ANNUAL REPORT 2018
GROWTH STRATEGY
SUSTAINABLE DEVELOPMENT
2018 was a landmark year for our Company. It is the year of the 75th anniversary
of the beginning of the oil field development in the Republic of Tatarstan and the 70th
anniversary of the discovery of one of the world’s largest Romashkinskoye field. The
Company participated in the development of these fields from the very beginning.
The accumulated potential and new opportunities are a reliable foundation for the
Company’s long-term development.
The 20018 Annual Report of the Public Joint Stock Company TATNEFT was
approved by the Annual PJSC Tatneft Shareholders’ Meeting held in June 21, 2019,
Protocol No. 29 dated 25.06.2019
2
www.tatneft.ru
3
Contents
4
About the Company
6-7
TATNEFT Group
8-9
Business model
10-13
Mission and values of the Company
14-15
16-19
Key fundamentals of the growth
strategy
Strategy-2030 and key performance
indicators of 2018
20-31
Macroeconomics
33
34-35
Report of the PJSC TATNEFT
Board of Directors on Priority
Lines of Business
Joint address of the President of the
Republic of Tatarstan, Chairman of the
Board of Directors R.N. Minnikhanov
and General Director, Chairman of the
Management Board N.U. Maganov
to shareholders, investors and partners
36-37
Priority lines of business
38-41
Performance indicators
42-43
Investment program
44-45
Resource potential
46-65
Company’s operations review
In 2018, TATNEFT successfully implemented
its tasks with a focus on ensuring long-term
growth in shareholder value.
148
Appendices
149-230
Appendix 1. Consolidated financial
statements in accordance with
International Financial Reporting
Standards as of and for the year
ended December 31, 2018 with
an independent auditor’s report
231-247
Appendix 2. PJSC TATNEFT
financial statements and the
independent auditor’s report
dated December 31, 2018
249-251
Appendix 3. Report on interested
transactions concluded by PJSC
TATNEFT named after V.D. Shashin
in 2018
252-264
Appendix 4. Report on compliance with
the principles and recommendations
of the Corporate Governance Code
265-269
Appendix 5. Principal risks
270-275
Appendix 6. On the annual report and
the underlying regulatory documents
constituting the framework for the current
annual report
67
Corporate governance
123
Sustainable development
124-125
Global business challenges and new
opportunities
126-127
Sustainable development goals
128
Human rights
129
Interaction with stakeholders
130-137
Industrial, occupational and
environmental safety
138-141
Staff and social guarantees
142-143
Social investments
144-145
Interaction with suppliers
The Company’s strategy implementation includes
aspects of sustainable growth and provision of
favorable economic and social conditions for business
development based on the most efficient use of all
types of resources and creating value for stakeholders
at each stage of activity.
68-73
Corporate governance system
74-75
General meeting of shareholders
76-93
Board of Directors
94-99
Executive bodies
100-101
Management bodies’ fee
102
Corporate Secretary
103
Audit
104-105
Audit Commission
106-108
Information policy
109
Anti-corruption policy
110-113
Risk management and internal control
114-121
Interaction with shareholders and
investors
114
Share capital
117
Dividend policy
119
Enforcement of shareholder rights
The company follows the principle of constructive
interaction with all stakeholders in the interests of
shareholders to make strategically balanced decisions
and achieve high performance simultaneously
maintaining a favorable environment and developing
human capital.
Annual Report 2018TATNEFT Group
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About the company
TATNEFT is one of the leading Russian oil and gas producers with over 75 years
of experience in the industry. The full production cycle vertical integration strategy
is implemented in the Group status.
The Company’s main assets are located in the Russian Federation, business
projects are implemented in the domestic and foreign markets.
The TATNEFT Group’s structure provides management
processes from obtaining licenses for resource development to
the sale of oil, oil and gas processing products and petrochemicals
in the domestic market and for export, as well as the manufacturing
of equipment for oil production, oil and gas treatment and
processing, provision of engineering, supply and construction
services for oil, gas and petrochemical projects. The Company
operates a developed network of filling stations under the TATNEFT
brand. By now, the Company has also begun to develop the gas
and petrochemical industry.
The business infrastructure is formed by the geographical
proximity of oil and gas production, the Company’s own oil
processing and generating facilities and high-quality logistics for
the sale of oil and oil products.
The TATNEFT Group’s structure includes banking business
(ZENIT Banking Group).
For more information on the TATNEFT Group’s structure and
PJSC TATNEFT’s subsidiaries, see the IFRS Consolidated Financial
Statements for 2018 (Appendix 1 to the Annual Report) as well as on
page 6-7 of this Annual Report.
Geographic reach
LARGE FIELDS AND MAIN PRODUCTION IN THE TERRITORY OF THE REPUBLIC OF TATARSTAN
EXPLORATION AND PRODUCTION OUTSIDE THE REPUBLIC OF TATARSTAN
TATNEFT’S FILLING STATION NETWORK OPERATION AREAS
Nenets
autonomous district
Ulyanovsk region
Samara region
Orenburg region
Republic
of Kalmykia
BELARUS
UKRAINE
RUSSIA
Geological exploration
Oil and gas processing
Tire production
Retail network
Energy
Machine building
Equipment and
technology supply
Banking segment
Bondyuzhskoye
Pervomayskoye
NIZHNEKAMSK
Romashkinskoye
Novo-Elkhovskoye
ALMETYEVSK
Sabanchinskoye
Bavlinskoe
RUSSIA
KAZAKHSTAN
TURKEY
TURKMENISTAN
CHINA
Company capitalization
Following the results of 2018, the Company’s total market
capitalization (the market value of common and preferred shares)
increased by RUB 587.7 billion as compared to the end of 2017 and
amounted to RUB 1.7 trillion.
In dollar terms, total market capitalization increased by 27.4%
to USD 24.2 billion.
The company is in the top 10 of the most
expensive public russian companies
in terms of capitalization
Capitalization, billion RUB
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
299,8
307,6
344,6
475,0
471,6
513,4
716,6
1,7 trillion rubles
(USD 24,2 billion)
total market capitalization
of the Company in 2018
During 2018, TATNEFT’s market capitalization
reached more than RUB 1.9 trillion
+ 53.5%
CAPITALIZATION GROWTH COMPARED
TO THE END OF 2018
965,0
1097,0
1684,7
LIBYA
Capitalization is calculated at the close of trading in the reporting year.
Annual Report 2018TATNEFT GroupTATNEFT GROUP
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TATNEFT Group
Main segment-forming divisions and enterprises
Oil and gas production
NGDU Almetyevneft
NGDU Aznakaevskneft
NGDU Bavlyneft
NGDU Jalilneft
NGDU Elkhovneft
NGDU Leninogorskneft
NGDU Nurlatneft
NGDU Prikamneft
NGDU Yamashneft
LLC TATNEFT-Samara
OJSC Kalmneftegaz
CJSC Severgeologiya
(**until 10.09.2018)
LLC Severgeologiya (*since
10.09.2018)
CJSC Severgaznefteprom
(**until 10.09.2018)
LLC TATNEFT-NAO (*since 10.09.2018)
CJSC KalmTatneft
CJSC Yambuloil
Oil and gas processing,
oil and oil product
sales
Crude Oil & Oil Products Sales
Department
Tatneft Europe AG
Tataneftegazpererabotka Administration
Elkhovsk Oil Refining Administration
JSC TANECO
LLC Tatneft-AZS Center
LLC Tatneft-AZS-Zapad
LLC Tatneft-AZS-Yug
LLC Tatneft-AZS-Ukraine
LLC Tatneft-Trans
FLLC Tatbelnefteprodukt
LLC Saimen (**until 01.10.2018)
LLC Kharkov-Capital
LLC Poltava-Capital
LLC Processing Center
LLC TATNEFT-Aviaservice
LLC Tatneft-AZS-Tashkent (*since
26.12.2018)
Pjsc tatneft
is the corPorate center
of the GrouP
Pjsc tatneft
Board
of directors
ManaGeMent
Board executive
office
Petrochemical
production
LLC Managing Company
TATNEFT-Neftekhim
PJSC Nizhnekamskshina
LLC Nizhnekamsk Truck Tire Factory
LLC Nizhnekamsk All Steel Tire Plant
JSC Nizhnekamsktekhuglerod
JSC Nizhnekamsk Mechanical Plant
LLC TATNEFT-Neftekhimsnab
(**until 06.07.2018)
LLC Trading House KAMA
JSC Yarpolimermash-TATNEFT
Heat power energy
LLC Nizhnekamsk CHP
LLC TATNEFT-Energosbyt
JSC Almetyevsk Heating Networks
As of December 31, 2018, TATNEFT Group
included over 100 companies
PJSC TATNEFT is the corporate center of the Group coordinating
the activities of the enterprises that form the Company’s business
segments. The TATNEFT Group management organization is based
on a single mission and targeted development priorities, while
respecting the fair interests of all members of the Group.
The primary industry environment is all large Russian oil companies,
including PJSC Rosneft Oil Company, PJSC LUKOIL, PJSC
Surgutneftegas, PJSC Gazprom Neft and Public Joint Stock Oil Company
Bashneft. The Company competes with these and other oil companies
for the right to supply crude oil and oil products in Russia and to the
international market.
Core production
support
R&D
and organizational support
Tatneftesnab Administration
LLC Process Fluid Treatment Facility
for Reservoir Pressure Maintenance
Tatar Geological Exploration Department
Bugulma Mechanical Plant
Motor Transport Enterprise LLC
TATNEFT-URS
LLC TATNEFT Trade and Technology
House
LLC TATNEFT-Neftekhimservis
TatNIPIneft
Technological Development Center
(Construction Project Delivery Department)
Business Service Center
LLC NTC TATNEFT (in Skolkovo)
LLC NPC Oil and Gas Technologies
JSC TatNIIneftemash
LLC TATITNEFT
* enterprise creation
** enterprise liquidation
Branch and representative
offices
Representative Office in Moscow
Representative Office in the Republic of Iraq
Representative Office in Ukraine
Branch Office in Libya
Branch Office in Turkmenistan
Annual Report 2018TATNEFT GroupTATNEFT GROUPwww.tatneft.ru 8
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Business model
PJSC TATNEFT
IS THE CORPORATE CENTER
OF THE TATNEFT GROuP
CORPORATE GOVERNANCE
• Balanced strategy
• Logical organizational structure
• Resource consolidation
• Operational performance monitoring
• Growth point creation
• Reduction of intersegment costs
• Strengthening of financial sustainability
• Risk control
• Formation of unified standards
• Interaction with the business environment
RESOuRCE BASE
PRODuCTION
OIL AND GAS PROCESSING
OIL AND OIL PRODuCT SALES:
EXPORT AND DOMESTIC MARKET
VALuE CREATION
UPSTREAM
Ensuring increase in production
and replenishment of reserves
• Strengthening the resource base
• Extension of production asset geographic reach
• Development of hard-to-recover,
including super viscous (SVO), oil fields
DOWNSTREAM
Strengthening the structure
of core assets and increasing
the operating efficiency of business
segments.
Production of marketable, highly
competitive and premium oil and gas
products. Development of premium
trade channels.
RETAIL TRADE NETWORK
Geographical proximity of the oil production center
to the main regions of sales and processing
of oil and oil products – the Company has
the lowest weighted average rate
of oil transport to European
markets among major vertically integrated
oil companies of Russia.
MACHINE BuILDING
PETROCHEMISTRY
The company’s business model integrates the potential of core diversified assets
in the areas of exploration and production, oil processing, petrochemistry, oil and oil
product sales, as well as energy, machine building and technology on the basis of
a unified strategy, ensuring the creation of value and conditions for long-term sustainable
development, taking into account external factors and risk mitigation mechanisms.
The business structure allows the Company to maximize the use of resource assets
and production facilities based on project and process management within a single
investment policy.
GAS-BASED PETROCHEMICALS
HEAT POWER ENERGY
EXTERNAL IMPACT FACTORS
products
• Macroeconomics
• Global and domestic prices on oil and oil
• Global demand for oil and oil products
• Taxation and rate policy
• Redistribution of supply margins
• Inflation rate
• Exchange rates
• Transport rates
• Technological and environmental regulations
• Competitive environment
BANKING SEGMENT
Includes PJSC Bank ZENIT and its subsidiaries
(ZENIT Banking Group). ZENIT Banking Group
is consolidated into the TATNEFT Group financial
statements since the fourth quarter of 2016.
See details on ZENIT Banking Group activities
at https://www.zenit.ru/bank/disclosure/ annual-reports/
Annual Report 2018TATNEFT GroupTATNEFT GROUP
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Mission and values of the Company
THE COMPANY’S MISSION is to ensure progressive development in the
status of one of the largest vertically integrated Russian producers of oil and
gas, oil and gas processing products and petrochemicals based on efficient
shareholder asset management, rational use of natural resources and
corporate social responsibility.
Strategy-2030
The Company’s strategy implementation includes aspects
of sustainable growth and provision of favorable economic and
social conditions for business development based on the most
efficient use of all types of resources and creating value for
stakeholders at each stage of activity.
• High-quality organizational
• Advanced forms of business
structure
process management and
organization
• High level of staff competence
• Qualitative asset structure
project management
• Strategic planning
• Efficient investment
• High organizational
• Margin increase
efficiency
in value chain
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The Company’s key task is to ensure the most effective monetization of the
reserves until 2030 and to channel the profits to create new promising value
growth points, to diversify the business, which would contribute to maintaining
a stable position and profitability of the Company beyond 2030.
Priority – growth of the shareholder value through increase
of free cash flow and payment to shareholders.
Sustainable competitive
position in the industry
Strong financial
standing – focus on
growth in profitability
Balanced investment policy
Scenario planning with built-in
protection against sudden volatility
in oil prices and macroeconomics
Planning business growth and free
cash flow with scenario planning
variability
High standards of corporate
governance and business
planning
Guaranteed
progressive
dividend policy
Support
of investment programs
in accordance
with Development Strategy
Potential of capital
distribution in case
of oil price increase
• Creation of sustainable
• Digital integration into
technological basis
all production and
management processes
• The Company’s own scientific
and technical complex
• Commitment to 17 UN
Sustainable Development
Goals
responsibility
• Corporate social
• High environmental
• Human life and health
responsibility
priority
The Company is aware of its responsibility to shareholders,
investors, partners, employees and society as a whole, equal
responsibility for operating results, industrial and environmental
safety and seeks to maximize its potential for long-term sustainable
development.
According to the Company’s position, harmonious and efficient
business development can be ensured only when a balance
between these aspects, high ethical principles and the social
partnership development are observed.
The Сompany’s consistent programmatic actions allow to ensure the oil and
gas production profitability, maintain a high level of hydrocarbon resource
support, efficiently develop its own oil processing and petrochemistry, as well
as increase innovative potential and introduce progressive digital solutions to
create a reliable technological basis for the Сompany.
Annual Report 2018TATNEFT GroupTATNEFT GROUP
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Сreating value
for stakeholders
Investors
and shareholders
minimUm
50 %
OF NET PROFITS
IS uSED TO PAY
DIVIDENDS
+72 %
GROWTH OF PROFITS
DuE TO THE GROuP
SHAREHOLDERS
IN 2018
27.5%
RETuRN ON CAPITAL E
MPLOYED (ROACE)
+56.8 %
GROWTH OF EBITDA
Profit due to the Group
shareholders (billion RUB)
2017
2018
Basic and diluted profit
in terms of one share (RUB)
Common
2016
2017
2018
Preferred
2016
2017
2018
Share capital (billion RUB)
2014
2015
2016
2017
2018
123.1
211.8
47.50
54.73
94.11
47.48
54.32
93.89
582.2
657.7
708.9
718.7
776.8
Government
and society
Environmental
responsibility
Social
investments
475 billion RUb
THE TOTAL AMOuNT OF ACCRuED
TAXES, PAYMENTS AND CONTRIBuTIONS
FOR PJSC TATNEFT IN 2018.
TATNEFT is one of the largest
taxpayers in the region of its main
activity.
Creation of high-performance jobs
OVER
55 000
JOBS
64 000 RUb
MONTHLY SALARY
>
33 000
OF THE COMPANY EMPLOYEES
WERE TRAINED IN 2018
inClUding
>
6 000
OF THE COMPANY EMPLOYEES
WERE TRAINED AT CORPORATE
uNIVERSITY IN 2018
“The company realizes that the long-term sustainable
business development is based on the social progress of the
society as a whole. We are making a significant contribution
to improving the social infrastructure – supporting health,
science, education, spiritual heritage, culture and sport.
Coordinated measures with the heads of cities and
settlements in the areas of our operation give a successful
result in improving the life quality not only of the Company’s
employees and their families, but of the local population as
well.”
General Director of PJSC TATNEFT N.U. Maganov
SOCIAL INVESTMENT PROGRAMS COMPREHENSIVELY
SuPPORT THE SOCIAL INFRASTRuCTuRE
DEVELOPMENT IN THE AREAS OF THE COMPANY’S
MAIN ACTIVITY AND CONTRIBuTE TO THE
IMPROVEMENT OF LIVING CONDITIONS
>5.6 billion RUb
SOCIAL INVESTMENT VOLuME IN 2018
>770 million RUb
AIMED AT TARGETED ASSISTANCE
uNDER THE MILOSERDIE PROGRAM
>25.7million RUb
AIMED AT 44 SOCIAL PROJECTS SELECTED
ON A GRANT BASIS WITHIN A CHARITABLE
FOuNDATION OF TATNEFT
>11billion RUb
TOTAL INVESTMENTS OF THE TATNEFT GROuP
AIMED AT ENVIRONMENTAL SAFETY
REDuCTION OF MAN-MADELOAD ON
THE ENVIRONMENTTO THE LEVEL WHERE
THERE IS A POTENTIALFOR SELF-RECOVERY
OF ECOSYSTEMS
Prevention
of global climate
change
As part of measures to prevent global climate
change, TATNEFT Group is developing a system for
accounting and managing greenhouse gas emissions,
applies emissions capture technologies, develops
a direction on the use of low-carbon energy sources
such as gas and renewable sources, implements
resource-saving and energy efficiency programs,
produces and uses environmentally friendly types
of fuel.
In 2018 – implementation of a greenhouse gas
accounting and inventory system in accordance with
the new requirements of the Russian Federation
legislation and international standards in the field
of climate change.
The Company prevents
air emissions
>3 million tonnes
(in Co2 eqUivalent)
GREENHOuSE GAS PER YEAR DuE TO
THE HIGH LEVEL OF EFFICIENT uSE OF
ASSOCIATED PETROLEuM GAS
Annual Report 2018TATNEFT GroupTATNEFT GROUPwww.tatneft.ru 14
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15
Key fundamentals of the growth strategy
In 2018, the Board of Directors adopted the TATNEFT Group Development Strategy until
2030, accumulating ambitious tasks based on the previously approved Strategy 2025
that already confirmed its effectiveness at the early stages
expAnsion of The geogrAphiC reACh And
The resourCe bAse ouTside The republiC
of TATArsTAn And The russiAn federATion,
including gaining access to oil and gas reserves
with the possibility of forming strategic alliances,
as well as developing new markets for products.
sTrengThening TeChnologiCAl
poTenTiAl wiTh effiCienT invesTmenT
in The produCTion bAse developmenT
And modernizATion bAsed
on accumulating digital high-tech
solutions, developing new and improving
the efficiency of the used equipment
and technologies as a new generation
unified production management platform
at all stages of the value chain.
inCreAsed produCTion And sAles
of CompeTiTive finished produCTs
wiTh high Added vAlue that meet
the global environmental standards
and promising market requirements,
the development of the Company’s
own oil processing facilities,
petrochemical production facilities.
The inCreAse in The volume of
profiTAble oil And gAs produCTion
from The produCTion sTAbilizATion –
To susTAinAble orgAni C growTh, increased
oil recovery in the developed license fields and
the active development of new fields, including
highly viscous and hard-to-recover oil fields
in the republic of Tatarstan while reducing
specific operating and investment costs.
ensuring susTAinAble
developmenT based on a high
level of corporate social responsibility,
industrial and environmental safety and
environmental balance in the process
of production and business activities.
improving The effiCienCy of The oil
produCT reTAil TrAde neTworK And
diesel fuel refineries of the Company
through filling stations and small wholesale;
updating the brand concept and unique
trade offer with an increase in service
standards and the development of related
services.
The corporate strategy is aimed at long-term sustainable
development of the Сompany — ensuring an optimal balance between
the oil and gas production and refining volumes and achieving the
maximum operating income in all business segments.
holding The leAding posiTion
in The russiAn Tire mArKeT And
developmenT of new mArKeT niChes
through the efficient implementation
of marketing programs, quality
improvement and expansion
of the product range.
Annual Report 2018TATNEFT GroupTATNEFT GROUP 16
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High efficiency
UPSTREAM
High-tech facilities
DOWNSTREAM
Asset security over 30 years
Reserve replacement ratio > 100%
Production growth to 38.4 million tonnes/year
Increase in oil processing capacity
to 15.7 million tonnes/year
With a 99% processing depth
89% light oil product yield
Produced oil
monetization
Optimal balance of oil
and oil product sales
Увеличение выпуска премиальных
нефтепродуктов
Development of premium trade
channels and logistics optimization
of oil product sales
Strategy – 2030
Key performance indicators of 2018
+
2.1%
PRODuCTION GROWTH
+
9.6%
THROuGHPuT GROWTH
20.3 million
tonnes
11.3 million
tonnes
CRuDE OIL SOLD
OIL PRODuCT SOLD
TATNEFT Group
hydrocarbon reserves
1.35 billion tonnes o.e.,
INCLuDING PROVEN RESERVES
970.9 million tonnes o.e.
(6915.9 MILLION BARRELS O.E.)
29.5 million
tonnes
576.4 tHoUsand
baRRels/daY
9.2 million
tonnes
179 tHoUsand
baRRels/daY
PRODuCTION VOLuME
THROuGHPuT
>
40%
OIL PRODuCED DuE TO TERTIARY
AND HYDRODYNAMIC ENHANCED
OIL RECOVERY
>
35%
CuRRENT OIL
RECOVERY FACTOR
10.1 million tonnes
PRODuCTION OF OIL
AND GAS PRODuCTS
Current reserve
replacement ratios
TATNEFT Group production, million tonnes
Oil processing, thousand barrels/day
297.6%
200.4%
OF 1Р OIL
OF 2Р OIL
2017
2018
Average daily oil flow rate, thousand barrels/day
2017
2018
28.9
29.5
564.8
576.4
2017
2018
163.3
179.0
Production of oil and gas products, thousand tonnes
Production of oil products
2017
2018
Production of gas products
2017
2018
8.4
8.9
1.1
1.2
38.6
45.0
Sales to the domestic market
Sales to the non-CIS countries
Sales to the CIS countries
Own oil processing
+
222.5 billion RUb
GROWTH OF REVENuE FROM OIL
AND OIL PRODuCT SALES
829.4 billion RUb
REVENuE FROM OIL
AND OIL PRODuCT SALES
Crude oil delivery
destinations (%)
Oil products delivery
destinations (%)
31.1
4.1
29.5
million
tonnes
26.2
5.2
49.8
11.3
million
tonnes
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19
Growth in
petrochemical
unit profitability
Retail business
efficiency and
margin growth
The Company’s
own generating
facilities
Banking segment
ZENIT Banking
Group
Efficiency of
industrial and environmental
safety management
Tire sales growth
by 2030 to 18.1 million pcs/year
Growth in average
daily sales through
1 filling station by 2030
to 13.4 ton/day
Ensuring power
generation by 2030
of 2.7 billion kW/h per year
Transition to the most
crisis-resistant model
of a universal bank
The Company strives to achieve leadership positions
in the field of industrial safety, occupational safety
and environmental friendliness of production, minimizing
environmental impact, including climatic aspects.
Ensuring compliance with the last generation international
standards ISO 14001:2015 and ISO 45001:2018
Strategy 2030
Key performance indicators of 2018
14.6 million PCs.
TIRE PRODuCTION
370
COMMODITY ITEMS
20%
SHARE IN THE DOMESTIC MARKET
30%
EXPORT SuPPLIES
50 CoUntRies
DELIVERY DESTINATIONS
711
FILLING STATIONS, INCLuDING 109 FILLING
STATIONS OuTSIDE OF THE RuSSIAN
FEDERATION
+ 29.1%
3 455 tHoUsand
tonnes
OIL PRODuCT SALES THROuGH
RETAIL TRADE NETWORK
+13.8%
9.1tonnes / daY
1 FILLIJNG STATION AVERAGE DAILY SALES
Industrial production
of motor gasolines
AI-92, AI-95, AI 98, AI 100.
Sales through the network
of the Company’s own
filling stations.
1.2 billion KW/H PeR YeaR
POWER GENERATION
Ensuring the reliability
of power supply to the
Company’s own production
facilities and enterprises
of the Nizhnekamsk
industrial hub
500 000
RETAIL CuSTOMERS
20 000
CORPORATE CuSTOMERS
Building profitable
Business
The Company implements successive
measures in the field of climate conservation.
FoR tHe PeRiod oF 2016-2018
>96%
26 %
20 %
EFFICIENT uSE OF ASSOCIATED
PETROLEuM GAS
One of the highest rates
in the industry.
REDuCTION OF GROSS
EMISSIONS OF POLLuTANT
SuBSTANCES INTO
ATMOSPHERIC AIR
REDuCTION OF GROSS
EMISSIONS OF GREENHOuSE
GASES (CO2-Eq.) FOR THE
PERIOD OF 2016-2018.
> 9000000
GREEN TREES AND SHRuBS PLANTED
IN 2013-2018 uNDER THE GREEN
INVESTMENT PROGRAM, WHICH IS
ABOuT 5 000 HECTARES OF FOREST
>1billion RUb
EXPENDITuRES
ON OCCuPATIONAL
SAFETY BY
TATNEFT GROuP
50 %
INJuRY REDuCTION
The targeted program activities aimed at preserving
life and health, improving the working conditions of
employees, reducing accidents, significant production
risks, improving the safety of equipment and fire safety
of facilities.
0.14
ACCIDENT
FREquENCY
RATE
0.08
LTIFR FACTOR
WITH A DECLINE
TREND
Annual Report 2018TATNEFT GroupTATNEFT GROUPwww.tatneft.ru 20
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21
macroeconomics
Global factors put pressure on the oil market and, in general, change
the economy architecture, intensify competition, increase price volatility.
As a baseline oil price forecast to calculate the target indicators of
Strategy 2030 , the Ministry of Economic Development of the Russian
Federation forecast up to 2024 (valid as of July 2018) was used, it
suggests a gradual decrease in the oil price from 71 USD/barrel to
53.5 USD/barrel in 2024. From 2025 it includes an increase in the
oil price in accordance with dollar inflation. The baseline scenario
assumes more stringent external conditions than forecasts of
leading experts on the global oil market development and is generally
conservative. This is due to the continuing uncertainty in the global
market of liquid hydrocarbons, including forecasts for growth in
North American production, as well as the lack of solid consensus
among OPEC+ countries on the target level of global oil price.
Oecd oil reserves
According to experts of the OPEC Technical Committee,
commercial oil reserves in the member countries of the Organization
for Economic Cooperation and Development (OECD) by the end
of 2019 will exceed the average for five years by 170 million barrels
if the OPEC+ agreement will end in the first half of 2019 and will drop
by 50 million barrels below the average for five years if the OPEC+
agreement will be maintained until the end of the year.
OECD oil reserves, billion barrels
SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION, PLATTS
3,0
3,25
3,5
2,75
2,5
2,25
2,0
OECD commercial oil and oil product
reserves, billion barrels
Commercial reserves forecast
from April 2019, billion barrels
OECD commercial oil and oil product reserve average
for 5 years, billion barrels
Brent,
USD/barrel (right scale)
125,00
112
64
48
47
46
45
31
81
69
71
69
66
57
100,00
75,00
50,00
25,00
0,00
2014
2015
2016
2017
2018
2019
2020
Global oil price dynamics (Brent, Urals)
The reduction in oil production in the first half of 2018 supported
oil prices – up to October the average monthly price increase was
3%, reaching a peak in October – 81.2 USD/barrel. However, at
the end of the year, the oil price volatility increased, the average
monthly price for Brent dropped to 57.4 USD/barrel in December.
Nevertheless, the price for the year amounted to 71.04 USD/barrel,
which is 31% higher than the average annual price in 2017 (54.3
USD/barrel).
The current market vision of the baseline forecast for liquid
hydrocarbon (LHC) demand against the backdrop of a predicted
slowing but steady growth in global GDP – consumption
will reach its peak by 2035. Within the period, additional
consumption will grow by another 15% to the current level
(15 million barrels/day).
In the next 15 years, drivers of growth in demand for liquid
hydrocarbons are expected to change – the
leadership
in maintaining the growth in demand will shift from motor fuels
to petrochemicals (naphtha and LPG), but motor vehicles will
remain a key consumer of liquid hydrocarbons.
Price for Brent and Urals crude oil in 2014-2018 (USD/barrel)
SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION, PLATTS
112
64
48
47
54
62
Brent
75
81
Urals
63
2014
2015
2016
2017
2018
2019
Oil price forecast (USD/barrel)
SOURCES: EIA, CENTRAL BANK OF THE RUSSIAN FEDERATION, MINISTRY OF ECONOMIC DEVELOPMENT OF THE RUSSIAN FEDERATION, IHS, STRATEGIC PLANNING DEPARTMENT
Actual
IHS
(interfuel competition)
IHS
(fast growth of RES)
Strategy 2030 –
Stress Scenario
Strategy 2030 –
Baseline Scenario
Strategy 2030 –
Optimistic Scenario
71
65
63
42
65
60
42
65
58
43
66
56
44
68
55
45
69
54
46
71
55
47
72
56
48
74
57
49
75
59
50
42
51
42
77
60
51
78
61
52
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Dynamics of the LHC total production
in the world by key players,
million barrels/day
SOURCE: IHS
Total increase in LHC supply
in the world for the years 2018-2025
by key players, million barrels/day
SOURCE: IHS
USA
OPEC
CIS
Canada
Latin America
Europe
Asia
Other non-OPEC countries
Non-oil sources*
USA
Other non-OPEC countries
10%
40%
14%
12%
2017
13%
38%
14%
12%
2020
13%
39%
13%
12%
2030
Canada
ОПЕК
Latin America
Non-oil sources*
Europe
Asia
Demand in 2017
97
12%
42%
13%
12%
2040
5,5
2,0
1,4
1,2
1,0
0,9
0,8
–0,1
–1,2
108
5
2
0
2
n
i
d
n
a
m
e
D
115
105
95
85
75
65
55
45
35
25
90
80
70
60
50
0
120
100
80
60
40
20
0
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23
Oil demand dynamics by global regions and forecast up to 2019
Despite a slight slowdown in the growth of the world economy,
oil consumption in 2018 as a whole and in individual regions
maintained high growth rates, overcoming 100 million barrels/day
in the second half of the year. The leaders in the steel consumption
growth are the Asia countries – the demand growth in the region
amounted to approximately 2 million barrels/day, which was
supported by the continued high growth rates of the China and
India economies. A significant contribution to the global oil demand
growth was made by the USA, which increased consumption by 1.3
million barrels/day, while the euro area countries increased their oil
consumption by 0.08 million barrels/day.
In the medium term, the hydrocarbon market will also be
affected by slower economic growth in a number of countries,
expansion of sanctions, trade wars, growing
involvement
in the development of unconventional hydrocarbon reserves,
the introduction of restrictions on sulfur content in marine fuels
(IMO ) planned for 2020, as well as growing attention of investment
community to environment and energy saving (quota trading
and CO2 emissions systems are being introduced, international
initiatives are being developed which, in the short run, will oblige
all public companies and investment funds to disclose their carbon
footprint and measures to reduce it, as well as plans to enter a low-
carbon future).
Due to environmental requirements, international oil companies
adjust their strategies – the share of gas assets in portfolios will be
from 40% to 62% of the total production of companies in 2030. In
general, global gas consumption will increase from 20% to 27% by
2040, which will equalize the oil and gas shares.
IMO (International Maritime Organization) –
Международная морская организация
Oil demand dynamics by countries/regions in 2014-2018
And iea forecast up to 2040, million barrels/day
Source: U.S. Energy Information Administration
OECD countries
Non-OECD countries
IEA forecast
93,9
1,3
0,8
-0,1
2,2
1,8
0,1
99,9
6,4
106,3
Forecast of the structure of global demand
for liquid hydrocarbons by sector, (%)
SOURCE: WOODMACKENZIE, IHS.
Increase in global consumption by types of oil products
(Million barrels/day for corresponding period)
SOURCE: WOODMACKENZIE, IHS.
Private sector / Commercial sector / Agriculture
Industry
Petrochemistry
Other vehicles
Marine vehicles
Air vehicles
Motor vehicles
Other sectors
Diesel fuel
Motor gasoline
Aviation kerosene
LPG
Naphtha
Source
Other
Motor vehicles
Key drivers
Petrochemistry
10
10
12
5
7
10
10
13
5
7
10
10
14
5
7
10
10
15
5
7
10
10
16
5
7
44
45
44
44
43
5,9
0,4
1,4
0,7
1,6
0,6
0,8
0,4
4,6
2,3
1,2
1,5
0,5
–1,4
3,5
0,4
0,6
0,4
1,2
0,5
0,3
1,6
0,3
1,1
0,4
0,2
0,9
0,3
0,8
–0,2
2014
USA
Europe
Other OECD
countries
China
Rest
of Asia
Other
countries
2018
World
2040
10
2017
9
9
2020
2025
8
2030
8
2035
2017–2020
2020–2025
2025–2030
2030–2035
2035–2040
Historical dynamics and forecast of primary consumption*
by energy source type (Billion tonnes of fuel equivalent)
SOURCE: WOODMACKENZIE, IHS.
5,0
4,0
3,0
2,0
1,0
0
Oil
Hydro
Coal
RES
Gas
Biofuel
Nuclear
% - the share in primary consumption
36
25
19
10
6
2
32
27
22
10
5
2
2
27
27
19
11
8
5
3
65
60
55
50
45
40
35
30
Predicted gas production share in total
hydrocarbon production by majors (%)
SOURCE: WOODMACKENZIE, IHS.
BP
Chevron
ExxonMobil
Statoil
BP ex. Rosneft
Eni
Shell
Total
62
58
53
52
48
40
49
47
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2016
2018
2020
2022
2024
2026
2028
2030
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25
Dynamics of global oil product manufacturing and consumption
(by key regions, including the Russian Federation)
Trade flow (export-import) million barrels/day
Source: Eikon Thomson Reuters
2014
2015
2016
2017
2018
FORECAST 2019
MOTOR gASOLINE, CONSuMpTION By MAjOR REgIONS Of ThE wORLd
60
North America
(27 637)
Latin America
48 920
Europe
1 391
CIS
(25 817)
Africa
(14 388)
Middle East
10 996
Asia
1 760
(30 632)
57 282
3 338
(28 531)
(13 201)
8 089
5 268
(35 239)
57 565
3 695
(28 284)
(10 495)
12 099
dIESEL fuEL, CONSuMpTION By MAjOR REgIONS Of ThE wORLd
49 503
North America
(38 587)
Latin America
(34 006)
Europe
46 461
CIS
(37 715)
Africa
(847)
Middle East
31 054
Asia
51 828
(37 770)
(38 827)
52 001
(42 149)
14 738
32 111
54 631
(36 696)
(45 165)
47 298
(40 952)
30 138
37 277
9 846
(42 441)
60 019
3 242
(28 919)
(11 326)
9 650
65 183
(49 872)
(41 795)
50 967
(43 205)
36 563
37 377
9 525
(42 419)
56 964
6 377
(28 498)
(11 757)
2 456
66 856
(52 085)
(46 205)
56 270
(46 016)
28 665
42 462
10 690
(42 468)
54 231
6 844
(29 436)
(9 352)
1 950
66 756
(51 055)
(47 262)
54 078
(48 353)
28 614
31 684
By 2035, the global fleet is predicted to grow by 45%, while the
gasoline and diesel fuel consumption – only by 11-12%. The main
limiting factors are the increase in mileage per liter of fuel, as well
as the increase in the share of electric vehicles in the global fleet.
The greatest prospects for electric vehicles are in the passenger
fleet, so it is expected that, first of all, they will replace the demand
for gasoline.
Forecast of changes in the global car fleet structure and the fleet in absolute terms
SOURCE: WOODMACKENZIE, IHS.
LNG
Diesel fleet
Gasoline fleet
LPG
Electric and plug-in hybrid vehicles
100%
1,13
1,20
1,26
1,32
1,38
1,43
1,48
1,53
1,59
1,64
14%
83%
90
80
70
60
10
0
1%
1%
12%
8%
79%
Fleet dynamics in terms of consumed oil product types (AI gasoline, diesel fuel) by the regions of the world, thousand pcs.
SOURCE: IEA (THOMSON REUTERS).
Gasoline
Diesel
1,4%
Russian Federation
–0,2%
Europe
5,5%
China
0,6%
USA
55 472
329 639
325 974
311 501
249 031
259 185
50 328
3
9
7
4
4
5
3
5
5
4
2
4
9
4
8
4
0
6
4
1
1
0
7
1
5
2
5
9
5
1
6
8
3
5
6
1
8
8
5
0
5
1
214 043
6
5
1
3
9
1
7
8
8
0
2
3
9
9
1
8
2
8
0
5
9
2
7
1
7
2
4
2
4
1
3
6
3
4
5
2
5
2
2
4
6
6
2018
2025
2018
2025
2018
2025
2018
2025
New consumer preferences, technological progress and
new energy policies will increasingly transform the global energy
landscape and influence the oil market.
Actual and predicted values of global motor
fuel consumption (million barrels/day)
SOURCE: WOODMACKENZIE, IHS.
Dynamics of the Russian Federation fleet,
thousand pcs.
Motor gasoline
Diesel fuel
32
30
28
26
24
22
20
18
0
28
26
+11%
+12%
31
29
Gasoline
Diesel
Gas
Electric vehicles
+18%
43 726
4198
46 796
4634
7
9
9
8
5
0
1
49 096
50 190
4920
5139
51 292
51 433
51 638
5327
5460
5535
2
2
1
1
1
0
3
1
6
9
2
1
0
0
3
1
1
9
0
3
1
38 531
41 104
43 054
43 750
44 669
44 673
44 793
2017
2020
2025
2030
2035
2000
2005
2010
2015
2020
2025
2030
2035
2012
2013
2014
2015
2016
2017
2018
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GDP dynamics of key economies
Dynamics of GDP growth, %
SOURCES: BUREAU OF ECONOMIC ANALYSIS, U.S. DEPARTMENT OF COMMERCE; EUROSTAT; NATIONAL BUREAU OF STATISTICS OF CHINA; CENTRAL STATISTICAL ORGANIZATION, INDIA; RUSSIAN FEDERAL STATE STATISTICS SERVICE
Russia
USA
Euro area
China
India
10
8
6
4
2
0
–2
–4
2014
2015
2016
2017
2018
In 2018, the Russian economy began to recover: the inflation
rate was 4.3%, the country’s GDP grew by 2.3%. In September-
November, there was some slowdown in economic growth in
both developed and developing countries. In the third quarter of
2018, there was a slowdown in the annual GDP growth rates of
such trading partners of Russia as the euro area (a decline from
2.2 to 1.7%) and China (6.7 to 6.5%). Among the world’s leading
economies, growth acceleration in annual terms continued only in
the United States, primarily as a result of stimulating fiscal policy.
