corpo-
rate Secretary.

Non-Executive Director

Executive Director

Non-Executive Director

Executive Director

Independent Director

Executive Director

Born in 1964.

Born in 1946.

Born in 1965.

Born in 1956.

Born in 1950.

Born in 1964.

Born in 1949.

Born in 1949

1986 – graduated from the
Kazan State University.

General Director of JSC Svy-
azinvestneftekhim since 2003

1971 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

1987 – graduated Moscow
Institute of Petrochemical and
Gas Industry n.a. Academi-
cian I.M. Gubkin.

1999 until November 2013 –
General Director of PJSC
TATNEFT.
Starting November 2013 -
Assistant to President of the
Republic of Tatarstan on the
oil industry issues, Advisor to
Chairman of PJSC TATNEFT’s
Board of Directors.

2010 to 2011 – Director of
PJSC TATNEFT’s Branch in
Libya.
2011- 2015 – Head of NGDU
“Elkhovneft” of PJSC TAT-
NEFT.
Deputy General Director of
PJSC TATNEFT for Develop-
ment and Production of Oil
and Gas since 2015.

1978 – graduated from Kazan
Aviation Institute, specialty -
mechanical engineer.
2000 – graduated from the
Law Faculty of Kazan State
University.

Appointed the First Deputy
Minister of Land and Property
Relations of the Republic of
Tatarstan in December 2008.
Appointed Head of the Min-
istry of Land and Property
Relations of the Republic of
Tatarstan in March 2009.

1978 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

Deputy General Director –
Chief Geologist of PJSC TAT-
NEFT since October 1997.

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.

He graduated from the Ufa
Petroleum Institute

Since 1989 – he has been
heading NGDU «Leninogor-
skneft»

1972 graduated from Moscow
Institute of Petrochemical and
Gas Industry n.a. Academi-
cian I.M. Gubkin.

Since 1995 until 03.08.2016 –
Secretary of the Board of
Directors of PJSC TATNEFT

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,116503.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,123914.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,000056.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,01876.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,019746.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,010465.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,010107.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,000284.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

ATTENDANCE OF MEETINGS BY MEMBERS OF THE BOARD OF DIRECTORS

There were 12 full-time and one absentee meeting of the Board of Directors the reporting year.

Full name

29.01.
2016

25.02.
2016

23.03.
2016

25.04.
2016

25.05.
2016

24.06.
2016

03.08.
2016

26.08.
2016

29.09.
2016

03.11.
2016

24.11.
2016

26.12.
2016

Total

Minnikhanov R.N..

Maganov N.U.

Ibragimov N.G.

Levin Yu.L.

Gaizatullin R.R.

Gerech L.

Muslimov R.Kh.

Sabirov R.K.

Sorokin V.Yu.

Nurmukhametov R.S
(From 24.06.2016).

Taziyev M.Z.
(Until 24.06.2016)

Takhautdinov Sh.F.

Khamaev A.K.

Khisamov R.S.

Khalimov R.Kh..
(From 26.06.2015)

Steiner R.F.

All members of the Board of Directors participated in the absentee meeting held on June 24, 2016.

12/12

11/12

10/12

12/12

11/12

7/12

5/12

11/12

10/12

12/12

10/12

LIST OF MAIN ISSUES CONSIDERED AT THE MEETINGS OF THE BOARD OF
DIRECTORS IN 2016

1. Results of the budget execution of PJSC TATNEFT.
2. Approval of a new version of the Regulation on the Internal Audit Department.
3. Results of the Internal Audit Department work and approval of the work plan of the UBA.
4. Composition of the Management Board of PJSC TATNEFT.
5. Annual General Meeting of Shareholders of PJSC TATNEFT.
6. Progress of construction and the strategy for the further development of the TANECO project.
7. Candidates to the Board of Directors, the Audit Commission of the Company and proposals to the agenda of the Annual

General Meeting of shareholders.

8. Approval of the Regulation on the Corporate Secretary of PJSC TATNEFT.
9. Giving consent to the participation of the General Director and members of the PJSC TATNEFT Management Board in the

management bodies of other companies.

10. Approval of related party transactions.
11. Crude oil production plans and geological and technical measures, the state of work to increase the oil recovery and the

efficiency of the infill well drilling.

12. Recommendation of the auditing company to the annual General Meeting of shareholders of PJSC TATNEFT to audit the

reporting of PJSC TATNEFT in accordance with IFRS and RAS.
13. The results of financial and economic activities of PJSC TATNEFT.
14. Main work areas of the PJSC TATNEFT’s Audit Committee of the Board of Directors.
15. About dividends on shares of PJSC TATNEFT.
16. Results of the consolidated financial statements under IFRS for the TATNEFT Group of Companies.
17. State of ecological monitoring of the bitumen oil fields operation.
18. Work plan of the Board of Directors of PJSC TATNEFT.
19. Statement of the Board of Directors of PJSC TATNEFT concerning independent directors.
20. The official of PJSC TATNEFT on monitoring compliance with the requirements of the Russian Federation legislation on

combatting the misuse of insider information and market manipulation.

21. Establishment of Committees of the Board of Directors of PJSC TATNEFT.
22. Development strategy of the TATNEFT Group of Companies for the period until 2025.
23. Approval of Regulations on committees of the Board of Directors of PJSC TATNEFT.
24. Results of implementing the corporate small business support program in the south-eastern part of the Republic and

results of activity and strategy of development.
25. Performance of PJSC TATNEFT’s subsidiaries.
26. The strategy and innovations in performance of exploration works at PJSC TATNEFT until 2025.
27. New approaches of PJSC TATNEFT in the field of well construction and repair.

STRUCTURE OF ISSUES CONSIDERED BY THE BOARD OF DIRECTORS IN 2016

18.4%

14.3%

TOTAL

ISSUES

30.6%

36.7%

Budget

Production

Strategic area

Related party trasactions

REMUNERATION OF THE PJSC TATNEFT’S BOARD OF DIRECTORS’ MEMBERS

The Code of Corporate Governance recommended by the Bank of Russia for public joint stock companies defines the pro-
cedure for assessing the work of the Board of Directors, its committees and members of the Board of Directors. The evalu-
ation procedure should be conducted annually in the form of a self-assessment and additionally once in three years with the
involvement of an external expert. The self-assessment procedure was carried out on 5 key components: the competence
and authority of the Board of Directors, the composition of the Board of Directors, committees of the Board of Directors, the
work procedure of the Board of Directors, the Annual General Shareholders Meeting for compliance with the principles of the
Code and with the level of the corporate management. The questionnaire has been made in full compliance with the Code. The
self-assessment procedure and the content of the questionnaire are coordinated by the Board of Directors’ Corporate Man-
agement Committee and independent directors. Completing the questionnaire provides for the principle of confidentiality. The
results of the self-assessment were considered at the in-person meeting of the Board of Directors on May 27, 2017.

Based on the results of the questionnaires preliminary analysis: the Company complies with the requirements of the Russian
legislation in the field of corporate governance and fully follows the recommendations of the Russian Corporate Governance
Code, and complies with a significant number of additional provisions of international best corporate governance practice.
Simultaneously, the questionnaires reflect comments on further improvement of the mechanisms of work of committees of
the Board of Directors and development of corporate practice. The summarized results of the self-assessment of the Board of
Directors activities were transferred to the Corporate Management Committee.

Remuneration to members of the Board of Directors of PJSC TATNEFT is paid on the basis of the “Regulation on payment of
remuneration to members of the Board of Directors and the Audit Commission of PJSC TATNEFT.

The remuneration of the Board of Directors is formed of fixed and variable portions. The fixed remuneration portion and it is
defined by the Regulation and it is indexed simultaneously with the change of tariffs and salaries of the PJSC TATNEFT’s em-
ployees.

The variable part of the remuneration of the Board of Directors members is formed according to the following key performance
indicators:

• ratio of the Company’s capitalization level for the year compared with the previous year;
• ratio of the cost of dividends to the net profit (compared with the previous year );
• amount of additional profitability versus the baseline profitability.

The remuneration amount for the Board of Directors members is set by the decision of the General Shareholders’ Meeting and
includes:

• remuneration for the performing the duties of a member of the Board of Directors;
• remuneration for the performing the functions of the Chairman of the Board of Directors Committee.

In 2016, the total remuneration amount paid to the Joint Stock Company’s members of the Board of Directors amounted to
RUB 148,842,246.68, including remuneration for participation in the work of the Board of Directors, salaries, bonuses and
other forms of remuneration. Compensations to the Company’s Board of Directors members amounted to RUB 9,596,987.79.

PJSC TATNEFT BOARD OF DIRECTOR’S
COMMITTEES

Rustam M.
KHISAMOV

Corporate Secretary – Head of
the Corporate Secretary Office
of PJSC TATNEFT

Born in 1959.

He graduated from the Kazan
Financial Economics Institute.
He has been working at PJSC
TATNEFT Since 1987.

Since 1994 – Deputy Head of
Securities Department of PJSC
TATNEFT.
Since 1998 – Securities Depart-
ment Head of PJSC TATNEFT.
Since 07.12.2015 – Deputy Cor-
porate Secretary – Head of the
Corporate Secretary’s Office.
Since 26.12.2016 – Corporate
Secretary – Head of the Cor-
porate Secretary Office Staff of
PJSC TATNEFT.

CORPORATE SECRETARY
THE PJSC TATNEFT’S CORPORATE SECRETARY’S OFFICE

The staff of the PJSC TATNEFT’s Corporate Secretary Office ensures the procedure for prepar-
ing and holding of the General Meeting of Shareholders, as well as the activities of the Board of
Directors and Committees of the Board of Directors, compliance of the Company with require-
ments of the current legislation, the Articles and internal documents of the Company guaran-
teeing the exercise of the rights and legitimate interests of the shareholders.

The Corporate Secretary – Head of the PJSC TATNEFT’s Corporate Secretary’s Office was ap-
proved by the Board of Directors Meeting, Minutes No. 8 of December 26, 2016.

Rustam M. Khisamov, who previously was in the position of the PJSC TATNEFT’s Securities Of-
fice Head, was appointed Head of the Corporate Secretary Office on December 7, 2015,

The competence of the Corporate Secretary Office includes maintaining an effective system of
interaction among all participants of the corporate relations, including subsidiaries and affili-
ates of the Joint Stock Company, and monitoring the abidance of the Joint Stock Company’s
subsidiaries and affiliates to the corporate procedures related to the implementation of the of
shareholders and other participants of corporate relations’ rights ensuring interaction of the
Joint Stock Company with a specialized registrar, depositories, with public administration bod-
ies authorized to carry out related party transactions of corporate relations and with the securi-
ties market, as well as with other securities market participants.

The Corporate Secretary’s Office provides for the organization and follow-up of the legal re-
quirements with regard to public disclosure of information, including the preparation and disclo-
sure of information in the form of the annual report, quarterly issuer’s reports, essential facts,
as well as documents and information related to the issuance and circulation of securities on
a stock exchange, Regulation of documents and information at the request of shareholders,
proper storage of the Joint Stock Company’s corporate documents. In order to improve the
corporate practice efficiency, the Corporate Secretary’s Office performs monitoring the Com-
pany‘s existing procedures efficiency and prepares the annual report of the Board of Directors
on the state of the Joint Stock Company’s corporate management and prospects for its devel-
opment. The reports on the corporate management are formed in accordance with the Rules of
exchange trading and disclosure requirements on the corporate management in the Company
to all interested parties.

The objectives pursued by the Corporate Secretary work are as follows:
l ensuring compliance with the requirements of corporate legislation, the Articles and internal
documents of the Company that guarantee the implementation and protection of the rights and
legitimate interests of the shareholders;

l ensuring effective corporate management system of the Company, as well as interaction of all
participants in corporate relations, including subsidiaries and dependent companies, in order to
increase the Company’s investment attractiveness, increase its capitalization;

l development of the corporate management practices of the Company in accordance with the

interests of its shareholders.

CORPORATE MANAGEMENT COMMITTEE

The Committee has been a permanent Committee under the Board of Directors since 2004. The main objective of the Committee is
preliminary consideration and preparation of recommendations to the Board of Directors on the issues of development and improve-
ment of the corporate management system in the Company. The Committee is guided in its activities by the laws of the Russian Federa-
tion, the Articles of the Company, the Regulation on the Board of Directors of the Company, decisions of the Board of Directors of the
Company, this Regulations and other internal documents of the Company, as well as the decisions of the Committee.

COMMITTEE COMPOSITION
Chairman:
Nail U. Maganov – Member of the Board of Directors, Chairman of the Management Board, General Director of PJSC TATNEFT.

Committee Members:
Rinat K. Sabirov – member of the Board of Directors of PJSC TATNEFT, Assistant to President of the Republic of Tatarstan, Member of
the Corporate Management Committee, Member of the HR and Remuneration Committee;
Nurislam z. Syubaev – Member of the Management Board, Deputy General Director for Strategic Development of PJSC TATNEFT.
Evgeny A. Tikhturov – Member of the Management Board, Head of the PJSC TATNEFT’s Financial Department
Rustam M. Khisamov – Corporate Secretary - Head of the PJSC TATNEFT’s Corporate Secretary’s Office.
Natalia E. Dorpeko – Corporate Consultant of the PJSC TATNEFT’s General Director.
Vasiliy A. Mozgovoy – Assistant to General Director of PJSC TATNEFT, Corporate Finances.
Valery D. Ershov – Member of the Management Board, Head of PJSC TATNEFT’s Legal Department.
Nuriya z. Valeyeva – Head of Technical and Economic Information and Advanced Experience Extension Office, PJSC TATNEFT.

MAIN FUNCTIONS
• Regulation of relations between the shareholders, the Board of Directors and Executive Bodies of the Company, as well as the is-
• Control over the reliability and effectiveness of the risk management system and the corporate governance system, including the

sues of interaction with entities controlled by the Company and other interested parties.

analysis of implementing risk management policies, the evaluation of the effectiveness of the risk management procedures, corpo-
rate governance practices and preparation of proposals for their improvement.

• Evaluation of the corporate management system in the Company, development of a methodology for evaluating the corporate

management system and formation of recommendations to the Board of Directors on the activities necessary to improve the cor-
porate governance practices in the Company.

MAIN AREAS OF THE COMMITTEE WORK IN 2016

• Monitoring of the Company’s compliance with the requirements of legislation on joint stock companies, regulatory
• Assistance to the Board of Directors of PJSC TATNEFT and the General Director in assessing the quality of corporate

acts of regulatory bodies, legitimate interests and shareholders’ rights.

relations and in the development of the corporate management system in the Company - regulating the relationship
between shareholders, the Board of Directors and the Company’s management, as well as interaction with the Com-
pany’s subsidiaries and other interested parties.

• Development of recommendations on the preparation and conduct of the Annual General Meeting of Shareholders.
• Development of recommendations for amending the Articles and other internal documents of the Company, which
• Development of recommendations on draft internal documents aimed at improving the Company’s corporate man-

approval falls within the competence of the General Meeting of Shareholders and the Board of Directors.

agement.

HR AND REMUNERATION COMMITTEE

The Committee has been a permanent Committee under the Board of Directors since 2004.

The Committee is guided in its activities by the legislation of the Russian Federation, the requirements of stock exchanges
applicable to the Company as an issuer of securities (including outside the Russian Federation), the Company’s Articles, the
Regulation on the Board of Directors, decisions of the Board of Directors, Regulations on the Committee and other internal
documents of the Company approved by the General Meeting of Shareholders of the Company and the Board of Directors, as
well as by decisions of the Committee. The Committee acts in the interests of the Company’s shareholders.

The Committee assists the Board of Directors in monitoring the reliability of the PJSC TATNEFT’s financial statements, compli-
ance with the requirements of laws and regulations, the selection of independent auditors, the work of independent auditors
and the internal audit system, monitoring of financial and business activities, and other responsibilities within its competence.

COMMITTEE COMPOSITION
Chairman
Yuri L. Levin, Member of the PJSC TATNEFT’s Board of Directors, Independent Director, Managing Partner of BVM Capital
Partners Ltd.

Committee Members:
Radik R. Gayzatullin, member of the Board of Directors, Minister of Finance of the Republic of Tatarstan.
Laszlo Gerech, member of the Board of Directors of PJSC TATNEFT, Independent Director. Managing Director of G Petrocon-
sultant Ltd., Member of the HR and Remuneration Committee .
René Frederic STEINER, Member of the PJSC TATNEFT’s Board of Directors, Independent Director, Program Director of the
Private Equity FIDES Business Partner AG, Switzerland, Chairman of the HR and Remuneration Committee.

MAIN FUNCTIONS
The main functions of the Committee are monitoring of the following aspects:

• ensuring the completeness, accuracy and reliability of the Company’s accounting (financial) reporting;
• reliability and efficiency of the internal control system and risk management of the Company;
• ensuring independence and objectivity of the functions of the internal and external audit;
• effectiveness of the notification system of potential cases of fraudulent actions of the Company’s and third parties’ employ-

ees, as well as other violations in the activities of the Company, and monitoring the implementation of measures taken by
the Company’s executive bodies within such a system.

MAIN AREAS OF THE COMMITTEE WORK IN 2016:
• Control over the completeness, accuracy and reliability of PJSC TATNEFT’s accounting (financial) statements.
• Coordination of the external auditors and the Internal Audit Department work, as well as regular review of their reports. Organization of

an independent evaluation of the internal audit function performance and making proposals for improving the work of the Internal Audit
Department.

Company’s external auditor.

• Verification of the independence of the external auditor and implementation of the internal audit function.
• Review and analysis of the quarterly, semi-annual and annual financial statements of PJSC TATNEFT, including the results of audits by the
• Conducting an evaluation of candidates for auditors and making recommendations to the Board of Directors on the election of independ-
• Assistance to the Board of Directors in monitoring the reliability and effectiveness of the internal control and risk management system of
• Preliminary consideration of related-party transactions and transactions with PJSC TATNEFT-related parties submitted for approval by the

ent auditors of PJSC TATNEFT’s financial statements in accordance with IFRS and RAS.

PJSC TATNEFT.

PJSC TATNEFT’s Board of Directors.

The Committee is a body of the Board of Directors set up for preliminary consideration of issues referred by the Articles of the
Company and the Regulations on the Board of Directors to the competence of the Board of Directors in the field of personnel
policy and remuneration. The Committee has been a permanent Committee under the Board of Directors since 2004.

The Committee assists the Board of Directors of PJSC TATNEFT in improving personnel policies and strengthening of mecha-
nisms for motivating employees and managers of the Company. The Committee’s area of work is improving the quality of the
Board of Directors operation through the preliminary review and preparation of recommendations on the issues of creating
conditions for attraction of qualified professionals to the Joint Stock Company’s Management and the necessary incentives
for their efficient operation.

COMMITTEE COMPOSITION
Chairman
René Frederic STEINER, Member of the PJSC TATNEFT’s Board of Directors, Independent Director, Program Director of the
Private Equity FIDES Business Partner AG, Member of the PJSC TATNEFT’s Audit Committee.

Committee Members:
Laszlo Gerech, member of the Board of Directors of PJSC TATNEFT, Independent Director. Managing Director of G Petrocon-
sultant Ltd., Member of the HR and Remuneration Committee. Member of the PJSC TATNEFT’s Audit Committee.
Yuri L. Levin, Member of the PJSC TATNEFT’s Board of Directors, Independent, Director Managing Partner of BVM Capital
Partners Ltd., Chairman of the PJSC TATNEFT’s Audit Committee.
Rinat K. Sabirov – Member of the Board of Directors of PJSC TATNEFT, Assistant to President of the Republic of Tatarstan,
Member of the Corporate Management Committee;

of the Board of Directors.

MAIN FUNCTIONS
• Drafting and periodic review of the Company’s policy on remuneration of the management bodies’ members.
• Preliminary assessment of the Company’s management bodies work.
• Conducting a self-assessment and/or an external evaluation of the performance of the Board of Directors and committees
• Interaction with shareholders in order to form recommendations to the shareholders on election of candidates to the Board
• Planning of personnel appointments in the Company, taking into account the continuity in the Company’s activities, mem-

bers of the collegial executive body, making recommendations to the Board of Directors regarding candidates for the posi-
tion of Corporate Secretary, members of the Company’s executive bodies and other key management officials.

of Directors.

MAIN AREAS OF THE COMMITTEE WORK IN 2016
• Facilitation of the effective performance of the Board of Directors functions in the implementation of personnel planning, attracting
• Development and periodic review of the Company’s policy on remuneration of the Board of Directors members, members of the

qualified professionals to the Company’s management and creation of the necessary incentives for their effective work.

collegial executive body and the person acting as the sole executive body, overseeing its introduction and implementation. Consid-
eration of the issue «Corporate social network as an instrument of intracorporate communications and organization of team work.»

indicators and achievement of objectives.

• Introduction of a motivation system for managers of oil and gas producing divisions based on performance of key performance
• Consideration of the issue «Corporate University as an effective tool of the personnel development corporate system».
• Consideration of the issue «Remuneration of the Company’s personnel following the results of 2016».

MANAGEMENT BOARD

SOLE EXECUTIVE BODY

COLLEGIAL EXECUTIVE BODY OF THE COMPANY

General Director is appointed by the Board of Directors. N.U. Maganov has been General Director of PJSC TATNEFT since
November 2013 until present time.

The Management Board is formed by the Board of Directors and it is composed of the Chairman and members of the Manage-
ment Board.

General Director is Chairman of the Management Board of PJSC TATNEFT.

Powers of the General Director are determined by the Joint Stock Company’s Articles and the “Regulation on General Director
of PJSC TATNEFT”.

General Director manages the ongoing activities in accordance with the corporate Company Development Strategy.
General Director determines the organizational structure of the Company oversees the rational use of resources, solves organi-
zational issues of the Company’s business structure management and social guarantees to personnel Regulation, including,
without limitation:

• ensuring execution of the General Shareholders’ Meeting decisions;
• presentation of candidates for the Management Board members to the Board of Directors;
• allocation of responsibilities among the Management Board members;
• organization of the Management Board work, as Chairman of the Management Board meetings,
• approval of the Joint Stock Company’ internal documents, except for internal documents, which approval is referred by the

Joint Stock Company’s Articles to the competence of the General Shareholders’ Meeting, the Board of Directors and the
Management Board;

ning table, branches and representative offices, approval of job descriptions and salaries;

• determination of the of the Joint Stock Company’s organizational structure, approval of the Joint Stock Company’s man-
• introduction to the Board of Directors candidates for the position of the First Deputy General Director;
• conclusion of employment contracts with employees of the Joint Stock Company;
• ensuring the drafting, conclusion and execution of the Collective Agreement.

The Management Board acts based on the laws of the Russian Federation, the Republic of Tatarstan, the Company’s Articles
and the Regulation on the Management Board.

The rights and duties of the members of the Management Board are determined by law, the Articles of the Company, these
Regulations, as well as agreements concluded on behalf of the Company by the Chairman of the Board of Directors with each
member of the Management Board.

The quantitative composition of the Management Board is determined by the Board of Directors. The procedure for the for-
mation, status, composition, functions, goals and tasks, powers of the Management Board, the procedure for its operation
and interaction with other management bodies of the Company are determined by the Regulation on the Management Board.
Meetings of the Board are held in accordance with the work plan of the Board.

Core competencies of the Board:

Plans to the Board of Directors, preparation of reports on their fulfillment;

• participation in the development of prospective and current plans of the Joint Stock Company’s activity, representation of
• Joint Stock Company’s participation in commercial and non-profit organizations;
• implementation of the Joint Stock Company’s programs of financial and investment activity within the powers received from
• coordination of production programs of subsidiaries;
• Regular reporting to the Board of Directors on the financial condition of the Joint Stock Company, and transactions as well

the Board of Directors;

as decisions that can have a significant impact on the Joint Stock Company‘s condition.

REMUNERATION OF THE MANAGEMENT BOARD MEMBERS

Payments to members of the Management Board are made in accordance with basic conditions of the contracts concluded for
the performance of duties of the Management Board members, including implementation of decisions of the General Share-
holders’ Meeting, the Board of Directors, and participation in working out the Joint Stock Company’s development plans, as
well as enhancing the effectiveness of the of Company and its subsidiaries work plans.

In 2015, the total remuneration of the Joint Stock Company’s members of the Management Board amounted to RUB
223,668,388.2 including remuneration for participation in the work of the Management Board, salary, bonuses and other forms
of remuneration. Compensation to the members of the Joint Stock Company’s Management Board members of amounted to
RUB 1,336,925.

no. of the management board memberS by the
termS of Stay in the management board

Less than
1 year

From 1 to
7 years

Over
7 years

Nail U.
MAGANOV

Anvar V. VAKHI-
TOV

Vladlen A.
VOSKOBOINIKOV

Nikolay M. GLAz-
KOV

Victor I. GOROD-
NY

Valery D. YER-
SHOV

Nail G. IBRAGI-
MOV

Rustam N.
MUKHAMADEEV

General Director PJSC
TATNEFT
PJSC TATNEFT’s Board PJSC
TATNEFT’s of Directors
Member
Chairman of the
Management Board

Director of OOO «TATNEFT-
Neftekhim” Management
Company.

Head of PJSC TATNEFT’s
Consolidated Financial
Statements Department.
Member of the PJSC
TATNEFT’s Board of
Directors Information
Disclosure Committee

Deputy General Director for
Capital Construction of PJSC
TATNEFT

Deputy General Director –
Head of Property
Department of PJSC
TATNEFT
Chairman of the PJSC
TATNEFT’s Board of
Directors Management
Committee

Head of PJSC TATNEFT’s
Legal Department.

First Deputy General
Director for Production
- Chief Engineer of PJSC
TATNEFT since 2000.
PJSC TATNEFT’s Board of
Directors Member.

PJSC TATNEFT’s General
Director Deputy for HR &
Social Development

Born in 1958.

Born in 1951.

Born in 1965.

Born in 1960.

Born in 1952.

Born in 1949.

Born in 1955.

Born in 1952

1983 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

July 2000 to November
2013 – First Deputy General
Director – Head of Crude Oil
and Petroleum Products Sales
Department of PJSC TATNEFT.
Appointed General Director of
PJSC TATNEFT in November
2013.

1980 – graduated from Kazan
Institute of Chemical Technol-
ogy.

1993 – graduated from the
Southern Alberta Institute of
Technology in Calgary.

1988 – graduated from Kazan
Construction Engineering
Institute.

April 2014 until present
time – Director of «TATNEFT-
Neftekhim” Management
Company.

2005 until present time Head
of PJSC TATNEFT’s Consoli-
dated Financial Statements
Department

2008-2010 – Head of Con-
struction Department of PJSC
TATNEFT.
2010 until present time –
Deputy General Director for
Capital Construction of PJSC
TATNEFT.

1978 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

1995 until present time – Dep-
uty General Director – Head
of PJSC TATNEFT’s Property
Department since.

1978 – graduated from Kazan
State University named after
V.I. Ulyanov-Lenin.

2002 until present time –
Head of Legal Department of
PJSC TATNEFT.

1977 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

2000 until present time – First
Deputy General Director for
Production – Chief Engineer
of PJSC TATNEFT.

2001 until present time –
Deputy General Director for
HR & Social Development.

% share in the Joint Stock
Company’s authorized capi-
tal – 0.000176.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,000254.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0.019831.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,020873.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,004204.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,004264.

Nurislam z. SY-
UBAEV

Evgeny A. TIKH-
TUROV

Vladimir P. LA-
VUSHCHENKO

Head of NGDU «Leninogor-
skneft of PJSC TATNEFT.

Deputy General Director for
Strategic Development.
Member of the Corporate
Management Committee of
the Board of Directors

Head of the PJSC TATNEFT’s
Finance Department
Member of the PJSC
TATNEFT’s Board of
Directors Information
Disclosure Committee

PJSC TATNEFT’s General
Director Deputy for
Economics
Member of the PJSC
TATNEFT’s Management
Board (until 03.08.2016)

Alexander T.
YUKHIMETS

Secretary of the PJSC
TATNEFT’s Board of
Directors (until 03.08.2016)
From 04.0.2016 the
functions of the Secretary
of the Board of Directors
of PJSC TATNEFT passed
into the competence of the
Corporate Secretary.

Born in 1949.

Born in 1960.

Born in 1949.

1974 – graduated from the Ufa
Oil Institute.

1989 until present time – Head
of the NGDU «Leninogor-
skneft» of PJSC TATNEFT.

1982 – graduated from
Moscow Institute of National
Economy n.a, G.V. Plekhanov
2002 until present time –
Deputy General Director for
Strategic Development

В 1982 – graduated from
Moscow Institute of Man-
agement named after
S.Ordzhonikidze.

1972 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. Acad-
emician I.M.Gubkin.

1999 – until present time Head
of PJSC TATNEFT’s Depart-
ment of Finance since.

1984 – graduated from post-
graduate course of VNIIO-
ENG.
Doctor of Economics.
1997 until present time –
Deputy General Director for
economics of PJSC TATNEFT.

1972 – graduated from Mos-
cow Institute of Petrochemical
and Gas Industry n.a. I.M.
Gubkin.

Secretary of the PJSC TAT-
NEFT’s Board of Directors
since 1995 until 03.08.2016.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,010465.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,010107.

% share in the Joint Stock
Company’s authorized capi-
tal – none.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,045465.
% share of the Joint Stock
Company’s ordinary shares
owned by the person –
0,048194.

% share in the Joint Stock
Company’s authorized capi-
tal – 0,000284.
% share of the Joint Stock
Company’s ordinary shares
owned by the person – none.

DISTRIBUTION OF RESPONSIBILITY AND
AUTHORITY AREAS OF THE GENERAL DIRECTOR
AND HIS DEPUTIES

In accordance with the “Regulation on General Director of PJSC TATNEFT”,
the General Director has the right to entrust the resolution of certain issues
to his deputies.

The acting organizational and administrative documents of the Company as-
sign the responsibilities between the General Director and Deputies of the
General Director, in terms of the work organization in the following areas:

development of oil and gas fields;

• core activities: oil and gas production, creation of a technical base for the
• exploration and management of external oil and gas projects;
• workover, well drilling and enhanced oil recovery;
• capital construction;
• economics and finance;
• strategic development;
• selection, appointment, personnel training and development of their

skills, creation of the managers and professionals reserve, planning and
implementation of the Company’s social development;

• interaction with federal governmental bodies, ministries, representative

offices of foreign countries and companies.

The Deputies of the PJSC TATNEFT’s General Director organize the work and
are responsible for the relevant activities of the Company in terms strategic
and long-term planning, performance of technical and economic indicators,
efficient and rational use of fixed assets, raw materials, fuel and energy and
other resources, organization of production and labor, labor protection and
safety, as well as other activities.

Full Name

11.01

01.02

09.03

05.04

05.05

06.06

06.07

06.09

04.10

08.11

06.12

Всего

Maganov N.U.

Voskoboinikov V.A.

Gorodny V.I.

Glazkov N.M.

Mukhamadeyev R.N

Tikhturov E.A.

Subaev N.Z.

Lavushchenko V.P.
03.08.2016

Yukhimets A.T. 03.08.2016

Ershov V.D.

Ibragimov N.G.

Nurmukhametov R.S.

Vakhitov A.V.

11/11

8/11

10/11

9/11

6/11

7/11

8/11

9/11

10/11

11/11

LIST OF ISSUES REVIEWED AT THE MEETINGS OF THE MANAGEMENT BOARD IN 2015

1. About participation in the establishment of the «1C-TEK» limited liability company and «TatITneft» limited liability company.
2. Participation in PJSC Bank ZENIT.
3. Participation in JSC Naberezhnye Chelny Heat Network Company.
4. Participation in the company «Tatneft International Co-operative U.A.».
5.

Introduction of changes to the section «Disciplinary and financial liability for violations in the area of finance» of the PJSC
TATNEFT’s Corporate Code.

6. About participation of PJSC TATNEFT n.a. V.D. Shashin in the authorized capital of PJSC ZENIT Bank.
7. On the main tasks and objectives of the development and production unit to reduce costs as part of the Company’s value

doubling strategy until 2025.

8. On the approval of the «PJSC TATNEFT Policy in the area of industrial safety, labor and environmental protection» and
«PJSC TATNEFT Program in the area of industrial and occupational safety and health to prevent injuries, reduce risks, ac-
cidents and unscheduled losses».
Information about the organization of the parade and the festive show at the square, the Lenin, Gagarin streets, and
the site behind the Drama Theater in Almetyevsk. Information about the preparation for the contest «Professional Excel-
lence – 2016».

10. On increasing the authorized capital of the «Nizhnekamsk CHP» Limited Liability Company from RUB 1,000,000 to RUB

3,399,522,716 paid for by the property on the balance sheet of the e for Lease Relations Department.

11. On the implementation of the project «Involvement of personnel in in the industrial safety and labor protection processes

on the basis of» Self-Declaration» at the NGDU “Almetyevneft

12. About work with the personnel reserve of PJSC TATNEFT.
13. Increasing the effectiveness of NGDU based on the introduction of process management.
14. On the effectiveness of investments in crude oil production in the territory of the Republic of Tajikistan for 9 months of 2016

and the program formation for 2017

15. Proposals for the implementation of the TATNEFT Company employees’ health improvement program at Company’s own

health resorts in 2017, taking into account the vouchers cost subsidizing.

16. About transferring the share of PJSC TATNEFT amounting to 63.16% in OOO « LUCH TV Company» in the subsidiary.
17. On the amount of voluntary contributions from the City Housing Department as part of the Housing Construction Program

under the Social Mortgage for 2016 and 2017.

18. On centralizing the management of PJSC TATNEFT’s social facilities.

COMMENT OF THE CENTRAL BANK OF THE RUSSIAN FEDERATION:
«THE CORPORATE GOVERNANCE IS A KEY ISSUE IN ESTABLISHING AN EFFECTIVE
MARKET ECONOMY BASED ON THE RULE OF LAW. THEREFORE, THE PROBLEMS OF
CORPORATE GOVERNANCE MOVES TO THE STATE LEVEL. IN THE EVENT OF EQUAL
PRODUCTION, FINANCIAL AND OTHER BASIC INDICATORS THE COMPANIES WITH
GOOD REPUTATION IN THE AREA OF CORPORATE MANAGEMENT ARE MUCH MORE
EXPENSIVE. RUSSIAN COMPANIES MAY COUNT ON RECEIVING A BONUS TO THE
PRICE OF THEIR SHARES IN THE AMOUNT FROM 20 TO 50% ONLY AT THE EXPENCE
OF IMPROVING CORPORATE GOVERNANCE».

The Company’s activity in the stock market is regulated by
the current legislation and the requirements of the stock
market regulators. The principles of the Corporate Govern-
ance Code of the Central Bank approved by the Government
of the Russian Federation in February 2014 and the Board of
Directors of the Bank of Russia in March 2014 and the prin-
ciples of the best practices of the Organization for Economic
Cooperation and Development (OECD) G20 / OECD have
set a high benchmark for the development of the Company’s
corporate governance system.

Concepts and procedures from the best international corpo-
rate practices are consistently introduced into the Russian
corporate environment.

The Russian Code of Corporate Governance contains re-
quirements for corporate governance standards, covering
virtually all areas of the corporate practice. This is based
on the understanding that long-term investors need a clear
understanding of the Company’s strategic goals and pros-
pects and the conviction that their rights will not be violated.

Система корпоративного управления ПАО «Татнефть»
основывается на принципах, направленных на эф-
фективное управление активами, рост рыночной сто-
имости, поддержание финансовой стабильности и
прибыльности Компании, обеспечение законных прав
и интересов акционеров и иных заинтересованных
лиц, информационной открытости.

They started paying more attention in the Russian practice of
corporate governance to the following issues:

nificant corporate actions,

egy, monitoring of its implementation,

• protection of the shareholders’ rights in execution of sig-
• adoption of a balanced and realistic development strat-
• improving the efficiency of the Board of Directors’ com-
• establishment of systems for effective risk management
• development of the remuneration policy principles for

and conflict prevention,

mittees work,

top managers of the Company.

The new version of the Bank of Russia’s Corporate Govern-
ance Code focuses on ensuring the rights of shareholders,
including:

• Protection of shareholders’ dividend rights.
• •Building effective work of the Board of Directors, defin-

ing the Board of Directors functions, organizing the work
of committees, clarifying the requirements for directors,
including the directors’ independence.

management bodies and key executives of the Company.

• Construction of a remuneration system for members of
• Building an effective system of risk management and in-
• Additional disclosure of material information about the
• Formation and control of internal regulations and proce-

Company and entities controlled by it.

ternal control.

dures for the conduct of material corporate actions (on
increasing the authorized capital, acquisition, listing and
delisting of securities, reorganization, major transac-
tions), allowing to ensure protection of rights and equal
treatment of shareholders.

INITIATIVES FOR THE DEVELOPMENT OF
CORPORATE GOVERNANCE PRACTICES

FOCUS AREAS OF IMPROVING
THE CORPORATE PRACTICE

To ensure full implementation of the new Listing Rules of the
Moscow Stock Exchange and the provisions of the Corporate
Governance Code recommended by the Bank of Russia, the
Corporate Management Committee of PJSC TATNEFT’s Board
of Directors has formed an appropriate plan of actions.

The plan has been developed taking into account the approved
work plan of the PJSC TATNEFT’s Board of Directors and
decisions of the Board of Directors and it includes the current
and operational tasks of the corporate practice. The plan
provides for joint the work of committees of the Board of
Directors and interaction with the executive bodies of the
Company’s management.

In order to coordinate the work of the Board of Directors’
committees, it is possible to hold joint meetings, including
those in the «round table» format with the invitation of competent
professionals to exchange views on significant corporate
issues, as well as using electronic formats for the interaction
through video and conference communications. Coordination
of the committees’ interaction is arranged by the Corporate
Secretary – Head of the Corporate Secretary Office of PJSC
TATNEFT.

High Level of Competencies

Management of the vertically integrated structure of
the Company requires high competence and profes-
sionalism of the management team, an effective sys-
tem of corporate governance and control. The Com-
pany has a clear and understandable organizational
structure with a good level of interaction between man-
agement bodies and the distribution of responsibilities
for control and management.

Liability Insurance of the Company’s Manage-
ment Bodies’ Members

PJSC TATNEFT n.a. V.D. Shashin insures liability risks
of the Company’s management body members, in-
cluding the insurance abroad, on terms and in amounts
corresponding to the insurance market for such risks
in the Russian Federation. The insurer of such risks
were SK SOGAZ (throughout the year) and Chulpan
(until September 2016).

In the area of respecting the shareholders’ rights:

• Increasing the transparency of the information disclosed;
• Implementing a set of measures to improve interaction

with shareholders;

In the area of improving the effectiveness of the man-
aging bodies work:

• Improving certain procedures for organizing the work of
• drafting new versions of the Company’s key internal

the managing bodies;

documents in order to bring them in line with the require-
ments of legislation, regulators and best practices of the
corporate management.

In the area of improving the quality of corporate man-
agement and following the best practices:

• improving the subsidiaries’ management system;
• updating of internal documents and procedures regu-

lating the corporate management relations within the
Group;

• analysis and assessment of the corporate management

practices on a systematic basis.

In the area of information disclosure:

mation Policy of PJSC TATNEFT;

• drafting of a new version of the Regulation on the Infor-
• drafting of the Regulation on provision of information to
• Improving the quality of information disclosure in the An-
• consideration by the Board of Directors of the Informa-

nual Report and on the Company’s website;

the shareholders of PJSC TATNEFT

tion Policy based on the recommendations of the Corpo-
rate Management Committee.

The information policy is based on the principles of
transparency combined with the preservation of the
Company’s interests in the area of protecting trade
secrets and confidential information. The most important
channels for disseminating information that available to
interested parties are the
the
Company’s official website (www.tatneft.ru) and the
Annual Report. Adhering to the principle of fair
accessibility to the information for all interested parties,
the Company publishes information posted on the official
website in Russian and English.

largest number of

PRINCIPLES AND THE ORDER OF INTERACTION WITH SHAREHOLDERS

The Company ensures equal and fair treatment of all shareholders in the exercise of their right to participate in the
management of the Company and builds relationships with shareholders based on the principles of:

Guaranteed equal protection and observance of the legitimate rights and interests of all shareholders of the Company,
regardless of the size of the shareholding, established by the current legislation of the Russian Federation, requirements and
recommendations of regulators of the stock markets, which the Company’s shares circulate on.

Continuous interaction of the Company’s management with all shareholders in order to efficiently manage the Com-
pany, ensure its sustainable and dynamic development.

Continuous improvement of the existing and development of new mechanisms and forms of interaction with share-
holders, increasing the efficiency and quality of interaction, taking into account the emergence of new shareholders and the
setting of new tasks by the shareholders.

Identification and resolution of all possible general and specific problems related to the shareholders exercising their rights.

Taking all necessary and possible measures in case of a conflict arising between the Company’s bodies and the
Company’s shareholders (shareholder), as well as between the shareholders, if the conflict affects the interests of the Com-
pany, for a full settlement of the conflict, and creating conditions that exclude the conflict arising in the future.

The Company publishes on a quarterly basis «Management’s analysis of the financial condition and performance results» -
an Appendix to the financial statements of PJSC TATNEFT prepared in accordance with IFRS standards, and familiarizes the
investors and analysts with the Company’s own production assets, providing an opportunity for field meetings at production
facilities. The interaction is based on the availability of responsible managers and employees of the Company to communicate
with the shareholders, investors and analysts of the stock market, as well as consultants of institutional investors on voting.

The Company’s interaction with shareholders and investors is maintained on a regular basis in the format of meetings, presen-
tations, conference calls with participation of management and key experts within the framework of investment conferences
and the Company’s participation in «road shows» at the sites of international financial centers, allowing the shareholders, ana-
lysts and investors representing investment companies to receive information and answers to all their questions directly from
the top managers of the Company. This format of interaction allows the shareholders and investors to form a fair understand-
ing of the strategy and current Company’s activities and at the same time enables the Company’s management to assess the
expectations of the shareholders and investors, generally providing for a constructive dialogue and the potential for working
out optimal solutions for the Company’s development, shareholders’ assets management and sustainable development of the
Company.

The Company seeks to further improve the mechanisms and forms of interaction with shareholders, taking into account the
emergence of new shareholders and the setting of new tasks by the shareholders and improving the overall quality of the cor-
porate governance.

ENSURING LEGAL
RIGHTS OF SHARE-
HOLDERS

The Company guarantees
compliance with and obser-
vance of legal rights and in-
terests of all the Company’s
shareholders regardless of
the number of shares they
own and the location of the
shareholders, as set out by
applicable laws of the Rus-
sian Federation, require-
ments and recommendations
of stock markets regulators,
where the shares of the
Company circulate, and the
Company’s Articles.

The Shareholders participate
in the Company’s Activities,
exercising their rights and
responsibilities and
on the basis of their voluntary
initiatives aimed at improv-
ing the management of the
Company’s operations.

The Company provides
the shareholders with access
to documents in accordance
with the applicable law.

INFORMATION
POLICY

DIVIDEND
POLICY

INTEREST CONFLICT
AVOIDANCE

The Company’s information
policy is aimed at effective
information interaction of the
Company with shareholders,
investors and other interested
parties.

The Company’s information
policy is aimed at providing the
information to the interested
parties in the amount neces-
sary to make a balanced deci-
sion on committing the actions
that could affect the financial
and economic activities of the
Company.

When providing the information
to the Company’s shareholders
a reasonable balance is main-
tained between the interests
of specific shareholders and
the interests of the Company
as such, which is interested in
preserving the confidentiality
of important commercial and
official information that may
have a significant impact the
Company’s competitiveness.

The Company’s dividend policy
is based on strict observance
of the legitimate rights and
interests of the shareholders, is
consistent with the mission and
strategic goals of the Company
aimed at increasing its capitali-
zation and the level of dividend
yield on invested capital, as a
result of effective management
of the shareholders’ assets.

The Company creates condi-
tions that ensure the inter-
est of management and the
shareholders in increasing the
Company’s profitability (growth
of net profit) and a long-term
value.

When determining the amount
of dividends (per share)
recommended to the General
Meeting of Shareholders the
Company’s Board of Directors
recommendation is based on
the amount of the Company’s
net profit and it is assumes that
the amount allocated for the
dividends payment is at least
30% of the net profit deter-
mined under RAS.

The Company’s corporate
management system includes
a set of rules and procedures
to avoid conflicts of inter-
est between the Company’s
management bodies and its
shareholders, as well as be-
tween the shareholders, if the
conflict affects the interests
of the Company, identification
and resolution of all possible
general and specific prob-
lems relating to the rights of
the shareholders.

In case of a conflict aris-
ing there are mechanisms
provided to take all necessary
and possible steps to com-
plete the conflict settlement,
as well as create the condi-
tions excluding the conflict in
future.

This work is carried out by the
authorized division interacting
with the Board of Directors
committees, the Internal
Audit Department and other
relevant divisions of the Com-
pany.

Regulation on the Information
Policy of PJSC TATNEFT and the
Regulation on Providing Information
to Shareholders of PJSC TATNEFT
(Minutes of the of the Board of Di-
rectors of PJSC TATNEFT Meeting
No. 12 of April 27, 2017)

Regulation on Dividend Policy was
approved by the Board of Directors
of PJSC TATNEFT on April 25, 2016.
Minutes of the Board of Directors
Meeting No. 12

The authorized unit for ensuring the Company’s interaction with shareholders is the Corporate Secretary’s office.

HISTORY OF DIVIDEND PAYMENTS FOR THE FIVE COMPLETED FISCAL YEARS

Type of shares

2011

2012

2013

2014

2015

% of face
value

dividend per
share, rubles

% of face
value

dividend per
share, rubles

% of face
value

dividend per
share, rubles

% of face
value

dividend per
share, rubles

% of face
value

dividend per
share, rubles

THE PJSC TATNEFT’ SHARE CAPITAL STRUCTURE

THE PJSC TATNEFT’S SHARE CAPITAL STRUCTURE AS OF DECEMBER 31, 2016

32.85%

3.46%

Total
2,326,199,200
shares

35.93%

Republic of Tatarstan*

The ADR program

Treasury groups

Other shareholders

27.76%

* Legal entities Controlled By

the Republic Tatarstan

TOTAL NUMBER 0F SHARES
OUT OFTHEM:

Ordinary Shares

Всего

Foreign shareholders

Russian shareholders

Preference shares

Total

Foreign shareholders

Russian shareholders

2,326,199,200

2,178,690,700

562, 260*

2,178,128,440

147,508,500

91,667*

147,416,833

*without ownership through Russian nominal holders

INFORMATION ON EACH CATEGORY (TYPE) OF SHARES

Full name of securities (Rind and Type)

Ordinary registered shares

Preferred registered shares

Securities Issue Form

Quantity issued, pcs.

Nominal value of 1 (one) security (RUB)

Issued securities state registration number

Information on state registration

DIVIDEND POLICY

Non-documentary

2,178,690,700

1 000

1-03-00161-А

26.10.2001

147,508,500

1 000

2-03-00161-А

26.10.200

The Company’s dividend policy is based on strict observance of the legitimate rights and interests of the shareholders, is con-
sistent with the mission and strategic goals of the Company aimed at increasing the Company’s capitalization and the level of
the dividend yield on invested capital as a result of the efficient shareholders’ assets management and follows principles:

increase the amount of dividends on the basis of the consistent profits growth;

• The Company recognizes dividends as one of the key indicators of the Company’s investment attractiveness and seeks to
• The Company creates conditions that ensure the interest of management and the shareholders in increasing its profitability
• The Board of Directors determines the amount of dividends recommended to the General Meeting of the Shareholders on

the basis of an economically sound approach to the distribution the of profits and compliance with the balance sheet of
short-term (revenue) and long-term (development of the Company) interests of the shareholders;

(growth of net profit) and long-term value)

• The Company ensures equality of conditions for all shareholders, irrespective of the size of the shareholding and the loca-

tion of the shareholders, and equal treatment of them by the Company in exercising their ability to participate in the Com-
pany’s profits through the receipt of dividends;

• The Company ensures maximum transparency of the dividend policy.

The principles and conditions for making decisions on the payment (declaration) of dividends, the procedure for determining
the size and payment of the dividends are determined by the Regulation on the Dividend Policy of pa TATNEFT approved by the
Board of Directors of the Company. The Regulation is based on the observance of the rights of the shareholders provided for
by the legislation of the Russian Federation, taking into account the recommendations of the corporate governance code of the
Bank of Russia and the best practices of the corporate governance

Total amount of divi-
dends (RUB bln)

The percentage of net
profit (under RAS) spent
for paying dividends

Ordinary shares

Preference shares

Date of the decision to
pay dividends

16.5

30%

20.0

30%

19.2

30%

24.6

30%

25.5

30%

708

7.08

860

8.60

823

8.23

1058

10.58

1096

10.96

The Annual General
Meeting of Sharehold-
ers for 2011, which
was held on June 29,
2012, Minutes No. 19 of
03.07.2012

The Annual General
Meeting of Sharehold-
ers on the results of
2012, which was held on
June 28, 2013, Minutes
No. 20 of 02.07.2013

The Annual General
Meeting of Sharehold-
ers on the results of
2013, which was held on
June 27, 2014, Minutes
No. 21 of July 2, 2014

Actual date of Payments August 27, 2012.

August 26, 2013

The nominal holder is
July 29, 2014. Share-
holders registered in the
shareholders register –
August 19, 2014.

The Annual General
Meeting of Sharehold-
ers following the results
of 2014, which was
held on June 26, 2015,
Minutes No. 22 of July
30, 2015null

The nominal holder
on July 29, 2015. The
shareholders registered
in the shareholders
register on August 19,
2015.

The Annual General
Meeting of Sharehold-
ers on the results of
2015, which was held on
June 24, 2016, Minutes
No. 23 of July 29, 2016

Nominal holder – July
22, 2016. To sharehold-
ers registered in the
shareholders register –
August 12, 2016.

The amount of dividends on ordinary and preference shares of PJSC TATNEFT recommended by the Board of Directors to the
General Meeting of Shareholders as of the end of 2016 is 22.81 rubles (2281% of the share’s nominal value.

Dividends are paid in cash in the ruble equivalent. The Company and its Executive Bodies ensure timely accrual and full payment of
dividends to the shareholders and nominal holders of shares, who have the right to receive them, in accordance with the procedure
provided for by the current legislation and the Company’s Articles.

Information on the decision to pay (declare) dividends, their amount and payment procedure is posted on the official Internet portal
of the Company www.tatneft.ru in Russian and English, as well as on the website of the information agency authorized to perform the
Company’s information disclosure conduct actions.

COST OF PJSC TATNEFT SHARES FOR THE PERIOD 2006-2016. (PRIVILEGED, ORDINARY), RUB

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Ordinary

Preference

121.99

148.00

55.25

139.48

145.06

158.16

218.00

208.20

226.55

315.50

427.00

77.31

87.00

20.35

76.35

86.65

88.02

105.15

121.70

134.60

198.10

235.00

DIVIDENDA YIELD IN SHARES FOR THE PERIOD 2011-2016. (PREFERENCE, ORDINARY)

Ordinary

Preference

2011

2012

2013

2014

2015

2016

3.17%

3.25%

4.13%

3.63%

3.35%

2.57%

5.70%

6.73%

7.07%

6.11%

5.34%

4.66%

In December 1996, TATNEFT became one of the first Russian companies to place the Company’s securities on international fi-
nancial markets and to provide for an access to the shares for international investors through depositary receipts. On December
12, 2016, N.U. Maganov, General Director of TATNEFT, opened trades on the London Stock Exchange and held a meeting with
international investors in the presence of Nihil Rati, General Director of London Stock Exchange plc., and A.V. Yakovenko, Am-
bassador of the Russian Federation in the United Kingdom. The events were timed to coincide with the 20th anniversary of the
company’s listing on the London Stock Exchange. Heads of The Bank of New York Mellon (depository bank of the Company’s
depositary receipts program), PWC (auditor), Cleary Gottlieb (legal adviser accompanying the placement of the TATNEFT’s
securities on the international exchanges) also participated in the opening ceremony.

REPORT ON PUBLICLY DISCLOSED INFORMATION

The Company complies with all applicable legal requirements related to the information disclosure by public companies. Following
the principle of the maximum business transparency, we provide for regular, efficient, affordable, reliable and meaningful disclosure.
An important channel of the information disclosure is the Company’s official website. Presented on the website pages there are data
for all major activity areas, the sustainable Company’s development, as well as the information for shareholders and investors, press
releases and news, annual reports. An important source of information disclosure are quarterly reports and Annual Reports, which
the Company annually issues in preparation for the Annual General Meeting of Shareholders.

STATEMENTS DISCLOSURE

TATNEFT Company discloses the annual consolidated financial statements together with the auditor’s report, and the con-
solidated interim condensed financial statements together with the assessment review of the consolidated interim condensed
financial statements.

The Joint Stock Company provides for disclosure of biographical data of the Board of Directors members, including informa-
tion on whether or not they are independent directors, as well as prompt information disclosure about the loss of an Independ-
ent Director status by a member of the Board of Directors.

The Joint Stock Company discloses information on the capital structure in accordance with the Corporate Management Code
recommendations.