The annual increase in US GDP in the 3rd and 4th quarter of 2018
was 3%. However, already in 2019, as the effect of fiscal stimuli is
exhausted, the growth of rates continues and the economic cycle
moves to the mature stage, the US economic growth is expected to
slow down to 2.5%.
Russia’s GDP growth in 2018 accelerated to 2.3% from
1.6% a year earlier, which surpassed all estimates, and was
provided by such sectors as the mining industry, transportation
and storage, construction, financial and insurance activities.
The acceleration of GDP growth is largely due to one-off factors
(for example, the growth of oil production in the second half of
the year after the OPEC+ June decision) and is not sustainable.
According to the forecast of the Central Bank of the Russian
Federation for 2019, economic growth is expected to slow down to
1.2%, according to the IMF estimate – to 1.6%.
Inflation in 2018 was 4.3%, accelerating from 2.5% in 2017, which
forced the Central Bank of the Russian Federation (hereinafter the
Bank of Russia, the Central Bank) to tighten monetary policy – to
raise the key rate to 7.75% (the Bank of Russia makes decisions on
the key rate to achieve the goal of monetary policy – maintaining
annual inflation near a given level of 4%). Changes in the external
environment, which significantly increased the inflation risks, led
the Central Bank to revise the annual inflation forecast in the range
of 5–5.5% in 2019 with a return to 4% in 2020. This will create
conditions for easing monetary policy at the end of 2019 – early
2020.
At the beginning of 2019, the Central Bank of the Russian
Federation retained the key rate at the level of 7.75%.
(2) According to IMF
Consumer price growth dynamics of key economies, %
SOURCES: EUROSTAT.
Russia
USA
Euro area
China (incl. Hongkong)
India
18
16
14
12
10
8
6
4
2
0
–2
2014
2015
2016
2017
2018
Dynamics of the ruble exchange rate against usd and euro
SOURCE: CENTRAL BANK OF RUSSIA
Dynamics of USD exchange rate against RUB
Dynamics of EUR exchange rate against RUB
2014
2015
2016
2017
2018
Dynamics of the ruble exchange rate compared to the dynamics of oil prices, usd/barrel
SOURCE: USD EXCHANGE RATE – CENTRAL BANK OF THE RUSSIAN FEDERATION, BRENT QUOTES – THOMSON REUTERS
USD exchange rate against RUB
Brent
100
80
60
40
20
120
100
80
60
40
20
I 2014
VII 2014
I 2015
VII 2015
I 2016
VII 2016
I 2017
VII 2017
I 2018
VII 2018
X 2018
Inflation in the Russian Federation in the non-food product
segment: price growth accelerated to 4.1% in 2018 compared with
2.8% in 2017. Last year, the prices for tobacco products (+10.1%
y/y), diesel fuel (+15.0%) and motor gasoline (+9.4% y/y) rose the
most.
Over the past five years, the macroeconomic policy of the
Russian Federation has changed significantly – in 2014 the oil
price, balancing the budget and the payment balance, exceeded
110 USD/barrel, now it stands at 40 USD/barrel. The economy
dependence on oil fluctuations has decreased sharply. The
difference became apparent in October-November 2018, when oil
prices fell faster than in 2014.
Geopolitical factors again came to the fore in determining
market conditions and the economic development of countries and
regions. Although the global growth rate in 2018 was close to peak
values in the period after the crisis of 2008–2009, it is becoming
clear that the rise of the global economy is slowing. According to the
International Monetary Fund (IMF), the rise of the global economy
slowed down – in 2018, growth was 3.7%, as in the previous
year, and in 2019, growth is projected to slow down to 3.5%, in
2020 – 3.6%
Trade and investment are slowing down, industrial production
is slowing down, the increase in trade tensions (trade wars) and
deterioration of financial conditions are the most important sources
for risk of failure to achieve predicted economic growth values.
High trade uncertainty will further reduce investment and lead to
disruption of global supply chains. The high level of private debt and
public sector debt in leading economies of the world lead to stricter
financial conditions.
Slowing of the growth in China may occur earlier than previously
predicted, especially if trade tensions persist, which could lead to a
dumping of assets in financial and commodity markets, as was the
case in 2015–2016. In Europe, the dramatic situation with Brexit
remains, and costly secondary effects of interrelated sovereign and
financial risks remain a threat. In the United States, the continued
closure of federal government institutions creates risks of lower
growth.
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29
Oil and condensate production in the Russian Federation for the period
of 2016-2018
In 2018, in the field of oil and condensate production in Russia,
the positive dynamics of recent years was resumed – growth for the
year was 1.7% (after falling by 0.1% in 2017) or 9 million tonnes,
which amounted to 555.9 million tonnes (546.7 million tonnes in
2017). Of the incremental volume, 5 million tonnes were produced
at new fields (greenfields). The main production growth occurred in
the second half of the year following the June decision of OPEC+ to
increase oil production.
Production growth in 2018 occurred in virtually all VICs with the
exception of PJSC Gazprom Neft, whose production remained at
the level of 2017, and PJSC Bashneft, whose production decline
is observed for the second year in a row – minus 8.1% or -1.7
million tonnes compared to the previous year (in 2017, the decline
was 3.6% or 0.8 million tonnes). According to the year results,
PJSC Rosneft (+5.5 million tonnes or 3%) and PJSC TATNEFT
(+0.6 million tonnes or 2.1%) became the production growth leaders.
Market balance of the Russian Federation, million tons
Oil and condensate production,
million tonnes
526,7
534,0
Export from RF
Supplies to the RF domestic market
547,5
546,7
555,9
292,1
289,1
286,3
286,6
291,4
240,9
261,6
254,2
257,0
257,7
2014
2015
2016
2017
2018
Provision with proven reserves, years
Source: data of the companies
Oil recovery factor (%)
SOURCE: MINISTRY OF ENERGY OF THE RUSSIAN FEDERATION, THE COMPANY DATA
Rosneft
LUKOIL
Gazprom Neft
TATNEFT
20
19
15
30
Norway
USA
Среднее по миру
TATNEFT generally
World average
Saudi Arabia
Iran
47
39
35
35
27
23
23
Year-over-year production growth, %
Rosneft
Surgutneftegas
LUKOIL
TATNEFT
Gazprom Neft
Other
Bashneft
Russia total
(right scale)
30
25
20
15
10
5
0
–5
–10
0,7
11,6
4
,
0
5,7
11,0
1
,
2
2,7
7
,
0
–
1,4
1
,
2
9
,
0
–
4,5
0,7
2014
7,8
7,3
5,3
10,0
–0,3
2,5
9
,
0
1,3
4,6
–0,1
6
,
0
–
–3,6
1,7
3,1
3,0
–8,1
Share of PJSC TATNEFT oil production to the share
of total exports from the Russian Federation (%)
Rosneft
Surgutneftegas
LUKOIL
TATNEFT
Gazprom Neft
Other
Bashneft
20,8
4
,
3
21,7
7
,
3
22,8
9
,
3
23,2
8
,
3
23,5
4
,
3
11,7
6,4
16,4
0
,
5
11,5
6,4
16,0
1
,
5
11,3
6,9
15,2
2
,
5
11,1
7,2
14,9
3
,
5
11,0
7,1
14,8
3
,
5
36,2
35,4
34,7
34,5
34,9
100
80
60
40
20
0
2015
2016
2017
2018
2014
2015
2016
2017
2018
Oil export from the Russian Federation
for the period of 2016-2018
Structure of oil export from RF, million tonnes
Diesel by pipe
Diesel outside the pipe
Near abroad
According to the structure of oil export from the Russian
Federation, there is a tendency to increase supplies outside the
PJSC TRANSNEFT pipeline system (an increase in 2018 compared
to 2016 was 29.4%, the growth is due to a double increase in
shipments to the CPC system, as well as from Murmansk and
Arkhangelsk) at the total decrease in deliveries via pipe.
2014
2015
2016
2017
2018
195,5
220,3
221,1
216,8
213,1
22,8
22,5
Total export
from RF
240,9
28,2
22,6
261,6
34,9
18,1
254,2
41,7
18,1
257,0
45,1
18,0
257,7
TATNEFT Group share in the volume of oil and condensate production in the Russian Federation
TATNEFT Group oil and condensate production, million tonnes
conventional oil
SVO
26,3
26,2
0,073
26,4
26,3
0,15
26,5
26,3
0,24
27,3
26,9
0,4
28,7
27,8
0,8
28,9
27,3
1,6
29,5
27,6
1,95
Share of PJSC TATNEFT oil production to the share
of total export from the Russian Federation
5,08%
5,05%
5,04%
5,10%
5,24%
5,29%
5,31%
2012
2013
2014
2015
2016
2017
2018
TATNEFT Group share in the volume of oil export from the Russian Federation
TATNEFT Group oil export from the Russian Federation, million tonnes
Diesel export
Gasoline export
12,5
12,5
11,4
1,05
9,7
8,4
1,3
11,6
10,3
1,3
13,0
11,9
1,1
15,5
14,2
1,2
12,4
11,2
1,2
Share of PJSC TATNEFT oil export to the share of total export from the
Russian Federation
4,8%
4,9%
4,0%
4,4%
5,1%
6,0%
4,8%
2012
2013
2014
2015
2016
2017
2018
Shares of TATNEFT oil export and supply to the domestic market to the total RF results (%)
SOURCES: USD EXCHANGE RATE – CENTRAL BANK OF THE RUSSIAN FEDERATION, BRENT QUOTES – THOMSON REUTERS
Share of PJSC TATNEFT oil export to the share of total export from RF
Share of PJSC TATNEFT oil export to the total supply to the RF domestic market
6,0
5,5
5,0
4,5
4,0
5,1
4,8
5,0
4,9
2012
2013
5,3
4,0
2014
5,2
4,4
2015
5,1
5,1
2016
6,0
4,5
2017
5,7
4,8
2018
TATNEFT Group share in the volume of oil shipments to the domestic market of the Russian Federation
PJSC TATNEFT oil supplies to the domestic market of the
Russian Federation (for processing)
OJSC TAIF-NK
JSC TANECO
Other refineries, incl. Kichuy Refinery
Share of PJSC TATNEFT oil supply to the total supply
to the domestic market of the Russian Federation
2012
2013
2014
2015
2016
2017
2018
13,7
5,8
7,5
0,4
13,71
5,37
7,67
0,67
15,61
6,194
8,395
1,020
15,00
6,241
8,621
0,138
14,59
6,950
7,381
0,260
12,95
4,717
7,302
0,930
16,19
4,852
8,601
3,005
5,1%
5,0%
5,3%
5,2%
5,1%
4,5%
5,6%
Ratio of oil supplies to the domestic market
and for export, %
Share of export to the own production, %
Share of oil supplies to the domestic market
(to the own production)
47,5
47,1
36,4
42,6
45,4
53,4
41,9
52,1
51,9
58,8
55,0
50,9
44,7
55,8
2012
2013
2014
2015
2016
2017
2018
100
80
60
40
20
0
TATNEFT share in the volume of crude oil
export from the Russian Federation in 2018
decreased by 1.2% to 4.8%, while shipments
for processing increased.
Annual Report 2018TATNEFT GroupTATNEFT GROUP
30
www.tatneft.ru
31
Oil processing
Oil industry tax regulation in the Russian Federation
In 2018, the oil processing depth in Russia reached 82.9%,
which is 1.6% higher than the 2017 level. The rate growth in 2018
was due to reduction in the fuel oil yield by 6.3% by 2017 and an
increase in oil processing by 2.4%. The fuel oil yield reduction in
Russia began in 2015, along with a systematic increase in export
duties on fuel oil and a large-scale refinery modernization in order
to expand the production of light oil products.
In oil processing, the Company has one of the best indicators in
the industry – the processing depth and the light oil product yield
with no fuel oil production.
Up to 2030, the Company will maintain the highest rates
of processing depth and light oil product yield.
Strategic processing plans: light oil product
yield and depth, %
Dynamics of fuel oil production in the RF and TATNEFT,
million tonnes, Dynamics of processing depth, %
Years
2022
100
90
80
70
60
50
75
58
2027
2025
Processing depth
Light oil product yield
86
76
95
80
2030
99
89
Commercial fuel oil
production in RF,
million tonnes
Total processing depth
in RF (right scale), %
1
,
2
75
74
71
72
71
70
9
,
1
76
78
72
9
,
1
71
74 74
TANECO fuel oil
production,
million tonnes
TATNEFT processing
depth (right scale), %
99
99
2
,
2
85
79
55
81
50
3
,
1
83
45
70
73
74
69
54
50
45
Rosneft
LUKOIL
Gazprom Neft
TATNEFT
2012
2013
2014
2015
2016
2017
2018
Production and export of oil products (gasoline, diesel, fuel oil) from the Russian Federation for the period
of 2016-2018 (including internal consumption)
Motor gasolines
Gasoline production in the Russian Federation, million tonnes
Gasoline export from the Russian Federation for the period
Supplies to the domestic gasoline market in the Russian Federation
2012
2013
2014
2015
2016
2017
2018
38,2
3,6
34,3
38,7
4,3
34,1
38,3
4,3
33,1
39,2
4,7
34,6
40,0
4,9
34,9
39,2
4,1
35,2
39,5
3,8
35,6
diesel fuel
Diesel fuel production in the Russian Federation, million tonnes
Diesel fuel export from the Russian Federation, million tonnes
Diesel fuel supplies to the domestic market in the Russian Federation, million tonnes
69,4
0,0
0,0
72,0
37,5
32,3
77,3
44,1
31,5
76,1
45,1
31,3
76,3
43,7
32,5
76,9
43,7
32,8
77,5
42,0
35,7
fuel oil
Commercial fuel oil production in the Russian Federation, million tonnes
Fuel oil export from the Russian Federation, million tonnes
Fuel oil supplies to the domestic market in the Russian Federation, million tonnes
71,9
56,9
11,4
74,5
57,3
12,8
76,3
0,0
0,0
71,1
53,8
15,3
54,9
42,0
12,8
49,8
39,4
10,3
45,1
32,8
12,3
Oil processing and primary product manufacturing,
million tons
TATNEFT Group share in oil product production and export
from the Russian Federation for the period of 2016-2018
Total crude oil
production in RF,
million tonnes
265,4
272,5
Commercial fuel oil
production in RF,
million tonnes
289,0
282,9
Diesel fuel
production in RF,
million tonnes
280,6
Gasoline production in RF,
million tonnes
279,9
287,0
69,4
71,9
72,0
74,5
77,3
76,3
76,1
76,3
76,9
77,5
71,1
54,9
49,8
38,2
38,7
38,3
39,0
40,0
39,2
45,1
39,5
TANECO fuel oil
production,
million tonnes
TANECO Ai gasoline
production for the
period of 2016-2018
TANECO diesel fuel
production for the
period of 2016-2018
Other products,
million tonnes
7,6
1,9
7,1
2,1
8,5
1,9
1,0
8,7
2,2
1,4
8,7
1,3
1,6
8,6
8
0
,
0
2,3
7,8
1,4
5,0
5,7
5,6
5,1
5,9
6,4
6,2
2012
2013
2014
2015
2016
2017
2018
2012
2013
2014
2015
2016
2017
2018
In 2018, tax innovations carried out over the past few years
were implemented in the Russian Federation. The main legislative
amendments are aimed at completing the tax maneuver in the
industry (hereinafter referred to as TMC) from January 1, 2019, as
well as introducing an alternative tax regime – a tax on additional
income from hydrocarbon production (hereinafter referred to as
AIT) from January 1, 2019.
On August 3, 2018, Federal Law No. 301-ФЗ amended the Tax
Code on TMC in 2019–2024, introduced a “refundable (negative)
excise tax” mechanism for crude oil, which is sent to domestic
refineries. It implies a gradual waiving of the export duty on oil and
oil products in favor of the mineral extraction tax (MET) increase,
the elimination of export duties on oil and oil products (by 2024 it
is planned to gradually reduce export duties on oil and oil products
to zero), at the same time the mineral extraction tax will gradually
increase, which will compensate for budget losses from tax
revenues through the export channel. It also implies the possibility
of using a higher depreciation factor for investments in the Western
Siberia fields, a MET reduction factor for companies using tertiary
oil recovery methods, and stimulating oil fringes, the development
of which is currently unprofitable.
From January 1, 2019 to 2024, a gradual introduction of excise
tax on crude oil sent for processing and a tax deduction on this
excise tax is planned. The increase in the MET and the decrease in
export duties on oil may lead to an increase in its domestic price.
Due to the increase in the domestic oil price, the cost of oil product
manufacturing will increase, which will put upward pressure on their
prices. Also, the tax maneuver implies a reduction in export duties
on oil products, which, like in the oil market, will boost the increase
in their prices.
In order to reduce the impact of lower export duties and increase
in mineral extraction tax on domestic prices of oil products, the
Government of the Russian Federation introduces a refundable
(negative) excise tax, which provides for partial compensation to
producers of the cost of oil sent for processing. This should partly
cover the cost of oil product supply to the domestic market and
contribute to decreasing the pressure on their prices. Thus, the tax
maneuver will cease the duty subsidies to Russian refineries and
replace them with subsidizing the refineries in the same volume
by providing them with tax deductions for oil excise. Introduced
excise subsidies, unlike the duty ones, will be targeted, that is, not
all refineries, but only those that meet certain criteria, are covered.
The Government Decree “On agreements on the modernization
of oil processing facilities” defines the list of oil recycling facilities
that may be the subject of agreements on the modernization of oil
processing facilities and approves the form of such agreements.
To smooth out fluctuations in the oil product prices in the
domestic market when global oil prices change, in order to
preserve the refinery efficiency, a damping component is added to
the negative excise tax formula.
In 2019, a pilot AIT project will also be launched, which for
the period until 2030 can be expanded to the entire industry.
The following PJSC TATNEFT license blocks located in the
Nenets Autonomous District are subject to AIT regime: Severo-
Khayakhinskoye, Vostochno-Khayakhinskoye, Podveryukskoye,
Khosoltinskoye, Tibeyvisskoye, Severo-Tibeyvisskoye and
Yambotinsky, the approximate industrial production start is
scheduled for 2020-2023.
Transferring the tax burden from customs duties to MET as part of TMC*, thousand RUB/ton
SOURCE: CONSULTANT PLUS
MET
on oil
Oil
customs duty
Fuel oil
customs duty
Naphtha
customs duty
Motor gasoline
customs duty
Diesel fuel
customs duty
Pet coke
customs duty
*at the Urals price = 60 USD/barrel, the RUB exchange rate
against the USD = 65 RUB/USD
8
8
,
6
8
8
,
6
10,66
11,88
3
7
,
5
3
7
,
5
8
7
,
3
6
0
,
2
6
0
,
2
5
4
,
0
5
1
,
3
2
7
,
1
2
7
,
1
7
3
,
0
13,02
9
5
,
4
9
5
,
4
2
5
,
2
8
3
,
1
8
3
,
1
0
3
,
0
4
4
,
3
4
4
,
3
14,17
14,89
16,03
9
2
,
2
9
2
,
2
9
8
,
1
3
0
,
1
3
0
,
1
2
2
,
0
6
2
,
1
9
6
,
0
9
6
,
0
5
1
,
0
5
1
,
1
5
1
,
1
3
6
,
0
4
3
,
0
4
3
,
0
7
0
,
0
17,18
In 2024, export
duties on oil
and oil products
will be nullified
2018
2019
2020
2021
2022
2023
2024
Annual Report 2018TATNEFT GroupTATNEFT GROUP 32
www.tatneft.ru
33
Report of the PJSC TATNEFT Board
of Directors on Priority Lines of Business
In 2018, TATNEFT successfully implemented its tasks
with a focus on ensuring long-term growth in shareholder value.
High operating and financial results were achieved.
Decisions taken by the Board of Directors and Management actions were
aimed at maximizing business efficiency and return on the Company’s assets,
strengthening the technological base, development of innovative forms
of production process management and organization, improving operational
efficiency at all stages of value creation maintaining high rates of sustainable
development.
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS 34
www.tatneft.ru
35
Joint address
to shareholders, investors and partners
of the President of the Republic of Tatarstan,
Chairman of the PJSC TATNEFT Board of Directors
R.N. Minnikhanov
General Director,
Chairman of the PJSC TATNEFT Management Board
N.U. Maganov
Dear shareholders, investors and partners!
In 2018, the Board of Directors adopted the TATNEFT Group
Strategy until 2030, accumulating the Company’s ambitious goals
based on the previously approved Strategy 2025 that already
confirmed its effectiveness at the early stages keeping a steady
focus on ensuring a long-term growth in shareholder value. The
updated goals are aimed at maximizing business efficiency and
return on existing assets. Our priorities are to further strengthen
the resource and technological potential, develop innovative forms
of production process management and organization, improve
margins across all business segments, and sustain a strong
position of financial stability and growth of the Company.
In the reporting year, TATNEFT reached a new level of
performance as one of the leaders among the most expensive
Russian public companies by capitalization, maintaining high
level of investment attractiveness. Over the year, the Company’s
capitalization increased by 53.5%, reaching RUB 1.7 trillion (USD
24.2 billion) in December 2018.
The Group shareholder profit grew by 72% and amounted to
RUB 211.8 billion. The return on capital employed of approximately
27.5% is one of the highest in the industry environment. We provide
the positive free cash flow generation, which increased by 40%
compared to the last year level and amounted to RUB 147.8 billion.
The Company’s high operating efficiency is reflected in a 58.7%
increase in EBITDA.
In the conditions of persistent price volatility and uncertainty in
the oil market, the achieved results demonstrate the efficiency of
the Company’s vertically integrated business model and program
actions of the management, concentrating its efforts on expanding
reserve replacement, ensuring the growth of profitable oil and gas
production, developing oil and gas processing, gas chemistry,
energy, tire production, machine building, engineering segments,
improving the cash flow stability and business process profitability.
The Group total oil production in 2018 amounted to 29.5 million
tonnes. Average daily production increased by 2.1% to 576.4
thousand barrels per day. Due to fulfillment of obligations under
the OPEC+ agreement, the Company had to restrain its production
growth rates, while maintaining the potential for ramping up the oil
production amid its high level of reserve availability.
The Company resource base is characterized by a high level
of proven reserves and replacement rate over 100%. Efficient
bringing of reserves into development and increase in production
is achieved through advanced technological solutions and
optimization of production processes.
The share of oil produced using tertiary and hydrodynamic
EORs exceeds 40%. The hydrocarbon resource potential includes
bitumen and unconventional oil reserves. Pilot works are being
conducted at the Domanic and Bitum testing sites, from exploration
to the field development and operation.
The Company seeks to maximally utilize the existing potential of
oil fields, accumulated technological experience and competencies
in order to strengthen its position in both the Russian and global
energy markets.
We are strengthening our own refining unit with a planned
increase in capacity to 15.7 million tons/year, with the industry’s
highest processing depth of 99.1% and light oil product yield of
84%. The processing volume in the reporting year increased by
10% and amounted to 179 thousand barrels per day. The total
volume of oil and gas product output amounted to 10.1 million
tonnes. The oil product sales revenue increased by 47% in 2018.
In order to increase profitability, the Company develops
premium sales channels and provides oil product logistics
optimization.
The main downstream asset of the Company is the TANECO
Refinery Complex.
The product range
includes TANECO premium diesel
fuel, including arctic, fully complying with the Euro-6 engine
requirements, and import-substituting products such as API Group
III high-quality base oils through 100% and aviation fuel as well.
The year 2018 became an important milestone in the TANECO
Complex development. Thus, five high-tech processing plants
were commissioned, which will assuredly provide the growth
of petroleum refining efficiency as well as ensure the projected
volume of petroleum product output nearly on a full scale. The
product line includes motor gasolines AI 92, AI 95, and AI 98. In
2019, we launched the production of premium gasoline AI 100 for
high-powered engine cars and sports cars.
The Company’s strategy includes the synergy of crude oil
refining and gas processing, and petrochemical production as part
of development of the gas-based petrochemical business segment.
This is a promising area that will provide new growth points and
market risk reduction in the long term.
In 2018, 711 filling stations operated in the segment of oil
product retail sales under the TATNEFT brand, including 109 filling
stations outside the Russian Federation. The implemented Strategy
in this area aims to increase the filling station network profitability by
increasing the oil product sales volume, efficient infrastructure with
the development of related services and digital formats.
In the tire business, represented by the KAMA TYRES brand,
the production volume increased by 13.2% compared to 2017
to 14.6 million pieces of tires in 370 commodity items. The Company
retains approximately 20% of the domestic market. More than 30%
of tire products are exported. The Company develops international
sales channels, tires are supplied to 50 countries.
The Company’s strategy is based on the principles of innovative
development, ensuring a reliable technological base and the
integration of digital solutions in management and production.
The Company makes significant investments in its own
development of technological solutions and equipment.
Implementing capital-intensive business projects, the
Company sees the provision of a high level of industrial and
occupational safety and environmental protection as a key
priority. Consistent activities in this field resulted in the reduction
of environmental footprint to the level where there is a potential
for self-recovery of ecosystems.
The Company shares the global concern about the climate
change and takes into account the fact of formation by energy
companies in the process of production activities of a significant
amount of greenhouse gas emissions that can adversely affect
the climate. Due to the introduction of advanced technologies,
increasing the efficiency of accounting and monitoring systems
over three years, the Company reduced the total gross emissions
of greenhouse gases (CO2-eq.) by 20%, gross emissions
of pollutants into the atmospheric air by 26%. To a great extent this
is ensured by the efficient use of APG at a level of more than 96%.
We realize that the long-term sustainable business development
is based on the human capital development. Staff development
programs, professional development, decent wages and social
guarantees for employees form a cohesive team of professionals
who are committed to the common cause.
Putting into life the principles of high corporate responsibility,
the Company makes a large-scale contribution to ensuring
favorable living conditions in the territories of its activities, in support
of healthcare, science, education, culture and sports.
2018 was a landmark year for our Company. It is the year of the
75th anniversary of the beginning of the oil field development in the
Republic of Tatarstan and the 70th anniversary of the discovery of
one of the world’s largest Romashkinskoye field. The Company
participated in the development of these fields from the very
beginning. The accumulated potential and new opportunities are
a reliable foundation for the Company’s long-term development.
We entered 2019 with clear objectives, the achievement
of which will be ensured by a high-quality investment program and
appropriate resources. On behalf of the Company, we express
our gratitude to our shareholders for their confidence and present
the Report of the Board of Directors on the results of the TATNEFT
Group’s development in priority areas of activity in 2018.
R.N. MINNIKHANOV
President of the Republic of Tatarstan,
Chairman of the PJSC TATNEFT Board of Directors
N.U. MAGANOV
General Director,
Chairman of the PJSC TATNEFT Management Board
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru 36
37
Strategic goals and priorities
“The main efforts of TATNEFT Group in the next 10-12 years
will be focused on accelerated growth of profitable oil and gas
production by active implementation of innovative technological
solutions with unconditional respect for the environment. In all areas
of activity, without exception, it is planned to carry out constant cost
control, increase the production process efficiency through the
large-scale implementation of IT technologies and the achievement
of the widest possible level of digital technology implementation.
The cost growth strategy is the basis for the Company’s human
capital development, the basis for economic development of the
Republic of Tatarstan and Russia, a guarantee of ensuring high
returns to shareholders.”
N.Z. Syubayev
Deputy General Director for Strategic Development
of PJSC TATNEFT
Successful achievement of business goals in the aggregate
will increase the Group’s capitalization to USD 36 billion in the
baseline scenario, ensure a high level of dividends, and maintain
leadership in the field of environmental protection and human
capital development.
The key tasks in the processing field are the timely commissioning
of TANECO units within the limits of planned budgets. It is planned
to allocate RUB 164 billion of investments to complete the TANECO
construction. Key business unit strategy initiatives:
processing unit enterprises;
efficiency based on industry benchmarking;
• formation of an effective system of existing unit operational
• implementation of IT strategy initiatives.
• In August 2018, the Board of Directors decided to develop a new
• open up new investment opportunities for the long term;
• provide a higher redistribution of products made by the
• reduce the risks of the Group as a whole by increasing the cash
gas and petrochemical area, which will allow to:
flow stability.
The first phase raw material capacity will be 390 thousand
tonnes/year, the investment volume – approximately RUB 70 billion.
A targeted long-term concept has been formed for the Company’s
gas and petrochemical area, which assumes, in its maximum
configuration, the processing of petrochemical raw materials in the
amount of more than 3 million tonnes/year with the release of 32
products in demand on the market.
Oil production is a key area of the Company’s business.
The operating fields in the Republic have significant potential,
with more than half of the current recoverable reserves
concentrated in carbonate reservoirs and SVO, i.e. considered
hard-to-recover.
The Retail Business area development strategy until 2030 is
focused primarily on improving the network’s “quality”, developing
a related product selling business and forming “service centers” for
motorists on the basis of filling stations, rather than quantitatively
developing the filling station network.
The Company plans to continue geological exploration in the
Republic of Tatarstan. At the same time, significant investments
in geological exploration are planned to be directed to the
development of production centers in regions outside the Republic
of Tatarstan, where TATNEFT is already present – Samara, Nenets
Autonomous Area and Orenburg.
The Company plans to reach the target “shelf” of production
of 38 million tonnes by 2030 due to the active acquisition of new
licenses in the existing operation areas of the Company outside the
Republic of Tatarstan in the term after 2025.
Significant growth in oil production will be achieved through the
SVO project implementation, the involvement of low-permeability
carbonate reservoirs in the Republic of Tatarstan into development
as a result of the introduction of new innovative technologies and
the industrial commissioning of projects in the Nenets Autonomous
Area.
Currently, the Company’s main projects outside the Russian
Federation are projects in Libya and Syria. After normalization of
the situation in these regions, the Company plans to resume work
in these countries.
The main drivers of growth in business efficiency will be the
involvement of reserves by drilling the infill wells, horizontal wells
and sidetracks, improving the hydraulic fracturing technology,
including the active introduction of multi-stage hydraulic fracturing,
cost control, and the implementation of IT solutions.
The competitive strategy is based on the renewal of unique fuel
and non-fuel supply at TATNEFT filling stations for target customers.
The main initiatives for the TATNEFT retail network development
are the brand concept renewal and format unification with stores
and cafes, introduction of advanced IT tools, including service
development in the form of self-service, targeted loyalty programs
and demand stimulation.
The main strategic tasks facing the Company’s Tire Complex
are:
• increasing the market share in the tire market of Russia
to 22% due to the growth in sales in the most promising
segments, bringing the tire sales volume to 18.1 million pcs.
by 2030;
• all-steel (R20+) and Viatti tire position in the more marginal price
segment “B” will be strengthened through efficient marketing
and service support and introduction of a value proposition
for consumers, based on an optimal price-quality ratio, a wide
range of products and, of course, convenience of its acquisition.
As early as 2021 approximately 50% of tires will be positioned in
the “B” segment (the current level is 27%);
• launch of the new all-steel tire brand KAMA PRO;
It is planned to implement three major investment projects: the
expansion of the all-steel and Viatti tire production capacities and
the launch of the large tire production. All three projects are aimed
at growing market segments.
THE COMPANY RATINGS
MOODY’S
Ваа2.
forecast – stable.
The Baa 2 credit rating refers to the investment level
and reflects the high credit quality of the Company.
FITCH RATINGS
Long-term Issuer default Rating (IdR) is BBB-.
forecast – stable
Short-term Issuer Default Rating is F3.
The rating confirmation reflects, among other things,
insignificant amount of the Company’s debt, significant
oil production and large amount of proven reserves.
Adjusted leverage of cash flow from the Company’s
operating activities (FFO) is approximately 0.1x.
RAEX
Credit rating is ruAAA.
forecast – stable.
The credit rating is assigned on the Russian national
scale and is long-term. The following Company’s
strengths are noted: the strong business profile of
TATNEFT Group, full coverage of debt obligations,
investment program, dividend expenses with predicted
operating cash flow, and extremely low level of the
Group’s total debt load, high levels of the Group
information transparency and strategic support.
FTSE4GOOD EMERGING INDEX OF
RESPONSIBLE INVESTMENT
TATNEFT is part of the FTSE4Good Emerging Index
included in the FTSE4Good Index Series.
The FTSE4Good (FTSE Russell) index series
is designed to evaluate the performance of companies
that demonstrate adherence to best practices
in environmental protection, social responsibility and
corporate governance (ESG).
The strategy in the Energy business area provides a set of
measures to improve the Nizhnekamsk CHP and Almetyevsk
Heating Networks efficiency, also, it is expected that participation
in the industrial park “Alabuga-2. Petrochemistry” will allow
the Company to receive compensation for the infrastructure
construction. The presence of the Company’s own generating
assets makes it possible to increase the reliability of heat supply
to TANECO and other industrial facilities of the Company. To meet
the growing TANECO heat demand, it is planned to increase heat
production at the Nizhnekamsk CHP by 2 times, taking into account
the implementation of petroleum coke burning project, which will
allow the station to operate using different types of raw materials
and increase its reliability.
The TATNEFT Group machine building business unit
development strategy provides for a steady pipe and high-quality
equipment supply to the Company’s enterprises. Ambitious 3.6
times growth in production and sales is planned
by 2030.
Banking business (ZENIT Banking Group) is a new direction in
the Company’s business portfolio. The Banking Group consists of
five banks - 149 service points in 51 cities, 5 thousand employees,
500 thousand retail customers, 20 thousand corporate customers.
The Banking Group main activities are: banking services for
corporate and retail customers, investment banking services,
personal services for private customers, non-banking financial
services - factoring, leasing. The banking business strategy
provides for the transition to the most crisis-resistant model – the
universal bank model, with the main focus on:
• profit growth to the level of average market indicators and
increase of business competitiveness with moderate risk
appetite;
• most promising products and segments with the greatest
potential for revenue growth and implementation of the
development business model;
• integration of the Group banks.
The program for improving efficiency and reducing costs,
implemented by the Bank in cooperation with the Company,
includes digitalization, development of new business lines in the
bank, and obtaining synergies through interaction with the TATNEFT
Group enterprises.
The Company’s main task is to create a sustainable, market-
oriented, profitable business and a liquid asset with a high market
value of at least RUB 50 billion on the basis of the ZENIT Banking
Group by 2025.
the 2030 strategy’s key task calls for the achievement of
maximized reserve monetization, business diversification
and creating of new perspective value growth points,
that will ensure a high effectiveness and efficiency of the
Company as well as a stable current growth of profitability
even beyond 2030.
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru 38
39
Financial performance
indicators
Revenue (billion RuB)
Free cash flow generation growth (billion RUB)
2016
2017
2018
580.1
681.2
910.5
2016
2017
2018
45.7
105.3
147.8
Group shareholder profit, (billion RuB)
2016
2017
2018
EBITDA (billion RuB)
2016
2017
2018
Adjusted EBITDA (billion RuB)
2016
2017
2018
ROACE (%)
2016
2017
2018
The Company provides a high-quality balance between
production and refining assets, which allows to efficiently generate
operating income. By the end of the year, free cash flow increased
by 40%, reaching approximately RUB 148 billion.
107.4
123.1
211.8
Free cash flow per barrel of oil production
(RuB/barrel)
165.6
185.3
294.0
2016
2017
2018
223.6
510.7
702.6
174.4
200.8
314.8
15.20
16.50
27.50
The Company maintains leadership among the largest industry
oil companies in terms of net profit per barrel of production.
Ratio between net profit and oil production
2016
2017
2018
107.4
123.1
204.3
206.1
211.8
210.4
526
597
1007
Net profit, RUB billion Production, million barrels Specific net profit, RUB/barrel
+
33.7%
REVENuE GROWTH
+
72%
GROWTH OF THE GROuP
SHAREHOLDER NET PROFIT
+
58.7%
EBITDA GROWTH
32%
EBITDA MARGIN
22.3 Usd/baRRel
EBITDA PER PRODuCED BARREL
+
40.4%
INCREASE IN FREE CASH FLOW
Company's Created Added Value
(billion RUB)
2014
2015
2016
2017
2018
264.2
308.1
329.6
419.4
642.9
+
53%
83.6%
GROWTH OF ADDED VALuE
SHARE OF ADDED VALuE IN TOTAL
PRODuCTION VOLuME
>
50%
GROWTH OF LABOR PRODuCTIVITY
BY EBITDA
The Company ensures the growth
of labor productivity and organizational
forms
efficiency
in management of production and business
processes.
innovative
through
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru 40
41
Assets by segments (billion RUB)
Exploration and production
2017
2018
Oil processing, oil and oil product sales
2017
2018
Petrochemistry
2017
2018
Banking activity
2017
2018
Corporate and other
2017
2018
TOTAL
2014
2015
2016
2017
2018
93.8 billion RUb
COMPANY’S ASSET VALuE
INCREASE IN 2018
Change in the structure of consolidated
TATNEFT Group assets for the period of 2011-2018 (%)
11.7
21.1
13.8
4.3
34.5
2.7
30.7
47.4
Exploration and production
Oil processing,
oil and oil product
sales
Petrochemistry
Banking activity
Corporate and other
33.8
2011
2018
The Company’s asset structure is balanced in the ratio of
“exploration and production” (30.7%) and “oil and oil product
processing and sales” (33.8%) segments, which provides the
potential for further revenue growth due to the added value
produced on the basis of hydrocarbon resource processing.
340 525
368 991
366 804
406 407
26 820
32 923
251 444
252 854
121 861
140 113
732 934
798 691
1 094 597
1 107 454
1 201 288
Cost of tatneft group consolidated assets
in 2011 and 2018 (billion RUB)
140.1
252.9
86.4
27.2
216.4
368.9
297.8
Exploration and production
Oil processing,
oil and oil product
sales
Нефтехимия
Petrochemistry
Corporate and other
2011
2018
32.9
406.4
The comparison of 2018 and 2011 is justified by the oil refining complex
commercial commissioning.
Fuel and energy resource consumption
The Company implements a target program to reduce the fuel and energy
resource consumption.
More than 464 thousand tonnes of fuel equivalent were
saved. The most efficient saving areas are: oil and gas treatment,
processing, transportation, oil and gas production technology,
reservoir pressure maintenance.
The cost of fuel and energy resources, saved as a result of the
energy saving program implementation in 2011-2018, amounted
to RUB 5.1 billion (including: electricity RUB 2.9 billion, heat
energy RUB 1 billion, boiler fuel RUB 0.8 billion, combustibles and
lubricants RUB 0.4 billion).
Following the energy saving program implementation in 2018,
the TATNEFT Group enterprises saved more than 47.7 thousand
tonnes of fuel equivalent, which amounted to RUB 842.5 million
and allowed a 0.8% reduction in the Company’s need for fuel and
energy resources.
The main energy savings were obtained by saving electricity.
Energy production using renewable energy sources
The main share (99.9%) of energy production from renewable
energy sources (RES) in the TATNEFT Group accounts for the
heat energy generation by pellet boiler houses, 0.01% - by the
solar power plants of the Company’s retail trade network, in 2018
the boiler house installed capacity was 1,778 Gcal/hour. The total
energy production from RES in 2018 amounted to 2,054.7 tonnes
of fuel equivalent or 0.24% of the total TATNEFT Group energy
production.
11%
SAVING OF
FuEL AND ENERGY
RESOuRCE CONSuMPTION
39.7%
DECREASE IN
FuEL AND ENERGY
RESOuRCE CONSuMPTION
sinCe tHe beginning oF tHe taRget PRogRam
imPlementation (2010) FoR tHe PeRiod oF 2011-2018
Dynamics of FER consumption decrease (%)
Базовый период
3.80
8.60
13.70
20.10
28.70
34.90
38.90
39.7
2010
2011
2012
2013
2014
2015
2016
2017
2018
Dynamics of fuel and energy resource saving (%)
2011
2012
2013
2014
2015
2016
2017
2018
1.5
3.0
4.5
5.9
7.4
8.6
9.8
11.0
The Сompany fuel and energy resource consumption in 2018
Meas. units
ConsuMption in natural units
Costs, Million ruB
Electricity including:
production consumption
Heat energy including:
production consumption
Natural gas including:
production consumption
Gasoline (total)
including:
AI-80
AI-92
AI-85
AI-98
Diesel fuel
thousand KWh
thousand KWh
Gcal
Gcal
thousand m3
thousand m3
tonne
tonne
tonne
tonne
tonne
tonne
tonne
6 027 682
5 990 446
8 596 156
8 011 715
1 990 178
1 989 696
3 984
194.96
2 431.3
1 353.2
4.54
4 154.26
691.7
16 833.077
7 924.094
8 732.258
170.64
7.80
101.83
60.77
0.24
169.98
20.37
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru
42
43
Investment program of the Сompany
The Company’s investment program is aimed at implementing
highly efficient projects as part of Strategy 2030. The planned investment
volume until 2030 is more than RUB 1.2 trillion. Mainly the Company’s
investments are concentrated in Russia.
Investment Program 2018
The Company’s Investment Program 2018 was reviewed by the
PJSC TATNEFT Board of Directors on December 22, 2017 (Minutes
No. 8 dated December 22, 2017). Implementation of Investment
Program 2018 was reviewed by the Board of Directors on February
27, 2019 (Minutes No. 10 dated February 27, 2019).
The investment portfolio in 2018 (excluding the ZENIT Banking
Group) amounted to RUB 97.8 billion, which is RUB 8.5 billion
higher than the level of 2017 (+9.5%), the main increase
is due to SVO project (+12.4 billion rubles).
Investment volume
2017
2018
2019 (planned)
89.4
82.3
97.8
91.2
Investment volume
Including capital
143.5
132.3
In 2019, the planned investments volume is approximately RUB 143.5 billion,
including RUB 132.3 billion of capital investments, which is higher than
the 2018 level by RUB 45.7 billion (46.7%).
Fund raising. Debt portfolio
In the baseline scenario, the Company plans to implement
strategic initiatives without large foreign loans.
Through the use of the most optimal tools for free cash allocation,
such as classic bank deposits, corporate bonds, foreign exchange
swap, REPO, Moscow Exchange deposits and their combination,
a RUB 5 billion income was received for all allocation operations
in 2018.
Credit limits are opened and maintained at the 6 largest Russian
banks.
The Company applies a conservative approach to long-term
lending aimed at minimizing risks and increasing the return on
the use of borrowed funds. The main criteria for the long-term
borrowing tool selection are: the estimated amount, the term of
the loan, the target orientation. In the case of attracting long-
term loans directed to the investment program financing, special
attention is paid to the compliance of the loan commercial terms
with the basic investment parameters of particular project. Primary
attention is paid to the possibility of structuring loans that imply their
repayment at the expense of additional cash flows generated from
the implementation of new investment projects.
The Company conducts regular monitoring of the main factors
affecting the lending market and seeks to take appropriate measures
for managing market risks, including those associated with rising
interest rates. When shaping trends to tighten monetary policy and
increase market expectations, taking into account the gradual increase
in lending rates, the Company practices the use of hedging instruments.
Currently TATNEFT Group has experience in structuring long-
term debt financing:
(particularly, for TANECO Construction Loan project);
• as part of the concept of so-called “project financing”
• successful attraction of loans guaranteed by Export Credit
• attraction of loans from international bank syndicates;
• on placement of classical and exchange bonds, both ruble
Agencies (particularly, SACE, EKF and Euler Hermes);
bonds and Eurobonds.
In 2018, the Group’s debt portfolio (excluding the ZENIT Banking
Group) consisted mainly of loans guaranteed by Export Credit
Agencies (ECA) attracted by JSC TANECO during the oil refining
complex construction. As of 31.12.18, the balance of such debt was
USD 98.57 million.
Investment portfolio structure in 2018 (%)
Oil and gas exploration and production in the oil fields of the Republic of Tatarstan (including the SVO fields)
and outside the Republic of Tatarstan and Russia
Oil and gas processing
Development of energy, tire, retail businesses, engineering and service subsidiaries
35.8
50.9
8.6
Social projects
2.1
Corporate projects
2.6
more than in 2017.
As a result of the best tools used for placing free cash
funds, such as classic bank deposits, corporate bonds, foreign
exchange swaps, REPO, deposits on the Moscow Exchange and
their combination, more than 5 billion rubles were earned for all
placement operations in 2018.
In fact, the Group has not attracted significant debt financing
(not including constant work with short term debt) since 2011 and
has worked all these years repaying previously raised loans.
In 2018, the Company continued to work on improving the
financial management procedures of enterprises in the PJSC
TATNEFT centralized treasury. In order to improve efficiency, quality,
accountability and stability of the serving business functions in the field
of PJSC TATNEFT financial management, in 2018 the “Centralization
of the PJSC TATNEFT structural subdivision financial functions in
the Shared Services Center” project was completed. As part of the
project, the functions of financial support for the Company’s structural
subdivision activities were transferred to the Corporate Finance
Center.
In order to efficiently use funds, the finance department
carried out a large amount of work to optimize settlements with
counterparties. This work will be continued in the future. In order to
reduce the diversion of the Company’s working capital and speed
up settlements with regular counterparties, counter-obligations are
repaid through the LOC (Liability Offset Center). The LOC turnover
for 2018 amounted to RUB 29.5 billion, which is RUB 0.5 billion
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru 44
45
The Company’s resource potential
As of 31.12.2018, according to an independent assessment of Miller & Lents, Ltd.
Hydrocarbon reserves – 1.350 billion tonnes of o.e.,
including unconventional oil reserves of 97.179 million tonnes of o.e., including:
Oil reserves of 1.289 billion tonnes,
including unconventional oil reserves of 96.708 million tonnes, including:
970.9
million tonnes of o.e.
343.3
million tonnes of o.e.
36.0
million tonnes of o.e.
924.851
million tonnes
328.070
million tonnes
35.6
million tonnes
In the reporting year, the Company carried out an analysis
and assessment of the current oil reserve resource base
potential, defining the boundaries of business challenges.
In 2018, the Company applied a zero MET rate to super
viscous oil with a viscosity of 10,000 MPa*s and more (in reservoir
conditions), as well as for oil produced
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including unconventional
oil reserves of
32.593
million tonnes of o.e.
including unconventional
oil reserves of
36.147
million tonnes of o.e.
including unconventional
oil reserves of
28.439
million tonnes of o.e.
including unconventional
oil reserves of
32.333
million tonnes
including unconventional
oil reserves of
35.946
million tonnes
including unconventional
oil reserves of
28.429
million tonnes
TATNEFT GROuP 1P OIL RESERVE
REPLACEMENT RATIO IS
297.6%
TATNEFT GROuP 2P OIL RESERVE
REPLACEMENT RATIO IS
200.4%
The tasks were detailed, additional R&D and pilot work projects
were launched for the study of geological structure, selection of
efficient technologies for reserve development.
Initiated and implemented:
• Project to increase production rates for Verei sediments to 8%
• Project to optimize the development system for facilities confined
• Project on production intensification through well drilling to the
to the Tula and Bobrikov horizons
Tournaisian and Bashkir stages.
Work has begun on a project to introduce into the active
development the oil reserves of the Kynovian horizon reservoirs with
boundary values of porosity and permeability properties.
A favorable economic condition for the Company’s field
development is the use of differentiated MET rates and privileges
on customs duties on oil.
The use of lower rates for export customs duties and a zero
MET rate for the super viscous oil horizons (with viscosity of 10,000
MPa*s and more) stimulates the Company’s SVO production
development.
from Domanic deposits. Also, differentiated MET rates were
used with a reduction factor for subsoil areas with more than 80%
depletion, for small subsoil areas with reserves (initial recoverable
reserves, IRR) of less than 5 million tonnes and a 5% or less
depletion (according to the National register of mineral reserves as
of 01.01.2011), for super viscous oil fields with viscosity of more
than 200 and less than 10,000 MPa*s in reservoir conditions, for
subsoil areas in Nenets Autonomous Area. In 2018, oil production
at these sites amounted to 24.78 million tonnes (including SVO with
viscosity of more than 10,000 MPa*s –1,949 thousand tonnes).
The Company achieves savings by reducing the tax rate on super
viscous oil in some of its fields and by other specific tax incentives
related to the production and sale of super viscous oil.
Due to the nature of the raw material base, the Company remains
prioritized the maintenance of incentive tax regimes for depleted
and super viscous oil fields.
TATNEFT Group Total Net Conditional Resources
Migration of proven oil reserves in 2018, thousand tonnes
thousand barrels (oil and condensate)
657 million cubic feet (gas)
1С resourCes
2С resourCes
3С resourCes
732 725
293 657
1 031 904
461 411
1 997 725
2 532 638
at the end of 2018
at the end of 2017
growth taking into aCCount
the produCtion in 2018
Proved drilled developed net oil reserves
Proved drilled undeveloped net oil reserves
Proved undrilled net oil reserves
Proved net oil reserves
499 749
310 280
114 822
924 851
480 097
306 915
79 477
866 489
49 186
3 365
35 345
87 896
10.3%
1.1%
44.5%
10.1%
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru
46
www.tatneft.ru
47
geological exploration and production
STRATEgIC TASKS
Production growth to 38.4 Million tonnes by 2030
100% Reserve replacement.
The Company develops its resource potential on the basis
of a rational approach to the subsoil development and strict
observance of industrial and environmental safety using
advanced methods and technologies possessed by the
internal and external oilfield services.
Ensuring the growth of hydrocarbon reserves.
Improving the efficiency of geological exploration
activities for the successful implementation of the
Company’s mineral resource base replacement
programs.
Development of new technologies for prospecting
and exploration of fields in explored and new areas in
various geological and climatic conditions.
Reduction of terms and improvement of the quality of
field preparation for industrial development.
Fulfillment of the existing resource base potential due
to the SVO production growth, the hard-to-recover
resource development with a high level of innovative
approach application.
Commercial commissioning of the fields in the Nenets
Autonomous Area.
Reduction of specific operating costs for conventional
oil production in the Republic of Tatarstan.
Implementation of IT projects, widespread use of oil
recovery factor enhancement technologies.
In 2018, RUB 2.6 billion were invested in solving the resource
base expansion problem. Of these, 81% are for drilling production
and exploration wells, approximately 10% for seismic exploration
methods and issue-related geological exploration work, 3% for well
interventions.
For 2019, it is planned to invest RUB 11 billion in projects for the
oil production development outside the Republic of Tatarstan and
produce 319 thousand tonnes of oil.
Geological exploration work in the territory
of the Republic of Tatarstan
On the territory of the Republic of Tatarstan, the Company was
granted 67 licenses, of which 36 licenses for mineral exploration and
production, 27 for geological survey including mineral prospecting
and evaluation, exploration and production, 4 for geological survey
including mineral prospecting and evaluation: 2 for geological
survey including mineral prospecting and evaluation and 2 -
for geological survey of developed mineral deposit underlying
horizons.
The geological exploration volumes envisaged by the license
agreements for license blocks are carried out in full.
In 2018, the growth in all categories (A+B1+C1+B2+C2) of
recoverable oil reserves in the Republic of Tajikistan amounted
to 29.9 million tonnes, including 19.9 million tonne increase in
reserves due to geological exploration.
Prospecting and exploration in the territory of the Republic of
Tatarstan were conducted within the Cheremshano-Bastryksk,
Tlyanchi-Tamak, and Stepnoozersk exploration areas and at the
Agbazovskiy, Yersubayinskiy, and Sokolkinskiy subsoil areas.
In 2018, the cost of geological exploration work carried out in
the Company’s licensed blocks within the Republic of Tatarstan
amounted to more than RUB 1.1 billion.
The volume of prospecting and exploration drilling in 2018 – 18.1
thousand meters, including exploration – 4.9 thousand meters,
prospecting – 13.2 thousand meters.
Construction of 12 exploration wells is completed, of which 10
are production wells.
Following the seismic exploration work results, 1 structure with
prospective resources in the D0 (recoverable) category – 0.183
million tonnes has been prepared for deep drilling.
In 2019, in the Company’s fields and exploration
areas, in order to replace reserves, it is planned to drill
35 exploration wells in the Republic of Tatarstan with
a total penetration of 54.5 thousand meters of rocks,
perform seismic exploration using 2D common depth
point method (CDPM) in the amount of 280 running km
and 3D CDPM in the amount of 558 km2.
83%
PROSPECTING AND EXPLORATION
DRILLING SuCCESS IN TATARSTAN
Geological exploration work outside
the Republic of Tatarstan
Outside the territory of the Republic of Tatarstan, the Company
was granted 31 licenses, of which 16 licenses for mineral
exploration and production, 13 for geological survey including
mineral prospecting and evaluation, exploration and production, 2
for geological survey including mineral prospecting and evaluation.
In 2018, geological exploration work was carried out in the
territories of the Ulyanovsk, Orenburg, Samara regions, the Nenets
Autonomous Area and the Republic of Kalmykia.
In the Republic of Kalmykia, a gas condensate field named
after V.E. Bembeev was opened. Recoverable free gas reserves
of C1+C2 categories for the field are 4.2 billion m3, condensate
reserves of C1+C2 categories – 1.6 million tonnes. The reserve
increase cost amounted to 487 RUB/tonne.
In the Samara region, the interim re-estimation of reserves
at the Tuarminskoe oil field was carried out; the reserves at the
Kanashskoe field changed. The increase in recoverable reserves
of A+B1+B2 categories amounted to 0.337 million tonnes.
In 2018, seismic exploration work was carried out in the
Republic of Kalmykia and the Samara region using 2D CDPM – a
total volume of 550 running km and 3D CDPM – a total volume of
114 km2.
The exploration drilling volume in 2018 is 8.2 thousand meters.
Construction of 3 prospecting and 1 exploration wells completed.
The prospecting and exploration drilling success is 100%.
In the Samara region, five structures with D0 category resources
(recoverable) of 9.405 million tonnes have been prepared for deep
drilling. Following the seismic exploration results, three structures
with D0 category resources (recoverable) of 4.099 million tonnes
have been prepared for deep exploration drilling..
In 2019, it is planned to drill 9 exploration wells with
a total penetration of 34.5 thousand meters of rocks,
perform 2D CDP seismic exploration in the amount
of 474 running km, 3D CDP - in the amount of 1,238
km2.
100%
PROSPECTING AND EXPLORATION
DRILLING SuCCESS OuTSIDE
TATARSTAN
Annual Report 2018TATNEFT GroupREPORT OF THE PJSC TATNEFT BOARD OF DIRECTORS www.tatneft.ru 48
www.tatneft.ru
49
oil and gas production
The Company endeavours to unlock to the utmost the oil reservoir potentials
and deliver on the accumulated technological knowledge and expertise
so that we could strengthen our positions on the energy markets in Russia
as we as worldwide.
The oil production output across the TATNEFT Group totaled
29.5 mln tonnes in 2018 including 27.6 mln tonnes of conventional
oil output and 1.9 mln tonnes of super-viscous oil production. The
average daily oil production rate was 2.1 % higher and amounted
to 576.4 thousand barrels per day. The Company had to hold down
the oil production rates under the OPEC+agreement while keeping
its potential to ramp up its oil output in future when the production
restrictions.
In order to ensure the sustainable development of the
hydrocarbon reserves and the increased oil production profitability
the Company applies cutting edge techniques and technologies,
and equipment many of which are unique and developed especially
taking into account the peculiarities of the resource base possessed
by the Company as well as the artificial intellect, high-precision
simulation and modeling software.
Oil production structure in 2018
(million tonnes)
TATNEFT Group oil production, including
Conventional oil
Super viscous oil
Associated petroleum gas production volume
(million m3)
One of the activity are is creating of digital twin models for
producing assets that make it possible to define with high reliability
the oil production potential and manage the reservoir development
with highest possible efficiency.
2016
2017
2018
The Company anticipates that the digital modeling of all its oil
29.5
27.6
1.9
1022.89
1007.28
1009.03
fields will have been finished by 2020.
Moreover, by 2030 the oil production is projected to be increased
up to more than 38 million tonnes per year. The strategic plans of
the Company are based on the development of already existing
licensed assets within the area of the main resource base in the
Republic of Tatarstan, the Samara District, the Nenets Autonomous
District taking into account the oil production development trends
outside Russia.
The sustainable organic growth strategy for oil production is
According to the results of 2018, associated gas production
amounted to 1,009.279 million m3, which is 1.753 million m3 more
than in 2017.
Oil production
(million tonnes)
2016
2017
2018
Daily production average
(thousand barrels/day)
28.7
28.9
29.5
2016
2017
2018
Use of apg for the company’s own needs
(million m 3)
NGL production *
(thousand tonnes)
2016
2017
2018
69.353
69.601
67.331
2016
2017
2018
*excluding TANECO NGL
In order to implement the corporate action program for
associated petroleum gas (APG) utilization, construction was
completed in the first quarter of 2018 and the gas pipeline
system from the NGDU Yamashneft and NGDU Elkhovneft
facilities was commissioned. In 2019, it is planned to carry out
design and exploration work for the project “Expansion of the gas
collection system from the NGDU Yamashneft facilities” and start
the construction and installation works.
based on the potential:
viable manner;
• bringing the existing reserves into production economically
• Technology scaling
• effective and efficient development of new projects;
• improved Oil Recovery Factor;
• Additional gas monetization.
The Company yields a high-margin production.
2016
2017
2018
4.1
4.5
4.2
1398 RUb
PeR baRRel
EBIDTA PER BARREL
PRODuCTION
>
35%
OIL
RECOVERY
FACTOR
Drilling volume in 2018, thousand m
Объем эксплуатационного бурения
Prospecting and exploration drilling volume
592.8
13.1
Average daily oil flow rate of existing production wells
(tonnes/day)
Well stock as of 01.01.2019
Operating production well stock
Active production well stock
Inactive production well stock
Developed production well stock and production well stock expecting development
Operating injection well stock
Active injection well stock
558.3
564.8
576.4
282.150
274.722
321.829
23 585
20 986
2 581
18
11 318
10 285
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Oil production by major fields in the territory of the Republic of Tatarstan in 2018
Oil and gas production outside tatarstan
The Company’s main production volume
is provided
by conventional fields located in the Republic of Tatarstan.
The main share of the current oil production accounts for
2 unique and 5 large fields: Romashkinskoye, Novo-Elkhovskoye,
Bavlinskoe, Sabanchinskoye, Pervomayskoye, Bondyuzhskoye,
Arkhangelskoye.
Oil production by major fields in 2018,
Thousand tonnes
Fields
Romashkinskoye
Novo-Elkhovskoye
Bavlinskoye
Bondyuzhskoye
Pervomayskoye
Sabanchinskoye
Arkhangelskoye
2018
15 494
2 780
1 207
239
310
537
237
Super viscous oil field
development
The Company produces super viscous oil at the Ashalchinskoye
field. In 2018, super viscous oil production was 1,949 thousand
tonnes. By the end of the year, daily oil production reached 5,675
tonnes. Overall, since the beginning of the development, the total
volume of super viscous oil production amounted to 5.4 million
tonnes.
18 super viscous oil fields of the Sheshmin horizon are in
development. Six SVO fields were commissioned in the reporting
year: (Chumachkinskaya, Novo-Chegodayskoye, Verkhneye
(deposit III), Averyanovskoye, Studeno-Klyuchevskoye, Yuzhno-
Yekaterinovskoye, Vostochno-Sheshminkinskoye), and work has
begun on drilling horizontal wells and arranging 6 additional SVO
fields (Arkhangelskoye, Gryadinskoye, Moroznoye, Dymnoye 1,
Podlesnoye, Yuzhno-Rodnikovskoye).
As of 01.01.2019, the operating well stock at the SVO fields
is 803 horizontal wells (including 239 wells drilled in 2018) and
2,275 appraisal wells (including 311 wells drilled in 2018). Active
production well stock consists of 258 wells, including 244 well pairs
and 14 cyclic steam wells. Active injection well stock consists of 396
wells, including 372 well pairs and 24 cyclic steam wells.
KAZAN
Bondyuzhskoye
Pervomayskoye
NABEREZHNYE CHELNY
Romashkinskoye
Novo-Elkhovskoye
ALMETYEVSK
Sabanchinskoye
Bavlinskoye
IMPLEMENTATION
OF PJSC TATNEFT
STRATEGIC GOALS
STRATEGIC DEVELOPMENT
PLANNING+
ECONOMIC MODEL
DEVELOPMENT MANAGEMENT BASED ON GEOLOGICAL
AND HYDRODYNAMIC MODELING (GHDM)
GEOLOGICAL AND HYDRODYNAMIC MODEL
DIGITAL DATABASE
During 2018, 18 oil fields were in operation outside of the Republic
of Tatarstan, including 15 fields – the Samara region, 2 fields – the
Orenburg Region, 1 field - the Nenets Autonomous Area. At the end
of 2018, oil production in the Samara and Orenburg regions was
carried out from 128 wells, including 127 wells in the Samara and
1 well in the Orenburg regions.
Oil production in 2018 in the Samara region amounted to 328
thousand tonnes, Orenburg region - 13 thousand tonnes. In the
Samara region, 11 new production wells were commissioned after
drilling and development. Average daily oil flow of new wells drilled
in 2018 is 10.5 tonnes/day. Also, 3 prospecting and 1 exploration
wells were drilled in the Samara region.
On the territory of the Nenets Autonomous Area, development
of 2 exploration wells at Podveryukskoye and Khosoltinskoye fields
continued. Also test operation of the Tibeyvisskoye field exploration
well was carried out – oil production in the reporting year amounted
to 521 tonnes.
The Company’s foreign projects in Libya and Syria are suspended
due to the difficult military and political situation in the territory of
these states. The Company monitors the situation development in
order to resume work after stabilization of the situation and obtain
guarantees for the safety of personnel working at the fields.
Republic of Tatarstan LLC TATNEFT-NAO
0.5 thousand tonnes
LLC TATNEFT-Samara
Samara region
328.5 thousand tonnes
LLC TATNEFT-Samara
Orenburg region
12.7 thousand tonnes
Digitalization of the field development
management with geological and
hydrodynamic modeling
The main tasks solved by geological and hydrodynamic
modeling are reserve localization in mature fields, planning the
new/promising site development. The basic principles of GHDM
operation:
• optimal well arrangement
is determined using GHDM
individually for each site, taking into account geological features,
recoverable reserve distribution and porosity and permeability
properties;
• optimal network may be heterogeneous in area and vary
depending on the stage of development, economic constraints
and optimization criteria;
• optimization is carried out according to the criteria adopted
by the Company (reserve development, profitability index, net
present value (NPV), etc.).
Overall, digital transformation opens up levels
of new opportunities in production and strategic
planning.
Formation of the monthly well intervention plan and well operation
modes based on modeling and economic calculations allows to:
various parameters;
• Generate a Well Intervention Pool and rank the interventions by
• Promptly make decisions on specific interventions and prevent
potential complications during operation.
Monitoring of implemented intervention efficiency using GHDM:
• Potential assessment, selection and recommendation of optimal
technologies for the reserve development and production
intensification, taking into account economic conditions.
production plan.
• Timely selection of additional interventions to ensure the
• Identification of “problem” places in the operation and drilling
technology for improvement by clarifying the well potential by
the model.
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oil sales
oil product sales
The Company provides the optimal balance in produced oil
supply distribution in order to increase operating profitability in
the market conditions.
In 2018, the Group exported approximately 62% of all
sold crude oil, compared to 73% in 2017, increasing overall
revenues from oil sales by 29.9%. At the same time, the
Company fully provides its own processing facilities with raw
materials.
For the oil transportation for export, the Group uses the services
of JSC Transneft (Transneft), the state monopolist and the
operator of the Russian trunk oil pipeline system. Approximately
73% of export oil is transported via the Druzhba pipeline (mainly
to Poland, the Czech Republic and Slovakia); 3% of export oil
was shipped through the Russian ports of the Black Sea (mainly
Novorossiysk) and 24% of export oil was shipped through the
Russian ports of the Baltic Sea (mainly Primorsk).
The Company’s oil products are sold wholesale abroad and in
the domestic market, and also delivered to the Company’s sales
subsidiaries for subsequent sale in Russia.
The Group’s total oil product sales in 2018 amounted to 11.4
million tonnes. The share of oil product supplies to the domestic
market was 49.8%. At the same time, in order to increase the
operating profitability, the Company increased the share of oil
product supplies to far abroad countries to 45%.
5.7 million tonnes of oil products were exported compared to 5
million tonnes in 2017.
In 2018, 50.2% of total sold oil products was shipped for export,
49.8% – to the domestic market.
Group crude oil sales volumes, thousand tonnes
2015
2016
2017
2018
Crude oil sales
19 959
22 117
21 830
20 341
Oil product sales volumes (thousand tonnes)
Revenue from oil product sales (billion RUB)
2015
2016
2017
2018
11 135
10 940
10 523
11 350
2015
2016
2017
2018
215.2
212.3
241.7
355.0
Revenue from oil sales, billion RuB
Revenue from oil sales
269.2
298.1
365.2
474.3
2015
2016
2017
2018
Overall, the revenue from oil product sales minus export duties
and excise taxes in 2018 amounted to RUB 355 billion, it is a 46.9%
increase compared to 2017.
The growth is mainly due to rising prices for oil products.
5.65 million tonnes of oil products were supplied to the domestic
market.
Shares of crude oil sales volumes for the group and by delivery destinations, %
Shares of oil product sales volumes by delivery destinations, %
to the domestic market
to the CIS countries
to the far abroad countries
2015
38.9
6.6
54.5
Shares of revenues from the crude oil sale, excluding export duties
by delivery destinations, %
to the domestic market
to the CIS countries
to the far abroad countries
2015
33.1
7.2
59.7
2016
39.1
5.1
55.8
2016
33.9
5.5
60.6
2017
27.2
5.6
67.2
2017
25.2
5.7
69.1
2018
38.0
6.0
56.0
2018
35.0
6.0
59.0
to the domestic market
to the CIS countries
for export to the far abroad countries
2015
51.4
5.9
42.7
2016
55.1
2.3
42.6
2017
52.2
3.8
44.0
2018
49.8
5.2
45.0
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oil and gas processing
STRATEgIC TASKS
Bringing capacities to 15.7 million tonnes of oil processing per year
Maintaining the reputation of reliable producer of high-quality oil products
Increase in production of high-margin products
High level of industrial and environmental safety
The Company has high-quality oil and gas processing facilities,
as well as carbon black production facilities, geographically
grouped at four sites in close logistic proximity to oil production in
Almetyevsk and Nizhnekamsk regions of the Republic of Tatarstan.
Based on the synergy of oil and gas processing, the Company
began to develop gas and petrochemical areas, identifying the
potential of new growth points and reducing the business strategy
market risks.
The integration of oil and gas processing and gas and
petrochemical industry, the growth in production volumes of
competitive and environmentally friendly products, the development
of premium sales channels, optimization of the oil product logistics
are key drivers for growth in operating profitability and produced oil
monetization.
Range of products made in 2018
1. LPG (NGL);
2. Stable natural gasoline
3. Aviation kerosene
4. Aviation fuel (TS-1/RT/Jet A-1)
5. Diesel fuel, including premium TANECO (summer/winter/
arctic)
6. Motor gasoline (AI-80/92/95/98)
7. Base oils (HVI-2, VHVI-4/6);
8. Lubricants (motor, transmission, hydraulic, transformer, special
oils)
9. Sulfur (granulated, lump)
10. Coke
11. Middle distillates
12. Industrial solvent
13. Flammable natural gas
14. Hydrocarbon liquefied gases
15. Ethane fraction
16. Propane fraction
17. Isobutane fraction
18. n-Butane fraction
19. Isopentane fraction
20. Commercially pure gaseous nitrogen
21. Commercially pure gaseous oxygen
22. Carbon black (10 active and 4 semi-active grades).
The oil processing quality ensures the
Company’s leadership in the industry
• 100% motor fuel complies with EURO-5
• 0 % - dark hydrocarbons
• Associated petroleum gas utilization over 96%
• The largest carbon black production (active and semi-active
brands)
• Production of import-substituting products: high-quality
API Group III base oils through 100% hydrotreatment and
lubricants based on them for all industries.
• Production of TANECO premium diesel product, including the
arctic one (by the cetane number, it is the best in Russia - 63
units without the addition of cetane-increasing additives; ultra-
low content of sulfur and polycyclic aromatic hydrocarbons).
This fuel fully complies with the requirements of Euro-6
engines — an environmental standard regulating the harmful
substance content in exhaust gases.
For the current period, the Company maintains the
ratio between oil processing and production volumes
at a level of more than 30%.
+
9.6%
GROWTH IN OIL PROCESSING
Oil processing (thousand barrels/day)
2017
2018
83.64 %
LIGHT OIL PRODuCT YIELD (TANECO)
10
NELSON COMPLEXITY INDEX (TANECO)
10.1 million tonnes
TOTAL OIL AND GAS PRODuCT YIELD
IN 2018 AMOuNTED TO
163.3
179.0
99,05
83,40
85–90
85
98
Processing depth* (%)
TANECO
Average value,
Russian Federation
Average value,
Europe
Average value,
OPEC countries
Average value,
USA
*according to the Ministry of Energy of Russia and Central Dispatching Department of Fuel Energy
Complex (CDU TEK) http://www.cdu.ru/tek_russia/articles/2/556/
Production of oil and gas products (Million tonnes)
2017
2018
9.6
10.1
Strengths of the Company’s oil refinery business unit
• Use of modern innovative technologies that provide a
high volume and wide product range
• Multi-tier integrated architecture of automated control
systems – production control is carried out automatically
• Improved environmental performance
• Developed transport and logistics infrastructure
• Import-substituting technologies and equipment
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TANECO Complex
Primary production areas
• Crude oil distillation
• Hydrocracking and base oils
• Oil product hydrotreatment and elemental sulfur production
• Heavy residue recycling
• Aromatic hydrocarbons production
• Commodity and raw material production
• Commodity product shipment department
• Industrial wastewater treatment, power supply, water supply, etc.
In the period from 2010 to 2018, more than
60 million tonnes of crude oil were processed
at the TANECO Complex.
Putting into commercial operation - 2011. Continuation of
construction in order to increase capacity. The development plan
of the TANECO Project is envisaged until 2026 and provides for the
commissioning of installations to increase the volume of oil refining
and the range of products.
Currently, of the ELOU-AVT-6 Plant construction is still underway,
which will increase the Complex capacity to 15.3 million tonnes.
On January 25, 2018 President of the Russian Federation V.V.
Putin and President of the Republic of Tatarstan R.N. Minnikhanov
took part in the naphtha hydrotreating and isomerization unit
commissioning ceremony in the video conference format. The unit
start-up was the first stage in the implementation of a full-scale
motor gasoline production scheme compliant with the Euro-5
environmental class at the Complex.
Naphtha hydrotreating and isomerization units are secondary
oil processing units. They sequentially operate in the process flow
scheme and allow to obtain a high-octane environmentally friendly
motor gasoline component. Also, the naphtha hydrotreating unit
Elkhovsk oil processing unit
A large-scale modernization was carried out in the period
from 2014 to 2018
TANECO Complex Oil Products
(thousand tonnes)
2017
2018
8190.8
8703.5
produces the raw material for the catalytic reformer, which allows
the production of high-octane gasoline component and aromatic
hydrocarbons that are in demand in the market.
Kerosene and diesel fuel hydrotreating units were commissioned,
which made it possible to increase production. In 2018, complex
testing began at the catalytic reformer, which allowed to start
premium class gasoline production.
The TANECO product range contains 20 types of high-quality
and sought-after products: motor gasolines AI-92, AI-95, AI-98,
diesel fuel Euro-5, which is the best in Russia in terms of cetane
number; aviation kerosene RT, TS-1, JET A-1, group II and III base
oils, etc.
On February 12, 2019 President of the Russian Federation V.V.
Putin and President of the Republic of Tatarstan R.N. Minnikhanov
took part in the gasoline AI-92, AI-95, AI-98, AI-100 industrial shipment
beginning ceremony at TANECO in the video conference format.
The
fuel components, obtained by modern naphtha
hydrocracking, hydrotreating and isomerization technologies,
catalytic reforming, are blended at the gasoline mixing station. The
gasoline recipe, selected and controlled online, provides motor
fuels with optimal operational and environmental performance.
The TANECO Complex motor gasolines meet the Euro-5
standard and provide easy engine start at any time due to the
inclusion of light fractions in the formulation, and reduction in
fuel consumption, increasing engine performance due to the
involvement of components with high density, octane number, low
olefin, benzene and sulfur content.
The rated gasoline production capacity is more
than 1.1 million tonnes/year. up to 3000 tonnes
of high-quality fuel are planned to be produced
daily.
The package oil processing unit consists
of complete units for
Yelkhosky Oil Refining Plant Oil Products
(thousand tonnes)
• Atmospheric and vacuum crude oil distillation
• Straight-run gasoline hydrotreating
• Gasoline catalytic reforming
• Commercial gasoline benzene-free component production
• Diesel fuel hydrotreating
• Hydrocarbon gas amine treatment
• Elemental sulfur production
• Paving bitumen production
• Commercial product receipt and storage commodity park
• Regular-92 commercial gasoline production unit
2017
2018
224.5
213.9
The main products are nonleaded gasoline Regular-92
(AI-92-K5), nonleaded gasoline Normal-80 (AI-80-K5), diesel fuel,
kerosene and gas oil fraction, light vacuum gas oil.
In 2018, 214 thousand tonnes of oil products were produced.
Tataneftegazpererabotka
The complex is designed for processing of
associated petroleum gas and a broad fraction
of light hydrocarbons (NGL from unified oil
processing unit), storage and shipment of finished
products. The existing capacities allow to provide
the whole complex of gas processing processes:
• gas purification from hydrogen sulfide and carbon dioxide;
• moisture drying; gas separation into individual fractions –ethane,
• propane, isobutane, isopentane, pentane-isopentane fractions,
• normal butane and stable natural gasoline fractions, as well
as dry stripped gas and gas sulfur.
Nizhnekamsktekhuglerod
The Company’s carbon black production facilities are among
the largest Russian enterprises in this industry. Produced carbon
black is a highly competitive counterpart of foreign products.
In 2018,
the carbon black production amounted
to 134.4 thousand tonnes.
Products correspond to high-quality foreign counterparts,
supplied to the domestic market and 29 importing countries.
Oil and gas chemistry
On 24.08.2018, the TATNEFT Board of Directors made a
decision to build gas and petrochemical facilities for the production
of engineering plastics and a wide range of other petrochemical
products previously not manufactured in Russia. In order to build
an effective model for managing the TATNEFT Group gas and
petrochemical complex development, a project office for the gas
and petrochemical complex development was established.
New growth points in the long-term strategy
of the Company
Tatneftegazpererabotka Complex Gas Products
(thousand tonnes)
2017
2018
1108.1
1120.4
The gas processing complex consists of units for gas
purification from hydrogen sulfide, petroleum gas and dry stripped
gas compression, a cryogenic unit for deep processing of dry
stripped gas, units for gas purification and drying, low-temperature
condensation and rectification, cascade refrigeration unit, gas
fractionation units, flare facilities, warehouse fleet for receiving and
storing raw materials and finished products; a loading/unloading
rack for sending products by rail.
In 2018, 1120 thousand tonnes of gas products were produced.
Associated petroleum gas is a valuable raw material for the
production of a wide range of highest quality gas processing
products, which are later used in petrochemistry and energy.
Carbon black production (thousand tonnes)
2015
2016
2017
2018
117.1
118.8
133.7
134.4
In the period 2018 - 2023, it is planned to construct and
commission the Stage 1 production facilities of the gas and
petrochemical complex with a total investment of RUB 70.6 billion.
Development conditions:
sufficient to provide raw materials
• Availability of own petrogaschemical feedstock in the amount
• independence from third-party suppliers
• Logistical advantage within the Russian Federation
• Opportunities for cooperation with Tatarstan enterprises
• Relative proximity to export markets
Development of gas-based petrochemical activity
in business structure with high potential of profitability
increase
Projected product output (%)
77.9
15.8
Ensuring increased profitabilty of the Company
thanks to high-margin gas-based petrochemicals
produced from its oiwn feedstock
Import phaseout in the gas-based petrochemical
business segment
Market risk reduction
3.2
3.1
317
thousand
tonnes
per year
polypropylene
maleic anhydride
acrylonitrile
carbon fiber
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retail filling station network
STRATEgIC TASKS
Development of the filling station network (modernization of existing filling stations,
expansion of the filling station network)
Differentiated pricing
Margin improvement
Development of non-fuel offer at filling stations
Branded fuel sales increase.
The volume of oil product sales through the TATNEFT Group
retail trade network in 2018 amounted to 3.5 million tonnes,
including commission sales, which is 22% more than in 2017,
particularly, retail sales increased by 15%, a positive dynamics is
demonstrated in average daily sales per 1 filling station (+12% by
2018). 1,858 thousand tonnes of oil and gas products were sold
through a filling station network. Regional business units sold 1,597
thousand tonnes of oil and gas products in small wholesale.
Total sales volume through retail trade network (Thousand tonnes)
retail trade network
RF
outside the Russian Federation
filling station network
RF
outside the Russian Federation
small wholesale
RF
outside the Russian Federation
average daily sales
2014
2015
2016
2017
2018
2 050
1 970
80
1 250
1 193
57
800
776
4
6.4
2 435
2 356
79
1 376
1 325
51
1 059
1 031
28
7.0
2 575
2 485
90
1 505
1 440
65
1 070
1 045
25
7.6
2 677
2 580
97
1 580
1 503
77
1 096
1 077
19
8.0
3 455
3 327
128
1 858
1 759
99
1 597
1 568
29
9.1
TATNEFT’s retail trade unit companies demonstrate high
performance indicators and are leaders in many regional
markets of the Russian Federation.
Quality control of retail trade network oil products
Sold products and services comply with applicable regulations
and standards. The compliance is confirmed by inspections
conducted by supervisory authorities.