The Joint Stock Company’s Annual Report provides additional information recommended by the Corporate Management Code:

controlled entities during the past year;

absentia) meetings, participation of each member of the Board of Directors in the meetings,

• overview of the most significant transactions, including related party transactions made by the Joint Stock Company and its
• report on the work of the Board of Directors for the year, containing, inter alia, information on the number of full-time (in
• report on the work of the Committees of the Board of Directors, including the main areas of the committees’ work;
• information about direct or indirect possession of Joint Stock Company’s shares by members of the Board of Directors and
• information on any conflict of interests of the members of the Board of Directors and other executive bodies (including those
• description of the remuneration system of the Board of Directors members, including the total remuneration amount of the

associated with participation of the mentioned persons in the competitors’ managing bodies of the Joint Stock Company);

other executive bodies;

managing bodies: the Board of Directors and the Management Board for the year.

Ser. No.

Message Content

Message about the date on which persons who have the right to exercise rights with regard to the
issuer's equity securities are defined, including the date on which the list of persons entitled to
participate in the general meeting of the issuer's shareholders is drawn up

Date of disclosure

25.02.2016

Message on the person’s termination of the right to have control over a certain number of votes as-
signed to the voting shares (stakes) that constitute the authorized capital of the Issuer.

12.02.2016

Message on the person’s acquisition of the right to have control over a certain number of votes as-
signed to the voting shares (stakes) that constitute the authorized capital of the Issuer.

18.03.2016, 18.06.2016, 08.04.2016,
08.04.2016, 28.06.2016, 28.10.2016,

Message on the procedure of access to information contained in a quarterly report.

Message about disclosure of the Company’s affiliated entities list on the Internet page.

Notice of holding the meeting of the Board of Directors (Supervisory Board) and its agenda.

12.02.2016, 13.05.2016, 12.08.2016,
11.11.2016

11.01.2016, 01.04.2016, 01.07.2016,
04.10.2016

26.01.2016, 15.02.2016, 16.03.2016,
18.04.2016, 17.05.2016, 20.06.2016,
25.07.2016, 22.08.2016, 26.09.2016,
28.10.2016, 21.11.2016, 20.12.2016

On convening and holding the general meeting of members (shareholders) of the Issuer, as well as
about the decisions taken by the general meeting of members (shareholders) of the Issuer.

Messages about paid income on the Issuer's securities.

Message of the Issuer’s default to the holders of the securities issued

25.02.2016

12.08.2016

Message about information disclosure on the internet web site about annual financial statements of
the Joint Stock Company

30.03.2016 Годовая БО, 27.04.2016,
28.07.2016, 28.10.2016

Message on certain decisions adopted by the Board of Directors (Supervisory Board) of the Joint Stock
Company.

01.02.2016, 25.02.2016, 23.03.2016,
25.04.2016, 25.05.2016, 24.06.2016,
24.06.2016, 03.08.2016, 26.08.2016,
30.09.2016, 24.11.2016

Message about the issuer committing a related party transaction.

01.06.2016, 28.06.2016

Message on the taken by the General Meeting of members (shareholders) of the Issuer

Message on the procedure of access to information contained in the Annual Report 2015.

29.06.2016

Message about the Information Sent or Provided by the Issuer to a relevant Agency (Organization)
of a Foreign State, a Foreign Exchange and (or) other Organizations under the Foreign Law for the
purpose of Disclosure or Submission to Foreign Investors in Connection with the Placement or
Circulation of the Issuer’s Securities outside the Russian Federation.

29.06.2016, 04.08.2016, 11.08.2016,
26.08.2016, 31.08.2016, 30.11.2016,
12.12.2016

Notice of the date of defining the persons entitled to exercise rights under the registered equity
securities.

Messages about accrued income on the Issuer's securities.

Message on changes (corrections) the essential fact text "On certain decisions taken by the is-
suer's board of directors (Supervisory Board)"

29.06.2016

26.02.2016

Message about the issuer’s disclosure of the consolidated statements (consolidated financial state-
ments), as well as provision of the audit opinion prepared with regard to such statement

31.03.2016

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY
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20.

21.

22.

23.

24.

Message about acquisition (disposal) of the voting shares (stakes) of the issuer or securities of the
foreign issuer certifying the rights in respect of the issuer’s voting shares by the issuer and/or by
organization controlled by the issuer.

12.04.2016

Message about web disclosure of the consolidated financial statements under IFRS for three
months ended on March 31, 2016, June 30, 2016, September 30, 2016

09.06.2016, 26.08.2016, 30.11.2016

Message about information, which by the issuer's opinion, essentially affects the value of the is-
suer’s equity securities

21.10.2016

Message about the emergence of the organization controlled by the issuer essentially important for
the issuer.

28.10.2016

Message on the change (correction) of the text message of the essential fact “about the informa-
tion sent or provided by the issuer to a relevant agency (organization) of a foreign state, a foreign
exchange and (or) other organizations under the foreign law for the purpose of its disclosure or
submission to foreign investors in connection with the placement or circulation of the issuer’s secu-
rities outside the russian federation.

30.11.2016

25.

Message on the change correction of information earlier published in the news bulletin.

09.12.2016

According to international standards (in the form of press releases and publication of reports in accordance with the rules of the London Stock Exchange)

26.

27.

28.

29.

Publication of the annual consolidated financial statements under IFRS for 2015

Publication of the consolidated interim condensed financial statements under IFRS for the three
months of 2016 (unaudited).

Publication of the consolidated interim condensed financial statements under IFRS for the six
months of 2016 (unaudited).

31.03.2016

09.06.2016

26.08.2016

Publication of the consolidated interim condensed financial statements under IFRS for the first nine
months of 2016 (unaudited).

30.11.2016

PROTECTION OF INSIDER INFORMATION
PROTECTION.

INSIDER INFORMATION PROTECTION COMMITTEE

The Company provides all necessary procedures for the protection of the insider information with the relevant internal regula-
tory documents: Rules for Monitoring Compliance with the Legislation of the Russian Federation on Combatting the Illegal Use
of Insider Information and Market Manipulation, the Regulation on the Procedure for Access to Insider Information and the
Rules for the Protection of Its Confidentiality Based on the List of Information Relating to the Insider Information.

The Committee is guided in its activities by the legislation of the Russian Federation.

COMPOSITION OF THE INSIDER INFORMATION PROTECTION COMMITTEE IN 2016:
Chairman
Rustam M. KHISAMOV – Corporate Secretary - Head of the Corporate Secretary Office of PJSC TATNEFT, a responsible per-
son for exercising control over the compliance with the Law on Combatting Illegal Use of the Insider Information.

Committee Members:
Valery D. ERSHOV – member of the Management Board, Head of PJSC TATNEFT’s Legal Department;
Alexey P. BESPALOV – Head of IT Department - Deputy Chief Engineer PJSC TATNEFT;
Ildar A. RAKHMATULLIN – Head of Internal Audit Department of PJSC TATNEFT;
Vasiliy A. MOzGOVOY – Assistant to General Director of PJSC TATNEFT, Corporate Finances;
Peter A. GLUSHKOV – Head of International Law Department, Department of Consolidated Financial Statements PJSC TAT-
NEFT;
Rifdar R. KHAMADYAROV – Head of Personnel Office of PJSC TATNEFT.

INTEGRATED RISK MANAGEMENT SYSTEM

CORPORATE INTEGRATED SYSTEM OF RISKS MANAGEMENT

The Company has an integrated risk management system based on the analysis and evaluation of possible factors that could
materially affect the performance of PJSC TATNEFT’s and the Group’s entities production and financial and business activities,
and also have a direct or indirect impact on the Company’s current operations and / or strategic plans. An important component
of the risk management system is the activity aimed at ensuring the implementation of unified corporate standards that regulate
the main processes of production and financial and business activities of PJSC TATNEFT and the Group’s enterprises.

When analyzing potential risks, both external and internal factors are taken into consideration.

External market, sectoral, socio-economic, political, financial, conjuncture and other conditions of the Company and its
subsidiaries and dependent companies are referred to the external risks category.

While managerial, production, personnel-related , social, environmental and others factors are of intra-corporate nature.

The corporate risk management system is aimed at identifying potential risks and the possibility of taking timely measures to
eliminate or minimize them, which makes it possible to adjust the business planning, investment activities and social policy of
the Company. The corporate standards in the Company significantly reduce the intra-corporate risks.

Given the dynamic development of the business environment, the constant change in the composition, quality and intensity of
factors that can affect the Company’s operations, the risk management system is constantly being improved to ensure prompt
response to such processes. Based on the processing of large data sets, better forecasting tools are being developed that
allow taking measures aimed at eliminating or minimizing potential risks. The corporate planning system uses, in particular,
various development scenarios that allow reacting promptly to changes related to the factors affecting the Company’s
operations.

TATNEFT Group Management

Ensuring Business
Process Efficiency

Business Process
Quality Control

Corporate Risks
Control

Key Elements of Risk Management

The mechanism of quality assessment of all possible factors,
which can significantly affect the performance of production and
financial activities of the Group and have a direct or in indirect im-
pact on the current operations and strategic plans of the Company

The system of uniform corporate standards,
regulating basic processes of industrial, financial and economic
activities of TATNEFT Company,
its structural divisions and entities of the Group

Identification of Risks

Ensuring the related party transactions of the production
financial and business process activities

Avoidance or Minimization of Risks

Prevention of risks in the framework of related party transactions

Monitoring of Risk Management

quality control of corporate standards performance
identification of emerging risks in the course of business processes and implementation of new projects
assessment of personal responsibility of officials

The analysis of risk factors considers all aspects of the
market, industry, socio - economic, political, financial, market competition and other conditions of the Company, its
subsidiaries and affiliates operation.
At the same time taken into account are all intra-corporate factors: management, production, HR, social, environmental.
Currently such procedures are provided for basic production and corporate blocks.

Risks Control

Production Activity

Corporate Management

INDUSTRY RISKS

Risk of oil and refined products prices. Cash inflows,
profitability and the future level of growth largely depend on
the existing prices for crude oil and oil products. In the past,
the crude oil and oil products prices fluctuated over a wide
range under the influence of many factors, among which:

• international and regional supply and demand (reflect-

ing, inter alia, expectations of future supply and demand)
for the oil and petroleum products;

export restrictions and taxes;

• weather conditions;
• national and foreign governmental regulation, including
• prices and availability of alternative fuels;
• prices and availability of new technologies;
• ability and willingness of members of the Organization

of Petroleum Exporting Countries (OPEC) and other oil-
producing countries to establish and maintain certain
levels of production and prices;

• political and economic events in oil-producing regions, in
• global and regional economic situation.

particular, in the Middle East;

Over the years, the prices for crude oil and petroleum prod-
ucts have been relatively high, but in recent years, there has
been a significant decline. The prices for crude oil and petro-
leum products vary in different directions. The fall in prices
for oil and oil products adversely affects the results of op-
erations and the financial position of the Company. Despite
certain stabilization of oil prices, which has been observed
recently, lower prices from the current levels may lead to a
reduction in the volume of profitable oil production by the
Company, which will lead to a reduction in the volume of
effective development of the Company’s reserves and to a
decrease in the economic efficiency of the programs for car-
rying out search-prospecting works.

It is worth noting that despite the development of alternative
energy sources and the potential for increasing the fleet of
electric vehicles, in the medium term the Company does not
expect that they will be able to significantly lead to substitu-
tion of oil and oil products, while the demand for oil and oil
products will continue growing in many respects at the ex-
pense of countries with developing economies. Therefore,
according to the Company, no significant deterioration in of
the demand structure in the industry is expected.

Technical and technological risks.
Exploration, development and equipping of new fields,
maintenance of operating wells, drilling of new ones, as well
as treatment, transportation and processing of oil and gas
are a very complex and capital-intensive process. Additional
investments are required for enhanced oil recovery, which
is especially important for the Company. The role of special
methods of the oil recovery enhancement will increase in
the future, as a result of deposits depletion. Accordingly, the
economic efficiency of the fields exploration and develop-
ment will largely depend on the ability of the Company to use
the most productive and affordable technologies. The Com-
pany pays considerable attention to the development and
application of the most advanced technologies in the area of
exploration, production, treatment, transportation and refin-
ing of oil and gas, being one of the innovation leaders in this
area in Russia.

The Company and its subsidiaries and dependent compa-
nies operate sophisticated process systems and facilities for
the extraction, treatment, transportation and refining of oil
and gas, which are classified as hazardous production facili-
ties. The Company takes all necessary measures aimed at
ensuring safe operation of these production facilities, com-
pliance with all applicable standards and requirements, ap-
plies the best practices in this area, and also provides liability
insurance for a number of facilities.

Transportation. Since most of the regions of crude oil pro-
duction in Russia are remote from the main markets for oil
and oil products sailing, oil companies depend on the de-
gree of the transport infrastructure development, as well as
on the possibility of accessing it. The Company transports
a significant portion of crude oil, which the Company sells
for export and to the domestic market through the system
of trunk pipelines in accordance with contracts concluded
with PJSC “Transnet” and its subsidiaries, which formulate
the main obligations between the parties, including the right
of “Transneft” Company to mix or replace the Company’s oil
with the oil from other producers. A significant part of the oil
transported through the pipeline is delivered to sea ports for
further transportation by sea. The Russian marine terminals
have certain restrictions related to geographical location,
weather conditions and the throughput. The transportation
of petroleum products across Russia is mainly carried out by
rail. The railway infrastructure of the Russian Federation is
owned and operated by JSC “Russian Railways”. “Transneft”
and “Russian Railways” are state-owned companies. Since
the activities of the above companies are part of the natu-
ral monopolies, their tariff policy is determined by the state

COUNTRY AND REGIONAL RISKS

The Company is registered and carries out most of its activities
in the Russian Federation. The Company’s main production as-
sets are located, and the main production activity is carried out
in the territory of the Republic of Tatarstan - a constituent entity
of the Russian Federation. In particular, the political situation in
the Russian Federation and in the Republic of Tatarstan is sta-
ble. The risks of a possible military conflict, announcement of a
state of emergency or a strike in the region of the Company’s
core business are assessed as low. At the same time, the Com-
pany has approved procedures that can activated in the event
of a state of emergency to reduce the impact of such a situation
on the lives, health and safety of employees and residents of
the regions of operations, as well as the Company’s production
activities. Geographical features of the region of the Company’s
core business are not characterized by an increased risk of nat-
ural disasters, which may have a significant impact on normal
production activities. When planning and carrying out the works
for the production, treatment, transportation and storage of oil
and gas, oil and gas products, as well as materials involved in
production, the Company takes into account the geographi-
cal, including climatic, features of the region of activity. In the
event of negative consequences for the Company’s operations
that may be caused by natural disasters such as floods, earth-
quakes, mudflows, hurricane winds and others, the Company
approved procedures and policies aimed at prompt elimina-
tion such consequences. The Company has monitoring pro-
cedures, using modern technical means, aimed at preventing
possible occurrence of negative consequences of the natural
phenomena and informing the population of the Company’s ac-
tivities region about the possibility of such consequences. The
region of the Company’s core business is not remote from the
point of view of transport and other infrastructure.

bodies to ensure the balance of interests of the state and
all participants in the transportation process. Tariffs of the
natural monopolies are established by the Federal Tariff Ser-
vice of the Russian Federation (“FST”). The tariff amount
depends on the transportation direction, the volume of sup-
ply, the distance to the destination, and also on some other
factors. The FST reviews the tariffs at least once a year. The
Company closely follows the development and maintenance
of the transport infrastructure necessary for the delivery of
produced oil and produced oil products to customers, as
well as the tariff policy, and actively participates in relevant
sectorial discussions and initiatives.

Environmental risks. The oil and gas sector of the economy
is subject to a high degree of environmental risks. In case of
violation of environmental standards, there is a risk of penal-
ties. In addition, there is a possibility of revising federal and
regional environmental standards in the direction of their fur-
ther tightening. The Company continuously carries out and
introduces new technical and organizational measures that
minimize the impact of technical and environmental risks.

STRATEGIC RISK

The activities and results of the Company’s financial activities
depend on many factors, including those related to changes
in the energy market environment, state policy, primarily taxa-
tion-related, technologies development and the labor market
dynamics. The Company’s managing bodies decisions related
with development (strategy) are prepared on the basis of all
available information relevant to possible development sce-
narios and seek to take into account all reasonably foreseeable
variations in the assumptions used in such planning. Taking into
consideration the existence of a high-tech oil and refining base
formed over many years, the Company has a stable platform
for development and, adjusts its plans, as necessary. At the
same time, since the implementation of the main investment
projects by the Company is usually carried out during a num-
ber of years, a significant negative change in the prerequisites
laid down when making decisions on the implementation of a
project may have a negative impact on the results of operations
and the Company’s profitability.

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYRisks of the banking system. The Company’s cash is allo-
cated on the accounts and placed in deposits with banks of
the Russian Federation. The Company implements a diversi-
fied approach when placing its free cash. At the same time,
the Company encountered the situations of normal activity
suspension and withdrawal of licenses of the credit institu-
tions where funds were placed. Due to the above diversifi-
cation, as well as monitoring the state of credit institutions
where the funds are placed, the Company reduces the risks
of their loss.

RISK OF THE BUSINESS REPUTATION LOSS

in strict compliance with

Due to the fact that the main products sold by the Company
(oil, oil products and gas products) are homogeneous and
are produced
the current
requirements and standards, and the Company itself is one
of the largest Russian oil companies with more than 65 years
of history, an understanding of the financial stability or
financial position of the Company among the main
counterparties (customers) of the Company’s products
does not have a significant impact on their decision to
cooperate with the Company.

At the same time, the representation of consumers of the
Company’s products and the quality of products and
services affects the sales volumes and profitability of this
segment. The Company carries out continuous monitoring
of the quality of oil and gas products sold through the
network of filling stations, expands the range of services
rendered to customers at the filling station stations and
undertakes other measures to
improve the quality of
services. In addition, the Company constantly informs its
customers and counterparties of the Company’s activities
through publishing materials and press releases on the
Internet, distributing them through the media, and through
mobile applications. There are free telephone lines for
customers of the filling station network to receive feedback
and complaints about the quality of products and services.
The Company has adopted and operates procedures to
promptly respond to the customer claims and complaints in
order to eliminate their causes. In addition to the regular
disclosure of information (compulsory and voluntary), at the
request of customers and counterparties, subject to the
requirements of the law, the Company provides all necessary
information on its financial position and sustainability.

FINANCIAL RISKS

The main financial risks of the Company’s operations are relat-
ed to currency fluctuations, inflation, as well as the conjuncture
in financial markets and the stability of the banking system.

Currency risks. The Company is exposed to risks of unfa-
vorable changes in exchange rates, the main of which is the
fluctuation of the ruble against the US dollar. This is due to
the fact that a significant share of the Company’s revenues
is denominated in US dollars, while the greater part of its
expenses is expressed in rubles. The currency structure of
the Company’s debt as a whole reflects the structure of the
Company’s income, which reduces dependence on the cur-
rency fluctuations.

Influence of inflation. The current level of inflation does
not have a significant negative impact on the Company’s fi-
nancial position. It is not possible to predict the critical level
of inflation for the Company, since in addition to the level of
consumer prices, it is necessary to take into account the
change in the real purchasing power of the ruble, the con-
juncture in the Russian and international oil markets, as well
as the market of materials and services for the oil industry,
and the state’s further policy with regard to tariffs.

Financial markets. In accordance with the Company’s de-
velopment strategy until 2025, the main investments in de-
velopment are planned to be financed received from the in-
come of the operating activities (equity capital). At the same
time, the Company periodically raises borrowed funds and
the ability to do so at acceptable rates and in the required
quantities depends on the environment in the financial mar-
kets. In particular, the change in interest rates may have an
impact on the Company’s operations of borrowing money
and servicing the current debt: in the case of borrowing
funds in the form of bank loans with a floating interest rate,
an increase in the general level of interest rates on the mar-
ket leads to an increase in the amount of funds, payable on
interest. When planning its activities and forming budgets,
the Company takes into account the current and forecasted
situation in the financial markets and supports access to a
wide range of financing sources to ensure that funds can be
raised on optimal terms.

The Company periodically places part of its cash in financial
instruments, which value depends on the situation on the mar-
ket. These financial instruments may differ in terms of risk and
return. The Company pursues a balanced policy in the area of
the allocating the free cash, it monitors the risks associated
with such investments, but can not in all cases guarantee the
achievement of the expected results for such investments.

102

To carry out its activities, the Company receives licenses for
the exploration and production of oil and gas, for the
operation of hazardous production facilities and other
activities in accordance with applicable law. At present, the
Company does not expect significant changes related to the
licensing procedure for the exploration and development of
oil and gas fields, the operation of hazardous production
facilities, including oil and gas refineries, which could have a
significant negative impact on the activities of PJSC TATNEFT
and its subsidiaries.

The Company is involved as a defendant in a number of
court cases, as well as a party in other proceedings arising in
the course of its normal business.

LEGAL RISKS

PJSC TATNEFT is a subject of foreign economic activity,
among other things, exporting oil and oil products,
equipment and services outside the Russian Federation,
and investing in projects abroad. In this regard, any changes
in the legislation of the Russian Federation or other countries,
where the Company operates, in the area of currency
regulation and currency control, as well as rules of customs
control and duties that may limit the funds of repatriation,
export or importation of goods and equipment, as well as
requiring compliance with preliminary or subsequent
procedures related to currency transactions or customs
procedures, may complicate the Company’s operations and
lead to additional expenditures. The Company believes that
the risk of adverse changes in exchange control and customs
regulations in the Russian Federation at present are not
significant.

Given the role of the oil industry for the Russian economy,
tax revenues of the Company are significant. Changes in tax
legislation may have a material impact on the Company’s
operations, profitability of its operations, financial position
and the value of securities. The larger part of taxes and
duties, primarily in the form of a mineral extraction tax and a
customs export duty on oil and oil products, are levied on the
basis of gross indicators (volumes of production or exports),
regardless of the profitability of the Company’s operating
activities. At the same time, the current legislation provides
the Company with a number of privileges for these taxes and
fees, including the oil production from deposits with a high
degree of reserves depletion and the development of high-
viscosity oil fields, which economic effectiveness largely
depends on their availability. At the moment, the Russian
Federation is developing mechanisms for taxing the oil
industry on the basis of the activities profitability, including,
in particular, the introduction of a tax on additional income
from the extraction of hydrocarbon raw materials, which is
planned to be pre-tested in a number of pilot projects, as
well as additional changes in the use of export duty on oil
and petroleum products (up until its cancellation). These
possible changes may have both a positive and negative
impact on the Company’s financial performance and
investment projects.

103

POLICY IN THE AREA OF INTERNAL AUDIT

INTERNAL CONTROL

The internal audit is carried out within the framework of the annual plan approved by the Board of Directors. Such items as the
system of internal control over the operational efficiency of processes, compliance with legislation and safety of property are
considered within the framework of the audit. The audit is conducted on a risk-oriented basis approach. A report on the internal
audit results is sent to the Company’s management and to the Audit Committee.

Subsequently, the Internal Audit Department monitors the implementation of activities and informs the Company’s management
and the Audit Committee about the progress in eliminating the identified shortcomings.

There were 9 audits performed in 2016. In addition, following the instructions of the Company’s management the Department’s
representatives participated in 32 unscheduled projects on various issues of the financial and economic activity.

2016 witnessed monitoring implementation of the action plans based on the results of audits carried out in 2009-2016. All the
cases of non-fulfillment of the action plans were initially reported to the management of the relevant division after which the
General Director was informed.

The PJSC TATNEFT’s Internal Audit Department successfully performed in November 2016 evaluation of the internal audit
functions quality. Based on the results of the evaluation, the experts of ZAO Deloitte & Touche CIS concluded that the activities of
the Department as a whole are in line with the International Professional Standards of the Internal Audit and the Code of Ethics of
the Institute of Internal Auditors.

The internal audit procedures are an integral part of the corporate management system and include targeted actions taken by the
Board of Directors and the Company’s management aimed at improving the risk management process and increasing the
likelihood of achieving the set goals. As part of the improvement of corporate management practices, in the reporting corporate
year, there were amendments made to the Regulation on the Internal Audit Department of PJSC TATNEFT. The Board of Directors
approved the new version of the Regulation in March 2016.

The Internal Control Service participates in the audits of structural divisions and subsidiaries of the TATNEFT Group. The
corporate control function is to provide methodological support to the management staff of the Executive Office and structural
subdivisions of the TATNEFT Group of Companies in terms of compliance with the norms of both the tax legislation and the
accounting legislation. This function helps ensuring compliance with legislative norms and reducing the tax and financial risks
in the Company.

INDEPENDENT AUDITOR

In in view of the independent assessment of the financial statements reliability, the Company annually attracts an external
auditor to conduct an audit of the IFRS and RAS financial statements.
The PJSC TATNEFT’s Board of Directors Audit Committee preliminarily considers candidates for external auditors of the
Company, which recommendations are the basis of made for further approval of the external auditors in accordance with the
procedure established by the law.

The General Meeting of Shareholders approved JSC PricewaterhouseCoopers Audit as the auditor of the Company’s
accounting statements under RAS for 2016.

The General Meeting of Shareholders approved JSC PricewaterhouseCoopers Audit as the auditor of the Company’s
consolidated financial statements in accordance with IFRS for 2016.

104

105

In 2014 the decision of the Board of Directors of PJSC TAT-
NEFT approved the organization standard the «Anti-cor-
ruption policy of PJSC TATNEFT n.a. V.D. Shashin (STO TH
123-2014), which sets out the basic principles aimed at pre-
venting the corruption.

The main principles of the anti-corruption policy are:

Non-Acceptance of Corruption and the Ban on the Cor-
ruption Actions

The Company’s activities are based on preventing the cor-
ruption in all forms and manifestations. All employees, mem-
bers of the Company’s management bodies and other per-
sons acting on behalf of the Company or in its interests are
prohibited directly or indirectly, personally or through any in-
termediary, to be involved in corrupt practices, regardless of
the business doing practice in a particular country or region.

PJSC TATNEFT does not allow any corrupt acts, including a
conflict of interest manifestation, both in relation to repre-
sentatives of the state, public formations, organizations of
any form of ownership, politicians and other third parties,
and with regard to the Company’s employees, in any way,
including through abuse of office aimed at gaining any per-
sonal benefit.

Inevitability of Punishment

The Company carries out an investigation of all reasonably
justified reports of violating proper procedures to counteract
involvement in corrupt activities and prosecutes perpetra-
tors without regard to their position, term of service, status
in the Company and other relationships with it in the manner
prescribed by the applicable law and local regulatory docu-
ments of the Company. The Company applies all possible
reasonable and legitimate efforts for the quickest possible
restraint of violations. The Company makes public the infor-
mation about persons who violated the requirements of ap-
plicable the law and this Anti-Corruption Policy.

Legitimacy

The Company and its employees in the course of carrying
out their duties are obliged to comply with the norms of the
Russian anti-corruption legislation, as well as the applicable
norms of any foreign anti-corruption legislation in case of
entering into legal relations subject to such a legislation.

Top Management Attitude

Monitoring

The managing officials of the Company, including members
of management bodies, heads of departments, offices and
other divisions of the Company, must declare an irreconcil-
able attitude to any forms and manifestations of corruption
at all levels, demonstrate, implement and comply with it in
practice.

Regular Risks’ Assessment of Involvement in Corrupt
Activities

The Company identifies, evaluates and periodically reas-
sesses the corruption risks inherent in its potentially vulner-
able business processes. In identifying and assessing the
risks, the Company takes into account the completeness of
information on the Company’s activities and plans, the in-
cluding investment and strategic ones, available at the time
of valuation and reassessment.

Consistency and Adequacy

The Company develops and implements a system of proper
procedures on combating and preventing any involvement in
corrupt activities. The Company strives to make the proce-
dures as transparent, clear, feasible and reasonably respon-
sive to the identified risks as possible.

Due Diligence Principle

The Company monitors and checks counterparties and
candidates for positions in the Company before deciding
whether to start or continue business relations or hire to the
positions for their reliability, non-acceptance of corruption
and the conflict of interest risk.

Information Sharing and Training

The Company informs and clarifies the principles and norms
of the applicable legislation, the Anti-Corruption Policy and
other local regulatory documents with respect to combatting
any involvement in corruption activities, including training
employees on the basics of combatting the involvement in
any corruption activities and clarifying the Company’s policy
in this area to counterparties.

The Company continuously monitors implemented proce-
dures to combat and prevent involvement in corrupt activi-
ties and controls their compliance. The Company periodi-
cally makes an independent assessment of the state of the
system for counteracting involvement in corrupt activities,
as well as assessing the compliance of the Company’s activ-
ities with the norms of the applicable legislation and the Anti-
Corruption Policy. The results of the evaluation are commu-
nicated to the shareholders and to the public in the annual
report, press releases and other information materials.

Improving the Due Diligence Procedures System

The Company develops and maintains an alert system for
violations and risks associated with corrupt activities. This
system applies both to the employees and other persons
with the possibility of maintaining anonymity. The Company
guarantees confidentiality to all employees and other per-
sons who have faithfully reported on the corruption risks and
violations.

Reports on violations of the Anti-Corruption Policy can be
transferred in the following ways:

• directly to the immediate or superior managing person;
• through the round-the-clock phone of the PJSC TAT-
• to law enforcement agencies.

NEFT’s «hotline»;

Protection of Workers’ Interests

No sanctions can be applied to the employee for:

• refusal to participate in corrupt activities, even that such

a refusal resulted in the Company’s incurring losses, loss
of profits, commercial and / or not obtaining competitive
advantages;

• bona fide reporting of alleged violations, facts of corrupt

activities, other abuses or inadequate effectiveness of
existing control procedures.

If an employee or other person provides knowingly false
information or attempts, using anticorruption procedures,
to obtain personal benefits contrary to the interests of the
Company or the applicable law, then such a person may be
held liable in accordance with the current legislation and lo-
cal regulatory documents of PJSC TATNEFT.

All employees, irrespective of the position held, are liable
under the current legislation of the Russian Federation for
compliance with the principles and requirements of the An-
ti-Corruption Policy, as well as for the actions (inaction) of
subordinate persons violating these principles and require-
ments. The persons guilty of violating the requirements of
the Anti-Corruption Policy may be brought to disciplinary,
administrative, civil or criminal liability on following the ini-
tiative of the Company, law enforcement agencies or other
persons in the manner and on the grounds provided for by
the laws of the Russian Federation, the Company’s Articles,
local regulations and Labor contracts.

“HOT LINE”

The Company effectively operates a special confidential
channel through which an employee or an outsider can re-
port the facts of various violations related to the Company’s
activities, including corruption: the “Hotline”.

Reception of calls is carried out by an independent operator.
There were 790 applications of various nature received and
processed in 2016. Appropriate measures have been taken,
including introduction of new standards and regulations to
the corporate practice aimed at reducing the risks of viola-
tions in the Production and economic activities, as well as
at improving labor discipline and employees’ responsibility.
Additional control measures have been introduced to pre-
vent violations of the earlier identified nature in the future.

THERE IS A «HOT LINE» INFORMATION
SYSTEM OPERATING AT THE COMPANY
SINCE 2015
PHONE: 8 800 100 4112

106

107

COMMENT:

This Report has been generated in accordance with Chapter 70 of Bank of the Russia Regulation No. 454-P of Dec. 30, 2014
“On disclosure of information by issuers of equity securities” and it reflects the Company’s compliance with the principles and
recommendations of the Corporate Governance Code (hereinafter also referred to as the Code) recommended by the Bank of
Russia for use by joint-stock companies, which securities are admitted to organized trading.

The text of the Corporate Governance Code is posted on the official website of the Bank of Russia on the Internet at: http://
www.cbr.ru/finmarkets/files/common/letters/2014/inf_apr_1014.pdf.

As a methodology for assessing compliance of PJSC TATNEFT with principles of corporate governance, the recommendations
set forth in the Bank of Russia Letter No. IN-06-52 / 8 of February 17, 2016 “On disclosure of a report on compliance with the
principles and recommendations of the Code of Corporate Governance in the annual report of a public joint stock company”.

Description of the most significant aspects of the model and practice of the corporate governance at PJSC TATNEFT is con-
tained in the section “Corporate Management” of the Company’s Annual Report for 2016, as well as on the Company’s official
Internet website at www.tatneft.runull.

THE PJSC TATNEFT’S BOARD OF DIRECTORS CONFIRMS THAT THE PRESENT
REPORT CONTAINS COMPLETE AND RELIABLE INFORMATION ABOUT THE
COMPANY’S COMPLIANCE WITH PRINCIPLES AND RECOMMENDATIONS OF THE
CORPORATE GOVERNANCE CODE RECOMMENDED BY THE BANK OF RUSSIA.

PJSC TATNEFT, being a company registered in the Russian Federation, fully complies with the requirements of Russian leg-
islation and is guided by the national principles of the corporate governance recommended for application by the regulatory
authorities for the securities market of the Russian Federation. At the same time, the Company applies the principles of the
best international corporate practices and strives to generally comply with the best standards of the corporate governance.

PJSC TATNEFT adheres to the appropriate standards to provide all stakeholders with understandable, complete and structured
information on the corporate governance system that has evolved in the Joint-Stock Company, explaining the key reasons,
factors and (or) circumstances, in which the Company does not respect or adhere to the full principles of the corporate govern-
ance, formalized in the Code of Corporate Governance.

During 2016, the Company was developing the corporate practice and improving internal corporate procedures in accordance
with the recommendations of the Corporate Governance Code recommended by the Bank of Russia.
The following internal documents, which are fundamental to the Company’s corporate practice system were updated in the
reporting corporate year:

(24.06.2016 );

• Articles of Public Joint Stock Company TATNEFT n.a. V.D. Shashin (24.06.2016 );
• Regulation on the General Meeting of Shareholders of the Public Joint Stock Company TATNEFT n.a. V.D. Shashin
• Regulation on the Board of Directors of the Public Joint Stock Company TATNEFT n.a. V.D. Shashin (24.06.2016 );
• Regulation on the General Director of the Public Joint Stock Company TATNEFT n.a. V.D. Shashin (24.06.2016 );
• Regulation on the Management Board of the Public Joint Stock Company TATNEFT n.a. V.D. Shashin (24.06.2016 );
• Regulation on the Board of Directors’ Audit Committee of PJSC TATNEFT n.a. V.D. Shashin (29.09.2016);
• Regulation on the Board of Directors’ HR and Remuneration Committee of PJSC TATNEFT n.a. V.D. Shashin (29.09.2016);
• Regulation on the Board of Directors’ Corporate Management Committee of PJSC TATNEFT n.a. V.D. Shashin

New adopted documents:

• Regulation on the Corporate Secretary of PJSC TATNEFT n.a. V.D. Shashin (25.02.2016);
• Regulation on the Dividend Policy of PJSC TATNEFT n.a. V.D. Shashin (25.04.2016).

108

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYNo.

Corporate Governance Principle

Criteria for Assessing Compliance with the Principle of
Governance

Status37 of
Compliance with
the Principle of
the Corporate
Governance

Explanations38 for Deviations from
the Criteria for Assessing the
Compliance with the Corporate
Governance Principle

The Company shall ensure equal and fair treatment of all shareholders in the exercise of their right to participate in the management of
the Company.

1.1.

1.1.1.

The Company shall create the best
possible conditions for shareholders to
participate in the general meeting and
develop informed positions on issues
on its agenda and to coordinate the
Company’s actions, as well as an op-
portunity to express the opinions on the
issues being discussed.

1.1.2.

The procedure for notification on hold-
ing a General Meeting and provision of
materials for the general Meeting gives
shareholders the opportunity to properly
prepare for participation in it the General
Meeting.

1.1.3. During the preparation and holding of the

General Meeting, the shareholders shall
have the opportunity to receive informa-
tion about the meeting and materials to it
without hindrance and in a timely manner,
to pose questions to the executive bodies
and to communicate with each other.

1.1.4.

The exercise of the shareholder’s right
to demand convocation of the General
Meeting, nominate candidates for the
management bodies and carry propos-
als for inclusion in the agenda of the
General Meeting shall not be accompa-
nied by unjustified complexities.

1.1.5. Each shareholder had the opportu-

nity to freely exercise the right to vote
in the simplest and most convenient
way for him.

110

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

1. The “Regulation on the General Meeting of the
Shareholders”, approved by the General Meeting of
the Shareholders and regulating the procedures for
holding the General Meeting, is publicly available.
(The new version was approved by the decision of
the General Meeting of the Shareholders of PJSC
TATNEFT on June 24, 2016).

2. The Company provides an affordable way of
communicating with the Company, such as a hotline,
e-mail, allowing the shareholders to express their
opinion and forward questions regarding the agenda for
the General Meeting in preparation. These actions used
to be taken by the Company on shortly before each
General Meeting that took place in the reporting period.

1. The Company made a notice of holding the General
Meeting of the Shareholders posted (published in
the news line) on the Internet website at least 30 days
before the date of the General Meeting.

2. The communication on holding the meeting provides
information on the meeting venue and documents
required for admission to the premises.

3. The shareholders were provided with access to the
information about who proposed the agenda and who
nominated candidates to the Board of Directors and the
Audit Commission of the Company.

1. During the reporting year, the shareholders
were offered the opportunity to pose questions to
members of the Company’s executive bodies and the
Company’s Board of Board of Directors members
shortly before and during the Annual General Meeting.

complied with

partial compliance

no compliance

2. The Board of Directors’ position of (including
dissenting opinions incorporated in the Minutes) for
each agenda item of General Meetings held during
the reporting period was included into the materials
prepared for the General Meeting of the Shareholders.

3. The Company provided for the access of the
shareholders to the list of persons entitled to
participate in the General Meeting from the date of
its receipt by the Company, in all cases of holding
General Meetings in the reporting year.

1. In the reporting year, the shareholders had the
opportunity, for at least 60 days after the end of
the relevant calendar year, to submit proposals for
inclusion in the agenda of the annual General Meeting.

2. In the reporting year, the Company did not refuse
to accept proposals on the agenda or nominees for
the bodies of the Company due to misprints and other
insignificant shortcomings in the shareholder’s proposal.

1. The Company’s internal documents (internal
policy) contain provisions according to which each
participant of the General Meeting can request
a copy of the ballot filled out by him before the
meeting completion.

The shareholders shall be given an equal and fair opportunity to participate in the Company’s profits distribution through receiving divi-
dends

1.1.6. Procedures for holding a General
Meeting set by the Company shall
provide an equal opportunity for all
persons present at the general meeting
to express their opinions and ask ques-
tions that might be of interest to them.

complied with

partial compliance

no compliance

1. When holding a General Meeting of the
Shareholders in the form of a meeting (joint attendance
of the shareholders) during the reporting period,
sufficient time was provided for the reports on the
agenda items and time for discussion of these issues.
2. The candidates for management and control
bodies of the Company were available to answer
questions from the shareholders at the meeting at
which their nominees were put to a vote.

3. The Board of Directors, when making decisions
related to the preparation and conduct of the
General Meeting of the Shareholders, considered
the issue of using telecommunications to provide
remote access to the shareholders for participation
in the General Meeting in the reporting period.

1.2.

1.2.1.

1.2.2.

The Company shall develop and
implement a transparent and under-
standable mechanism for determin-
ing the amount of dividends and their
payment.

1. The Company has developed and made publicly
available the “Regulation on the dividend policy
of PJSC TATNEFT” approved by the decision of
the Board of Directors of PJSC TATNEFT n.a. V.D.
Shashin, Minutes No. 12 of April 25, 2016.

The Company shall not decide on
the payment of dividends, unless
such decision, formally not violating
the restrictions established by law, is
economically unjustified and can lead
to the formation of false perceptions
about the Company’s activities.

1. The Company’s dividend policy contains clear
indications of financial/economic circumstances in
which a Company should not pay dividends.

1.2.3.

The Company shall not allow deterio-
ration of the existing shareholders’
dividend rights.

1. In the year under review, the Company did not
take any actions leading to a deterioration in the
dividend rights of the existing shareholders.

1.2.4.

The Company shall strive to exclude
the use by the shareholders of
any other ways of generating profit
(income) from the Company in addi-
tion to dividends and the Company’s
liquidation value distribution.

2. The history of dividend payments reflects the
Company’s consistency in ensuring a high level of
the dividend yield, while maintaining the balance
of short-term (receiving the income in the form of
dividend payments) and long-term (investing in the
development of the Company).

1. In order to exclude any other ways of the
shareholders generating profit (income) from the
Company in addition to the dividends and the
liquidation value distribution, internal documents
of the Company establish control mechanisms that
ensure the timely identification and the procedure for
approving transactions with persons affiliated with
material shareholders having the right to dispose of
votes falling on voting shares), in cases where the
law does not formally recognize such transactions as
related party transactions.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

The Company emanates from
the sufficiency principle of 55
days term as defined by the
Articles.

1.3.

1.3.1.

complied with

partial compliance

no compliance

The system and practice of the Corporate governance ensure equal terms and conditions for all shareholders owing shares of the same
category (type), including minority (small) and foreign shareholders, and equal treatment of them by the Company.

The Company shall create the condi-
tions for fair treatment of each share-
holder by the Company’s management
bodies and supervisory persons, in
particular, ruling out the abuse possi-
bility of minority shareholders by major
shareholders.

1. During the reporting period, the procedures
for managing potential conflicts of interest of the
essential shareholders were effective, and the
Board of Directors paid due attention to the conflicts
between shareholders, if any.

complied with

partial compliance

no compliance

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

The Company shall not perform any
actions, which will or might result in
artificial reallocation of the corporate
control.

1. There were no quasie-treasury shares or they did
not participate in the voting during the reporting
period.

complied with

partial compliance

no compliance

The shareholders shall be provided with reliable and effective ways of recording the rights to the shares, as well as the possibility of un-
hindered and easy disposal of their shares.

The shareholders shall be provided
with reliable and effective ways of
recording rights to the shares, as well
as the possibility of free and easy
disposal thereof.

1. The quality and reliability of activities carried
out by the Company’s Registrar in maintaining the
register of securities’ owners correspond to the
needs of the Company and its shareholders.

complied with

partial compliance

no compliance

The Board of Directors shall carry out the strategic management of the Company, define major principles and approaches to the organ-
izing of the Company’s risk and internal control management system, monitor the activities of the Company’s executive bodies, and also
exercise other key functions.

1.3.2.

1.4.

1.4.1.

2.1.

2.1.1.

2.1.2.

The Board of Directors shall be respon-
sible for making decisions related to
the appointment and dismissal of the
executive bodies, including due to their
improper performance of their du-
ties. The Board of Directors shall also
ensure that the Company’s executive
bodies act in accordance with the ap-
proved development strategy and the
main lines of the Company’s business.

The Board of Directors shall set the
basic long-term targets for the Com-
pany’s activities, and shall assess and
approve its key performance indicators
and principal business goals, as well
as its strategy and business plans with
regard to the Company’s principal
areas of operations.

2.1.3.

The Board of Directors shall define
the principles and approaches to the
organization of the risk and internal
control management system in the
Company

1. The Board of Directors has the authority stipulated
in the Articles of Association to appoint, discharge
from office and determine the terms of contracts with
respect to members of the executive bodies.

complied with

partial compliance

no compliance

2. The Board of Directors considered the report
of the sole executive body and members of the
collegial executive body on the implementation of
the Company’s strategy.

1. During the reporting period, the Board of
Directors considered the issues related to the
implementation and actualization of the strategy,
approval of the Company’s financial and economic
plan (budget), as well as considered the criteria and
indicators (including interim ones) of implementing
the strategy and business plans.

1. The Board of Directors defined the principles
and approaches to the organization of the risk and
internal control management system in the Company

2. The Board of Directors performed the assessment
of the Company’s risk and internal control
management system during the reporting period.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

The Board of Directors shall define
the Company’s policy of remu-
neration and (or) reimbursement of
expenses (compensations) to the
Board of Directors’ members, execu-
tive bodies and other key executives
of the Company.

The Board of Directors shall play
a key role in preventing, identify-
ing and resolving internal conflicts
among the Company’s bodies, and
the hareholders of the Company and
employees of the Company.

The Board of Directors shall play a
key role in ensuring the transparency
of the Company, the timeliness and
completeness of the Company’s
information the disclosure and easy
access of the shareholders to the
documents of the Company.

1. The Company has developed and implemented a
policy (policies) approved by the Board of Directors for
the compensation and reimbursement of the Board
of Directors’ members, the executive bodies of the
Company and other key executives of the Company.

complied with

partial compliance

no compliance

2. During the reporting period, the meetings of the
Board of Directors considered issues related to this
policy (policies).

1. The Board of Directors plays a key role in preventing,
identifying and resolving internal conflicts.

2. The Company has created a system for identifying
transactions related to conflicts of interest and a
system of measures aimed at resolving such conflicts.

1. The Board of Directors has approved a Regulation
on the information policy.

2. There were the persons responsible for the
implementation of the information policy determined
in the Company.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

2.1.4.

2.1.5.

2.1.6.

112

2.1.7

The Board of Directors shall exercise
control over the practice of the cor-
porate governance in the Company
and shall plays a key role in the mate-
rial corporate events of the Company.

1. During the reporting period, the Board of Directors
considered the issue of the corporate governance
practices in the Company.

2.2.

The Board of Directors shall be accountable to the Company’s shareholders.

2.2.1.

The information on the work of the
Board of Directors shall be disclosed
and provided to the shareholders.

1. The annual report of the Company for the
reporting period includes the information on the
attendance of meetings of the Board of Directors
and the Committees by individual directors.

2. The annual report contains the information on the
main results of evaluating the operation of the Board
of Directors carried out in the reporting period.

2.2.2. Chairman of the Board of Directors
shall be available to communicate
with the shareholders of the Com-
pany.

1. There is a transparent procedure implemented in
the Company that provides shareholders with the
opportunity to send questions to the Chairman of the
Board of Directors and express their position.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

2.3.

The Board of Directors shall be an effective and professional management body of the Company, capable of making objective independ-
ent judgments and making decisions that are in the best interests of the Company and its shareholders.

2.3.1. Only persons with an impeccable
business and personal reputation
and possessing the knowledge, skills
and experience necessary to make
decisions within the competence of
the Board of Directors, which are re-
quired for the effective performance
of its functions, may be elected as
the Board of Directors’ members.

2.3.2. Members of the Company’s Board

of Directors shall be elected through
a transparent procedure that allows
the shareholders to obtain informa-
tion about the candidates sufficient to
form an idea about their personal and
professional qualities.

2.3.3.

2.3.4.

The composition of the Board of
Directors shall be balanced in terms
of its members’ qualifications, their
experience, knowledge and business
qualities, and the Board shall enjoy
confidence of the shareholders.

The quantitative composition of the
Board of Directors shall enable to
organize the activities of the Board of
Directors in the most efficient manner,
including the possibility of forming
committees of the Board of Direc-
tors, and assures that the substantial
minority shareholders of the Company
may elect to the Board of Directors a
candidate, who they vote for.

1. The accepted in the Company procedure for
evaluating the performance of the Board of Directors
includes, among other things, assessing the
professional qualifications of the Board of Directors’
members.

complied with

partial compliance

no compliance

2. In the reporting period, the Board of Directors
(or its nominations committee) evaluated the
candidates to the Board of Directors in terms of their
having necessary experience, knowledge, business
reputation, lack of conflict of interest, etc.

1. In all cases of the holding of the General Meeting
of the Shareholders in the reporting period, which
agenda included the items about electing of the
Board of Directors, the Company provided the
shareholders with biographical data of all candidates
for membership in the Board of Directors, results
of the evaluation of such candidates made by the
Board of Directors (or its nominations committee),
as well as information on the candidate’s compliance
with the independence criteria, in accordance with
recommendations 102 - 107 of the Code and the
written consent of the candidates for election to the
Board of Directors.

1. As part of the procedure for evaluating the Board
of Directors’ work in the reporting period, the Board
of Directors analyzed the own needs in terms of
professional qualifications, experience and business
skills.

1. As part of the evaluation procedure for the Board
of Directors in the reporting period, the Board of
Directors considered the issue of the quantitative
composition of the Board of Directors compliance
with the needs of the Company and the interests of
the shareholders.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

2.4.

The Board of Directors shall include a sufficient number of independent directors.

2.4.1.

An independent director shall be a
person who has sufficient profession-
alism, experience and independence
to form his own position, is able to
make objective and conscientious
judgments that are independent of
the Company's executive bodies’
influence, of certain groups of the
shareholders or other parties con-
cerned. However, it should be noted
that, under normal circumstances, a
candidate (elected director) cannot
be regarded as independent if he
is connected with the Company, a
substantial shareholder, a material
trading partner or a competitor, or
connected with the Government.

2.4.2. An assessment shall be made of the

candidates for the Board of Direc-
tors’ membership compliance with
independence criteria, and a regular
analysis of the independence of
the independent Board of Directors
members shall be carried out. In the
performance of such an assessment,
the content should prevail over the
form.

2.4.3.

The independent directors shall
account for at least one-third of all
directors elected to the Board.

1. During the reporting period, all independent
members of the Board of Directors met all the
independence criteria specified in recommendations
102-107 of the Code, or were deemed independent
by the decision of the Board of Directors.

complied with

partial compliance

no compliance

1. In the reporting period, the Board of Directors
(or the committee on nominations to the Board of
Directors) formed an opinion on the independence
of each candidate to the Board of Directors
and presented the relevant conclusion to the
shareholders.

complied with

partial compliance

no compliance

2. During the reporting period, the Board of Directors
(or the Board of Directors nomination committee)
at least once examined the independence of the
current members of the Board of Directors, whom
the Company indicates as independent directors in
its annual report.

3. The Company has developed procedures that
determine the necessary actions of a member of the
Board of Directors in the event that it ceases to be
independent, including the obligation to promptly
inform the Board of Director.

1. The independent directors account for at least
one-third of all directors elected to the Board.

2.5.1. An independent director shall be

elected as a Chairman of the Board
of Directors, or a senior independent
director out of the independent direc-
tors number shall be appointed to
coordinate the independent directors
work and interact with the Chairman
of the Board of Directors

1. The Chairman of the Board of Directors is an
independent director, or a senior independent
director is defined among the independent directors.

2. The role, rights and duties of the Chairman of
the Board of Directors (and the senior independent
director, if applicable) are duly determined in the
internal documents of the Company.

complied with

partial compliance

no compliance

In the year under review,
Chairman of the Board of
Directors was a non-executive
Director, and there wert no
senior director determined
among independent directors.

The Chairman of the Board
of Directors was elected
unanimously by all Members of
the Board of Directors, as the
most authoritative member of
the Board of Directors, pos-
sessing professionalism and
knowledge.

The Company assumes that all
members of the Board of Di-
rectors have equal rights, and
also takes into account the fact
that the independent directors
did not determine the senior
independent director.

2.5.2. The Chairman of the Board of Direc-
tors shall provide for a constructive
atmosphere for holding meetings,
free discussion of issues on the
agenda of the meeting, monitor-
ing the implementation of decisions
taken by the Board of Directors.

2.5.3. The Chairman of the Board of Directors

shall take the necessary measures for
the timely provision to the Board of Di-
rectors of the information necessary for
making decisions on the agenda items.

1. The efficiency of the Chairman of the Board of
Directors was evaluated in the framework of the
procedure for assessing the effectiveness of the
Board of Directors in the reporting period.

complied with

partial compliance

no compliance

1. The duty of the Chairman of the Board of Directors
to take measures to ensure the timely provision of
materials to the Board of Directors members on
the agenda of the Board of Directors is fixed in the
documents of the Company.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

The Board of Directors
includes three independent
directors. The Company
believes that the composition
of Board of Directors is optimal
for ensuring the interests of all
groups of shareholders.

2.6.

The Board of Directors’ members shall act in good faith and reasonably in the interests of the Company and its shareholders on the basis
of sufficient knowledge and with due of care and diligence.

2.6.1. The Board of Directors’ members

shall make decisions taking into ac-
count all available information, in the
absence of a conflict of interest, tak-
ing into account the equal treatment
of the Company’s shareholders, in
the normal course of business risk.

1. The Company’s internal documents establish that a
member of the Board of Directors must notify the Board
of Directors if it has a conflict of interest with respect
to any item on the agenda of the meeting of the Board
of Directors or before the Board of Directors begins
discussion on the corresponding agenda item.

complied with

partial compliance

no compliance

2.4.4.

The independent directors shall
play a key role in preventing internal
conflicts in the Company and in its
performance of material corporate
actions.

1. The independent directors (who have no conflict of
interest) preliminarily assess the essential corporate
actions associated with a possible conflict of interests,
and the results of such an assessment are submitted to
the Board of Directors

complied with

partial compliance

no compliance

2.5.

Chairman of the Board of Directors shall contribute to the most efficient implementation of the functions assigned to the Board of Directors.

2. The Company’s internal documents provide that a
member of the Board of Directors must refrain from
voting on any issue in which he has a conflict of interest.

3. The Company has established a procedure that
allows the Board of Directors to receive professional
advice on matters within its competence, at the
expense of the Company.

1. The Company adopted and published an internal
document clearly defining the rights and duties of
members of the Board of Directors.

complied with

partial compliance

no compliance

2.6.2.

The rights and duties of the Board of
Directors’ members shall be clearly
articulated and secured in the inter-
nal documents of the Company.

114

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

2.6.3. The Board of Directors’ members

shall have enough time to fulfill their
duties.

1. The individual attendance of the meetings of the Board
of Directors and its committees, as well as the time
devoted to preparing for participation in the meetings,
was taken into account in the evaluation procedure of the
Board of Directors in the reporting period.

complied with

partial compliance

no compliance

2. In accordance with the internal documents of
the Company, members of the Board of Directors
are obliged to notify the Board of Directors of their
intention to become members of the management
bodies of other organizations (other than the
controlled and dependent organizations of the
Company), as well as the fact of such appointment.