The Company is developing an effective quality control system
for sold oil products that meets industry standards and internal
regulations.
During the year, approximately 18.1 thousand samples of oil products
were taken from all filling stations and tank farms, they were analyzed
for more than 113.3 thousand indicators in 11 independent specialized
laboratories and using 3 mobile laboratory complexes, the equipment
of which allows in a short time determine more than 15 indicators for
gasoline and 10 indicators for diesel fuel using express methods.
Quality control is provided by a multi-level control system using
modern equipment, advanced technologies, hardware and software
systems.
No cases of noncompliance with the regulatory requirements
and voluntary codes concerning the impact of products and
services on health and safety were registered in reporting year.
One of the priorities inherent in the network development,
is the use of advanced energy and resource saving and
environmentally friendly technologies.
Filling station network
The filling station network is the fourth largest on the
territory of the Russian Federation.
By the end of 2018, the Company’s retail network included 711
filling stations (including leased ones), of which 602 in the Russian
Federation, 91 in Ukraine and 18 filling stations in the Republic of
Belarus.
Considering the current trend of converting cars to gas fuel,
gas units are being commissioned at the Company’s retail trade
network facilities and additional gas dispensers are installed at the
filling stations.
For gas fuel, the Company uses its own raw materials produced
at Tataneftegazpererabotka facilities. Associated petroleum gas,
which has passed through all stages of drying, purification and
separation, is an environmentally friendly fuel that allows to increase
engine resources and extend the life of many car units with a
relatively low cost compared to other motor fuels.
Quality control of oil products, the development of a unique fuel
and non-fuel offer at filling stations, updating the brand concept
with the unification of formats with shops and cafes, the introduction
of advanced IT tools, targeted marketing activities, loyalty programs
are key areas for improving the retail business efficiency.
Number of filling stations
Gross income for non-fuel business
Total, icluding
RF
Ukraine
Belarus
2017
685
574
94
17
2018
711
602
91
18
Meas. units
2017
2018
Gross income
Filling station retail
Small wholesale network
Number of filling stations with shops
Cafeterias
million RUB
million RUB
million RUB
pcs.
pcs.
1 040
912
128
421
259
1 269
1 096
173
452
415
Customer informing
Product and service customer informing at filling stations is
carried out by placement of the quality certificates for sold oil
products and goods at the filling station, the development and
placement of information at the filling station with a description of
the sold product properties.
Feedback
Filling station customers can:
the customer can use it around the clock.
• Use the hotline
• TATNEFT retail trade network hotline is 8 (800) 5555911,
• Write a message on the website www.azs.tatneft.ru and
• PJSC TATNEFT retail trade network hotline is 8 (800) 104112,
• Send a message to e-mail tn@88001004112.ru.
• Write a message on the website http://www.tatneft.ru/
the customer can use it around the clock.
in the Feedback section
goryachaya-liniya/
Received appeals are recorded and classified by categories of
appeals.
The main identified problems are:
• fuel charges
• service culture
• equipment malfunction
• related service
All comments and suggestions received through the hotline are
analyzed, and on the basis of the results and information obtained in
the Company’s retail structures, decisions can be made to improve
the quality of provided services and eliminate shortcomings in the
filling station operation.
The time for processing an appeal (response to call) received
through the hotline is 6 working days from the day the appeal was
received. If the conduct of official proceedings requires a longer
period, it may be extended for up to 20 business days.
The Company has an internal “Regulation on the
work with the TATNEFT’s retail trade network
customer inquiries”.
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Tire business
STRATEgIC gOALS By 2030
Increase production and sales to 18 million tires
Increase the share on the russian tire market by at least 22%
Tire complex enterprises
The Company’s tire complex is united under a single brand of
the KAMA TYRES manufacturer, integrating the tire production
business chain from scientific and technical development to final
products with a high level of after sales service. The complex
has highly efficient production facilities and technologies. The
processes of planning, production, sales and after sales service
include quality standard control at all stages.
The compact arrangement of the tire complex enterprises
provides an efficient infrastructure for the production business
chain.
Tire product manufacturing (million pcs.)
LLC Managing Company TATNEFT-Neftekhim
2016
2017
2018
11.5
12.9
14.6
+ 13.2%
GROWTH IN TIRE PRODuCT MANuFACTuRING
PJSC Nizhnekamskshina
Manufacture of tires, rubber goods,
associated goods.
JSC Nizhnekamsk Mechanical Plant
Release of machine building products and
tire production equipment overhaul.
LLC Trading House KAMA
Motor tire sales.
LLC Nizhnekamsk Truck Tire Factory
Manufacture of tires, rubber goods,
associated goods.
LLC Nizhnekamsk Solid Steel Cord Tyre
Factory
Manufacture of tires, rubber goods.
JSC Yarpolimermash-TATNEFT
Production of tire molds, autoforms, equipment
for oil and gas production industry enterprises,
cast products.
LLC Scientific & Technical Centre Kama
Research and development.
LLC TATNEFT-Neftekhimsnab
Provision of material and technical
resources for petrochemical complex
enterprises.
LLC Energoshinservis
Service provision
Leadership positions
Tire product structure (%)
• Over 45 years on the market
• full business cycle of production
• 370 Commodity items of car, truck, all steel,
agricultural and special tires kama, kama euro, kama
pro and viatti
• The company’s own scientific and technical
developments, advanced technologies and industrial
facilities
• high standards and quality control at all stages of
product creation
• high level of after sales service
• 20% Share in rf domestic market
• Over 30% of products is sold for export in 50 countries
• Sustainable partnership with the largest russian
auto manufacturers and localized foreign auto
manufacturers
5.7
24.1
Car, light truck
Truck
Agricultural, other
70.2
Primary tire product brands (%)
14.4
9.1
Кама, Kama-Euro
Viatti
AS
Truck,
agricultural,
other
18.8
57.7
NIZhNEKAMSKShINA
The car and light truck tires are produced using the KAMA-EURO
stream assembly and vulcanization equipment with capacity of 5.1
million tires/year. The car and light truck tires are assembled on the
KAMA stream assembly equipment with capacity of 7.1 million tires;
40, 40.5, 55 inch autoforms are used to manufacture car and light
truck tires, industrial tires.
NIZhNEKAMSK SOLId STEEL CORd TyRE fACTORy
The range of products consists of more than 80 models of
tires with sizes from 215/75R17.5 to 12.00R24. The all steel (AS)
tire production at the factory is made using a special formulation
of rubber mixtures based on natural rubber and silica. The steel-
cord carcass of tires provides an increase in running life to 700,000
km with due consideration of a double recovery, as well as high
durability and fuel efficiency.
NIZhNEKAMSK TRuCK TIRE fACTORy
Truck and agricultural tires of radial and diagonal design with a
profile width from 11 to 18 inches are produced on the first stream
with capacity of 0.8 million tires/year. Also, the equipment of the tire
factory assembly and stock preparation shops is used to produce
semi-finished products of another enterprise.
As part of the investment program, the Tire Complex
enterprises in 2018 implemented projects aimed at
improving the quality and expanding the range of tire
products, increasing capacity in accordance with the
market demand (AS tires and car and light truck tires
Viatti).
Business projects
2018
mixes (30,000 tonnes/year) for the Viatti tire production;
• Modernization of the stock preparation shop to produce rubber
• Organization of the special tire production section;
• A new series of KAMA tires with improved performance properties
• The first models of the new generation of AS tires were launched
and extended operating temperature range has been launched;
under the KAMA PRO brand. It is a pneumatic off-road tire with
adjustable pressure;
• The quality management system has confirmed compliance with
international standards in the following areas: environmental
management; quality management for the automotive industry;
• Tires for the state President limousine as part of the Unified
Modular Platform Cortege project.
2019
PRO brand;
• Increased production of car and light truck tires;
• Increased production of AS tires;
• Development and utilization of a truck tire series under the KAMA
• Online store creation;
• Improvement of the Company’s own Tyre&Service retail network.
Opening of 2 flagship trade and service centers and a trade and
service center using franchisee system;
• Automation of the car and light truck tire spiking process;
• Improvement of the STC testing laboratory: commissioning
of test benches for truck tires and laboratory equipment for
research and incoming quality control of raw materials
• Construction of new energy efficient cooling towers.
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Tire product sales
Tire sales dynamics by sales markets
Million pcs. (Including off-take)
2016
2017
2018
Ratio between supplies to the Russian
and export markets (%)
Domestic market
Equipment
Export
TOTAL SALES
7.7
1.2
3.1
12
9.2
0.7
3.2
13.1
8.8
0.6
4.2
13.6
2016
2017
2018
74
76
69
Russian market
Export markets
26
24
31
Domestic market
Tires are supplied to the domestic market and for export. The
domestic market of the Russian Federation (excluding equipment)
is the main market for tire products. Tire products are sold through
large and medium distributors for further resale, and to final
customers.
The distribution network covers all regions of Russia. In 2018,
tire sales volume in the domestic market decreased by 3% due to
the aggressive pricing policy of competitors in the price segment
“C”.
Share of tire complex in the russian tire market
Meas. units
2016
2017
2018
pASSENgER CAR TIRES
Russian market
TC sales
TC market share
Main competitors: Nоkian, Cordiant, Yokohama, Matador
LIghT-TRuCK TIRES
Russian market
TC sales
TC market share
Main competitors: Altai Tire Plant, Nokian, Cordiant, Matador
TRuCK TIRES
Russian market
TC sales
TC market share
Main competitors: Cordiant, Altai Tire Plant
AS-TIRES
Russian market
TC sales
TC market share
Main competitors: Cordiant, BF Coodrich, Matador, Hankook
AgRICuLTuRAL ANd INduSTRIAL TIRES
Russian market
TC sales
TC market share
Main competitors: Voltyre, Altai Tire Plant, Petroshina
Aftermarket
Russian tire sales market
TC sales
TC market share
million pcs.
million pcs.
%
thousand pcs.
thousand pcs.
%
million pcs.
million pcs.
%
million pcs.
million pcs.
%
million pcs.
million pcs.
%
32.1
5.7
17.8
4 408
1 206
27.4
2.1
1.1
50.9
3.4
0.8
23.0
1.7
0.1
6.4
Meas. units
2016
million pcs.
million pcs.
%
43.7
8.9
20.3
39.4
6.5
16.5
4 379
1 183
27.0
2.1
1.2
55.4
3.6
0.9
25.7
1.8
0.1
5.4
2017
51.3
9.9
19.2
44.0
6.3
14.0
3911
1064
27.0
2.0
1.0
52.0
3.2
0.9
28.0
1.7
0.1
4.0
2018
54.8
9.4
17.0
Supplies for equipment
The company is a supplier of tires for the new automotive vehicle
equipment for the following car assembly plants: KAMAZ, UAZ, GAZ
Automobile Plant, Volkswagen Group Rus, FS Elabuga.
In 2018, supplies for equipment decreased by 18% due to a
reduction in the total vehicle production by automotive plants,
a change in the model structure of the manufactured equipment
or the redistribution of orders in favor of competitive products,
including a decrease in the volumes for Ford Fiesta and Ford Focus
projects related to decommissioning in 2019.
Main equipment market product
customers (%)
22.3
6.8
30.6
7.4
14.1
18.8
Export supplies (%)
26.9
Export
Over 30 % tire output produced by Tire Complex are exported.
The export performance trend demonstrates growth amid higher
tire demand. In 2018, export volume increased by 1 million tires in
absolute terms and totaled 4.2 tire pieces. Over 70 % export sales
go to the near abroad countries. About 90% far abroad country
export volumes are delivered to the European countries. In 2018,
the supplies to Brazil, the Netherlands, Slovenia, Sudan and
Tanzania were resumed or made for the first time.
PJSC KAMAZ
LLC UAZ
LLC Volkswagen
Group Rus
LLC GAZ Automobile
Plant
LLC FS Elabuga
Other
73.1
Far abroad countries
Near abroad countries
Tire Manufacturing Qaulity Assurance
All products manufactured by the PJSC TATNEFT TC tire plants
meet the requirements of regulatory documents (GOST, TU), as
well as the requirements of the UNECE Regulations No. 30, 54 and
117 (international standards).
The quality management system is based on the requirements
of the international quality management system standards
ISO 9001:2015 and IATF 16949:2016 and is aimed primarily at
preventing non-compliances in product quality.
In order to confirm the tire product compliance with the
requirements aimed at ensuring its safety for life, health and
property of citizens, products are certified for compliance with
the requirements of the Technical Regulations “On the safety of
wheeled vehicles” and “On the safety of agricultural and forestry
tractors and trailers for them”.
The tire product quality compliance is confirmed by certificates
of quality and certificates of conformity, and an annual audit of
finished products.
Product quality improvement is a priority in business planning.
In 2018, a new internal document “Tire Business Quality Policy”
was approved, it includes setting target quality indicators for
products and processes, planning measures to achieve them, and
assessing the efficiency of taken measures.
Quality assurance is carried out at all stages of the product life
cycle in accordance with the internal regulatory documents and
includes:
• product quality planning at the new tire design and utilization
stage using APQP AIAG project management (advanced
product quality planning);
• managing the procurement of raw and other materials, including
obtaining approval for the supply of new types of raw materials
or conventional raw materials from new manufacturers in
accordance with the PPAP methodology and requirements of
automotive plant customers, concluding contracts with suppliers
approved following the assessment result, conducting incoming
control and supplier audits;
• quality determination and incoming control of the molds;
• production control of products at all stages of manufacturing,
including statistical process control (SPC AIAG), assessment of
the equipment manufacturing accuracy, introduction of “error
protection” methods (POKA-YOKE), excluding the transfer of
nonconforming products for the next operation;
• multi-level quality control of finished products to confirm
their compliance with established requirements, including
acceptance tests, periodic and requalification tests.
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energy
STRATEgIC gOALS By 2030
IMPLEMENTATION OF THE PROGRAM ON DIVERSIFICATION
OF RAW MATERIAL SOURCES.
FOR NIZHNEKAMSK CHP-2 WITH THE AIM OF INCREASING
THE STATION PERFORMANCE AND REDUCING ITS DEPENDENCE
ON THE RAW MATERIAL MARKET CONDITIONS
Main facilities
LLC Nizhnekamsk CHP
Heat and power cogeneration
JSC Almetyevsk Heating Networks
Heat energy (in the form of heat carrier) and electricity generation,
provision of the SVO boiler house operation services
for NGDU Yamashneft
LLC TATNEFT-Energosbyt
The TATNEFT Group’s main energy trader in terms of power supply for more
than 80 enterprises in the South-East of the Republic of Tatarstan
To meet the growing needs of TANECO in the heat, it is planned to implement a program
on raw material source diversification at the Nizhnekamsk CHP in order to improve the
plant performance and reduce its dependence on the raw material market conditions.
In addition, it is planned to develop and implement a set of measures aimed at reducing
the unit cost of electricity and heat production.
In 2018, heat was supplied to the TATNEFT Group enterprises
in the amount of 1,782,488 Gcal (42% of the total supply), to external
consumers - 2,479,863 Gcal (58% of the total supply). The increase
in heat supply to the TATNEFT Group enterprises in 2018 by 48.6%
is related to the commissioning of new JSC TANECO facilities.
The decrease in supply to external consumers by 12.1% is related
to the repair works at the facilities of PJSC Nizhnekamskneftekhim.
The generating enterprises of the Company’s energy sector are
taking measures to increase the reliability and efficiency of heat and
electricity production and reduce losses and energy costs.
Programs are being developed and implemented to diversify
raw material (natural gas, fuel oil, pet coke) sources for the
Nizhnekamsk CHP, which will improve the plant performance by
choosing the optimal type of fuel depending on market conditions
and reduce the risk of power and heat supply failure.
The total power generation by the Company’s enterprises in
2018 amounted to 1.23 billion kWh. In 2018, 1.23 billion kWh of
electricity was released, including by LLC Nizhnekamsk CHP,
-1.167 billion kWh, and by JSC Almetyevsk Heating Networks - 0.06
billion kWh. The 15.6% decrease in supply by 2017 is related to the
choice of the most cost efficient and optimal operation mode for the
LLC Nizhnekamsk CHP equipment.
Heat energy was generated in the amount of 4,384,379 Gcal,
which is 6% more than in 2017.
machine building
Bugulma Mechanical Plant (BMP) is a plant with more than half a
century history, specializing in the manufacturing of products for oil
and gas production, oil and gas processing, petrochemical, energy
and other industries. The plant satisfies the needs of the oil industry
in Tatarstan and Russia. The products are supplied for export.
The equipment to be used for the production of the Company is
manufactured at the facilities of the BMZ plant. Also, manufactured
products are supplied to both the domestic and export markets as well.
In 2018, the volume of production of goods, works and services
amounted to 4,810 million rubles, the target plan was fulfilled for
100%, the growth rate was 101% relative to the previous year. Sales
revenue growth was 170%. The cost of one-ruble of marketable
products decreased by 2% and amounted to 0.97 rubles.
Key competitive advantages
• Over 50 years of unique industry experience
• Competitive price offer
• Unique technologies
• Convenient logistics
Innovation Potential
The most important basis for the dynamic development of
the Company is to ensure a reliable technological base and the
integration of digital solutions in production management.
testing and
The company makes significant investments in its own
development,
innovative
technological solutions and equipment, interacting with leading
industry research centers. In 2018, more than 1 billion rubles were
invested in R&D and pilot test operations.
implementation of
Investments of 1.7 billion rubles are planned for 2019.Today,
almost all production stages in the Company are provided with
Volume of production, works and services
(million RUB)
2017
2018
4748
4810
Main types of products
• Air coolers
• Heat exchangers
• Internal and external anti-corrosion pipe coating
The product customers are industry companies Rosneft,
LUKOIL, Novatek, TAIF, Irkutsk Oil Company, SIBUR Holding,
Transneft, etc.
modern information systems, starting from the level of work
crew, oil field office and finishing with corporate systems for top
management, which are integrated into a single information space.
Production operations are equipped with high-precision
electronic control systems, while using artificial intelligence and
robotics.
The company maintains leadership in the industry in terms
of its innovative technological potential and supplies the market
with advanced certified production technologies and information
products, many of which have no analogues.
Details on the innovation policy and technology base of the Company
are disclosed in the Integrated Annual Report, taking into account
aspects of sustainable development (ESG), which the Company
publishes annually
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Corporate Governance
The Company follows the principle of constructive interaction between the Board
of Directors and the Management Board in the interests of shareholders by making
strategically balanced decisions and achieving high performance simultaneously
maintaining a favorable environment and developing human capital.
Ensuring the confidence of shareholders and investors in the effectiveness of their
investments, long-term and steady growth in shareholder value is the key aspect of the
corporate practice of TATNEFT Company.
Annual Report 2018TATNEFT GroupCorporate governanCe 68
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69
corporate
governance system
The Company’s corporate governance system is aimed at creating
and maintaining reliable and trusting relationships with the investor
and shareholder community, achieving high operational and financial
performance indicators, increasing the investment attractiveness, and
strengthening the competitiveness of the Company.
Basic principles of corporate governance
Corporate governance of the Company corresponds to the Bank of Russia
Code by 91%, and subject to partial compliance with the requirements
of the Code by 96%.
The results of the assessment of compliance with the recommendations
of the Bank of Russia Code are set out in Annex 4 to the Annual Report.
Respect and protect
the legal rights of
shareholders
high professionalism
of the Board of directors
Leadership
Informational openness
and transparency
No tolerance for
corruption in all its forms
Interaction with
stakeholders
decision making based
on consistency and
collegiality
forward-looking and
transparent dividend
policy
Innovative technology
Compliance with ethical
standards and respect
of human rights
Sustainable
development
Corporate
responsibility
Basic internal documents
establishing the corporate
governance system
For basic internal documents of
the Company, please, visit the
Company’s website.
TATNEFT
• Articles of Association of PJSC TATNEFT
• Regulations on the General Meeting of Shareholders of PJSC TATNEFT
• Regulations on the Board of Directors of PJSC TATNEFT
• Regulations on the Audit Committee of the Board of Directors of PJSC TATNEFT
• Regulations on the HR and Remuneration Committee of the Board of Directors of PJSC
• Regulations on the Corporate Governance Committee of the Board of Directors of PJSC
• Regulations on the General Director of PJSC TATNEFT
• Regulations on the Management Board of PJSC TATNEFT
• Regulations on the Audit Commission of PJSC TATNEFT
• Regulations on the Corporate Secretary of PJSC TATNEFT
• Regulations on the Internal Audit Department of PJSC TATNEFT
• Code of Corporate Governance of PJSC TATNEFT
TATNEFT
• Regulations on the Dividend Policy of PJSC TATNEFT
• Regulations on the Information Policy of PJSC TATNEFT
• Regulations on Disclosure to Shareholders of PJSC TATNEFT
• Regulations on the procedure for access to insider information of PJSC TATNEFT, the rules for protecting its confidentiality
and monitoring compliance with the requirements of the legislation of the Russian Federation and the European Union and
internal documents adopted thereunder.
executive office by lines of business
• Internal documents establishing the distribution of powers and responsibilities of managers and employees of the
• Regulations on compensation to members of the Board of Directors of PJSC TATNEFT
• Regulations on compensation to members of the Audit Commission of PJSC TATNEFT
• Compensation policy for members of the management bodies of PJSC TATNEFT
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Strategic priorities of corporate
governance
The Company builds corporate governance on the integration of key priorities
that form a single platform for managing the Company’s shareholder value and
maximizing return on assets.
Increasing the investment attractiveness
and shareholder value of the Company
based on long-term sustainable
development with the integration
of ESG factors.
Building an efficient process
of strategic and investment planning,
implementation of production and
business plans and operational
performance.
Constructive interaction of shareholders
and investors with the Board of
Directors and executive bodies for
the joint setting of tasks and making
effective decisions.
Professional and ethical responsibility
of members of the Board of Directors
and executive management, officers
and employees of the Company.
An integrated system to ensure a high level
of staff competence, effective incentive
mechanisms and KPI system.
Securing and improving the quality and
structure of assets.
2018 Focus
• Development Strategy of TATNEFT Group.
• Distribution of areas of responsibility of managers and key employees.
• Development of the KPI system.
• Development of risk management and internal control system in the Company (RMS).
• Development of a corporate support system for subsidiaries.
• Amendments to the internal documents of the Company.
• Improving the management of sustainable development.
THE BOARD OF DIRECTORS OF PJSC TATNEFT PLAYS A KEY ROLE IN THE
PROCESS OF IMPROVING THE SYSTEM OF CORPORATE GOVERNANCE
PRACTICES BASED ON THE PRINCIPLE OF CONTINuITY AND ADVANCED
INTERNATIONAL STANDARDS
Development of an integrated risk
management and internal control
system.
Prevention and settlement of corporate
conflicts.
Maintaining goodwill of the Company.
Integration of social aspects, industrial
and environmental safety issues into the
Strategy and day-to-day activities of the
Company.
Providing high-quality products and
services.
Transparency and informational
openness of the Company.
The Company undertakes appropriate
procedures in order to increase the level
of the collective knowledge of the Board
of Directors in connection with economic,
environmental and social issues.
In the reporting year, the Company continued its work on
improving corporate governance focusing on international best
practices and the principles of socially aware investing (SAI).
2019 Focus
mechanisms in the Company (RMS).
• Development Strategy of TATNEFT Group.
• Increasing the role of independent directors in the activities of the Board of Directors.
• Further development of the KPI system.
• Development of the system and improvement of risk management and internal control
• Formulation of sustainable development policies in accordance with 17 UN Sustainable
• Development of the Health, Safety, and Environment Management System.
• Development of a policy and a target program in the field of climate conservation.
• Further development of the corporate support system for subsidiaries.
• Improving the mechanisms for performance evaluation of corporate practices.
• Amendments to the internal documents of the Company.
Development Goals; development of ESG governance mechanisms
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Company
management structure
A well-functioning corporate governance system is an important factor for
sustainable development and successful implementation of the strategy in
order to increase the shareholder value of the Company.
The Company’s corporate governance system is aimed at
ensuring the legitimate rights and interests of shareholders and other
stakeholders, efficient asset management and increasing equity
capital, increasing capitalization and dividend yield, maintaining
long-term economic growth through effective management of
corporate resources and risk control.
The Company has the status of the Group. PJSC TATNEFT is
the corporate center of the Group coordinating the activities of
the enterprises that form the Company’s business areas and
business segments. The organizational structure provides all
levels of interaction between management and operational units
with information coverage throughout the Group’s perimeter. In
order to ensure uniform principles of management and business
transparency of subsidiaries, the Company has appropriate
mechanisms and a system of uniform corporate standards.
The Company has a two-tier model of governing bodies,
involving the separation of management functions between the
Board of Directors and executive bodies.
The chief executive officer of the Company is the General
Director of PJSC TATNEFT. The collegial executive body of the
Company is the Management Board headed by the General Director.
The General Director and the Management Board report to the
Board of Directors and the General Meeting of Shareholders.
General supervision over the financial and economic activities of
the Company is carried out by the Audit Commission.
Planning of financial and operational indicators is integrated into
a single corporate governance system of the Group in accordance
with the Development Strategy and key resolutions adopted by
the Board of Directors, including taking into account aspects
of sustainable development. The authority to implement the
production plans, economic, environmental and social goals and
objectives is delegated to the management of the Company with
the provision of supervision at the level of the Board of Directors and
its Committees, the Management Board, and the General Director.
Management of sustainable development is based on the
coherence of the Company’s actions with the basic principles
and goals of the UN on sustainable development, global trends
of sustainable development and priorities of national and regional
development.
Responsibility for the strategic planning and operational activities
of the Company is distributed between the Board of Directors, the
General Director and the Management Board, as well as at the
level of authority of officials in business lines with performance
monitoring and incentive mechanisms based on the KPI system.
Key Performance
Indicator System
Insurance of liability risks
of members of management bodies
The Company insures liability risks of members of the Company’s
management bodies, including abroad, under the terms and in the
amounts that are consistent with the insurance market for such
risks in the Russian Federation. During 2018, SOGAZ JSC was the
insurer of such risks of the Company.
In order to
improve the effectiveness and efficiency
of operations and ensure the achievement of business goals, the
Company develops a KPI system. In 2018, the strategic goals were
decomposed into annual measurable indicators, which allowed
for a transparent assessment of the impact of top management
and key employees on the implementation of business plans and
helped to identify inefficient elements in management processes
to further improve the approaches to the development of the KPI
system, including innovation, IT, HR, corporate governance, HSE,
environmental performance.
In 2019, the Company moved to the next stage of development
of the KPI system, i.e expanding the coverage in the main lines
of business and business units with the inclusion of ESG aspects.
GENERAL MEETING OF SHAREHOLDERS
Audit Commission
Independent Auditor
BOARD OF DIRECTORS
Chairman
of the Board of Directors
Corporate Secretary
Internal Audit Department
Corporate Secretary
GENERAL DIRECTOR
Chairman of the Management Board
MANAGEMENT BOARD
Committees of the Board of Directors
Corporate Governance Committee
HR and Remuneration Committee
Audit Committee
Investment Committee
Human Resources Management Committee
Ethics and Corporate Culture
Development Committee
The current operations of the Company are provided by the services of the executive office, structural subdivisions,
curators of business units and lines of business as well as authorized representatives in the management
bodies of subsidiaries and affiliates.
Prevention of possible
conflicts of interests
The Board of Directors applies procedures aimed at preventing and
monitoring conflicts of interest. The Company provides disclosure
of information on conflicts of interest (cross-membership on
several Boards of Directors, cross-ownership of shares with
suppliers and other stakeholders; the existence of a controlling
shareholder and affiliates).
The Company’s corporate governance system includes a set
of rules and procedures aimed at eliminating conflicts of interest
between the Company’s management bodies and its shareholders,
as well as between shareholders, if the conflict affects the interests
of the Company; identifying and resolving all possible common and
specific problems related to shareholders’ rights.
In the event of a conflict, mechanisms are provided for taking
the necessary measures to settle it in full and create conditions that
preclude conflict in the future.
This is done within the interaction of the authorized subdivision
with the committees of the Board of Directors, the Internal Audit
Department and other competent subdivisions of the Company.
The issues of preventing and minimizing possible conflicts
of interest among members of the Board of Directors are in the
area of particular attention of the Company. To prevent possible
conflicts of interest, the Company imposes certain restrictions and
requirements on members of the Board of Directors. In accordance
with the Regulations on the Board of Directors of PJSC TATNEFT,
a member of the Board of Directors shall refrain from actions that
would or may lead to a conflict of interest.
In the reporting year, there were no conflicts of interest among
members of the Board of Directors.
Control over compliance with the mechanism for preventing
conflicts of interest of members of the Board of Directors
is exercised by the Corporate Secretary.
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General meeting of shareholders
The General Meeting of Shareholders
is the supreme governing body of PJSC
TATNEFT and operates in accordance
with the regulations of the Russian
Federation, the Articles of Association
and the internal policies of the
Company.
The General Meeting of Shareholders delegates overall
management of the Company to the Board of Directors. The
procedure for holding the General Meeting of Shareholders
fully ensures that the rights of shareholders are respected. The
procedure for preparing, convening, conducting and summarizing
the results of the General Meeting of Shareholders of the Company
is determined by the Regulations 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 Annual General
Meeting, extraordinary meetings of shareholders may be convened.
Shareholders are provided with information on the agenda items
of the General Meeting of Shareholders in the amount and within
the period that allows them to choose a reasonable position on
the issues under consideration, as well as make decisions on
participation in the meeting and the method of such participation.
The Annual General Meeting considers the election of members
of the Board of Directors and the Audit Commission, approval of
the auditor, approval of the annual report, annual accounting
General Meetings of Shareholders held in 2018
Annual General Meeting of Shareholders
June 22, 2018
RESOLuTIONS ADOPTED BY THE ANNuAL
GENERAL MEETING OF SHAREHOLDERS:
1. Approve PJSC TATNEFT named after V.D. Shashin Annual
V.D. Shashin
5. Elect the members of the Company’s Audit Commission.
6. Approve PricewaterhouseCoopers Audit Joint Stock Company
(PwC Audit JSC) as the auditor of PJSC TATNEFT named after
V.D. Shashin for a period of one year for the implementation
of a mandatory audit of the annual financial statements for
2018, prepared in accordance with Russian and international
accounting standards.
Report 2017.
2. Approve PJSC TATNEFT named after V.D. Shashin Annual
Accounting (Financial) Statements 2017.
3. Approve the distribution of profits (including the payment
(declaration) of dividends) of PJSC TATNEFT named after V.D.
Shashin according to the results of the reporting year.
Pay dividends for 2017, taking into account dividends
previously paid according to the results of nine months:
a) attributable to preferred shares in the amount of 3,994%
of the share par value;
b) attributable to ordinary shares in the amount of 3,994%
of the share par value.
Establish July 6, 2018, as the record date. Pay dividends in
cash.
4. Elect the Board of Directors of PJSC TATNEFT named after
Decisions on matters on the agenda of the General Meeting of
Shareholders are made by poll voting in the manner prescribed
by current legislation and the Company’s Articles of Association.
When formulating decisions of the meeting, it is necessary to
indicate by what majority of votes decisions were made and special
opinions are introduced. The minutes are signed by the Chairman
and the secretary of the meeting. During the preparation and
holding of the General Meeting, shareholders of the Company
have the opportunity to freely and timely receive information about
the meeting and materials thereto, ask questions to the executive
bodies and members of the Board of Directors of the Company,
communicate with each other.
(financial) statements, distribution of profits, including dividend
payments (declarations), and losses based on the results of the
reporting year, and approval of internal documents regulating the
activities of the Company’s bodies. Shareholders make decisions
on the most important aspects of the Company’s activities. The full
list of reserved matters of the General Meeting is established by
the requirements of the Federal Law No. 208-FZ “On Joint Stock
Companies” dated December 26, 1995. When electing the Board
of Directors, the Company provides shareholders with detailed
information on the background, experience, and skills of each
candidate, and also seeks to ensure the personal presence of
candidates at the General Meeting of Shareholders.
Each shareholder has the right to participate in the meeting in
person or by proxy. At the General Meeting, shareholders receive
a detailed and reliable report on the ongoing corporate policy and
production and business activities of the Company from the Board
of Directors and executive bodies. The Board of Directors of the
Company prepares reports for shareholders on each agenda item,
presenting its position, as well as minority reports of members of
the Board of Directors, if any.
Extraordinary General Meeting of Shareholders
(in the form of absentee voting)
September 28, 2018
Extraordinary General Meeting of Shareholders
(in the form of absentee voting)
December 21, 2018
DECISIONS MADE BY THE EXTRAORDINARY
GENERAL MEETING OF SHAREHOLDERS:
DECISIONS MADE BY THE EXTRAORDINARY
GENERAL MEETING OF SHAREHOLDERS:
1. Pay dividends according to the results of 6 months of 2018:
a) attributable to preferred shares of PJSC TATNEFT in the
amount of 3,027% of the share par value;
b) attributable to ordinary shares of PJSC TATNEFT in the
amount of 3,027% of the share par value.
2. Establish October 12, 2018, as the record date. Pay dividends
1. Pay dividends for the first 9 months of 2018, including
dividends previously paid for the first 6 months of 2018:
a) attributable to preferred shares of PJSC TATNEFT in the
amount of 5,253% of the share par value;
b) attributable to ordinary shares of PJSC TATNEFT in the
amount of 5,253% of the share par value.
in cash.
2. Establish January 9, 2019, as the record date. Pay dividends in
cash.
The quorum of General Meetings of Shareholders for 2016-2018
59.91%
Annual General Meeting
of Shareholders
June 24, 2016
Annual General
Meeting
of Shareholders
June 23, 2017
Extraordinary
General Meeting
of Shareholders
December 12, 2017
Annual General Meeting
of Shareholders
June 22, 2018
Extraordinary
General Meeting
of Shareholders
September 28, 2018
Extraordinary
General Meeting
of Shareholders
December 21, 2018
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77
Board of directors
The role of the Board of Directors and top executives is crucial in developing,
approving and updating the wording of the Company’s objectives, its values
and mission, as well as strategies, policies, and tasks in relation to economic,
environmental, and social impacts.
The Board of Directors carries out general management
of the Company’s activities, determines the priority areas,
development strategy, and policy of the Company, coordinates
and approves the strategic long-term and medium-term plans and
development programs of TATNEFT Group, including in the areas
of investment, borrowing, and asset management, basic principles
and approaches to organization of the internal control and risk
management system, is responsible for managing the Company’s
key risks affecting the achievement of its strategic goals, makes
decisions on key projects and major transactions, monitors the
achievement of strategic tasks, the implementation of plans and
targeted programs of the Company, assists in ensuring the timely
disclosure of complete and reliable information on activities. When
considering the Company’s strategy, preparing and approving
plans, budgets and investment programs, the Board of Directors
takes into account aspects of sustainable development and goals in
the field of industrial and environmental safety, social policy, human
resources management.
One of the key functions of the Board of Directors is to form
effective executive bodies and ensure control over their activities.
The reserved matters of the Board of Directors include:
• election of executive bodies, termination of their powers and
• supervision of the Company’s business based on regular reports
incentives for executive bodies;
of the executive bodies on the implementation of the Strategy
and business plans:
• improving the system and practices of corporate governance in
the Company.
The Board of Directors has a key role in ensuring the
transparency of the Company’s work, timeliness and completeness
of information disclosure, easy access of shareholders to the
Company’s documents.
The Company ensures the procedure for nomination and
selection of candidates to the Board of Directors and its Committees
based on the criteria of diversity, independence, professional
qualifications and experience.
The Board of Directors conducts work on the basis of approved
plans, including summing up the results of activities, determining
the priority areas of the Company’s business, preparing
general meetings of shareholders, deciding whether to enter
into transactions or subsequently approving interested-party
transactions and other transactions in accordance with the Articles
of Association.
The Company implements comprehensive actions to ensure the
efficient work of the Board of Directors::
• Information and technical resources with a secure corporate
communication channel for prompt remote delivery of
information materials of meetings of the Board of Directors;
• Software for holding meetings of the Board of Directors
and Committees of the Board of Directors through video
conferencing;
• Storing archive of meeting minutes;
• Ensuring that the members of the Board of Directors are familiar
with the internal documentation and operational activities of the
Company, including production, economic, environmental and
social aspects;
• Procedures for reporting to the Board of Directors, including
about critical issues if they occur.
The formation procedure, status, composition, functions, goals,
and tasks, competencies, powers of the Board of Directors, its
Chairman of the Board of Directors
The Chairman of the Board of Directors of the Company is
elected by the members of the Board of Directors from among
them by a majority of votes from the total number of members of
the Board of Directors and performs its functions in accordance
with the Articles of Association, the Regulations on the Board of
Directors and the Code of Corporate Governance. The Chairman of
the Board of Directors arranges its work, convenes meetings of the
Board of Directors and presides at them, organizes minutes keeping
at meetings, and presides at the General Meeting of Shareholders.
In the absence of the Chairman of the Board of Directors of the
Company, his functions are performed by one of the members of
the Board of Directors by the decision of the Board of Directors of
the Company.
Main functions of the Chairman of the Board of Directors:
• Organization of work of the Board of Directors.
• Convening meetings, presiding over them.
• Preparation of proposals for the distribution of tasks among
members of the Board of Directors and Committees of the
Board of Directors.
• Ensuring open discussion of agenda items and taking into
• Identification of key issues to be considered by the Board
account the views of all members of the Board of Directors.
of Directors, and selection of the optimal meeting form for
discussing issues.
• Representation of the Board of Directors in relations with
shareholders, management, and other stakeholders.
operation, and interaction with other management bodies of the
Company are established by the Articles of Association and the
Regulations on the Board of Directors of PJSC TATNEFT and are
clearly delimited from the competence of the executive management
bodies of the Company, managing its current operations.
The members of the Board of Directors in the amount of 14 people
are elected by the General Meeting of Shareholders by cumulative
voting (the candidates who receive the largest number of votes are
considered to be elected). One member of the Board of Directors
is appointed on the basis of a special right. The Company is obliged
to include the election of members of the Board of Directors on the
agenda of the Annual General Meeting of Shareholders.
The Company provides a transparent procedure for electing
members of the Board of Directors and discloses information in
advance about the current composition of the Board of Directors
and candidates for the Board of Directors. When nominating
members of the Board of Directors and its committees, criteria and
factors of professional qualifications and experience are taken into
account, including in the areas of economic, environmental, and
social issues.
At the first meeting after the formation of the Board of Directors,
the Chairman of the Board of Directors of PJSC TATNEFT is elected,
whose powers are established by the Regulations on the Board of
Directors, and the committees of the Board of Directors are formed.
.
Board of Directors’ Committees
In order to improve the effectiveness and efficiency
of the decisions made by the Board of Directors there
are three Board Committees in place in the Company
that preliminary consider the most important agenda
items for the Board meetings as well as set the relevant
guidelines within their competences. These are as
follows: Audit Committee, HR and Remuneration
Committee and Corporate Governance Committee.
The Committees are fully accountable to the Board
of Directors. The members of the Committees are
approved by the PJSC TATNEFT Board of Directors
taking
into account of their related expertise,
qualification and experience of each nominee of the
committee. The company provide the Board with the
detailed information with regard to CV, background,
expertise, knowledge and skills of each nominee to be
elected to any of the committees. The membership
of the Audit Committee and the HR and Remuneration
Committee is predominated by the Independent
Directors.
The Company ensures the procedure of nominating and selecting
of the candidate member to the Board and its Committees based
on the criteria of diversity, independency, and professional qualification
and experience. The Board of Directors operates based on the
approved plans particularly to define priorities for the Company
to develop its business activities and strategy, review the performance
results, and prepare for general shareholders’ meetings, as well as
makes the decisions to authorize or further ratify any non-arm’s
length transactions or any other transactions under the Article
of the Association.
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79
Composition of the Board of
Directors of PJSC TATNEFT
Minnikhanov
Rustam Nurgalievich
Chairman of the Board of Directors
of PJSC TATNEFT
Maganov
Nail Ulfatovich
Gaizatullin
Radik Raufovich
Gerech
Laszlo
General Director of the PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Chairman of the Management Board
of PJSC TATNEFT
Chairman of the Corporate Governance
Committee of the Board of Directors
of PJSC TATNEFT
Member of the Board of Directors of
PJSC TATNEFT
Member of the Audit Committee of the
Board of Directors of PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Member of the Audit Committee of the
Board of Directors of PJSC TATNEFT
Member of the HR and Remuneration
Committee of the Board of Directors
of PJSC TATNEFT
The Board of Directors in the number of 15 people was elected
by the Annual General Meeting of Shareholders on June 22, 2018.
In 2018, there were no changes in the composition of the Board of
Directors.
At the first meeting of the Board of Directors of PJSC TATNEFT
after the Annual General Meeting of Shareholders on June 22,
2018, R.N. Minnikhanov was elected Chairman of the Board of
Directors unanimously by all members of the Board of Directors,
as the most authoritative member of the Board of Directors, having
professionalism and knowledge, significant experience in senior
positions, impeccable business and personal reputation.
The Chairman of the Board of Directors is a Nonexecutive
Director. The Chairman of the Board of Directors is not a member
of any committee of the Board of Directors.
Nonexecutive Director
Executive Director
Nonexecutive Director
Independent Director
Born in 1957.
Born in 1958.
Born in 1964
Born in 1953
In 1978, graduated from the Kazan Agricultural Institute
In 1986, graduated from the Soviet Trade Institute
1996-1998, Minister of Finance of the Republic
of Tatarstan
From July 1998 to March 2010, worked as the Prime
Minister of the Republic of Tatarstan
President of the Republic of Tatarstan since
March 2010.
In 1983, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From July 2000 to November 2013, First Deputy
General Director – Head of Crude Oil and
Petroleum Products Sales Department of PJSC
TATNEFT
From November 2013 to the present, General
Director of PJSC TATNEFT
In 1985, graduated from the Kazan Agricultural
Institute
Head of the Ministry of Finance of the Republic
of Tatarstan since June 2002
In 1977, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
In 1995, graduated from Oxford Business
University
From 2015 to January 1, 2017, Managing
Director of MOL Oman Limited, Oman Branch
From January 1, 2017, to the present, Managing
Director of G Petroconsulting Ltd
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
Share in the authorized capital of the
Company, %
0.000176
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Holding of ordinary shares of the
Company, %
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
no
no
Annual Report 2018TATNEFT GroupCorporate governanCe 80
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81
Ibragimov
Nail Gabdulbarievich
Levin
Yuri Lvovich
Member of the Board of Directors
of PJSC TATNEFT
First Deputy General Director for
Operations – Chief Engineer
PJSC TATNEFT
Member of the Management Board
of PJSC TATNEFT
Member of the Board of Directors of
PJSC TATNEFT
Chairman of the Audit Committee of the
Board of Directors of PJSC TATNEFT
Member of the HR and Remuneration
Committee of the Board of Directors of
PJSC TATNEFT
Muslimov
Renat Khaliullovich
Member of the Board of Directors
of PJSC TATNEFT
Sabirov
Rinat Kasimovich
Sorokin
Valery Yurievich
Member of the Board of Directors
of PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Member of the Corporate Governance
Committee of the Board of Directors
of PJSC TATNEFT
Member of the HR and Remuneration
Committee of the Board of Directors
of PJSC TATNEFT
Takhautdinov
Shafagat Fakhrazovich
Member of the Board of Directors
of PJSC TATNEFT
Advisor to the Chairman of the Board
of Directors of PJSC TATNEFT
Executive Director
Independent Director
Nonexecutive Director
Nonexecutive Director
Nonexecutive Director
Nonexecutive Director
Born in 1955
Born in 1953
Born in 1934
Born in 1967
Born in 1964
Born in 1946
In 1977, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From 2000 to the present, First Deputy General
Director for Operations – Chief Engineer of PJSC
TATNEFT
In 1975, graduated from the Moscow Finance
Institute
In 1957, graduated from the Kazan State
University
In 1979, post-graduate studies at the Institute of
World Economy and International Relations
Since 2001, Managing Partner of BVM Capital
Partners Ltd.
From June 2007 to the present, Adviser to
the President of the Republic of Tatarstan
on development of crude oil and gas fields,
Professor of the Crude Oil and Gas Geology
Department of Kazan State University
In 1991, graduated from the Kazan State
University
In 1986, graduated from the Kazan State
University
In 1994, graduated from the postgraduate course
of the Kazan State Technological University
Since 2003, General Director of PJSC
Svyazinvestneftekhim
In 1998, completed a course within the frames
of the President Program of Management
Training
In 2012, training under the Master Business
Administration program of the State University
of Colorado (USA)
From 2006 to June 2010, Head of Petrochemical
Complex Department of the Office of the Cabinet
of Ministers of the Republic of Tatarstan
From June 2010 to the present, Assistant to the
President of the Republic of Tatarstan
In 1971, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From 1999 to November 2013, General Director
of PJSC TATNEFT.
From November 2013 to the present, Assistant
to the President of the Republic of Tatarstan on
oil industry issues, Advisor to the Chairman of the
Board of Directors of PJSC TATNEFT
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
0.019831
0.020873
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
0.047618
0.050282
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
0.116503
0.123914
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83
Khalimov
Rustam Khamisovich
Khamaev
Azat Kiyamovich
Khisamov
Rais Salikhovich
Member of the Board of Directors
of PJSC TATNEFT
First Deputy General Director for Oil
and Gas Exploration and Production of
PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Deputy General Director – Chief
Geologist of PJSC TATNEFT
Steiner
René Frederick
Member of the Board of Directors
of PJSC TATNEFT
Chairman of the HR and Remuneration
Committee of PJSC TATNEFT
Member of the Audit Committee of the
Board of Directors of PJSC TATNEFT
Nurmukhametov
Rafail Saitovich
Member of the Board of Directors
of PJSC TATNEFT
Head of NGDU Leninogorskneft of
PJSC TATNEFT
Information on the composition
of the Board of Directors and its
activities is disclosed on the official
website of the Company.
Executive Director
Nonexecutive Director
Executive Director
Independent Director
Executive Director
Born in 1965
Born in 1956
Born in 1950
Born in 1964
Born in 1949
In 1987, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From 2010 to 2011, Director of the Branch of
PJSC TATNEFT in Libya
From 2011 to 2015, Head of NGDU Elkhovneft of
PJSC TATNEFT
In 1978, graduated from the Kazan Aviation
Institute
In 2000, graduated from Kazan State University,
Law Faculty
In December 2008, was appointed First Deputy
Minister of Land and Property Relations of the
Republic of Tatarstan
From 2015 to May 20, 2018, Deputy General
Director for Oil and Gas Development and
Production of PJSC TATNEFT
From March 2009 to the present, Head of the
Ministry of Land and Property Relations of the
Republic of Tatarstan
From May 21, 2018, to the present, First Deputy
General Director for Oil and Gas Exploration and
Production
In 1978, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From October 1997 to the present, Deputy
General Director – Chief Geologist of PJSC
TATNEFT
In 1989, graduated from Technical High School
in Zurich.
Bachelor of Swiss Banking, Zurich
Since 2011, co-founder, Program Director of
Direct Private Investments of FIDES Business
Partner AG, Switzerland
In 1974, graduated from Ufa Petroleum Institute
From January 30, 1998, to the present, Head of
NGDU Leninogorskneft
Share in the authorized capital of the
Company, %
0.000056
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Holding of ordinary shares of the
Company, %
no
Share in the authorized capital of the
Company, %
0.01876
Holding of ordinary shares of the
Company, %
0.019746
no
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
0.010465
0.010107
Annual Report 2018TATNEFT GroupCorporate governanCe 84
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85
Balanced composition
of the Board of Directors
The composition of the Board of Directors of the Company is based on the
balance of key knowledge, skills, and experience required for effective work.
The members of the Board of Directors of PJSC TATNEFT
have competences, knowledge, and experience in strategic
management, in financial activities, risk management, accounting,
and auditing, as well as in the Company’s industry lines of
business, sufficient for making balanced and objective decisions
in the interests of the Company and the shareholders.
The Board of Directors is composed of 15 directors, including
Duration of work in the Board of Directors
7 Nonexecutive Directors
5 Executive Directors
3 Independent Directors
46.7% of the total number
of the Board of Directors
33.3% of the total number
of the Board of Directors
• Minnikhanov Rustam Nurgalievich,
• Gaizatullin Radik Raufovich
• Muslimov Renat Khaliullovich
• Sabirov Rinat Kasimovich
• Sorokin Valery Yurievich
• Takhautdinov Shafagat Fakhrazovich
• Khamaev Azat Kiyamovich
• Maganov Nail Ulfatovich
• Ibragimov Nail Gabdulbarievich
• Nurmukhametov Rafail Saitovich
• Khalimov Rustam Khamisovich
• Khisamov Rais Salikhovich
20% of the total number
of the Board of Directors
• Gerech Laszlo
• Levin Yuri Lvovich*
• Steiner René Frederick
Minnikhanov R.N.
Muslimov R.K.
Takhautdinov S.F.
Khisamov R.S.
Ibragimov N.G.
Gaizatullin R.R.
Maganov N.u.
Sabirov R.K.
Sorokin V.Y.
Khamaev A.K.
Steiner R.F.
Gerech L.
Levin Y.L.
Khalimov R.K.
Nurmukhametov R.S.
The composition of the Board of Directors is balanced by
the participation of independent, nonexecutive, and executive
directors. According to the Company, three independent directors
are enough to significantly influence the decision-making process
and ensure objectivity when considering issues, the independence
of the judgments of these directors increases the efficiency of the
Board of Directors, and also contributes to the improvement of the
Company’s corporate governance system. The participation of five
executive directors ensures the deep integration of the work of the
Board of Directors and the executive bodies.
Participation in the work of the Board of Directors of three
independent and seven nonexecutive directors ensures the
maintenance of a balance between the interests of various groups
of shareholders, which contributes to the objectivity of decisions
made, enhancing the confidence of investors and shareholders in
the Company as well as other stakeholders.
All members of the Board of Directors have considerable
experience in the Company, a high professional reputation and, in
the performance of their powers, interact with the management and
executives of the Company, its main subdivisions, as well as with the
registrar and auditor
1997 1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018 2019
Instatement
Succession Planning
in the Board of Directors
The Company follows the principles of maintaining the balance
of qualifications, the experience of directors, continuity and
consistent renewal of the composition of the Board of Directors
in order to ensure maximum efficiency of the Board of Directors.
For operational inclusion in the work of the Board of Directors
and effective use of the professional skills of its members, the
Company provides a procedure for instatement of newly elected
directors – familiarization with the current operations of the
Company, its strategy, corporate and organizational structure, and
corporate management practices. In order to effectively exercise
their powers, members of the Board of Directors are provided with
explanations on observing confidentiality and protecting insider
information and participating in meetings of the Board of Directors
and its committees.
The Company has mechanisms for providing members of the
Board of Directors with information in the amount and within the
time required for making weighted and objective decisions on
agenda items.
*Yu.L. Levin was recognized as an Independent Director by a unanimous
decision of the Board of Directors due to a formal affiliation with a significant
counterparty (Minutes No. 2 of PJSC TATNEFT the Board of Directors meeting
dated June 22, 2018).
The Board of Directors evaluates compliance with the independence criteria
of members of the Board of Directors operating as independent members. As
a result of such an assessment, it was revealed that one of the criteria for the
independence of a member of the Board of Directors, Mr. Yu.L. Levin was
violated in connection with financial operations for the short-term placement
of the Company’s funds in PJSC Ak Bars Bank, the member of the Board of
Directors of which Mr. Yu.L. Levin is (affiliation with a significant counterparty).
Having considered all the parties, the Board of Directors expressed the opinion
that the affiliation of Mr. Yu.L. Levin with a significant counterparty (PJSC Ak
Bars Bank) is of a formal nature, whereas many years of experience, high
professional training, and personal responsibility of Mr. Yu.L. Levin allow him to
make objective decisions independently of any other persons, fully meeting the
interests of PJSC TATNEFT and its shareholders, on the grounds of which the
Board of Directors made the unanimous decision to recognize Mr. Yu.L. Levin
as an Independent Director of the Board of Directors of PJSC TATNEFT for the
current corporate year.
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87
Activity of the Board of Directors
in 2018
The key stage in planning the Company’s activities was TATNEFT Group
Development Strategy - 2030 adopted by the Board of Directors in 2018,
accumulating ambitious objectives based on Strategy 2025 that was
previously approved and confirmed its effectiveness at the early stages.
The agenda of the reporting year of the Board of Directors
is focused on reviewing the long-term and medium-term
development plans and programs of TATNEFT Group, monitoring
their implementation, including in the areas of investment, financial
condition, production, management of subsidiaries, making
decisions on significant transactions. Close attention was paid to
strengthening the technological basis of the Company, switching to
innovative forms of managing and organizing business processes,
industrial and environmental safety, and increasing margins in the
value chain.
In 2018, 15 meetings of the Board of Directors were held,
including twelve in-person and three in absentia. In total, more than
80 issues were considered. At the same time, during in-person
meetings, issues relating to corporate governance, the Company’s
strategy, approval of interested-party transactions, decision-
making in preparation for the annual and extraordinary general
meeting of shareholders of the Company, production issues were
discussed.
In the reporting year, the Board of Directors approved the new
versions of the internal documents of PJSC TATNEFT:
1. List of information relating to insider information of PJSC TATNEFT
named after V.D. Shashin (Minutes No. 12 dated April 24, 2018).
2. Regulations on access to insider information of PJSC TATNEFT
named after V.D. Shashin, the rules for the protection of its confidentiality
and compliance monitoring with the Legislation of the Russian Federation
and the European Union and adopted in accordance with its internal
documents. (Minutes No. 12 dated April 24, 2018).).
3. Regulations on disclosure to shareholders of PJSC TATNEFT
named after V.D. Shashin (Minutes No. 9 dated January 30, 2018).
4. Regulations on the Dividend Policy of PJSC TATNEFT named
after V.D. Shashin (under Minutes No. 9 dated January 30, 2018).
Participation of members of the Board of Directors in meetings of the Board of Directors in 2018
Minnikhanov Rustam Nurgalievich
Maganov Nail Ulfatovich
Ibragimov Nail Gabdulbarievich
Levin Yuri Lvovich
Gaizatullin Radik Raufovich
Gerech Laszlo
Muslimov Renat Khaliullovich
Sabirov Rinat Kasimovich
Sorokin Valery Yurievich
Nurmukhametov Rafail Saitovich
Takhautdinov Shafagat Fakhrazovich
Khamaev Azat Kiyamovich
Khisamov Rais Salikhovich
Khalimov Rustam Khamisovich
Steiner René Frederick
15/15
14/15
13/15
14/15
13/15
15/15
14/15
15/15
15/15
15/15
14/15
14/15
13/15
13/15
15/15
.
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Key Issues Considered by the Board of Directors in 2018
TATNEFT.
TATNEFT.
PJSC TATNEFT.
• On the work plan of the Board of Directors of PJSC TATNEFT.
• On the General Director of PJSC TATNEFT.
• On the formation of Committees under the Board of Directors of
• Reports of the Committees of the Board of Directors of PJSC
• On the main areas of work of the Audit Committee of the Board
• Report of the Internal Audit Department on the results for 2017
of Directors of PJSC TATNEFT.
and the plan of the internal audit for 2018 and the time budget of
the internal audit department.
• On the composition of the Management Board of PJSC
• Approval of the budget.
• On the results of the budget implementation of PJSC TATNEFT.
• On giving consent to the participation of the General Director
and members of the Management Board of PJSC TATNEFT in
the management bodies of other companies.
• On the official of PJSC TATNEFT in monitoring compliance with
the requirements of the legislation of the Russian Federation on
countering the unlawful use of insider information and market
manipulation.
• On the Development Strategy of TATNEFT Group until 2030.
• Oil production development plan.
• On the international exploration and production activities.
• Studies on obtaining road bitumens from extra-viscous oil.
• On the plans of oil production, geological and technical
• Implementation of the project to improve the efficiency of wells
maintenance, due to the centralization of underground wells
repair shops in PJSC TATNEFT.
measures for 2019.
Number of meetings held
12
3
In-person
In absentia
Структура основных вопросов, рассмотренных
Structure of the main issues considered
Советом директоров в 2018 году (%)
by the Board of Directors in 2018
14.30
39.20
Number
of issues
considered
26.20
13.20
7.10
Corporate practice
Strategy
Related party transactions
Finance
Production
free cash.
• On the implementation of the TANECO Project Strategy, the
construction of facilities for the 2nd stage of the TANECO
Complex.
• On the implementation of development programs for enterprises
• On the development strategy of the gas chemical complex of
of the petrochemical unit of TATNEFT Group.
the Company and the market prospects for the development of
this area.
• On the Personnel Management Strategy of TATNEFT Group.
• Innovation management: the process of innovation and a
systematic approach to identifying and implementing future
trends and new technologies (in development and production),
skills and competencies.
• Analysis of the implementation of the project “Reconstruction of
LLC Nizhnekamsk CHP with the installation of low-grade steam
turbines.”
• Investor Relations Management: overview of responsibilities and
authority, key objectives and results, main problems/effects and
opportunities, potential for improvement.
• On the investments of PJSC TATNEFT in the financial sector.
• On the investment risk management system in TATNEFT Group.
• On the effectiveness of cash flow management and temporarily
• Management of relations with creditors: review of duties and
authorities, key goals and results of work, main problems
and effects, potential for improvement, management of loan
conditions based on operational activities.
safety and labor protection (HSE) in TATNEFT Group.
• On the organization of the KPI system in TATNEFT Group.
• On the results of the activities of subsidiaries of PJSC TATNEFT.
• Development of functions in the field of industrial, environmental
• On the further development of material and technical support.
• On the single system for managing social projects and programs
• On the outcome of the financial and economic activities.
• On the results of the internal assessment (self-assessment) of
the quality of work of the Board of Directors of PJSC TATNEFT
and committees of the Board of Directors.
of TATNEFT Group.
• On the report of the Board of Directors on the results of work
for 2017, the annual report, the annual accounting (financial)
statements, including the distribution of profits of PJSC TATNEFT
named after V.D. Shashin.
• On the consolidated financial statements under IFRS.
• On the results of the audit of the financial and economic activities of
PJSC TATNEFT for 2017 by the Audit Commission of the Company
and the auditing company PricewaterhouseCoopers Audit JSC.
• On the annual general meeting of shareholders of PJSC
TATNEFT following the results of 2017, candidates for the
Board of Directors, the Audit Commission of the Company
and proposals for the agenda of the annual general meeting of
shareholders on the results of work for 2017.
• About dividends following the results of work for 2017.
• On convening an extraordinary general meeting of shareholders
of PJSC TATNEFT in the form of absentee voting. On
recommendations to the extraordinary general meeting of
shareholders on the amount of dividends for the first 9 months
of 2018 and the procedure for their payment.
• On recommendations to the annual general meeting of
shareholders of PJSC TATNEFT for an audit firm to audit PJSC
TATNEFT’s financial statements under IFRS and RAS for 2018.
• On the procedure for approving interested-party transactions
• On related party transactions.
• On the statement of the Board of Directors of PJSC TATNEFT
• Approval of internal documents.
regarding independent directors.
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committees of the Board of directors
Audit Committee
The Committee prepares recommendations for the Board of Directors on control over
the completeness, accuracy and reliability of the Company’s accounting (financial) reports
in accordance with IFRS and RAS standards, as well as regarding the independence of
the external auditor, the performance of the internal audit function and its independence
from the Company’s executive bodies, reliability and efficiency of internal control and risk
management.
Composition of the Committee
Chairman
Levin yuri Lvovich – Member of the Board of Directors of PJSC TATNEFT
Committee members:
Independent Director
Managing Partner of BVM Capital Partners Ltd
Member of the HR and Remuneration Committee of the Board of Directors of PJSC
TATNEFT
gaizatullin Radik Raufovich –
Member of the Board of Directors of PJSC
TATNEFT
Steiner René frederik – Member of the
Board of Directors of PJSC TATNEFT
Independent Director
Nonexecutive Director
Minister of Finance of the Republic of
Tatarstan
gerech Laszlo – Member of the Board of
Directors of PJSC TATNEFT
Program Director of Direct Private
Investments of FIDES Business Partner AG.
Chairman of the HR and Remuneration
Committee of the Board of Directors of
PJSC TATNEFT
There were no changes in the
composition of the Audit Committee
during the corporate year.
Independent Director
Managing Director of G Petroconsulting Ltd
Member of the HR and Remuneration
Committee of the Board of Directors of
PJSC TATNEFT
The Audit Committee consists of three independent directors. Chairman of the Committee
Yu.L. Levin (recognized by the Board of Directors of PJSC TATNEFT as an independent)
has experience and knowledge in the field of preparation, analysis, evaluation, and audit of
accounting (financial) statements. The members of the Committee possess the necessary
knowledge and competencies for the preliminary consideration of issues related to the
control over the financial and economic activities of the Company. The Board of Directors
have decided to increase the composition of the Committee by including an additional one
nonexecutive director who also has experience and knowledge in the preparation, analysis,
evaluation, and audit of the accounting (financial) statements (R.R. Gaizatullin).
Main functions
• Control over ensuring the completeness, accuracy, and
reliability of the accounting (financial) statements of PJSC
TATNEFT, including the preparation of the consolidated financial
statements of PJSC TATNEFT Group with the integration of the
financial statements of ZENIT Bank into it.
• Coordination of the work of external auditors and the internal
• Organization of an independent assessment of the performance
audit department, as well as regular review of their reports.
of the internal audit function and making suggestions for
improving the work of the internal audit department.
• Check of the independence of the external auditor.
• Consideration and analysis of the quarterly, semi-annual and
annual financial statements of PJSC TATNEFT, including the
results of inspections by its external auditor.
• Assessment of candidates for auditors and submission of
recommendations to the Board of Directors on the election
of independent auditors of the financial statements of PJSC
TATNEFT in accordance with IFRS and RAS.
• Assistance to the Board of Directors in exercising control over
the work of the internal control and risk management systems
of PJSC TATNEFT.
• Preliminary consideration of interested-party transactions
• and transactions with parties related to PJSC TATNEFT that
are submitted for approval by the Board of Directors of PJSC
TATNEFT.
Work of the Audit Committee in the reporting year
In 2018, 7 meetings of the Audit Committee were held in person, 46 issues were considered.
Key issues considered by the Committee in 2018:
Review of the consolidated financial statements with the participation of external auditors
Issues related to the selection of external auditors and confirmation of the independence of external auditors
Issues related to the work of the Internal Audit Department (IAD)
Issues related to a preliminary consideration of interested-party transactions and transactions with parties related to
PJSC TATNEFT that are submitted for approval by the Board of Directors of PJSC TATNEFT
Other
nuMBer of issues
14
3
15
4
10
Participation in Audit Committee meetings
Yu.L. Levin
L. Gerech
R.F. Steiner
R.R. Gaizatullin
7/7
7/7
7/7
7/7
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Corporate
Governance Committee
The Committee assists the Board of Directors in improving corporate governance in the
Company, improving the efficiency of corporate practice in accordance with protecting
the interests of shareholders, ensuring the sustainable development of the Company,
strengthening the risk management and internal control systems, ensuring compliance
of the Company’s activities with the requirements of corporate legislation, stock market
regulators, and international best practices applicable to public Companies.
Composition of the Committee
Chairman
Nail ulfatovich Maganov – Member of the Board of Directors of PJSC TATNEFT
General Director, Chairman of the Management Board of PJSC TATNEFT
Committee members:
Nuriya Zufarovna Valeyeva –
Head of Technical and Economic
Information and Best Practices Department
of PJSC TATNEFT
Vasiliy Aleksandrovich Mozgovoi –
Assistant to the Director General
for Corporate Finance of PJSC TATNEFT
damir Maratovich gamirov –
Acting Corporate Secretary – Deputy Head
of the Office of the Corporate Secretary of
PJSC TATNEFT
Natalia Evgenievna dorpeko –
Corporate Consultant to the General
Director of PJSC TATNEFT
Valery dmitrievich Ershov –
Member of the Management Board, Head
of Legal Department of PJSC TATNEFT until
18.09.2018
Rinat Kasimovich Sabirov –
Member of the Board of Directors, Assistant
to the President of the Republic of Tatarstan;
Member of the HR and Remuneration
Committee of the Board of Directors of
PJSC TATNEFT
Nurislam Zinatulovich Syubaev –
Member of the Management Board, Deputy
General Director for Strategic Development
of PJSC TATNEFT
Evgeny Aleksandrovich Tikhturov –
Head of the Finance Department, Member
of the Management Board of PJSC
TATNEFT
В составе Комитета
по корпоративному управлению
в течение корпоративного года
произошли изменения:
прекращены полномочия Ершова В.Д.
в связи с выходом на пенсию.
The committee members possess relevant knowledge, experience, and competencies
in the field of corporate law, requirements of stock market regulators to issuers, advanced
standards of corporate governance and sustainable development, strategy issues.
Committee activity in the reporting year
In 2018, four meetings of the committee were held.
Key issues considered by the Committee
• on the election of the chairman of the committee for the
• on the new version of the Regulations on the access to insider
protection of insider information;
information of PJSC TATNEFT, the rules for protecting its
confidentiality, monitoring compliance with the requirements of
the legislation of the Russian Federation and the European Union
and internal documents adopted thereunder and the List of
information relating to the insider information of PJSC TATNEFT;
• information on the Regulations on the use of insider information
and the procedure for informing on transactions with PJSC
TATNEFT securities, approved by the Board of Directors on
October 27, 2006, Procedure for access to insider information
of PJSC TATNEFT named after V.D. Shashin and the rules for
protecting its confidentiality, approved by the Board of Directors
on December 28, 2011, the Rules for monitoring compliance
with the requirements of the legislation of the Russian
Federation on combating the misuse of insider information and
market manipulation, approved by the Board of Directors on
29.12.2012;
• on changes in the Company’s internal documents due to
changes in the current legislation and effective corporate
governance practices;
of Directors;
activities of the Company;
of the Company’s official website;
• on the procedure for self-assessment of members of the Board
• proposals for improvements in corporate governance;
• on the progress of work on the redesign and reorganization
• disclosure of information on the environmental and social
• on the expediency of joining the UN Global Compact;
• on informing the Company’s employees on the requirements
• on the organization of work with investors;
• recommendations on increasing the Company’s value and
• on the disclosure of reporting information on profitability and
of the legislation on the protection of insider information;
increasing liquidity;
liquidity.
Participation in the meetings of Corporate Governance Committee
N.U. Maganov
N.Z. Valeyeva
D.M. Gamirov
N.E. Dorpeko
V.A. Mozgovoi
R.K. Sabirov
N.Z. Syubaev
E.A. Tikhurov
*V.D. Ershov
*untill18.09.2018"
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
1/4
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0
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HR and remuneration
Committee
Performance Evaluation of the Board of Directors
and Committees of the Board of Directors
The committee forms recommendations for the Board of Directors on effectiveness
of HR policy, the system of appointments and remuneration, evaluation of candidates to
the Board of Directors and the Company’s management, compliance by independent
directors with the criteria for independence as well as efficiency of activities of the Board of
Directors, executive bodies and top managers of the Company. The Committee combines
the functions in terms of the performance of HR (nominations) and remuneration functions.
Composition of the committee
Chairman
Committee members:
René Steiner –
Member of the Board of Directors of PJSC TATNEFT Independent Director
Program Director of Direct Private Investments, FIDES Business Partner AG
Member of the Audit Committee of the Board of Directors of PJSC TATNEFT
gerech Laszlo –
Member of the Board of Directors of PJSC
TATNEFT
Independent Director
Managing Director of G Petroconsulting
Ltd
Member of the Audit Committee of the
Board of Directors of PJSC TATNEFT
Governance Committee of the Board
of Directors of PJSC TATNEFT
yuri Lvovich Levin – Member of the Board
of Directors of PJSC TATNEFT
Independent Director
Managing Partner of BVM Capital Partners Ltd
Chairman of the Audit Committee of the
Board of Directors of PJSC TATNEFT
There were no changes in the
composition of the HR and
Remuneration Committee during
the corporate year.
Rinat Kasimovich Sabirov –
Member of the Board of Directors of PJSC
TATNEFT
Assistant to the President of the Republic
of Tatarstan, Member of the Corporate
The HR and Remuneration Committee of the Board of Directors
of PJSC TATNEFT includes three independent directors. René
Steiner, Independent Director, is the Chairman of the Committee.
Due to the fact that the Committee combines the tasks of the
Remuneration Committee and the Nominations (Appointments,
Staff) Committee, the Board of Directors decided to increase
the composition of the Committee by including an additional
nonexecutive director (R.К. Sabirov). All members of the Committee
have the relevant knowledge, competence, and experience for the
tasks of the Committee.
Work of the HR and remuneration Committee in the reporting year
In 2018, there were 2 in-person meetings of the HR and
Remuneration Committee.
Assessing the quality of work of the Board of Directors is aimed at
determining the effectiveness of the work of the Board of Directors,
committees and members of the Board of Directors, matching their
work with the development needs of the Company, enhancing the
work of the Board of Directors and identifying areas in which their
work can be improved.
Distribution of average ratings
by key components
naMe of the Criterion
evaluation
Competencies and powers of the Board of Directors
Composition of the Board of Directors
Committees of the Board of Directors
Procedure of the Board of Directors
Annual General Meeting of Shareholders
4.17
4.21
4.00
4.24
4.54
The Company adopted the practice of evaluating the work of the
Board of Directors as a whole, members of the Board of Directors
and Committees of the Board of Directors. Evaluation is carried
out on a regular basis at least once a year in the form of a self-
assessment procedure.
The assessment includes 50 criteria for 5 key components:
competencies and powers of the Board of Directors; composition
of the Board of Directors; Committees of the Board of Directors;
procedure of work of the Board of Directors; the Annual General
Meeting of shareholders.
Assessment methodology - a questionnaire survey of members
of the Board of Directors on the activities during their term of
office in the status of members of the Board of Directors of PJSC
TATNEFT since their election in the reporting corporate year. The
questionnaire is based on the RAEX rating scale. (RAEX is included
in the register of credit rating agencies of the Bank of Russia, RAEX
ratings are included in the list of official requirements for issuers and
are used by the Central Bank of Russia, the Moscow Exchange, and
professional experts.)
In 2019, the self-assessment of the work of the Board of
Directors was conducted for the reporting corporate year. The
results of the self-assessment and its analysis were reviewed at the
in-person meeting of the Board of Directors. (Minutes No. 12 dated
24.04.2019)
Based on the results of the self-assessment, a positive
conclusion was made on the work of the Board of Directors in the
reporting corporate year. At the same time, in the process of self-
assessment, the members of the Board of Directors presented an
opinion on the further improvement of the mechanisms of work of
the Board of Directors and the development of corporate practice.
Generalized comments on the activities of the Board of Directors
were submitted to the Corporate Governance Committee and the
HR and Remuneration Committee.
The key issues considered by the Committee:
• The Committee’s Action Plan
• HR Policy
• Key HR Management projects
• Rem policy
• Analysis of pay level across industry
Participation in hr and remuneration committee
meetings
Steiner R. F.
Sabirov R. K.
Levin Yu. L.
Gerech L.
2/2
2/2
2/2
2/2
.
8
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2
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0
5
2
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.
8
1
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1
1
8
2
.
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sole
executive body
General
Director
Management Board
The General Director is appointed by the
Board of Directors.
The General Director is the Chairman
of the Management Board of PJSC
TATNEFT.
From November 2013 to the present,
Nail Ulfatovich Maganov is the General
Director of PJSC TATNEFT.
Maganov
Nail Ulfatovich
General Director of the PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Chairman of the Management Board
of PJSC TATNEFT
The powers of the General Director are defined by the Company’s
Articles of Association and the Provision on the General Director of
PJSC TATNEFT.
The General Director manages the current operations of the
Company, determines the organizational structure of the Company,
controls the safety of the Company’s assets and their effective
use, resolves the organizational issues of managing the business
structure of the Company, ensuring industrial safety, occupational
health, and protection of the environment, developing human
resources and social guarantees for employees as well as issues of
sustainable development and corporate responsibility.
The General Director has the right to entrust the resolution of
certain issues within his competence to his deputies, heads of
subdivisions. The General Director is personally responsible for the
state of affairs and the Company’s activities.
The distribution of responsibilities between the General Director
and the deputies of the General Director is determined by internal
organizational and administrative documents of the Company. The
deputy general directors arrange the work and are responsible for
the relevant activities.
The Management Board is a collegial executive body responsible for the
day-to-day management of TATNEFT, the development and implementation
of a common development strategy for the Company’s subsidiaries.
Changes in the composition of the Management
Board of PJSC TATNEFT in 2018
In 2018, changes were made to the composition of the
Company’s Management Board.
Until 18.09.2018, it consisted of 9 persons. By the decision of
the Board of Directors on the grounds of Article 2 of the Regulations
on the Management Board of PJSC TATNEFT, the authority of
Valery Dmitrievich Ershov, Member of the Management Board of
PJSC TATNEFT, was terminated due to the dismissal of the Head of
the Legal Department of PJSC TATNEFT.
The Management Board is guided in its activities by the current
legislation, PJSC TATNEFT Articles of Association. The procedure
for forming the composition of the Management Board, the rights,
duties, and responsibilities of members of the Management
Board, the regulations for the activities of the Management Board
are established by the Regulations on the Management Board
of PJSC TATNEFT. The rights and obligations of members of the
Management Board are also determined by contracts concluded
on behalf of the Company by the Chairman of the Board of Directors
with each member of the Management Board.
The Management Board is represented by the heads of the main
business and corporate areas of the Company. The Management
Board includes executives of the Company and its subsidiaries
with the necessary professional qualifications and leadership
experience in the field of the Company’s activities.
Meetings of the Management Board are held according to
the work plan of the Board. The quantitative composition of the
Management Board is determined by the Board of Directors.
Duration of work in the Management Board
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
201 1
2012
2013
2014
2015
2016
2017
2018
2019
Maganov Nail ulfatovich
Ibragimov Nail Gabdulbarievich
Nurmukhametov Rafail Saitovich
Tikhturov Evgeny Aleksandrovich
Voskoboinikov Vladlen Aleksandrovich
Glazkov Nikolay Mikhailovich
Ershov Valery Dmitrievich
Mukhamadeev Rustam Nabiullovich
Syubaev Nurislam Zinatulovich
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Composition of the Management Board
of PJSC TATNEFT in 2018
Maganov
Nail Ulfatovich
Voskoboinikov
Vladlen Aleksandrovich
Glazkov
Nikolay Mikhailovich
Ershov
Valery Dmitrievich
Ibragimov
Nail Gabdulbarievich
Mukhamadeev
Rustam Nabiullovich
General Director of the PJSC TATNEFT
Member of the Board of Directors
of PJSC TATNEFT
Chairman of the Management Board
of PJSC TATNEFT
Head of the Consolidated Financial
Statements Department of PJSC
TATNEFT
Deputy General Director for Capital
Construction of PJSC TATNEFT
Head of Legal Department of PJSC
TATNEFT
Member of the Corporate Governance
Committee of the Board of Directors of
PJSC TATNEFT
Member of the Management Board
until 18.09.2018
First Deputy General Director for
Operations – Chief Engineer of PJSC
TATNEFT
Member of the Board of Directors of
PJSC TATNEFT
Deputy General Director for General
issues of PJSC TATNEFT
Born in 1958.
Born in 1965
Born in 1960
Born in 1949
Born in 1955
Born in 1952.
In 1983, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From July 2000 to November 2013, First Deputy
General Director – Head of Crude Oil and
Petroleum Products Sales Department of PJSC
TATNEFT
From November 2013 to the present, General
Director of PJSC TATNEFT
In 1993, graduated from the Technical Institute of
Southern Alberta in Calgary
In 1988, graduated from Kazan Institute of Civil
Engineering
From 2005 to the present - Head of the
Consolidated Financial Statements Department
of PJSC TATNEFT
From 2008 to 2010, Head of the Capital
Construction Department of PJSC TATNEFT
From 2010 to the present, Deputy General
Director for Capital Construction of PJSC
TATNEFT
In 1978, graduated from Kazan State University
named after V.I. Ulyanov-Lenin
From 2002 to 18.09.2018, Head of the Legal
Department of PJSC TATNEFT
In 1977, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
In 1977, graduated from the Moscow Institute
of Petrochemical and Gas Industry named after
academician I.M. Gubkin
From 2000 to the present, First Deputy General
Director for Operations – Chief Engineer of PJSC
TATNEFT
From 2001 to 04.12.2017, Deputy General
Director for HR and Social Development of PJSC
TATNEFT
From December 4, 2017, to the present, Deputy
General Director for General Issues of PJSC
TATNEFT
Share in the authorized capital of the
Company, %
0.000176
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Holding of ordinary shares of the
Company, %
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
no
no
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
0.019831
0.020873
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
0.004204
0.004264
no
no
Annual Report 2018TATNEFT GroupCorporate governanCe 98
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Activities of the
Management board in 2018
Structure of issues considered
by the Management Board in 2018
4.60
9.10
4.50
50.00
Corporate issues
Strategy
Transactions
Budget
Production
Local acts
27.30
4.50
Decisions made on the following issues:
12
22
NuMBER
OF MEETINGS HELD
NuMBER OF ISSuES
CONSIDERED
in 3
Banking Group until 2020;
• The development strategy of ZENIT
• Approval of the Company’s participation
• On the acquisition of shares
• On termination of PJSC TATNEFT’s
in organizations;
companies;
participation in 4 companies as part
of the optimization of the corporate
structure of the Company;
• On the approval of the conclusion of
transactions for the transfer to lease
of property assets and the sale of land
plots;
• On the reorganization of subsidiaries;
• On the establishment of the state
registration of a subsidiary with a 100%
participation of PJSC TATNEFT named
after V.D. Shashin in Uzbekistan;
• On approval of transactions for concluding
• On the implementation of the project
contracts for short-term rental of real estate;
on the deployment of a process control
system to optimize the cost estimates in
the business units;
• On summing up the results of declaring
the execution of the directive, regulatory,
planned
financial performance
indicators of the structural subdivisions
of PJSC TATNEFT for 2017;
• On the amount of voluntary contributions
from the state fund under the Social
Mortgage Housing Construction
Program for 2018;
• On the implementation of the quality
control mechanism for the work of
personnel in the project groups of the
corporate social network;
• On approval of transactions for the sale
of vehicles.