1. In accordance with the internal documents of the
Company, members of the Board of Directors have
the right to access documents and make inquiries
concerning the Company and its controlled entities,
and the Company’s executive bodies are required to
provide relevant information and documents.

2. There is a formalized program in the Company of
familiarization activities for newly elected members

complied with

partial compliance

no compliance

2.6.4. All the Board of Directors’ members
shall have equal access to the Com-
pany’s documents and information.
Sufficient information about the
Company and the work of the Board
of Directors shall be provided to the
newly elected members of the Board
of Directors as soon as possible.

2.7.

Meetings of the Board of Directors, preparation for and participation in them of the Board of Directors’ members ensure the effective
functioning of the Board of Directors.

2.7.1. Meetings of the Board of Directors
shall be held as necessary, taking
into account the scale of the activities
and the Company’s tasks in a certain
period.

1. The Board of Directors held at least six meetings
in the reporting year.

2.7.2.

The procedure for preparing and hold-
ing meetings of the Board of Directors
shall be stipulated in the Company’s
internal documents, which provide for
the Board of Directors members to
properly prepare for the meeting.

1. The Company has approved an internal document
that defines the procedure for preparing and holding
meetings of the Board of Directors, which also
stipulates that a notice of the meeting should be
made, as a rule, at least 5 days before the date of
the meeting holding.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

2.7.3. The form of the meeting of the Board

of Directors shall be determined
taking into account the importance of
the issues on the agenda. The most
important issues shall be resolved at
physical meetings.

2.7.4. Decisions on the most important

issues of the Company shall be
taken at the meeting of the Board of
Directors by a qualified majority or a
majority of all elected members the
Board of Directors.

1. The Company's Articles or internal documents
stipulate that the most important issues (according
to the list given in Recommendation 168 of the Code)
should be considered at the physical meetings of
the Board.

complied with

partial compliance

no compliance

1. The Company's Articles stipulate that decisions on the
most important issues set out in the Recommendation
170 of the Code should be taken at a meeting of the
Board of Directors by a qualified majority of not less
than three-quarters of the votes, or by a majority of all
elected members of the Board Of Directors.

complied with

partial compliance

no compliance

Not formalized, but actually
performed

2.8.

The Board of Directors shall establishes Committees for preliminary consideration of the most important issues of the Company’s business.

2.8.1

It is recommended to establish an
Audit Committee consisting of inde-
pendent directors for the preliminary
consideration of issues related to the
control over the financial and eco-
nomic activities of the Company.

1. The Board of Directors established an Audit
Committee consisting entirely of independent
directors.

2. The Company’s internal documents define the tasks
set out before the Audit Committee, including the tasks
contained in Recommendation 172 of the Code.

3. At least one member of the Audit Committee,
who is an independent director, has experience and
knowledge in the preparation, analysis, assessment
and audit of the accounting (financial) statements.

4. Meetings of the Audit Committee were held at
least once a quarter during the reporting period.

complied with

partial compliance

no compliance

One non-executive Director
taking into account vast
experience and the
competencies required

It is recommended to establish a
Remuneration Committee consisting
of independent directors and headed
by an independent director who is not
the Chairman of the Board of Direc-
tors for the preliminary consideration
of issues related to the formation of
an effective and transparent remu-
neration practice.

1. The Board of Directors established the
Remuneration Committee, which consists of
independent directors only.

2. The Chairman of the Remuneration Committee is
an independent director who is not the Chairman of
the Board of Directors.

3. The tasks of the Remuneration Committee are
defined in the internal documents of the Company,
including the tasks contained in Recommendation
186 of the Code.

complied with

partial compliance

no compliance

One non-executive Director
taking into account vast
experience and the
competencies required

2.8.2

2.8.3

It is recommended to establish a
Nomination Committee (appoint-
ments, cadres) for the preliminary
consideration of issues related to the
HR planning (succession planning),
professional composition and ef-
ficiency of work of the Board of Direc-
tors, with the majority of members
presenting independent directors.

2.8.4 Given the scale of the activities and

the level of risk, the Company’s Board
of Directors shall make sure that the
composition of its Committees fully
meets the objectives of the Company.
Additional Committees either had to
be established or were not deemed
necessary (Strategy Committee,
Corporate Management Committee,
Ethics Committee, Risk Manage-
ment Committee, Budget Committee,
Health, Safety and Environment Com-
mittee, etc.).

The Committees‘ composition should
have been defined in a way allow-
ing for a comprehensive preliminary
discussion of the issues to be con-
sidered, taking into account different
opinions.

2.8.5

2.8.6 Chairmen of the Committees shall on
the regular basis inform the Board of
Directors and its Chairman about the
work of their Committees.

1. The Board of Directors established the
Nomination Committee (or its tasks specified in
Recommendation 186 Code are implemented within
the framework of another Committee) with the
majority of members being independent directors.

complied with

partial compliance

no compliance

2. In the internal documents of the Company,
the tasks of the Nomination Committee (or the
corresponding Committee with a combined
functionality) are defined, including tasks specified

1. In the reporting period, the Board of Directors
of the Company considered the issue of the
consistency of its Committees with the tasks of
the Board of Directors and the objectives of the
Company.

The additional committees had either been
established, or they were not deemed necessary

1. The committees of the Board of Directors are
headed by independent directors.

2. The Company’s internal documents (policies)
include the provisions according to which persons,
who are not members of the Audit Committee, the
Nomination Committee and the Remuneration
Committee, may attend the meetings of the
Committees upon the invitation of the Chairman only.

1. During the reporting period, the Chairmen of the
Committees regularly reported on the work of the
Committees to the Board of Directors.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

2.9.

The Board of Directors provides for the assessment of the Board of Directors, its Committees and the Board of Directors’ members work.

2.9.1

The performance evaluation of the
Board of Directors shall be aimed at
determining the degree of effective-
ness of the Board of Directors, the
Committees and the Board of Direc-
tors’ members, their relevance to the
development needs of the Company,
the revitalization of the Board of Di-
rectors and the identification of areas
in which their activities improved.

1. The self-assessment or the external evaluation
of the Board of Directors operation in the reporting
period included the work evaluation of the
Committees, individual members of the Board of
Directors and the Board of Directors as a whole.

complied with

partial compliance

no compliance

2. The results of the self-assessment or the external
evaluation of the Board of Directors conducted
during the reporting period were considered at the
physical meeting of the Board of Directors.

116

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The work evaluation of the Board
of Directors, Committees and the
Board of Directors’ members shall be
carried out on a regular basis at least
once a year. The independent exter-
nal organization (consultant) shall be
invited for assessing the work quality
of the of the Board of Directors at
least once every three years.

1. The Company invited the independent external
organization (consultant) to evaluate the work quality
of the Board of Directors, at least once during the
last three reporting periods).

complied with

partial compliance

no compliance

Over the past three years, the
Company has not brought an
external organization to carry
out an independent evalua-
tion of the work of the Board of
Directors, since this procedure
would have involved additional
costs (time, financial costs).

The Company’s Corporate Secretary shall carry out effective current interaction with shareholders, and coordinate the actions of the
Company to protect the rights and interests of the shareholders, supporting the effective operation of the Board of Directors.

The Corporate Secretary shall have
the knowledge, experience and quali-
fications that are sufficient to fulfill the
duties assigned to him, an impec-
cable reputation and shall enjoy the
confidence of the shareholders.

The Corporate Secretary shall be
sufficiently independent from the
executive bodies of the Company
and shall have the necessary powers
and resources to carry out the tasks
assigned to him.

1. The internal document has been adopted and
disclosed in the Company: the Regulation on the
Corporate Secretary.

2. The biographical information on the Corporate
Secretary with the same level of detail as for the
members of the Board of Directors and the executive
management of the Company has been placed
on the Company’s website and in the Company’s
Annual Report.

1. The Board of Directors approves appointment,
removal from office and additional remuneration of
the Corporate Secretary.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

The level of remuneration paid by the Company shall be sufficient to attract, motivate and retain individuals, who are qualified and com-
petent for the Company. The remuneration to the members of the Board of Directors, executive bodies and other key executives of the
Company shall be paid in accordance with the Company’s remuneration policy.

The level of remuneration provided
by the Company to the Board of
Directors members, executive bodies
and other key executives shall create
sufficient motivation for their effective
work, allowing the Company to attract
and retain competent and qualified
specialists. However, the Company
shall avoid setting the compensa-
tion level any higher than necessary
as well as an unjustifiably large gap
between the remuneration levels of
these individuals and employees of
the Company.

The Company’s compensation policy
has been devised by the Remunera-
tion Committee and approved by the
Company’s Board of Directors. The
Board of Directors, with the support
of the Remuneration Committee,
shall oversee the implementation
the remuneration policy in Company,
and, if necessary, shall revise and
correct it.

The Company’s remuneration policy
shall contain transparent mecha-
nisms for determining the remunera-
tion of the Board of Directors’ mem-
bers, executive bodies and other key
executives of the Company, as well
as regulate all types of payments,
benefits and privileges granted to
these persons.

1. The Company has adopted an internal document
(policy) for the remuneration of members of the
Board of Directors, executive bodies and other
key management personnel, which clearly outlines
the approaches to the remuneration for these
individuals.

complied with

partial compliance

no compliance

1. During the reporting period, the Remuneration
Committee reviewed the remuneration policy
(policies) and practices of its (their) implementation
and, if necessary, submitted appropriate
recommendations to the Board of Directors.

complied with

partial compliance

no compliance

1. The Company’s remuneration policy contains
transparent mechanisms for determining the
remuneration of members of the Board of Directors,
executive bodies and other key executives of the
Company, and also regulates all types of payments,
benefits and privileges granted to these persons.

complied with

partial compliance

no compliance

2.9.2

3.1.

3.1.1

3.1.2

4.1.

4.1.1

4.1.2

4.1.3

118

4.1.4

The Company shall define a policy of
expenses reimbursement (compensa-
tion), which shall specify the list of ex-
penses to be reimbursed, and the level
of service that the Board of Directors’
members, executive bodies and other
key executives of the Company can
claim. Such a policy can be an integral
part of the Company’s remuneration
policy.

1. The remuneration policy (policies) or other
internal documents of the Company set the rules for
compensating the expenses of the members of the
Board of Directors, executive bodies and other key
executives of the Company.

complied with

partial compliance

no compliance

4.2.

Remuneration system of the Board of Directors members shall ensure that the financial interests of the directors shall be in line with the
long-term financial interests of the shareholders.

4.2.1. The Company shall pay a fixed an-
nual fee to the Board of Directors
members.

1. The fixed annual remuneration was the only
monetary form of remuneration for members of the
Board of Directors for their work on the Board of
Directors during the reporting period.

complied with

partial compliance

no compliance

The Company shall not pay remuner-
ation for participation in the individual
meetings of the Board or the commit-
tees of the Board of Directors.

The Company shall not apply forms
of short-term motivation and any
additional material incentives to the
Board of Directors’ members.

4.2.2. The long-term ownership of the

Company’s shares shall be the most
conducive to convergence of the finan-
cial interests of the Board of Directors’
members with long-term interests of
shareholders. At the same time, the
Company shall not stipulate the rights
to sell shares by achieving certain
performance indicators, and the Board
of Directors’ members shall not partici-
pate in option programs.

4.2.3. The Company shall not provide for any
additional payments or compensation
in the event of early powers termination
of the Board of Directors’ members in
connection with the transfer of control
over the Company or due to other
circumstances.

1. If an internal document (documents): the
Company’s policy (policies) provide for the provision
of the Company’s shares to the Board of Directors
members, clear rules for the ownership of shares
by members of the Board of Directors should be
provided and disclosed, aimed at encouraging the
long-term ownership of such shares.

complied with

partial compliance

no compliance

1. The Company does not provide for any additional
payments or compensation in the event of early
termination of the powers of members of the Board
of Directors in connection with the transfer of control
over the Company or other circumstances.

complied with

partial compliance

no compliance

4.3.

The remuneration system of members of the executive bodies and other key executives of the Company shall provide for the dependence
of the reward on the results of the Company’s operation and their personal contribution to achieving this result.

4.3.1. Remuneration of members of the

executive bodies and other key ex-
ecutives of the Company shall be de-
termined in such a way as to ensure
a reasonable and justified ratio of the
fixed part of the remuneration and
the variable part of the remuneration
depending on the results of work of
the Company and the personal (indi-
vidual) contribution of the employee
to the final results.

1. During the reporting period, the annual performance
indicators approved by the Board of Directors
were used to determine the amount of variable
compensation for members of the executive bodies
and other key management personnel of the Company.

complied with

partial compliance

no compliance

2. In the course of the latest evaluation of the
remuneration system for members of the executive
bodies and other key management personnel, the
Company, the Board of Directors, ascertained that an
effective ratio of the fixed part of the remuneration and
the variable part of the remuneration are applied in the
Company.

3. There is a procedure existing at the Company
ensuring the return to the Company of bonus
payments illegally received by the members of
the executive bodies and other key management
personnel of the Company.

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4.3.2.

The Company has implemented a
program of the long-term motiva-
tion of the members of the executive
bodies and other key executives of
the Company using the Company’s
shares (options or other deriva-
tive financial instruments, which
underlying assets are the Company’s
shares).

4.3.3.

The amount of compensation (“golden
parachute”) paid by the Company in case
of early termination of powers to members
of executive bodies or key executives on
the initiative of the Company and in the ab-
sence of unfair acts on their part shall not
exceed twice the value of the fixed portion
of the annual remuneration.

1. The Company introduced a long-term motivation
program for members of the executive bodies and
other key executives of the Company using the
shares of the Company (financial instruments based
on the shares of the Company).

complied with

partial compliance

no compliance

2. The program of the long-term motivation of
the members of executive bodies and other key
executives of the Company provides that the right to
sell shares and other financial instruments used in
such a program shall start only after three years from
the date of their provision. At the same time, the right
to sell them is conditioned by the achievement of
certain performance indicators of the Company.

1. The amount of compensation (“golden
parachute”) paid by the Company in the event of
early termination of powers to members of the
executive bodies or key executives on the initiative
of the Company and in the absence of unfair acts on
their part did not exceed twice the fixed part of the
annual remuneration in the reporting period.

complied with

partial compliance

no compliance

5.1.

The Company shall establish an efficient risk and internal control management system aimed at ensuring reasonable confidence in
achieving the goals set for the Company.

5.1.1. The Company’s Board of Directors

shall define the principles and ap-
proaches to the organization of the
risk and internal control management
system in the Company.

1. The functions of various management bodies and
divisions of the Company in the system of risk and
internal control management are clearly defined in
the internal documents/corresponding policies of
the Company, approved by the Board of Directors.

5.1.2. The Company’s executive bodies

shall ensure the creation and mainte-
nance of the effective risk manage-
ment and internal control system in
the Company.

1. The Company’s executive bodies ensured
distribution of functions and authorities with regard
to the risk management and the internal control
among the subordinate managers (heads) of
departments and divisions accountable to them.

5.1.3. The system of risk and internal control
management in the Company shall en-
sure an objective, fair and clear picture
of the current state and prospects of
the Company, the Company’s integrity
and transparency of reporting, as well
as the soundness and acceptability of
the Company’s accepted risks.

5.1.4. The Company’s Board of Direc-

tors shall take the necessary steps
to ensure that the current risk and
internal control management system
complies with the Board of Direc-
tors’ principles and approaches to its
organization and functions effectively.

1. The Company has adopted a policy on combatting
corruption.

2. There is an accessible way established in the
Company to inform the Board of Directors or the
Audit Committee of the Board of Directors of
violations of law, internal procedures, the Code of
Ethics of the Company.

1. During the reporting period, the Board of Directors
or the Audit Committee of the Board of Directors
conducted an evaluation of the effectiveness of the
Company's risk and internal control management
system. The information on the main results of such
an assessment is included in the annual report of the
Company.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

The Company shall organize the internal audit for a regular independent evaluation of the reliability and effectiveness of the risk and
internal control management system, and the Corporate Governance practice.

1. A separate structural division for conducting the
internal audit functions has been established in the
Company, which is functionally accountable to the
Board of Directors or the Audit Committee, or an
independent external organization with the same
principle of accountability has been invited.

complied with

partial compliance

no compliance

It is recommended that internal
audits be performed by a separate
structural division (internal audit
department) to be established by the
Company or by retaining an inde-
pendent outside body. The functional
and administrative accountability of
the internal audit division shall be dif-
ferentiated. The internal audit division
shall be functionally accountable to
the Board of Directors.

5.2.

5.2.1.

120

5.2.2. The Internal Audit Division shall

perform effectiveness evaluation of
the internal control system, as well
as effectiveness evaluation of the
risk management system, and the
corporate governance system.
The Company shall apply generally
accepted activity standards in the
area of the internal audit.

1. The effectiveness of the internal control and risk
management system was assessed during the
reporting period within the framework of the internal
audit.

complied with

partial compliance

no compliance

2. The Company applies commonly accepted
approaches.

6.1.

The Company and its activities shall be transparent to the shareholders, investors and other interested parties.

6.1.1. The Company shall develop and
implement an information policy
ensuring the efficient exchange of
information by the Company, its
shareholders, investors, and other
interested parties.

6.1.2. The Company shall disclose the

information on the corporate govern-
ance system and practice, including
detailed information on the compli-
ance with the principles and recom-
mendations of the Code.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

1. The Board of Directors of the Company has approved
the information policy of the Company, developed in
accordance with the recommendations of the Code.

2. The Board of Directors (or one of its Committees)
has considered issues related to the Company’s
compliance with its information policy at least once
during the reporting period.

1. The Company discloses the information on the
Company’s corporate governance system and the
general principles of the corporate governance
applied in the Company, including the information
disclosed on the Company’s Internet website.

2. The Company discloses the information on the
composition of the executive bodies and the Board
of Directors, the independence of the members of
the Board and their membership in the Committees
of the Board of Directors (as defined by the Code).

3. In the event that there is a person controlling the
Company, Company publishes a memorandum of
supervisory authority regarding the plans of such a person
with respect to corporate governance in the Company.

6.2.

The Company shall timely disclose full, up-to-date and reliable information about the Company to ensure the possibility of making in-
formed decisions by the Company’s shareholders and investors.

6.2.1. The Company shall disclose the

information in accordance with the
principles of regularity, consistency
and efficiency, as well as availability,
reliability, completeness and compa-
rability of the disclosed data.

1. The Company’s information policy identifies
approaches and criteria for identifying the
information that can have a significant impact on the
Company’s valuation and the value of its securities
and procedures that ensure the timely disclosure of
such information.

complied with

partial compliance

no compliance

2. In the event that the Company’s securities are
circulated in foreign organized markets, the disclosure
of material information in the Russian Federation and
in such markets is carried out synchronously and is
equivalent during the reporting year.

3. If foreign shareholders own a significant number of
the Company’s shares, then during the reporting year,
the information is disclosed not only in Russian, but
also in one of the most common foreign languages.

6.2.2.

The Company shall avoid a formal ap-
proach in disclosing the information
and shall disclose significant informa-
tion about its activities, even if the law
does not provide for the disclosure of
such information.

1. During the reporting period, the Company was
disclosing the annual and semi-annual financial
statements prepared in accordance with IFRS. The
annual report of the Company for the reporting period
includes annual financial statements prepared in
accordance with IFRS, together with an audit report.

complied with

partial compliance

no compliance

2. The Company discloses full information on the
Company’s capital structure in accordance with
Recommendation 290 of the Code in the annual
report and on the Company’s Internet website.

121

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

6.2.3. The Company’s annual report, as

one of the most important tools of the
Company’s information exchange with
shareholders and other interested par-
ties, shall contain information making
it possible to assess the Company’s
performance results for the year.

1. The annual report of the Company contains
information on the key aspects of the Company’s
operations and its financial results.

2. The Company’s annual report contains
information on the environmental and social aspects
of the Company’s activities.

complied with

partial compliance

no compliance

6.3.

The Company shall provide information and documents at the requests of the shareholders in accordance with the principles of equal and
unhindered accessibility

6.3.1. The Company shall provide the infor-
mation and documents at the request
of the shareholders in accordance
with the principles of fairness and
ease.

1. The Information Policy of the Company defines an
easy procedure for providing the shareholders with
access to the information, including the information
on entities controlled by the Company, at the request
of the shareholders.

6.3.2.

It is recommended that when provid-
ing the information to the sharehold-
ers the Company shall maintain a
reasonable balance between the
interests of individual sharehold-
ers and the Company’s interests,
which is interested in preserving the
confidentiality of important com-
mercial information that may have a
significant impact on the Company’s
competitiveness.

1. During the reporting period, the Company did not
refuse to satisfy the shareholders’ requests for the
information, or such refusals were justified.

2. In cases determined by the Information Policy
of the Company, the shareholders are warned
about the confidential nature of the information
and assume the responsibility for maintaining its
confidentiality.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

7.1.

Actions that shall or may materially affect the structure of the Company’s share capital and financial position and, accordingly, the share-
holders’ position (material corporate actions) shall be carried out on fair terms ensuring compliance with the rights and interests of the
shareholders as well as other parties concerned.

1. The Company’s Articles, taking into account the
specifics of its activities, set at a lower level than
the statutory minimum criteria for classifying the
Company’s transactions as material corporate
actions.

complied with

partial compliance

no compliance

2. During the reporting period, all material corporate
actions went through the approval procedure prior to
their implementation.

7.1.3. When taking material corporate

actions, which would affect rights or
legitimate interests of the sharehold-
ers, it is recommended that equal
terms and conditions be guaranteed
for all shareholders; if the statutory
machinery designed to protect the
shareholders’ rights proves insuf-
ficient, then additional measures shall
be introduced to protect their rights
and legitimate interests. In such
instances, the Company shall comply
with formal requirements of the law
and with the corporate governance
principles set out in this Code.

7.2.

The Company shall provide a procedure for taking material corporate actions that enables its shareholders to receive full information
about such actions in due time and influence them, and also guarantee that the shareholder rights are observed and duly protected when
such actions are taken.

7.2.1. The information on the performance

of the material corporate actions
shall be disclosed with an explana-
tion of the reasons, conditions and
consequences of committing such
actions.

1. During the reporting period, the Company
disclosed in a timely manner and in detail the
information on the material corporate actions of the
Company, including the grounds and timing of such
actions.

7.2.2. The rules and procedures related
to the Company’s performance of
material corporate actions shall be
formulated in the Company’s internal
documents.

1. The internal documents of the Company provide
for the procedure for attracting an independent
appraiser to determine the value of property
disposed of or acquired by a major transaction or an
related party transaction.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

1. The Company’s Articles determined a list of
transactions or other actions that are material
corporate actions and the criteria for their
determination. Decisions on the material corporate
actions are within the competence of the Board
of Directors. In cases where the implementation
of these corporate actions is directly attributed by
law to the competence of the General Meeting of
the Shareholders, the Board of Directors provides
appropriate recommendations to the shareholders.

2. As a minimum, the Company’s Articles consider
the following events as essential corporate actions:
reorganization of the Company, acquisition of 30
percent or more of the voting Company’s shares
(takeover), fulfillment of substantial transactions by
the Company, increase or decrease in the capital of
the Company, listing and delisting of the Company’s
shares.

1. The Company provides for a procedure whereby
the independent directors declare their position on
the material corporate actions prior to their approval.

complied with

partial compliance

no compliance

complied with

partial compliance

no compliance

7.1.1. Material corporate actions shall be

deemed to include reorganization of
the Company, acquisition of 30 per
cent or more of the Company’s vot-
ing shares (takeover), making major
transactions, increasing or reducing
the Company’s share capital, listing
and delisting of the Company’s shares,
as well as other actions, which might
result in material changes in the rights
of the shareholders or infringement of
their interests. It is recommended that
the Company’s Articles of Association
shall define a list (criteria) of transac-
tions or other actions, deemed to be
material corporate actions, and refer
the consideration of such actions to the
competence of the Company’s Board
of Directors.

The Board of Directors shall play a
key role in making decisions or mak-
ing recommendations for material
corporate actions. The Board of Di-
rectors shall base its position on the
opinion of the Company‘s independ-
ent directors.

7.1.2.

122

2. The internal documents of the Company provide
for the procedure for engaging an independent
appraiser to estimate the cost of acquiring and
repurchasing the shares of the Company.

3. The internal documents of the Company provide
for an expanded list of grounds, on which the
members of the Board of Directors of the Company
and other persons provided for by the law are
recognized as interested in the transactions of the
Company.

123

COMMENT:

LIST OF RELATED PARTY TRANSACTIONS CONCLUDED BY THE COMPANY IN 2016:

This Report contains a list of transactions concluded by PJSC TATNEFT named after V.D. Shashin (hereinafter referred to as
PJSC TATNEFT) in 2016, which were recognized transactions as related party in accordance with Federal Law No. 208-FZ “On
Joint Stock Companies” of 26.12.1995 on the basis of their status at the time of the transactions.

Transaction
Date

Transaction
Approval
Date

The Company’s
Body That
Approved the
Transaction

Information about the Person (Persons), Interested in Concluding the Transaction, Subject of the Transaction and Its
Essential Terms

This Report in the form of an independent document is published by the Company for the first time in accordance with require-
ments of Articles 52 and 81 of the Federal Law No. 208-FZ “On Joint Stock Companies” of 26.12.1995

The Board of Directors shall also in prepare a report on the related party transactions concluded by PJSC TATNEFT named after
V.D. Shashin in 2016 for the approval of the Annual General Meeting of Shareholders.

The report is signed by the General Director of PJSC TATNEFT.

The reliability of the data contained in the Report is confirmed by the Audit Commission of PJSC TATNEFT.

The information included in the Report contains:

• name of counterparties to transactions;
• list of persons interested in transactions, and the basis for recognizing these persons as the parties interested in transac-
• subject of transactions and essential conditions for them.

tions;

This Report on the related party transactions of PJSC TATNEFT n.a. V.D. Shashin in 2016, were reviewed and ap-
proved at the meeting of the Board of Directors of PJSC TATNEFT on May 27, 2017.

01.03.2016

25.02.2016 Board of
Directors
of PJSC
TATNEFT

01.03.2016

25.02.2016 Board of
Directors
of PJSC
TATNEFT

01.03.2016

25.02.2016 Board of
Directors
of PJSC
TATNEFT

Transaction type and subject matter: Property Sale and Purchase Contract between PJSC TATNEFT n.a. V.D.
Shashin (Seller) and OOO “Nizhnekamsk CHP” (Buyer).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination the transaction is directed at: the sale and purchase of spare tools and
accessories for the equipment under the project “Construction of power generation facilities using turbines of
low-potential steam at Nizhnekamsk”.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and OOO “Nizhnekamsk CHP”.

Sign of interest: OOO “Nizhnekamsk CHP”, a legal entity in which Public Joint Stock Company n.a. V.D.
Shashin is entitled to dispose of more than 20 percent of the votes attached to voting shares or composing the
authorized capital or the shareholders’ capital, contributions, shares of the mentioned legal entity.

Amount – RUB 46,000,000.00 (46 million) 00 kopecks.

Deadline for the fulfilment of obligations under the transaction: 30 calendar days since the day of signing
the relevant specification.

Monetary valuation of property under the transaction: RUB 46,000,000 accounting for 0.0075% of the
Company‘s assets book value as of September 30, 2015.

Transaction type and subject matter: Lease contract of immovable property and land plots between PJSC
TATNEFT n.a. V.D. Shashin (Lessor) and OOO “Nizhnekamsk CHP” (Lessee).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: Lease of immovable property and land plots.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin OOO “Nizhnekamsk CHP”.

Deadline for the fulfilment of obligations under the transaction: Lease term is 11 months from the contract
conclusion date.

Leased property:
l immovable property, costing RUB 3,022,154,012.05;
l land plots, costing RUB 17,148,396.08.

The amount of rent for one month of using the immovable property and land plots (Contract price):
l immovable property: RUB 13,205,991.94 (Thirteen million two hundred five thousand nine hundred ninety one)

94 kopecks (Including 18% VAT);

l l and plots: RUB 533,175.34 (five hundred thirty three thousand one hundred seventy five) 34 kopecks

(Including 18% VAT).

Monetary valuation of property under the transaction: RUB 3,039,302,408.13 (three billion thirty nine million
three hundred two thousand four hundred eight) 13 kopecks, accounting for 0.49% of the Company‘s assets
book value as of September 30, 2015.

Transaction type and subject matter: Lease contract of movable property between PJSC TATNEFT n.a. V.D.
Shashin (Lessor) and OOO “Nizhnekamsk CHP” (Lessee).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: Rent of movable property.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and OOO “Nizhnekamsk CHP”.

Deadline for the fulfilment of obligations under the transaction: Lease term is 11 months from the
contract conclusion date. The amount of rent for one month of using the movable property (Contract
price): 11,903,655.62 (eleven million nine hundred and three thousand six hundred and fifty five) 62 kopecks.

Monetary valuation of property under the transaction: 11,903,655.62 (eleven million nine hundred and
three thousand six hundred and fifty five) 62 kopecks, accounting for 0.61% of the Company‘s assets book
value of September 30, 2015.

124

125

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

11.04.2016*

23.03.2016

26.08.2016

Board of
Directors
of PJSC
TATNEFT

* The prop-
erty Sale and
Purchase
Contract was
termi-
nated without
transfer or dis-
posal of any
property, as
a result of the
parties signing
the agreement
on termination
of the contract
in connection
with the termi-
nation of the
need for its
transaction.

24.05.2016

25.04.2016 Board of
Directors
of PJSC
TATNEFT

06.06.2016

25.04.2016 Board of
Directors
of PJSC
TATNEFT

Transaction type and subject matter: Property Sale and Purchase Contract between PJSC TATNEFT n.a. V.D.
Shashin (Seller) and OOO “Nizhnekamsk CHP” (Buyer).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination the transaction is directed at: Sale and purchase of equipment under
the project “Reconstruction of installed power boiler units TGME-464 of the Nizhnekamsk CHP for burning
petroleum coke in the form of dust from the delayed coking unit JSC TANECO.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and OOO “Nizhnekamsk CHP”.

Deadline for the fulfilment of obligations under the transaction: Property transfer time – 30 calendar days
since the day of signing the relevant specification.

Monetary valuation of property under the transaction: RUB 3,400,703,564.94 (three billion four hundred
million seven hundred three thousand five hundred sixty four rubles and 94 kopecks), accounting for 0.55% of
the company‘s assets book value as of September 30, 2015.

Transaction type and subject matter: Immovable property Sale and Purchase Contract between PJSC TATNEFT
n.a. V.D. Shashin (Seller) and JSC TANECO (Buyer).

The content of the transaction, including civil rights and obligations, which establishment, modification or
termination of the transaction is directed at: Sale and purchase of immovable property.

immovable property item: title 007 section 1700: “Naphtha Splitter Section”.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Sign of interest: JSC TANECO, a legal entity in which Public Joint Stock Company n.a. V.D. Shashin is entitled to
dispose of more than 20 percent of the votes attached to voting shares or composing the authorized capital or the
shareholders’ capital, contributions, shares of the mentioned legal entity.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

3. E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov

Member of the collegial executive body

Board of Directors member

Deadline for the fulfilment of obligations under the transaction: 10 working days from the date of handing
technical documentation for the facility and Signing reconciliation reports of completed construction and
installation works.

Monetary valuation of property under the transaction: RUB 1,192,332,009 (One billion one hundred ninety
two million three hundred thirty-two thousand nine) and 53 kopecks, accounting for 0.19% of the Company‘s
assets book value as of December 31, 2015.

Transaction type and subject matter: Supplementary Agreement to the Purchase and Sale Contract between
PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

The content of the transaction, including civil rights and obligations, which establishment, modification or
termination the transaction is directed at: Increasing the amount of the Contract for the Purchase of inventory
items, including spare tools and accessories (SPTA) for equipment for the facilities of the Complex of Oil Refining and
Petrochemical Plants in Nizhnekamsk, No. 430/13.02-06/13 dated October 23,.2013.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U.

Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

3. E.A. Tkhturov Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov Member of the collegial executive body

Board of Directors member

06.06.2016

25.04.2016 Board of
Directors
of PJSC
TATNEFT

04.05.2016

25.05.2016 Board of
Directors
of PJSC
TATNEFT

01.06.2016

25.05.2016 Board of
Directors
of PJSC
TATNEFT

Deadline for the fulfilment of obligations under the transaction: 06.06.2016

Monetary valuation of property under the transaction – RUB 300,000,000 (three hundred million) and 00
kopecks, accounting for 0.05% of the Company‘s assets book value as of December 31, 2015.

Transaction type and subject matter: Supplementary Agreement to the Purchase and Sale Contract between
PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U.

Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

3. E.A. Tkhturov Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov Member of the collegial executive body

Board of Directors member

Deadline for the fulfilment of obligations under the transaction: 06.06.2016

Monetary valuation of property under the transaction – RUB 300,000,000 (three hundred million) and 00
kopecks, accounting for 0.05% of the Company‘s assets book value as of December 31, 2015.

Transaction type and subject matter: Agreement on paying up the contribution with “Tatneft International Co-
operative U.A.”

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: paying up the contribution on the following
essential terms: amount of contribution shall not exceed 49,900 (forty-nine thousand nine hundred) US dollars.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and “Tatneft International Co-operative U.A.”

Sign of interest: “Tatneft International Co-operative U.A., a legal entity in which Public Joint Stock Company n.a.
V.D. Shashin is entitled to dispose of more than 20 percent of the votes attached to voting shares or composing the
authorized capital or the shareholders’ capital, contributions, shares of the mentioned legal entity.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

“Tatneft International Co-operative U.A.

1. N.Z. Syubayev Member of the collegial executive body Member of the collegial executive

body

Monetary valuation of property under the transaction: no more than RUB 3,241,504, accounting for 0.0005
% of the Company‘s assets book value as of March 31, 2016.

Transaction type and subject matter: Sale and Purchase Contract of immovable property between PJSC
TATNEFT n.a. V.D. Shashin (Seller) and JSC TANECO (Buyer).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at the Purchase and Sale of immovable property.

Items of immovable property:

l title 015, section 5100: “Delayed Coking Unit”, costing RUB 11,602,990,000.00 (Excluding VAT);
l Land plot, with cadastral number 16:00:000000:450, total area of 41,673 sq. m., costing RUB 20,867,754.75

(Excluding VAT).

Contract price: RUB 11,623,857,754 (Eleven billion six hundred twenty three million eight hundred fifty seven
thousand seven hundred fifty four) and 75 kopecks.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

126

127

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

25.05.2016

25.05.2016 Board of
Directors
PJSC
TATNEFT

06.06.2016

25.04.2016 Board of
Directors
of PJSC
TATNEFT

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U.

Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

3. E.A. Tkhturov Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov Member of the collegial executive body

Board of Directors member

Deadline for the fulfilment of obligations under the transaction: 10 working days from the date of handing technical
documentation for the facility and Signing reconciliation reports of completed construction and installation works.

Monetary valuation of property under the Monetary valuation of property under the transaction: RUB
11,623,857,754 (Eleven billion six hundred twenty three million eight hundred fifty seven thousand seven hundred fifty
four) and 75 kopecks, accounting for 1.78% of the Company‘s assets book value as of March 31, 2016.

Transaction type and subject matter: Guarantee Contract No. VLG/PR/080/16 with PJSC ROSBANK.

The content of the transaction, including civil rights and obligations, which establishment, modification
or termination the transaction is directed at: The Guarantor agrees to have full joint and several liability with
the Limited Liability Company “Tatneft-Neftekhimsnab” (hereinafter referred to as the Client) to the Bank for the
execution by the Client of any and all of its obligations arising from or in connection with the Agreement on the
opening of documentary letters of credit (hereinafter referred to in the text as the Basic Agreement) concluded
between the Bank and the Client on the following essential terms:
l The maximum amount of all current letters of credit opened by the Bank on behalf of the Client under the Basic

Agreement) shall not exceed 30,000,000.00 (Thirty million and 00/100) US dollars;

l The expiry date of each Letter of Credit opened within the framework of the Agreement cannot exceed 6 months
(subject to a deferred payment under the letter of credit), and it shall not fall on a date later than the date that
occurs 18 months from the date of concluding the Agreement for Opening the documentary letters of credit.

Sign of interest: OOO Tatneft-Neftekhimsnab belongs to the group of persons of the public Joint-Stock Company
TATNEFT named after V.D. Shashin.

Validity Term of the Guarantee Contract: until November 30 2019.

Monetary valuation of property under the transaction: 30,000,000.00 (Thirty million and 00/100) US dollars,
accounting for 0.3% of the Company‘s assets book value as of March 31, 2016.

Transaction type and subject matter: Sale and purchase of ordinary registered uncertificated shares
(individual state registration number of the shares’ issue – 10103255B007D, date of the issue state registration
– March 25, 2016).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: Sale and Purchase Contract No. 17-002/2016
of ordinary registered uncertificated shares (individual state registration number of the shares’ issue –
10103255B007D, date of the issue state registration – March 25, 2016).

Deadline for the fulfilment of obligations under the transaction: No later than 10 working days from the date
of conclusion of the agreement to pay the value of shares, the seller within three working days after transferring the
value of shares to conduct operations in the register on making a credit entry on the personal account

Transection parties and beneficiaries: PJSC TATNEFT n.a. V.D. Shashin (Buyer) and PJSC Zenit Bank (Seller).

Sign of interest: PJSC Zenit Bank, a legal entity in which Public Joint Stock Company n.a. V.D. Shashin is
entitled to dispose of more than 20 percent of the votes attached to voting shares or composing the authorized
capital or the shareholders’ capital, contributions, shares of the mentioned legal entity.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

PJSC zenit Bank

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. N.Z. Syubayev

Member of the collegial executive body

Board of Directors member

E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

Sh.F. Takhautdinov Board of Directors member

Board of Directors member

Transaction amount in monetary terms: RUB 6,700,000,000 (Six billion seven hundred million).

Transaction amount as a percentage of the issuer’s assets value: 1.03% of the Company’s book assets value.

The issuer’s assets value as of the end date of the last completed reporting period preceding the
transaction (conclusion of the contract): RUB 651,259,342 thousand, as of March 31, 2016.

18.07.2016

26.08.2016 Board of
Directors
of PJSC
TATNEFT

03.08.2016

26.08.2016 Board of
Directors
PJSC
TATNEFT

25.11.2016

24.11.2016

Board of
Directors
of PJSC
TATNEFT

Transaction type and subject matter: Supplementary Agreement No. 3 of July 18, 2016 to Guarantee Contract
No. 85130007/1 of September 30, 2013, concluded between PJSC TATNEFT n.a. V.D. Shashin and PJSC Sberbank.

The content of the transaction, including civil rights and obligations, which establishment, modification
or termination the transaction is directed at: Supplementary Agreement No. 3 of July 18, 2016 to Guarantee
Contract No. 85130007/1 of September 30, 2013, concluded between PJSC TATNEFT n.a. V.D. Shashin and PJSC
Sberbank, which is a related party transaction in securing the performance of JSC TANECO’s obligations under the
Bank Guarantee Agreement No. 85130007 of April 23, 2013. The Supplementary Agreement provides for:
l Reduction of the fee for providing the Guarantee – down by 0.17 (zero point seventeen) percent per annum.
l Reduction of the total liability limit of the Guarantor PJSC TATNEFT n.a. V.D. Shashin under the current Guarantee
Contract No.85130007/1 of September 30, 2013 to the amount of RUB 9,500,000,000 (Nine billion five hundred
million) rubles.

l Other terms of the Contract remain without change.

Beneficiary under the transaction – JSC TANECO.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U.

Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

E.A. Tkhturov Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov Member of the collegial executive body

Board of Directors member

Transaction type and subject matter: Property Sale and Purchase Contract between PJSC TATNEFT n.a. V.D.
Shashin (Buyer) and OOO “Nizhnekamsk CHP” (Seller).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: Sale and purchase of flanges.

Property total cost: RUB 416,385 (four hundred and sixteen thousand three hundred and eighty-five and 36
kopecks (Excluding VAT);

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and OOO “Nizhnekamsk CHP”.

Sign of interest: OOO “Nizhnekamsk CHP”, a legal entity in which Public Joint Stock Company n.a. V.D. Shashin
is entitled to dispose of more than 20 percent of the votes attached to voting shares or composing the authorized
capital or the shareholders’ capital, contributions, shares of the mentioned legal entity.

Deadline for the fulfilment of obligations under the transaction: Deadline for the property transfer – 30
calendar days after the day of signing the relevant specification.

Monetary valuation of property under the transaction: RUB 416,385 (Four hundred sixteen thousand three
hundred and eighty five) and 36 kopecks, accounting for 0.00006% of the Company‘s assets book value as of
June 30, 2016.

Transaction type and subject matter: Supplementary Agreement to Contract No. 0083/26/108 of June 01, 2016
PJSC TATNEFT n.a. V.D. Shashin (Seller) and JSC TANECO (Buyer).

The content of the transaction, including civil rights and obligations, which establishment, modification or
termination the transaction is directed at:

Subject matter of the supplementary agreement: The amount reduction of the immovable property sale contract No.
0083/26/108 of June 01, 2016.

Supplementary Agreement price: 382,845,022.18 (three hundred and eighty-two million eight hundred forty-five
thousand twenty-two) rubles and 18 kopecks.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

128

129

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY1

Parties interested in the transaction:

ФИО

ПАО «Татнефть» им. В.Д. Шашина

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

АО «ТАНЕКО»

JSC TANECO

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

3. E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov

Member of the collegial executive body

Board of Directors member

Deadline for the fulfilment of obligations under the transaction: November 25, 2016

Monetary valuation of property under the transaction: RUB 382,845,022.18 (three hundred and eighty-two
million eight hundred forty-five thousand twenty-two) and 18 kopecks accounting for 0.055% of the Company‘s
assets book value as of September 30, 2016.

Transaction
not com-
pleted

26.08.2016 Board of
Directors
PJSC
TATNEFT

Transaction type and subject matter: Immovable property Sale and Purchase Contract between PJSC
TATNEFT n.a. V.D. Shashin (Seller) and JSC TANECO (Buyer).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination of the transaction is directed at: Sale and purchase immovable property.

Immovable property items:
l Title 066, section 8220 Pumping unit at the flushing and off-test product park delayed coking unit”, costing RUB

210,369,397.68;

l Title 124/4, section 9504 “Stand-alone distribution and transformer substation of the off-plot facilities”, costing

RUB 265,276,831.98;

l Title 030/1, section 8204 “Flushing and off-test product park of the diesel fuel hydrotreatment installation”, costing

RUB 160,196,494.16;

l Title 062, section 8217 “Pumping unit at the flushing and off-test product park of the installations of hydrotreatment

of gasoline fraction, kerosene, diesel fuel”, costing RUB 139,402,171.80;

l Title 015/1, section 5110, facility No. 1 “Unit of loading petroleum coke into dump trucks”, costing RUB

233,499,672.10;

l Land plot with cadastral number 16:30:011701:250, total area of 3466 sq. m., costing RUB 40,646.88;
l Land plot with cadastral number 16:30:011701:256, total area of 496 sq. m., costing RUB 31,570.28.

Contract price: RUB 1,008,816,784 (one billion eight million eight hundred sixteen thousand seven hundred and
eighty four) and 89 kopeck.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov

Member of the collegial executive body

Board of Directors member

Monetary valuation of property under the transaction: RUB 1,008,816,784 (one billion eight million eight
hundred sixteen thousand seven hundred and eighty four) and 89 kopecks, accounting for 0.15% of the
Company‘s assets book value as of June 30, 2016.

Transaction type and subject matter: Supplementary Agreement to Contract the Purchase and Sale Contract
between PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO No. 430/13.02-06/13 от 23.10.2013

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination the transaction is directed at: Increasing the contract amount for the purchase
and sale of inventories, including spare tools and supplies (SPTA) for equipment for the facilities of the Complex
of Oil Refining and Petrochemical Plants in Nizhnekamsk, No. 430 / 13.02-06 / 13 of October 23, 2013

Supplementary Agreement price: 400 000 000 (Four hundred million) rubles 00 kopeck;

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Transaction
not com-
pleted

26.08.2016 Board of
Directors
PJSC
TATNEFT

24.11.2016

Transaction
not com-
pleted

Board of
Directors
PJSC
TATNEFT

24.11.2016

Transaction
not com-
pleted

Board of
Directors
PJSC
TATNEFT

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov

Member of the collegial executive body

Board of Directors member

Monetary valuation of property under the transaction: RUB 400,000,000 (four hundred million) and 00
kopecks accounting for 0.06% of the Company‘s assets book value as of June 30, 2016.

Transaction type and subject matter: Immovable property Sale and Purchase Contract between PJSC TATNEFT
n.a. V.D. Shashin (Seller) and JSC TANECO (Buyer).

The content of the transaction, including civil rights and obligations, which establishment, modification or termination
of the transaction is directed at: Immovable property sale and purchase.

Immovable property item:
l title 007 section 1300: “Naphtha hydrotreatmenr”;
l Contract price: RUB 2,596,327,212.62 (two billion five hundred ninety six million three hundred twenty seven

thousand two hundred twelve) and 62 kopecks.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and JSC TANECO.

Parties interested in the transaction:

FULL NAME

PJSC TATNEFT n.a. V.D. Shashin

JSC TANECO

1. N.U. Maganov

Board of Directors member, Member of the collegial
executive body (Chairman), Sole executive body

Board of Directors member
(Chairman)

2. R.K. Sabirov

Board of Directors member

E.A. Tkhturov

Member of the collegial executive body

Board of Directors member

4. N.M. Gazkov

Member of the collegial executive body

Board of Directors member

Monetary valuation of property under the transaction: RUB 2,596,327,212.62 (two billion five hundred
ninety six million three hundred twenty seven thousand two hundred twelve) and 62 kopecks, accounting for
0.375% of the Company‘s assets book value as of September 30, 2016.

Transaction type and subject matter: Supplementary Agreement to the Sale and Purchase Contract of PJSC
TATNEFT n.a. V.D. Shashin (Seller) and OOO “Nizhnekamsk CHP” (Buyer).

The content of the transaction, including civil rights and obligations, which establishment,
modification or termination the transaction is directed at:

Subject matter of the Supplementary Agreement: Increasing the amount of the Sale and Purchase Contract of
No. 0083/21/2 of March 01, 2016

Price of the Supplementary Agreement: RUB 15,000,000 (Fifteen million) and 00 kopecks.

Parties to the Transaction: PJSC TATNEFT n.a. V.D. Shashin and OOO “Nizhnekamsk CHP”.

Sign of interest: OOO “Nizhnekamsk CHP”, a legal entity in which Public Joint Stock Company n.a. V.D. Shashin
is entitled to dispose of more than 20 percent of the votes attached to voting shares or composing the authorized
capital or the shareholders’ capital, contributions, shares of the mentioned legal entity.

Monetary valuation of property under the transaction: RUB 15,000,000 (Fifteen million) and 00 kopecks,
accounting for 0.00216% of the Company‘s assets book value as of September 30, 2016.

INFORMATION ON MAJOR TRANSACTIONS MADE BY THE COMPANY IN THE REPORTING YEAR:
The Company did not make any major transactions in 2016.

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AVERAGE NUMBER OF PJSC TATNEFT
AND TATNEFT GROUP EMPLOYEES

In 2016 the average number of PJSC TATNEFT employees was
20 899 persons. The total number of the TATNEFT Group’s per-
sonnel is 53 thousand persons (by enterprises consolidated
under IFRS). The main reason for the change in the number of
personnel for the TATNEFT Group is related to the change in the
list of enterprises consolidated under IFRS.

PERSONNEL MANAGEMENT POLICY

In 2016, the Personnel Management Policy of PJSC TAT-
NEFT underwent significant changes in the development of
the Company’s employees.

A Competency based model of the Company has been cre-
ated, competency indicators have been developed, a sys-
tem of integrated personnel assessment has been intro-
duced, and a new business process scheme “Staff reserve
formation” has been built.

The approved Competency-based model is balanced and
includes the following elements: qualification requirements,
formed list of corporate competencies, as well as evaluation
of the employee’s performance.

The Competences are formed and consolidated in corpo-
rate professional standards on the basis of existing profes-
sional standards, based on the specifics of the organization
of the production process.

Block of Corporate Competencies:

• Management competencies (“Personnel development” for

the whole category of managers and the competency “ So-
lutions Systemic Character”, which is absorbed by “Strate-
gic thinking” - for the managerial level of the heads of enter-
prises, offices, deputy directors of PJSC TATNEFT);

• General professional competencies (“Knowledge of in-

formation and communication technologies”, “Labor pro-
tection, industrial and environmental safety”, “Competent
communication”);

• Competencies related to ensuring the performance of labor

functions within the scope of the type of production activity.

Since July 1, 2016, amendments to the Labor Code on the
specifics of the using professional standards have come into
force (Federal Law No. 122-FZ of May 2, 2015). Since then, the
employers are obliged to apply professional standards, if the
law or regulations establish requirements for the qualifications
required for the employees to perform a certain work function
(Article 195.3 of the Labor Code of the Russian Federation,
from July 1, 2016).

Comprehensive assessment of the
employee competencies

Competency based
model

Methods of the
competence
development

THE COMPANY’S HR MANAGEMENT POLICY
IS BASED ON THE IMPORTANCE OF THE
HUMAN CAPITAL, ATTRACTING HIGHLY
SKILLED WORKERS AND ARRANGEMENT
OF CONDITIONS FOR THEIR SUSTAINABLE
MOTIVATION TO ACHIEVE MAXIMUM
PRODUCTIVITY, PROFESSIONAL AND
PERSONAL GROWTH.

Training
program

Individual
development plan

SUCCESSION PIPELINE

The Company has established mechanisms for the transparent
formation of the personnel reserve. Each employee can take
part in the formation of the staff reserve - business unit man-
agers, enterprise managers, personnel departments of enter-
prises, ordinary employees who can apply for inclusion their
colleagues into the personnel reserve.

There are two levels of the staff reserve formation: the Com-
pany’s reserve and the reserve of the Group’s enterprises. Two
types of reserve are also defined: operational and prospective
personnel reserve.

Adhering to the general trend of business development in the
industry, TATNEFT opens projects for the removal of operation-
al functions from the main productions and business blocks.

In 2016, the Company established the Center for Regulatory
Research, the Center for Human Resources Management
and Motivation, and the plans provide that in 2017 the Center
for Accounting and Tax Support, the Procurement Center, the
Corporate Finance Center and the Personnel Administration
Center will be opened.

The plans for 2017 provide for revising the existing personnel
management system in PJSC TATNEFT with the establishment
of the Corporate Center as a separate unit in the organizational
structure of the Company, which will be assigned with strategic
functions of the General Service Center, which assumes the
centralization of operational functions, and particularly in the
Company’s structural enterprises, the so-called supporting
functionality that performs HR functions at the sites.

TRAINING AND DEVELOPMENT
PROGRAMS FOR THE TATNEFT GROUP
EMPLOYEEES

Since 2016, the main goal of the Company in terms of the staff
development is the transfer of the training to the corporate for-
mat. The training, organized in the corporate format, allows
motivating the staff for the achievement of high results, rallying
the team of efficient professionals and making the Company
even more successful, profitable and competitive.

In 2016, the Company upgraded the skills of its mid-level pro-
fessionals in accordance with the Training Plan for Company’s
Managers and professionals approved by the General Director
of PJSC TATNEFT, as well as with the Personnel Development
Plans. The training was conducted at the Corporate Univer-
sity of PJSC TATNEFT and at the TATNEFT Personnel Training
Center on the basis of profile universities of the region and the
Russian Federation.

550 educational programs have been developed, including
278 vocational training programs for workers, 177 additional
training programs for workers and 95 additional training pro-
grams for managers and professionals.

67 vocational training programs have been developed taking
into account professional standards approved by the Ministry
of Labor and Social Protection of the Russian Federation.

In 2016, more than 19,000 employees of the Company were
trained and upgraded. The amount over RUB 130 million was
allocated for the purpose.

February 2016 witnessed the completion of a large-scale pro-
fessional retraining project of the Company’s geological ser-
vice in accordance with the program of the Non-State Educa-
tional Private Institution of Additional Professional Education
“Moscow Institute of Oil and Gas Business”, “Geotechnologies
for Oil and Gas Production”: 75 professionals received profes-
sional retraining diplomas.

From March 2015 to December 2016 10 professionals of PJSC
TATNEFT went through the corporate training under the 14
module program of the Higher School of the Kazan (Privolzh-
sky) Federal University “MBA of Extractive Industries”.

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PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY
In 2016, the Company’s professionals took part in federal
training programs going through the Russian and foreign in-
ternships:

• 120 persons. have been upgrading their qualifications

in the Kazan (Privolzhsky) Federal University within the
framework of the industry dedicated program;

search institutes in Russia;

• 25 persons were sent for training at enterprises and re-
• 12 persons were sent for an internship in France;
• 18 persons - Managers and professionals of the struc-

tural divisions of PJSC TATNEFT (including 5 profession-
als from the personnel reserve) were trained under the
Presidential Program of Management Personnel for the
National Economy at the Kazan (Privolzhsky) Federal
University.

In December 2016 in Almetyevsk, corporate training of 161 ac-
counting professionals of PJSC TATNEFT was organized with
the involvement of an external provider; the Institute of Devel-
opment of Modern Educational Technologies in Moscow.

The corporate training was organized on the basis of the Al-
metyevsk State Petroleum Institute in the course “Statistical
Management”. 115 employees of the Company were trained.