Participation of members of the Management Board in meetings
of the Management Board in 2018
Maganov Nail Ulfatovich
Voskoboinikov Vladlen Aleksandrovich
Glazkov Nikolay Mikhailovich
Mukhamadeev Rustam Nabiullovich
Tikhturov Evgeny Aleksandrovich
Syubaev Nurislam Zinatulovich
Ershov Vladimir Dmitrievich *18.09.2018
Ibragimov Nail Gabdulbarievich
Nurmukhametov Rafail Saitovich
12/12
12/12
12/12
11/12
12/12
3/12
11/12
12/12
.
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(
Nurmukhametov
Rafail Saitovich
Head of NGDU Leninogorskneft
of PJSC TATNEFT
Syubaev
Nurislam Zinatulovich
Tikhturov
Evgeny Aleksandrovich
Deputy General Director for Strategic
Development of PJSC TATNEFT
Member of the Corporate Governance
Committee of the Board of Directors of
PJSC TATNEFT
Head of the Finance Department of
PJSC TATNEFT
Member of the Corporate Governance
Committee of the Board of Directors of
PJSC TATNEFT
Born in 1949
Born in 1960
Born in 1960
In 1974, graduated from Ufa Petroleum Institute
From 1989 to the present, Head of NGDU
Leninogorskneft of PJSC TATNEFT
In 1982, graduated from the Moscow Institute of
National Economy named after G.V. Plekhanov
In 1992, graduated from S. Ordzhonikidze
Moscow Institute of Management.
2013 to 17.07.2016, Head of the Strategic
Planning Department – Advisor to the General
Director for Foreign Economic Affairs and
Financial and Banking Issues
From July 18, 2016 to the present, Deputy
General Director for Strategic Development of
PJSC TATNEFT
From 1999 to the present, Head of the Finance
Department of PJSC TATNEFT
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
0.010465
0.010107
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
Share in the authorized capital of the
Company, %
Holding of ordinary shares of the
Company, %
no
no
no
no
Annual Report 2018TATNEFT GroupCorporate governanCe
100
www.tatneft.ru
101
Remuneration of members of the
Management bodies
The Board of Directors determines the Company’s policy on remuneration
and/or reimbursement of expenses (compensations) to members
of the Board of Directors, executive bodies and other key executives
of the Company.
The policy of incentives for the Company’s management
personnel is aimed at forming a single remuneration system
with its variable part linked to key performance indicators
presenting the success of achieving the Company’s strategic
goals.
The remuneration of members of the executive bodies and other
key managers of the Company is determined in such a way as to
ensure a reasonable and grounded ratio of the fixed part of the
remuneration and the variable part of the remuneration, depending
on the performance of the Company and the personal (individual)
contribution of the employee to the final result.
For the preliminary consideration of issues related to the
formation of the effective and transparent practice of remuneration,
a Remuneration Committee was established, consisting of
independent directors and headed by an independent director who
is not the chairman of the Board of Directors.
When forming the remuneration system and determining the
specific remuneration to members of the Company’s management
bodies, it is assumed that the level of remuneration payable
should be sufficient to attract, motivate and retain persons with the
necessary competence and qualifications for the Company.
The remuneration system is based on the principles and
recommendations of the Corporate Governance Code, taking
into account the Company’s remuneration and compensation
practices.
The Company seeks to establish remuneration for members of
the Board of Directors, taking into account the contribution they
make to the development of the Company. Adequate remuneration
contributes to attracting highly qualified candidates and implies the
provision of compensation for the time and effort spent on preparing
and participating in meetings of the Board of Directors.
The remuneration system for management personnel is formed
taking into account the strategic goals of the Company 2030.
Remuneration of the
members of the Board
of Directors of PJSC
TATNEFT
Remuneration to members of the Board
of Directors of PJSC TATNEFT is paid on
the basis of the “Provision on the payment
of monetary remuneration to members
of the Board of Directors and the Audit
Commission of PJSC TATNEFT.” Formed
from constant and variable parts.
The permanent part of the remuneration
is established by the Regulations and is
indexed simultaneously with the change
in tariffs and salaries of PJSC TATNEFT
employees.
The variable part of the remuneration
of members of the Board of Directors is
formed depending on the fulfillment of the
following key indicators:
• the ratio of the Company’s capitalization
level for the year compared with the
previous year;
• the ratio of expenses for dividends to net
profit (as compared with the previous
year);
• the size of additional profitability in
relation to the basic profitability.
to
The amounts of remuneration
members of the Board of Directors are
established by a decision of the General
Meeting of Shareholders and provide for,
among other things:
for performing
of a member of the Board of Directors;
• remuneration for performing the duties
• remuneration
the
functions of the Chairman of the
Committee of the Board of Directors.
In 2018, the total amount of remuneration
to members of the Board of Directors of the
Company amounted to 153,970,828.32
rubles,
for
participation in the work of the Board
of Directors, salary, bonuses and other
types of remuneration. Compensation
to members of the Board of Directors of
the Company amounted to 7,444,125.08
rubles.
remuneration
including
Remuneration of
members of the
Management board
Payments
to members of
the
Management Board are made
in
accordance with the main terms of the
contracts for fulfilling the duties of a member
of the Management Board, including the
implementation of decisions of the General
Meeting of Shareholders, the Board of
Directors, participation in the elaboration
of development plans for the Company,
improving the performance of the Company
and its subdivisions.
In 2018, the total amount of remuneration
to members of the Company’s Management
Board amounted to 139,442,565.97 rubles,
including remuneration for participation
in the work of the Management Board,
salaries, bonuses, and other types of
remuneration. Compensations to members
of the Company’s Management Board
amounted to 646,939.98 rubles.
Remuneration for participation in the management body
Salary
Awards
Other types of rewards
Total
Compensation
ruBles
7 324 133.00
81 733 758.67
48 607 858.21
1 776 816.09
139 442 565.97
646 939.98
Remuneration for participation in the management body
Salary
Awards
Commission
Other types of rewards
TOTAL
Compensation
ruBles
112 007 358.00
19 729 183.28
22 089 746.14
0
144 540.90
153 970 828.32
7 444 125.08
Annual Report 2018TATNEFT GroupCorporate governanCe 102
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103
corporate
secretary
audit
Internal audit
Ensures that the Company’s management bodies comply with the requirements
of the legislation, the Articles of Association and internal documents guaranteeing
the protection of the rights and legal interests of shareholders. Organizes the work
of the Board of Directors and effective communication between shareholders,
management, control and executives of the Company.
Damir Maratovich Gamirov
Acting Corporate Secretary – Deputy Head of the Office of the
Corporate Secretary of PJSC TATNEFT
Member of the Corporate Governance Committee of the Board
of Directors of PJSC TATNEFT
Born in 1980.
In 2003, graduated from Ufa State Petroleum Technical
University
From 2013 to 16.04.2017, Economist at the Securities Section
of the Property Management Department of PJSC TATNEFT
From April 17, 2017 to the present, Deputy Head of the Office of
the Corporate Secretary of PJSC TATNEFT.
Duties of the acting corporate secretary are entrusted to Damir
Maratovich Gamirov by the decision of the Board of Directors dated
06.11.2017.
The Corporate Secretary is sufficiently independent of the
executive bodies of the Company and has the powers and
resources required to fulfill the tasks assigned to him.
The Corporate Secretary acts
in accordance with the
Company’s Articles of Association and the Regulations on the
Corporate Secretary of PJSC TATNEFT, which takes into account
all the requirements of the Moscow Exchange PJSC and the
recommendations of the Bank of Russia Code regarding the
activities of the Corporate Secretary.
Key functions of the corporate secretary
• Ensuring the effectiveness of the mechanisms for implementation
by the Company, subsidiaries, and affiliates of corporate
procedures related to the exercise of the rights of shareholders
and other participants of the Company’s corporate relations.
• Ensuring the preparation and holding of General Meetings of
Shareholders and meetings of the Board of Directors, including
the preparation of materials for meetings of the Board of Directors
in accordance with the internal documents of the Company.
• Ensuring the work of committees of the Board of Directors of the
• Ensuring the interaction of the Company with the organizers of
Company, coordination of their activities.
the auction, the registrar, depositories, with government bodies
authorized to regulate corporate relations and the securities
market, as well as with other professional participants of the
securities market within the authority assigned to the corporate
secretary.
• Ensuring compliance with the requirements for disclosure of
information, provision of documents and information at the
request of shareholders, monitoring the effectiveness of corporate
mechanisms for disclosing information, ensuring proper storage
of corporate documents of the Company.
• Formation of a list of information attributable to the insider, working
with insiders, ensuring control over the execution of transactions
with the Company’s securities by insiders.
• Ensuring the Company’s interaction with its shareholders and
• Monitoring the Company’s compliance with the requirements of
participation in the prevention of corporate conflicts.
corporate legislation, the provisions of the Company’s internal
documents and shareholders’ rights in the part related to the
competence of the Corporate Secretary, taking the necessary
measures to eliminate such violations, minimize the consequences
of such violations.
Office of the Corporate Secretary
The competences of the Office of the Corporate Secretary
include maintaining an effective system of interaction between
all participants of corporate relations, including subsidiaries
and affiliates, monitoring the implementation by the Company,
subsidiaries, and affiliates of corporate procedures relating to
the exercise of the rights of shareholders and other participants
in corporate relations, ensuring the Company’s interaction with
a specialized registrar, depositories, with government bodies
authorized to regulate corporate relations and the securities
market as well as with other participants of the securities market.
The Office of the Corporate Secretary ensures the organization
and control of compliance with the requirements of legislation
on public disclosure of information, including the preparation
and disclosure of information in the form of an annual report,
issuer’s quarterly reports, material facts, as well as documents
and information related to the issuance and circulation of
securities for organized stock market, provision of documents
and information requested by shareholders, proper storage
of corporate documents of the Company. As part of improving
corporate practice, the Office of the Corporate Secretary
monitors the effectiveness of the Company’s current procedures
and ensures that an annual report to the Board of Directors
on the state of corporate governance in the Company and its
development prospects is prepared.
Performs assessment of the reliability and efficiency of the
Company’s business processes, provides for the identification
of internal reserves to improve the efficiency of the financial and
economic activities of PJSC TATNEFT, including the Group
Companies.
Internal audit is carried out in accordance with the plan approved
by the Board of Directors.
As part of the audit, a system of internal control over the
operational efficiency of processes, compliance with the legislation,
and safety of property is considered.
The audit is conducted on a risk-based approach. The report
on the results of the internal audit is sent to the management of
the Company and the Audit Committee. Subsequently, the Internal
Audit Department monitors the implementation of measures and
informs the management of the Company and the Audit Committee
of the Board of Directors on the progress of elimination of the
identified deficiencies.
Control inspections
Total
Scheduled
Unscheduled
Monitoring
Note
2018
33
9
24
2017
21
9
12
2016
41
9
32
Execution of action plans following
the results of the audit 2017-2018.
Execution of action plans for
2016-2017.
Execution of action plans for
2015-2016.
Unscheduled inspections on the
instructions of the Company’s
management on various issues
of financial and economic activities
Unscheduled inspections on the
instructions of the Company’s
management on various issues
of financial and economic activities
Unscheduled inspections on the
instructions of the Company’s
management on various issues
of financial and economic activities
The quality assessment of the internal audit function
implemented by the Internal Audit Department of PJSC
TATNEFT was successfully conducted. According to the
results of the evaluation by experts of CJSC Deloitte & Touche
CIS, it was concluded that the management activities generally
comply with the International Professional Standards of
Internal Audit and the Code of Ethics of the Institute of Internal
Auditors.
Independent auditor
In order to independently assess the reliability of the accounting
(financial) statements, the Company annually engages an external
auditor to conduct an audit of statements prepared under IFRS
and RAS. The external auditor is approved by the General Meeting
of Shareholders on the recommendation of the Board of Directors
of the Company, adopted on the basis of an assessment carried out
by the Audit Committee.
PricewaterhouseCoopers Audit was approved as an auditor for
compulsory audit of the annual financial accounting statements
for 2018 prepared in accordance with Russian and international
accounting standards by the decision of the Annual General
Meeting of Shareholders (Minutes No. 26 dated June 27, 2018,
of the General Meeting of Shareholders).
Annual Report 2018TATNEFT GroupCorporate governanCe
104
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105
Audit commission
Supervises the financial and economic activities of the Company
and its management bodies, officials, subdivisions and services,
branches and representative offices. The Audit Commission is a
permanently elected body of the Company.
The Audit Commission is elected by the General Meeting of
Shareholders and is accountable to it. Members of the Audit
Commission may not simultaneously be members of the Board
of Directors of the Company, as well as occupy other positions
in the management bodies of the Company. The activities of the
Audit Commission are governed by the Company’s Articles of
Association.
The Audit Commission is elected as a body of nine members by
the General Meeting of Shareholders for a term until the next Annual
General Meeting of Shareholders. A member of the Company and
any person proposed by a shareholder may be a member of the
Audit Commission.
The object of the audit performed by the Audit Commission is the
Company’s activities, including the identification and assessment
of risks arising from the results and in the process of financial and
economic activities.
Composition of the commission
On June 22, 2018, by the decision of the General Meeting of Shareholders of PJSC
TATNEFT, for the reporting corporate year, the following Audit Commission was elected:
Chairwoman of the Audit
Commission
Members of the Audit
Commission
Ranilya Ramilevna gizatova
Year of birth: 1972
In 1994, graduated from the Bashkir State
Pedagogical Institute
In 2005, graduated from Almetyevsk State
Oil Institute
From 2001 to 01.11.2018, Head of
the Investment Department of NGDU
Elkhovneft
From 01.11.2018 to the present,
Lead Economist in the Planning and
Performance Management Section of the
Production Processes of the Exploration
and Production Department
Ksenia gennadievna Borzunova
Year of birth: 1980
In 2003, graduated from Kazan State
Financial and Economic Institute
From 2006 to the present, Head of the
Economics Department of the Ministry
of Land and Property Relations of the
Republic of Tatarstan
guzal Rafisovna gilfanova
Year of birth: 1967
In 1993, graduated from Saint Petersburg
State University
In 2005, graduated from the Kursk
Regional Financial and Economic Institute.
Since 2011, has been working in the
Office of PJSC TATNEFT as an economist,
currently Deputy Head of the Control and
Auditing Department
Salavat galiaskarovich Zalyaev
Year of birth: 1975
In 1999, graduated from the Moscow
Military Institute of the Federal Border
Service of the Russian Federation
From 2002 to the present, Leading Legal
Counsel of the Corporate and Legal
Section of the Legal Department in PJSC
TATNEFT
*From 22.06.2018
Venera gibadullovna Kuzmina
Year of birth: 1946
In 1972, graduated from the Moscow
Institute of Petrochemical and Gas Industry
named after Academician I.M. Gubkin
From 2002 to 2017, Economist at NIS
PJSC TATNEFT
(veteran of labor)
Organization: individual (retired)
In 2018, changes were made to the Audit Commission by the decision of the Annual
General Meeting of Shareholders (Minutes No. 26 dated 27.06.2018), the powers of the
member of the Audit Commission of PJSC TATNEFT T.G.Nurkhametova were terminated,
and S.G. Zalyatov was elected to the Audit Commission.
The Audit Commission audits the Company’s financial and
economic activities, confirms the accuracy of the data included
in the annual report of PJSC TATNEFT and the annual accounting
(financial) statements of the Company, and also confirms the
accuracy of the data contained in the report on interested-party
transactions made in the reporting year.
The Audit Commission submits to the Board of Directors no
later than forty days before the annual meeting the conclusion on
the results of the annual audit in accordance with the rules and
procedures for maintaining financial statements and accounting.
During the work of the Audit Commission of the Company in 2019,
the reliability of the data contained in the annual accounting (financial)
statements and the Company’s Annual Report for 2018, as well as the data
contained in the Report on the interested-party transactions concluded
by PJSC TATNEFT in 2018, was confirmed.
Taskirya gaptenurovna Nurkhametova
Year of birth: 1962
Education: Kazan Financial and Economic
Institute
Organization: LLC Management Company
System - Service
Position: Chief Accountant
*until 22.06.2018
Liliya Rafaelovna Rakhimzyanova
Year of birth: 1967
In 1988, graduated from Kazan Financial
and Economic Institute
From 2010 to August 2012, Head of the
Oil and Gas Production Section of the
Hydrocarbons Department
Since August 2012, Head of the Oil
Production and Refining Department of
the Ministry of Industry and Trade of the
Republic of Tatarstan
Nazilya Rafisovna farhutdinova
Year of birth: 1963
In 1985, graduated from Kazan Financial
and Economic Institute
From 2010 to present, Deputy Director for
Economics and Finance of
LLC TagraS-RemService
Sariya Kashibulkhakovna yusupova
Year of birth: 1965
In 1986, graduated from Kazan Financial
and Economic Institute
Since 1991, Deputy Head of the
Department of the Ministry of Finance
of the Republic of Tatarstan
Ravil Anasovich Sharifullin
Year of birth: 1961
In 1990, graduated from Kazan Financial
and Economic Institute
From 2009 to 2012, Chief Accountant of
NGDU Yamashneft
From 2012 to the present, Head of the
Control and Audit Department of PJSC
TATNEFT named after V.D. Shashin
Remuneration of the members
of the Audit commission
In 2018, the total amount of remuneration to the members of
the Company’s Audit Commission was 10,077,724.40 rubles,
including remuneration for participation in the work of the Audit
Commission, salaries, bonuses, and other types of remuneration.
Compensations to members of the amounted to 0.00 rubles.
ruBles
Remuneration for participation in the management
body
Salary
Awards
Other types of rewards
Total
Compensation
2 177 921.00
3 211 310.45
4 666 232.66
22 260.29
10 077 724.40
0
Annual Report 2018TATNEFT GroupCorporate governanCe 106
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107
information policy
In 2018, 197 press-releases on the Company’s activities
were posted on the Tatneft official website.
The Company follows the principles of information transparency,
guarantees the timely provision of essential information to its
shareholders, the investment community and all interested parties
based on:
main activities;
• Regularity and sequence of disclosure of information on the
• Efficiency of disclosing relevant information on material events
• Guarantee of the accuracy and completeness of the disclosed
and facts in the Company’s activities;
information about the Company and legal entities controlled by
it, which are of substantial importance to it within the framework
of the TATNEFT Group;
• Ensuring the availability of information for stakeholders and equal
• Ensuring compliance and consistency of information disclosed
access to information for the same categories of stakeholders;
in different ways and/or in different forms, as well as the
possibility of comparing the disclosed indicators for different
periods of time;
• The independence of the provision of financial and other
information on the interests of any persons or their groups.
The Company discloses material information about its activities
and avoids a formal approach to information disclosure. At
the same time, the Company does not evade from disclosing
negative information about itself, if such information is essential
for shareholders, investors and other stakeholders. The Company
seeks to provide simultaneous and equivalent disclosure of material
information in the Russian Federation and abroad in accordance
with the circulation of the Company’s securities in overseas
organized securities markets, including in the form of foreign
depositary receipts. The equivalence of information disclosure
means that if it is disclosed in an organized market in one country,
the same content should be disclosed in other countries where the
Company’s securities circulate in organized markets.
Disclosure, dissemination, and provision of information are
carried out in the volume, manner, and within the time limits
established by applicable Russian and applicable foreign law in the
field of information disclosure by issuers of securities.
In the field of information disclosure, PJSC TATNEFT is guided
by the Federal Law “On the Securities Market,” the Federal Law “On
Joint Stock Companies,” Bank of Russia Regulations No. 454-P
“On Information Disclosure by Issuers of Equity Securities,” and is
also guided by the requirements of PJSC Moscow Exchange and
London Stock Exchange, recommendations of the Code of the
Bank of Russia.
Information subject to mandatory disclosure in accordance
with the legislation of the Russian Federation is disclosed in the
information and telecommunication network on the Company’s
official website (tatneft.ru) in Russian and English as well as in
the news feed and on the website of the information agency (JSC
Screen) authorized to carry out actions to disclose information of
the Company.
The Company provides shareholders with easily
accessible communication tools such as a “hot line”
service as well as e-mail, allowing shareholders to ask
questions about the ownership of their shares, how
to receive dividends or provide feedbacks and send
questions regarding the agenda in the process
of preparing for Shareholders’ General Meeting.
Data on disclosure of information subject
to mandatory disclosure
1. List of affiliates
2. Annual Report
3. Quarterly Report
4. RAS Reporting
5.
IFRS reporting
6. On holding a meeting of the Board of Directors and its agenda
7.
8. On convening and holding a General Meeting of Shareholders
9. About decisions of General Meetings
Individual decisions made by the Board of Directors
10. About accrued income on equity securities
11. About income paid on equity securities
12. On the issuer’s failure to fulfill its obligations to holders of issued securities
11. On assigning or changing the rating to the issuer by the rating agency on the grounds of the concluded agreement
12. On changing the participation share of a member of the issuer’s governing body in the issuer’s authorized capital
On the acquisition by a person of the right to dispose of a certain number of votes attributable to voting shares constituting the
authorized capital of an individual organization
On the date on which the persons entitled to exercise rights under the issuer’s equity securities are determined, including the
date on which the list of persons entitled to participate in the general meeting of shareholders of the issuer
13.
14.
Information sent outside the Russian Federation for its disclosure to foreign investors in connection with the placement or
circulation of the issuer’s equity securities outside the Russian Federation
15.
16. Articles of Association
17.
Internal documents regulating the activities of the Company’s management bodies
QuantitY
4
1
4
4
4
15
15
3
3
3
3
1
1
1
2
5
2
1
13
Data on voluntary disclosure of information
Information on decisions made by the Board of Directors (in the form of a press release)
1.
2. Presentations for investors
3. Messages and presentations on IFRS (statements) (in the form of a press release)
4. Production performance of the Company (in the form of a press release)
5. Recommendations of the Board of Directors on the payment of dividends (in the form of a press release)
6. Announcement of the Annual General Meeting (in the form of a press release)
7. Press release and presentation on the Development Strategy for the period until 2030
8. Report on the conference of the labor collective of PJSC TATNEFT
9. News (in the form of a press release)
QuantitY
15
4
4
11
3
1
1
1
197
Disclosure of reporting
TATNEFT discloses annual consolidated financial statements
together with an auditor’s report and consolidated interim
condensed financial statements along with a review inspection
report of the consolidated interim condensed financial statements.
As well as annual financial statements along with the auditor’s
report and interim financial statements.
Transparency of financial statements is one of the main elements
of corporate governance. 28.03.2018 The Company has published
audited annual financial statements according to RAS for 2017 and
on 29.03.2018 - audited consolidated annual financial statements
under IFRS for 2017.
Annual Report 2018TATNEFT GroupCorporate governanCe 108
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Protection of insider information
Procedures and regulations
Anti-corruption
policy
Compliance with
anti-monopoly policy
PJSC TATNEFT, whose securities circulate on organized
markets not only in Russia but also in the UK pays special attention
to measures aimed at preventing and controlling the inadmissibility
of the unlawful use of insider information.
In its activities, the Company is guided by Federal Law No. 224-
FZ “On Countering the Inappropriate Use of Insider Information and
Market Manipulation and on Amendments to Certain Legislative
Acts of the Russian Federation” dated 27.07.2010, other legislation
of the Russian Federation, and Regulation (EC) 596/2014 of the
European Parliament and of the Council “On Market Abuse” dated
April 16, 2014.
The Company provides all the necessary procedures for the
protection of insider information with relevant internal regulatory
documents: The Company has Regulations on the procedure
for access to insider information of PJSC TATNEFT, the rules for
protecting its confidentiality and monitoring compliance with the
requirements of the legislation of the Russian Federation and the
European Union and internal documents adopted thereunder, as
well as a number of other local regulations governing the procedure
for:
• circulation of insider information within the Company;
• access to insider information;
• disclosure of insider information;
• making transactions with the Company’s securities, including
the procedure for informing the Company by insiders about such
transactions.
In accordance with the requirements of the EU Regulation
On Market Abuse, a special procedure applies to the implementation
of transactions with the Company’s securities by members of the
Board of Directors and the Management Board. Members of the
Company’s governing bodies are informed of the requirements for
handling insider information, procedure and deadlines for notifying
the regulatory authorities and the Company of securities transactions;
a ban on transactions with the Company’s securities in closed periods.
In accordance with international best practices, insiders who are
not members of the Company’s governing bodies also establish
restrictions on carrying out transactions with securities in the so-
called closed periods.
The Company annually develops a Calendar of periods available
to the insider for transactions with the Company’s securities and
their derivative securities in accordance with Regulation (EU)
596/2014 of the European Parliament and the Council “On Market
Abuse” dated April 16, 2014. The Company’s website contains the
Insider Calendar.
On an ongoing basis, explanatory work is being conducted on
the requirements of the applicable legislation.
Informing the Company’s employees who have access to insider
information, including via the corporate website of the Company.
The Board of Directors decided to appoint Damir Maratovich
Gamirov, Acting Corporate Secretary – Deputy Chief of the Office of
the Corporate Secretary, as an official of PJSC TATNEFT to monitor
compliance with the requirements of the legislation of the Russian
Federation on countering the unlawful use of insider information
and market manipulation.
By the decision of the Committee for the Protection of Insider
Information (Minutes No. 1/2018 dated April 16, 2018), D. Gamirov
was appointed the Chairman of the Committee.
Composition of the Committee for the protection
of insider information in 2018
Chairman
Committee members
damir Maratovich gamirov – Acting
Corporate Secretary - Deputy Head of
the Office of the Corporate Secretary,
the responsible person for monitoring
compliance with the Law on Countering the
Misuse of Insider Information.
Alexey petrovich Bespalov –
Chief Expert of the Business Service
Center of PJSC TATNEFT
Vasiliy Aleksandrovich Mozgovoy –
Assistant Director General for Corporate
Finance of PJSC TATNEFT
petr Andreevich glushkov – Advisor
to the General Director for International
Legal Issues of PJSC TATNEFT
Ildar Asylgaraevich Rakhmatullin –
Head of the Internal Audit Department
of PJSC TATNEFT
Valery dmitrievich Ershov –
Member of the Management Board,
Head of Legal Department of PJSC
TATNEFT until 18.09.2018
Rifdar Rifkatovich Khamadyarov –
Deputy Head of the Corporate Culture
Development Department of PJSC
TATNEFT
The anti-corruption policy of the Company was adopted by
the Board of Directors. On its basis, an appropriate corporate
standard has been approved, in which the basic principles aimed
at preventing corruption are formulated.
The Anti-corruption policy Standard applies to all areas of
the Company’s business.
The Company’s position in the field of anti-corruption is
The Company operates in strict accordance with the anti-
monopoly state regulation, legislation, recommendations of
the Federal Antimonopoly Service (FAS Russia), and the best
international practices. The Company follows the principles of
competitive business conduct and provides for rules of conduct
for employees aimed at preventing violations of anti-monopoly
legislation.
public.
Responsibility for the implementation of the Company’s anti-
corruption policy and combating corruption in all areas of the
Company’s business is ensured by the Economic Security,
Information Protection, Civil Defense and Emergency Situations
Department of PJSC TATNEFT.
Regular risk assessment of engaging
in corrupt activities
The Company identifies, evaluates and periodically re-assesses
corruption risks characteristic of its potentially vulnerable business
processes. When identifying and assessing risks, the Company
takes into account the fullness of information on activities and plans,
including investment and strategic ones, available at the time of the
assessment and reassessment.
Results of anti-corruption
programs implementation
In the reporting year, the Company held events to identify and
assess corruption risks in conjunction with the Internal Audit and the
HR Departments. As a result of the measures taken, certain facts
of violations were revealed and appropriate measures were taken.
The Company is constantly improving
its internal procedures aimed at preventing
violations of current anti-monopoly
legislation, including the training of
employees in anti-monopoly regulation.
The Company has
a hotline information
system
Telephone: 8 800 100 4112
E-mail: tn@88001004112.ru
The Company effectively operates a special confidential
channel, through which an employee or an outsider can report
facts of various violations related to the Company’s activities –
professional activities, corporate governance, and corporate
ethics issues, respect for human rights, work schedule, social
aspects, industrial and environmental safety, labor protection,
quality of products and services, other issues, including those
of a corruption nature – the “Hotline.” Receiving calls is carried
out by an independent operator.
In 2018, 702 appeals were received and processed.
Appeals were received on various topics and areas: labor
and wage management issues, implementation of tender
activities, proposals for improvement, assistance to veterans
and employees, signals of possible embezzlement and
abuse. Appropriate measures have been taken, including at
the level of introducing new standards and regulations into
corporate practice aimed at reducing the risks of violations
in production and business activities, as well as at increasing
the labor discipline and responsibility of employees. Additional
control measures have been introduced to prevent previously
identified violations in the future.
Annual Report 2018TATNEFT GroupCorporate governanCe 110
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111
Risk management
and internal control
The Company’s key priority in risk management and internal control is
to ensure reasonable confidence in achieving strategic and operational
goals, safeguarding assets, complying with legal and regulatory
requirements, compliance with information disclosure procedures, and
security in all areas of work.
The Company’s risk management and internal control policy
includes the goals, tasks, and basic principles of risk management,
the functions of participants in the corporate risk management
system, as well as the interrelation of the risk management
process with the processes of strategic and investment planning,
operational planning, human resource management, and labor
relations, supply chain, aspects of industrial safety, environmental
and social activities.
The Company develops an Integrated Risk Management System
(RMS) based on the analysis and assessment of possible factors
that can affect the performance of production and financial and
economic activities as well as directly or indirectly affect the current
work and/or strategic plans of the Company.
Risk management is aimed at identifying, evaluating, and
monitoring all significant risks as well as at taking measures to
reduce the level of risks that may have a negative impact on current
results and long-term work.
The principal approach of the Company is to assess the
likelihood of a risk event occurring and the priority of preventive
measures over reactive ones.
The Company adheres to the precautionary principle, which is
one of the basic in the system of strategic and current planning of
activities in all areas.
This principle defines a risk control mechanism to prevent the
occurrence of risk or its minimization in circumstances beyond the
control of the Company.
Key principle of the risk management system –
Precaution principle
Target FOCUS:
• Development of a risk management system based on the integration of identifying and controlling
risks in the processes of strategic planning, the formation and implementation of an investment
program, operational and financial activities, and the identification of economic, environmental and
social risks.
• Interaction with stakeholders to identify financial, industrial, technological, legal, economic,
environmental, and social impacts that can generate risks and effective opportunities in risk
management.
• Analysis of the effectiveness of risk management methods used.
Information on the main risks is provided in Annex 5
to this Annual Report “Main Risks.”
Risk management system (RMS)
MANAGEMENT OF TATNEFT GROUP
EFFICIENCY ASSURANCE
OF BUSINESS
PROCESSES
CONTROL
OF QUALITY OF BUSINESS
PROCESSES
CORPORATE
RISK
MANAGEMENT
KEY ELEMENTS OF RISK MANAGEMENT
The mechanism for the qualitative assessment
of all possible factors that can significantly
affect the indicators of production and
financial and business activities of the Group,
have a direct or indirect impact on the current
operations and strategic plans of the
Company, the social environment.
The system of unified corporate standards
governing:
• the main processes of production and financial
and economic activities of the Company,
structural subdivisions, and enterprises
of the Group;
• ESG aspects;
• supply chain.
Risk identification
Providing internal regulations
Elimination or minimization of risks
Risk avoidance within the framework of the regulations
RISK MANAGEMENT MONITORING. INTERNAL CONTROL.
Quality control of corporate standards
Identification of new risks in the course of business processes and the implementation of new projects
Evaluation of personal responsibility of officials (KPI)
RISK CONTROL. COMPLIANCE.
Corporate governance
Production activities
Approaches in risk assessment:
• Risk identification
• Risk reduction planning
• Risk monitoring and control of risk reduction measures.
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113
In order to ensure the sustainable development of the
Company, risk management is integrated into the decision-making
mechanisms and management system in all areas of activity:
SAfETy
• Corporate governance
• Industrial safety
• Occupational health and safety
• Environmental protection
• Anti-corruption
ORgANIZATIONAL
SuSTAINABILITy
BuSINESS
CONTINuITy
requirements
• Strategy and planning
• Compliance with legal
• Corporate governance
• Safety and efficiency of assets
• Information technology
• HR issues
• Corporate governance
• Investment policy
• Production processes
• Technology and intangible assets
• Financial results
• Quality of products and services
• Information security
Principles of risk management
Uniformity of the Company’s methodological base: The risk management system is
based on uniform approaches and standards for all structural subdivisions and subsidiaries
of the Company.
Continuity:
The risk management system operates
on an ongoing basis.
Integrity:
The risk management system covers
all lines of the Company’s business and all
types of risks arising within their framework.
Control procedures exist in all business
processes of the Group at all levels of
management.
Accountability:
The risk management system defines
the competence for decision-making and
control in the field of risk management at all
levels of the TATNEFT Group.
Awareness and timeliness
of the message:
is
The risk management process
accompanied by the availability of objective,
reliable, and relevant information.
Rationality:
The Company makes rational use of
resources to implement risk management
measures.
Adaptability:
The risk management system is regularly
improved to identify all possible risks of
activities and maximize the use of risk
control and management methods
Strict regulation:
All operations are conducted
in
accordance with the procedure for their
implementation, established by internal
regulatory documents.
Reasonable confidence:
The risk management system can
provide only reasonable guarantees for the
achievement of the Company’s goals but
cannot provide an absolute guarantee due
to the inherent limitations of the external and
internal environment.
Active management involvement:
The management of the Company
and its subsidiaries and affiliates actively
participates and provides support in the
implementation and improvement of the risk
management system of TATNEFT Group.
The corporate risk management system is aimed at identifying
potential risks and the possibility of taking timely measures to
eliminate them or initiate them, which makes it possible to adjust
the business planning, investment plans and social policy of the
Company.
Taking into account 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.
When analyzing potential risks, external and internal factors are
considered.
• External factors: market, industry, socio-economic, political,
financial, market and other conditions of the Company and its
subsidiaries and affiliates.
• Internal corporate factors: managerial, production, personnel,
social, environmental and others.
Based on the processing of large data arrays, more advanced
forecasting tools are being developed, which allow taking
measures aimed at eliminating or minimizing potential risks. The
corporate planning system uses, in particular, various development
scenarios that enable it to quickly respond to changes related to
factors affecting the Company’s operations. The Company plans to
improve its risk management system.
An important component of the risk management system is
ensuring the implementation of uniform corporate standards
governing the main processes of production and financial and
business activities of PJSC TATNEFT and the Group’s enterprises.
The Company’s management system includes the relationship
of KPI management with objectives in the field of risk management
and internal corporate control.
Internal control
.
The Company is working to identify risks of business processes
and introduce control procedures, which contributes to improving
the efficiency and manageability of business processes, ensuring
the accuracy of financial reporting, compliance with the legislation
and internal regulatory documents of the Company.
Internal control contributes to the executive bodies in
improving the efficiency of the management of the Company, the
implementation of financial and economic activities. The function
of corporate control is in the methodological support of the
management apparatus, structural subdivisions of the companies
of TATNEFT Group in terms of compliance with tax and accounting
legislation. This function helps to ensure compliance with legislative
norms and reduce tax and financial risks in the Company.
Risk management system infrastructure
The Company develops a set of components and mechanisms
that provide the foundations, organizational measures, and
structure for the implementation of the risk management and
internal control process across the Group.
A unified register of risks and control procedures is being formed,
quantitative models are being developed to assess the key risks of
the Company. On an ongoing basis, development, implementation,
and unification of control procedures in the Company’s business
processes are underway.
To minimize the possible negative impact
on the results of financial and economic
activities, the Company develops and
implements appropriate compensating
measures. To keep risks at an acceptable
level, some of the risks are insured.
The Company plans to improve its risk
management system.
Current targets
Improving implementation processes
improving the risk management
and
system:
• Formation of corporate risk reporting
procedures – common
organizations of TATNEFT Group.
for all
• Development of communication
mechanisms of the KPI management
system with the objectives in the field of
risk management and internal corporate
control.
• Development of a unified corporate
culture of risk management in the
Company to ensure that management
and employees have a common
understanding of the basic principles
and approaches to risk management.
• Further
of
the
enhancement
effectiveness of the system approach to
identifying and assessing risks inherent
both in the Company’s activities as a
whole and in certain areas of its activities.
• Integrating risk management and
internal control systems into the supply
chain.
• Implementation of the risk management
standards of international system ISO
31000:2018.
Information on the main risks is provided
in Annex 5 to this Annual Report “Main
Risks.”
Annual Report 2018TATNEFT GroupCorporate governanCe 114
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115
interaction with shareholders
and investors
Ensuring the confidence of shareholders and investors
in the effectiveness of their investments, long-term and
steady growth in shareholder value is the key aspect of the
corporate practice of TATNEFT.
Share capital
Share capital structure
(ordinary shares)
37
36
2 326 199 200
RuBLES
Authorized capital of PJSC TATNEFT
The Republic of Tatarstan*
Treasury groups
ADR program
Other shareholder
3
24
* legal entities under the control of the
Republic of Tatarstan
As of December 31, 2018, 40,801 shareholders are registered in the share register of
PJSC TATNEFT. Of these, the largest owners (nominee shareholders) of the Company’s
shares are:
Заголовокзаголовок заголовокзаголовокзаголовокзаголовок
Full name of the legal entity
Type of registered person
In % of the authorized
capital
In % of voting (ordinary)
shares
Information About Each Category (Type) Of Shares
full naMe of the seCurities (tYpe and kind)
ordinarY registered shares
preferred registered shares
Security issue form
Volume of production, pcs.
Par value of one (1) security (in rubles)
State registration number of the issue of securities
State registration date
ISIN code
Exchange and trading code
Uncertificated
2,178,690,700
1, 000
1-03-00161-А
26.10.2001
RU0009033591
Moscow Exchange, TATN
Uncertificated
147,508,500
1,000
2-03-00161-А
26.10.2001
RU0006944147
Moscow Exchange, TATNP
In accordance with the depositary agreement between PJSC TATNEFT named after V.D.
Shashin and The Bank of New York Mellon, depositary receipts (ADRs) for the Company’s
ordinary shares, 6 ordinary shares in one receipt, with the ISIN code US8766292051 are
issued and circulate in foreign markets. The main trading platform where the Company’s
ADRs are used is the London Stock Exchange (trade code is ATAD).
The Company does not have information on the possible acquisition by certain
shareholders of the degree of control disproportionate to their participation in the
Company’s authorized capital, including on the grounds of shareholder agreements or
other means.