At the beginning of October 2016, within the framework of
training activities in the area of information security for 13
professionals, a corporate training seminar “Cybersecurity
of modern industrial systems” was organized by the Com-
petence Center of the Kaspersky Laboratory of the ANO VU
“University of Innopolis” in Almetyevsk.

PJSC TATNEFT STAFF STRUCTURE
BY SEX FOR THE PERIOD 2014-2016

DISTRIBUTION OF PJSC PERSONNEL BY
COUNTRIES FOR THE PERIOD 2014-2016

2014

2015

2016

2014 (%)

2015 (%)

2016 (%)

persons.

% persons.

Russian Federation

99.728

99.810

99.806

Male

Female

TOTAL

12, 843

60.8 13, 388

61.7

13,212

8,287

39.2

8,315

38.3

8,028

62.2

37,8

21 130

21 703

21 240

Turkmenistan

Libya

Ukraine

0.219

0.048

0.005

0.139

0.046

0.005

0.146

0.43

0.005

PJSC TATNEFT STAFF STRUCTURE
BY AGE FOR THE PERIOD 2014-2016

THE DYNAMICS OF THE MEN AND WOMEN
RATIO IN THE MANAGEMENT OF PJSC TATNEFT
FOR 2014-2016

Up to 30

From 31 to 50

Over 50

2014 (%)

2015 (%)

2016 (%)

24.2

51.4

24.4

25.2

51.5

23.3

24.3

52.7

Male

Female

2014 (%)

2015 (%)

2016 (%)

82.2

17.8

82.1

17.9

82.1

17.9

STAFF TURNOVER BY AGE AND SEX AT PJSC TATNEFT FOR 2014-2016

Dismissed
Total (%)

Of them

Of them by age (years)

M (%)

F (%)

to 20 (%)

From 20 to 30
(%)

From 30 to 40
(%)

From 40 to 50
(%)

From 50 to 60
(%)

Over 60 (%)

2014

2015

2016

4.87

3.44

3.13

3.45

2.5

1.42

0.94

1.13

0.19

0.1

0.25

2.29

1.39

1.2

1.25

0.99

0.88

0.76

0.61

0.5

0.33

0.29

0.24

0.05

0.06

COOPERATION WITH EDUCATIONAL INSTITUTIONS

The Company annually establishes personal scholarships to
encourage the best students who have distinguished them-
selves in their studies and the research work. In 2016, 111
students from the Almetyevsk State Petroleum Institute, the
Almetyevsk Polytechnic College, the Leninogorsk Oil Techni-
cal College and the Bugulma Engineering College received
111 special scholarships from PJSC TATNEFT. The amount of
the scholarship paid was RUB 3,477 thousand.

In 2016, PJSC TATNEFT structural divisions employed 220
graduates of the profile educational institutions of higher
and secondary vocational education, mainly graduates of
the Almetyevsk State Petroleum Institute, Kazan (Privolzh-
sky) Federal University, Kazan National Research Techno-
logical University, Kazan State Technical University n.a. A.N.
Tupolev, Ufa State Petroleum Technical University, Alme-
tyevsk Polytechnic College, Leninogorsk Oil Technical Col-
lege, Bugulma Engineering College and other specialized
educational institutions of higher professional education.

In 2016, financial assistance provided to the educational
institutions of higher professional education amounted to
RUB 183,404 thousand, secondary vocational education –
RUB 5,664 thousand.

An integrated system of continuous professional education
has developed and successfully operates in the Company.
It has been created with the support of the Government of
Tatarstan and in close cooperation with specialized educa-
tional institutions. This allows maintaining the intellectual
potential of the Company and its competitiveness in the oil
industry of the country at a sufficient level.

The Company develops training centers, opens basic chairs
at the educational institutions, organizes all types of intern-
ship for students.

PJSC TATNEFT together with the leading higher educational
institutions of the Republic of Tatarstan annually organizes
targeted contract training for attracting young professionals
at expense of the federal and republican budgets.

To date, there are about 250 students studying in the areas
of training relevant to the Company at the Russian State Uni-
versity of Oil and Gas named after I.M. Gubkin, Kazan (Priv-
olzhsky) Federal University, Almetyevsk State Petroleum
Institute, Kazan National Research Technological University
and other educational institutions. Students are assigned to
the companies of the TATNEFT Group. In accordance with
the terms of the targeted contract training concluded the
students will be employed at these enterprises upon com-
pletion of the training.

Employees of the profile production services of the Compa-
ny’s enterprises hold meetings with students, discuss ques-
tions of academic progress, writing the term and diploma
papers, and doing all kinds of internship.

For many years already TATNEFT Company has been suc-
cessfully implementing a cluster system of continuous pro-
fessional education with the participation of the Almetyevsk
State Petroleum Institute (AGNI), Almetyevsk Polytechnic,
Leninogorsk Oil, the Bugulma Engineering Colleges and the
TATNEFT Personnel Training Center.

In 2016, the Company supported opening at the premises of
AGNI of a unique training course for masters in the field “Oil
and Gas Business” under the program “Modeling and man-
agement of hydrocarbon fields development”.

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135

CU Trainings

CU Webinrs

326

Training on the basis
of AGNI

229

Invited teachers

974

880

STAFF CERTIFICATION

The issues of staff appraisal in the Company are regulated by
the “PJSC TATNEFT’s Personnel Certification Standard”. The
standard establishes a uniform procedure for attestation of
personnel in all divisions of the Company and it is recommend-
ed for application in subsidiaries and dependent companies.

The personnel certification/ which is an integral part of the hu-
man resources management system, aimed at implementing
the corporate strategy, is conducted in accordance with the
Labor Code of the Russian Federation and relevant regulatory
documents.

The purpose of personnel certification is to identify the com-
pliance of the employees’ competence with and qualification
requirements, as well as to assess the opportunities for their
further career growth.

Managers, professionals and employees of the Company are
subject to attestation.

CORPORATE UNIVERSITY

In 2016, the order of PJSC TATNEFT’s General Director estab-
lished the Corporate University as a division of the Company.

The Corporate University is part of the emerging Corporate
Personnel Development System of the TATNEFT Group,
aimed at creating effective HR-cycle processes.

Within the framework of the «Definition of Criteria» and «Staff
Assessment» programs the main tasks of the Corporate Uni-
versity are:

• methodical support of the Company’s transition to the

system of professional standards, including ensuring the
active participation of the Company in the creation both
in the Republic of Tatarstan and in the Russian Federa-
tion of a system of professional public accreditation of
educational programs for training professionals for the
oil and gas industry and a system of professional certifi-
cation of the already working professionals;

• development and implementation of corporate profes-

sional standards, including the definition for all employ-
ees of general corporate, managerial, professional and
general professional competencies;

• organization of the staff evaluation procedures in terms

of new qualification requirements and competencies.

Within the framework of new approaches to the personnel
management, the Corporate University developed a two-day
course «National Qualification System of the Russian Federa-
tion: Qualification Frame, Professional Standards, Competen-
cy Approach» for managers, employees of HR departments
and the Company’s Offices of labor organization and salaries.

More than 200 persons were trained in this course, including
the employees of PJSC TATNEFT, Tatneft-Neftekhim Man-
agement Company, OOO Tatneft-AZS Center.

On May 27, 2016 the PJSC TATNEFT’s Corporate University
together with GMC Consulting held a national scientific and
practical seminar «Professional standard as a tool for per-
sonnel policy. Problems of adaptation and implementation»,
which was attended by more than 200 representatives of the
leading companies of the Republic of Tatarstan.

In 2016, the Corporate University developed the main corpo-
rate educational programs aimed at shaping and develop-
ment of general corporate and management competencies
of the Company’s employees.

All educational programs are built on a modular basis.

In accordance with the concept, the professional retraining
program «Efficient Manager» includes the following educa-
tional modules:

• fundamentals of management and economics;
• psychology of management;
• personal potential of the manager;
• leadership and teambuilding;
• personnel management and fundamentals of coaching;
• project management;
• change management;
• time management;
• information management systems;
• corporate culture and efficient communication.

In 2016, the Corporate University of PJSC TATNEFT received
a license to conduct educational activities under the pro-
grams of additional vocational education.

The training was organized for 2,409 persons in 2016.

There was a project «Professionalism from the first person»
initiated in PJSC TATNEFT to improve the quality of shaping
the professional competencies of the graduates of the edu-
cational organizations, which form the basis for the training
of the Company’s personnel. In 2016 there were 26 sessions
organized and conducted by the Company’s managers for
the students of AGNI.

The project was launched to create a unified IT-platform for
training and development of the TATNEFT Group employees,
which takes into account the needs of all types of business.

136

137

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28.7 mln tonnes - Total oil production for TATNEFT Group in 2016

FINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYwww.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTPJSC TATNEFT ANNUAL REPORT 2016ACCOUNTING STATEMENTS PREPARED IN ACCORDANCE
wITH RUSSIAN ACCOUNTING STANDARDS

AUDITOR’S REPORT
Independent Auditor’s Report
To the Shareholders and Board of Directors of PJSC TATNEFT n.a. V.D. Shashin

Opinion
In our opinion, the attached financial statements reflect fairly, in all material respects, the financial position of PJSC Tatneft n.a.
V.D. Shashin (the «Company») as of December 31, 2016, as well as its financial results and cash flows for the year then ended,
in accordance with the accounting rules established in the Russian Federation.

Subject of audit
We have audited the Company’s financial statements, which include:

• balance sheet as of December 31, 2016;
• statement of financial results for the year ending on that date;
• statement of changes in equity for the year ending on that date;
• statement of cash flows for the year ending on that date;
• explanations to the balance sheet and the financial results report.

GROUNDS FOR EXPRESSING THE OPINION

We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibility in accordance with
these standards is described further in the section «Auditor’s Responsibility for the Audit of Financial Statements» of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our report.

Independence
We are independent of the Company in accordance with the Code of Ethics for Professional Accountants of the International
Ethics Standards Board for Accountants (IESBA) and the ethical requirements of the Code of Professional Ethics of Auditors
and the Rules of Independence of Auditors and Audit Organizations applicable to our audit of accounting in the Russian
Federation. We have also fulfilled other ethical duties in accordance with these requirements and the Code of IESBA.

OUR AUDIT METHODOLOGY OVERVIEW
Materiality
Materiality at the level of the Company’s accounting statements as a whole: 5,400 million Russian rubles (million rubles), which
is 4% of profit before tax.

Key issues of audit
Estimation of the obligation to liquidate fixed assets and of restoration of natural resources.

Our audit methodology assumes the definition of materiality and the assessment of the risks of material misstatement of the
financial statements. In particular, we analyzed in which areas the management made subjective judgments, for example,
with respect to significant accounting estimates, which included the application of assumptions and consideration of future
events with which uncertainty is due to their nature. We also considered the risk of circumvention of the internal controls by
management, including, among other things, an assessment of whether there are signs of management bias that creates the
risk of material misstatement due to fraud.

The scope of the audit is defined by us in such a way that we can perform the work in sufficient volume to express our opinion on
the accounting statements as a whole, taking into account the Company’s structure, accounting processes and controls used
by the Company, as well as taking into account the specifics of the industry in which the Company operates.

Materiality
The determination of the scope of our audit was influenced by the application of our materiality. The audit is intended to obtain
reasonable assurance that the financial statements do not contain material misstatement. Distortions can arise as a result
of unfair acts or mistakes. They are considered significant if it is reasonable to expect that individually or collectively they will
affect the economic decisions of users made on the basis of these financial statements.

Based on our professional judgment, we have established certain quantitative thresholds for materiality, including materiality at the
level of the Company’s accounting as a whole, as indicated in the table below. With the help of these values and taking into account
qualitative factors, we have determined the scope of our audit, as well as the nature, timing and scope of our audit procedures and
assessed the impact of distortions (taken separately and in aggregate), if any, on the financial statements as a whole.

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141

HOW DID WE DETERMINE IT:
4% of the Company’s profit before taxation

RATIONALE FOR THE APPLIED LEVEL OF MATERIALITY:
We decided to use as a base indicator to determine the level of materiality of profit before tax, because we believe that it is this
base indicator that is most often considered by users to assess the performance of the Company, and it is a generally accepted
benchmark.

We have established materiality at 4%, which falls within the range of acceptable quantitative thresholds of materiality applicable
to profit-driven companies in this industrial sector.

Key audit issues
The key issues of the audit are issues that, according to our professional judgment, were the most significant for our audit of financial
statements for the current period. These issues were considered in the context of our audit of the financial statements in general and
in the formation of our opinion on these financial statements, and we do not express a separate opinion on these issues.

Key audit question
What audit procedures were performed regarding the key issue of the audit
Assessment of an estimated liability for fixed assets liquidation and natural resources restoration

See Explanation 8 (table section), Explanations 2 and 13 (text part) to the balance sheet and the financial results report.

The Company’s financial statements reflect the estimated liability to liquidate fixed assets related to exploration, development
and production activities after the end of their operation and to restore natural resources («OLOS»).

We carried out the following procedures with respect to the calculation models for estimating OLOS:

• verification of the arithmetic accuracy of calculations and the completeness of the data used, such as the list of objects

subject to liquidation, the cost of conservation and abandonment of wells, the number of wells and other fixed assets, the
cost of reclamation and the area of land, the period before abandonment of the field (discount period);

The evaluation of OLOC is carried out by the management annually and involves the use of various estimates and
judgments of the management due to the complexity inherent in the estimation of future costs, while the amount of the
estimated liability is significant for the Company’s balance sheet.

As of December 31, 2016, the amount of this liability amounted to RUB 30,406 million. As of December 31, 2015, it was
RUB 33,545 million (lines 1430 and 1540 «Estimated liabilities» of the balance sheet).

We paid considerable attention to the evaluation of OLOS in view of the materiality of this obligation, and especially in
connection with the reduction in the amount of OLOS during 2016 by RUB 3,139 million, which affected the financial
results of the Company for 2016. Expenses in the amount of RUB 3,271 million and income in the amount of RUB 7,150
million from the changes in OLOS are reflected in the statement of financial results under lines 2330 «Interest payable»
and 2340 «Other income», respectively. This decrease was due to several multidirectional factors, the most significant of
which is revision of the assumptions used in the calculation, in particular, the inflation rate, the discount rate, the cost of
liquidation of fixed assets and the period of discounting.

• An analysis of the validity of the assumptions used in calculating OLOS, such as the inflation rate and the discount rate

Our procedures for verifying the validity of the management costs used by the management for estimating OLOS of the
cost of liquidation of wells, other fixed assets and land reclamation included discussion with the Company’s technical
experts of the list and procedure for conducting liquidation and restoration works, as well as reconciliation with the
standard estimates of the Company for the liquidation of fixed assets.

The most significant effect on the change in the value of OLOS during 2016 was the change in the inflation rate used
to estimate the future cost of liquidation of fixed assets. We checked the inflation rate applied by the Company’s
management to the forecasts of the socio-economic development of the Russian Federation prepared by the Ministry of
Economic Development of the Russian Federation.

We have also checked the discount rate used by the Company’s management to the level of profitability of government
securities, the maturity of which is comparable to the expected deadline for fulfilling obligations to liquidate fixed assets
and restore natural resources.

Based on the results of the conducted procedures, we came to the conclusion that the assessment of the obligation to
liquidate fixed assets and restore natural resources as of December 31, 2016, made by the Company’s management, is
appropriate.

OTHER INFORMATION
The management is responsible for other information. Other information contains the Company’s Annual Report for the year
2016 and the Issuer’s Quarterly Report for the 1st quarter of 2017 (but excludes the financial statements and our audit report
on these financial statements), which are expected to be provided to us after the date of this audit report.

Our report on the financial statements does not apply to other information, and we do not and will not provide a conclusion
expressing confidence in any form regarding this information.

In connection with our audit of the financial statements, our responsibility is to acquaint ourselves with the above other
information and to consider whether there are material inconsistencies between other information and accounting statements
or our knowledge obtained during the audit and whether other information contains other possible material distortions.

If, upon acquaintance with the Company’s Annual Report for 2016 and the Quarterly Report of the Issuer for the 1st quarter of
2017, we come to the conclusion that they contain material distortions, we are obliged to bring this to the attention of those
responsible for corporate governance.

RESPONSIBILITY OF THE MANAGEMENT AND PERSONS RESPONSIBLE FOR COR-
PORATE GOVERNANCE FOR FINANCIAL STATEMENTS

The management is responsible for the preparation and fair presentation of these financial statements in accordance with the
accounting rules established in the Russian Federation and for the internal control system that the management considers
necessary for the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the ability of the Company to continue its
business continuously, for disclosure, as appropriate, of information relating to business continuity and for reporting on the
basis of the assumption of business continuity, unless the management intends to liquidate the Company, to terminate its
activities or when it lacks any other real alternative, except for the liquidation or termination of activities.

The persons responsible for corporate governance are responsible for overseeing the preparation of the Company’s financial statements.

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ABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RU

AUDITOR’S RESPONSIBILITY FOR AUDIT OF FINANCIAL STATEMENTS

Our goal is to obtain reasonable assurance that the financial statements do not contain material misstatements due to fraud or
error, and in the issuance of an audit report containing our opinion. Reasonable confidence is a high degree of certainty, but it
is not a guarantee that an audit conducted in accordance with ISA always reveals material distortions when they are present.
Distortions can be the result of fraud or error and are considered material if it can reasonably be assumed that individually or
in combination they can affect the economic decisions of users taken on the basis of this accounting.

As part of the audit conducted in accordance with ISA, we apply professional judgment and maintain professional skepticism
throughout the audit. In addition, we perform the following:

• identify and assess the risks of material misstatement of financial statements due to fraud or error; develop and conduct

audit procedures in response to these risks; obtain audit evidence that is sufficient and appropriate to serve as a basis
for expressing our opinion. The risk of not detecting a material misstatement as a result of unfair acts is higher than the
risk of not detecting a material distortion as a result of an error, since unfair acts may include collusion, fraud, intentional
omission, misrepresentation or circumvention of the internal control system;

• obtain an understanding of the internal control system that is relevant to the audit in order to develop audit procedures

appropriate to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control system;

• assess the appropriate nature of the accounting policies applied and the reasonableness of accounting estimates and the
• conclude that the management has accepted the assumption of continuity of business and, on the basis of the audit

corresponding disclosure of information prepared by management;

evidence obtained, the conclusion is whether there is significant uncertainty in connection with events or conditions that
may raise significant doubts about the Company’s ability to continue its business. If we come to the conclusion that there
is significant uncertainty, we must draw attention to our disclosure in the financial statements in our audit report, or, if such
disclosure is improper, modify our report. Our conclusions are based on the audit evidence received before the date of
our audit report. However, future events or conditions may lead to the Company losing the ability to continue its business
continuously;

• assess the presentation of the accounting statements in general, its structure and content, including disclosure of

information, and also whether the accounting statements present the underlying operations and events in such a way as to
ensure their reliable representation.

We carry out informational interaction with persons responsible for corporate governance, bringing to their attention, among
other things, information about the planned scope and timing of the audit, as well as significant comments on the audit results,
including significant deficiencies in the internal control system that we identify in the audit process.

We also provide those responsible for corporate governance with a statement that we have complied with all relevant ethical
requirements for independence and have informed these individuals of all relationships and other matters that can reasonably
be considered influencing the independence of the auditor and, where necessary, a statement on appropriate precautions.

Of those issues that we brought to the attention of those responsible for corporate governance, we identify the issues that were
most significant for the audit of financial statements for the current period and, therefore, were key audit issues. We describe
these issues in our audit report, except in cases where public disclosure of information about these issues is prohibited by law
or regulation, or when in very rare cases we come to the conclusion that information about an issue should not be reported in
our report, as it can reasonably be assumed that the negative consequences of the communication of such information will
exceed the socially significant benefit from its communication.

Maxim Timchenko
Head of the assignment, which resulted in the issuance of this auditor’s report of an independent auditor.

March 28, 2017
Moscow, Russian Federation

Maxim Timchenko, Head of the assignment (Qualification certificate No. 01-000267),

PricewaterhouseCoopers Audit Joint Stock Company

Auditee: Public corporation «Tatneft named after V.D. Shashina

The certificate of state registration No. 632 was issued by the Ministry of Finance of the Republic of Tatarstan on January 21, 1994.
The certificate of entry in the Unified State Register of Legal Entities for No. 1021601623702 was issued on July 18, 2002 by the
Interdistrict Inspectorate of the Ministry of the Russian Federation for Taxes and Levies No. 16 for the Republic of Tatarstan
423450 Russia, Republic of Tatarstan, Almetyevsk, ul. Lenin 75

Independent Auditor: PricewaterhouseCoopers Audit Joint Stock Company

The certificate of state registration No. 008.890 was issued by the Moscow Registration Chamber on February 28, 1992.
The certificate of entry in the Unified State Register of Legal Entities was issued on August 22, 2002 under No. 1027700148431
Member of the self-regulatory organization of auditors «Russian Union of Auditors» (Association)
ORNZ in the register of auditors and audit organizations - 11603050547

144

145

State Registration Certificate No. 632 issued by the Ministry of Finance of Tatarstan Republic on January 21, 1994.

Certificate of Entry in the Unified State Register of Legal Entities registered before July 1, 2002, Registration No. 1021601623702
dated July 18, 2002 issued by the Interdistrict Inspectorate of the Ministry for Taxes and Duties of the Russian Federation No. 16 for
Republic of Tatarstan.

Principal place of business: 75 Lenin Street, Almetyevsk 423450, Republic of Tatarstan, Russian Federation

AUDITOR

Joint Stock Company “PricewaterhouseCoopers Audit” (JSC PwC Audit) having its place of business at: 10 Butyrsky Val, Mos¬cow
125047, Russian Federation.

Certificate of State Registration of Joint-Stock Company No. 008.890 issued by the Moscow Registration Chamber on Febru¬ary
28, 1992.

Certificate of Entry in the Unified State Register of Legal Entities registered before July 1, 2002, Registration No. 1027700148431
dated August 22, 2002 issued by the Moscow Interdistrict Inspectorate of the Ministry for Taxes and Duties of the Russian Fed¬eration
No. 39.

Member of the Non-commercial Partnership “Audit Chamber of Russia” (NP APR), which is a self-regulating organization of auditors
- Registration number 870 in the Register of NP APR members.

Basic State Registration Number in the register of auditors and auditor organizations - 10201003683

We have audited the enclosed accounting statements of PJSC TATNEFT n.a. V.D. Shashin (hereinafter referred to as
the Com¬pany) which comprise the Balance Sheet as at December 31, 2015, Profit and Loss Account, Statement of
Capital Changes, Cash Flow Statement for 2015, Notes to the Balance Sheet and Profit & Loss Account (hereinafter
jointly referred to as the “Accounting Statements”).

COMPANY’S RESPONSIBILITY FOR THE ACCOUNTING STATEMENTS

The Company’s management is responsible for preparation and fair presentation of the said of the said Accounting Statements in
compliance with the rules on preparing accounting statements set out in the Russian Federation and for the internal control system
necessary to prepare the accounting statements that are free from material misstatements whether due to fraud or error.
Auditor’s Responsibility

Our responsibility is to express an opinion on the fair presentation of the accounting statements based on our audit. We con¬ducted
our audit in accordance with the Federal Auditing Standards and International Standards on Auditing. These standards require
the compliance with the applicable ethical rules as well as audit planning and carrying out in such a manner that gives sufficient
confidence that the accounting statements are free of material misstatements.

The audit included auditing procedures aimed at obtaining the audit evidence that prove the numeric values in the accounting
statements and disclose of the information contained therein. The choice of the auditing procedures is the subject matter of our
judgment which is based on assessment of the risk of material misstatements, whether due to fraud or error. During the assess¬ment
of the risk we considered the internal control system procuring preparation and accuracy of the accounting statements in order to
select appropriate auditing procedures but not to express the opinion if the internal control system is efficient. The audit also included
the assessment of the proper nature of the applied accounting policy and soundness of the estimates obtained by the management
of the Company as well as the evaluation of the overall presentation of the accounting statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to express an opinion on the fair presentation of
the accounting statements.

OPINION

In our opinion, the accounting statements present fairly in all material respects the financial standing of the Company as at December
31, 2015, and the results of its financial and economic activities and cash flows for 2015 in conformity with the rules on preparing the
accounting statements set out in the Russian Federation.

March 28, 2016
Moscow, Russian Federation
M.E. Timchenko, Director
JSC PriceWaterhouseCoopers Audit

146

147

BALANCE SHEET

ASSETS

I. FIXED ASSETS

Intangible assets

Research and development results

Intangible exploration assets

Tangible exploration assets

Fixed assets

incl. incomplete capital investments

advance payments given for procurement and construction of
fixed assets

Income-bearing investments in tangible assets

Financial investments

Deferred tax assets

Other 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

Value added tax on acquired assets

Accounts receivable

incl. noncurrent nondelinquent accounts receivable (that are
due beyond 12 months after 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 investments (except for cash equivalents)

Cash and cash equivalents

Other current assets

TOTAL for section II

BALANCE

148

Line Code

As of December
31, 2016

As of December
31, 2015

As of December
31, 2014

LIABILITIES

Line Code

As of December
31, 2016

As of December
31, 2015

As of December
31, 2014

thousand RUB

BALANCE SHEET (CONTINUED)

1110

1120

1130

1140

1150

1151

1152

1160

1170

1180

1190

1191

1100

1210

1211

1212

1213

1214

1215

1220

1230

1231

1232

1233

1234

1235

1236

1237

1238

1240

1250

1260

1200

1600

465 285

632 054

4 288 829

2 376 749

363 181

425 495

4 298 721

1 181 376

307 582

325 099

4 256 953

1 133 728

207 011 450

185 402 361

121 288 999

87 479 230

79 479 182

27 392 755

4 575 908

9 896 607

8 688 542

4 776 524

2 302 366

1 888 783

253 078 329

234 265 798

213 205 328

51 255 795

37 433 580

40 578 570

28 996 993

29 293 324

29 232 592

523 885 015

465 672 878

382 985 042

33 955 382

27 195 783

26 948 648

4 900 427

2 581 938

421 525

412 249

1 994190

225 794

25 781 234

21 045 366

17 399 856

2 398 102

454 094

2615 128

541 102

6 700 323

628 485

3 386 647

3 708 117

4 308 690

88 128 999

107 136 545

82 279 954

4 686 487

6 348 987

6 656 414

436 418

822 812

128 897

582 784

363

188

3 427 257

6 219 727

6 073 442

83 442 512

100 787558

75 623 540

64 239 889

56 610 370

47 652 992

6 843 389

27 710 973

18816538

12 359 234

16466215

9 154010

55 736 376

28 266 335

45 942 537

21 949 639

8 393 083

34 916 922

1 259 705

19 634

17 200

204 416 748

174 719 497

194413951

728 301 763

640 392 375

577 398 993

III. CAPITAL AND RESERVES

Authorized capital (share capital, registered fund, contributions of
partners)

1310

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

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

(-)

11 294 898

10 546 619

9 799 512

320 092

441 293

252 710

1 328 926

1 364 610

1 341 864

609 147 154

530 650 255

471 369 384

624 417 269

545 328 976

485 089 669

370 000

1 568 072

3 144 387

10 272 462

8 602 514

10 372 405

30 330 233

33 486 117

29 975 977

392

40 973 087

43 656 703

43 492 769

4 207 953

2 396 685

8 739 722

56 573 009

47 072 098

38 349 893

21 155 447

26 585 497

19 086 327

545 876

462 037

19 498 095

10 059 307

8 403 106

2 939 963

149 472

133 304

337 717

8 982 193

6 432 831

117215

6 821 013

6 891 990

3 393 610

55 757

3 568

4 478

2 074 688

1 934 345

1 722 462

62 911 407

51 406 696

48 816 555

728 301 763

640 392 375

577 398 993

149

thousand RUB

ESSENTIAL ASPECTS OF THE ACCOUNTING POLICY
AND PRESENTATION OF THE ACCOUNTING STATEMENTS

Indicator Description

Line Code

FY 2016

FY 2015

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)

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 the period

Total profit/loss for the period

FOR REFERENCE

Basic earnings (loss) per share

Diluted earnings (loss) per share

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

486 176 316

462 962 074

(312 524 760)

(306 851 332)

173 651 556

156 110742

(36 919 888)

(36 617 097)

(127 769)

(72 494)

136 603 899

119421 151

1 593 297

4 857 244

707 955

9 845 751

(3 451 408)

(3 801 044)

64 995 252

19 168 972

(71 033 928)

(33 833 924)

133 564 356

111 508 861

(27 313 688)

(28 308 902)

(2 270 765)

(4 237 239)

(1 669 948)

1 769 891

49 045

194 284

45 445

(6 557)

104 824 049

85 008 738

1 095 374

826 602

(121 201)

188 583

105 798 222

86 023 923

47,20

38.28

* The full version of the accounting (financial) statements under RAS is available at:

http://www.tatneft.ru/storage/block_editor/files/fc100472fb7ea0fab305d3ec5ebadc2748f99559.pdf

150

MAIN APPROACHES TO PREPARATION OF THE ANNUAL ACCOUNTING STATEMENTS

Financial accounting in the Company is performed in accordance with Federal 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. The accounting statements of the Company for 2015 were prepared in compliance with the mentioned Accounting
Law, accounting regulations and policy. The annual accounting statements for 2015 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 accounting statements”. The data of the accounting statements are presented in thousands of
Russian rubles.

ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY

Accounting for assets and liabilities denominated in foreign currencies is carried out in accordance with RAS 3/2006
“Account¬ing of Assets and Liabilities Denominated in Foreign Currencies”, and approved by Order No. 154n of November 27,
2006 of the Finance Ministry of the Russian Federation.

The exchange rate difference is reflected in the accounting and financial statements for the concerned reporting period with
the due date of payment or which the financial statements were executed for.

The exchange rate difference arising from conversion of the organization’s assets and liabilities denominated in foreign
cur¬rency used for performing activities outside the Russian Federation into rubles is credited to the company’s capital surplus.

The exchange rate difference on other activities is credited to financial results of the organization as other income and
ex¬penses. The currency exchange rate gains and losses are recognized in the Profit and Loss account in the “Other income”
or “Other expenses”.

For accounting business transactions in foreign currencies there was the official exchange rate applied of the foreign currency
to the ruble valid on the date of transaction. Cash on foreign currency accounts in banks and on hand, financial investments
(except shares), and settlement funds in foreign currencies (except the funds received and paid advances and pre-payment or
earnest money) are reflected in the financial statements as amounts calculated on the basis of the currency official exchange
rates valid on the reporting date. The currency exchange rates amounted to RUB 60,6569 to USD 1.00 as of December 31,
2016 (RUB 72,8827as of December 31, 2015; RUB 56,2584 as of December 31, 2014); RUB 63,8111 to EURO 1.00 (RUB
79.6972 as of December 31, 2015; RUB 68.3427 as of December 31, 2014).

INTANGIBLE ASSETS

As a part of intangible assets there are software programs for computers reflected; databases; inventions; useful models;
trademarks and service marks, licenses for mineral geological exploration and production, licenses for mineral production,
exploration and evaluation expenditures of mineral resources (transferred from the intangible exploration assets after
confirmation of the commercial viability of oil production in the field).

Intangible assets are reflected in the accounting records at historic cost in that reporting period when the documents are
received confirming the Company’s exclusive rights to the results of intellectual activity or means of individualization irrespective
of in¬tangible assets used in production, performance of works or rendering of services, for administrative purposes.

151

ABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUThe value of intangible assets shall be repaid by the straight-line depreciation method at the rates specified on the basis of the
due date of the useful life.

Depreciation is not charged for intangible assets with an indefinite period of the useful life.

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
explora¬tion of mineral resources for relevant license blocks.

Depreciation charging is performed through accumulation of appropriate amounts in a separate account. Depreciation
on in¬tangible assets is reflected in the accounting period, which they refer to and and which is charged regardless of the
company’s operating results in the reporting period.

Intangible exploration assets as licenses for geological subsurface study are depreciated by straight-line method 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.

The useful life of intangible assets is annually verified for the purpose of clarification. 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 defined. The resulting
ad¬justments are reflected in the accounting and financial reporting at the beginning of the year as changes in the estimated values.

Acquisition costs incurred for exploration and mining licenses, as well as the costs of prospecting, evaluation and exploration
of mineral resources are not depreciated until the commercial feasibility of oil production is confirmed in the relevant license
block of mineral resources and approval of the order of commercial field development.

Value adjustment of intangible assets of homogeneous groups at fair market value is not performed.

EXPENSES FOR RESEARCH & DEVELOPMENT, DEVELOPMENT
AND ENGINEERING WORKS

The commercial feasibility of oil production is considered to be confirmed at the moment of approval of the reservoir
manage¬ment plan in the license area of mineral resources.

The Company performs annual verification of exploration assets depreciation as of December 31 of the calendar year, as well as in
the case of cessation of their recognition when confirming commercial feasibility of oil production in the relevant license block.

Expenses for the research & development, development and engineering works are accounted in the amount of actual
ex¬penses incurred during performance of these works.

For the purposes of verifying exploration assets for depreciation the aforementioned assets are categorized by mineral
re¬source blocks indicated in the licenses.

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 company.

Writing off the costs of each performed research & development, development and engineering work which 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 works which have not produced positive results
are written off to the financial result as miscellaneous expenses in the reporting period.

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 advance producing wells, as well as other oilfield
• expenses for acquisition and rig-up of the equipment for prospecting, exploration and advance producing operation wells.

facilities;

According to the Company, intangible exploration assets include the following types of exploration costs:

min¬eral resources;

• acquisition costs of licenses for geological study of subsurface, licenses for geological exploration and production of
• 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 structural 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 performance and coordination of works on exploration, evaluation and prospect¬ing
of mineral resources, as well as expenses for maintenance and repair of tangible exploration assets.

Impairment loss of exploration assets is reflected in the profit-and-loss statement in line code “Other expenses”. Furthermore,
the Company applies the reversal of impairment loss to exploration assets.

The Company ceases recognition of exploration assets in relation to a certain licensed block of mineral resources when
con¬firming commercial feasibility of oil production in the relevant licensed block or recognizing lack of prospects of mineral
re¬sources production in this area.

When confirming the commercial feasibility of oil production in the licensed block of mineral resources the Company performs
reclassification of exploration assets:

• tangible exploration assets are included in the category of fixed assets at residual value;
• intangible exploration assets are included in the category of intangible assets at residual value.

The Company writes off the exploration assets to other expenses, if they are not able to provide economic benefits 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 reflected in the fixed assets.

The Company annually revaluates fixed assets (buildings for industrial purposes; facilities, such as pipelines, machinery and
equipment (except for data equipment) based on the current value (replacement asset value) at the end of the report¬ing period.

The fixed assets put into operation before January 1, 2002 are depreciated at uniform depreciation rates approved by Decree
No. 1072 of the USSR Council 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 classification of fixed 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 information sources about
the useful life periods. For this purpose, the following useful life periods are specified for fixed assets put into operation starting
from January 1, 2002 by depreciation groups.

152

153

Fixed asset group

Buildings

Facilities, including:

Wells

Machinery and equipment

Useful life of items of fixed assets (number of years)

Before 01.01.2002

After 01.01.2002

25-50

10-25

10-15

5-15

8 -31

4-31

6 -11

1-26

Depreciation is not charged on land plots and natural resources sites.

On disposal of financial 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 first-time financial investments acquisition (FIFO method);
• on disposal of bills - at original cost of each unit of financial investments accounting.

On disposal of financial 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 financial investments disposal are reflected in the profit and loss statement as part of other income and
expenses.

Changing the original value of fixed assets as they were included for accounting purposes is allowed in cases of completion,
retrofit, renovation, modernization, partial liquidation and revaluation of the fixed assets.

INVENTORIES

Repair expenses of fixed assets items are included at actual costs and referred to the reporting period in which they were done.

The line of “Capital expenditures 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 reflects the cost
of capital construction projects before their putting into operation, after which the structures are transferred into fixed assets.

The “Raw Materials and Supplies” line of the balance sheet reflects raw materials, basic and auxiliary materials, purchased
semi-finished products and components, fuel, packaging, spare parts, construction and other materials.

The line of the inventories also reflects the assets, which meet the conditions necessary for the recognizing them as fixed
as¬sets of the cost no more than 40 000 rubles per unit.

In addition to this, the “Capital expenditures in progress” line reflects the costs associated with the lease of land for construction
of future wells.

The inventories are recorded at the actual cost of their acquisition with the exception of VAT and other recoverable taxes
(ex¬cept as provided by the legislation of the Russian Federation). Disposal of the inventories is carried at the average cost.

Leased fixed assets are reflected in the line of “Income-bearing Investments in Tangible Assets”.

OTHER NONCURRENT ASSETS

Assets under construction are Included in other noncurrent assets, which the management decided to sell.

Also included in other non-current assets are costs associated with the production of extra-viscous oil, which had been incurred
before the start of production. These costs are written off evenly over the period of oil production at the relevant development
target, starting 1 day of the month following the month of the start of production.

FINANCIAL INVESTMENTS

Financial investments are accepted for accounting at original cost.

Financial investments defining the fair market value are reflected in the financial 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 definition of the current market value are reflected in financial statements as of
the re¬porting date at original cost after deduction of the reserve amount formed for their depreciation. The provision for
depreciation of financial investments is created by the amount of the difference between the book value and their estimated
value if the results of the depreciation test confirm a sustained significant decrease in the value of financial investments.

Financial investments are reflected as part of the current assets if the expected duration of their possession is less than 12
months after the reporting date. Other financial investments are included in fixed assets.

The inventories, which are obsolete, wholly or partially have lost their original quality, or which current market value is
de¬creased, are reflected in the balance sheet less the reserve provision for impairment of the material values.

Raw materials and materials transferred to processing on a give-and-take basis continue to be accounted for in raw materials
and materials of the Company. Monthly raw materials and materials that have passed through all processing stages are
recognized in the finished products.

FINISHED PRODUCTS, GOODS AND SALES EXPENSES

Finished products are reflected 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 financial and economic activities without differentiating
be¬tween the sold and unsold products.

GOODS SHIPPED

The accounting item “Goods Shipped” reflects shipped products, the title for which was not transferred to buyers.

This line also reflects the real estate property transferred to the buyer by the delivery-acceptance act before the moment of
state registration of the transfer ownership.

154

155

AUTHORIzED CAPITAL, SURPLUS CAPITAL AND RESERVE FUNDS

Indebtedness of buyers and customers (reflected as part of the accounts receivable) is determined based on the 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 proven to be such.

Accounts receivable not paid within the time limits or which will most likely not be paid within the time limits stipulated in
contracts and not secured with respective guarantees is shown after deduction of accrued reserves for doubtful debts. The
reserve is created for each doubtful debt outstand¬ing (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 within one financial year are
reflected in the financial results statement in the lines “Other Income” or “Other Expenses”.

Advance payments issued and received are presented in the balance sheet less the value added tax (from the amount of
advance payments) that is subject to deduction (payment) in accordance with tax legislation.

The authorized capital is reflected in the amount of the face value of ordinary and preferred shares.

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 fixed assets resulting from revaluation classified in the additional capital is reflected in the
“Revalua¬tion of Fixed Assets” line. Revaluation surplus in case of the fixed asset item disposal is transferred from the capital
surplus to the undistributed profit of the Company.

In accordance with the legislation, the Company established a reserve fund in the amount to 5% of the authorized capital formed
out of net profits of the Company. The reserve fund is intended to cover the losses of the Company, for bonds redemp¬tion and
repurchase of the Company’s shares if other funds are unavailable.

In accordance with the constituent documents, the Company establishes the Employee Share Ownership Fund which is formed
out of net profits of the Company. Contributions to this fund are made in accordance with the methodology approved by the
“Regulations on Bonus Certificates of PJSC TATNEFT”.

CASH AND CASH EQUIVALENTS

ESTIMATED LIABILITIES

In accordance with the RAS 23/2011 “Report of Cash Flows” approved by Order No. 11 n 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 insignificant risk of value change.

The Company refers the bank deposits placed for maximum 3 months period to the cash equivalents.

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

reflected in the rubles amount, which is determined in accordance with RAS 3/2006. «Accounting for assets and liabilities,
which are expressed in foreign currency», approved by the Order of the Ministry of Finance of Russia on November 27,
2006 No. 154n. Differences arising in connection with the conversion of the organization’s cash flows and cash equivalents
in foreign currency exchange rates on different dates are reflected in the cash flows 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

con¬tractors and payments to the budget system of the Russian Federation or reimbursement out of it are reflected
as bal¬anced result being part of other income (payments) for the current activity in the line of “Other Income” (“Other
Payments”).

• Proceeds from the sale of products and goods contain customs duties.

Cash flows are reflected in the statement of cash flows on a net basis in the following cases:

• cash receipts from certain entities stipulate relevant payments to other entities (cash flows of the commission buyer or

agent in connection with the performance of commission or agency services (except for payment for services themselves);
income from the counterparty against the reimbursement of utility payments and performance realization of these payments
in leasing and other similar relationships etc.);

• cash flows are characterized by quick return, large amounts and short payback periods (purchase and resale of financial
• cash flows on short-term deposits (more than three months but less than one year), which relate to financial investments.

investments, short¬term investments (up to three months) using the proceeds from borrowings etc.);

Cash flows on deposits are disclosed in Tabular Format 3 “Financial Investments” in the Notes to the balance sheet and
financial results statement.

• Cash flows for loans received by the Company from subsidiaries - participants in the Treasury system. These loans are

characterized by a rapid turnover, large amounts and short terms of return.

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.

Further, based on the Provision “Estimated Liabilities, Contingent Liabilities and Contingent Assets (RAS 8/2010)” approved
by the Order of the Russian Ministry of Finance No. 167n of December 13, 2010, the Company recognizes estimated liabilities
on unused vacations by the employees.

The estimated liability value of unused vacations 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 specified 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.

An inventory of the estimated liability for unused vacation payment is carried out as of the last day of each quarter, which results
are reflected by the estimated liability adjustments.

In accordance with the requirements of the regulations (Federal Law No. 2395-1 “On Subsoil”, No. 7-FZ “On Environmental
Protection”, etc.), the terms of license agreements for the right to use the subsoil the Company recognizes in the accounting
records and financial statements the estimated liabilities on liquidation of fixed assets, as well as commitments for remediation
of lands in the fields after completion of the oil and gas production.

Estimated liabilities are formed for all real estate oil & gas assets. Estimated liabilities on fixed assets retirement and restora¬tion
of natural resources are calculated by groups of the fields. The value of estimated liability is recorded at the present value
(discounted cost).

Accrued estimated liabilities at initial recognition, as well as the newly introduced fixed assets are included in the “Other fixed
assets”.

Depreciation of assets on liquidation liabilities is accrued on a monthly basis in proportion to the oil production volume. The

156

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ABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUamount of monthly depreciation is determined for each group of the fields and Oil & Gas Production Division based on the
amount of oil produced during the current month and the amount of assets on liquidation liabilities attributable to 1 tonne of oil
reserves on deposits of the group at the end of the previous reporting period.

Accrual of interest due to the increased present value as we approach the period of performance estimated liability is recorded
in the financial results statement in the line of “Interest payable”.

Adjustment of estimated liabilities on the fixed assets retirement and restoration of natural resources due to the review of core
indicators of calculation (forecast inflation rate, discount rate, discount period) is recorded in the financial results statement in
the line of “Other income”.

LOANS AND BORROWINGS

In accordance with RAS 15/2008 “Accounting of expenses on loans and borrowings” approved by Order No. 107n of the
Minis¬try 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 reflected in the balance sheet line of
“Bor¬rowings”.

Indebtedness under the received loans and borrowings as well as accrued interest for accounting is subdivided 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 are 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 first
day of the month following the month of accepting the asset for accounting as a fixed asset, intangible asset or R & D expenses.

SALES REVENUE RECOGNITION

Revenue from sales of goods, products and (execution of works, service rendering) is recognized as and when the ownership
of the products is transferred to the customers (as works are executed, services are rendered to the customers). Revenues
are reflected in the accounting statements less value added tax, excise duties, customs duties.

The item “Other income” include the income which is not included in the revenue: revenue from the sale of fixed assets,
con¬struction in progress and other assets, foreign currency sale, income from changes in estimates on fixed assets liquidation
and restoration of natural resources, foreign exchange differences and other similar income.

EXPENSES

The administrative expenses include the maintenance expenditures of the Executive Office. The mentioned expenses
are al¬located on a monthly basis between the oil-and-gas production divisions in proportion to the planned volume of oil
production (in natural terms).

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 products (works, services) on a pro rata basis to their total production
expenses less the deductions, taxes and other obligatory payments.

The item “Other expenses” include expenses which are not related to the manufacture and sales of products, execution of
works, rendering of services, purchase and sale of goods .

ACCOUNTING OF PROFIT TAX CALCULATIONS

The Company has been a responsible member of the consolidated group of taxpayers (hereinafter referred to as CGT) from
January 1, 2012. In 2015, the CGT included four members. Since 2016, the composition of the participants has been expanded
to five members.

The Company independently forms the accounting information on income tax in accordance with RAS 18/02. In this regard,
temporary and permanent differences are determined by the Company based on its revenues and expenses included in the
consolidated tax base of the CGT in accordance with the norms of the Tax Code of the Russian Federation. The amount of the
current income tax is determined on the basis of the Company’s accounting information and recognized in the profit-and loss
statement in the line 2410 “Current income tax”. The difference between the amount of the current income tax calculated by
the Company for inclusion in the consolidated tax base of the CGT and the amount of funds due and payable by the Company
based on the terms of the agreement on CGT establishment in the profit-and loss statement, is reflected in the line 2465
“Adjusted tax on the profit for the consolidated group of taxpayers” and included in determination of net income (loss) of the
Company without participating in generation of the profit (loss) before taxation.

The outstanding amount of CGT income tax on CGT as a whole, to be paid by the Company as a responsible CTG participant to
the budget, is reflected in the Company’s balance sheet in the line 1523 “Taxes and dues payable”.

The overpaid amounts of CGT income tax to the budget is reflected in the balance sheet in the line 1238 “Other debtors”.

The outstanding amount upon settlements with the CGT members on CGT income tax (interim payment) is reflected in the
balance sheet separately in the items of the current assets in the line 1238 “Other debtors” and short-term liabilities in the line
1526 “Other creditors” of the balance sheet, respectively.

The Company as a responsible CGT member reflects the income tax assessment and payments to the participants in the
framework of the agreement on CGT establishment with account 78 “Settlements with the CGT members”.

In preparation of the accounting statements, the balanced (net) amounts of deferred tax asset and deferred tax liability are
reflected in the balance sheet.

CORRECTION OF ERRORS IN THE ACCOUNTING AND REPORTING

An error identified in the accounting and financial statements is recognized to be essential if the ratio of the error to the
nu¬merical indicator of the relevant group of balance sheet items of the Company, or item of the profit-and-loss statement of
the Company for the reporting period is minimum five percent. Otherwise, the error is insignificant.

158

159

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163

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165

Assets

Cash and cash equivalents

Banking: Mandatory reserve deposits with CB RF

Restricted cash

Accounts receivable, net

Banking: Loans to customers

Other short-term financial assets

Inventories

Prepaid expenses and other current assets

Prepaid income tax

Non-current assets held for sale

Total current assets

Long-term accounts receivable, net

Banking: Loans to customers

Other 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

Banking: Due to banks and CB RF

Banking: Customer accounts

Taxes payable

Income tax payable

Other short-term liabilities

Total current liabilities

Long-term debt, net of current portion

Banking: Due to banks and CB RF

Banking: Customer accounts

Decommissioning provision, net of current portion

Deferred income tax liability

Other long-term liabilities

Total non-current liabilities

Total liabilities

Note

31 December
2016

31 December
2015

77,106

1,988

63,900

69,103

57,931

33,271

23,889

1,058

4,247

24,600

318

60,151

13,055

32,042

48,033

1,030

332,496

179,229

1,807

123,923

44,397

639

2,248

48,469

5,632

583,614

557,778

2,043

5,678

762,101

1,094,597

19,288

45,509

13,935

177,422

23,737

4,511

1,961

286,363

34,842

4,415

3,292

30,324

22,600

3,857

99,330

385,693

2,535

2,800

619,462

798,691

5,281

43,488

18,202

1,940

68,911

12,880

33,352

21,771

4,119

72,122

141,033

166

167

The accompanying notes are an integral part of these consolidated financial statements.

In mIllIons of RussIan RoublesFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYwww.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTPJSC TATNEFT ANNUAL REPORT 2016CONSOLIDATED STATEMENT
OF FINANCIAL POSITION (CONTINUED)

CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME

Note

31 December
2016

31 December
2015

Note

Year ended 31
December 2016

Year ended 31
December 2015

Shareholders’ equity

Preferred shares (authorized and issued at 31 December 2016 and 2015 – 147,508,500 shares; nominal
value at 31 December 2016 and 2015 – RR1.00)

Common shares (authorized and issued at 31 December 2016 and 2015 – 2,178,690,700 shares;
nominal value at 31 December 2016 and 2015 – RR1.00)

746

11,021

Additional paid-in capital

Accumulated other comprehensive income

Retained earnings

Less: Common shares held in treasury, at cost

(75,481,000 shares and 55,491,000 shares at 31 December 2016 and 2015, respectively)

Total Group shareholders’ equity

Non-controlling interest

Total shareholders’ equity

Total liabilities and equity

85,224

1,293

615,477

(10 250)

(10,250)

703,511

5,393

708,904

1,094,597

85,170

1,639

532,821

(3 083)

(3,083)

628,314

29,344

657,658

798,691

28,29

Sales and other operating revenues on non-banking activities, net

580,127

552,712

Costs and other deductions on non-banking activities

Operating expenses

Purchased oil and refined products

Exploration

Transportation

Selling, general and administrative

Depreciation, depletion and amortization

Loss on impairments of property, plant and equipment and other assets

Taxes other than income taxes

Maintenance of social infrastructure and transfer of social assets

Total costs and other deductions on non-banking activities

Gain/(loss) on disposals of interests in subsidiaries and associates, net

Other operating (expenses)/income, net

Operating profit on non-banking activities

Net interest, fee and commission and other operating income/(expenses) and gains/
(losses) on banking activities

Interest, fee and commission income

Interest, fee and commission expense

Provision for loan impairment

Operating expenses

Loss arising from dealing in foreign currencies, net

Other operating expenses, net

Total net interest, fee and commission and other operating expenses and losses on
banking activities

Other income/(expenses)

Foreign exchange (loss)/gain, net

Interest income on non-banking activities

Interest expense on non-banking activities, net of amounts capitalized

Share of results of associates and joint ventures

(119,480)

(108,294)

(80,166)

(1,185)

(30,478)

(46,754)

(21,626)

(5,616)

(59,913)

(1,856)

(30,149)

(48,871)

(25,052)

(5,981)

(126,590)

(137,380)

(5,182)

(4,665)

(437,077)

(422,161)

1,951

(50)

(917)

3,684

144,084

134,185

7,955

(5,105)

(1,167)

(2,258)

(175)

(230)

(980)

(3,304)

5,430

(3,920)

(339)

2,283

11,023

(7,691)

(2,172)

14,
30

13,
28

13,
29

Total other (expenses)/income

Profit before income tax

(2,133)

140,971

3,443

137,628

The accompanying notes are an integral part of these consolidated financial statements.

168

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In mIllIons of RussIan RoublesIn mIllIons of RussIan RoublesABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUCONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME (CONTINUED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Income tax

Current income tax expense

Deferred income tax expense

Total income tax expense

Profit for the year

Other comprehensive income/(loss):

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation adjustments

Unrealized holding gains on available-for-sale securities

Items that will not be reclassified to profit or loss:

Actuarial loss on employee benefit plans

Other comprehensive loss

Total comprehensive income for the year

Profit/(loss) attributable to:

- Group shareholders

- Non-controlling interest

Total comprehensive income/(loss) attributable to:

- Group shareholders

- Non-controlling interest

Basic and diluted earnings per share (RR)

Common

Preferred

Weighted average shares outstanding (millions of shares)

Common

Preferred

Прим.

За год,
закончившийся
31 декабря
2016

За год,
закончившийся
31 декабря
2015

(29,657)

(5,184)

(34,841)

106,130

(30,954)

(902)

(31,856)

105,772

(1,050)

1,338

(634)

(346)

318

222

(789)

(249)

105,784

105,523

107,389

(1,259)

98,930

6,842

106,130

105,772

107,043

(1,259)

98,681

6,842

105,784

105,523

47.50

47.48

2,113

148

43.56

43.53

2,123

148

Attributable to Group shareholders

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s
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a
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a
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o
s
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g

Balance at 1 January
2015

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

Disposal of non-
controlling interest in
subsidiaries

Dividends declared

Balance at 31 December
2015

Profit for the year

Other comprehensive
(loss)/income for the year

Total comprehensive
(loss)/income for the
year

Treasury shares

- Acquisitions

- Disposals

Business combinations
(Note 29)

Acquisition of non-
controlling interest in
subsidiaries

Disposal of subsidiaries
(Note 28)

Dividends declared

Balance at 31 December
2016

2,270,685

11,767

87,482

(3,087)

(198)

1,933

153

457,915

555,965

26,279

582,244

(21)

(2,312)

(5)

(789)

318

98,930

6,842

105,772

222

(249)

(789)

318

222

98,930

98,681

6,842

105,523

(5)

(2,312)

1,220

(1,092)

(2,963)

(24,024)

(2,034)

(26,058)

2,270,708

11,767

85,170

(3,083)

(987)

2,251

375

532,821

628,314

29,344

657,658

(19,990)

(20,196)

206

(7,167)

(7,215)

107,389

(1,259)

106,130

(634)

(1,050)

1,338

(346)

(634)

(1,050)

1,338

107,389

107,043

(1,259)

105,784

(7,167)

(7,215)

7,395

(7,167)

(7,215)

7,395

(229)

(175)

(29,855)

(24,733)

(3)

(24,736)

2,250,718

11,767

85,224 (10,250)

(1,621)

1,201

1,713

615,477

703,511

5,393

708,904

The accompanying notes are an integral part of these consolidated financial statements.

170

171

CONSOLIDATED STATEMENT OF CASH FLOwS

CONSOLIDATED STATEMENT OF CASH FLOwS (CONTINUED)

operAting Activities

Profit for the year

Adjustments:

Net interest, fee and commission and other operating expenses and losses on banking activities

Depreciation, depletion and amortization

Income tax expense

Loss on impairments of property, plant and equipment, other assets and disposals of
interest in subsidiaries and associates

Effects of foreign exchange

Share of results of associates and joint ventures

Change in provision for impairment of financial assets

Change in fair value of trading securities

Interest income on non-banking activities

Interest expense on non-banking activities, net of amounts capitalized

Other

Changes in operational working capital, excluding cash:

Accounts receivable

Inventories

Prepaid expenses and other current assets

Financial assets at fair value through profit or loss

Accounts payable and accrued liabilities

Taxes payable

Other non-current assets

Net cash provided by non-banking operating activities before income tax and
interest

Net interest, fee and commission and other operating expenses and losses on banking
activities

Adjustments:

Provision for loan impairment

Other

Changes in operational working capital on banking activities, excluding cash:

Mandatory reserve deposits with CB RF

Due from banks

Loans to customers

Due to banks and CB RF

Customers accounts

Debt securities issued

Financial assets at fair value through profit or loss

Other assets and liabilities

Net cash used in banking operating activities before income tax

Year ended 31
December 2016

Year ended 31
December 2015

106,130

105,772

980

21,626

34,841

3,665

(1,774)

339

(226)

(48)

(5,430)

3,920

(3,020)

(5,336)

(1,412)

5,326

(51)

7,417

6,934

(519)

25,052

31,856

6,031

1,501

2,172

1,862

(30)

(11,023)

7,691

(4,913)

(16,608)

(776)

2,771

1,303

885

3,999

333

Income taxes paid

Interest paid on non-banking activities

Interest received on non-banking activities

Net cash provided by operating activities

investing Activities

Additions to property, plant and equipment

Proceeds from disposal of property, plant and equipment

Net cash inflow/(outflow) on acquisition of subsidiaries

Proceeds from disposal of subsidiaries and associates, net of disposed cash

Purchase of available-for-sale financial assets

Purchase of held to maturity investments

Proceeds from disposal of available-for-sale financial assets

Proceeds from redemption of held to maturity investments

Proceeds from sale of non-current assets held for sale

Purchase of investments in associates and joint ventures

Placement of bank deposits

Proceeds from redemption of bank deposits

Proceeds from redemption of loans and notes receivable

Issuance of loans and notes receivable

Dividends received

Change in restricted cash

Net cash used in investing activities

173,362

157,878

FinAncing Activities

(980)

1,167

(1,235)

2,770

(8,651)

(506)

1,083

(1,950)

(983)

(30)

(9,311)

Proceeds from issuance of debt from non-banking activities

Repayment of debt from non-banking activities

Issuance of bonds

Redemption of bonds

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

Note

Year ended 31
December 2016

Year ended 31
December 2015

(26,888)

(807)

5,015

(27,792)

(1,032)

11,462

141,371

140,516

(95,669)

993

48,534

33,155

(7,566)

(3,037)

5,587

2,174

110

(6,700)

(40,096)

10,032

6,151

(2,940)

1,521

315

(92,872)

895

(2,122)

(19,821)

(20,129)

(98,851)

112,368

7,748

(8,291)

1,317

(47,436)

(119,758)

2,129

(6,629)

1,504

(5,081)

(24,717)

(3)

(7,215)

12,072

(24,914)

(24,008)

(2,034)

(5)

(39,964)

(38,823)

53,971

(1,465)

24,600

77,106

(18,065)

1,117

41,548

24,600

The accompanying notes are an integral part of these consolidated financial statements.

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173

NOTE 1: ORGANISATION

PJSC 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 refining and marketing of crude oil, refined products as well as production and marketing of
petrochemicals and since October 2016, with acquisition of the controlling interest in ZENIT Banking Group (Bank ZENIT) the
Group is also engaged in banking activities (see Note 29).

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 2016 and 2015 the government of Tatarstan controls approximately 36% of the Company’s voting stock.
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 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 defined under Russian law. The Golden Share currently has an indefinite term. The Tatarstan government also
controls or exercises significant influence over a number of the Group’s suppliers and contractors.

The Company is domiciled in the Russian Federation. The address of its registered office is Lenina St., 75, Almetyevsk, Republic
of Tatarstan, Russian Federation.

NOTE 2: BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”).

These consolidated financial statements have been prepared on a historical cost basis, except for initial recognition of financial
instruments based on fair value, revaluation of available-for-sale financial assets and financial instruments categorized at fair
value through profit or loss.

The entities of the Group maintain their accounting records and prepare their statutory financial statements principally in
accordance with the Regulations on Accounting and Reporting of the Russian Federation (“RAR”), and applicable accounting
and reporting standards of countries outside the Russian Federation. A number of entities of the Group prepare their financial
statements in accordance with IFRS. The accompanying consolidated financial 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 hyperinflation 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 benefits and (11) business combinations and goodwill.

The preparation of financial 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 significant to the consolidated
financial statements are disclosed in Note 4.

Reclassifications. Certain reclassifications have been made to previously reported financial statements to conform to the
current year presentation; such reclassifications had no effect on net profit for the year, shareholders’ equity or cash flows.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Functional and Presentation Currency. The presentation currency of the Group is the Russian Ruble.

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 Ruble because the majority of Group revenues, costs, property and
equipment purchased, debt and trade liabilities are either priced, incurred, payable or otherwise measured in Russian Rubles.
Accordingly, transactions and balances not already measured in Russian Rubles (primarily US Dollars) have been re-measured
into Russian Rubles 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 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 Rubles
are recognized in the profit or loss for the year.

For operations of major 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 Rubles are recorded in a separate
component of shareholders’ equity entitled foreign currency translation adjustments. Revenues, expenses and cash flows 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 official rate of exchange, as published by the Central Bank of Russian Federation (“CB RF”), of the Russian Ruble (“RR”)
to the US Dollar (“US $”) at 31 December 2016 and 2015 was RR 60.66 and RR 72.88 to US $, respectively. Average rate of
exchange for the years ended 31 December 2016 and 2015 were RR 67.03 and RR 60.96 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 significantly 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. Identifiable 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 recognizes 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 or at fair value.

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 identifiable net assets acquired is recorded as
goodwill. If the total of consideration transferred, non-controlling interest recognized 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
recognized directly in the profit and loss for the year.

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Associates and joint ventures. Associates and joint ventures are entities over which the Group has significant influence
(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
recognized 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 recognized as follows: (i) the Group’s share of profits or losses of associates or joint ventures is recorded in the consolidated
profit or loss for the year as share of result of associates or joint ventures, (ii) the Group’s share of other comprehensive income
is recognized 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 recognized in profit 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 recognize 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 classifications in its consolidated statement of financial position.

Cash and cash equivalents. Cash represents cash on hand and in bank accounts and CB RF, other than mandatory
reserves deposits with CB RF, 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. Cash and cash equivalents are carried at amortised cost.

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 financial position and of the consolidated statement of cash flows and disclosed separately.

Mandatory reserve deposits with the CB RF. Mandatory reserve deposits with the CB RF represent non-interest
bearing funds placed with the CB RF that are not available to finance the Group’s day-to-day operations and, therefore, are not
considered part of cash and cash equivalents. The amount to be deposited with the CB RF is calculated in accordance with the
CB RF’s regulation and depends on the volume of funds attracted by the Group from its customers and banks in the course of
banking activities.

Financial Assets. All financial assets are initially recognized when an entity becomes a party to the contract, they are recognized
at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group‘s
financial assets include cash and cash equivalents, restricted cash, mandatory reserve deposits with CB RF, banking customer
loans, deposits, due from banks, securities, derivatives, precious metals, trade and other receivables, loans issued.

Financial assets have the following categories: (a) loans and receivables; (b) available-for-sale financial assets; (c) financial
assets at fair value through profit or loss; (d) held to maturity investments. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial recognition.

The Group derecognizes financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise
expired or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-
through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither
transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control is retained if the
counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to
impose restrictions on the sale.

Loans and receivables. Loans and receivables is a category of financial assets with fixed or determinable payments that are
not quoted in an active market. Subsequent to initial recognition loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses. The accrued interest is included in the profit and losses for the year. The
allowance for impairment of loans and receivables is established if there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of the loans and receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators
that the receivable is impaired. The amount of the allowance is the difference between the carrying amount and the recoverable
amount, being the present value of expected cash flows, discounted at the financial asset’s original effective interest rate at the date
of origination of the loan or receivable. The losses arising from impairment are recognized as selling, general and administrative
expenses in the consolidated statements of profit or loss and other comprehensive income.

Due from banks. Amounts due from banks other than those that are part of the Group are recorded when the Group advances
money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or
determinable dates. Amounts due from other banks are carried at amortised cost. Deposits, placed in the course of banking
activities in other banks having maturity exceeding one working day from the balance sheet date are treated as amounts due
from banks. Due from banks that mature within three months or less from the date of placement are included in cash and cash
equivalents. Due from banks are initially recognized at fair value. These balances are subsequently re-measured at amortized
cost at the effective interest method and are carried net of any allowance for impairment.

Loans to customers. Loans issued in the course of banking activities that have fixed or determinable payments that are not
quoted in an active market are classified as loans to customers. Loans to customers are measured at amortised cost using the
effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be immaterial.

Financial assets at fair value through profit or loss. A financial asset is classified at fair value through profit or loss
category if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at
fair value through profit 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 profit or loss are measured at fair value, and changes therein are recognized in profit and loss for the year. Coupon
and interest earned on financial assets at fair value through profit or loss are reflected as interest, fee and commission income.
Dividends received, all other elements of the changes in the fair value and gains or losses on derecognition are recorded in
other operating income/(expenses) in the consolidated statement of profit or loss and other comprehensive income in the
period in which they arise.

Available-for-sale financial assets. Available-for-sale financial assets are non-derivative financial assets that are
designated as available-for-sale or are not classified in any of the above categories of financial assets. Available-for-sale
financial assets include investment securities which the Group intends to hold for an indefinite 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 changes 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 reclassified to profit
and loss for the year. Dividends on available-for-sale equity instruments are recognized in profit or loss for the year when the
Group’s right to receive payment is established and it is probable that the dividends will be collected. All other elements of

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The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial
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 financial assets, the cumulative loss (measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognized in the other comprehensive income) is recognized in the profit and loss for the year as a reclassification adjustment
from other comprehensive income.

Held to maturity investments. Held to maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity. Held to maturity
investments are measured at amortized cost using the effective interest method less any impairment.

If the Group were to sell or reclassify more than an insignificant amount of held to maturity investments before maturity (other
than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available-
for-sale. Furthermore, the Group would be prohibited from classifying any financial asset as held to maturity during the current
financial year and following two financial years.

Impairment of financial assets carried at amortized cost. Impairment losses are recognized in profit or loss when
incurred as a result of one or more events (“loss events”) that occurred after the initial recognition of the financial asset and
which have an impact on the amount or timing of the estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated. If the Group determines that no objective evidence exists that impairment was incurred
for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics, and collectively assesses them for impairment. The primary factors that the Group considers
in determining whether a financial asset is impaired are its overdue status and realisability of related collateral, if any.

Repurchase agreements. Repurchase agreements (“REPO”) are used by the Group as an element of its treasury
management and trading business in a course of its banking activities and are treated as secured financing transactions.

A REPO is an agreement to transfer a financial asset to another party in exchange for cash or other consideration and a
concurrent obligation to reacquire the financial assets at a future date for an amount equal to the cash or other consideration
exchanged plus interest.

Financial assets sold under REPO are included into financial assets at fair value through profit or loss, available-for-sale
financial assets or held to maturity investments and funds received under these agreements are accounted for as amounts due
to banks and CB RF and customer accounts as appropriate. Financial assets purchased under agreements to resell (“reverse
repurchase”) are recorded as amounts due from banks or loans to customers as appropriate. Gain/loss on the sale of the
above instruments is recognized as interest income or expense on banking activities in the consolidated statement of profit
or loss and other comprehensive income based on the difference between the repurchase price accreted to date using the
effective interest method and the sale price when such instruments are sold to third parties. When the reverse REPO/REPO is
fulfilled on its original terms, the effective yield/interest between the sale and repurchase price negotiated under the original
contract is recognized using the effective interest method.

Financial liabilities. All financial liabilities are recognized initially at fair value and in the case of loans and borrowings, net of
directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, due to banks and CB
RF, banking customer accounts, debt securities and bonds issued, credit facilities, subordinated debt and other borrowings.

Financial liabilities are recognized initially at fair value. Subsequent to initial recognition, these financial liabilities are measured
at amortized cost using the effective interest method.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification 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 recognized in the profit and loss for
the year.

Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only
when there is a legally enforceable right to offset the recognized amounts, and there is an intention to either settle on a net
basis, or to realise the asset and settle the liability simultaneously.

Due to banks and CB RF, customer accounts and subordinated debt. Amounts due to banks and CB RF, customer
accounts and subordinated debt are initially recognized in accordance with the accounting policy for financial instruments
and subsequently re-measured at amortized cost. Any difference between net proceeds and the redemption value of these
amounts due is recognized in the consolidated statement of profit or loss and other comprehensive income over the life of
related financial liability using the effective interest method.

Debt securities and bonds issued. Debt securities issued include promissory notes and certificates of deposit issued
by the Group to its customers in the course of its banking activities. Bonds issued represent securities issued by the Bank that
are traded and quoted in the open market. Promissory notes carry a fixed date of repayment. These may be issued against
cash deposits or as a payment instrument, which the customer can sell at a discount in the over-the-counter market. Debt
securities and bonds issued are accounted for according to the same principles used for amounts due to banks and CB RF,
customer accounts and subordinated debt. If the Group purchases its own debt, it is removed from the consolidated statement
of financial position and the difference between the carrying amount and the amount paid is recognized as a gain or loss on
redemption of debt.

Non-current assets held for sale. A non-current asset is classified as held for sale if it is highly probable that the asset’s
carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group)
is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification of an asset as held for sale.

Non-current assets held for sale are measured at the lower of its carrying amount and fair value less costs to sell. If the fair value
less costs to sell of an asset held for sale is lower than its carrying amount, an impairment loss is recognized in the consolidated
statement of profit or loss and other comprehensive income as other operating income/expense. Any subsequent increase
in an asset’s fair value less costs to sell is recognized to the extent of the cumulative impairment loss that was previously
recognized in relation to that specific asset.

Precious metals. Assets and liabilities denominated in precious metals are translated at the current rate computed based
on the second fixing of the London Metal Exchange rates, using the RR/US $ exchange rate effective at the date. Changes in
the bid prices are recorded in other operating income/expenses from banking activities.

Inventories. Inventories of crude oil, refined oil products, materials and supplies, finished goods and other inventories 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 benefits associated with the asset will flow to the Group. Prepayments for
services such as insurance, transportation and others are written off to profit or loss when the goods or services relating to the
prepayments are received.

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Mineral extraction tax. Mineral extraction tax (MET) on crude oil is defined monthly as an amount of volume produced
per fixed tax rate (RR 857 and RR 766 per ton in 2016 and 2015, 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 modified by benefit for fields whose depletion rate exceeds 80% of proved reserves as determined under Russian resource
classification. The Company receives a benefit of 3.5% per field for each percent of depletion in excess of the 80% threshold.
Tax benefit is calculated using tax rate of RR 559 per ton (в 2015: RR 530 per ton).

The ultimate amount of the MET on crude oil depends also on geographic location of the oil field (for certain regions zero tax
rate may be applied depending on the volume of crude oil produced and period of field development). Also a zero MET tax
rate applies to the production of highly viscous crude oil with viscosity of more than 10,000 Megapascal second in reservoir
conditions. MET for production of highly viscous crude oil with viscosity between 200 and 10,000 Megapascal second is eligible
to tax benefit calculated using tax rate of RR 559 per ton (2015: RR 530 per ton).

MET is recorded within Taxes other than income tax in the consolidated statements of profit 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
confirmation 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 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 find oil and gas reserves are capitalized as exploration
and evaluation assets on a “field by field” 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 firmly planned. Exploration costs not meeting these criteria are charged to expense.

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 field 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 flows to be written down to their recoverable amount which is the higher of fair value less costs to sell and
value-in-use.

Individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets - generally on a field-by-field basis for exploration and
production assets, at an entire complex level for refining assets or at a site level for service stations. Impairment losses are
recognized in the profit 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
field based upon proved developed oil and gas reserves, except in the case of significant asset components whose useful life
differs from the lifetime of the field, 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:

Buildings and constructions

Machinery and equipment

Years

30-50

10-35

Exploration and evaluation costs are subject to technical, commercial and management review as well as review for impairment
at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When indicators
of impairment are present, resulting impairment loss is measured.

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 other income and expenses in the consolidated statement of profit or loss
and other comprehensive income.

If subsequently commercial reserves are discovered, the carrying value, less losses from impairment of respective exploration
and evaluation assets, is classified as development assets. However, if no commercial reserves are discovered, such costs are
expensed after exploration and evaluation activities have been completed.

Capitalisation of borrowing costs on non-banking activities. 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.

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

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 specifically 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.

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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.

Interest income on non-banking activities. Interest income on non-banking activities is recognized on a time-
proportion basis using the effective interest method.

Employee Benefits, Post-employment and other long-term Benefits. Wages, salaries, contributions to the
social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits (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 outflows 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 recognized using the projected unit credit method.

The cost of providing pensions is accrued and charged to staff expense within operating expenses in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income reflecting the cost of benefits as they are earned over the service
lives of employees.

Remeasurements of the net defined benefit liability arose as the actuarial gains or losses from changes in assumptions and from
experience adjustments with regard to post employment benefit plans are recognized immediately in other comprehensive income.
Actuarial gains and losses related to other long-term benefits are recognized immediately in the profit or loss for the year.

Past service costs are recognized 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 flow using a discount rate that reflects 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 2016 and 2015 is determined based on the final 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 field 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 reflects current market assessments of
the time value of money and the risks specific 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 recognized 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 recognized immediately in profit and loss.

The Group’s petrochemical, refining 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.

Financial guarantee contracts issued and letters of credit. Financial guarantee contracts and letters of credit
issued by the Group in the course of its banking activities are credit insurance that provides for specified payments to be made
to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due under the original or
modified terms of a debt instrument. Such financial guarantee contracts and letters of credit issued are initially recognized at
fair value. Subsequently they are measured at the higher of (a) the amount recognized as a provision in accordance with IAS
37 “Provisions, Contingent Liabilities and Contingent Assets» and (b) the amount initially recognized less, where appropriate,
cumulative amortization of initial premium revenue received over the financial guarantee contracts or letter of credit issued.

Income Taxes. Effective 1 January 2012, the Company has established the Consolidated Taxpayer Group which currently
includes 5 companies of the Group. Income taxes have been provided for in the consolidated financial 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 recognized in profit or loss for the year, except if it is recognized in other comprehensive income
or directly in equity because it relates to transactions that are also recognized, 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 profits 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 financial reporting purposes. Deferred
income tax assets and liabilities are recognized 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
• In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal

is not a business combination and, at the time of the transaction, affects neither the accounting nor taxable profit or loss;

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 profit will be available against which the deductible temporary differences and

the carry forward of unused tax credits and unused tax losses can be utilised.

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Income tax penalties expense and income tax penalties payable are included in Taxes other than income tax in the consolidated
statement of profit 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 profit 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 classified as equity.

Dividends paid to shareholders are determined by the Board of directors and approved at the annual shareholders’ meeting.
Dividends are recorded as a liability and deducted from equity in the period in which they are declared and approved.

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 profit or loss attributable to ordinary and preference share holders
by the weighted average number of ordinary and preferred shares outstanding during the period. Profit 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 profit 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 risks and rewards of ownership are 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 which are of a similar nature and value 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 statement of profit or loss and other comprehensive income. Revenue includes only economic
benefits which flow to the Group. Taxes and duties arising on the sale of goods to third parties do not form part of revenue.

Recognition of interest, fee and commission income and expense on banking activities. Interest income
and expense are recognized on an accrual basis calculated using the effective interest method. The effective interest method
is a method of calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial
liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral
part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt
instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Commissions and other fees are recognized when the related transactions are completed. Loan origination fees for loans
issued to customers, are deferred (together with related direct costs) and recognized as an adjustment to the loans effective
yield. Other income and expenses are recognized on an accrual basis.

Once a financial asset or group of similar financial assets has been written down (partly written down) as a result of an impairment
loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose
of measuring the impairment loss.

Loan origination fees are deferred, together with the related direct costs, and recognized as an adjustment to the effective
interest rate of the loan. Where it is probable that a loan commitment will lead to a specific lending arrangement, the loan
commitment fees are deferred, together with the related direct costs, and recognized as an adjustment to the effective interest
rate of the resulting loan. Where it is unlikely that a loan commitment will lead to a specific lending arrangement, the loan
commitment fees are recognized in the consolidated statement of profit or loss and other comprehensive income over the
remaining period of the loan commitment. Where a loan commitment expires without resulting in a loan, the loan commitment
fee is recognized in the consolidated statement of profit or loss and other comprehensive income on expiry. Loan servicing
fees are recognized as revenue as the services are provided. Loan syndication fees are recognized in the consolidated income
statement when the syndication has been completed. All other commissions are recognized when services are provided.

Transportation expenses. Transportation expenses recognized in the consolidated statements of profit 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.

Fiduciary activities. The Group provides fiduciary services to its customers in the course of its banking activities. The Group
also provides depositary services to its customers which include transactions with securities on their depositary accounts.
Assets and liabilities held by the Group in its own name, but on behalf of third parties, are not reported on the consolidated
statement of financial position. The Group accepts the operational risk on these activities, but its customers bear the credit and
market risks associated with such operations.

NOTE 4: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING
ACCOUNTING POLICIES

The Group makes estimates and assumptions that affect the amounts recognized in the consolidated financial statements and
the carrying amounts of assets and liabilities within the next financial 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 significant effect on the amounts recognized in the consolidated
financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within
the next financial year include:

• Estimation of oil and gas reserves;
• Useful life of property, plant and equipment;
• Decommissioning provisions;
• Impairment of property, plant and equipment;
• Impairment of loans to customers on banking activities;
• Financial instruments fair value estimation.
Estimation of oil and gas reserves. Oil and gas development and production assets are depreciated on a unit-of-
production (UOP) basis for each field or group of fields 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

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185

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 profit 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 insignificant
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.

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 benefit 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.

Sensitivity analysis for changes in discount rate:

Discount rate

Change in

Impact on decommissioning provision

At 31 December 2016

At 31 December 2015

+1%

-1%

(6,812)

8,954

(7,892)

10,534

Information about decommissioning provision is presented in Note 14.

Impairment of property, plant and equipment. At 31 December 2016 management assessed whether there is any
indication of impairment of long-lived assets. Based on the stable financial performance, absence of significant adverse
changes in economic and market environment and decrease in interest rates the management believes that there is no
indication of impairment as of 31 December 2016.

Impairment of loans to customers on banking activities. The Group regularly reviews its loans to assess for impairment.
The Group’s loan impairment provisions are established to recognize incurred impairment losses in its portfolio of loans and
receivables. The Group considers accounting estimates related to allowance for impairment of loans and receivables a key source of
estimation uncertainty because (i) they are highly susceptible to change from period to period as the assumptions about future default
rates and valuation of potential losses relating to impaired loans and receivables are based on recent performance experience, and
(ii) any significant difference between the Group’s estimated losses and actual losses would require the Group to record provisions
which could have a significant impact on its financial statements in future periods.

The Group uses management’s judgment to estimate the amount of any impairment loss in cases where a borrower has
financial difficulties and there are few available sources of historical data relating to similar borrowers. Similarly, the Group
estimates changes in future cash flows based on past performance, past customer behavior, observable data indicating an
adverse change in the payment status of borrowers in a group, and national or local economic conditions that correlate with
defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to those in the group of loans. The Group uses management’s
judgment to adjust observable data for a group of loans to reflect current circumstances not reflected in historical data.

The allowances for impairment of financial assets in the consolidated financial statements have been determined on the basis
of existing economic and political conditions. The Group is not in a position to predict what changes in conditions will take
place in the Russian Federation and what effect such changes might have on the adequacy of the allowances for impairment
of financial assets in future periods.

Financial instruments fair value estimation. Financial instruments that are classified at fair value through profit or loss
or available-for-sale, and all derivatives are stated at fair value. If a quoted market price is available for an instrument, the fair
value is calculated based on the market price. When valuation parameters are not observable in the market or cannot be derived
from observable market prices, the fair value is derived through analysis of other observable market data appropriate for each
product and pricing models which use a mathematical methodology based on accepted financial theories. Pricing models take
into account the contract terms of the securities as well as market-based valuation parameters, such as interest rates, volatility,
exchange rates and the credit rating of the counterparty. Where market-based valuation parameters are missed, management
will make a judgment as to its best estimate of that parameter in order to determine a reasonable reflection of how the market
would be expected to price the instrument, in exercising this judgment, a variety of tools are used including proxy observable
data, historical data, and extrapolation techniques. The best evidence of fair value of a financial instrument at initial recognition
is the transaction price unless the instrument is evidenced by comparison with data from observable markets. Any difference
between the transaction price and the value based on a valuation technique is not recognized in the consolidated statement
of profit or loss and other comprehensive income on initial recognition. Subsequent gains or losses are only recognized to the
extent that they arise from a change in a factor that market participants would consider in setting a price.

Information on fair value of financial instruments where estimate is based on assumptions that do not utilize observable market
prices is presented in Note 30.

NOTE 5: ADOPTION OF NEW OR REVISED STANDARDS AND INTERPRETATIONS

A number of amendments to current IFRS and annual improvements also approved for application in Russian Federation
became effective for the periods beginning on or after 1 January 2016 but did not have any significant impact on the Group’s
consolidated financial statements:

• IFRS 14, Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after

1 January 2016).

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187

for the periods beginning on or after 1 January 2016).

May 2014 and effective for the periods beginning on or after 1 January 2016).

• Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11 (issued on 6 May 2014 and effective
• Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (issued on 12
• Agriculture: Bearer plants – Amendments to IAS 16 and IAS 41 (issued on 30 June 2014 and effective for annual periods
• Equity Method in Separate Financial Statements – Amendments to IAS 27 (issued on 12 August 2014 and effective for
• Annual Improvements to IFRSs 2014 (issued on 25 September 2014 and effective for annual periods beginning on or after
• Disclosure Initiative Amendments to IAS 1 (issued in December 2014 and effective for annual periods on or after 1 January 2016).
• Investment Entities: Applying the Consolidation Exception Amendment to IFRS 10, IFRS 12 and IAS 28 (issued in December

annual periods beginning 1 January 2016).

1 January 2016).

2014 and effective for annual periods on or after 1 January 2016).

Certain new standards, amendments to standards and interpretations have been issued that are mandatory for the annual
periods beginning on or after 1 January 2017 or later, and which the Group has not early adopted:

IFRS 9, Financial Instruments: Classification and Measurement (amended in July 2014 and effective for
annual periods beginning on or after 1 January 2018). The standard reflects all phases of the financial instruments
project and replaces all previous of IFRS 9. The standard introduces new requirements for classification and measurement,
impairment, and hedge accounting. The Group is considering the implications of the standard, the impact on the Group and
the timing of its adoption by the Group.

IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods
beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognized
when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are
distinct must be separately recognized, and any discounts or rebates on the contract price must generally be allocated to the
separate elements. When the consideration varies for any reason, minimum amounts must be recognized if they are not at
significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the
period when the benefits of the contract are consumed.

Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective
for annual periods beginning on or after 1 January 2018). The amendments do not change the underlying principles of
the Standard but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation
(the promise to transfer a good or a service to a customer) in a contract; how to determine whether a company is a principal (the
provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and how to determine
whether the revenue from granting a licence should be recognized at a point in time or over time. In addition to the clarifications,
the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.

IFRS 16, Leases (issued in January 2016 and effective for annual periods beginning on or after 1 January
2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases.
All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made
over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or
finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to
recognize: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value;
and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially
carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating
leases or finance leases, and to account for those two types of leases differently.

Disclosure Initiative – Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods
beginning on or after 1 January 2017). The amended IAS 7 will require disclosure of a reconciliation of movements in
liabilities arising from financing activities. The Group will present this disclosure in its 2017 financial statements.

The Group is currently assessing the impact of new standards on its consolidated financial statements.

The following other new pronouncements are not expected to have material impact on the Group when adopted:

• Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12 (issued on 19 January 2016 and
• Amendments to IFRS 2, Share-based Payment (issued on 20 June 2016 and effective for annual periods beginning on or

effective for annual periods beginning on or after 1 January 2017).

after 1 January 2018).

All new standards, amendments to standards and interpretations are approved for application in Russian Federation except
for those listed below. These new pronouncements are also not expected to have material impact on the Group when adopted:

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28
• Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 (issued on 12 September

(issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB).

2016 and effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that
choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the
overlay approach).

after 1 January 2017 for amendments to IFRS 12, and on or after 1 January 2018 for amendments to IFRS 1 and IAS 28).

• Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual periods beginning on or
• IFRIC 22 - Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016 and effective for annual
• Transfers of Investment Property – Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods

periods beginning on or after 1 January 2018).

beginning on or after 1 January 2018).

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

Due from banks

Total cash and cash equivalents

At 31 December 2016

At 31 December 2015

40,847

22,744

13,515

77,106

12,273

12,327

24,600

Term deposits with original maturity of less than three months represent deposits placed in banks in the course of non-banking
activities. Due from banks represent deposits with original maturities of less than three months placed in the course of banking
activities in banks other than those that are part of the Group. The fair value and credit quality analysis of cash and cash equivalents
is presented in Note 30.

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189

Short-term and long-term accounts receivable comprise the following:

At 31 December 2016

At 31 December 2015

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

Fair value of short-term and long-term accounts receivable is presented in Note 30.

Analysis by credit quality of trade and other receivables is as follows:

61,295

4,239

(1,634)

63,900

1,581

334

(108)

1,807

65,707

58,170

3,891

(1,910)

60,151

1,512

794

(58)

2,248

62,399

At 31 December 2016

At 31 December 2015

Trade receivables

Other financial
receivables

Trade receivables

Other financial
receivables

17,079

7,783

14,054

11,183

2,862

1,172

6,646

60,779

646

688

1,409

(1,409)

61,467

4,170

333

(333)

4,240

15,399

8,166

7,903

5,005

3,134

6,866

10,423

56,896

852

417

1,269

1,517

(1,517)

58,165

4,059

175

451

(451)

4,234

Neither past due nor impaired

- international crude oil and oil products traders

- Russian crude oil and oil products traders

- Russian refineries

- central and eastern Europe refineries

- Russian tire dealers and automotive manufacturers

- Russian construction companies

- unrated

Total neither past due nor impaired

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 impaired (gross)

- less than 90 days overdue

- 91 to 180 days overdue

- over 180 days overdue

Total individually impaired

Less: provision for impairment

Total

190

Movements in the provision for impairment for trade and other receivables are as follows:

Provision for impairment at 1 January

Provision for impairment during the year

Amounts written off during the year as uncollectible

Foreign exchange gain

Change in Group structure

At 31 December 2016

At 31 December 2015

Trade receivables

Other financial
receivables

Trade receivables

Other financial
receivables

(1,517)

(167)

165

103

(451)

(140)

251

(19,880)

(498)

18,111

750

(447)

(4)

Provision for impairment at 31 December

(1,409)

(333)

(1,517)

(451)

As of 31 December 2014 the Group had receivables from ChMPKP Avto of US $334 million, relating to the sale of crude oil to
Ukraine (Kremenchug refinery), which had been fully provided for (Note 27). During the year ended 31 December 2015 the
receivables were written off against the provision due to bankruptcy and subsequent liquidation of the debtor (intermediary in
the crude oil sales transaction).

NOTE 8: BANKING: LOANS TO CUSTOMERS

Loans to legal entities

Loans to individuals

Loans to customers before impairment

Provision for impairment

Total loans to customers

Less: long term loans

Less: provision for long term loans impairments

Total short term loans to customers and current portion of long
term loans to customers

At 31 December 2016

At 31 December 2015

159,176

35,017

194,193

(1,167)

193,026

(125,090)

1,167

69,103

Since acquisition of Bank ZENIT additional provision of loans to customer of RR 1,167 million was accrued.

As at 31 December 2016 the Group granted loans to 36 customers totaling RR 78,955 million, which individually exceeded 5%
of the Bank ZENIT equity.

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Other long-term financial assets comprise the following:

Trade

Manufacturing

Construction

Services

Food

Finance

Agriculture

Oil and gas

Individuals, including:

mortgage loans

consumer loans

car loans

plastic cards overdrafts

Other

Total loans to customers before impairment

At 31 December 2016

At 31 December 2015

Carrying value

Share in
customer loan
portfolio, %

Carrying value

Share in
customer loan
portfolio, %

37,883

34,895

33,733

33,811

4,983

6,765

2,653

1,629

35,017

23,182

10,105

973

638

119

2,824

194,193

19.51%

17.97%

17.37%

17.41%

2.57%

3.48%

1.37%

0.84%

18.03%

11.94%

5.20%

0.50%

0.33%

0.06%

1.45%

100%

Loans to customers’ credit quality analysis is presented in Note 30.

As at 31 December 2016, the total amount of pledged loans to legal entities is RR 7,246 million and loans to individuals is RR
5,435 million. The loans are pledged against the funds accounted within Due to banks and CB RF (Note 19).

NOTE 9: OTHER FINANCIAL ASSETS

Short-term other financial assets comprise the following:

Loans and receivables:

Notes receivable

Other loans (net of provision for impairment of RR 5 million and RR
23 million as of 31 December 2016 and 2015)

Bank deposits (net of provision for impairment of RR 5,400 million
as of 31 December 2016)

Due from banks

REPO with banks

Financial assets at fair value through profit or loss:

Held-for-trading

Available-for-sale financial assets

Held to maturity investments

Total short-term financial assets

At 31 December 2016

At 31 December 2015

1,107

32,206

3,022

6,638

8,190

4,254

2,511

57,931

5,596

3,617

2,594

1,248

13,055

Loans and receivables:

Notes receivable (net of provision for impairment of RR 318 million

as of 31 December 2016 and 2015)

Loans to employees (net of provision for impairment of RR 1,476 million

and RR 1,414 million as of 31 December 2016 and 2015)

Other loans

Bank deposits

Due from banks

Available-for-sale financial assets

Held to maturity investments

Total long-term financial assets

At 31 December 2016

At 31 December 2015

455

1,018

2,284

500

227

31,864

8,049

44,397

4,181

1,262

1,963

17,774

23,289

48,469

Fair value, credit quality and maturity analysis for financial assets are presented in Note 30.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit and loss comprise the following:

Held-for-trading:

Russian government and municipal debt securities

Corporate debt securities

Corporate shares

Total financial assets at fair value through profit and loss

At 31 December 2016

At 31 December 2015

1,928

5,673

589

8,190

562

601

1,248

Corporate bonds consist of Russian Ruble, US Dollar and Euro denominated bonds and Eurobonds issued by Russian banks
and companies. These bonds mature from 2017 to 2046. The annual coupon rates on these securities range from 4.7% to
13.3%, and yields to maturity vary from 4.2% to 13.2%.

Municipal bonds consist of Russian Ruble denominated bonds issued by regional and municipal authorities of the Russian
Federation and mature from 2017 to 2023. The annual coupon rates on these securities range from 7.5% to 11.9%, and yields
to maturity vary from 8.6% to 10.9%.

Federal loan bonds consist of Russian Ruble denominated government securities issued by the Ministry of Finance of the
Russian Federation, which are commonly referred to as “OFZ” and Russian Federation Eurobonds. These bonds mature from
2023 to 2031. The annual coupon rates on these securities vary from 7% to 8.5%, and yield to maturity vагу from 8.3% to 8.6%.

Corporate shares include quoted shares of Russian companies and banks.

192

193

Available for sale financial assets comprise of the following:

Russian government and municipal debt securities

Corporate debt securities

Corporate shares

Investment fund units

Total available-for-sale financial assets

At 31 December 2016

At 31 December 2015

543

7,822

8,150

19,603

36,118

3,505

19,784

23,289

NOTE 10: INVENTORIES

Materials and supplies

Crude oil

Refined oil products

Petrochemical supplies and finished goods

Other

Total inventories

At 31 December 2016

At 31 December 2015

9,696

9,996

9,087

4,183

309

33,271

11,861

6,436

7,586

6,159

32,042

Corporate bonds consist of Russian Ruble, US Dollar and Euro denominated bonds and Eurobonds issued by Russian banks and
companies. Corporate bonds include RR 16 million securities sold under REPO agreements. These bonds mature from 2017 to
2046. The annual coupon rates on these securities range from 3.2% to 15%, and yields to maturity vary from 1.2% to 43.3%.

NOTE 11: PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets are as follows:

Municipal bonds consist of Russian Ruble denominated bonds issued by regional and municipal authorities of the Russian
Federation and mature in 2020. The annual coupon rate on these securities is 8.2% and yield to maturity is 9.4%.

Federal loan bonds consist of OFZ and Russian Federation Eurobonds. These bonds mature from 2017 to 2028. The annual
coupon rates on these securities vary from 6.5% to 12.8%, and yield to maturity vагу from 4.8% to 10.7%.

Corporate shares include quoted and unquoted shares of Russian companies and banks. At 31 December 2016 and 2015
unquoted securities include investment in AK BARS Bank ordinary shares (8.6%) in the amount of RR 2,300 million. The fair
value of these shares is measured using combination of the net asset method (based on IFRS consolidated financial statements
of AK BARS Bank) and comparable company valuation multiples technique.

Investment fund units are solely presented with investment in closed mutual investment fund AK BARS – Gorizont. The main
assets of this fund are the land plots. The Group does not exercise significant influence over this investment and therefore
accounts for it as an available-for-sale investment.

Held to maturity investments

Held to maturity investments comprise of the following:

Municipal debt securities

Corporate debt securities

Total held to maturity securities

At 31 December 2016

At 31 December 2015

483

10,077

10,560

Municipal bonds consist of Russian Ruble denominated bonds issued by regional and municipal authorities of the Russian
Federation and mature from 2017 to 2021. The annual coupon rates on these securities range from 9.7% to 10.9%, and yields
to maturity vary from 8.5% to 9.6%.

Corporate bonds consist of Russian Ruble, US Dollars and Euro denominated bonds and Eurobonds issued by Russian banks and
companies. Corporate bonds include RR 1,066 million securities sold under REPO agreements. These bonds mature from 2017 to
2027. The annual coupon rates on these securities range from 0.5% to 12%, and yields to maturity vary from 2.6% to 9.6%.

At 31 December 2016

At 31 December 2015

Prepaid export duties

VAT recoverable

Advances

Prepaid transportation expenses

Other

Prepaid expenses and other current assets

4,490

5,375

11,475

1,679

870

23,889

NOTE 12: NON-CURRENT ASSETS HELD FOR SALE

Long-term financial assets include the following:

1 January 2016

Addition as a result of acquisition of subsidiary

Addition by taking possession of collateral

Impairment

Disposal as a result of sale

31 December 2016

6,678

9,473

28,985

1,192

1,705

48,033

4,347

217

(159)

(158)

4,247

As at 31 December 2016 non-current assets held for sale include real estate which the Group received in the course of its banking
activities by taking possession of collateral held as security for loans and receiving other property. These non-cash settlements
were excluded from the consolidated statement of cash flows. The carrying amount of non-current assets held for sale will be
recovered through a sale transaction. The Group’s management approved a sales plan and the Group has started the process of
active marketing of non-current assets held for sale in order to sell them within 12 months starting from the date of their classification
into this category. The property in the amount of RR 158 million has been converted into cash during fourth quarter of 2016 with a
loss of RR 48 million.

194

195

NOTE 14: PROPERTY, PLANT AND EQUIPMENT

Investments in associates and joint ventures comprise the following:

Name of an investee

Associates and joint ventures:

Bank ZENIT

Nizhnekamskneftekhim

Other

Total

Ownership percentage
at 31 December

Net book value
at 31 December

Share of results of associates
and joint ventures

2016

2015

2016

2015

2016

2015

20-75

639

5,246

(4,690)

(2,111)

386

5,632

4,098

253

(339)

(61)

(2,172)

On 17 March 2016 the Group acquired a 25% minus 1 share voting interest in Nizhnekamskneftekhim for total cash consideration
of RR 19,850 million which was paid in December 2015. 26 December 2016 the Group sold its share in Nizhnekamskneftekhim for
RR 32,000 million, received in December 2016. RR 9,800 million gain on sale is presented within gain on disposals of interests in
subsidiaries and associates of consolidated statement of profit or loss and other comprehensive income. During 2016 the Group
received dividends from Nizhnekamskneftekhim in the amount of RR 1,521 million net of RR 227 million income tax withheld at source.

In June 2016, the Group increased its equity share in Bank ZENIT through a subscription to the bank’s additional share emission
for a cash consideration of RR 6,700 million. As a result of the transaction the Group increased its share in Bank ZENIT from
24.56% to 48.79%. As a result of the mandatory offer carried out by the Company in accordance with the Federal Law on
“Joint-Stock Companies”, Tatneft Group’s stake in the share capital of Bank ZENIT increased and exceeded 50% in the fourth
quarter of 2016. At 31 December 2016 the Group’s share in Bank ZENIT is 50.43% (Note 29).

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 or loss of associates and joint ventures

Share of other comprehensive income of associates and joint ventures

Dividends from associates

Remeasurement of investment in associate upon business combination (Note 29)

Acquisition of associates

Reclassification of investment in Bank ZENIT to subsidiaries (Note 29)

Disposal of associates

Other

Net book value at 31 December

2016

5,632

2,407

(1,748)

(2,746)

26,550

(7,278)

(22,200)

(2)

639

2015

7,212

(2,172)

222

370

5,632

The condensed financial information of the Group’s equity basis investments is as follows:

Year ended 31 December 2016

Year ended 31 December 2015

Sales/interest income

Net income/(loss)

Other comprehensive income

Total comprehensive income/(loss)

Total assets

Total liabilities

196

Other

4,274

801

9,040

9,382

Bank zENIT

32,318

(9,498)

902

(8,596)

314,817

293,771

Other

3,496

(139)

6,502

6,138

Oil and gas
properties

Buildings and
constructions

Machinery and
equipment

Construc-tion in
progress

Total

Cost

As of 31 December 2014

348,458

179,566

144,597

Additions

Disposals

Changes in Group structure

Transfers

Changes in decommissioning provision

As of 31 December 2015

Depreciation, depletion and amortisation

(2,912)

31,945

(17,631)

359,901

(467)

(345)

7,494

(1,166)

(8,007)

12,547

90,379

101,884

(4,553)

(1)

(51,986)

186,248

147,972

135,723

As of 31 December 2014

Depreciation charge

Disposals

Changes in Group structure

As of 31 December 2015

Net book value

As of 31 December 2014

As of 31 December 2015

Cost

164,480

27,918

9,589

(2,703)

4,744

(310)

(158)

171,366

32,194

63,016

10,734

(692)

(4,552)

68,506

183,978

188,535

151,648

154,054

81,581

79,466

90,379

135,723

507,586

557,778

763,000

101,926

(9,098)

(8,353)

(17,631)

829,844

255,414

25,067

(3,705)

(4,710)

272,066

As of 31 December 2015

359,901

186,248

147,972

135,723

829,844

Additions

Disposals

Changes in Group structure (Note 28, 29)

Transfers

Changes in decommissioning provision

(497)

(58,426)

36,742

(6,253)

(1,358)

(3,257)

15,869

(524)

(20,776)

4,852

92,780

(1,995)

(230)

(57,463)

92,800

(4,374)

(82,689)

(6,253)

As of 31 December 2016

331,486

197,502

131,525

168,815

829,328

Depreciation, depletion and amortisation

As of 31 December 2015

Depreciation charge

Disposals

Changes in Group structure (Note 28, Note 29)

As of 31 December 2016

Net book value

As of 31 December 2015

As of 31 December 2016

171,366

32,194

68,506

10,723

(370)

(29,214)

152,505

4,693

(831)

(2,078)

33,978

7,900

(453)

(16,722)

59,231

272,066

23,316

(1,654)

(48,014)

245,714

188,535

178,981

154,054

163,524

79,466

72,294

135,723

168,815

557,778

583,614

Included within construction in progress are advances for construction of RR 7,329 million and RR 12,326 million at 31
December 2016 and 2015, respectively.

197

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 fields as discussed below in further detail.

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 significant. The Group incurred social infrastructure
expenses of RR 4,918 million and RR 4,643 million for the years ended 31 December 2016 and 2015, respectively, for
maintenance that mainly relates to housing, schools and cultural buildings.

The Group’s oil and gas fields 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 fields. The Group’s existing production licenses for its
major fields expire, after their recent extension, between 2026 and 2038, with other production licenses expiring between 2018
and 2044. The economic lives of many of the Group’s licensed fields extend beyond these dates. Under Russian law, the Group
is entitled to renew the licenses to the end of the economic lives of the fields, provided certain conditions are met. Article 10
of the Subsoil Law provides that a license to use a field “shall be” extended at its scheduled termination at the initiative of the
subsoil user if necessary to finish production in the field, 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 field, Romashkinskoye, was extended through
2038. And the license to produce oil and gas from the Group’s second largest field, 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.

Decommissioning provisions.

The following tables summarize the Group’s decommissioning provisions and decommissioning costs activities:

Balance, beginning of period

Unwinding of discount

New obligations

Release of existing obligations

Changes in estimates

Balance, end of period

Less: current portion of decommissioning provisions (Note 18)

Long-term balance, end of period

2016

2015

33,417

45,738

3,271

770

(29)

(7,023)

30,406

(82)

5,337

502

(27)

(18,133)

33,417

(65)

30,324

33,352

In 2016 the Group recorded the change in estimate for oil and gas properties decommissioning mainly due to the change in
discount rate and expected long-term inflation rate. In 2015 the Group recorded the change in estimate for oil and gas properties
decommissioning mainly due to the change in discount rate, estimated cost per well and expected long-term inflation rate.

These plans have been designed on the basis that the Group will be producing crude oil through the economic lives of the fields
and not with a view to exploiting the Group’s reserves to maximum effect only through the license expiration dates.

Key assumptions used for evaluation of decommissioning provision were as follows:

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 fields. “Reasonable certainty” is the applicable
standard for defining proved reserves under the SEC’s Regulation S-X, Rule 4-10.

Discount rate

Inflation rate

Exploration and evaluation assets included in Oil and Gas assets above, net book value:

At 1 January 2015

Additions

Reclassification (to)/from other categories

Charged to expense

At 31 December 2015

Additions

Reclassification (to)/from other categories

Charged to expense

At 31 December 2016

11,323

430

(150)

(4,558)

7,045

3,076

6,948

17,069

NOTE 15: TAXES

Income tax expense comprises the following:

Current income tax expense

Deferred income tax expense

Income tax expense for the year

At 31 December 2016 At 31 December 2015

8.56%

4.30%

9.75%

5.85%

Year ended 31 December
2016

Year ended 31 December
2015

(29,657)

(5,184)

(34,841)

(30,954)

(902)

(31,856)

For the years ended 31 December 2016 and 2015, operating and investing cash flows used for exploration and evaluation
activities amounted to RR 1,185 million and RR 3,076 million and RR 1,856 million and RR 430 million, respectively.

Social assets. During the years ended 31 December 2016 and 2015 the Group transferred social assets with a net book
value of RR 264 million and RR 22 million, respectively, to local authorities. At 31 December 2016 and 2015 the Group held
social assets with a net book value of RR 5,954 million and RR 5,459 million, respectively, all of which were constructed after
the privatization date.

198

199

Profit before income tax

Theoretical income tax expense at statutory rate

Increase due to:

Non-deductible expenses, net

Unrecognized deferred tax assets

Other

Income tax expense

Year ended 31 December
2016

Year ended 31 December
2015

140,971

(28,194)

(5,484)

(1,163)

(34,841)

137,628

(27,526)

(3,150)

(1,180)

(31,856)

At 31 December 2016 no provision has been made for additional income taxes on RR 35,385 million (2015: RR 31,159 million) of
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 2,191 million (2015: RR 1,964 million) if they were remitted as dividends.

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for statutory tax purposes. Deferred tax assets (liabilities) are
comprised of the following:

31 December 2015). Starting from 1 January 2017 the amendments to the Russian tax legislation became effective in respect of
tax loss carry forwards. The amendments affect tax losses incurred and accumulated since 2007 that have not been utilised. The
ten year expiry period for tax loss carry-forwards no longer applies. The amendments also set limitation on utilisation of tax loss
carry forwards that will apply during the period from 2017 to 2020. The amount of losses that can be utilised each year during
that period is limited to 50% of annual taxable profit. In determining future taxable profits and the amount of tax benefits that are
probable in the future management makes judgments including expectations regarding the Group’s ability to generate sufficient
future taxable income and the projected time period over which deferred tax benefits will be realized.

The Group is subject to a number of taxes other than income taxes, which are detailed as follows:

Mineral extraction tax

Property tax

Penalties and interest

Other

Year ended 31
December 2016

Year ended 31
December 2015

119,393

5,623

1,574

129,608

5,888

1,798

Total taxes other than income taxes

126,590

137,380

For mineral extraction tax for fields whose depletion rate exceeds a certain threshold the Group received a benefit of
approximately RR 23.2 billion and RR 24.3 billion for the years ended 31 December 2016 and 2015, respectively.

Tax loss carry forward

Decommissioning provision

Prepaid expenses and other current assets

Long-term investments

Other

Deferred income tax assets

Property, plant and equipment

Inventories

Accounts receivable

Long-term investments

Other liabilities

Deferred income tax liabilities

Net deferred tax liability

At 31 December 2016 At 31 December 2015

At 31 December 2016 and 2015 taxes payable were as follows:

3,736

6,065

304

886

11,076

(29,145)

(1,896)

(413)

(166)

(13)

(31,633)

(20,557)

4,220

6,670

814

11,704

(29,449)

(980)

(57)

217

(671)

(30,940)

(19,236)

Mineral extraction tax

Value Added Tax on goods sold

Export duties

Property tax

Other

Total taxes payable

NOTE 16: OTHER LONG-TERM ASSETS

Other long-term assets are as follows:

Deferred income taxes are reflected in the consolidated statement of financial position as follows:

Deferred income tax asset

Deferred income tax liability

Net deferred tax liability

At 31 December 2016 At 31 December 2015

2,043

(22,600)

(20,557)

2,535

(21,771)

(19,236)

Prepaid computer programs

Precious metals

Prepaid license agreements

Other long-term assets

Total other long-term assets

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 profits will be available against which the unused tax losses/credits can be utilized.

Tax losses carry forward. At 31 December 2016, the Group had recognized deferred income tax assets of RR 3,736 million
(RR 4,220 million at 31 December 2015) in respect of unused tax loss carry forwards of RR 18,680 million (RR 21,102 million at

200

At 31 December 2016 At 31 December 2015

14,652

2,707

1,277

1,128

3,973

23,737

7,401

3,909

2,534

1,360

2,998

18,202

At 31 December 2016 At 31 December 2015

1,721

974

2,972

5,678

1,521

1,220

2,800

201

NOTE 17: DEBT

Short-term debt
Bonds issued

Debt securities issued

US $2.0 bln 2010 credit facility

US $75 mln 2011 credit facility

US $144.5 mln 2011 credit facility

EUR 55 mln 2013 credit facility

Other debt

Total short-term debt

Current portion of long-term debt

Total short-term debt, including current portion of long-term debt

Long-term debt
US $2.0 bln 2010 credit facility

US $75 mln 2011 credit facility

US $144.5 mln 2011 credit facility

EUR 55 mln 2013 credit facility

Bonds issued

Subordinated debt

Other debt

Total long-term debt

Less: current portion of long-term debt

Total long-term debt, net of current portion

At 31 December 2016 At 31 December 2015

3,903

4,894

830

2,001

3,584

2,925

695

18,832

456

19,288

28,795

4,497

2,006

35,298

(456)

34,842

1,313

3,968

5,281

3,144

2,952

4,921

4,038

1,793

16,848

(3,968)

12,880

Fair value of debt is presented in Note 30. Maturity and currency analysis of debt is presented in Note 30.

Credit facilities

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 PLC, 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 financial covenants including,
but not limited to, minimum levels of consolidated tangible net worth and interest coverage ratios. The 7-year tranche bears the
interest of LIBOR plus 5%. The 3-year and 5-year tranches were fully repaid.