Nominal holder
26.139806
27.905221
Total number of shares, of them:
Joint Stock Company
Central Depository
of the Republic
of Tatarstan
Joint Stock Company
Svyazinvestneftekhim
Nonbank Credit
Organization Joint Stock
Company National
Settlement Depository
The Bank of
New York Mellon
Owner, is in the nominal holding of Joint Stock Company
Central Depository of the Republic of Tatarstan
and share register
27.232389
29.071778
Central Depository
59.739154
58.637917
Depositary Programs Account is located in the Central
Depository nonbank Credit Organization Joint Stock
Company National Settlement Depository
22.845478
24.392234
The Company has no information on the existence of shares of ownership in excess
of 5%, other than those disclosed in this table.
Ordinary shares
Prefered shares
906 729 770
*
*
81 600
TOTAL
2 178 690 700
TOTAL
147 508 500
In possession of:
foreign persons
Russian persons
1 271 960 930
147 426 900
*without ownership
through Russian nominees
Annual Report 2018TATNEFT GroupCorporate governanCe 116
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117
Investment potential
of securities
Value of shares of PJSC TATNEFT, rubles
121.99
148.0
77.31
87.0
55.25
20.35
139.48
145.06
158.16
76.35
86.65
88.02
105.15
121.7
134.6
218.0
208.2
226.55
198.1
235.0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Ordinary
Preferred
315.5
427.0
478.8
365.0
522.0
737.9
Securities of PJSC TATNEFT have been circulating on the
Russian and international stock markets for more than 20 years.
The Company’s shares are traded on PJSC Moscow Exchange (first
level quotation list), on the London Stock Exchange in the form of
American Depositary Receipts (ADRs).
Shares of PJSC TATNEFT are included in many stock indices,
including indices of the Moscow Exchange and MSCI Russia.
TATNEFT ordinary shares are included in the following key indices:
MOEXBC Moscow Exchange blue chips, Moscow Exchange Broad
Market Indices IMOEX and RTSI, MSCI Russia, MSCI Russia 10/40,
MSCI Emerging Markets, Moscow Industrial Exchange MOEXOG/
RTSOG and MSCI EM Energy. TATNEFT ADRs are included in the
MSCI Russia ADR/GDR Index, BNY Mellon ADR EM Index, and others.
preferred shares are included in key indices: IMOEX, RTSI, and
In 2018, over 2.5 million transactions with TATNEFT ordinary
and preferred shares were concluded on the Moscow Exchange
during the main trading session. The total volume of transactions
concluded on the Moscow Exchange during the main trading with
the Company’s ordinary shares during 2018 exceeded 254.5 billion
rubles, and together with over-the-counter transactions totaled
307.5 billion rubles. The average daily trading volume of ordinary
shares on the Moscow Exchange in the reporting period exceeded
1 billion rubles. The total volume of transactions with preferred
shares of the Company during the main trading on the Moscow
Exchange in 2018 amounted to 31.5 billion rubles, exceeding
36 billion rubles, including over-the-counter transactions. The
average daily volume of core trading in preferred shares was 124
million rubles.
MOEXOG/RTSOG.
Based on the results of trading on the Moscow Exchange at the
end of 2018, the value of one ordinary share of PJSC TATNEFT
amounted to 737.90 rubles (10.61 U.S. dollars), one preferred share -
522 rubles (7.51 U.S. dollars). Based on the results for the year,
TATNEFT shares became the growth leader among the largest
Russian oil companies.
TATNEFT American depositary receipts on the basis of trading
on the London Stock Exchange rose in price by 27.4% for the year.
The cost of one ADR of the Company as of December 31, 2018, was
63 U.S. dollars. During the same period, the key MSCI Emerging
Markets (emerging markets) and S&P 500 (largest US companies)
indices lost 17% and 6%, respectively, while the MSCI EM Energy
index grew by 1%, respectively.
Turnover during the main trading in ADRs on the London Stock
Exchange amounted to 3.8 billion U.S. dollars (average daily
turnover of 14.8 million U.S. dollars), and taking into account over-
the-counter transactions - 5 billion U.S. dollars (average daily
turnover of 19.6 million U.S. dollars).
Dividend stock returns, %
Ordinary
2015
2016
2017
Preferred
2015
2016
2017
3.61
6.97
10.30
6.6
12.3
14.8
Dividend policy
The Company adheres to progressive dividend policy, recognizing dividends as
one of the key indicators of investment attractiveness for shareholders, and seeks
to increase the value of dividends on the basis of consistent profit growth.
The Board of Directors of the Company determines the amount
of dividends recommended by the General Meeting of Shareholders
based on an economically sound approach to the distribution of
profits and respect for the balance of short-term (income) and long-
term (development of the Company) shareholders’ interests.
The principles and conditions for making decisions on the
payment (declaration) of dividends, the procedure for determining
the amount and payment of dividends are determined by the
Regulations on the Dividend Policy of PJSC TATNEFT approved
by the Board of Directors of the Company (Minutes No. 9,
Decision No. 7 dated January 30, 2018). The Regulations are
based on the observance of shareholders’ rights, as provided for
by the legislation of the Russian Federation and best corporate
governance practices.
The Board of Directors of the Company, when determining the
dividend size (calculated per share) recommended to the General
Meeting of Shareholders, proceeds from the amount of the
Company’s net profit and the fact that the amount of funds allocated
for paying dividends is at least 50% of the net profit determined in
Dividends per share, rubles
Russian Accounting Standards (RAS) or IFRS, whichever is greater.
At the same time, the Board of Directors takes into account, on the
basis of information from the executive bodies, the obligations and
the investment program of the Company, the need for working
capital and the reserves required for normal activities, and proceeds
from the fact that the available funds that are formed after financing
the specified investment program, execution of obligations and
other needs of the Company can be distributed in the form of
dividends.
In June 2018, dividends were approved at 75% of net income
under IFRS (at the end of 2017), and at the end of 6 and 9 months
of 2018, the level of dividend payments amounted to 75% of net
profit under RAS.
In accordance with the decision of the meeting of shareholders,
92.908 billion rubles were allocated for the payment of dividends
for 2017, including payments for the first 9 months of 2017, and
122.195 billion rubles for 6 and 9 months of 2018.
4.6
4.6
5.65
5.65
4.42
4.4
6.56
6.56
5.02
5.02
7.08
7.08
8.6
8.6
8.23
8.23
10.58
10.58
10.96
10.96
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
22.81
22.81
39.94
39.94
* taking into account dividends proposed for approval by the Annual General Meeting of Shareholders
Ordinary
Preferred
84.91
84.91
Annual Report 2018TATNEFT GroupCorporate governanCe 118
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119
The Company provides one of the highest dividend yield
levels.
In 2018, TATNEfT entered the TOp 10 of the best oil and gas
companies in the world in terms of profitability for shareholders
of the world rating of The Boston Consulting group (BCg) for
value increase for shareholders (TSR). The Company has been
in the TOp-10 of this rating since 2016.
It is proposed to send 197.518 billion rubles to pay dividends
for 2018 – 100% of the net profit received under RAS (including
rounding to two decimal places of dividends per share). The
Company’s cash flow makes it possible to pay out this amount of
dividends without creating a source deficit for the implementation
of the investment program, operating activities and the fulfillment of
existing obligations.
Following the results of 2018, the Board of Directors recommends
the annual general meeting of shareholders of PJSC TATNEFT
to decide on paying dividends on preferred and ordinary shares,
taking into account previously paid dividends based on the results of
6 and 9 months, of 8491% of the par value of preferred and ordinary
shares. Taking into account that following the results of 9 months
of 2018, in accordance with the decision of the shareholders’
meetings, interim dividends in the amount of 122.195 billion rubles
were accrued in PJSC TATNEFT, the additional accrual of dividends
in 2018 will be 75.322 billion rubles.
BCG publishes annual rankings of the best companies in terms of value added, based on the total shareholder return (TSR)
for the previous five years (from 2013 to 2017). At the end of 2017, 2425 companies were analyzed worldwide.
TSR (Total Shareholder Return), a weighted average total return on shareholders, allows measuring the growth of stock prices
and dividend income on Company shares over a certain period of time. It is considered the most complete measure of effectiveness
in creating shareholder value.
The average annual total shareholder return is the size of the TSR, which the Company, on average, brings in each year from
the analyzed five-year period.
History of dividend payments
for five last finished financial years
Total amount of accrued
dividends (billion rubles)
Total amount of dividends
paid (billion rubles)
Ordinary shares
(% of par value)
Ordinary shares
(Dividends amount)
Preferred shares
(% of par value)
Preferred shares
(Dividends amount)
Dividends
(% of net profit)
Date of the decision
to pay dividends
Date on which the persons
having the right to receive
dividends are determined)
Date of actual payment
for 2014
for 2015
for 2016
for the
9 Months
of 2017
Based on the
results of
2017 Q4
for 2017
total:
for 2017
total: for
6 Months
of 2018
total: for
9 Months
of 2018
total:
for 2018
24.611
25.495
53.061
64.622
28.287
92.908
70.414
51.781
24.587
25. 477
53.006
64.561
28.26
92.821
70.342
51.725
1058%
1096%
2281%
2778%
1216%
3994%
3027%
2226%
8491%
10.58
10.96
22.81
27.78
12.16
39.94
30.27
22.26
84.91
1058%
1096%
2281%
2778%
1216%
3994%
3027%
2226%
8491%
10.58
10.96
22.81
27.78
12.16
39.94
30.27
22.26
84.91
30%
30%
50,6%
75%
75%
75%
75%
75%
100%
Annual General
Meeting of
Shareholders at
the end of 2014,
which was held
on 26.06.2015,
Minutes No.
22 dated
30.07.2015
Annual General
Meeting of
Shareholders at
the end of 2015,
which was held
on 24.06.2016,
Minutes No.
23 dated
29.06.2016
Annual General
Meeting of
Shareholders
based on the
results of 2016,
which was held
on 23.06.2017,
Minutes No.
24 dated
28.06.2017
Extraordinary
General Meeting
of Shareholders
based on the
results of 9
months of 2017,
which took place
on 12.12.2017,
Minutes No.
25 dated
14.12.2017
Annual General
Meeting of
Shareholders
for 2018
Annual General
Meeting of
Shareholders at
the end of 2017,
which was held
on 22.06.2018,
Minutes No.
26 dated
27.06.2018
Extraordinary
General Meeting
of Shareholders
based on 6
months of 2018,
which took place
on 28.09.2018,
Minutes No.
27 dated
29.09.2018
Extraordinary
General Meeting
of Shareholders
based on the
results of 9
months of 2018,
which took place
on 21.12.2018,
Minutes No.
28 dated
24.12.2018
15.07.2015
08.07.2016
07.07.2017
23.12.2017
06.07. 2018
12.10.2018
09.01. 2019
05.07.2019
To nominal
holder –
29.07.2015
To shareholders
registered in
the register of
shareholders –
19.08.2015
To nominal
holder –
22.07.2016.
Shareholders
registered in
the register of
shareholders –
12.08.2016
To nominal
holder –
21.07.2017 To
shareholders
registered in
the register of
shareholders –
11.08.2017
To nominal
holder –
15.01.2018
To shareholders
registered in
the register of
shareholders –
5.02.2018
To nominal
holder –
20.07.2018
To shareholders
registered in
the register of
shareholders –
10.08.2018
To nominal
holder –
26.10.2018
To shareholders
registered in
the register of
shareholders –
20.11.2018
To nominal
holder –
23.01.2019
To shareholders
registered in
the register of
shareholders –
13.02.2019
To nominal
holder –
19.07.2019
To shareholders
registered in
the register of
shareholders –
09.08.2019
* The Board of Directors of PJSC TATNEFT decided to recommend to the General Meeting of Shareholders to approve the
payment of dividends for 2018 on preferred and ordinary shares in the amount of 8,491% (taking into account previously paid
dividends for 6 and 9 months) of the par value (Minutes No. 12 dated 26.04.2019).
Protection and enforcement
of the rights of shareholders
The Company has established a multi-level system for protecting the rights
of shareholders of the Company.
ThE COMpANy pROVIdES ALL ThE TERMS fOR ThE
ShAREhOLdERS TO IMpLEMENT ThEIR RIghTS
• The right to participate in the management of the Company by
• The right to participate in the formation of the Board of Directors
voting at the general meeting of shareholders of PJSC TATNEFT.
of PJSC TATNEFT in accordance with the conditions stipulated
by the legislation of the Russian Federation.
of dividends.
• The right to receive part of the Company’s profits in the form
• The right to receive the necessary information about the
• The right to free and unhindered disposal of shares, reliable
Company on a timely and regular basis.
methods of recording rights to shares.
guARANTEES Of ThE RIghTS Of ShAREhOLdERS,
pROVIdEd By LEgISLATION ANd LISTINg RuLES
In accordance with the legislation of the Russian Federation,
shareholders of the Company are entitled to:
• vote at the General Shareholders’ Meeting on the principle
of “one share - one vote” in voting on issues in respect of which
they have the right to vote;
• submit
issues to the agenda of the General Meeting
of Shareholders and candidates for members of the Board
of Directors (if shareholders have at least 2% of voting shares);
securities convertible into shares;
• exercise preemptive rights when placing shares and issued
• receive dividends declared by the Company in proportion to the
• get acquainted with the information and materials provided
• obtain information on the Company’s activities upon request and
in preparation for the General Meeting of Shareholders;
number of shares owned by the shareholder;
in accordance with the conditions established by the legislation
of the Russian Federation;
• freely dispose of shares;
• exercise other rights established by the legislation of the Russian
Federation.
Protection of rights on shares
The Company provides reliable and secure methods of recording rights to shares, attracting a
professional registrar to keep records.
Company’s registrar
The organization that registers the rights to equity securities
of PJSC TATNEFT is limited liability Company Eurasian
Registrar, which has been conducting professional activities on
the Russian securities market as a specialized registrar for more
than 20 years.
Eurasian Registrar is in the top 10 largest Russian registrars and
maintains registers of more than 600 issuers, the rights to shares
of which are recorded on 169,844 personal accounts of securities
owners. Shareholder service centers and transfer-agent points
are open in 52 regions of the greatest presence of the Company’s
shareholders: this is the central office, 6 branches, 50 transfer-
agent points in partner registrars.
The Registrar is a member of the self-regulatory organization
Professional Association of Registrars, Transfer Agents, and
Depositories (SRO PARTAD).
The high degree of reliability and security of maintaining
electronic databases is ensured by the use of the Zenit registry
management system, which has the certificate of SRO PARTAD. The
software and hardware capacity of the Registrar allows servicing
over 1 million personal accounts of the owners of securities.
Guarantees to customers are provided by Ingosstrakh
comprehensive insurance policy for the compensation of property
damage as a result of the registration activity.
Information about the registrar, the procedure for transferring
the rights to the shares of PJSC TATNEFT, obtaining extracts
from the register of shareholders and performing other actions is
available at http://erd.ru
The Company together with the Registrar regularly informs
shareholders about the need to update the information
on shareholders contained in the register of shareholders
of pjSC TATNEfT.
Annual Report 2018TATNEFT GroupCorporate governanCe 120
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121
Key principles of interaction
with company shareholders
Interaction with shareholders
guaranteed equal provision and observance of the
legal rights and interests of all shareholders of the Company,
regardless of the size of the block of shares they own, established
by the current legislation of the Russian Federation, requirements
and recommendations of stock market regulators in which the
Company’s shares circulate.
The key priority of the Company’s interaction with
shareholders and the investment community as a whole is
building a dialogue and effective feedback from investors and
analysts, reviewing and discussing their opinions about the
Company and its investment history by responsible managers,
making appropriate decisions.
Constant interaction of the Company’s management with
all shareholders in order to effectively manage the Company and
ensure its sustainable and dynamic development.
Constant improvement of existing and development
of new mechanisms and forms of interaction with shareholders,
increasing the efficiency and quality of interaction, taking into
account the emergence of new shareholders, setting new tasks by
shareholders.
Identification and resolution of all possible general and
specific problems associated with the exercise of shareholder
rights.
Taking all necessary and possible measures in the event of
a conflict between the bodies of the Company and its shareholders
(shareholder), as well as between shareholders, if the conflict
affects the interests of the Company, to fully resolve the conflict, as
well as creating conditions that preclude future conflict.
The Company has Regulations on providing information to
shareholders. The Regulation establishes the procedure and
deadlines for providing shareholders and persons exercising
rights to shares, as well as their representatives, documents
and copies of such documents.
Materials for shareholders and investors, including press
releases, presentations, the Annual Report and the integrated
report taking into account aspects of the Company’s sustainable
development, essential facts about decisions of the Board of
Directors of the Company, are posted on the corporate website
www.tatneft.ru.
In 2018, 197 press releases on the Company’s activities
were published on the official website of TATNEfT.
In order to achieve the highest possible quality of interaction with
shareholders, the Company strives to use the most reliable methods
and forms of communication, including advanced information
technologies.
The Company’s interaction with shareholders and
investors is based on the availability of responsible
executives and key employees of the Company
to communicate with shareholders, investors and
analysts of the stock market, as well as consultants
to institutional investors in voting, discussing
development plans and results of the Company’s
operations.
The Company’s interaction with shareholders and
investors is provided through telephone conferences,
group and individual meetings, including investment
conferences, Company visits and special trips (“road
shows”) of authorized representatives of the Company
to major international financial centers.
In order to ensure the implementation of corporate rights, as well
as effective interaction with shareholders in the Company, several
communication channels are operated:
via phone 8 800 100 4 112.
8 (8553) 37-37-71; 8 (8553) 37-37-39.
• Round-the-clock “Hotline” for shareholders of PJSC TATNEFT
• Multichannel phone for receiving and processing oral requests
• Postal address for receiving written requests: 75 Lenina Str.,
• E-mail for sending electronic messages: ocb@tatneft.ru.
• Fax: 8 (8553) 37-35-08
Almetyevsk, 423450, the Republic of Tatarstan Russia
In 2018, the Office of the Corporate Secretary of PJSC TATNEFT
processed 3,101 appeals from shareholders.
Dynamics of shareholders’ appeals in 2016-2018
2016
nuMBer of
reQuests
2017
nuMBer of
reQuests
2018
nuMBer of
reQuests
Updating personal data
Registration of inheritance rights
Selling and redemption of shares
Dividend payment
Providing certificate under 2-NDFL
form
Issues related to the General Meeting
of Shareholders
Requests of a notary, court
Other issues
TOTAL
203
150
57
1 265
228
169
70
1 466
317
228
92
2 008
103
119
158
43
61
83
1 965
50
69
96
2 266
71
96
131
3 101
Structure of shareholders appeals in 2018, %
Updating personal data
Registration of inheritance rights
Selling and redemption of shares
Dividend payment
Providing certificate under 2-NDFL form
Issues related to the General Meeting of Shareholders
Requests of a notary, court
Other issues
10.2%
7.4%
3%
64.8%
5.1%
2.3%
3.1%
4.1%
>
3000
SHAREHOLDERS’ APPEALS
Interaction with
institutional investors
TATNEFT shares are one of the most attractive investment
instruments among Russian issuers. The Company’s international
institutional shareholders are located in the main centers of business
and financial activity, including New York, London, Frankfurt, and
Singapore.
Meetings allow
investors, analysts, representatives of
international rating agencies to receive information on the strategic
vector of the Company’s development, production activities and
financial resources management directly from the Company’s
management.
During 2018, meetings were held with shareholders, investors,
and analysts in accordance with the plan of measures approved
by the General Director of PJSC TATNEFT and in the course of the
current work of the departments and employees responsible for
investor relations (IR).
Meetings with institutional investors in the
“one on one” format in 2018:
Frankfurt, Germany
Boston and New York, USA
London, Great Britain
February
April
May
Meetings with institutional investors within the
framework of conferences and trips of investors
in the Russian Federation in 2018:
Investment Conference “Sberbank CIB”
in Moscow
A trip to the Russian Federation of investors
in oil and gas companies, organized by
Credit Suisse Bank, Moscow
Institutional Investors Trip, organized
by Citi Bank, Moscow
Annual Investment Conference “VTB Capital.
Russia is calling!” Moscow
May
June
September
November
In May 2018, a meeting of a group of international institutional
investors and analysts of Goldman Sachs Bank was held with the
general director N.U. Maganov and the Company’s management
in Kazan.
During 2018, more than 60 individual meetings and telephone
calls with investors and analysts were held, and constant work
was carried out to provide answers to inquiries from investors and
analysts of the stock market.
>
50
MEETINGS WITH INVESTORS
AND ANALYSTS
The structure of questions of investors and analysts,%
Results and plans of the Company (Strategy, corporate
governance, operations, financial results)
Macro conditions of the Company’s activity
65%
- about 35%
The main topics of interest to investors and analysts are related
to the implementation of the Company’s strategy, dividend policy,
changes in the taxation of the industry, and the Company’s initiatives
in the field of sustainable development.
The main topics of questions:
products.
by the Company.
context of OPEC+ restrictions.
(development of the petrochemical industry, others).
introduction of new facilities at the TANECO complex.
• Company dividend policy and dividend payment plans.
• Corporate governance.
• Opportunities for the implementation of Strategy 2030 in the
• Plans for oil production and production of petroleum products
• Prospects for diversification on the basis of core business
• Development of the refining segment, the timing of the
• Development of petrochemical direction.
• The main channels and markets for the sale of oil and oil
• Participation in the banking segment.
• Strategy for noncore assets (land, banking, etc.).
• Taxation of the industry (the completion of a large tax maneuver,
• Cost control, optimization of production processes.
• Capital optimization
• Initiatives of the Company in the field of sustainable development,
aspects of environmental protection, climate, social sphere
(ESG).
The Company has organized the process of prompt preparation
of responses to investors’ requests in various areas of activity.
Answers are provided in written and oral form with mandatory
disclosure and publication of any information that is material and
may affect the value of the Company’s securities.
the introduction of VAT).
Comments received from investors on a regular basis are
reported to the management of the Company.
The Company holds quarterly conference calls for investors
with detailed coverage of the results of activities for the reporting
period. During 2018, 4 presentations for investors were prepared
and published on the Company’s website:
results), April 2018.
• Presentation of TATNEFT Group for investors (incl. 2017 IFRS
• Presentation with a review of indicators under IFRS for Q1 2018,
• Presentation with a review of indicators under IFRS for
• Presentation of the Strategy of TATNEFT Group until 2030,
Q2 and 1st half of 2018, August 2018.
June 2018.
September 2018.
Annual Report 2018TATNEFT GroupCorporate governanCe 122
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123
Sustainable development
The Company’s strategy implementation includes aspects of sustainable growth
and provision of favorable economic and social conditions for business development
based on the most efficient use of all types of resources and creating value for
stakeholders at each stage of activities.
Recognition of human rights to safe working conditions, favorable environment,
and living conditions is a fundamental principle in planning, setting, and solving
business tasks at the level of all production processes of the Company.
Annual Report 2018TATNEFT GroupSUSTAINABLE DEVELOPMENT 124
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125
global business Challenges
and new opportunities
VOLATILITY OF
MACROECONOMIC
PARAMETERS AND
WORLD PRICES OF
OIL AND OIL PRODuCTS
Company’s Response
The Company’s strategy takes
into account various scenarios of
macroeconomics development;
planning is carried out on the basis
of the scenario approach.
Balanced investment policy and
built-in protection against low oil
prices.
Focus on high operational efficiency
and profitability at all business
levels.
HIGHLY-
COMPETITIVE
INDuSTRY
ENVIRONMENT
DYNAMIC GROWTH
OF HIGH-TECH
SOLuTIONS IN THE OIL
INDuSTRY
DIGITAL TRANSFORMATION
(INDuSTRY 4.0)
IN BuSINESS PROCESSES
AND PRODuCTION ACTIVITIES
GROWING
ENVIRONMENTAL
AND SOCIAL
RESPONSIBILITY
INCREASE IN
REquIREMENTS TO THE
LEVEL OF PROFESSIONAL
COMPETENCIES OF AND
INCENTIVES FOR PERSONNEL
Calibrated production targets
based on the analysis of industry
factors.
Introduction of advanced
technologies.
Reliable pool of financial and
economic sustainability and
technological potential.
Focus on leadership.
Development of targeted
technological solutions for the in-
house production, including fields
at the late stage of development, on
the basis of the corporate scientific
base and strategic partnership with
the leading centers of the industry,
including import-substituting
technologies and equipment.
Extensive investment in R&D.
Integration of digital solutions
in management and production
activities at all stages of planning,
implementation, control, and
reporting.
Digital modeling of production base
and processes.
Application of unique information
solutions and artificial intelligence
in production activities.
Control over the environmental
impact of production activities
and environmental safety at an
acceptable level.
High level of industrial and
occupational safety.
Target programs and investment in
social infrastructure development.
Resource saving programs,
renewable energy sources.
Hiring highly-qualified employees.
Professional development and
personal growth programs for
personnel.
Corporate University.
Decent labor remuneration and
social guarantees.
Incentive system and KPIs.
STRONG FINANCIAL STANDING
SUSTAINABLE COMPETITIVE
POSITION
CUTTING-EDGE RELIABLE
TECHNOLOGICAL BASIS
FORMATION OF THE COMPANY’S
SINGLE INTEGRATED PLATFORM
HIGH LEVEL OF COMPETENCE
AND EMPLOYEE ENGAGEMENT
REDUCTION OF ENVIRONMENTAL
FOOTPRINT TO THE LEVEL
WHERE THERE IS A POTENTIAL
FOR SELF-RECOVERY
OF ECOSYSTEMS
FAVORABLE LIVING CONDITIONS
IN THE TERRITORIES OF THE
COMPANY’S OPERATION
Annual Report 2018TATNEFT GroupSUSTAINABLE DEVELOPMENT 126
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127
Aims of sustainable development
The Company takes into account global trends in sustainable development, adheres to the
Principles of the UN Global Compact, UN Initiatives on the Principles of Responsible Investment
(UNPRI), the G20/OECD Principles of Corporate Governance, the provisions of the Social
Charter of Russian Business, approaches of the Russian Union of Industrialists and Entrepreneurs
(RUIE) to the formation of the indices of corporate sustainability, responsibility, and openness for
sustainable development.
The UN action program Transforming our world: the 2030 Agenda for Sustainable Development
adopted in 2015 and including recommendations on the coordination of actions of authorities
and business in the field of sustainable development is a significant benchmark for the Company.
The Company adheres to the principle of consistent continuous
improvement of indicators of the current and planned activities,
products, and services impact on personnel, population, and the
environment.
Employees of the Company, including services related to
personnel management and security activities, are involved in
human rights procedures on an ongoing basis and undergo
appropriate training on a regular basis. The principal areas
of monitoring in the field of human rights include the following:
compliance with legal requirements; internal audit in terms of
compliance with corporate procedures and standards by lines of the
Company’s business; procedures for assessing the environmental
impact of production activities and the efficiency of industrial and
occupational safety measures; interaction with the Trade Union and
monitoring the Collective Agreement implementation; analysis of
feedback, including that within the ≪hotline≪.
ECONOMIC ASPECT
Compliance with the goals of the UN:
• Participation in the development of
the national fuel and energy complex
infrastructure.
• Job creation.
• Creation of added value.
• Assistance to local economies.
• Introduction of innovations.
• Ensuring financial and economic stability
• Development of the in-house research
of the Group’s enterprises.
and production base integrated with
leading industry research centers.
INNOVATIONS
Compliance with the goals of the UN:
The Company’s Strategy is based on the
principles of innovative development.
The target focus is the technologies
required to implement the Strategy and to
overcome the challenges hindering it.
The Company consistently develops
and implements the most cutting-edge
solutions, many of which are unique in
the industry and in the technology supply
market.
Interaction with the national
and foreign leading scientific, technical,
and technological centers allows for
the integration of production tasks and
innovative
extensive experience with
scientific potential in all areas of the
Company’s operation.
SOCIAL ASPECT
Compliance with the goals of the UN:
services.
• Legal compliance.
• Respect for human rights.
• Positive public opinion.
• Quality management.
• Provision of high-quality goods and
• Continuous improvement of product
• Strive to follow the changing demands of
• Provision of reliable information about
• Assistance in the social and economic
the Company’s products.
development of the regions of the
Company’s operation.
consumers.
quality.
• Support of local communities in the
areas of presence.
sports.
• Development of human capital in the
• Addressing socially significant issues
territories of the Company’s operation.
in the territories of the Company’s
operation through cooperation with local
communities.
a set of social benefits for employees.
• Promotion of education, culture, and
• Support for socially vulnerable groups.
• Ensuring competitive compensation and
• Development and training of personnel,
• Good working conditions.
• Development of effective corporate
• Implementation of best social practices.
communication with all stakeholders.
the formation of personnel reserve.
ECOLOGY ASPECT
Compliance with the goals of the UN:
• Increasing the level of industrial and
occupational safety, reducing injuries,
accidents, occupational diseases.
• Reduction of environmental footprint and
maintenance of the natural environment
and human habitat in a favorable state.
• Rational use, restoration, and protection
resources, biodiversity
of natural
preservation.
• Combating climate change.
• Implementation of the world’s best
practices in the field of environmental
safety.
sources.
• Environment protection.
• Use of recyclable materials.
• Use of environment-friendly energy
• Energy saving.
• Recycling.
• Ensuring safe working conditions,
protecting the health of the personnel
and the population living in the areas of
the Company’s operation.
• Reduction of environmental footprint and
prevention of environmental damage
from economic activities.
• Rational use of natural resources.
• Implementation of a set of measures to
maintain the environment in the regions
of the Company’s operation at the
standard admissible level corresponding
to the natural ecosystems’ potential for
self-recovery.
Annual Report 2018TATNEFT GroupSUSTAINABLE DEVELOPMENT
128
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129
human rights
interaction with stakeholders
The Company recognizes the importance of respecting and observing the fundamental
human rights proclaimed by the UN Universal Declaration of Human Rights.
Key principles of interaction with stakeholders
As an international company conducting business projects in
countries with different political systems and cultural traditions,
TATNEFT presumes that everyone should have all the rights and
freedoms set forth therein without distinction of any kind, such
as race, color, sex, age, language, religion, political or other
convictions, national or social origin, property, birth, or other status,
including the right to work, the right to a favorable environment, the
rights of indigenous minorities and special population groups, etc.
• The Company strives to adhere to the basic principles in the field
of labor relations and environmental protection enshrined in the
conventions of the UN and the International Labor Organization
(ILO).
discrimination.
• The Company does not tolerate any form of harassment or
• The Company respects the rights of each employee to collective
representation, including labor unions, while excluding any
possibility of an atmosphere that is hostile, humiliating, or
insulting for human dignity.
• The Company assumes the obligations in respect of rights to a
healthy environment and safe work and intends to implement
all the available and feasible measures to prevent occupational
injuries and diseases of personnel, accidents and to mitigate any
consequences thereof.
• The Company supports the preservation of the national and
cultural identity of the people living in regions of the Company’s
operation.
Respect for human rights in the Company
Evaluation of the Company’s human rights activities is carried
out in the process of analyzing aspects and preparing a report on
sustainable development. The main guidelines for monitoring the
observance of human rights:
• compliance with legal requirements;
• internal audit in terms of compliance with corporate procedures
• carrying out procedures for assessing the environmental impact
and standards for areas of activity;
of production activities and the impact of industrial safety and
labor protection measures;
• interaction with the Trade Union Organization and monitoring the
• feedback analysis including that as part of the hotline.
implementation of the Collective Agreement;
• The company recognizes and respects the rights of trade unions,
• the right of each employee to be represented by a trade union
including those enshrined in the ILO core conventions:
organization of his/her own choice and the fundamental trade
union rights relating to the freedom of association and the right
of employees to organize trade unions as well as the right to
collective bargaining
• exclusion of any form of forced or compulsory labor;
• actual exclusion of child labor;
• promoting and ensuring equal opportunities and treatment
for the employees, including equal compensation for women
and men for work of equal value, and nondiscrimination in
employment and occupation.
Employees of the Company, including
the services related to the personnel
and security management activities,
are continuously involved in procedures
regarding human rights aspects of and take
appropriate training on a regular basis.
Compensation for damage
The Company has clear mechanisms in place to resolve claims
and disputes with consumers as well as measures to prevent the
same.
All cases of receipt of consumer claims are recorded, the causes
are analyzed and in the case of identification of justified claims, the
relevant measures are undertaken.
The Company takes preventive measures to avoid damage to
the interests of consumers.
Privacy
The Company ensures respect for privacy and protection
of personal data through the use of reliable and secure systems
for the collection and protection of consumer data. Information
about consumers is collected only in legal ways. The collection
of personal data of consumers of the Company’s products and
services is limited to the information that is required for the provision
of products or services or is provided on a voluntary basis with the
consumer’s consent.
Protection of the collected personal data of consumers
is ensured with the use of effective security measures.
In 2018, there were no complaints regarding violations
of consumer privacy and loss of consumer data.
Safety
Consumer health and safety protection includes the provision
of products and services that are safe and do not pose an
unacceptable risk of harm when used or consumed. The Company
strictly controls compliance with all regulatory requirements
governing the quality of products and services. At all life-cycle
stages of the offered products and services, the Company assesses
their impact on health and safety in order to identify opportunities
for improvement. No cases of noncompliance with the regulatory
requirements concerning the impact of products and services on
health and safety were registered in 2018.
Obtaining information
The Company provides consumers with access to complete,
accurate, and comprehensible information that enables them to
make informed decisions according to their individual expectations.
Contracts for the supply of products are set out in clear,
unambiguous, and comprehensible language, do not contain unfair
contractual obligations, provide clear and sufficient information
about the price, features of the product, and the terms and
conditions of the contract.
No cases of noncompliance with the regulatory requirements in
respect of informing consumers about the properties of products
and services were registered in 2018.
Fair and responsible marketing practices
The Company uses only fair marketing practices and protects
consumers from unfair or misleading advertising or labeling. The
Company’s activities in the field of promotion of products and
services, advertising, and marketing comply with the legislation of
the Russian Federation.
In 2018, no cases of noncompliance of the Company’s
activities with the legislation in the field of promotion of products
and services, advertising, and marketing were registered. In
the reporting year, the Company was not charged with fines for
noncompliance with the legislation and regulatory requirements
relating to the provision and use of products.
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health, safety, and environment
Industrial safety
The occupational health, safety, and environment (HSE)
measures at the facilities and territories of operation of all the
TATNEFT Group organizations are ensured on the basis of a
systematic approach and effective interaction with stakeholders.
Special attention is paid to the development and implementation
of environmentally effective innovative technologies that contribute
to the reproduction and rational use of natural resources, prevention
of the negative impact of production processes on the environment
as well as the restoration of natural ecosystems, conservation of
biological, landscape diversity and climate.
Important aspects of the Company’s production process
management are the issues of reducing the carbon footprint,
the
ensuring environmentally safe waste management,
development of renewable energy sources and energy saving.
Fundamental priorities
• To recognize the right of people to safe working conditions,
• To ensure the occupational and environmental safety
a healthy environment, and favorable living conditions.
of production processes as an integral part of national
security.
• To preserve and restore the favorable environment, natural
ecosystems, natural landscapes, natural complexes, and
biological diversity of systems in the regions of operation of
TATEFT Group organizations.
• To ensure the rational use of natural resources involved in
the production by TATNEFT Group organizations through the
introduction of resource-saving and energy-efficient technologies,
the use of environmentally friendly and alternative energy sources,
waste processing, and the use of recyclable materials.
Basic internal documents defining the industrial and
occupational safety management system
Environment.
• TATNEFT Policy in the Field of Occupational Health, Safety, and
• Regulations on the Industrial Safety Management System.
• Regulations on the Occupational Safety Management System
of TATNEFT Group.
• To reduce consistently the negative impact on the environment
and prevent environmental damage from the economic activities
of TATNEFT Group organizations, to minimize the impact on
climate change through the introduction of the best available
technologies, equipment, materials, digital solutions for
technological process control.
• To adhere to the risk-based approach to HSE.
The Сompany adheres to the principle of “consistent
procedures,” which means that further measures are formed on the
basis of data obtained as a result of the previous level procedure
Currently, the Company is implementing an integrated
management system in accordance with the latest-generation
international standards ISO 45001:2018 and ISO 14001:2018
standards.
• Regulations on Industrial Control over the Compliance with
the Industrial Safety Requirements at Hazardous Production
Facilities.
• System for Ensuring Production Safety.
The number of personnel trained in HSE
Industrial safety (including radiation and energy safety)
Occupational health and safety
Fire safety
2017
901
2 354
11 753
2018
639
2 473
16 510
Fire safety
In 2018, the Plan of Organizational and Technical Measures
to Strengthen the Fire Safety of the Company’s Facilities was
implemented.
In 2018, there were no fires at the Company’s facilities.
Radiation safety
In order to control and ensure radiation safety in 2018, a number
of activities were carried out, such as a planned radiometric survey
of oil treatment facilities; individual dosimetric control of personnel;
selective radiometric surveys of production premises as well as
verification of compliance with radiation safety requirements during
the quality control of welded joints, etc.
According to the Department of the Federal Service for
Supervision on Consumer Rights Protection and Human Wellbeing
in the Republic of Tatarstan, the state of radiation safety of the
Company is assessed as satisfactory.
Ensuring energy security
ЭThe efficiency of the power supply system is characterized
by the level of shutdowns and energy security. The Company is
implementing a program to improve the reliability of the power
supply system (introduction of the advanced and safe equipment),
introducing elements of network digitalization (installation
of microprocessor protection units, implementation of automatic
reserve input, automatic restart).
In terms of energy security, the energy management system
is under reorganization. The result of this work is a reduction
of failures in the power supply system by 15.9%.
To maintain an open dialogue with all stakeholders on the
environmental activities of the Company, an open information
environment has been created. Mass media provide coverage
of the technological processes and environmental issues
in a comprehensible form. Environmental initiatives of TATNEFT
become the subject of discussion at the Roundtables with the
participation of experts, government officials, the general public,
and the media.
The Company has a multi-level industrial safety management
system (ISMS) in place and functioning. The Group’s enterprises
annually develop and implement plans of measures to ensure
industrial safety and programs of industrial environmental control
with the identification of persons exercising industrial control.
To strengthen labor and industrial discipline, involve personnel
in the processes of ensuring industrial and occupational safety,
Self-Declaration Control Sheets have been developed for the Oil
and Gas Field Operating Division shops and services on the self-
declaration basis.
Production safety is ensured by regular preventive inspections
of the technical condition of equipment and routine maintenance
of equipment as well as the equipment preventing emergencies.
To ensure readiness for localization and response to accidents,
the plans of measures for localization and response to accidents
are updated on a regular basis. Annually, competitions among
irregular emergency response units and fire relays are held among
the teams of voluntary fire-prevention units of the Company.
Safety level assessment
at hazardous industrial facilities
For an objective and comprehensive assessment of the safety
level at hazardous production facilities, the method for automated
calculation of the occupational safety coefficient (OSC) comprising
over 30 indicators is applied.
Oil spill emergency prevention and response system
System of prevention and response to emergencies, which result
from oil spills, and the protection of people and the environment
from their harmful impact is implemented at TATNEFT in two focus
areas: a set of engineering and organizational measures aimed at
enhancing production equipment reliability, timely oil spill detection,
and minimizing the resulting damages as well as a set of measures
to respond immediately to this type of emergency.