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 financial covenants including,
but not limited to, minimum levels of consolidated tangible net worth and interest coverage ratios.

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 financial covenants including, but not limited to, minimum levels of consolidated tangible net worth
and interest coverage ratios.

In May 2013, TANECO entered into a Euro 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 financial covenants including, but not limited to,
minimum levels of consolidated tangible net worth and interest coverage ratios.

Bonds issued. At 31 December 2016 bonds issued are bonds denominated in Russian Rubles issued by Bank ZENIT that mature
between 2017 and 2026. The annual coupon rates on these securities range from 8.5% to 12.5%, and yields to maturity vary from
7.5% to 12.3%.

Subordinated debt. At 31 December 2016 subordinated debt is presented with eight subordinated loans raised by Bank ZENIT,
including five subordinated loans from Deposit Insurance Agency (DIA). Further information on subordinated debt received from DIA
is provided in Note 30. Other subordinated loans bear interest at rates ranging from 6.5% to 8.3% and mature from 2019 to 2024.

In relation to two of subordinated loans maturing in 2021 and 2024 bearing an interest rate of 8.3% the Group is obliged to comply
with eight financial covenants. As of 31 December 2016 the Group failed to comply with some of these covenants. The Group has
obtained a waiver on breach of the covenants as of 31 December 2016.

Debt securities issued. At 31 December 2016 debt securities are promissory notes issued by Bank ZENIT at a discount to
nominal value and interest bearing promissory notes denominated in Russian Rubles, US Dollars and Euro with effective interest
rates from 3.99% to 10.73%, from 2% to 5.99% and from 1.65% to 2.8% respectively. Maturity dates of these promissory notes vary
from 2017 to 2028.

As at 31 December 2016 non-interest-bearing promissory notes of the aggregate nominal value of RR 915 million were issued by the
Group for settlement purposes and mature primarily on demand.

Other debt. Other debt is primarily comprised of loans with Russian companies and banks. Other debt bear contractual interest
rates of 0.5% to 4.8% per annum as of 31 December 2016 and 0.5% to 4.4% per annum as of 31 December 2015.

NOTE 18: 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 14)

Other accounts payable and accrued liabilities

Total non-financial liabilities

Accounts payable and accrued liabilities

At 31 December 2016 At 31 December 2015

25,575

149

430

26,154

4,555

10,361

4,357

19,355

45,509

27,816

133

580

28,529

4,746

2,847

7,301

14,959

43,488

In November 2011, TANECO entered into a US $144.5 million credit facility with equal semi-annual repayments during ten years with
the first repayment date on 15 May, 2014. The loan was arranged by Société Générale, Sumitomo Mitsui Banking Corporation Europe

The fair value of each class of financial liabilities included in short-term trade and other payables at 31 December 2016 and
2015 is presented in Note 30.

202

203

Risk concentrations by customer industry within customer accounts are as follows:

Term deposits from other banks

Term deposits from CB RF

Correspondent accounts and other banks’ overnight deposits

Total due from banks and CB RF

Less: long term due from banks and CB RF

Total short term of due from banks and CB RF

At 31 December 2016 At 31 December 2015

11,810

6,080

460

18,350

(4,415)

13,935

Included in amounts due to banks as at 31 December 2016 are RR 12,510 million of correspondent accounts and term deposits from three
Russian banks, which individually exceeded 5% of the Bank ZENIT equity. Term deposits from the CB RF mature from 25 January 2017 to 27
December 2018. The interest rates on term deposits from CB RF range from 10.3% to 10.8%. As at 31 December 2016 term deposits in the
amount of RR 10,974 million are collateralized with loans to customers in the amount of RR 12,669 million discussed in Note 8.

NOTE 20: BANKING: CUSTOMER ACCOUNTS

Individuals

Finance

Oil and gas

Trade

Services

Manufacturing

Construction

Other

Total customer accounts

At 31 December 2016

At 31 December 2015

Carrying value

Share in
customer loan
portfolio, %

Carrying value

Share in
customer loan
portfolio, %

109,856

34,953

3,193

7,358

8,368

5,176

6,456

5,354

180,714

60.79%

19.34%

1.77%

4.07%

4.63%

2.86%

3.57%

2.97%

100%

At 31 December 2016 At 31 December 2015

Other long-term liabilities are as follows:

NOTE 21: OTHER LONG-TERM LIABILITIES

State and public organizations

Current / settlement accounts

Term deposits

Other legal entities

Current / settlement accounts

Term deposits

Individuals

Current / settlement accounts

Term deposits

Total customer accounts

Less: long-term customer accounts

Total short-term customer accounts

739

4,457

21,022

44,640

11,578

98,278

180,714

(3,292)

177,422

Included in customer accounts at 31 December 2016 are RR 31,432 million of current/settlement accounts and term deposits
from 11 customers, which individually exceeded 5% of the Bank ZENIT equity.

Pension liability

Other long-term liabilities

Total other long-term liabilities

Pension liabilities

At 31 December 2016 At 31 December 2015

3,856

3,857

3,871

248

4,119

The Group has various pension plans covering substantially all eligible employees and members of management. The amount of
contributions, frequency of benefit payments and other conditions of these plans are regulated by the “Statement of Organization
of Non-Governmental Pension Benefits for OAO Tatneft Employees” and the contracts concluded between the Company or its
subsidiaries, management, and the JSC “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 benefit upon retirement. Contributions
or benefits are generally based upon grade and years until official 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 benefits,
the amounts of which are generally based on salary grade and years of service at the time of retirement.

Principal actuarial assumptions are as follows:

Discount rate

Rate of increase in salary levels

Actuarial rate of NPF

Statutory insurance contributions rate

At 31 December 2016 At 31 December 2015

8.33%

7.23%

3.0%

31.73%

9.7%

6.27%

3.0%

30.69%

Management has assessed that reasonable changes in the principal significant actuarial assumptions will not have a significant
impact on the consolidated statements of profit of loss and other comprehensive income or the liability recognized in the
consolidated statement of financial position.

204

205

Reconciliation of the opening and closing balances of plan assets’ fair value:

At 31 December 2016 At 31 December 2015

Present value of defined benefit obligation

Less: Fair value of plan assets

Net defined benefit liability

Change in the defined benefit obligation amount:

Defined benefit obligation at beginning year

Effect of exchange rate changes

Current service cost

Interest cost

Benefits paid

Remeasurement losses/(gains):

Actuarial losses arising from changes in financial assumptions

Actuarial losses arising from changes in demographic assumptions

Actuarial (gains)/losses - Experience

Past service cost

Disposal of subsidiaries (Note 28)

Defined benefit obligation at the end of the year

The amounts recognized in profit or loss are as follows:

Service cost

Net interest expense

Remeasurement losses/(gains):

Actuarial losses arising from changes in financial assumptions

Actuarial losses arising from changes in demographic assumptions

Actuarial (gains)/losses– Experience

Disposal of subsidiaries (Note 28)

Total included in ‘employee benefits expense’

5,442

(1,586)

3,856

2016

5,834

(38)

151

566

(604)

775

(95)

(1,158)

5,442

2016

151

376

141

(125)

(711)

(165)

5,834

(1,963)

3,871

2015

4,379

140

558

(677)

643

640

5,834

2015

205

350

143

153

864

The amounts recognized in other comprehensive income are as follows:

Remeasurement losses:

Actuarial losses arising from changes in financial assumptions

Actuarial losses arising from changes in demographic assumptions

Actuarial losses – Experience

Effect of exchange rate changes

Total included in other comprehensive income

2016

2015

634

(38)

634

229

487

789

Plan assets at beginning of year

Interest income

Contributions

Benefits paid

Actuarial gain/(loss)

Disposal of subsidiaries (Note 28)

Plan assets at year end

2016

1,963

190

183

(305)

(447)

1,586

2015

1,630

208

193

(340)

272

1,963

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 benefit payments and portfolio management.

Plan assets structure:

Russian corporate bonds and equity securities of Russian issuers

Russian government and regions bonds

Bank deposits

Foreign government securities

Other

Total plan assets

At 31 December 2016 At 31 December 2015

49.36%

11.86%

27.87%

6.61%

4.3%

100%

32.61%

11.6%

33.86%

6.9%

15.03%

100%

Expected contributions to be paid during the next annual reporting period are RR 493 million.

NOTE 22: SHAREHOLDERS’ EQUITY

Authorized share capital. At 31 December 2016 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 hyperinflation of capital contributions
made before 2003.

Golden share. Tatarstan 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 defined
under Russian law.

The Golden Share currently has an indefinite term. The Tatarstan government also controls or exercises significant influence
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:

206

207

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 significantly from IFRS
(see Note 2). The statutory accounts are the basis for profit distribution and other appropriations. Russian legislation identifies
the basis of distribution as the current period net profit 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
2016 and 2015, the Company had a statutory current profit of RR 104,824 million and RR 85,009 million, respectively.

In June 2016 the shareholders of the Company approved the payment of dividends for the year ended 31 December 2015 in
amount of RR 10.96 per preference and ordinary share. In June 2015 the shareholders of the Company approved the payment
of dividends for the year ended 31 December 2014 in amount of RR 10.58 per preference and ordinary share.

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 profit or loss attributable to ordinary and preference shareholders by the weighted
average number of ordinary and preferred shares outstanding during the period. Profit 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 profit 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 2016

Year ended 31
December2015

107,389

(23,116)

(1,617)

82,656

2,113

148

2,261

47.50

47.48

98,930

(22,463)

(1,561)

74,906

2,123

148

2,271

43.56

43.53

Non-controlling interest. Non-controlling interest is adjusted by dividends paid by the Group’s subsidiaries amounting to
RR 3 million and RR 2,034 million at 31 December 2016 and 2015, respectively.

NOTE 23: EMPLOYEE BENEFIT EXPENSES

Wages and salaries

Statutory insurance contributions

Bonus certificates granted to directors and employees

Pension costs – defined benefit plans (Note 21)

Other employee benefits

Total employee benefit expense

Year ended 31
December 2016

Year ended 31
December 2015

29,569

8,656

1,215

(165)

2,043

41,318

39,018

11,438

1,257

864

2,055

54,632

Employee benefit expenses are included in operating expenses, selling, general and administrative expenses, maintenance
of social infrastructure and transfer of social assets, other expenses and operating expenses from banking activities in the
consolidated statement of profit or loss and other comprehensive income.

NOTE 24: INTEREST INCOME AND INTEREST EXPENSE ON NON-BANKING ACTIVITIES

Interest income on non-banking activities comprises the following:

Interest income from loans and receivables

Unwinding of the present value discount of long-term financial assets

Total interest income on non-banking activities

Interest expense on non-banking activities comprises the following:

Bank loans

Unwinding of the present value discount of decommissioning provision

Unwinding of the present value discount of long-term financial assets and liabilities

Total interest costs recognized in profit or loss

Year ended 31
December 2016

Year ended 31
December 2015

5,084

346

5,430

10,873

150

11,023

Year ended 31
December 2016

Year ended 31
December 2015

564

3,271

3,920

1,082

5,337

1,272

7,691

NOTE 25: SEGMENT INFORMATION

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
financial 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 four main operating segments:

consist of transfer of crude oil to refinery and other goods and services provided to other operating segments,

• Exploration and production consists of exploration, development, extraction and sale of own crude oil. Intersegment sales
• Refining and marketing comprises purchases and sales of crude oil and refined products from third parties, own refining
• Petrochemical products include production and sales of tires and petrochemical raw materials and refined products, which
• Banking segment includes operations of Bank ZENIT.

activities and retailing operations,

are used in production of tires.

208

209

The Group evaluates performance of its reportable operating segments and allocates resources based on segment earnings,
defined as profit before income taxes and non-controlling interest not including interest income and expense on non-banking
activities, share of results of associates and joint ventures, other income (expenses) and foreign exchange loss or gain.
Intersegment sales are at prices that approximate market. Group financing (including interest expense and interest income on
non-banking activities) and income taxes are managed on a Group basis and are not allocated to operating segments.

For the year ended 31 December 2016, revenues of RR 79,257 million or 14% of the Group’s total sales and operating revenues
is derived from one external customer.

For the year ended 31 December 2015, revenues of RR 68,833 million or 12% of the Group’s total sales and operating revenues
is derived from one external customer.

Petrochemicals
Tires – domestic sales

Tires – CIS sales

Tires – non-CIS sales

Petrochemical products and other

Intersegment sales

Total petrochemicals

Banking
Interest income

Fee and commission income

Total banking

Total segment sales

Corporate and other sales

These revenues represent sales of crude oil and are attributable to the exploration and production segment and refining and
marketing segment.

Elimination of intersegment sales

Total sales and other operating revenues

32,861

27,641

8,443

1,709

2,250

929

6,802

1,999

2,385

1,142

46,192

39,969

7,054

901

7,955

673,041

12,833

(97,792)

588,082

656,484

17,763

(121,535)

552,712

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 2016

Year ended
31 December 2015

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

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

210

86,486

16,572

173,371

4,601

94,592

375,622

14,498

123,743

138,241

6,979

7,165

81,608

88,773

7,008

2,271

73,486

19,328

150,295

5,864

117,088

366,061

15,735

127,592

143,327

15,411

10,374

72,155

82,529

5,882

3,305

243,272

250,454

(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, Netherlands and United Kingdom based traders

and Poland based refineries.

Segment earnings

Exploration and production

Refining and marketing

Petrochemicals

Banking

Total segment earnings

Corporate and other

Other income/(expenses)

Profit before income tax

Year ended 31
December 2016

Year ended 31
December 2015

146,618

13,899

1,463

(980)

161,000

(17,896)

(2,133)

140,971

122,657

16,617

1,482

140,756

(6,571)

3,443

137,628

For the year ended 31 December 2016 corporate and other loss includes loss on deconsolidation of subsidiaries (Note 28),
gain on disposal of interest in associate (Note 13) and impairment of bank deposits (Note 30). For the year ended 31 December
2015 corporate and other loss included impairments of financial assets and other losses.

Segment assets.

Assets

Exploration and production

Refining and marketing

Petrochemicals

Banking

Corporate and other

Total assets

At 31 December 2016 At 31 December 2015

300,673

356,191

29,977

286,421

121,335

1,094,597

297,517

338,852

31,674

130,648

798,691

211

As of 31 December 2016 and 2015 corporate and other comprised RR 639 million and RR 5,632 million, respectively,
investments in associates and joint ventures. For the year ended 31 December 2016 deconsolidation of subsidiaries (Note 28)
caused disposal of exploration and production segment assets and corporate and other assets on amount of RR 33,149 million
and RR 14,289 million respectively.

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

Banking

Corporate and other

Additions to property, plant and equipment

Exploration and production

Refining and marketing

Petrochemicals

Corporate and other

Total additions to property, plant and equipment

Итого поступления основных средств

Year ended 31
December 2016

Year ended 31
December 2015

11,848

7,120

1,852

750

21,626

13,340

7,137

1,995

2,580

25,052

Year ended 31
December 2016

Year ended 31
December 2015

47,694

34,433

1,193

3,273

86,593

86 593

19,809

58,163

1,027

5,531

84,530

84 530

For the years ended 31 December 2016 and 2015 additions to property, plant and equipment of exploration and production segment
are shown net of RR 6,253 million and RR 17,631 million, respectively, associated with changes in the decommissioning provision.

NOTE 26: 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 significant influence or joint control over the other party in making financial 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 associates, joint ventures, government related companies,
key management personnel and other related parties. These transactions include sales and purchases of refined products,
purchases of electricity, transportation services and banking transactions.

212

Associates, joint ventures and other related parties

The amounts of transactions for each period with associates, joint ventures and other related parties are as follows:

Revenues and income

Sales of refined products

Other sales

Interest income

Costs and expenses

Purchases of crude oil

Other services

Other purchases

Прочие закупки

Year ended 31
December 2016

Year ended 31
December 2015

975

1,019

2,113

1,231

5,055

5 055

294

3,622

103

1,575

597

For the years ended 31 December 2016 and 2015, the Group sold crude oil on a commission basis from related parties for RR
0 million and RR 103 million, respectively.

At 31 December 2016 and 2015 the outstanding balances with associates, joint ventures and other related parties were as follows:

At 31 December 2016 At 31 December 2015

Assets

Cash and cash equivalents

Restricted cash

Accounts receivable

Other financial assets

Notes receivable

Trading securities

Other loans receivable

Prepaid expenses and other current assets

Due from related parties short-term

Long-term accounts receivable

Other financial assets

Notes receivable

Bank deposits

Available for sale

Other loans receivable

Due from related parties long-term

Liabilities

Accounts payable and accrued liabilities

Customer accounts

Other debt

Due to related parties short-term

Other debt

Due to related parties long-term

675

146

361

469

1,651

142

3,758

2,022

5,922

(47)

(812)

(859)

(33)

9,392

211

373

5,085

428

325

15,821

4,156

17,199

1,715

23,084

(42)

(814)

(856)

213

The amounts of transactions for each period with Government bodies and state organizations are as follows:

At 31 December 2016 and 2015 the outstanding balances with Russian Government bodies and state organizations were as
follows:

At 31 December 2016 At 31 December 2015

Assets

Cash and cash equivalents

Banking: Mandatory reserve deposits with CB RF

Accounts receivable

Banking: Loans to customers

Other financial assets

Bank deposits

Trading securities

Available-for-sale

Held to maturity

Other loans

Prepaid expenses and other current assets

Due from related parties short-term

Other financial assets

Available-for-sale

Held to maturity

Other loans

Due from related parties long-term

Liabilities

Accounts payable and accrued liabilities

Banking: Due to banks and CB RF

Banking: Customer accounts

Other debt

Due to related parties short-term

Subordinated debt

Banking: Due to banks and CB RF

Due to related parties long-term

19,899

1,988

1,720

2,279

409

3,138

1,452

571

290

9,052

40,798

5,027

3,453

238

8,718

(961)

(4,700)

(4,061)

(3)

(9,725)

(2,140)

(9,624)

(11,764)

3,388

616

907

23,575

28,492

(511)

(378)

(889)

At 31 December 2015 prepaid expenses and other current assets include prepayments for acquisition of 25% minus 1 share
of Nizhnekamskneftekhim, the transaction was completed in March 2016 (Note 13).

Sales of crude oil

Sales of refined products

Other sales

Interest income

Interest expense

Purchases of crude oil

Purchases of refined products

Purchases of electricity

Purchases of transportation services

Other services

Other purchases

Year ended 31
December 2016

Year ended 31
December 2015

567

10,501

3,994

585

460

21,941

12,897

22,272

3,943

1,735

11,439

1,841

2,865

841

19,141

11,507

20,005

3,867

7,750

In April 2016 the Group purchased 20 million treasury shares from the company related to Russian Government bodies and
state organizations in the amount RR 7,168 million.

Compensation to key management personnel

As of 31 December 2016 and 2015 total remuneration, including pension cost, for key management personnel was RR 1,677
million and RR 1,797 million, respectively.

For the year ended 31 December 2016, the Company issued 2.1 million Awards to key management personnel, all of which are
expected to be settled at a price of RR 252.81 per Award. Final settlement is subject to approval at the Company’s Management
Committee meeting in July-September 2017. For the year ended 31 December 2015, the Company issued 3.3 million Awards to
key management personnel, all of which were expected to be settled at a price of RR 200.76 per Award. The amount of related
compensation expense recognized in selling, general and administrative expenses of the consolidated statement of profit or loss and
other comprehensive income for the years ended 31 December 2016 and 2015 was RR 534 million and RR 667 million, respectively.

At 31 December 2016 key management personnel customer accounts in Bank ZENIT amounted to RR 21,667 million.

NOTE 27: CONTINGENCIES AND COMMITMENTS

Operating Environment of the Group

The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil
and gas prices. Tax, currency and customs legislation is sometimes subject to varying interpretations and contributes to the
challenges faced by companies operating in the Russian Federation.

In the recent years the Russian economy was negatively impacted by a decline in oil prices and ongoing political tensions.

The ongoing uncertainty and volatility of the financial markets and other risks could have significant negative effects on the
Russian financial and corporate sectors. Management determined provisions for impairment by considering the economic
situation and outlook at the end of the reporting period.

These events may have a further significant impact on the Group’s future operations and financial position, the effect of which
is difficult to predict.

214

215

Capital commitments. As of 31 December 2016 and 31 December 2015 the Group has outstanding capital commitments
of approximately RR 46,176 million and RR 59,294 million, respectively, mainly for the construction of the TANECO refinery
complex. These commitments are expected to be paid between 2017 and 2019.

Management believes the Group’s current and long-term capital expenditures program can be funded through cash flows
generated from existing operations as well as lines of credit available to the Company. The TANECO refinery project has been
funded from the Company’s cash flow with the support of the bank facilities (Note 17).

Management believes the Company has the ability to obtain syndicated loans and other financings as needed to continue
funding the TANECO refinery project, refinance any maturing debts as well as finance business acquisitions and other
transactions that may arise in the future.

Operating lease commitments. Where the Group is the lessee, the future minimum lease payments under non-
cancellable operating leases are as follows:

Less than one year

More than one year and less than five years

More than five years

Total operating lease commitments

At December 31 2016 At December 31 2015

481

1,115

1,617

Credit related commitments. The credit related commitments comprise loan commitments, letters of credit and guarantees.
The contractual commitments represent the value at risk should the contract be fully drawn upon, the client defaults, and the value
of any existing collateral becomes worthless. In general, certain part of Group’s import letters of credit are collateralised with cash
deposits or collateral pledged to the Group and accordingly the Group normally assumes minimal risk.

Outstanding credit related commitments are as follows:

Loan commitments

Guarantees issued

Import letters of credit

Total credit related commitments before impairment

Less: allowance for credit related commitment impairment

Less: client funds held as security for guarantees issued

Less: client funds held as security for import letter of credit

Total credit related commitments

At December 2016

At December 2015

24,885

15,211

1,082

41,178

(978)

(354)

(751)

39 085

Trustee services. These assets are not included in the Group’s consolidated statement of financial position as they are not
assets of the Group and are held in custody or safekeeping for customers. The nominal values disclosed below are normally
different from the fair values of respective securities.

Bills of exchange

Corporate bonds

Banks’ shares

Corporate eurobonds

Federal loan bonds (OFZ)

Companies’ shares

Municipal bonds

Investment funds’ units

Depositary notes

Total

At December 2016

At December 2015

25,611

15,672

5,074

3,747

2,736

2,030

338

55,324

Taxation. The Russian tax legislation is subject to varying interpretations and changes which can occur frequently.
Management’s interpretation of the legislation, as applied to the transactions and activities, may be challenged by the tax
authorities. The tax authorities may take a different position in their interpretation of the legislation, and it is possible that
transactions and activities that have not been challenged in the past may be challenged.

The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by
the Organisation for Economic Cooperation and Development (OECD), with certain specific features. This legislation allows
tax authorities to assess additional taxes for controllable transactions (transactions between related parties and certain
transactions between unrelated parties) if such transactions are not on an arm’s length basis.

Tax liabilities arising from intercompany transactions are determined using actual transaction prices. It is possible, with the evolution
of the interpretation of the transfer pricing rules, that such prices could be challenged. 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. The Group
believes that its interpretation of the new legislation is appropriate and the Group’s tax position will be sustained.

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 financial 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 financial statements.

Social commitments. The Group contributes significantly 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.

Transportation of crude oil. The Group benefits 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.

216

217

Ukrtatnafta. 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”) in connection with the forcible takeover of Ukrtatnafta and seizure of shares
of the Group in Ukrtatnafta. In July 2014 the arbitral tribunal issued the award holding Ukraine liable for violation of the Russia-Ukraine
BIT and required Ukraine to pay Tatneft US$ 112 million plus interest. Ukraine filed an appeal of award in Court of Appeals in Paris,
France (seat of arbitration) which on 29 November 2016 refused the appeal. In March 2017 Ukraine has filed a cassation appeal against
the Paris Court of Appeals decision of November 29, 2016 rejecting its request for annulment. At this time it is not clear whether and
when the appeal will be heard. Filing of the cassation appeal shall not preclude Tatneft from commencing enforcement of the award.

On 23 March 2016 Tatneft commenced court proceedings in England against Gennady Bogolyubov, Igor Kolomoisky,
Alexander Yaroslavsky and Pavel Ovcharenko. Tatneft alleges that in 2009 those individuals fraudulently diverted to themselves
sums owed to Tatneft for oil it had supplied to Kremenchug refinery (Ukrtatnafta). Tatneft claims damages of US$ 334.1 million
plus interest. On 8 November 2016 the High Court refused the claim. On 23 November 2016 Tatneft filed with the Court of
Appeals permission to appeal the judgement of 8 November 2016. Permission to appeal will be heard by the Court of Appeals
on the week commencing 24 July 2017.

Libya. As a result of the political situation in Libya, in February 2011 the Group had to entirely suspend its operations in
that country and evacuate all its personnel. In February 2013 the Group started the process of resuming its activities in
Libya, including the return of its personnel to a branch in Tripoli and recommencement of some exploration activities. Due
to the deterioration of security situation in Libya in the second half of 2014 the Group had to suspend all of its operations
and announced a force-majeure under the Exploration and Production Sharing Agreements, acknowledged by the National
Oil Company, which is continuing as of the date of this report. The Group is constantly monitoring the security and political
situation in Libya, and plans to resume its operations once the conditions permit to do so.

As of 31 December 2016 the Group had approximately RR 5,752 million of assets associated with its Libyan operations of
which RR 5,532 million is related to capitalized exploration costs, RR 210 million of inventories and RR 10 million of cash. As of
31 December 2015 the Group had approximately RR 5,745 million of assets associated with its Libyan operations of which RR
5,524 million is related to capitalized exploration costs, RR 210 million of inventories and RR 11 million of cash.

NOTE 28: PRINCIPAL SUBSIDIARIES

Set out below are the Group’s principal subsidiaries at 31 December 2016. 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

Principal activity

At 31 December 2016

At 31 December 2015

Bank ZENIT

Tatneft Europe AG

TANECO

TMS Group

Nizhnekamskshina

Banking operations

Export oil sales

Oil refinery

Oil lifting services

Tires production

Nizhnekamskiy zavod shin CMK

Tires production

Trade House Kama

Tatneft AZS-Centr

Tatneft AZS-Zapad

Tires sales

Oil products sales

218

% 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

On 1 January 2016 several entities of the Group ceased to meet the power criteria for consolidation under IFRS 10 “Consolidated
financial statements” and were deconsolidated as of that date. The Group did not have any direct or indirect ownership in the
deconsolidated entities but exercised control over them in prior years. Deconsolidation resulted in one-off loss on disposal
in amount of RR 8,745 million recorded within gains/(losses) on disposals of interest in subsidiaries and associates in the
consolidated statement of profit or loss and other comprehensive income. Non-controlling interest in the consolidated
statement of financial position decreased by RR 29,878 million comparing to non-controlling interest as at 31 December 2015.

Loss attributable to total non-controlling interest for the year ended 31 December 2016 is RR 1,259 million, of which RR 790
million is attributed to Bank ZENIT. Profit attributable to non-controlling interest for the year ended 31 December 2015 is RR
6,842 million, of which RR 2,677 million is attributed to TMS Group and Burenie. As of 31 December 2016 accumulated non-
controlling interest in Bank ZENIT was RR 6,605 million and as of 31 December 2015 accumulated non-controlling interest in
TMS Group was RR 8,699 million.

The summarised financial information relating to the subsidiaries with material non-controlling interest was as follows:

Current assets

Non-current
assets

Current liabilities

Non-current
liabilities

Revenue

Profit/(Loss)

Year ended 31 December 2016

Bank ZENIT

Nizhnekamskshina

Total

Year ended 31 December 2015

TANECO

TMS Group

Nizhnekamskshina

Burenie

Total

139,869

2,413

136,694

3,652

219,019

4,034

54,459

3,584

7,955

15,407

(1,508)

(287)

142,282

140,346

223,053

58,043

23,362

(1,795)

10,690

1,278

2,411

181,959

30,147

3,004

25,622

585

3,709

155,253

4,751

2,972

38,508

33,435

15,344

11,182

6,520

1,977

199

797

14,379

215,110

29,916

162,976

98,469

9,493

NOTE 29: BUSINESS COMBINATIONS

In June 2016, the Group increased its equity share in PJSC “Bank ZENIT” through a subscription to the bank’s additional share
issue for a cash consideration of RR 6,700 million. As a result of this transaction the Group increased its share in PJSC “Bank
ZENIT” from 24.56% as of 31 December 2015 to 48.79% as of 30 June 2016. The Group continued to exercise significant
influence and applied the equity method of accounting for its investment in PJSC “Bank ZENIT”.

In October 2016, as a result of the mandatory offer procedure in accordance with the Federal Law “On Joint Stock Companies”,
the Group acquired additional 1.64% interest in PJSC “Bank ZENIT” for cash consideration of RR 327 million increasing its
interest to 50.43% and, as a result, obtained control over PJSC “Bank ZENIT” in October 2016.

At 31 December 2016 the Group had finalized purchase price allocation and in accordance with IFRS 3 “Business Combinations”
recognized the acquired assets and liabilities at fair value. The fair values of assets and liabilities acquired are based on
discounted cash flow models and market quotes.

Purchase consideration of RR 7,605 includes cash for the 1.64% interest in PJSC “Bank ZENIT” acquired in October 2016 in the amount
of RR 327 million and fair value of previously held 48.79% interest accounted for using the equity method in the amount of RR 7,278.

As a result of the Group obtaining control over PJSC “Bank ZENIT”, the Group’s previously held 48.79% interest was remeasured
to fair value, resulting in a loss of RR 2,746 recognized in share of results of associates and joint ventues in the statement of
profit or loss and other comprehensive income.

219

NOTE 30: FINANCIAL RISK MANAGEMENT

Attributed fair value

Financial risk management objectives and policies.

Cash and cash equivalents

Banking: Mandatory reserve deposits with CB RF

Accounts receivable, net

Inventories

Banking: Loans to customers

Other financial assets

Due from banks

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Held to maturity investments

Prepaid expenses and other current assets

Prepaid income tax

Non-current assets held for sale

Property, plant and equipment, net

Other assets

Debt

Bonds issued

Subordinated debt

Debt securities issued

Accounts payable and accrued liabilities

Banking: Due to banks and CB RF

Banking: Customer accounts

Taxes payable

Other liabilities

Income tax payable

Deferred tax liability

Fair value of identifiable net assets of subsidiary

Less: non-controlling interest

Goodwill arising from the acquisition

Total purchase consideration and previously held interest in the acquiree

Less: Non-cash consideration

Less: Cash and cash equivalents of subsidiary acquired (net of intercompany accounts)

Inflow of cash and cash equivalents on acquisition

60,023

1,992

623

398

185,500

12,924

5,389

10,856

10,679

448

265

4,347

3,951

3,454

(38,023)

(14,500)

(12,775)

(587)

(19,086)

(198,545)

(164)

(2,109)

(5)

(136)

14,919

(7,395)

7,605

(7,278)

48,507

48,834

The acquired subsidiary contributed revenue of RR 7,955 million and loss of RR 1,508 million to the Group for the period from
the date of acquisition to 31 December 2016.

The Group‘s activities expose it to a variety of financial 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 financial markets and seeks to minimize potential adverse effects on the Group‘s financial 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
financing denominated in foreign currencies.

The table below summarises the Group’s exposure to foreign currency exchange rate risk as of 31 December 2016.

Russian Ruble

US Dollar

Other

Total

Financial assets
Cash and cash equivalents

Cash on hand and in banks

Term deposits with original maturity of less than three months

Due from banks

Restricted cash

Banking: Mandatory reserves with CB RF

Accounts receivable

Trade receivables

Other financial receivables

Banking: Loans to customers

Other financial assets

Bank deposits

Due from banks

Notes receivable

Loans to employees

Other loans

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Held to maturity investments

Total financial assets

21,348

22,744

13,496

1,988

32,805

4,240

173,725

32,706

6,758

458

1,018

3,391

6,168

32,596

3,847

13,628

5,871

27,214

18,568

2,621

2,005

3,489

6,713

1,448

733

508

40,847

22,744

13,515

1,988

61,467

4,240

193,026

32,706

9,887

458

1,018

3,391

8,190

36,118

10,560

357,291

74,244

8,623

440,158

220

221

Trade payables

Dividend payable

Other payables

Debt

Bonds issued

Subordinated debt

Debt securities issued

Credit facilities

Other debt

Banking: Due to banks and CB RF

Banking: Customer accounts

Other short-term liabilities

Total financial liabilities

Net position

Russian Ruble

US Dollar

Other

Total

24,302

149

404

32,698

2,060

2,265

1,951

10,989

142,404

1,398

218,620

138,671

941

2,437

2,629

6,415

750

653

29,724

43,575

30,669

332

25,575

2,925

6,708

8,586

18,551

(9,928)

149

430

32,698

4,497

4,894

9,340

2,701

18,350

180,714

1,398

159,412

В таблице ниже представлен риск Группы в отношении изменения обменного курса валют по состоянию на 31 декабря 2015 г.:

Russian Ruble

US Dollar

Other

Total

Financial assets
Cash and cash equivalents

Cash on hand and in banks

Term deposits with original maturity of less than three months

Due from banks

Restricted cash

Accounts receivable

Trade receivables

Other financial receivables

Other financial assets

Bank deposits

Notes receivable

Loans to employees

Other loans

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Total financial assets
Financial liabilities

Trade and other financial payables

Trade payables

Dividend payable

Other payables

Debt

Credit facilities

Other debt

Total financial liabilities

Net balance sheet position

222

3,422

11,299

318

36,005

4,232

17,157

1,718

1,262

5,272

1,219

23,289

8,733

1,028

20,487

3,211

8,059

308

118

1,673

12,273

12,327

318

58,165

4,234

20,368

9,777

1,262

5,580

1,248

23,289

105,193

41,855

1,793

148,841

25,616

133

308

1,738

27,795

77,398

272

11,017

1,368

12,657

29,198

2,200

27,816

133

580

4,038

6,238

(4,445)

15,055

3,106

46,690

102,151

For the year ended 31 December 2016 recognized RR 17,170 million and RR 20,474 million foreign exchange gains and losses
respectively in the consolidated statement of profit or loss and other comprehensive income (2015: RR 39,779 million and RR
37,496 million).

The following table presents sensitivities of profit and loss and equity to changes in US Dollar exchange rates applied at the end
of the reporting period relative to Russian Ruble:

US Dollar strengthening by 10%

US Dollar weakening by 10%

b) Interest rate risk.

Year ended 31 December 2016

Year ended 31 December 2015

Impact on profit
before tax

Impact on equity

Impact on profit
before tax

Impact on equity

3,067

(3,067)

2,453

(2,453)

2,825

(2,825)

2 260

(2 260)

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
interest rates.

Non-banking operations interest rate risk management

The majority of the Group’s borrowings is at variable interest rates (linked to the LIBOR rate). To mitigate the risk of significant
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 fixed 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 financing on fixed-rate or variable-rate basis would be more beneficial to the
Group over the expected period until maturity.

Banking operations interest rate risk management

The majority of the Group’s interest rate sensitive banking financial assets and liabilities are at fixed rates. Therefore, the Group’s
interest rate risk arises primarily from unmatched positions on maturities of assets and liabilities carried at fixed rates.

Management of interest rate risk is performed through analysis of the structure of assets and liabilities by re- pricing dates. Interest
rates that are contractually fixed on both assets and liabilities may be renegotiated before any new credit tranche is issued to reflect
current market conditions. All new credit products and transactions are assessed in respect of interest rate risk upfront, prior to
starting these transactions.

Additionally, as disclosed in the maturity analysis above, the maturity dates applicable to the majority of the Group’s assets and
liabilities are relatively short-term and that provides the Group with a certain level of flexibility to react to changing market conditions.

The Group’s overall interest rate risk is monitored by Assets and liabilities committee (“ALCO”) which reviews the structure of assets
and liabilities, current and projected interest rates. Treasury departments are responsible for day-to-day management of the
interest rate mismatch, preliminary approval of interest rates on projected transactions, preparation and submission for approval
suggestions on acceptable interest rate levels by instrument and duration. Risk management departments review current interest
rate gaps and assess resulting effects of interest rate risk on the Group’s interest margin and economic capital.

The Group’s approach to interest rate risk assessment is based on advisory materials of the Basel Committee on Banking Supervision,
CB RF regulations and IFRS. The methodology is designed on the current experience of mathematical simulation models of interest
rate sensitive assets and liabilities and dynamics of interest rates using the series models, which consider major statistical regularities.

An automated procedure of interest rate risk assessment designed in accordance with the above methodology uses scenario
simulation (Monte Carlo simulation) of fluctuations of interest rate sensitive assets and liabilities depending on the model of volume

223

The quantitative estimation of interest rate risk is carried out using stress-models which quantify the change in net interest margin
due to fluctuations of interest rate sensitive assets and liabilities. For this purpose the Group identifies interest rate sensitive assets
and liabilities and assesses the level of interest rate sensitivity by each asset or liability. The analysis is made by currencies on an
annual horizon and is based on certain assumptions in respect of expected fluctuations of interest rates and most sensitive stress
scenario. The results are used for on-going interest margin monitoring and regulation and are included in the quarterly report on the
Group’s consolidated risks.

Interest rate risk analysis on banking and non-banking operations of the Group

The table below summarises the Group’s exposure to interest rate risks. The table presents the aggregated amounts of the Group’s
financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates:

Financial assets
Cash and cash equivalents

Cash on hand and in banks

Term deposits

Due from banks

Banking: Loans to customers

Other financial assets

Bank deposits

Due from banks

Notes receivable

Loans to employees

Other loans

From 1 to 6
months

From 6 to
12 months

From 1 to 2
years

From 2 to 5
years

More than
5 years

Non-
sensitive

Total

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Held to maturity investments

Demand
and less
than 1
month

43,011

33,040

9,971

31 December 2016

Total financial assets

Total financial liabilities

Net interest sensitivity gap

31 December 2015

Total financial assets

Total financial liabilities

66,740

73,097

63,016

53,797

25,130

11,847

75,899

15,040

40,544

32,370

125,818

440,158

61,554

280,746

(6,356)

9,219

13,283

60,859

8,173

64,264

159,412

11,020

7,887

2,983

5,970

2,298

4,453

2,546

4,291

6,552

16,341

3,782

98,878

28,529

148,841

46,690

Net interest sensitivity gap

11,020

4,904

3,672

1,907

(2,261)

12,559

70,349

102,151

The table below summarizes the effective average year end interest rates, by major currencies (US Dollars, Russian Ruble), for
financial instruments outstanding as of 31 December 2016 and 2015. The analysis has been prepared on the basis of weighted
average effective interest rates for the various financial instruments using year-end contractual terms and conditions.

Financial liabilities
Debt

Bonds issued

Subordinated debt

Debt securities issued

Credit facilities

Other debt

Banking: Due to banks and CB RF

Banking: Customer accounts

At 31 December 2016

At 31 December 2015

Russian Ruble

US Dollar

Russian Ruble

US Dollar

2.00%

10.34%

10.30%

12.48%

10.83%

12.90%

0.10%

3.19%

3.75%

10.81%

9.84%

6.52%

11.33%

11.90%

8.65%

4.77%

10.10%

10.15%

0.13%

10.36%

2.50%

6.64%

6.50%

4.00%

6.20%

5.62%

6.70%

6.51%

7.95%

4.00%

2.93%

2.61%

2.09%

2.62%

12.26%

8.15%

3.95%

4.36%

4.37%

7.17%

2.47%

5.90%

2.66%

3.52%

The following table presents a sensitivity analysis of interest rate risk on banking and non-banking financial assets and liabilities:

Year ended 31 December 2016

Year ended 31 December 2015

Impact on profit
before tax

Impact on equity

Impact on profit
before tax

Impact on equity

(951)

951

(761)

761

(188)

(150)

Increase by 100 basis points

Decrease by 100 basis points

c) Commodity and financial instruments price risk

Commodity price risk management

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 flows. 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 fluctuation in commodity prices and their impacts on
operational and investment decisions.

224

225

Financial instruments price risk management

Financial instruments prices risk is the risk that movements in market prices resulting from factors associated with an issuer of
financial instruments (specific risk) and general changes in the market prices of financial instruments (general risk) will affect
the fair value or future cash flows of a financial instrument and, as a result, the Group’s profitability.

Financial instruments prices risk for financial instruments held with in the Group’s financial assets at fair value through profit
or loss is managed: (a) through maintaining a diversified structure of portfolios; and (b) by setting position limits (i.e. limits
restricting the total amount of an investment or maximum mismatch between respective assets and liabilities) as well as stop-
loss and call-level limits, in addition to these, the Group sets limits on a maximum duration of debt financial instruments. When
necessary the Group establishes margin and collateral requirements.

Financial instruments prices risk is managed primarily through daily mark-to-market procedures, sensitivity analysis and
control of limits established for various types of financial instruments.

Financial instruments prices sensitivity is assessed using the VaR method. This is a technique that estimates potential losses
that could occur on a risk position as a result of movements in market rates and prices over a specified time horizon and to a
given level of confidence. The method is predominantly based on historical simulation models which incorporate the following
features: (i) potential market movements calculated with reference to data from the previous two years: (ii) risk is calculated
to a 98.5 per cent confidence level: and (iii) risk is calculated for a one-day holding period. The Group uses a VaR model that
relies on Monte Carlo simulations.

VaR estimates in respect of financial assets at fair value through profit or loss and available-for-sale financial assets as of 31
December 2016 and 2015 are as follows:

Fixed income securities price risk

Total price risk

Credit risk

Year ended 31 December 2016

Year ended 31 December 2015

Impact on profit
before tax

Impact on equity

Impact on profit
before tax

Impact on equity

153

122

Credit risk refers to the risk exposure that a potential financial loss to the Group may occur if a counterparty defaults on its
contractual obligations.

Non-banking activities credit risk management

Credit risk arises from cash and cash equivalents, bank 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 financial position,
past experience and other factors. Management systematically reviews ageing analysis of receivables and uses this information
for calculation of provision for impairment. A significant 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 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 influenced by economic factors affecting these customers, management believes there is no
significant risk of loss to the Group beyond the provisions already recorded.

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 financial and banking institutions where it
deposits cash.

The Group deposits available cash mostly with financial 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.

Banking activities credit risk management

The Group takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due.
The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one
borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis
and subject to an annual or more frequent review. Limits on the level of credit risk by product, borrower, group of borrowers
and industry sector are described in the Credit Policies, which are approved by Management Boards, and are reviewed on a
regular basis. The credit risk exposure is monitored on a regular basis to ensure that the credit limits and credit worthiness
guidelines established by the Group’s risk management policy are not breached.

The Group is generally exposed to credit risk through its financial assets and contingent liabilities. The Group’s maximum
exposure to credit risk, ignoring the fair value of any collateral, is generally reflected in the carrying amounts of financial assets
in the consolidated statement of financial position. The impact of possible netting of assets and liabilities to reduce potential
credit exposure is not significant.

In accordance with the Group’s collateral policies and procedures the Group may securitize its loans by multi- collateral, i.e. to
take different types of collateral in order to secure the same loan, in these cases the value of collateral taken by the Group may
exceed amounts lent to the customer. Therefore, maximum credit risk exposure on such loans is limited to the amount of loan
balances outstanding at reporting dates.

For risk management purposes, credit risk arising from positions held-for-trading and other financial instruments at fair value
through profit and loss is managed and reported as a market (financial instruments prices) risk.

In order to optimize the decision-making process on taking credit risk the Group established several credit committees
with different levels of responsibilities. Credit committees and their level of responsibility in respect of approval of maximum
exposures on a borrower or group of related borrowers are as follows:

Assets and Liabilities Management Committee

Credit committee

Credit committee on small and medium business borrowers

Credit committee on retail lending

Maximum exposure allowed to be approved

More than RR 600 million

RR 600 million

RR 100 million

RR 14 million

Exposure to credit risk is managed through regular analysis of the ability of borrower and potential borrowers to meet interest and
principal repayment obligations and by changing these lending limits, where appropriate. Exposure to credit risk is also managed,
in part, by obtaining collateral and corporate or personal guarantees. The Group implements a continuous monitoring system of risk
factors on substandard loans.

Internal instructions to assess potential borrowers are developed and applied for each segment of lending activities including lending
to legal entities, individuals, small and medium-size enterprises and certain others.

226

227

In mIllIons of RussIan RoublesIn mIllIons of RussIan RoublesABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYPJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RU
The decision making process within the Group is designed to ensure a thorough risk assessment is performed before any
credit risk is taken and on all transactions submitted for approval. Therefore, an initiator of the transaction prepares a resume
with a description of the suggested project, ensures (where appropriate) that an independent assessment of the collateral
and its quality is performed and forwards all transaction related documentation to the risk management department, which
is responsible for the independent risk assessment of the project itself, the transaction structure and the assessment of the
adequacy of limits, terms and conditions associated with the transaction. The risk management department formulates its own
conclusion on the project, which is submitted for approval along with all other transaction related documents.

The core procedure to assess credit risk associated with corporate lending is the analysis of corporate borrowers’ financial
statements for the latest available four quarters, their market position, business developments, organizational and functional
structure, business cycle and cash flows, transparency of shareholders (owners) as well as reputational risks of the borrowers.

Underwriting procedures with respect to individual borrowers are built to minimize internal costs in order to maximize financial
results taking into account potential risks. These procedures are based on certain rating techniques such as scoring methods
that allow the minimization of credit risks both on a separate loan and on a portfolio basis. The rating accounts for the financial
position of an individual borrower as well as the specifics of each credit product. However, the portion of loans to individuals
issued purely using scoring models is still insignificant.

The majority of loans to individuals are approved by specialized credit committees winch include transaction initiators and
representatives of units responsible for risk assessment, control and monitoring. Such underwriting procedures allow a flexible
combination of formalized techniques and non-formalized knowledge of experts which is adequate for the current retail lending
operations and provide a good basis for further development of retail business.

The Group securitizes its credit risk exposure by taking guarantees and collateral.

If a guarantee is taken the Group assesses a guarantor’s financial stability and business profile in a similar manner to the
assessment of a borrower described above.

The assessment of collateral is performed internally by special divisions responsible for collateral assessment and control.
They use several methodologies developed for each type of collateral. Valuations performed by third parties, including
independent appraisal firms authorized by the Group, may serve as additional data for such assessment. The Group usually
requires collateral to be insured by insurance companies authorized by the Group.

The Group does not enter into transactions with an initial rating of III or IV.

Procedures on subsequent monitoring of credit risk include:

bodies;

• analysis of actual exposures versus established limits;
• control over compliance with internal policies, procedures, instructions and orders issued by respective management
• review of corporate borrowers’ quarterly financial statements and, where appropriate. actual performance versus business
• control over existence and valuation of collateral taken;
• monitoring of business, economic and political events in order to assess whether these events can negatively affect (a) an

industry or a region where the Group’s corporate borrowers operate; (b) the reputation of these corporate borrowers and
of the Group itself;

plans;

• monitoring of macroeconomic parameters in order to assess adequacy of risk assessment associated with corporate
• portfolio analyses showing trends in default rates, concentrations/diversifications by borrowers or groups of borrowers,

lending portfolios and to validate scoring models used for retail lending programs; and

products, industries, countries, etc.

Attention is paid to improve efficiency of distressed debt collection and to protect the Group against illegal actions. Distressed debt
collection procedures are initiated if loans are overdue by more than 30 days. These procedures include the Group’s proprietary
techniques and the best practices of international and Russian banks in this area such as debt restructuring, searching for evading
debtors and their property, claims to property and earnings and actions against lending fraud. Debt collection procedures are
performed on the basis of current Russian legislation and international standards in close interaction with legal and law enforcement
authorities.

Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss as a result of another party to
a financial instrument failing to perform in accordance with the terms of the contract. The Group applies the same credit policies
in making conditional obligations as it does for off-balance sheet financial instruments through established credit approvals, risk
control limits and monitoring procedures.

The Group also uses several types of limits on amounts due from other banks such as maximum credit exposure on counterparty
and on a group of transactions with tins counterparty including lending, purchase and sale of securities, currency and other financial
assets if these transactions may cause a credit risk. In order to establish these limits the Group uses credit quality assessment
procedures similar to the ones applicable to corporate borrowers discussed above.

Collateral is not generally held over amounts due to banks, except where securities are held as a part of reverse re-purchase
and sale transactions.

Credit risk analysis on banking and non-banking operations of the Group

The Group measures and monitors credit risk on corporate portfolios by individual corporate exposure and estimates
quantitative parameters of credit risk such as expected and unexpected losses on credit exposures. These calculations are
based on internal ratings of creditworthiness assigned to each corporate borrower. The internal rating system is regularly
updated and developed. The information accumulated over tins period provides a sound ground for assessment of ratings
migration and allows the Group to calibrate corresponding parameters of default probability. While the revision of a recovery
number in classes of corporate borrowers is performed the historical data on losses is taken into consideration. In the final
calculations of losses on loans, liquid and reliable collateral is considered.

The Group uses the following rating categories for the analysis of credit quality of loans to customers:

The following table represents aggregate amounts affecting overall credit risk of the Group as of 31 December 2016:

borrower allowing generation of cash flows sufficient for meeting requirements of analyzed transaction;

• Rating I – standard quality transaction: low probability of default on the transaction due to stable financial position of the
• Rating II –stable quality transaction: average probability of default due to acceptable quality of the borrower’s cash flows,
• Rating III – middle and low quality transaction: middle and high probability of default because of non- stable financial
• Rating IV – non-recoverable loans which may be collected through legal procedures, claims to guarantors or realization of

however, the borrower’s financial position and its performance against business plans require closer monitoring;

position of the borrower, or the lack of or poor quality of collateral; and

collateral but expected results of these collection procedures are uncertain.

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229

Restricted cash

Banking: Mandatory reserves with CB RF

Accounts receivable

Banking: Loans to customers

Other financial assets

Total balance sheet credit risk

Loan commitments

Guarantees issued

Import letters of credit

Total off-balance sheet credit risk

Total credit risk

Maximum
exposure to
credit risk

Offset Net exposure
after offset

Collateral
pledged

Net exposure
after offset
and collateral

77,106

1,988

65,707

193,026

102,328

440,158

24,885

13,869

331

39,085

479,243

77,106

1,988

65,707

193,026

(162,258)

102,328

(6,639)

77,106

1,988

65,707

30,768

95,689

440,158

(168,897)

271,261

24,885

13,869

331

(2,094)

(5,431)

(161)

22,791

8,438

170

39,085

(7,686)

31,399

479,243

(176,583)

302,660

The following table represents aggregate amounts affecting overall credit risk of the Group as of 31 December 2015:

Cash and cash equivalents

Restricted cash

Accounts receivable

Other financial assets

Total credit risk

Maximum
exposure to
credit risk

24,600

318

62,399

61,524

148,841

Offset Net exposure
after offset

Collateral
pledged

24,600

318

62,399

61,524

148,841

Net exposure
after offset
and collateral

24,600

318

62,399

61,524

148,841

The table below shows credit quality by class of loans to customers as of 31 December 2016:

Neither past due nor impaired

- rating I

- rating II

- rating III

- rating IV

Loans to legal
entities

Loans to
individuals

111,316

17,139

31,615

541

875

272

Total

142,931

17,679

875

272

Total neither past due nor impaired

128,455

33,302

161,757

Past due but not impaired

- less than 30 days overdue

- 30 to 90 days overdue

- 91 to 180 days overdue

- 181 to 360 days overdue

- more than 360 days overdue

Total past due but not impaired

Individually impaired

- not overdue

- less than 30 days overdue

- 30 to 90 days overdue

- 91 to 180 days overdue

- 181 to 360 days overdue

- more than 360 days overdue

Less: provision for impairment

Total loans to customers

285

309

27,012

233

524

335

2,104

(1,030)

158,009

137

275

572

186

274

686

(137)

35,017

312

108

139

278

880

27,012

121

314

710

609

2,790

(1,167)

193,026

The Group uses the following rating categories for the analysis of credit quality of assets other than loans to customers and
accounts receivable:

• investment grade ratings classification referred to as Aaa to Baa3 for Moody’s Investment Services, as AAA to BBB- for
• non-investment (speculative) grade ratings classification referred to as Ba1 to C for Moody’s Investment Services, as BB+

Fitch Rating and as AAA to BBB- for Standard and Poor’s Rating, respectively;

to B- for Fitch Rating and as BB+ to D for Standard and Poor’s Rating, respectively.

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231

The table below shows credit quality of assets other than loans to customers and accounts receivable as of 31 December 2015:

Investment grade
rating

Non-investment
grade rating

Unrated

Total

Investment grade
rating

Non-investment
grade rating

Unrated

Total

Cash and cash equivalents
Cash on hand and in banks

Term deposits

Due from banks

Restricted cash

Banking: Mandatory reserves with CB RF

Other financial assets

Bank deposits

Due from banks

Notes receivable

Other loans

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Held to maturity investments

Past due but not impaired

Individually impaired

Other financial assets

Bank deposits

Due from banks

Notes receivable

Loans to employees

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Held to maturity investments

Less: provision for impairment

Total credit risk

16,014

2,066

3,447

1,900

2,743

3,774

29,944

948

13,585

32,206

5,000

3,528

3,208

4,632

5,400

3,585

602

(7,287)

65,412

23,885

9,159

11,449

1,988

500

1,440

458

3,391

2,762

27,876

2,153

318

2,494

(1,827)

86,069

40,847

22,744

13,515

1,988

32,706

9,887

458

3,391

8,190

33,827

10,560

5,400

318

2,494

3,585

602

(9,114)

181,425

Included in short term bank deposits is RR 5,400 million placed within Tatfondbank. Starting from 15 December 2016 a three-
month moratorium on satisfying claims of creditors was imposed on Tatfondbank. DIA has been authorized to perform duties
of a temporary administration for a period of six months. Subsequently, in March 2017, by the order of CB RF the license
to conduct banking operations was withdrawn from Tatfondbank. At December 31, 2016, the Group created a provision for
impairment of deposits placed with Tatfondbank in the amount of RR 5,400 million recognized within short term bank deposits.

Cash and cash equivalents
Cash on hand and in banks

1,758

Term deposits

Restricted cash

Other financial assets

Bank deposits

Notes receivable

Other loans

Financial assets at fair value through profit or loss

Available-for-sale financial assets

Past due but not impaired

Individually impaired

Other financial assets
Notes receivable

Loans to employees

Other loans

Available-for-sale financial assets

Less: provision for impairment

Total credit risk

Итого кредитный риск

Liquidity risk

1,758

1 758

9,053

4,758

211

17,204

9,242

117

3,585

(1,285)

42,885

42 885

1,462

7,569

107

3,164

535

5,580

1,131

20,988

318

2,676

(1,755)

41,798

41 798

12,273

12,327

318

20,368

9,777

5,580

1,248

20,988

318

2,676

3,585

(3,040)

86,441

86 441

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

Non-banking operations liquidity risk management

The Group’s approach to managing liquidity is to ensure that it will always have sufficient 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 flows and matches the maturity profiles of financial assets and liabilities.

The Group prepares various financial plans (monthly, quarterly and annually) which ensures that the Group has
sufficient cash on demand to meet expected operational expenses, financial 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.

Banking operations liquidity risk management

It is unusual for banks ever to be completely matched on maturities of assets and liabilities since business transacted is often of
an uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk
of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they
mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest and exchange rates.

232

233

The Group endeavors to maintain a stable and diversified funding base including core corporate and individual customer
accounts; short-, medium- and long-term loans from other banks; promissory notes and bonds issued. On the other hand,
the Group tends to keep diversified portfolios of liquid and highly liquid assets in order to be able to settle unforeseen liquidity
requirements in an efficient and timely manner.

Key parameters in liquidity risk management such as the structure of assets and liabilities, composition of liquid assets and
acceptable liquidity risks are established by ALCO. ALCO sets and reviews limits on liquidity gaps which are assessed on the
basis of liquidity stress-tests in regard to medium- and long-term liquidity. These tests are performed using the following
information:

• current structure of assets and liabilities including any known renewal arrangements as at the date of the respective test;
• amounts, maturity and liquidity profiles of transactions projected by business units;
• current and projected characteristics of liquid assets which include, apart from cash and cash equivalents, amounts due
• relevant external factors.

from other banks and certain financial assets held-for-trading: and

The resulting models allow for the assessment of future expected cash flows due to projected future business and different
crisis scenarios. While managing liquidity risk treasury departments of the Group distinguish liquidity required within a current
business day and term liquidity with a 1-year horizon. For managing current liquidity (with a 1-day horizon) the following
methods are used:

based);

• reallocation of cash between accounts with other banks;
• collection of information from business and other supporting units on large transactions (both proprietary and customer
• purchase and sale of certain financial assets in liquid portfolios;
• accelerating closure of trade positions;
• estimation of minimum expected cash inflow during a business day; and
• daily control over the balance of cash and estimated liabilities to be settled on demand.

For managing term liquidity treasury departments of the Group use liquidity graphs that reflect volume and time of liquidity
mismatches (surpluses or deficiencies). These liquidity graphs, in essence, present projected cash flows estimated with due
regard for expected maturities of assets and liabilities. The Group sets limits on acceptable accumulated liquidity mismatches
which are calculated by using the following instruments:

• discounts to assets are applied to recognize market risk in case of accelerated realization of respective assets; and
• models showing cash flow fluctuations due to accelerated settlement of liabilities.

In the normal course of business, liquidity reports covering the current and projected structure of assets and liabilities as well
as future expected cash flows are submitted to ALCO once every two weeks. Decisions on liquidity management made by
ALCO are implemented by treasury departments within their duties and responsibilities, in addition to this, ALCO reviews and
approves model of maturity for the minimum required daily balances of current accounts by currencies on the basis of analysis
of historical dynamics.

Financial liabilities
Trade and other financial payables

Trade payables

Dividend payable

Other payables

Debt

Bonds issued

Subordinated debt

Debt securities issued

Credit facilities

Other debt

Banking: Due to banks and CB RF

Banking: Customer accounts

Other short-term liabilities

Credit related commitments (Note 27)

Total

Less than 1

Between 1

Between 2

Over 5 years

Total

year

and 2 years

and 5 years

25,575

149

430

9,471

223

4,713

9,781

1,224

5,551

200,234

1,398

26,127

284,876

8,734

224

219

9,369

8,728

5,465

32,833

13,866

3,940

1,173

6,240

8,183

6,231

39,669

23,146

1,552

625

1,262

25,575

149

430

55,217

5,939

4,872

9,781

3,241

21,160

217,145

1,398

39,085

26,614

383,992

The following tables summarise the maturity profile of the Group‘s financial liabilities based on contractual undiscounted
payments, including interest payments as of 31 December 2015:

Financial liabilities
Trade and other financial payables

Trade payables

Dividend payable

Other payables

Debt

Credit facilities

Other debt

Total

Fair values

Less than 1

Between 1

Between 2

Over 5 years

Total

year

and 2 years

and 5 years

27,816

133

580

5,289

738

34,557

3,138

5,576

1,758

7,334

3,782

144

3,926

27,816

133

580

17,786

2,640

48,955

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 financial instruments are determined with reference
to various market information and other valuation techniques as considered appropriate.

Liquidity analysis for banking and non-banking operations of the Group

The different levels of fair value hierarchy have been defined as follows:

The following tables summarise the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments, including interest payments as of 31 December 2016:

Level 1 – Quoted prices in active markets for identical assets or liabilities that Group has the ability to assess at the measurement
date. For the Group, Level 1 inputs include held-for-trading financial assets that are actively traded on 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.

234

235

Recurring fair value measurements

The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows:

At 31 December 2016

Fair value

Level 1

Level 2

Level 3

Carrying
value

At 31 December 2015

Fair value

Level 1

Level 2

Level 3

Carrying
value

7,759

431

8,190

803

445

1,248

9,509

2,300

24,309

36,118

3,504

19,785

23,289

Financial assets at fair value
through profit or loss

Available-for-sale financial
assets

Total

17,268

2,300

24,740

44,308

803

3,504

20,230

24,537

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 2016 and 2015:

Available-for-sale financial assets

Fair value hierarchy

Level 2, Level 3

Valuation technique and key input data

Quoted prices for similar investments in active markets, net
assets valuation, comparative (market) approach Publicly
available information, comparable market prices

There were no changes in valuation technique for Level 2 and Level 3 recurring fair value measurements during the year ended
31 December 2016 (2015: 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 2016

Fair value

Level 1

Level 2

Level 3

Carrying
value

At 31 December 2015

Fair value

Level 1

Level 2

Level 3

Carrying
value

Assets
Cash and cash equivalents

Cash on hand and in banks

Term deposits

Due from banks

Restricted cash

Banking: Mandatory reserve
deposits with CB RF

Accounts receivable

Trade receivables

Other financial receivables

Banking: Loans to customers

Other financial assets

Bank deposits

Due from banks

Notes receivable

Loans to employees

Other loans

Held to maturity investments

10,560

40,847

22,744

13,515

1,988

40,847

22,744

13,515

1,988

61,467

4,240

61,467

4,240

193,026

32,706

9,887

458

1,018

3,391

32,706

9,887

458

1,018

3,391

10,560

12,273

12,327

318

Total financial assets

10,560

119,702

265,588

395,850

24,918

Trade and other financial payables

Trade payables

Dividend payable

Other payables

Debt

Bonds issued

Subordinated debt

Debt securities issued

Credit facilities

Other debt

Due to banks and CB RF

Customer accounts

Other liabilities

32,698

18,350

180,714

25,575

149

430

149

430

32,698

4,497

4,894

9,340

2,701

1,398

4,497

4,894

9,340

2,701

18,350

180,714

1,398

Total financial liabilities

32,698

199,064

48,984

280,746

58,165

4,234

12,273

12,327

318

58,165

4,234

20,161

20,368

9,518

1,262

5,162

9,777

1,262

5,580

98,502

124,304

27,816

133

580

133

580

13,744

3,106

15,055

3,106

45,379

46,690

236

237

The carrying amounts of financial assets and liabilities carried at amortized cost approximates their fair values.

The fair values in Level 2 fair value hierarchy were estimated using the discounted contractual cash flows and observable
interest rates for identical instruments. The fair values in Level 3 fair value hierarchy were estimated using the discounted cash
flows and observable interest rates for similar instruments with adjustment to credit risk and maturity.

NOTE 31: SUBSEQUENT EVENTS

On 7 March 2017, the Central Bank of Russian Federation registered an additional issuance of 14 billion of PJSC “Bank ZENIT”
ordinary shares with par value of RR 1 per share. The additional shares issuance will be placed via closed subscription in favour
of PJSC “Tatneft”. As a result of this transaction, after giving effect to PJSC “Bank ZENIT” new share issuance, the Group’s
share in PJSC “Bank ZENIT” will increase to 71.12%.

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 defines capital under management as equity as shown in the consolidated statement of financial position. The
amount of capital that the Group managed as of 31 December 2016 was RR 703,511 million (2015: RR 628,314 million). The
Group manages capital for banking and non-banking operations separately.

Non-banking operations capital management

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.

Consolidated total borrowings excluding borrowings of Bank ZENIT:

Credit facilities

Other debt

Notes payable

Consolidated shareholders’ equity

Debt to capital employed ratio, % (Consolidated total borrowings / Consolidated
shareholders’ equity)

Banking operations capital management

Year ended 31
December 2016

Year ended 31
December 2015

12,301

9,340

2,701

260

703,511

18,421

15,055

3,106

260

628,314

The Group’s policy on capital management is to maintain a strong capital base in order to support further business development
of the Group and to satisfy requirements set by regulatory authorities.

The Group has been developing procedures for the economic capital calculation on the basis of best international risk
management practices.

The CB RF establishes and controls capital adequacy requirements.

The Group also monitors capital requirements set by the CB RF for credit institutions. Under the current capital requirements
banks have to maintain a ratios of capital to risk-weighted assets (“statutory capital ratios”) above the prescribed minimum
levels. The CB RF sets the following mandatory capital ratios requirements for core capital, Tier 1 and total capital: 4.5%, 6%
and 8% respectively. As of 31 December 2016 and during the period from Bank ZENIT acquisition till 31 December 2016 the
Group complied with the statutory requirements related to the capital ratio.

In September 2015 Bank ZENIT received five subordinated loans totalling RR 9,933 million from DIA within the Russian
Federation Government programme for additional capitalisation of Russian banks. Under the terms of these subordinated loan
agreements DIA paid these loans by securities (OFZ of five series), that should be returned upon maturity of the subordinated
loans. These subordinated loans mature from January 2025 to November 2034 and bear interest equal to OFZ coupon rate
plus 1%. In accordance with IAS 39 ”Financial Instruments: Recognition and Measurement” if securities are loaned under
an agreement to return them to the transferor, they are not derecognized because the transferor retains substantially all the
risks and rewards of ownership. Accordingly, the obligation to return the securities should not be recognized. Therefore, OFZ

238

239

240

241

RUB 5.2 Bn – expenses for the maintenance of social infrastructure, including the construction
and maintenance of housing, schools, cultural and recreational facilities in 2016.

INFORMING ON THE ACTIVITY RELATED TO SUSTAINABLE
DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY

GOALS AND PRIORITIES OF THE SOCIAL POLICY IN THE ACTIVITY REGIONS

The Company develops and implements social programs relying on the following principles:

Consistency
Social programs are of
regular and systematic
character.

Openness
The Company strives
for development and
imple¬mentation of
social pro¬grams based
on dialog and collabora-
tion with the concerned
parties

Significance
The Company aspires to
make social programs
targeted as much as
possible, timely and
corresponding to vital
demands of the society.

Efficiency
Funds spent on
imple¬mentation of the
programs must sensibly
help in solving problems.
Results of the programs
are liable to regular as-
sessment and record.

TATNEFT Company has been elaborating annual reports on the sustainable development and social responsibility since 2005.
Since 2014, disclosure of information on the activity related to the corporate social responsibility is carried out as a part of
preparation of the TATNEFT Company’s Annual Report.

This chapter of the Report was elaborated based on:

• Guidelines on Reporting in the Field of Sustainable Development of Global Reporting Initiative (GRI)
• Standard of Interaction with Concerned Parties AA 1000
• International Standard ISO 26000 “Guideline on the Social Responsibility”
• Social Articles of the Russian Business Community.
• In general, the Report for 2016 con¬tains standard elements of GRI Guideline version G4 reporting.

In addition to the Guideline, GRI Oil and Gas Sector Supple¬ment was applied during the Report elaboration.

IMPLEMENTATION OF THE GRI PRINCIPLES
GRI Principle

Our actions

The Company aspires to make its social programs targeted as much as possible and corresponding to vital demands of the
society. Target groups of the social programs developed by PJSC TATNEFT are children and young people, war and labor
veterans, those in need of medical care and rehabilitation, orphaned children, as well as other socially vulnerable population
groups. The Company builds business relationships and interacts with the partners and other concerned parties based on the
corporate social responsibility.

Coverage of concerned parties

Context of sustainable development

TARGET AUDIENCES OF THE COMPANY’S SOCIAL PROGRAMS

Program on infrastructure development in cities and settlements Program on health care support
in the southeast of the Republic of Tatarstan

Residents of the activity regions
The Company’s employees

Program on development of popular sports and physical culture in the oil region of the Republic of
Tatarstan
Program on hockey development in the southeast of the Republic of Tatarstan

Program on social (targeted) support for population of districts of the Republic of Tatarstan

Program on education support

Program on culture support

Program on spiritual revival

Program on agricultural development

Program on workplace creation

Children
Adults
Coaches
The Company’s employees

Orphaned children
Handicapped people
Veterans
Other socially vulnerable population groups

Schoolchildren
Students
Teachers, professors

Theaters
Museums
Libraries
Cultural establishments

Mosques
Churches
Residents of the activity regions

Residents of rural areas

Unemployed people
Graduates of higher and other educational
establishments

Program on maternity and childhood support

Program on development of large-scale ecological programs

Children

Population

Information significance

Information completeness

Principle of balance

Information compatibility

Information accuracy

Timeliness

Clarity

Reliability

The Company makes considerable efforts in order to involve the concerned parties into discussion of
issues related to elaboration of the report, such as determination of the Report content, selection of
performance indicators, etc. To do that, consultations with representatives of the concerned parties,
conferences and seminars are held, questioning is carried out.

The information on the Company’s activity results is presented in the Report in close connection
with its contribution to the sustainable development. The Report shows all key points, indexes
and initiatives related to economic stability maintenance, environmental safety improvement and
strengthening of the social stability.

We strive to include in the report only those issues and indicators that are significant to the concerned
parties and are capable of influencing their decisions. While we determine significance of the issues,
we take into account such factors as goals and objectives of the Company, risks and capabilities,
industry-specific problems, etc.

The Company strives to achieve full disclosure of information in economic, environmental and social
spheres of the activity. The bulk of issues reviewed in the report is enough for the readers to assess
the Company’s performance and its contribution to sustainable development of the society.

In the framework of the principle of balance, the report covers both favorable results of the
Company’s activity and problems that the Company faces. Amount of attention given to various issues
corresponds to their relevance.

The report ensures comparability of the activity results from year to year. Each significant change
related to boundary, coverage or reporting period is explained. To ensure comparability of the
Company’s performance with the results achieved by the other companies, indicators included in the
GRI guidelines and technical protocols were used in elaboration of the report.

We strive to make information provided in the report accurate and detailed enough for the concerned
parties to use it in decision-making with a high level of reliability. Error of quantitative data is
minimized. Proportions and specific values used in the report are complimented with respective
absolute values. Data are provided using common international units and are calculated with standard
coefficients.

The Company is aware of the necessity to present timely information in the report that is why the
report is issued with equal periodicity once a year prior to the annual meeting of shareholders.

We make efforts to make information provided in the report clear, understandable and useful for
different concerned parties. The report contains a glossary and a list of abbreviations, which make
science and technology terms and abbreviations clear.

Information and data provided in the report are based on internal documentation, which can be
assessed by independent parties. Data that can not be supported by documents are not included in
the report.

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243

Concerned Parties

Regulatory Documents

All
Stakeholders

Corporate management code of PJSC TATNEFT

Articles of Association of PJSC TATNEFT

Provisions on the information policy of PJSC TATNEFT

The TATNEFT Company’s hotline work order

Policy of the TATNEFT Group in the field of industrial safety, labor and environmental protection

Integrated risk management system

Corporate standard “Anti-Corruption Policy of the TATNEFT Company”

Shareholders

Provisions on the General Meeting of Shareholders of PJSC TATNEFT

Provisions on the Board of Directors of PJSC TATNEFT

Provisions on the committees under the Board of Directors of PJSC TATNEFT

Business
Partners

Provisions on the procedure for registration of suppliers of goods/works/services in the TATNEFT Company

Regulation on the logistics of structural subdivisions and affiliates of the TATNEFT Company

Provisions on the organization of contractual work in the TATNEFT Company

Provisions on the organization of goods purchasing using electronic trading platform

Regulation on work in the “Trading Procurement Platform” system of the TATNEFT Company

Corporate standard on the accreditation order for prospective suppliers when organizing goods purchasing using electronic
trading platform

Provisions on the order of the Company’s subdivisions interaction on handling of complaints received by the Hotline of the
TATNEFT Company’s trading procurement platform

Provisions on the organization, execution, and automated record keeping of claim-related work in the TATNEFT Company

Regulation on the organization of goods purchasing from the companies manufacturing unique (custom-made) goods
(monopolist manufacturers)

Provisions on the use of insider information and on the procedure for distribution of information on security transactions

Provisions on the safe execution of works performed by third parties at the TATNEFT Company facilities

Provisions on the TATNEFT Group.

Corporate culture code of the TATNEFT Company

HR management policy

Employees

Standard for the Collective Agreement

Standard for personnel hiring and transfer to another job

Standard for personnel dismissal

Standard for personnel adaptation

Provisions on coaching

Standard for working with the candidate pool

Standard for personnel certification

Standard for personnel training and development

Standard for labor discipline

Standard for personnel rewarding

Standard for business trips of employees

Standard for the provision of information on candidates (internal and external) for vacant positions

Rules of internal work order for employees

Regulation on the preparation and holding of the employees conference

Provisions on the insurance of employees against industrial accidents

Provisions on the arrangement of therapeutic-resort activities for employees

Provisions on the system of industrial safety management

System for the assurance of industrial safety

Provisions on production control over compliance with industrial safety requirements at the hazardous production facilities

Procedure for the arrangement of pre-employment and routine medical examinations of employees involved in heavy and
harmful

works, as well as works with harmful and/or hazardous production factors

System of the employees’ personal responsibility for occupational safety

Provisions on non-recurrent loans provided for the employees to cover initial installments for housing bought through the

social mortgage system of the Republic of Tatarstan

Trade Union

Provisions on the allocation of loans for private housing construction or participation in joint housing construction (with other

entities involved in housing construction)

Standard for the Collective Agreement

Veterans and
Pensioners

Provisions on the workplace protection committee (commission)

Workplace protection agreement

Provisions on the arrangement of non-governmental pension provision for employees

Corporate standard “Requirements on environmental safety for the organizations involved in providing works and services at
the TATNEFT Company’s facilities”

Standard for the interaction of TATNEFT Company with external service providers during service rendering

Standard for the investment and technical policy of the TATNEFT Company for diversification and quality enhancement of oil
services

Regulation on the introduction of changes and approving of changes introduced in the layout of production facilities, defining
limits of liability sharing between service providers and structural subdivisions under the process of service providing for the
TATNEFT Company

Provisions on service for ordering of information technologies at the TATNEFT Company

Provisions on tenders for the submission of goods supply, work performance, and service rendering orders according to the
needs of TATNEFT Company

Regulation on pre-tender and post-tender activities concerning goods supply, work performance, and service rendering
according to the needs of the TATNEFT Company

Provisions on the marketing assessment of materials and equipment with regard to the TATNEFT Company logistics

Consumers

Provisions on the TATNEFT trademark and its use

Standard for production control over products and manufacturing processes

Standard for final inspection and products testing

Procedure for reviewing of claims and requests submitted by tire products consumers

Procedure for the collection and processing of information on consumers satisfaction

Rules for service rendering at filling stations

Local Com-
munities and
Public Organi-
zations

Rules of the TATNEFT Company’s trade practice in respect of diesel fuel realization in the Russian Federation

Agreements with municipal administrations of the cities and settlements in activity regions

Provisions on work with boarding schools graduates and orphaned students of specialized education establishments

Specialized corporate project of the TATNEFT Company aimed at the support for small and medium-sized business
development in the Republic of Tatarstan

Provisions on the participation of the TATNEFT Company in public organizations

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245

SOCIAL RESPONSIBILITY

THE COMPANY PERMANENTLY INTERACTS WITH A WIDE RANGE OF STAKEHOLDERS, CONSIDER¬ING
THE MUTUALLY BENEFICIAL RELATIONS WITH THEM AS A CRUCIAL ASSET FOR SUSTAINABLE DEVEL-
OPMENT. AS PER AA 1000 STANDARD DEFININTION CRITERIA, THE STAKEHOLDERS ARE ORGANI-
zATIONS, INDIVIDUALS OR GROUPS WHOSE INTERESTS COULD BE AFFECTED BY THE COMPANY’S
ACTIVITIES.

Ensuring a high level of the corporate social responsibil-
ity is a strategic initiative and a major principle of the Com-
pany’s activity, which implies the transparency and ethical
conduct that contributes to sustainable development and is
consist¬ent with the law and international standards.

Fundamentals of the stakeholder engagement:

garding the Company’s activities;

• Identification of the stakeholders;
• analysis of the stakeholders’ needs and expectations re-
• identification and implementation of communication and
• definition of the Company’s responsibility areas to the

feedback forms for each stakeholder;

key stakeholders.

Guiding principles of the Company’s social responsibility are
as follows:

ers and other stakeholders on its activity;

• to act in accordance with the legislation;
• to be a responsible partner of the government;
• to protect rights of the shareholders;
• to appreciate and respect its employees;
• to openly inform its shareholders, employees, consum-
• to act in accordance with the highest ethical standards;
• to be intolerant to corruption and bribery;
• to use its resources with the maximum efficiency;
• to use up-to-date technological achievements;
• to ensure environmental protection;
• to cooperate with public organizations;
• to strive to make each employee feel proud of the Com-

pany they work for.

Key stakeholders are divided into two groups according
to their degree of influence on the activity of the TATNEFT
Group and the degree of the Company’s influence on their
vital activity. A group of substantial influence includes stake-
holders which can substantially influence the activity of the
TATNEFT Group or whose interests are substantially affected
by the Company’s activity. These are internal stakeholders,
shareholders and investors, consumers and
clients, business partners, and public authorities. A group of
limited influence includes public organizations, invest¬ment
analytical companies and credit rating agencies, mass me-
dia communications, specialized institutions of higher and
intermediate vocational education and local compa¬nies,
i.e. the stakeholders whose interests can be partially af-
fected by the Company or which can indirectly influence the
Company.

THE COMPANY’S REPRESENTATION IN THE
BUSINESS AND PUBLIC ORGANIzATIONS

The Chamber of Commerce and Industry of the Russian Federation

All-Russian Association of Oil and Gas Employers

Russian Union of Industrialists and Entrepreneurs (RSPP)

“Miners of Russia” Non-Profit Partnership

Union of Oil and Gas Producers of Russia

Moscow International Petroleum Club (MMNK)

“Russian Institute of Directors” (RID) Non-Profit Partnership

The National Council on Corporate Governance (NSKU)

Share Issuers Committee of Moscow Exchange

Russian National Committee of the World Petroleum Council
(RNKMNS)

REGISTRY OF CORPORATE SOCIAL PROJECTS OF 2016

In many cities and towns of the southeast of the Republic, Tatneft’s enterprises are city-forming. In Almetyevsk, Leninogorsk,
Aznakaevo, Bavly, Jalil, Yelabuga and other towns of the enterprise PJSC TATNEFT provides tens of thousands of people with
modern jobs, a decent salary, forming the main part of the local budget, which allows full and timely payment of pensions and
salaries for those employed in the budgetary sphere.

Following the principles of corporate social responsibility, TATNEFT annually makes a weighty contribution to improving the
quality of life of residents of the Republic of Tatarstan. Social programs of the Company are regular and well-planned.

Lines of Social Investments

Projects

Program on infrastruc-
ture development in
cities and settlements

Wedding Palace construction

Repair of the roof in multiple flat buildings

Purchase of utility machinery

Places of implementation

Leninogorsk

Nurla

Urussu urban-type settlement of Yutaza mu-
nicipal district, Bugulma municipal district

Overhaul of housefronts and square reconstruction

Aznakaevo

Repair of urban streets and roads

Improvement of inner areas adjacent to houses

Almetyevsk and Almetyevsk municipal dis-
trict, Aznakaevo, Bavly, Leninogorsk, Urussu
urban-type settlement of Yutaza municipal
district Leninogorsk, Bugulma municipal
district

Almetyevsk, Leninogorsk, Karabash urban-
type settlement of Bugulma municipal
district, Bugulma municipal district

Program on devel-
opment of popular
sports and physical
culture in oil region
of the Republic of
Tatarstan

Overhaul of the central park, water supply and disposal system

Bugulma municipal district

Construction of squares

Bugulma municipal district

Organization and holding of physical education and recreational events

oil region of the Republic of Tatarstan

Support for the adolescent and juvenile boxing, wrestling, volleyball, ka-
rate, figure skating, equestrian sports

Oil region of the Republic of Tatarstan

Sports center construction

Cycling trek construction

Reconstruction of the ‘Jubileyny’ Ice Sports Palace

Nizhnyaya Maktama urban-type settlement
(Alnetyesvsk)

Almetyevsk

Construction of an ice sports palace

Aznakaevo, Leninogorsk

Construction of multipurpose sports hall with a swimming pool

Almetyevsk, Agryz

Construction of a tennis court

Reconstruction and repair of stadiums

Jalil urban-type settlement of Sarman mu-
nicipal district

Almetyevsk, Aznakaevo, Leninogorsk,
Chistopol, Jalil urban-type settlement of
Sarman municipal district

Establishment of ice hockey rinks with changing rooms and lighting

Almetyevsk, Alkeev, Atna municipal districts

Preparation of five sites in squares and parks for the free “Green Fitness”–
dancing exercises, yoga, Zumba, calanetics and a number of other sports
activities

Almetyevsk

Program on housing
improvement

Furnishing of apartments acquired by social mortgage

oil region of the Republic of Tatarstan

Provision of loans for employees to cover the first installment under the
social mortgage program

oil region of the Republic of Tatarstan

The Corporate Calendar of the Company’s Events for 2016 is detailed on the corporate website tatneft.ru

246

247

Construction of a hotel with a bath complex - an analogue of
the historical White Chamber of Bulgar of the XIV century

Program on occupa-
tional safety

Workplaces assessment

Acquisition of coveralls

oil region of the Republic of Tatarstan

Construction of an art gallery

Construction of children's art school

Construction of Civil Registry Office

Overhaul and equipment of the Culture House

Almetyevsk

Novosheshminsk village

Cheremshan, Yersubaykino

Support of the CH “Neftche” and the Drama Theater

Almetyevsk

Conducting cultural events, celebrating of the Victory Day and Sabantuy

oil region of the Republic of Tatarstan

“Cultural Environment” pilot project was launched, aimed at developing of
an active creative urban environment

Almetyevsk

Collective Agreement

Program on non-governmental pension provision

Purchase of equipment for handicapped people

Payment for the utility services for the local communities of handicapped
people

Repair of the premises of the boarding houses for the elderly and disabled

Financial aid to war veterans, widows, rear workers of the oil region of the
Republic of Tatarstan

oil region of the Republic of Tatarstan

Almetyevsk

Jalil Sarman district, Aznakaevo, Nurlat
Municipal Districts

oil region of the Republic of Tatarstan

Various activities for people with disabilities

oil region of the Republic of Tatarstan

Program on the social
guarantees provided
for the personnel

Program on sup-
port for veterans and
handicapped people

Program on health
care support in the
southeast of the
republic

Overhaul of the Central District Hospital

Purchase of medical equipment

Design work on the reconstruction of a pediatric hospital

Almetyevsk

Medical Sanitary Station of PJSC TATNEFT
and Almetyevsk

Children's hospital with perinatal center in
Almetyevsk

Construction of a radiotherapy complex in the oncologic dispensary

Almetyevsk

Acquisition of medical clothing and surgical underwear for medical institu-
tions

oil region of the Republic of Tatarstan

Implementation of the “Winter Without Cold” Municipal Project

Program on maternity
and childhood welfare

Health improvement for children of employees in the budgetary sphere in
recreation camps of the oil region of RT

Overhaul of a kindergarten

Overhaul of seven kindergartens

Almetyevsk

oil region of RT

Bugulma

Almetyevsk

Overhaul of secondary schools, gymnasiums and lyceums

Almetyevsk, Aznakaevo, Nurlat, Cheremshan
municipal districts

Installation of 30 children's playgrounds in the courtyards of the city. Instal-
lation of 5 children's playgrounds in the courtyards of the village

Almetyevsk, Sarmanovo village

Program on education
support

Almetyevsk State Oil Institute modernization and re-equipment

Acquisition of equipment, inventory for the dining rooms of the Almetyevsk
State Oil Institute

Repair of the student hostel

The completed satchels and sports suits for multi-child families and low-
income families were acquired within the framework of the campaign "Help
to Be Going to School"

Reconstruction of the central library

Repair of the roof of Youth Sports School building

Repair of the children's health camp “Rodnichok”

Acquisition of a playground for orphaned children

Almetyevsk

Bugulma

Leninogorsk orphan asylum

Laishevo Boarding School

Participation in the implementation of the "Day5" project

Almetyevsk

Agricultural Support
Program

Large-scale environ-
mental program

Allocation of funds for agriculture development

Almetyevsk municipal district

Creation of green zones, parks and avenues

oil region of the Republic of Tatarstan

Construction of a park

Improvement of the park zone

Improvement of the central city park

Novosheshminsk village

Aznakaevo

Nizhnekamsk

Landscaping and planting of greenery in the park and the Central Park

Bavly

Landscaping of the park and the central park

Reconstruction of water bodies (lakes)

Chuvashskoe village, Sirenkino of Alme-
tyevsk district

Sosnovka village, Almetyevsk municipal
district, Leninogorsk

Normalization of the reservoirs, Chernaya River Banking

Almetyevsk, Aznakaevo

Construction of water reservoirs

Provision of clean drinking water

Program of spiritual
revival

A charitable aid was allocated for the organization of the Hajj in the
Kingdom of Saudi Arabia for Muslims with limited material resources, for
holding the Republican Iftar (rendition), for the implementation of the plan
of activities of the Strategic Vision Group "Russia - Islamic World"; on the
restoration of the Cathedral of the Kazan Icon of the Mother of God

Aznakaevo, Bavly, Nurlat municipal district

oil region of the Republic of Tatarstan

Spiritual Administration of Muslims of the
Republic of Tatarstan, Kazan

The company takes part in the re-creation of the Bulgarian Islamic Acad-
emy

Bolgar, Spassky municipal district.

Charity aid was provided to muhtasibat

Almetyevsk, Aktanysh, Bugulma municipal
districts

Funds were allocated for capital repairs of the roof of the building of Kazan
Cathedral

Almetyevsk

Funds were allocated for the reconstruction of the church

New Mikhailovka village Almetyevsk

Cemeteries improvement

Construction of a church

Construction of an Orthodox church

Construction of a mosque

Bigash village, Kichuchatovo village, Alme-
tyevsk

Aznakaevo

Alexandrovka

Middle Kashir, Sarmanovo district

Part of the large-scale work on social development of the region was the grant system introduced by Tatneft this year. Through it,
funds have been allocated for the implementation of social initiatives aimed at addressing the pressing problems of the region.

In 2016 the grant committee considered about 70 projects from different regions of Tatarstan in the categories “Social Sphere”,
“Citizenship and Patriotism”, “Culture and Art” and “Sport”, 28 of them received financial aid from the Tatneft Company.

Social programs on the territory of production activities of PJSC TATNEFT continue to develop actively, they have been and will
be in the sphere of the Company’s responsibility.

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249

PJSC TATNEFT takes care of well-being and social security
of its employees and their families. The Company provides
its employees with a package of social benefits and guaran-
tees. Obligations on their fulfillment are stipulated in the Col-
lective Agreement annually concluded between PJSC TAT-
NEFT and the staff, including all employees and non-working
pensioners of the Company.

The Collective Agreement stipulates:

• employees’ benefits and guarantees;
• social protection of young employees;
• support for veterans and pensioners.

Structure of the social benefits and guarantees is stipulat-
ed by the Collective Agreement Standard of the TATNEFT
Group, which is advisory for all enterprises of the Group.

In 2016, the Company made amendments and changed size
of payments for the following:

first marriage;

caring for children aged 1.5-3.

• Financial aid for employees having parental leave and
• Financial aid at child birth or adoption of a child under 14;
• Financial aid for young employers in connection with the
• Financial aid for employees and pensioners in connec-
• One-time payment in connection with annual leave;
• Financial aid for retiring employees;
• Financial aid for families of late employees (pensioners)
• Financial aid for an employee having dependent disabled

to cover funeral-related expenditures;

tion with their jubilee;

children under 18.

SOCIAL BENEFITS UNDER THE
COLLECTIVE AGREEMENT

Main Employees’ Benefits and Guarantees;

and caring for children aged under 3 years

• Financial aid for female employees having parental leave
• Financial aid at child birth or adoption of a child under 14
• Granting a three-day paid vacation to an employee (fa-

ther) at the release of a baby from the maternity hospital
with retention of his average monthly income;

relatives;

• Financial aid in the event of death of an employee’s close
• Financial aid for the family of a late employee to cover
• Financial aid for orphaned children under 18 who lost

funeral-related expenditures;

both parents, if one of them was employed in PJSC TAT-
NEFT;

children under 18;

• Financial aid for multi-child families;
• Financial aid for an employee having dependent disabled
• Financial aid upon retirement;
• Granting at least two hours off weekly or one day off

monthly to female employees having children under 16
(disabled children under 18);

• Financial aid for an orphaned child under 18 whose par-

ents (or one of them) died in the line of duty at PJSC TAT-
NEFT was employed in PJSC TATNEFT;

Main Benefits for Young Employees:

OUTREACH OF YOUNG PEOPLE

The youth policy of PJSC TATNEFT covers research and
production, creative, social, cultural, popular, information,
sports and other spheres.

The total number of young employees of the Tatneft Group is
more than 28,000, including 7,340 employees of structural
divisions, and 20,660 young employees of subsidiaries and
oil services.

In 2016, the Corporate Youth Organization implemented a
number of new projects aimed at increasing the effective-
ness of organizing work with young people, reducing inef-
ficient costs, increasing the involvement of young people in
scientific creative and rationalization work.

Activities carried out by the Youth Organization that con-
tribute to the process of youth adaptation in the workplace,
and the disclosure of their talents: School of Youth Leader,
School of Production Management, scientific and practical
conferences and seminars, trainings from leading Russian
business trainers, intellectual games, youth sports days,
games of the corporate League of KVN, charity events and
much more.

Great attention shall be paid to cooperation with the student
community. In 2016, the Company Tatneft acted as the organ-
izer of the championship in solving engineering cases Case-in
at the All-Russian level in the oil and gas field. Students of 14 oil
and gas higher education institutions – Gubkin Russian State
University of Oil and Gas, Almetyevsk State Oil Institute, Ka-
zan (Privolzhsky) Federal University, Russian State Geological
Prospecting University named after Sergo Ordzhonikidzе have
participated in the championship. In general, taking into ac-
count a selection stage about 350 students have participated
in our intellectual competitions.

In November, 2016 the team of young specialists of PJSC TAT-
NEFT has taken part in Youth day of the V International Forum on
Energy Efficiency and Development of Power ENES 2016.

In total during 2016 young employers have submitted 17 000
innovation proposals, 80 patents were taken out. The company
relies on young talents, creating conditions for professional
and career growth. In 2016, 1,300 young workers raised their
category and over 900 were promoted.

In December 2016, the Strategy for the Development of the
Youth Organization of PJSC TATNEFT for 2017-2021 was ap-
proved, according to which the development of young lead-
ers and young talents becomes the main vectors of work with
young people.

quisition

• Interest-free loan for furniture and essential goods ac-
• Financial aid for an employee dismissed for military ser-

vice in the Armed Forces of the Russian Federation after
their return to the same workplace;

• Financial aid for the first marriage.

Benefits for Pensioners and Veterans:

• Financial aid on the Victory Day for the Great Patriotic
• Quarterly financial aid for non-working pensioners who

War participants, widows and home front workers

used to work in the system of PJSC TATNEFT for at least
10 years and retired before the foundation of the National
Private Pension Fund

COMMUNICATION
Corporate social network

Corporate mass media

Website of PJSC TATNEFT

Information stands at enterprises

Annual Reporting

Reporting-and Election
Conference

Methods
of informing and inter-
acting with
young people

INTERACTION
Corporate social network

Project implementation

Scientific and practical seminars and conferences

Youth Forums

Competitions of professional skill

Educational seminars and trainings

Intrafirm training

Creativity competitions

Festivals, KVN games

Sports and tourist activities

• Providing employees who worked in PJSC TATNEFT for

at least 10 years with an opportunity of early retirement at
the Company’s expense with retention of the Company’s
benefits and guarantees for pensioners;

• Financial aid in the event of death of a pensioner’s close

relatives.

FEEDBACK
Corporate social network

Annual sociological survey

Meetings of the Trade Union Committee

Meetings with the leadership

Focus Groups

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251

For the purpose of the social support for retiring employees,
the Company has been implementing a non-governmental
pension provision program since 1997.

The program provides employees with an opportunity to
form their pension capital on a parity basis securing respect-
able level of living at the advanced age. Provisions “On non-
governmental pension provision” stipulate rules, criteria and
procedures for non-governmental pension granting, as well
as three main pension schemes. In 2016, the number of the
PJSC TATNEFT, employees that joined the non-governmen-
tal pension provision program amounted to 8 600 people.

The number of pensioners of PJSC TATNEFT receiving a
non-governmental pension is 9 833 pensioners.

In the reporting year, Company allocated RUB 147,608 for
the non-governmental pension provision. In 2016, the non-
governmental pension payments for PJSC TATNEFT’s pen-
sioners through the National Non-governmental Pension
Fund were amounted to RUB 212,383.

The Company performs regular communication and explan-
atory work on terms of the corporate pension program as
well as on the rules of involvement. Information is published
at the Internet portal of the TATNEFT Group. Annually each
employee of the Company receives the notice on a condi-
tion of a personalized pension account. The main partner
of PJSC TATNEFT for the implementation of the corporate
pension program is the National Non-Governmental Pension
Fund (NNPF) - one of the largest interindustry non-state
pension fund of our country (it is included in the top ten of
more than 150 Russian non-state pension funds).

HIGH-TECH MEDICAL CARE

The TATNEFT Company with its significant financial invest-
ments in short time implemented Program on establishing
and putting into service regional medical-diagnostic center
under the Medical Sanitary Station of PJSC TATNEFT and
Almetyevsk for delivering of the High-Tech Medical Care
(HMC) on Cardiovascular Surgery, Traumatology and Or-
thopedics, Ophthalmology and Urology for the population of
the southeast region of our Republic. The center is large and
modern multifaceted medical and preventive establishment
having high-skilled talent pool and equipped with the state-
of-the-art medical equipment.

Over the past few years, the hospital was equipped with the
modern high-tech equipment for the diagnosis and treat-
ment. Public and republic programs on improving delivery of
health care for the people having heart diseases were imple-
mented, high-skilled experts passed their training in the best
clinics of the world.

Annually since 2008 for the Medical Unit there are allocated
state quotas for high-tech operations to residents of 10 dis-
tricts of the southeast of the Republic of Tatarstan in the are-
as of Cardiovascular Surgery, Orthopaedics & Traumatology
and Neurosurgery.

In 2016 for the implementation of the state order, financial
resources were allocated for the implementation of the
High-Tech Medical Care for residents of the southeast of the
Republic of Tatarstan in the amount of 207.6 million Rubles.
Additionally PJSC TATNEFT allocated 29.5 million Rubles for
the implementation of 160 coronary angiography and 160
operations of stenting of the coronary arteries in acute myo-
cardial infarction.

VOLUNTARY MEDICAL INSURANCE
FOR EMPLOYEES

ARRANGEMENT OF SANATORIUM AND
RESORT VACATION OF EMPLOYERS

Since 1997, PJSC TATNEFT has been implementing the vol-
untary medical insurance program, which gives employees
an opportunity for high-quality medical services and thera-
peutic-resort treatment, if needed. In 2016, the total number
of insured employees made up 21 618 people, RUB 236,7
million was allocated for the program implementation. The
TATNEFT Company maintains arrangement and payment for
the medical and other services under four programs, such
as “Outpatient Care”, “Hospital Service”, “Rehabilitation
Treatment” and “Complex Medical Care” programs.

In order to reduce the rate of infectious diseases, seasonal
immunoprophylaxis was held within the framework of the
program (vaccination against seasonal flu and tick-borne
encephalitis).

The balance of structural divisions and subsidiaries of PJSC
TATNEFT contains 11 Health and Recreation Resorts. During
2016, 3,618 employees of the Company rested and strength-
ened their health in medical institutions. And 339 employees
visited Health and Recreation Resorts of the Republic of Ta-
tarstan and the Russian Federation.

In a number of resorts of the Company, a preferential cat-
egory of Russian citizens, children and citizens are treated,
which, according to the doctors, need rehabilitation treat-
ment.

Within the contract on voluntary health insurance employ-
ees of the structural divisions of PJSC TATNEFT occupied at
works with harmful and (or) dangerous production factors
will undergo sanatorium improvement in Health and Recrea-
tion Resorts of PJSC TATNEFT.

PJSC TATNEFT took part in the XVI All-Russian forum «Health
resort-2016» (Kazan). In the competition held within the
framework of the forum, the Company’s social facilities were
awarded with medals and diplomas.

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253

PJSC TATNEFT is an active participant and the main payer of
the housing construction program on the social mortgages
in the Republic of Tatarstan. In 2016, 6 residential buildings
were put into operation. This is 802 apartments with total
area of 54,1 thousand m2 amounted to RUB 1.5 billion.

In 2016 the initial contribution amounted to RUB 102.6 mil-
lion was paid instead of employers of structure units. 30%
of the apartments are allocated to young families. The num-
ber of persons interested to furnish apartments has made
32 persons. 10 million Rubles are directed to these fami-
lies to acquisition of furniture. Under the “Rental Housing”
program, two houses (228 apartments with a total area of
11.5 thousand m2) were put into operation in the cities of
Almetyevsk and Nizhnekamsk for temporary residence of
employers with low incomes. Apartments are fully equipped
with furniture, household appliances and accessories.

In 2017 the construction of houses will be continued under
the social mortgage program. It is planned to put into opera-
tion 9 multi-apartment houses (1,033 apartments) in 2017
according to the housing construction program.

Construction of 40 individual houses was initiated in urban-
type settlement Karabash (with total area of 74.4 thousand
m2 amounted to RUB 2.3 billion).

ARRANGEMENT OF HEALTH-
IMPROVING ACTIVITIES FOR CHILDREN

Within the bounds of maternity and childhood protection
program, the Company annually arranges health-improv-
ing activities for employees’ children at thirteen recrea-
tion camps with the capacity of 2 736 beds. All recreation
camps offer cozy and modern blocks, gyms, playgrounds ,
swimming pools, proper equipment and assistance of well-
trained staff.

In accordance with the decision of the General Director of PJSC
TATNEFT, N.U. Maganov, in 2016, similarly to the last year, the
program for military-patriotic education of children was organ-
ized in children’s recreation camps of the Tatneft Company. Ac-
tivities carried out by mobile groups of the Center of assistance
and development of patriotic and sports education of youth
“Sons of the Fatherland”, Moscow.

For the purpose of early vocational guidance of schoolchil-
dren, children’s camps together with the youth committees
of the enterprises of the Tatneft Group are developing the-
matic exhibitions, including activities in the recreation pro-
gram that tell about the work of oilmen, and other working
professions. Excursions on production objects of the Com-
pany will be organized.

In the program of rest of children’s camps are included also
sports actions with delivery of GTO norms. Ecological class-
es, lectures of medical workers, classes on traffic rules and
many other things are conducted.

Over the past three years, the number of children covered by
summer holidays has increased by 2,500 children due to the
annual construction of additional sleeping buildings for chil-
dren’s camps, as well as major repairs of existing buildings.

In 2016, in accordance with the program for the improve-
ment of children in the children’s health camps of the Com-
pany, 11,709 children rested for four shifts.

INVOLVEMENT OF EMPLOYEES IN
SPORTS AND HEALTHY LIFESTYLE

Due to the favorable conditions, created in the Company,
sport has become an inherent part of oilmen’s everyday
life. Modern ice palaces and sports complexes were built
in every city of the oil region. 16 Ice Palaces were built in
the Republic of Tatarstan with the Company’s participation
and 91 teenage hockey clubs were taken under control by
efforts of the Company Funds for purchase of hockey kits
for the teenage clubs’ teams and remuneration for coaches
and staff maintaining the hockey rinks are allocated annu-
ally. In general, more than 5.0 thousand adolescents in-
volved in teenage clubs and hockey sections at the place of
residence. Tournaments are held between courtyard hockey
teams for the prizes of the Joint-Stock Company Tatneft,
as well as prizes of the “Oil and Life” magazine. Since 2011,
hockey competitions have been held among amateur teams
of PJSC TATNEFT.

Sport centers are provided for sports activities, within the
national idea of promotion of a healthy lifestyle, for workers
of oil country in the cities of the southeast of Tatarstan.

In 2016, the ski complex of PJSC TATNEFT was visited by
more than 36 thousand people.

In summertime, the Company gives to employees an oppor-
tunity to enjoy active recreation together with the families on
the recreation facilities located on banks of the Kama River
and Karabash Reservoir. In 2016, about 13 thousand em-
ployees and their families rested on summer camps.

In 2016, the XXIX Corporate Sports Games of PJSC TATNEFT
took place, in which more than 10 thousand employees took
part. Competitions were held in 12 kinds of sports. RUB 8.03
million was allocated for the arrangement of the Spartakiada
in 2016.

DEVELOPMENT OF EQUESTRIAN SPORT

At present, Tatneft is implementing the program “Develop-
ment of Equestrian Sport and Horse Breeding in the South-
east of the Republic of Tatarstan for 2016-2020”.

In the fourth quarter of 2016 competitions were held on
equestrian sports (competitions, dressage) at the Eques-
trian Sports School Centaur of the oil and gas production
department Prikamneft, the Equestrian sports school of the
Aznakayevskneft oil and gas production department and the
municipal autonomous supplementary education institution
“Children’s Youth Sports School for Equestrian Sports” of
Almetyevsk municipal district. In 2016, the cosmetic repair
was carried out, as well as allocated funds for the organiza-
tion and prize fund of the competitions were allocated for the
above schools with the purpose of organizing and conduct-
ing equestrian competitions. In the future, regular competi-
tions will be held in these schools.

One of the tasks of 2017 is the construction and organization
of a complex of mini stables for keeping ponies in each chil-
dren’s health camp of PJSC TATNEFT, in order to attract rest-
ing children to communicate with horses, instilling love for
horses and equestrian sports. 26 heads of Scottish breed
ponies have already been acquired for these purposes.

One of the directions is the breeding of horses of purebred
riding English breed in the Republic of Tatarstan. This direc-
tion is being developed by the Tatneft company on the basis
of the Nurlatsky stud farm. Currently, there are more than 50
horses of this elite breed. This is a horse race that has a ten-
dency in recent years in our country, first of all, thanks to the
established and annually played prizes of the President of
the Russian Federation. Thus, the Company relies on the de-
velopment of horse breeding in the territory of our republic.

254

255

The conscientious work of the collective of PJSC TATNEFT,
the consistent implementation of measures to preserve the
financial and economic sustainability of the company, al-
lowed the fulfillment of the obligations of the PJSC TATNEFT
Collective Agreement during 2016.

At the same time, the achieved level of social protection of
employees, including youth, and non-working pensioners
of the Company is ensured, including voluntary medical in-
surance, housing construction under the mortgage lending
program, organization of summer recreation for children of
employees, pensions, so on.

The Trade Union Committee of PJSC TATNEFT, its primary
trade union organizations on the basis of the Federal Law
“On Trade Unions, Their Rights and Guarantees of Activi-
ties”, the Labor Code of the Russian Federation, the Collec-
tive Agreement provide:

• Representation and protection of social and labor rights
• and interests of trade union members;
• Control over compliance with labor legislation of the Rus-
• Organization of sports and health and cultural-mass

sian Federation;

work in labor collectives.

The administration and the Trade Union Committee of PJSC
TATNEFT organized and conducted:

• the conference of the labor collective of PJSC TATNEFT,

where the Collective Agreement of the Company for 2016
was signed;

• a meeting of the permanent labor safety commissions of

PJSC TATNEFT and the Industrial Engineering Complex,
its structural divisions and subsidiaries following the re-
sults of work in 2016.

The interregional Trade Union Organization of PJSC TAT-
NEFT has 142,894 members of the trade union, consists of
92,466 employed, 44,831 unemployed pensioners, 5,597
students of AGNI, APT, LNT and BMT, and 31,550 young
workers. Primary associations, primary trade union organi-
zations in the number of 167 entities operate in structural
divisions, service management companies and subsidiaries
located in Tatarstan and beyond, and 4 entities are students
of AGNI, APT, LNT and BMT.

The qualitative composition of the active Trade Unionists,
numbering 13,861 people, includes: 171 heads of primary
Trade Unions, 636 chairmen of Trade Union Committees,
2,747 Trade Union groups, 1,417 members of Trade Union
Committees, 2,544 members of all Trade Union Committees
and 440 members of the revision commissions of primary
Trade Unions, 3,161 members of Trade Union Committees
and 2,745 labor protection commissioners.

Admission to the Trade Union is carried out on a voluntary
basis, on the basis of a personal application of the employee.
For newly-admitted employees, explanatory work is carried
out, the Trade Union Committee informs about the activities
of the Trade Union, sections of the collective agreement, and
shall be revealed the employee’s inclination to social activi-
ties, sports and other interests.

The work of the Trade Union Committee of PJSC TATNEFT,
consisting of 51 members of the Trade Union, was conduct-
ed according to the approved annual plan in full accordance
with the Trade Union’s Charter, the requirements of higher
Trade Union bodies, the Federal Law “On Trade Unions, their
Rights and Guarantees of Activities” and the Labor Code of
the Russian Federation.

9 commissions were created for goal-oriented control over ful-
fillment of the liabilities stipulated in the Collective Agreement:

union members;

• commission on social and economic protection of trade
• legal protection commission;
• workplace protection commission;
• mass organization commission;
• housing and public services commission;
• public catering control commission;
• culture, sports and health commission;
• young people’s affairs commission;
• commission for labor and the Great Patriotic War veterans.

In order to control the fulfillment of obligations of collective
agreements, the chairman of the trade union committee of
PJSC “Tatneft” G.K. Yarullin and his deputies, the chairper-
sons of the Trade Union Committees of the enterprises regu-
larly visited workplaces, got acquainted with the working and
living conditions, met with the collectives of the shops and
brigades.

The meetings of the conciliation commission for the develop-
ment of the Collective Agreement of PJSC TATNEFT for 2017
were organized and held, where the proposals of the compa-
ny’s employees were announced for the purpose of entering
into a Collective Agreement for their financial evaluation.

MPO PJSC TATNEFT on the principles of social partnership
takes an active part in the formation of the social strategy of
PJSC TATNEFT.

In July 2016, the administration and the Trade Union Com-
mittee of PJSC TATNEFT organized a festival of children’s
health camps at a high organizational level, attended by
more than 1,000 children from all 13 children’s health camps
of the Tatneft Company.

In 2016, in the review competition of children’s health camps
of the Neftegazstroyprofsoyuz of Russia, the Yunost chil-
dren’s health camps of NGDU Almetyevneft, Landysh chil-
dren’s health camps and Yubileyny children’s health camps
of NGDU Leninogorskneft, Vishnevaya Polyana children’s
health camps of NGDU Nurlatneft were recognized as win-
ners and awarded with Diplomas of Presidium of the Russian
Trade Union Council.

Information on cooperation of the administration and the
Trade Union Organization o PJSC TATNEFT for implementa-
tion of the Collective Agreement in due time was led up to
workers and the public during visits of jobs through corpo-
rate and republican media, the NGSP inform all-Russian
magazine, the monthly newsletter of trade-union committee
of PJSC TATNEFT “Tribune”, the electronic portal – corpo-
rate social network.

During the year, the Trade Union Committee of PJSC TAT-
NEFT from the primary Trade Unions consolidated proposals
on improving the provisions of the Collective Agreement for
discussion at the Conciliation Commission.

The Trade Union Committee organizes cultural-mass and
sports-recreational activities during the winter races for the
two-day recreation centers of PJSC TATNEFT.

The Trade Union Committees organize “Health Days”, con-
cert programs for employees and their families from May to
September in the city park named after the 60th anniversary
of Tatarstan’s oil.

Trade Union Committees organizes rest for employees of the
enterprises in Health and Recreation Resorts of PJSC TAT-
NEFT and beyond. They carry out Christmas parties for the
children of employees of enterprises. They organize a visit to
lectures and concerts for members of the Trade Union.

Representatives of the Trade Union of PJSC TATNEFT took
an active part in the meetings of the Russian Council Pre-
sidium and Plenums of the Neftegazstroyprofsoyuz, semi-
nars and meetings of the International Trade Union Confed-
eration, meetings of the Federation of Trade Unions of the
Republic of Tatarstan and meetings at the enterprises of the
Tatneft Production Group.

Trade Union employees are routinely involved in conducting
of preventive measures for labor protection and summariz-
ing the results of competitions:

• “For Maintenance of an Esthetic Condition of the
• “Best Recreation Camp of Structural Divisions and Sub-

Equipped Springs and Improvement of Water Quality”;

sidiaries”.

256

257

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS’ REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICY

The positive solution of issues on safety of work in reporting
year was promoted by systematic work of the Committee on
labor protection which is a component of a control system of
labor protection of the Company.

In the reporting year, 39 inspections of the conditions and safe-
ty of enterprises, compliance with labor protection legislation,
implementation of collective agreements and labor protection
agreements were conducted.

In accordance with the Labor Code of the Russian Federation,
Trade Union control in the field of labor protection on a volun-
tary basis is carried out by 2,713 authorized persons.

The obligatory participation of authorized persons of the
Trade Union for labor protection in administrative and pub-
lic multistage control is reflected in the Regulation on the
Industrial Safety and Labor Protection Management Sys-
tem in PJSC TATNEFT.

PROTECTION OF THE TRADE UNION MEMBERS
RIGHTS FOR THE SAFE WORK

One of the main directions in the work of the Trade Union
Organization of PJSC TATNEFT is the protection of workers’
rights to work in conditions that meet the requirements of
safety and hygiene; as well as public control over compliance
with labor protection legislation.

This joint work is carried out on the basis of collective agree-
ments, on the principles of social partnership between the
administrations of PJSC TATNEFT and its subsidiaries and
other enterprises on the one hand and representatives of
employees - the Trade Union Committees of PJSC TATNEFT
and the enterprises of the Tatneft Group, the technical labor
inspectorate and the authorized Trade Union for labor protec-
tion on the other hand.

At conferences and meetings of labor collectives, on the basis
of the results of work for 2016, the implementation of collec-
tive bargaining agreements, including the obligations of labor
protection agreements, was accepted by the administrator
and the Trade Union Committee. To finance the activities to
improve the conditions and safety of labor, the employer sent:

PJSC TATNEFT

Subsidiaries

Total, thousand
Rubles.

per one employee,
thousand Rubles

612,789

568,131

29.3

27.2

LEGAL PROTECTION OF TRADE UNION MEMBERS

WORK WITH YOUNG MEMBERS
OF THE TRADE UNION

In 2016 legal work was continued, aimed at protecting rights,
legal assistance and protection of union members.

Based on the Regulations on the Legal Commission for the
Protection of Trade Union Members, a commission of four
persons is working. In the reporting year, the Commission
conducted scheduled inspections in terms of compliance
with the working hours schedule, the provision of annual
paid holidays, payment for overtime work, on weekends,
non-working holidays in the oil and gas production depart-
ment of Elkhovneft, Tatneftegazpererabotka, OOO “UK Sis-
tema-Service”(in July); in JSC “Ta- togolgaz”, OOO “UPTZh
for PPD”, FKU “2 OFPS of the GPS for RT” (in September).
Nine inspections were carried out according to address-
es of members of labor union at the Bugulma mechanical
plant, in OOO Aznakayevsk Department of Technological
Transport, OOO UK Tatneft Neftekhim, OOO Ta-gras-Neft-
egazstroy, TatNIPIneft institute, NGDU “Aznakayevskneft”,
the Aznakayevsk enterprise of drilling operations, OOO UK
Tatburneft, management of Tatneftegazpererabotk. Accord-
ing to the annual schedule”the exit legal reception” works,
in 2016 92 persons are accepted: in YYelabuga (NGDU “Pri-
kamneft”, OOO P-D Tatneft-Alabuga Steklovolokno, OOO
Tatneft-Presskompozit), in Bugulma (OOO TNG Group, In-
stitute TatNIPIneft, OOO Tatneftedor). Issues that the mem-
bers of the Trade Union addressed were related to improv-
ing working conditions, indexation of the salary, payment of
utilities and others.

Work with letters and addresses of members of labor union
was continued except activity of a legal reception. The joint
work with PJSC “Tatneft” on appeals of employees to the
“hot line” was continued. During the reporting period Trust
line also continued to work. 265 complaints and other ap-
peals were considered, 217 complaints were found to be jus-
tified and satisfied.

Legal assistance was provided in the development of collec-
tive agreements. An examination of Collective Agreements
and local normative acts was carried out. Trade Union Mem-
bers receive free legal advice not only on labor, but also on
family, housing issues. The constant practical help was pro-
vided to primary Trade Union Organizations in the solution of
legal questions.

Trade Union Committees of primary Trade Union Organizations
pay special attention to working with young members of the
Trade Union. The commission on work with youth works effec-
tively.

The Trade Union Committee of PJSC TATNEFT sends funds
from the employer to organize cultural, sports, health and other
collective activities with young workers.

A section dedicated to the young employees of the company is
highlighted in the Collective. All youth leaders are members of
Trade Union Committees of enterprises. Representatives of the
youth organizations of enterprises take part in the development
of the Collective Agreement.

Young trade unionists actively and successfully participate in all
competitive and educational events of the Federation of Trade
Unions of the Republic of Tatarstan and the Neftegazstroyprof-
soyuz of Russia. In September, 2016 in Alushta, the Republic of
Crimea youth leaders of PJSC TATNEFT have participated in the
traditional youth meeting organized by NGSP of Russia.

Much attention is paid to military patriotic education. So with as-
sistance of Trade Union Committee in 2016 “A Сourage Тrack”
activity was held for the first time. Competitions have taken
place dynamically, in fascinating fight and have allowed all par-
ticipants to check themselves and the team.

Thanks to joint support of Administration and Trade Union Or-
ganization finalists of “Tatneft” KVN League KVN could play
on one stage with Champions of the Highest KVN League the
SOYUZ team.

Young trade unionists actively and successfully participate in all
competitive and educational events of the Federation of Trade
Unions of the Republic of Tatarstan. In 2016, creative youth of
the Company’s enterprises took part in the IV Republican TV
Festival of Creativity of Working Youth “Our Time - Beznen Za-
man”, according to which young members of the trade union
won a number of prizes in various nominations.

In December, 2016 “The development strategy of the Youth or-
ganization for 2017-2021” was considered and approved at the
17th conference of young employees of the company

258

259

«ODARENNYE DETI» (“GIFTED
CHILDREN”) FOUNDATION

“MILOSERDIE” (“MERCY”) CHARITY
FOUNDATION

In 2016 the charitable foundation funds were sent to sup-
port participants in various scientific forums: conferences,
subject and inter-subject Olympiads, master classes in
academic subjects. The Foundation provided support to 14
participants of the International Test-Rating Olympiad for
Schoolchildren in Physics and Mathematics - 3 team and 8
personal prizes, 10 participants of the Summer Academy of
Young Geologists under the “Step into the Future” program –
4 awards, 47 participants of the Republican Conference of
the Lobachevsky KFU - 12 prizes. Four times team of young
geologists from Almetyevsk and Nizhnekamsk traveled to
the Olympiads and conferences on Geology, as a result they
took the 2nd and the 1st places respectively in the Republi-
can Geological Field Olympiad in August 2016.

The fund winners were held in the city of Bavly, 180 school-
children and their mentors took part. The XIII regional sci-
entific and practical conference “Schoolchildren for the sci-
ence of the 21st century” was held with the participation of
300 scientific and research works, of which 104 experts were
admitted to the report in 11 sections, 38 reports were noted
and 43 students were awarded.

The winter school for the preparation of candidates for na-
tional teams for the national round of the All-Russian Sub-
ject Olympiad of schoolchildren in mathematics and physics
covered 40 pupils.

The scholarship was paid to 5 gifted schoolchildren from
low-income families.

More than 200 students and 150 mentors were encouraged
on rallies of the prize-winners of the All-Russian subject Ol-
ympiad of schoolchildren in the municipal districts covered
by the fund.

“Mercy” Charity Foundation was created in 1999. The objec-
tives of the fund: support for education, education, science,
culture, health, sports, social support for low-income seg-
ments of the population.

The Fund carries out its activities in all regions of the Repub-
lic of Tatarstan and abroad. The appearance of the settle-
ments and cities of the Republic is changing with the support
of the Foundation. The great help is rendered by the fund
for the development of sport, especially children’s hockey,
the construction of new hockey grounds in all areas of the
southeast of the republic.

The “Mercy” Charity Foundation supports work of “Rukhi-
yat” and “Gifted Children” Foundations. The Foundation
constantly provides assistance to children from low-income
families, identifies gifted children and directs them to various
Republican, Russian and International competitions and ol-
ympiads, where children adequately represent the Republic
of Tatarstan.

Much attention is paid to preservation and support of reli-
gious institutions. Recipients of the charitable help of fund
are various public organizations and outside the Republic of
Tatarstan. The “Mercy” Charity Foundation renders all-round
assistance to the Ministry of Internal Affairs of the Republic
of Tatarstan. The Foundation pays special attention to labor
veterans of PJSC TATNEFT.

The “Mercy” Charity Foundation allocates significant funds
for the economic support of people who gave their strength
and youth to the formation of the oil industry of the republic.
This is a purposeful and thoughtful policy of the company,
aimed at improving the living standards of veteran - oilmen.
“Mercy” together with the Trade Union of TATNEFT takes
part in the organization of rest and treatment of veterans of
labor in sanatoriums, where for them here, apart from high-
quality leisure, there are performances of professional and
amateur artists and creative teams. There are other types of
material assistance to veterans.

FOUNDATION FOR SPIRITUAL
REVIVAL “RUKHIYAT” («SPIRITUALITY»)

The Foundation for Spiritual Revival “Rukhiyat” was estab-
lished by PJSC TATNEFT in 1997 with the aim of activating
of the spiritual revival and cultural life of the oil region of the
Republic of Tatarstan; identification and support of talented
children of the oil region of the Republic of Tatarstan, organi-
zation of cultural and educational work, etc.

One of the projects of the Foundation is the Children’s Crea-
tivity Festival “Land of the Singing Nightingale”, which has
been held since 1998. About 50 thousand children from 21
settlements of the oil region of the Republic of Tatarstan took
part in it. The festival provides for about 20 nominations, an-
nually the foundation organizes a contest program in 7-9
nominations, alternating and conducting some of them once
in 2-3 years. When forming the jury members, the foundation
cooperates with the Kazan State Conservatory named after
N. Zhiganov, the Kazan State Institute of Culture and Arts,
the Union of Writers, Artists and Composers of the Repub-
lic of Tatarstan, the Creative School “Master Class” of the
Banking Group “Zenith” (Moscow), the musical colleges of
Almetyevsk and Nizhnekamsk, the Almetyevsk Picture Gal-
lery named after G. Stefanovsky. Gala concerts are organ-
ized in Almetyevsk and Kazan. The number of participants is
from 350 to 500 people.

The scholarship for the graduates of the festival “Land of the
Singing Nightingale” is awarded from 2011 to encourage the
winners of the festival, who decided to continue their studies
in higher or secondary educational institutions of the artis-
tic and aesthetic direction. The size of the scholarship is 12
thousand rubles.

To encourage the members of the Writers’ Union of the Re-
public of Tatarstan who gained recognition in the field of lit-
erary creativity, the Tatneft Company established a literary
prize named after the well-known Tatar poetess Sazhida
Suleymanova within the framework of the Foundation’s ac-
tivities. Annually it is awarded to 6 writers and poets. Ten
students engaged in literary creativity traditionally become
scholars of this award.

To support writers and artists of the oil region of the Republic
of Tatarstan, the Foundation also holds competitions, such
as “Literary debut” among novice writers, which resulted in
the publication of the collection “Yash Dulkyn - A New Lit-
erary Wave”, a competition of fine artists, together with the
Union of Artists of the Republic of Tatarstan, Almetyevsk Pic-
ture Gallery and the Creative School “Master Class” of the
Banking Group “ Zenith”. As a result, an album-catalog was
released.

For 20 years, the foundation is very active in publishing ac-
tivities. About 200 books with a total circulation of about 350
thousand copies were issued. Among them - scientific bib-
liographic publications, works of recognized Tatar poets and
writers, works by young authors, etc. The books published
by the Foundation are donated to the republican libraries,
educational institutions, museums, orphanages, nursing
homes, as well as to the regions of Russia to places of com-
pact residence of Tatars.

Annually there are presentations of books with the partici-
pation of authors and editors of books, the Union of Writers
of the Republic of Tatarstan, creative clerisy, university stu-
dents.

In November 2016, together with the Vladimir Spivakov Inter-
national Charity Foundation, a cultural and educational pro-
ject was implemented, “The Academy of the Vladimir Spiva-
kov Foundation, Children for the Children. Tatarstan”. Within
the framework of the project, there were “master classes”
of famous Russian and foreign musicians, choreographers
and artists for children and teachers of small towns in the oil
region of Tatarstan, as well as concerts with the participation
of scholarship holders of the funds and the best children’s
creative teams in the oil region of the Republic of Tatarstan.
The charity project, master classes were organized at the
expense of the Grant of the President of the Russian Federa-
tion and PJSC TATNEFT.

The Foundation actively cooperates with Ministries of Cul-
ture and Education of Tatarstan, the Union of Writers, Artists,
Composers and representatives of the creative clerisy of the
Republic of Tatarstan, the Russian Federation and others.

260

261

262

1.2 billion rubles invested in fixed capital to protect
environment and use natural resources efficiently in 2016.

263

The Company carries out the environmental safety activi-
ties in compliance with the federal laws and environmental
rules and regulations, taking into account the requirements
of the international instruments and according to the Health,
Safety and Environment Policy of the Company.

The Fundamental Principles of the PJSC TATNEFT Health,
Safety and Environment Policy are as follows:

working conditions and healthy environment;

• recognizing the constitutional right of people to safe
• industrial and environmental safety priority as an integral
• energy saving and rational use of natural resources dur-
• managerial and investment decision-making based on

ing oil production operations;

part of national security;

multi-optional scenarios, taking into account the indus-
trial and environmental safety priorities;

• giving priority to preventive measures over response ac-

tions to eliminate negative environmental impacts.

Realization of the health, safety and environment goals pro-
vides for the Company to accomplish the following objec-
tives:

• ensuring safe working conditions, protecting health of

workers and people living in the areas of the Company’s
operations;

mental impact standards

• compliance with the established permissible environ-
• improving industrial and environmental safety of hazard-
• mitigating manmade impact on the ecosystem in the

ous production facilities;

area of its operations by implementing new technolo-
gies, equipment, materials, upgrading process control
automation level rational use of natural resources

• and minimization of oil and gas losses
• increasing industrial and environmental safety of hazard-
• Eliminating unjustified wastes generated in technological

ous production facilities.

processes of oil production and related operations with
environmentally safe handling of wastes and their maxi-
mum use as a secondary raw material;

The Company makes the following commitments:

• ensure compliance with current legislation, industrial,

corporate and local regulations governing the Compa-
ny’s health, safety and environment activities as well as
other related external requirements the Company has
committed to be met;

• identify and assess industrial hazards and risks, work out

measures to manage and mitigate significant operation-
al risks;

pollutions;

es during its operations;

• identify and eliminate occupational hazards at workplac-
• take all possible measures to prevent the environment
• carry out a set of preventive measures to prevent a possi-

bility of emergency situations, and should it happen take
measures to mitigate the emergency situation impact on
the environment;

cupational diseases;

• carry out a set of measures to prevent injuries and oc-
• provide health, safety and environment training and skill
• require that the contractors carrying out work at produc-

development of the Company’s personnel;

tion facilities of the Company comply with the health,
safety and environment requirements existing in PJSC
TATNEFT;

holders in health, safety and environment activities;

• maintain an open dialogue with all the Company’s stake-
• attain and continuously improve the Company’s health,
• maintain and continuously improve the Integrated Health,
• ensure compliance with the Integrated Management

Safety And Environment Management System;

safety and environment performance results;

System to international occupational health and safety
standards OHSAS 18001: 2007 and the environmental
guidelines ISO 14001:2004;

• report to the public on the Company’s health, safety and

environment activities.

PRODUCTION SAFETY SYSTEM

The Company provides the measures for industrial safety,
occupational health and prevention of industrial injuries
and occupational diseases in compliance with its internal
documents: “Production Safety System”, “Industrial Safety
Management System Regulations” and “Regulations on in-
dustrial control over compliance with the industrial safety
requirements of industrial at hazardous industrial facilities”,
which establish a unified procedure for the implementation
of management of industrial, fire, electric power, radiation
safety, occupational health and production control in all
structural divisions and subsidiaries of PJSC TATNEFT.

There are standing commissions operating on an ongoing
basis such as the occupational health and safety commis-
sion, the production control commission, the fire and techni-
cal commission and the internal audit team of the integrated
management system. The working schedules of standing
commissions and the schedule of individual industrial safety
and occupational health inspections at the Company’s facili-
ties are fulfilled.

DYNAMICS OF OCCUPATIONAL HEALTH
EXPENDITURE, MLN RUBLES

2016

2015

2014

612.7

+28.2%

478.1

365.8

DYNAMICS OF OCCUPATIONAL HEALTH
EXPENDITURE PER WORKER, THOUS RUBLES.

2016

2015

2014

29.3

+26.3%

23.2

17.8

DYNAMICS OF INDUSTRIAL INJURIES FOR 2014
TO 2016

2016

2015

2014

0.14

0.1

6 0.3

In order to comply with the requirements of the international
standard OHSAS 18001 the Company developed the Health,
Safety and Environment Program to prevent injuries, reduce
risks and accidents, and contingent losses for 2016 through
2018. In 2016, 4.98 billion rubles were spent to realize the
Program.

Year

Number of accidents

Incl. fatal accidents

Fr. rate*

2014

2015

2016

0.1

0.3

0.14

* Fr. Rate (frequency rate – number of injured per 1000 employees)

In 2016, 121 mln rubles were assigned to implement fire
safety measures. Over the period of 2014 through 2016 no
fire had been registered in the PJSC TATNEFT’s structural
divisions.

More than 600 million rubles were spent to carry out the
measures provided for by occupational health agreements
in the structural divisions of PJSC TATNEFT. The average
cost per employee amounted to 29 321 rubles.

In 2016, no manmade accident was allowed to happen that
might cause any environmental damage within the operating
area of the Company.

264

265

fourth in succession the comprehensive and large scale
Environmental Program for the period of 2016 through 2020
were approved in 2016.

• Certified in 2006, the PJSC TATNEFT Integrated Health,

Safety and Environment Management System (IHSE MS)
successfully passed in 2016 through the re-certification
audit for compliance with the international standards ISO
14001:2004 and OHSAS 18001:2007. The audit was per-
formed by JSC Bureau Veritas Certification Russia.

Pursuant to the standard ISO 14001:2004 the PJSC TAT-
NEFT’s Environmental Management System has been certi-
fied for compliance with, the Company uses a methodology
of “sequential procedures” that provides for subsequent ac-
tions to be taken based on the data obtained according to
the previous level results.

INDUSTRIAL ENVIRONMENTAL MONITORING

The PJSC TATNEFT industrial environmental monitoring
(IEM) system is implemented in the following areas:

• taking measurements and samples related to the envi-
• maintenance of databases of sources of environmental

ronment protection;

impact and environmental setting, processing and anal-
ysis of data obtained;

mental requirements;

• determination of impact source conformity with environ-
• analysis and forecast of the environment conditions in
• development of the industrial environmental monitoring

the region;

system in new operating areas.

The industrial environmental monitoring system provides the
following types of monitoring:

• monitoring of sources of environmental impact (emis-
• monitoring of condition of the environment components

sions and discharges of pollutants and waste waters);

(air, surface and underground waters, lands and soils,
geological environment);

• two-level supervisory control of compliance with envi-

ronmental legislation.

ENVIRONMENTAL SECURITY MEASURES

In 2016, the Company continued its dedicated work on a
consistent basis to improve environmental safety of oil pro-
duction processes. The Company is particularly focused on
the environmental activities to reduce harmful emissions into
the atmosphere, discharges of pollutants into groundwater
and surface water, soil and subsoil as well as to ensure com-
pliance with the established norms of permissible impact on
the environment. Primarily, all these are ensured by main-
taining the technical condition of the oil-field equipment at
the appropriate level and implementing advanced and in-
novative environmental technologies as well as through the
activities, such as:

• Implementation of the technology to capture light hydro-

carbon fractions released from storage tank equipment
(vapor recovery units);

unit;

• Reducing flared associated gas volumes;
• Associated petroleum gas cleaning at desulphurization
• Repair and replacement of tanks and other storage tank

equipment and anti-corrosive coating application and
equipping with electrochemical protection means;

lines;

systems;

collection and disposal of wastes;

tion of technological process and product streams;

• Overhaul and replacement of commercial oil and gas pipe-
• Reconstruction of oil treatment facilities with the optimiza-
• Construction of storm water drain at industrial facilities for
• Mud pit lining and equipping rigs with waterproof circulating
• Overhaul and replacement of oil pipelines and their sacrifi-
• Equipping well servicing and workover crews with special
• Monitoring production casings of wells for integrity and
• Sealing of production casings, bringing top of cement to
• Running in additional (intermediate) casings;
• Increase lifetime of downhole equipment using protective

surface behind surface and production casings;

equipment to prevent fluid spills;

cial and inhibitory protection;

behind-casing cross-flows;

coatings, M1-X packers, sacrificial protection, corrosion in-
hibitors and cathodic protection of casing wells.

ATMOSPHERIC AIR PROTECTION AND
MONITORING

The gas pipeline corrosion control works were performed
such as introduction of active electrochemical protection,
delivery of corrosion inhibitors, use of corrosion-resistant
tubular to replace gas pipelines as well as major repair (re-
placement) of worn out sections.

For the purpose of sustainable use of associated petroleum
gas (APG), compliance with the established standards of
maximum permissible emissions (MPE) of pollutants into the
air, further reduction of pollutant emissions into the atmos-
phere and reduction of greenhouse gas emissions in 2016:

• major repairs were accomplished for 16.34 km of gas
• reconstruction (replacement) of flare facilities of NGDU

pipelines with 122 807 thous. rubles of the total costs;

Almetyevneft, NGDU Bavlyneft, NGDU Jalilneft was
completed which will provide soot-free combustion.
The investments totaled more than 12 635 thous. rubles
in 2016; oil heating furnaces with waste-heat exchang-
ers were commissioned at the Kama-Ismagilovky Sour
Crude Oil Treatment Facility of NGDU Leninogorskneft.
The investments had totaled more than 65 607 thous.
Rubles since the project beginning in 2013.

• Construction of the gas gathering system of Tatneft-

egazpererabotka Division (UTNGP) from NGDU Yamash-
neft and NGDU Elkhovneft continued. Since the project
beginning in 2015 the investments totaled more than 28
676 thous. rubles, including more than 4 231 thous. ru-
bles in 2016

• And other works.

To ensure compliance with the requirements for establishing
the maximum permissible emission limits and meeting the
requirements for granting the emission permits, the recon-
struction of the booster pumping station DNS-2 “Vishnevaia
Poliana” and the Sour Crude Oil Treatment Facility UPVSN-2
“Kutema” continued at NGDU Nurlatneft in 2016. Since the
project beginning in 2015 the investments totaled 119 732
thous. rubles including 104 876 thous. rubles in 2016.

Thanks to the focused efforts made out to reduce the as-
sociated petroleum gas (APG) flaring at the flare facilities, in
2016 the APG utilization efficiency was 96.44% across PJSC
TATNEFT. This made it possible to reduce harmful emissions
of pollutants and greenhouse gases from APG combustion
and dispersion. The total costs for implementation of APG
utilization projects for the period from 2008 to 2016 amount-
ed to more than 4.6 bln rubles.

Application of light hydrocarbon fraction capture technology
(vapour recovery units) helped reduce the carbon emissions
by more than 3.5 times as compared with the emissions in
1991. Currently, the PJSC TATNEFT’s facilities operate 44
vapor recovery units.

As a result of the air protection measures implemented in the
Company for the period from 1990 to 2016 the total emis-
sions of pollutants into the air from stationary sources be-
came three times less.

In 2016, PJSC TATNEFT produced 978 471 thous m3 of APG
(2015 – 946 941 thous m3), gathered and utilized 941 242
thous m3 (2015 - 899 538 thous m3), flared 37 229 thous
m3, including 2 357 thous m3 due to the UTNGP’s lifting
and hoisting equipment scheduled preventive maintenance
(2015 – 47 403 thous m3, incl. 1 651 thous m3 due to the
UTNGP’s lifting and hoisting equipment scheduled preven-
tive maintenance).

In order to monitor compliance with the sanitary norms and
regulations for air protection in the populated areas, as well
as part of substantiation (defining) of the sanitary buffer
zone sizes the atmospheric air was monitored in the human
settlements located within the area of the Company’s op-
erations and sanitary buffer zones of the production facili-
ties. There were 416 monitoring points. During the activities,
6 396 measurements of physical factors were taken and 15
173 analyses were performed to determine the current state
of the atmospheric air. The air basin was analyzed for 33 in-
gredients (hydrocarbons, hydrogen sulfide, nitrogen diox-
ide, carbon monoxide, etc.) with simultaneous meteorologi-
cal observations by measuring a wind speed and direction,
temperature and relative humidity.

GROSS HARMFUL EMISSIONS,
THOUS TONNES

2016

2015

2014

81.3

83.9

92.3

-3.1%

SPECIFIC EMISSIONS PER TONNE OF OIL
PRODUCTION, KG

2016

2015

2014

2.869

3.115

-7.9%

3.520

266

267

In 2016, a considerable amount of efforts was made to im-
prove reliability of various-application pipelines and well de-
signs. To ensure a leak-free operation of oilfield facilities the
Company applies the technologies to:

ing and paint coating application;

• protect the pipes against corrosion by polyethylene lin-
• manufacture pipes in corrosion-resistant versions;
• construct pipelines with effective internal and external

insulation and welding joint protection.

The following water resources conservation and their ration-
al management activities were going on:

• Reconstruction of the circulating water supply system

7/8 of the Tatneftegaspererabotka (UTNGP) plant. The
investments since the beginning of the project in 2015
totaled to more than 28 279 thous rubles including more
than 26 979 thous rubles in 2016;

• construction of modular sewage treatment units for the

circulation water supply system of the UTNGP’s gas pro-
cessing facilities. Since the project start in 2006, the in-
vestments totaled 178 709 thous rubles, incl. more than
34 994 thous rubles in 2016;

• Overhaul of hydraulic engineering works and special foun-

dations of NGDU Prikamneft. The total costs since the be-
ginning of the project in 2013 were more than 696 780 thous
rubles, including. 175 948 thous rubles in 2016.

In 2016, to ensure stable and smooth operation of the pro-
duction facilities while improving their industrial and environ-
mental safety the Company manufactured 785 km of corro-
sion-resistant pipes (MPT, TPC). Cathodic protection was
applied to 582 well casings; 21 662.5 km of pipelines were
furnished with electrochemical protection. The diagnostic
tests amounted to 2 546.6 km of pipelines. In order to pro-
tect the oilfield equipment and pipelines against corrosion
the Company tested and adapted dozens of chemical rea-
gent brands. Currently, only high efficient and technological-
ly sound corrosion inhibitors are used based on the recent
unification results. The high-efficient corrosion inhibitors in
the quantity of 5 380 tonnes were used in 2016.

The inner surfaces of 57 process tanks (vertical stainless
steel tanks and horizontal flow settling tanks) were lined with
anticorrosion coating at the crude oil gathering and treat-
ment facilities of the oil and gas field operating divisions. 50
vertical steel tanks were repaired. Diagnostic tests were run
in 545 bullet tanks and 60 vertical steel tanks.

There is a network of local observation points to monitor water
bodies in place within PJSC TATNEFT license areas. In 2016, the
observation system consisted of 1 975 sampling points includ-
ing 495 observation points to monitor surface water bodies and
1 480 observation points for underground water bodies.

Industrial environmental monitoring of water bodies is carried
out by 12 chemical analytical laboratories owned by the struc-
tural units of the Company, as well as the laboratories of other
organizations: OOO UPTZH dlya PPD, the Federal State-Fund-
ed Healthcare Institution “Hygienic and Epidemiological Center
in the Republic of Tatarstan”, the Federal Budgetary Institution
branches of the Centre of Laboratory Analysis and Techni-
cal Metrology for the Volga Federal District. Water analysis is
conducted to check the following parameters that are typi-
cally influenced by oil production: chloride ion, sulfate ion, total
hardness, hydrocarbonates, pH, calcium, anionic surfactants
(surfactant), and crude oil and petroleum products in dissolved
and emulsified state.

In the course of industrial control of environmental protection,
totally in 2016, the Company carried out 110 thousand analy-
ses of natural water, including 10 672 chemical analyses of
water samples that were run by the OOO UPTZH dlya PPD’s
chemical-analytical laboratory. Based on the results of labora-
tory studies the water quality in major rivers within the area of
the Company’s operations was stable in 2016. The content of
chlorides, crude oil and oil products in dissolved and emulsified
state in the major rivers and in the vast majority of the springs
did not exceed maximum permissible concentrations (MPC) of
harmful substances. Now the concentrations of these harmful
substances are steadily lowering in the groundwater.

In 2016, for twenty-first consecutive time since 1995 PJSC TAT-
NEFT had organized and held annual contest “maintaining beauty
of landscaped spring sites and improving water quality”.

CONSERVATION AND SUSTAINABLE
USE OF LAND AND FOREST RESOURCES

PJCS TATNEFT addresses the issues regarding sustainable
use of land resources and soil pollution prevention with the
utmost care.

The land protection measures provide for using modular
build rigs equipped with tank circulation systems with three-
stage mud cleaning systems. This helps prevent liquid spill-
age on the land surface and eliminate construction of earth
pits as well as provides reliable protection of fertile lands on
well-site area against contamination from drilling fluids and
formation waters.

In 2016, 1 606 hectares of land were reclaimed during the
construction of pipelines and other oil facilities.

In order to create a favourable environment within its oper-
ating area and higher greenhouse gas absorption, starting
from 2000, PJSC TATNEFT has been realizing special activity
programs for planting of greenery in by-road lanes along
highways and oilfield roads in the oil producing regions of
Tatarstan. TATNEFT’s personnel had planted over 472 thou-
sand seedlings of trees and shrubs including 15 023 seed-
lings in 2016.

During the year under report, the extensive work was carried
out to reduce the agricultural land allotment for construction
of oil facilities and restore the fertility of the disturbed land,
which became possible due to pad drilling and well pad con-
struction techniques.

In order to protect the land, surface and underground waters
162.2 km of oil pipelines for the oil gathering and treatment
system and 110.9 km of water lines for the reservoir pres-
sure maintenance system were overhauled using corrosion-
resistant pipes.

In order to ensure conservation of subsoil and fresh ground-
water resources the Company continued installation of high-
ly reliable packers and corrosion-resistant tubings. In 2016,
packers of various designs were run and set in 7149 injec-
tion wells which accounted for 72.8% of the active injecting
well stock. The corrosion-resistant tubings were run in 267
injectors. Totally, since the beginning of installation the cor-
rosion-resistant tubings were run in 7 143 wastewater and
formation water injecting wells which accounted for 90.1%
of this well stock, respectively.

PJSC TATNEFT ensures water management in compliance with
the Water Code of the Russian Federation and the Federal Law
“On Subsoil”. In 2016, the use of surface water bodies was car-
ried out on the basis of 121 water use agreements concluded
with the Ministry of Ecology and Natural Resources of the Re-
public of Tatarstan (including 61 agreements made in 2016)
and 7 resolutions on assignment for use of surface water bod-
ies. In 2015, PJSC TATNEFT performed the underground water
abstraction operations on the basis of 44 subsoil use licenses.

Thanks to implementing a variety of EORs and water sustain-
able use technologies, the quarterly amount of fresh water
intake for reservoir pressure maintenance (RPM) for the pe-
riod from 2000 to 2016 had decreased by 10.7 mln m3 (1.3
times). Moreover, 100% produced water during oil produc-
tion and oil treatment operations was injected back into res-
ervoir.

The volume of water utilized in 2016 for PJSC TATNEFT’s own
needs amounted to 36.875 mln m3, including fresh water in
quantity of 36.357 mln m3. In 2016, the specific amount of
fresh water consumption per tonne of crude oil production
amounted to 1.283 m3 (2013 – 1.077 m3, 2014 – 1.078 m3,
2015 – 1.061).

The higher water consumption is explained by the increased
well drilling and completion, increased oil production and
treatment, incl. increased sour crude oil treatment (UPVSN
NGDU Yamashneft), increased product outputs (BMZ),
commissioning of social facilities (NGDU Bavlyneft).

In 2016, the specific amount of polluted waste water dis-
charged into surface water bodies per tonne of oil produc-
tion amounted to less than 0.0037 m3 (2013 – less than
0.005 m3, 2014 – less than 0.004 m3, 2015 – 0.0035 m3).

268

269

OIL SPILL EMERGENCY PREVENTION
AND RESPONSE SYSTEM

One of the PJSC TATNEFT environmental priority is to reduce
the man-induced impact on the environment through selec-
tive accumulation, collection and disposal of wastes gener-
ated in oil production processes.

The Company established a complex system to collect and
recycle production and consumption wastes. Moreover, the
wastes are used as a raw material for producing marketable
products.

In 2016, PJSC TATNEFT carried out the hazardous waste
handling activities based on the license to carry out activities
for waste detoxification and disposal of I-IV classes of dan-
ger No. 16-00125 dated 27.06.2014a issued by the Federal
Service for Supervision over Natural Resources Manage-
ment (Rosprirodnadzor).

TOTAL GENERATED PRODUCTION AND
CONSUMPTION WASTES, THOUS TONNES

2016

2015

2014

50.2

61.2

-18.0%

75.3

SPECIFIC GENERATED WASTE VOLUME PER
TONNE OF CRUDE OIL PRODUCTION

2016

2015

2014

1.772

2.273

-22.0%

2.873

The system of prevention and response to emergency situ-
ations (ES) due to oil spills and protection of people and the
environment from their harmful impact is implemented in
PJSC TATNEFT in two focus areas: complex of engineering
and organizational measures, which are aimed at enhancing
production equipment reliability, timely oil spill detection and
minimizing resulting damages as well as a set of measures to
immediately respond to this type of emergency.

Pursuant to the RF Government Regulations No. 613 from
21.08.2000 “On urgent measures to prevent and eliminate
of oil spills and petroleum products” and No. 240 dated
15.04.2002 “On procedure for organizing measures to pre-
vent and eliminate oil and petroleum products spills in the
Russian Federation”, the “Oil spills prevention and response
plans” were developed at the PJSC TATNEFT’s structural
units in accordance with the established procedure, which
were approved by the Emergency Ministry of the Russian
Federation. The plans include the calculations of the num-
ber of workforces and facilities required to eliminate an oil
spill. The contents of the Plans meet the requirements of the
regulatory legal documents.

The irreducible material stocks were secured including for
elimination of oil spills in water bodies, there were available 900
meters of booms, 15 skimmers and 10 tonnes of sorbent.

The contracts were concluded with professional rescue
teams of the Chief Directorate of the MES of Russia for the
Republic of Tatarstan and FSI ERT “Northeast militarized
well control unit.” for the purpose of prevention and elimina-
tion of emergency situations related to oil spills. The training
classes and drill exercises were conducted with regard to
elimination of possible oil petroleum products spills.

Good working conditions are maintained for 526 stationary
oil recovery facilities, booms and bio-pond to prevent oil
pollution of surface water bodies (rivers) and water basins
(reservoirs).

ENVIRONMENTAL CULTURE PROMOTION
AND ENVIRONMENTALISTS TRAINING
AND DEVELOPMENT

FUNDS COMMITTED TO ENSURE
ECOLOGICAL SAFETY AND
ENVIRONMENTAL PROTECTION

In 2016, eighty four (84) employees of PJSC TATNEFT’s
divisions were trained in a 112-hour program “Professional
training of persons to have permit for hazardous waste man-
agement” to ensure environmentally sound management of
waste production and consumption. Seventy-two (72) em-
ployees of the Company were trained in 72-hour program
“Ensuring environmental safety by managers and special-
ists of general business management systems”. Two (2)
employees completed to the training program “Ensuring
environmental safety by managers and specialists of envi-
ronmental services and environmental control systems”. In
addition, 53 managers and leading specialists of the health,
safety and environmental services of the PJSC TATNEFT’s
divisions were trained in the program “Internal Auditor of
the integrated health, safety and environment management
system. Standard ISO 14001: 2015”. Altogether, 1 413 000
rubles were spent to the training programs.

In accordance with PJSC TATNEFT’s commitment to maintain
an open dialogue with all stakeholders with regard to the Com-
pany’s environmental activities the bulk information is made
available to the public by wide media coverage including print
and electronic media of topical articles, stories, press releases
and other materials. Environmental initiatives of the enterprises
are hot topics at panel discussions with participation of part-
ners, experts, local communities and mass media. Active infor-
mation support for environmental projects is provided through
print media, internet resources and TV.

The technological processes, the nature protection round
tables, seminars of chief engineers, environmental actions,
articles on audit and certification of the integrated HSE man-
agement system are covered in an easy-to-understand form in
mass media along with the performance assessments of the
experts dealing with the environmental risks in the Company.

PJSC TATNEFT’s total investments in environmental safety
activities by all sources of funding (opex and capex) in 2016
amounted to 7 269.149 mln. rubles including the investments
assigned for environmental protection and rational use of
natural resources in the amount of 1 196.477 million rubles.
The specific amount of funds allocated by the Company to
ensure ecological security and environmental protection per
tonne of crude oil production amounted to 246 rubles (2011–
208 rubles, 2012 – 230 rubles, 2013 – 246 rubles, 2014 – 238
rubles). The results of large-scale environmental measures
showed that in 2016 in the area of PJSC TATNEFT’s opera-
tions the level of man-induced impact on the environment
did not exceed the self-regeneration potential of the ecosys-
tems. That was evidenced by lower concentration of pollut-
ants in the air and underground and surface water sources.

PUBLIC RECOGNITION

In 2016, the results were summarized with regard to PJSC
TATNEFT’s participation
in the federal and republican
contests where the Company successfully positioned its
achievements in ensuring environmental safety at its oil pro-
duction facilities:

• As part of celebration of the June 5th Day of Environ-

mentalist, the Non-governmental Environmental Fund
named after V.I. Vernadsky awarded PJSC TATNEFT with
a diploma “For active participation in All-Russian Ecologi-
cal Saturday Work “Green Spring-2016” for outstanding
contribution to the environment improvement and envi-
ronmental education” as well as commemorative prize
“Green Spring-2016”.

• Based on the results of the sanitary and ecological two

month’s urban area cleaning campaign in the Republic of
Tatarstan, PJSC TATNEFT was awarded by the Ministry of
Ecology and Natural Resources of the Republic of Tatar-
stan with the Diploma Of Honor of the “EKOVESNA 2016”
competition winner in the nomination “ECOCOMPANY” of
the Almetyevsk municipal district;

• For the 13th time in a row, PJSC TATNEFT was recognized

as the absolute “ECOleader” in the Republic of Tatarstan.

270

271

No.

Performance Indicators

Production output

Hydrocarbon production – crude oil

Gross harmful emissions, total

including:

solid substances

of which:

furnace bottom ash

gases and liquids

of which:

sulphur dioxide

carbon oxide

nitrogen oxide (on conversion to NO2)

hydrocarbons (without volatile organic compounds)

volatile organic compounds

benz(a)pyrene

Harmful substance captured and neutralized, total

including:

solid substances

of which:

furnace bottom ash

gases and liquids

of which:

sulphur dioxide

carbon oxide

nitrogen oxide (on conversion to NO2)

hydrocarbons (without volatile organic compounds)

volatile organic compounds

benz(a)pyrene

Associated petroleum gas production

Associated petroleum gas use (utilization)

Associated petroleum gas utilization rate*

Associated petroleum gas flared

Including due to scheduled maintenance of lifting equipment

withdrawal and production of clean water for company’s own needs, total

including:

surface sources

subsurface sources

other sources

Waste water received from third parties

Clean water consumption, total

including for:

household and drinking needs

production needs

other (injection for reservoir pressure maintenance)

*as per the Russian Federation Government Resolution No. 1148 of 08.11.2012

272

Unit

Report

2014

2015

tonnes

26926971

83868.674

28332674

81274.716

tonnes

1246.623

866.381

tonnes

82622.051

80408.335

9474.642

12749.562

1407.619

10258.428

48349.728

0.003

157.378

7831.484

9641.82

1389.957

11166.128

49947.481

0.005

144.082

tonnes

157.378

144.082

tonnes

tonnes
mln m3
mln m3

%
mln m3
mln m3
thous m3

thous m3
thous m3
thous m3
thous m3
thous m3

thous m3
thous m3
thous m3

946.941

899.538

95.17

47.403

1.651

978.471

941.242

96.44

37.229

2.357

28565.03

36357.06

1541.1

974.71

26058.87

515.6

28565.03

881.58

7867.95

19815.5

1795.02

973.11

33588.93

517.81

36357.06

844.68

14270.24

21242.14

Waste water used for reservoir pressure maintenance

Water disposal in surface water bodies, total

including:

contaminated (without treatment)

contaminated (insufficiently treated)

regulatory clean water (without treatment)

treated to standard quality:

- on biological treatment plants

- on physical-and-chemical treatment plant

- on mechanical treatment plants

Water disposal into underground horizons, tota;

including for reservoir pressure maintenance

Recycled water volume

Sequentially reused water volume

Existing wastes

at year beginning, total

including oil sludges (III class of hazard)

at year end, total

including oil sludges (III class of hazard)

Wastes generated during year

including oil sludges (III class of hazard)

Wastes used, total

including oil sludges (III class of hazard)

Waste detoxified on enterprise site, total

including oil sludges (III class of hazard)

Wastes given to third parties, total

including oil sludges (III class of hazard)

Disturbed land area:

at year beginning

at year end

Contaminated land area:

at year beginning

at year end

Remediated land area during year

Number of accidents, total

including with environmental implications

Area contaminated as a result of accidents:

lands

water body surfaces

Accidental loss quantity:

oil, petroleum products

natural gas

Process loss of hydrocarbons:

oil

natural gas

Environmental damage from accidents

Commissioning of facilities for trapping and neutralizing harmful substances from waste
gases

Commissioning of waste water treatment facilities

thous m3

tonnes

thous m2

tonnes

thous rub.

ths m3/h

thous rub.

ths m3/h

thous rub.

515.6

94.6

517.81

106.08

94.6

106.08

42,14

52.46

164524.96

91180.28

41,35

64.73

178345.1

91185.39

143491.33

156585.15

0.8

61205.8

35274.8

6176.4

2607.8

148.5

146.1

78505.7

34488.9

261

325

0.0

1498

0.8

168.9

50211.0

21278.0

8045.7

116.4

0.0

79014.0

20992.7

325

439

0.0

1606

9603.9

4240.0

0.25

189 697.5

273

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYTHE CORPORATE ENVIRONMENTAL POLICY IS FOCUSED ON PREVENTING AND MITIGATING
THE NEGATIVE IMPACT OF THE PRODUCTION PROCESSES ON THE ENVIRONMENT AS WELL AS
ON RESTORING NATURAL ECOLOGICAL SYSTEMS, SAVING ENERGY RESOURCES, LOWERING
EMISSIONS AND ENSURING ENVIRONMENTALLY SAFE WASTE HANDLING AND MANAGEMENT.

THE COMPANY GIVES A HIGH PRIORITY TO DEVELOPMENT AND IMPLEMENTATION OF
ENVIRONMENTALLY EFFICIENT TECHNOLOGIES ENSURING REPLACEMENT AND SUSTAINABLE
USE OF NATURAL RESOURCES.

The achievements of the Company in nature conservation and ecological security at production facilities were recog-
nized at the “ECOleader” Competition in the Republic of Tatarstan Republic in 2016.

• PJSC TATNEFT once again was designated as the Absolute Winner.
• The TANECO Complex won the first place in the “Oil Producing and Petrochemical Industry” nomination category.

Commissioning of recycling water systems

Commissioning of waste neutralization and utilization

Equipping water intake facilities with meters to measure water volumes discharged into
natural (water) bodies (total existing devices)

incl. purchased and put into operation for year under report

Equipping water treatment facilities with meters to measure water volumes discharged into
natural (water) bodies (total existing devices)

incl. purchased and put into operation for year under report

35 Maintenance of associated petroleum gas (APG) metering units

Charges for negative impact on

including:

pollutant emissions:

normative

excess

pollutant discharges into water bodies:

normative

excess

waste disposal:

normative

excess

Charges for use of water bodies (water use charge) based on water use contracts

Fixed capital expenditures committed to environment protection and sustainable natural
resources management:

planned

actual, total

including:

water bodies conservation

air protection

protection of lands from production and consumption wastes

land reclamation

Current (operating) expenditures for environment conservation and expenditures for major
repairs of fixed production assets related to environment conservation, total:

including:

air protection and climate change control

waste water collection and treatment

waste handling

conservation and remediation of lands, surface and subsurface waters

environment protection from noise, vibration and other types of physical effects

biodiversity preservation and natural areas conservation

environmental radiation protection

research and development activities to mitigate human impact on the environment

other environmental activities

beautification (planting of trees and shrubbery)

ths m3/h

thous rub.

tonnes/year

thous rub.

pcs.

thous rub.

pcs.

thous rub.

pcs.

thous rub.

тыс. руб.

thous rub.

pcs.

thous rub.

11,2

460

12 595.6

198 235

102 929

4 752

98 177

86 381

86 370

8 925

8 920

481

5 375.9

34222

5822

5675

147

22128

6272

6271

517.045

740.292

937 945.9

1 232 214.4

1 196 477.0

34 811.6

63 498.5

828 305.9

1 016 702.0

0.0

74 828.5

5 703 779

0.0

116 276.5

6 072 672

370 168

133 486

157 045

371 289

130 901

137 085

4 937 652

5 317 435

27 924

1 143

74 516

1 845

15 194

31 916

497

1 704

112 532

1 229

15 023

27 824

274

275

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUABOUT COMPANYBOARD OF DIRECTORS REPORTCORPORATE MANAGEMENTFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYLIST OF ACRONYMS

The Public Joint Stock Company TATNEFT named after V.D. Shashin throughout the text of the Report is referred to as PJSC
TATNEFT, TATNEFT, Company, and Society.

BIA

AGFS
(AGZS)

Business Idea Auction

Autogas Fueling Station

ASPI (AGNI) Almetyevsk State Petroleum Institute

Anode bed

FFS (AZS)

Fuel Filling Station

AIS

JSC

Automated information System

Joint Stock Company

BWMB

Basin Water Management Board

BMZ

VOIR

GMPS
(GZNU)

Bugulma Mechanical Plant (PJSC TATNEFT's Business Unit)

All-Russian Society of Inventors and Innovators

Group Metering Pump Station

GMS (GZU) Group Metering Station

STSI
(GIBDD)

SCNS

GOST

Frac

F&L

HEI

BPS

CHC

State Traffic Safety Inspectorate

State Complex Nature Sanctuary

Horizontal Settler

National State Standard

Formation Hydraulic Fracturing

Fuels and Lubricants

Hydraulic Engineering Installations

Booster Pumping Station

Children's Holiday Camp

European Union

UNECE

United Nations Economic Commission for Europe

RCT

ZAO

CIS

PPD

KFU

CSR

Reinforced concrete tank

Private Joint Stock Company

Information System

Corporate Information System

Pad Pumping Station

Kazan (Volga region) Federal University

Corporate Social Responsibilty

MGPP

Minnibaevo Gas Processing Plant

Moscow Interbank Currency Exchange

Moscow
Interbank
Currency
Exchange;
MICEX

MPP

Metal-Plastic Pipes

(MTBR)

Mean Time Between Repair

Enhanced Oil Recovery

Multiphase Pump

Ministry for Emergency Situations

Oil and Gas Field Operating Division (PJSC TATNEFT's Business Unit)

Mineral Resource Recovery Tax

Value Added Tax

Nizhnekamsk All Steel Tires Plant

Research and Development

Oil Well Tubing

Intangible assets

EOR

MPP

MES

NGDU

MRRT

VAT

NASTP

R&D

Tubing

ITA

276

OR & PP

Refinery

OPU

STC

PCC

OOO

NCA

PDC

Oil Refining and Petrochemical Plants

Oil Refinery

Oil Processing Unit

Science and Technology Centre

Petrochemical Complex

Limited Liability Company

Nature Conservation Area

Pilot Operations

Production Dual Completion

P&I DC

Production and Injection Dual Completion

IDC

SEZ

MPC

APG

RPM

PCP

VSST

RIA

RUSO

SVO

CPS

CGS

Injection Dual Completion

Dual Completion

Special Economic Zone

Maximum Permissible Concentration

Associated Petroleum Gas

Reservoir Pressure Maintenance

Polymer Coated Pipes

Power Substation

Chain Drive

Vertical Stainless Steel Tank

Result of Intellectual Activity

Regional Youth Social organization

Republic of Tatarstan

Russian Federation,

Super Viscous Oil

Cathodic Protection Station

Corporate Governance Standard

EDMS

Electronic Document Management System

TTD

FEC

TPP

DCU

LHVR

Trading House

Trade Technical House

Technical Specifications

Fuel and Energy Complex

Thermal Power Plant

Delayed Coker Unit

Management Company

Light Hydrocarbon Vapour Recovery

HSOTF

High Sulfur Oil Treatment Facility

OTF

IWSU

Oil Treatment Facility

Initial Water Separation Unit

OOO UPTZH
dlya PPD

(PJSC
TATNEFT's
Subsidiary)

SRU

UTNGP

AS-tires

PTC

NGL

EIC

ECU

NPV

DPI

Process Fluid Treatment Facility for Reservoir Pressure Maintenance

Установка сероочистки

Sulphur Recovery Unit

TATNEFTEGAZPERERABOTKA Division (PJSC TATNEFT's Business Unit)

All-Steel Tires

Personnel Training Centre

Natural Gas Liquids

Electrical Insulating Connection

ELectronic Corporate University

Net Present Value

Discounted Profitability Index

277

PUBLIC JOINT STOCK COMPANY TATNEFT NAMED AFTER V.D. SHASHIN

REPORT PREPARATION TEAM:

ABBREVIATED NAME:
PJSC TATNEFT n.a. V.D. Shashin

HEAD OFFICE:
75, Lenin Street,
Almetyevsk 125047,
Republic of Tatarstan,
Russian Federation
Phone: +7 (8553) 30-75-68

REPRESENTATIVE OFFICE IN MOSCOW:
125047, Russian Federation,
17, Tverskoy Boulevard, Moscow
Phone: +7 (495) 937-55-78

REPRESENTATIVE OFFICE IN KAzAN:
Russian Federation,
Republic of Tatarstan
71, Karl Marx Street, Kazan
Phone: +7 (843) 533-83-12

FOR SHAREHOLDERS:
Corporate Secretary Office
Phone: +7 (8553) 37-61-01

AUDITOR OF COMPANY’S FINANCIAL STATEMENTS
ACCORDING TO RUSSIAN AND INTERNATIONAL STANDARDS
Joint-Stock Company “PriceWaterhouseCoopers Audit”
125047, Russian Federation,
10, Butyrskiy Val Street, Moscow
Belaya Ploshchad Business Centre.
Phone: +7 (495) 967-60-00

COMPANY’S REGISTRAR:
OOO Euro-Asian Registrar
Russian Federation,
Republic of Tatarstan
10, Mira Street, Almetyevsk, 423450
Phone: +7 (8553) 22-10-88

COMPANY WEB-SITE
tatneft.ru

REPORT RELEASE MONTH AND YEAR:
May 2017

Voskoboinikov V.A.
Gaifullina R.R.
Gamirov D.M.
Dinmuhamedov R.S.
Dorpeko N.E.
Zurbashev A.V.
Karpov V.A.
Kurochkin D.V.
Matveev O.M.
Mozgovoi V.A.
Mukhamadeev R.N.
Pavlov R.R.
Rafikov R.P.
Salahov R.A.
Tikhturov E.A.
Khisamov R.M.
Khisamov R.S.
Sharagina O.A.

CONCEPTION AND COORDINATION

Dorpeko N.E.
Khisamov R.M

DESIGN AND PRINTING

Design To Business | Brand Assistance

278

279

PJSC TATNEFT ANNUAL REPORT 2016www.TATNEFT.RUFINANCIAL RESULTSSOCIAL RESPONSIBILITYINDUSTRIAL SAFETY AND ENVIRONMENTAL POLICYtatneft.ru