The irreducible material stocks have been secured, including for
the elimination of oil spills in water bodies. 2,225 meters of booms,
17 skimmers, and 7 tonnes of sorbent are available.
Contingency accident response units, which are authorized to
perform operations for the localization and elimination of oil spills
and gas-hazard operations, have been established in oil and gas
producing divisions of the Company and certified by the industry
certification commission.
To prevent the pollution of surface watercourses (rivers) and
water bodies (reservoirs) with oil, 528 stationary oil recovery
units (ORU), booms, and bioponds are maintained in operating
condition.
In 2018, no emergencies related to oil and oil product spills were
registered at the facilities of TATNEFT Group.
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Occupational health and safety
The Company consistently implements targeted program activities aimed
at preserving life and health as well as improving the working conditions
of employees, reducing accidents, significant production risks, improving
the safety of equipment and fire safety of its facilities.
The amount of more than 1 billion rubles has been allocated
for occupational safety measures in 2018. Average costs per
1 employee amounted to about 24 thousand rubles. The dynamics
of occupational safety expenditures for TATNEFT Group, in
particular, per employee, shows a positive trend.
The main tool for assessing working conditions is the procedure
regulated by the Russian legislation, i.e. the Special Assessment of
Working Conditions (SAWC).
As of January 1, 2019, at the enterprises of TATNEFT Group, 94%
of workplaces were covered by the SAWC procedure conducted
during 2014-2018.
0.08
COEFFICIENT
LTIFR
14.4 thousand workplaces with acceptable working conditions
and 11.8 thousand workplaces with hazardous working conditions
were identified. The category of employees of TATNEFT Group,
associated with a high risk of injury, includes employees engaged
in the production and processing of oil and gas, underground well
repair, exploration, assembly, repair, and construction works,
maintenance of oil and gas facilities.
Following the SAWC, TATNEFT Group structural subdivisions
are developing measures to improve working conditions in the
workplace. The share of the Company’s employees occupied in
hazardous working conditions has been steadily declining in recent
years.
Dynamics of the number of days of temporary incapacity for
work, resulting from occupational accidents throughout TATNEFT
Group has shown a 3-fold decrease over the past five years. Over
the past 5 years, 2 cases of occupational diseases have been
registered in TATNEFT Group.
Occupational safety expenditures in TATNEFT Group, in particular, per employee, thousand rubles
2016
2017
2018
Funds spent on occupational safety measures
Funds spent on occupational safety measures per employee
972 030.99
22.1
981 449.29
22.3
1 060 052.66
23.9
Dynamics of the number of days of temporary incapacity to work
Dynamics of occupational injuries
Total number,
including fatal
Dynamics of occupational injuries of contractors’ employees
at the facilities of TATNEFT
Total number,
including fatal
2016
1 378
2016
12
2
2016
14
3
2017
692
2017
8
1
2017
10
2
2018
499
2018
6
1
2018
9
3
In 2018, the Lost Time Injury Frequency Rate (LTIFR) (the
number of cases of the lost working time to the total working time
in the organization for the reporting year and standardized per 1
million man-hours) amounted to 0.08.
In 2018, there were 6 accidents involving employees of the
Company, one of which was fatal, and 9 accidents with employees
of contractors, 3 of which were fatal.
The Company assumes responsibility for the preservation of
life and health of people, regardless of whether they are employed
with the Company or the contractors. In each case, a thorough
investigation of the circumstances was conducted and prompt
measures were taken to increase control over the prevention of
such incidents in the future.
The Company has established the Occupational Safety
Requirements Compliance Committee, which is composed of the
representatives of the Company (employer) and the trade union
committee. Its principal tasks are monitoring of working conditions
and occupational safety in workplaces, providing workers with
means of individual protection, assessment of the existing risk
for the employees’ health, and the development of measures to
prevent industrial injuries and occupational diseases.
Interaction with contractors
The Company establishes uniform requirements in the field of
HSE for the employees of TATNEFT Group and for contractors in
respect of works performed at the Company’s facilities and/or for
the benefit of the Company, including obligations to be guided by
the applicable international law, the requirements of the applicable
legislation, and the Company’s requirements in the field of HSE,
prevention of negative impact for natural objects, including animals
and plants, in the area of implementation of the Company’s projects
when planning and carrying out their activities.
It
is mandatory that the corresponding provisions be
incorporated into the contracts for works and services, concluded
with contractors. The contractor organizations are subject to the
obligation for the employees working at the Company’s facilities
to undergo training, mandatory introductory briefing, comply with
the requirements for personal protective equipment, the operated
transport, in the field of environmental protection, and other
obligations determined by the relevant standards.
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Environmental activities
The main priority of the Company is to ensure the ecological and economic
balance between the production and environmental safety and continuous
improvement of indicators.
Priorities of 2018
• To reduce harmful emissions into the atmosphere, discharges of
pollutants into underground and surface water bodies, soil, and
subsoil and to ensure compliance with the established norms of
permissible impact on the environment.
• Maintaining the technical condition of oilfield equipment at the
appropriate level, the introduction of advanced and innovative
environmental technologies.
Environmental safety measures
(LHVR), which are released from storage tank equipment;
• Application of the technology of light hydrocarbon vapor recovery
• Reducing the volume of flared associated petroleum gas;
• Associated petroleum gas cleaning at desulphurization units;
• Repair and replacement of tanks and other storage tank
equipment, application of the anticorrosive coating, and
equipping the tanks with electrochemical protection means;
collection and disposal of wastewater;
the technological process and product streams;
• Overhaul and replacement of commercial oil and gas pipelines;
• Reconstruction of oil treatment facilities with the optimization of
• Construction of stormwater drains at industrial facilities for the
• Mud pit lining and equipping rigs with waterproof circulating
• Overhaul and replacement of oil pipelines and their sacrificial
• Provision of well-servicing and improvement crews with special
• Monitoring production casings of wells for integrity and behind-
• Sealing of production casings up to the rise of cement behind
• Running in additional (intermediate) casings;
• Increase in the lifetime of well equipment using protective
the surface and production casings;
equipment to prevent fluid spills;
and inhibitory protection;
coatings, packers, sacrificial protection, corrosion inhibitors,
and the cathodic protection of casing wells.
casing overflows;
systems;
Industrial monitoring for environment protection
The Company’s industrial environmental monitoring (IEM)
system is implemented in the following principal areas:
environment;
• Taking measurements and samples related to protection of the
• Maintenance of databases of environmental impact sources
and state of environment, processing and analysis of the data
obtained;
of operations;
environmental requirements;
• Determination of the impact source compliance with the
• Analysis and forecast of the environment state in the regions
• Development of the IEM system in the new territories
of operation.
The scientific and methodological support of the Company’s
environmental activities is provided by the TatNIPIneft Institute and
a number of other scientific and research organizations and higher
educational institutions in Tatarstan and the Russian Federation.
The Company implements the
Environmental Program developed for
the period up to 2020, which aims to
maintain the state of the environment in the
region of the Company’s operation at the
standard admissible level corresponding
to the natural ecosystems’ potential for
self-recovery.
11 billion RUbles
TOTAL INVESTMENTS OF TATNEFT GROuP IN ENVIRONMENTAL SAFETY
Biodiversity preservation and natural areas
conservation
The Company implements the Biodiversity Preservation
Program. The program has been developed taking into account
legislative and other applicable requirements for biodiversity
preservation and is aimed at the conservation of rare species of
animals by supporting existing specially protected natural areas
and reduced-impact (rational) nature management in the habitats
of rare species.
In 2018, the activities were organized to stock the Kama with fish.
1.7 tonnes of carp juveniles were released into the Kama waters.
The event was held within the framework of the Federal long-term
program for stream sanitation of the Volga and its feeders.
Protection and sustainable use
of land and forest resources
The Company addresses the issues of the sustainable use of
land resources and soil pollution prevention with the utmost care.
The land protection measures include equipping the modular
rigs with tank circulation systems with three-stage mud cleaning
systems. This helps to prevent liquid spillage on the land surface
and eliminate the construction of earth pits as well as provide
for the reliable protection of fertile lands on fertile areas against
contamination from drilling fluids and formation waters.
Water resources
According to the results of laboratory studies, the water quality
in the major rivers in the territory of the Company’s operation was
stable in 2018. The content of chlorides, crude oil, and petroleum
products in a dissolved and emulsified state in major rivers and in
the vast majority of springs did not exceed the maximum permissible
concentrations (MPC) of harmful substances.
Within the territory of the Company’s operations, over 500
springs were cleared, captured, and architecturally completed with
the resources of the Company’s divisions.
A unique industrial waste landfill has been commissioned at
the TANECO Complex, having a reliable impervious screen at its
base, which eliminates the possibility of biological and chemical
contamination of adjacent territories and groundwater and ensures
the collection of leachate for its subsequent transportation to the
treatment facilities of oil refining and petrochemical complex.
Accounting for the generation of waste, which is considered
hazardous under the Basel Convention, is carried out at JSC
TANECO. In addition, JSC Nizhnekamskshina accounts for the
ash generated at the thermal waste decontamination unit, which
is considered hazardous waste pursuant to the Basel Convention
Annex.
Production and consumption waste handling activities
One of the environmental priorities of TATNEFT Group is the
reduction of environmental footprint through the reduced waste
generation. The Company has established a complex system of
selective accumulation, collection, and disposal of production and
consumption wastes and using them as a raw material to produce
marketable products.
In 2018, TATNEFT Group generated 101 thousand tonnes of
waste (156 thousand tonnes in 2017), including 25 thousand tonnes
of oil sludge (131.8 thousand tonnes in 2017). 13.7 thousand tonnes
of waste was reused (14 thousand tonnes in 2017), 4.3 thousand
tonnes were disposed of at the production facilities of TATNEFT
Group, including oil sludge in the of amount 0.095 thousand tonnes
(0.16 thousand tonnes in 2017). 95.7 thousand tonnes of waste,
including 25 thousand tonnes of oil sludge (31.7 thousand tonnes
in 2017), was transferred to third-party enterprises.
Enterprises of TATNEFT Group operate 3 landfills. Industrial
environmental control revealed no violations of the established
permissible impact standards.
To ensure environmentally safe management and treatment
of production and consumption waste, employees of TATNEFT
Group undergo training under the following programs: Professional
Training for the Right to Work with Hazardous Waste, Ensuring
Environmental Safety by Managers and Specialists of General
Economic Management Systems, Ensuring Environmental Safety
by Managers and Specialists of Environmental Services and
Environmental Monitoring Systems.
To create a favorable environment within its operating area
and increase the greenhouse gas absorption, starting from 2000,
Tatneft has annually realized special activity programs for planting
greenery in by-road lanes along highways and oilfield roads in the
oil-producing regions of Tatarstan.
In its activities, TATNEFT adheres to the
15th principle of taking precautionary
measures of the UN Declaration on
Environment and Development adopted
in Rio de Janeiro on June 3-4, 1992.
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140
120
100
80
60
40
20
0
Atmospheric air protection
To monitor compliance with the sanitary norms and regulations
for air protection in populated areas located within the area of the
Company’s operations, 136 points in populated areas and 271
points on the border of the sanitary buffer zones of the production
facilities were under control. 6,424 measurements of physical
factors, 27,691 tests to determine the current state of atmospheric
air were conducted. The air basin was analyzed for 33 ingredients
(hydrocarbons, hydrogen sulfide, nitrogen dioxide, carbon
monoxide, etc.) with simultaneous meteorological observations
through measuring wind speed and direction, temperature, and
relative humidity.
The gross emission of harmful substances into the air in 2018
for TATNEFT Group was reduced by 13,606 thousand tonnes
and amounted to 94,036 thousand tonnes. As a result of the
air protection measures implemented by the Company for the
period from 2016, the total emissions of pollutants into the air from
stationary sources or TATNEFT Group were reduced by 26.5%, i.e.
1.36-fold.
Application of the technology of light hydrocarbon vapor recovery
(LHVR) allowed reducing carbon emissions by more than 3.8 times
as compared with emissions in 1991. Currently, the facilities of
PJSC TATNEFT operate 44 LHVRs. The amount of hydrocarbons
captured by the LHVRs in 2018 amounted to 24.7 thousand tonnes.
Gross emissions of polluting substances for TATNEFT Group, (cid:31)thousand tons
Measures to prevent global climate change
2014
2015
2016
2017
2018
Total emissions of hazardous (polluting) substances, thousand tonnes
Including the emissions of hydrocarbons, thousand tonnes
Total emissions of hazardous (polluting) substances
Into the atmospheric air, tonnes
2014
2015
2016
2017
2018
102 687
93 093
127 930
107 642
94 036
The Company shares the global concern about the climate
change, is aware of the possible threats of natural disasters, risks
to human life and health, ecosystem damage, significant damage
to biodiversity of the animals and plants of the planet, and other
consequences of climate change.
The Company takes into account the fact of formation by energy
companies in the course of their production activities of a significant
amount of greenhouse gas emissions that can affect the climate
and create climate risks.
As part of measures to prevent global climate change, the
Company implements the following consistent actions:
• Targeted measures aimed at the rational use of associated
petroleum gas (APG), reducing the volume of its flaring,
and systematic reduction of emissions of pollutants into the
atmosphere, increasing the disposal of associated petroleum
gas and its targeted use for economic purposes.
management of greenhouse gas emissions.
• Development of the corporate system for accounting and
• Energy efficiency as well as energy and resource saving
• Development of renewable and alternative energy sources.
• Programs of the woods and greenery recharge.
In 2018, gross emissions of greenhouse gases (GHGs) into the
air (CO2-EQ.) for TATNEFT Group amounted to 2,950,862 tonnes.
The bulk of emissions into the atmosphere are attributed to the
upstream segment (80%). Therefore, the measures are aimed
primarily at the rational use of associated petroleum gas (APG) and
reducing the volume of its flaring.
programs.
The main activities for APG disposal are processing at the
production facilities of the Company and further products delivery
to the consumers. For the purpose of APG disposal and reduction
of negative impact on atmospheric air, TATNEFT Group ensures the
following:
• construction of facilities intended for the use of associated
petroleum gas as well as their technical reequipping,
reconstruction, and modernization;
• reduction of losses of hydrocarbon raw materials, growth of
processing volumes thereof, increasing the energy efficiency of
production;
weather conditions;
fuel-burning equipment;
from oil storage and treatment tanks;
• implementation of measures to reduce hydrocarbon emissions
• carrying out performance-and-commissioning works on the
• monitoring the efficiency of gas treatment plants operation,
• implementation of measures to control emissions during adverse
• gas fuel conversion of vehicles.
current and preventive maintenance thereof;
In 2018, major overhaul of 24,263 km of gas pipelines was carried
out; in order to increase gas collecting, 32,164 km of gas pipelines
were constructed; the reconstruction of the flare systems at the
facilities of Oil and Gas Field Operating Division was continued,
which will allow for sootless flaring; construction continued on the
all-factory flare system of the Minnibayevo Gas Processing Plant of
UTNGP of PJSC TATNEFT.
Project on the automatic control of industrial emissions of polluting
substances into the atmosphere
Agreement on cooperation between the Federal Service
for Supervision of Natural Resources, the Ministry of Digital
Development, Communications, and Mass Media of the Russian
Federation, and JSC TANECO.
In 2018, in collaboration with Rosprirodnadzor and the Ministry
of Digital Development, Communications, and Mass Media of
Russia, the Company launched a pilot project on automatic control
of industrial emissions of pollutants into the air at the sources of
pollution with the measurement of industrial emissions, within
which a tripartite Agreement on Cooperation between the Federal
Service for Supervision of Natural Resources, the Ministry of
Digital Development, Communications, and Mass Media of the
Russian Federation, and JSC TANECO was signed. To ensure
the monitoring, data transfer from automatic control systems of
industrial emissions of the TANECO Complex to the database of
the State Register of Facilities Having a Negative Impact on the
Environment (Moscow) was organized.
The results of the pilot tests were taken into account in the
development of the regulations. In March 2019, the Rules for
the Creation and Operation of an Automatic Control System for
Emissions of Pollutants and/or Discharges of Pollutants (approved
by Resolution No. 262 of the Government of the Russian Federation
dated 13.03.2009) were approved. The document outlined the
requirements for the programs of creation of the system of automatic
control over the environmental impact at the enterprises and the
conditions for inclusion of the stationary sources of emissions
(discharges) into such program.
In 2018, the level of the APG effective utilization throughout
TATNEFT Group was at 96.24%. This allowed reducing emissions of
pollutants and greenhouse gases from APG flaring and dispersion.
In order to create a favorable
environment and increased greenhouse
gas trapping in its zone of influence,
the Tatneft Group enterprises, starting
from 2000, annually implement special
programs for landscaping the lanes
along motorways and field roads in the
oil regions of Tatarstan.
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staff and
social guarantees
The HR management policy of the Company is based on the
importance of human resources, the involvement of professional
employees and the creation of favorable conditions for their
sustainable motivation to achieve maximum effectiveness and
professional and personal growth, covering all enterprises of
TATNEFT Group. The high level of social guarantees defined by
Collective Agreements of the Group’s enterprises reflects the
responsibility of the Company as a conscientious employer.
The increase in the number of personnel is associated with
solving the Company’s business tasks. Employees’ basic income
is formed from the salary and a social package. Salary includes
a tariff-based (fixed) part, according to the unified tariff table, and
bonuses (variable). The social package provides employees with
a relevant scope of medical benefits and other social guarantees.
The average number of employees
of the Company* persons
2016
45 574
2017
46 467
2018
48 078
*Headcount indicators for 2016-2018 were formed in accordance
with the perimeter of the Group companies under operational control.
Company’s personnel structure
by age in 2018 (%)
Men and women proportion
in the Company's management in 2018
19.65
21.07
23.47
76.53
up to 30 years
from 31 up to 50 years
over 50 years
59.28
Men
Women
Payroll Fund
The Company has an integrated HR management system aimed
at maintaining a high level of proficiency of workers and specialists
engaged in all areas of TATNEFT Group operation.
The Company has been successfully carrying out activities on
standardization of positions. Based on the results of 2018, the
Company took the 3rd place in the nomination “The Best Industrial
Enterprise on the Implementation of Professional Standards”
of the Competition on Implementation of Professional Standards
in the Activities of Organizations held among 352 organizations
of 46 constituent entities of the Russian Federation.
Labor and organizational effectiveness
Improving labor efficiency is one of the key priorities of the
Company. Within the framework of the business planning, measures
to increase labor productivity in the Company and internal corporate
methods of calculating labor productivity indicators for the Company
as a whole, for the principal business units and segment-forming
Companies of the Group, are determined. The target value of the
labor productivity indicator as a whole for the Company at the end
of 2018 was achieved.
Sociological surveys and opinion polls are regularly held among
employees of the Company to determine job satisfaction score
with regard to arrangement of work and safety conditions.
Key performance indicators system
In 2017, for the effective implementation of the Company’s
development Strategy, the transformation of the Company’s
incentive system based on key performance indicators (KPIs) was
launched, which allowed for the move to the new principles and
procedure of the annual bonus payments, which are applied to the
top managers of the Company, business-line leaders, and heads of
all subdivisions from 2017.
The incentive system includes personalization of indicators
of managers’ bonuses in the area of responsibility; changing the
variable part of salaries in terms of compensation for the results
of work for the year to increase the importance of individual KPIs;
revision of the monthly bonus-payment system with reference to the
current functional activities.
The principles of the incentive system are enshrined in the
Regulations on the Formation of Payroll Fund and Material
Incentives for Managers and Staff of Structural Subdivisions and
Subsidiaries of PJSC TATNEFT.
The Organization of the KPI System in TATNEFT Group (principles
and rules in the field of managing and improving the efficiency of
interaction between lines of business) was adopted and approved
by the Board of Directors of the Company (Resolution No. 3 dated
26.09.2018).
The KPI system in the Company is a model for managing the
implementation of the strategic goals and allows focusing on
priority targets in all areas of TATNEFT activities. Each specific
KPI is a marker of the quality of operational management, which
characterizes the effectiveness of implementing the strategic goals
and business processes. The total number of KPIs for TATNEFT
Group in all business segments, business units, and functional
lines is about 500 indicators, which includes 190 unique KPIs. The
number of participants in the program as at the end of the reporting
year is over 400 persons.
In 2018, TATNEFT moved to the next stage of development and
expansion of the KPI system perimeter coverage. The transition
from the main business lines to the lower levels was supplemented
with cross-functional lines – innovation activities, IT, HR.
>
500
KPIS
Training and development programs. Forming the personnel reserve
Extensive attention is paid in TATNEFT Group to the system of
personnel search and selection. The vacancies are filled mainly
from among the current staff of enterprises. In 2018, the enterprises
of TATNEFT Group and the executive office of PJSC TATNEFT have
submitted 95 applications for the search of 287 staff units.
To ensure effective implementation of the HR policy, a new
concept of personnel reserve formation has been approved; to
ensure the structured approach to the HR management system,
all positions in TATNEFT group are divided into three levels: TOP
100 (TOP management), TOP 300 (operational management),
TOP 1000 (production unit management). For the purpose of the
prompt and high-quality formation of the personnel reserve of the
Company, the Regulations on Holding a Competition for Inclusion
in the Personnel Reserve of TATNEFT Group and the Regulations
on the HR Committee of TATNEFT Group were approved and put
into effect, and the Standard of the Overall Assessment of TATNEFT
Group Employees was updated. In 2018, 1,083 employees of
TATNEFT Group took part in the Personnel Reserve competition.
Active work is performed to form an external personnel reserve.
Basically, the search for external candidates and the formation
of the personnel reserve is carried by the Company itself, in
particular among university graduates, by posting information
about the external personnel reserve on the Company’s website,
in professional social networks (Professionals, Linkedin), and on
recruitment websites.
In addition, the Company accepts employees proposed by
employment centers for the quota jobs. Employment assistance is
provided to citizens who are in particular need of social protection
and who have difficulties in finding permanent or temporary work.
In 2018, 46 persons were employed.
1083
EMPLOYEES TOOK PART IN THE
PERSONNEL RESERVE COMPETITION
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Management training
With the aim of developing the managerial competencies of
existing managers and personnel reserve of the Company, the
Targeted Educational EMBA Program for the TOP 100 Employee
Reserve and the Targeted Educational MBA Program for the TOP
300 Personnel Reserve are being implemented. As of this date,
more than 80 managers of different levels have been trained under
these programs.
> 33 000
30
EMPLOYEES ARE REGISTERED
IN THE SINGLE PLATFORM FOR
EMPLOYEE TRAINING AND
DEVELOPMENT OF TATNEFT GROuP
CORPORATE TRAINING
PROGRAMS
Social partnership. Collective agreement
The Company provides employees with a package of social
benefits and guarantees. Obligations for their provision are stated
in the Collective Agreement annually concluded between PJSC
TATNEFT and the workforce and covering all employees and
nonworking pensioners of the Company. The Collective Agreement
provides for the following: benefits and guarantees to employees;
social protection of young employees; support of veterans and
pensioners. The structure of social benefits and guarantees
is defined by the Standard of the Collective Agreement of the
Company. In 2018, changes were introduced and the amount of
social benefits was increased.
Employee training and development. Corporate university
Youth policy
The single corporate system of employee development, training,
and personal growth covers all business lines and categories of
employees of the Company, including corporate policies and
procedures, legislative requirements, cutting-edge practices of
Russia and foreign states. The training programs are aimed at
developing effective work skills, expanding professional knowledge
and practical experience. Teachers of leading universities,
reputable training, and consulting companies are engaged in the
training.
In 2018, professional development of the Company’s specialists
was carried out in accordance with the approved plan, taking into
account the requests of the heads of functional lines, and over 30
corporate programs were organized. The average annual number
of hours of training per 1 trained employee is 63.
In 2018, the Corporate University trained 4,709 persons
(167 groups) in 34 courses. In addition, training was organized
by external providers for 847 persons. As a result, the total plan for
full-time training was exceeded by 40%.
In 2019, it is planned to implement the Development of
E-Learning System in TATNEFT Group project, which will allow
employees to study remotely.
Large-scale work is underway to introduce a culture of self-
learning organization. Currently, 33,000 users, more than
30 courses, 40 tests, and over 120 webinars have been launched in
the virtual environment Mirapolis – the Single Platform for Employee
Training and Development of TATNEFT Group. The electronic
corporate library My book has 1,200 registered users.
Corporate pension policy
The pension program of the Company is based on the principle
of social partnership, according to which the Company and its
employees form the future corporate pension by joint efforts on a
parity basis.
The number of employees of PJSC TATNEFT participating in the
corporate program of nonstate support is 8,241 person. The actual
expenses of PJSC TATNEFT for nonstate pension support in 2018
amounted to 106,810 thousand rubles. The number of pensioners
of PJSC TATNEFT, receiving nonstate pensions is 9,260 persons.
In TATNEFT Group – 17,135. The nonstate pension payments to
pensioners of PJSC TATNEFT through JSC National Nonstate
Pension Fund (NNPF) for 2018 amounted to 311,306 thousand.
In accordance with the Collective Agreement of PJSC TATNEFT,
nonworking pensioners who retired before the establishment of
JSC NNPF receive quarterly financial assistance. The total amount
of the financial assistance granted to nonworking pensioners of
PJSC TATNEFT who retired before the establishment of JSC NNPF
amounted to 20,807 thousand rubles in 2018. The number of
nonworking pensioners of PJSC TATNEFT receiving such financial
assistance amounted to 3.5 thousand persons.
17 135
PERSONS RECEIVE CORPORATE
PENSION
The youth organization at TATNEFT Group has more than 25,000
young workers, of which 7,250 are employed with the structural
divisions, 7,818 are employed with the subsidiaries, 10,089 are
employed with the service organizations.
In 2018, the Youth Organization implemented a number
of projects aimed at increasing the effectiveness of work with
young people, reducing inefficient spending, and increasing
the involvement of young people in scientific, creative, and
innovatory work.
More than 4,500 innovative proposals were submitted by young
employees in 2018, and more than 40 patents were granted. The
total expected economic effect of their implementation will exceed
1.2 billion rubles.
In collaboration with the Almetyevsk State Oil Institute, with the
support of the management of PJSC TATNEFT, the ambitious, in
terms of its scale, international Science and Innovation Forum was
organized. The forum was held in order to get acquainted with the
priority areas of research, to address urgent issues, business and
technological challenges of fuel and energy and mineral resource
sectors, to share experience in the use and implementation of
innovative oil and gas technologies, to discuss issues related to
the trends in the development of the global and Russian oil and
gas sector.
The program of the Forum included 40 platforms; the Forum
was attended by over 700 persons from eight countries and more
than a dozen regions of Russia.
Young specialists of the Company became absolute winners
of the VI International Engineering Championship CASE-IN in the
League of Young Specialists. The winners received their awards from
Aleksandr Novak, the Minister of Energy of the Russian Federation.
In 2018, the Company became the best in the nomination
“Interaction with Youth Industry Organizations” in the competition
for the best socially oriented company in the oil and gas industry,
which is held by the Ministry of Energy of the Russian Federation.
As part of the VIII Saint Petersburg International Gas Forum, the
Company was encouraged by a gratitude letter from the Federal
Agency for Youth Affairs of the Russian Federation for assistance
in the implementation of the state youth policy and for a significant
contribution to the development of the professional path of young
professionals.
The team spirit among young employees is formed through
sports events: Youth Olympics of the Company in seven sports,
annual tourism festivals, hiking and rafting on mountain rivers.
In 2018, young employees of TATNEFT Group were able to climb
Elbrus, the highest mount in Europe, for the fourth time.
The Company traditionally pays great attention to addressing
social issues of young people. In 2018, 416 young employees were
provided with apartments under the mortgage lending system,
1,006 families of young employees were granted loans for furniture
and essential goods totaling over 100 million rubles.
The amount of 56.6 million rubles was allocated for the
implementation of the youth program of PJSC TATNEFT in 2018.
Annual Report 2018TATNEFT GroupSUSTAINABLE DEVELOPMENT 142
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143
social investments
Enterprises of TATNEFT Group are city-forming enterprises in most
localities regions of operation. Following the principles of corporate social
responsibility, the Company, in collaboration with municipal authorities,
implements projects for the improvement of cities and towns of the regions
of its operation, takes part in the construction of socially important facilities,
assists in the promotion of education, health, culture, and sports.
“The implementation of social programs is an essential condition of sustainable and successful
development of the Company, which has traditionally paid great attention to social issues. We
implement social programs for both our employees and the society as a whole. The programs are
implemented in the territory of the Company’s principal operation, are systematic and targeted, aimed
at both ensuring decent working conditions, professional growth, maintaining a high standard of living of
our employees, and the external environment – in order to maintain stability in the Company. We strive
to make these programs even more open, systematic, and effective.”
Rustam Mukhamadeev
Deputy General Director
for General issues of PJSC TATNEFT
Principal social programs of the company
• Facilitating the development of infrastructure
in cities and towns
• Promotion of mass sports and healthy lifestyle
• Facilitating the development of children’s and
youth hockey
• Support for education
• Support for culture
• Spiritual renovation
• Support for healthcare
• Maternity and childhood support program
• Care for the health of employees and residents
of the region
• Social targeted assistance to groups in need
of support
• Job creation
The Company was awarded a special as an expression of high
regard of the fuel and energy complex of the Ministry of Energy of
the Russian Federation and a diploma for the active implementation
of social policy in the Competition for the Best Socially-Oriented
Company in the Oil and Gas Industry, organized by the Ministry of
Energy of the Russian Federation in 2018.
The Company was recognized as the best in the following
categories: “Promotion of the Social Partnership Principles,
Development of New Forms of Social Partnership”; “Charitable
Activities of the Organization”; “Development of Social Issues of the
Territories of the Organization’s Presence”.
Details of corporate social programs are
disclosed in the Integrated Annual Report,
taking into account the aspects of sustainable
development (ESG), which the Company
publishes annually.
Charitable activities
Charity plays an important role in the implementation of social
programs of TATNEFT. With the purpose of increasing the efficiency
of social investment management in 2018, the decision was made
to unite the charities within a single Charitable Foundation of
TATNEFT. All the main long-term programs, including Miloserdie
(Mercy), Odarennye Deti (Gifted Children), Rukhiyat, Tazalyk, are
fully preserved.
The foundations were established in different periods for the
implementation of social projects of the Company related to the
support of education, culture, scientific creativity, sports, provision
of material assistance to various categories of the population. The
charitable program of the Company for a year is approved by the
Board of the Foundation chaired by General Director of PJSC
TATNEFT.
Within the framework of the Odarennye Deti program, the
Foundation supports talented children, provides financial
assistance to participants of republican, national, and international
academic competitions, scientific and technical contests. Every
year the Company holds research and training conference “Pupils
for Science in the 21st Century,” Master Class Winter School, and
the Meeting of winners of the Foundation program.
The Rukhiyat program is dedicated to Support for talented
children in the field of culture and art, preservation of cultural and
historical heritage. This includes the organization of festivals of
children’s talents Country of the Singing Nightingale, competitions
in the field of literature and art, revealing young talents and
promoting their creative growth, publishing books, etc.
In 2018, major cultural and educational projects were
implemented in collaboration with the V. Spivakov Foundation The
Third Academy of V. Spivakov Foundation. Children for Children.
Tatarstan, and the New Names Foundation, the President of which
is Denis Matsuev, the People’s Artist of Russia, piano virtuoso. In the
course of the projects, master classes were organized for children
by leading teachers of the country in various fields of culture and art
(playing musical instruments, choreography, painting, etc.).
In 2018, Valery Gergiev, Vladimir Spivakov, Denis Matsuev, Igor
Butman, Aida Garifullina, and Hibla Gerzmava visited Almetyevsk
with concert programs.
Under the Miloserdie program, targeted assistance is provided
to veterans and disabled people, low-income families, foster
children, orphan students, and citizens who encountered a difficult
situation. The Company supports non-profit organizations.
IN TOTAL, CHARITABLE ASSISTANCE WAS RENDERED TO
MORE THAN 40,000 INDIVIDUALS AND 300 LEGAL ENTITIES
AMOUNTING TO OVER 777 MILLION RUBLES.
The Tazalyk program is dedicated to the development and
support of sports, promotion of healthy lifestyles. In addition,
traditionally, support was provided for the implementation of Green
Fitness projects throughout the year, and assistance was rendered
to sports federations.
A new activity of the Foundation was the street theater Light
Wings project in Almetyevsk. In 2018, the theater was provided with
its own house, so the rehearsal process became year-round. To
systematize the work, a nonprofit organization was created under
the aegis of the Foundation. Today, more than 80 persons are
engaged in theater activities, and theatrical performances are very
popular among the citizens.
With the support of TATNEFT and the charitable foundation,
Tatneft KVN Team became the vice-champion of the First League
of the KVN International Union, and according to the results of the
Festival in Sochi, it achieved the right to participate in the Major
League of the KVN International Union, the games of which are
broadcast on Channel One.
To improve the efficiency of social initiatives, since 2016,
TATNEFT has introduced a Grant System, which allows selecting
and supporting the best social projects in the region on a competitive
basis. In 2018, the Grant Committee considered projects from
different regions of Tatarstan, the Russian Federation, in the
categories of Social Sphere, Citizenship and Patriotism, Culture
and Art, Ecology, Education, and Science.
44 soCial PRoJeCts
RECEIVED FINANCIAL SuPPORT
FROM TATNEFT ON A GRANT
BASIS FOR A TOTAL AMOuNT OF
25.7 million RUbles
770 million RUbles
TARGETED HELP uNDER THE
MERCY PROGRAM
Annual Report 2018TATNEFT GroupSUSTAINABLE DEVELOPMENT 144
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145
supply chain
Interaction with suppliers is based on the principles of full transparency
of decisions, market and formula pricing, long-term relationships under
framework contracts.
The Company purchases and sells a significant amount of
products and services. The selection of suppliers of the Company
is carried out according to uniform rules on the basis of open
electronic tender procedure only. Each potential supplier has
the opportunity to participate in the tender procedure with the
obligatory confirmation of compliance with the established criteria.
For potential suppliers, a comprehensive assessment of
compliance with corporate requirements is carried out (the checklist
has been approved and is applied).
Following the principles of corporate responsibility, the Company
considers potential suppliers for compliance of their activities with
environmental and social responsibility. If the tender subject provides
for the need to check the state of the HSE system of the potential
supplier, the Company’s specialists conduct an appropriate expert
assessment, which may include a request for confirmation of the
presence of the required production facilities and technologies,
relevant qualifications of specialists, licenses, certificates, including
in the field of ISO, technical audit opinions. In addition, within the
framework of tender procedures, the Company provides for the
request of information related to the social aspects of the potential
supplier’s activities, including respect for human rights, observance
of working hours and social guarantees of employees.
In case any discrepancies of applicants to the established
criteria are revealed, they are not allowed to participate in tenders.
According to the Company Policy in the field of HSE, all suppliers
and contractors must adhere to the Company’s principles in this
field as well as comply with legal and corporate standards in the
fulfillment of contractual obligations to the Company. The Company
monitors the activities of its contractors to comply with these
requirements.
Trade and procurement platform
39 thousand active suppliers are registered in the trading
and procurement platform, of which 6 thousand suppliers were
registered and 9.4 thousand suppliers participated in tenders for
the supply of goods in 2018.
As part of the improvement of the procurement system, the
Company introduces mechanisms for categorizing procurement,
delegation of authority, and personalization of responsibility;
the Company has created and published a library of technical
requirements and conditions for the goods, and a parametric
classifier has been developed to systematize the selection of similar
goods from the stocks in the E-store.
In 2018, about 8 thousand contracts were concluded with 1,000
suppliers for 32 billion rubles (without VAT). 50% of all orders were
placed with the enterprises of the Republic of Tatarstan, import
contracts amounted to 0.2%. The low share of import contracts
indicates a steady decrease in the import dependence of the
Company.
The principal share in the procurement structure accounts for the
supply under the price books: framework and long-term contracts
for an open amount, which allows for procurement without loss of
time and resources as well as improves the efficiency of estimating
the cost of facilities under construction and budget planning. As
of this date, there are over 600 price books covering about 150
thousand stock-list items, which accounted for 78% of the total
procurement in 2018 (79% in 2017).
Procurement structure by categories, %
Pipe products
Oilfield equipment
Instrumentation, control, automation, and
electric equipment
Rolled stock and metalwork
Chemical products
Construction materials
Isolating devices
Other
35
21
17
8
8
3
3
5
Company’s membership in associations, national
and international organizations
The Company participates in the work and interacts with industry
and socially oriented associations, unions, and other organizations
in order to address issues that are important for the Company, the
industry, and the society as well as to express its position on the
topical issues.
• Since 1994, the Company is a member of the Union of Oil and
Gas Producers of Russia (SNP). N.U. Maganov, General Director
of the PJSC TATNEFT, is a member of the Board. The SNP Board
makes proposals to the State Duma and the Government of the
Russian Federation on reforming the industry, strengthening state
regulation in the fuel and energy sector, amending the legislation,
and preparing government decisions.
• Since 2003, the Company cooperates with NPP Miners of
Russia. General Director of PJSC TATNEFT is a member of the
Supreme Mining Council. The issues discussed at congresses
and conferences held by Non-Profit Partnership Miners of Russia
are related to overcoming the consequences of the financial and
economic crisis, strengthening the potential of innovative and
technological development of the industry, legislative support for
the mineral and resource sector of the state economy, and several
other issues.
• Since 2003, the Company has been cooperating with the
Russian Union of Industrialists and Entrepreneurs (RSPP). N.U.
Maganov, General Director of PJSC TATNEFT, is a member of the
Management Board of RSSP; representatives of the Company are
members of the following RSPP committees: Energy Policy and
Energy Efficiency Committee, Labor Market and Social Partnership
Committee, Industrial Safety Committee. Every year, high-level
state conferences are held on topical economic issues with the
participation of representatives of the Russian and foreign business
community as well as heads of federal authorities. The results of
these forums are decisions made at the state level in the field of
entrepreneurship and business in Russia.
• Since 2011, the Company’s representatives are members of
the Working Group established under the Ministry of Energy of
the Russian Federation to monitor the situation related to the
production and consumption of petroleum products in the Russian
Federation in order to prevent uncontrolled growth of prices for
petroleum products and ensure stable and consistent supply of
petroleum products to the domestic market.
• Since 2015, the Company’s representatives are members of the
Working Group established under the Ministry of Energy of the
Russian Federation to monitor the quality of oil transported through
the system of oil trunk pipelines created to stabilize the quality of oil
in the system of oil trunk pipelines and prevent deterioration of the
quality of oil supplied to the Russian plants. The active position of
TATNEFT in the framework of the Working Group yielded several
positive results, including increasing the limit values for the sulfur
content in the export lines within the regular traffic scheme.
• In 2011, Tatneft signed a 4-party agreement with the Federal
Antimonopoly Service of Russia, Rostekhnadzor, and
Rostekhregulirovanie, aimed at improving the quality of petroleum
products supplied to commodity markets of the Russian Federation
and ensuring the efficient refinery modernization. The Company
fulfills its obligations under the agreement ahead of schedule.
• Since 2014, the Company is an active participant in the work of
the Council of Consumers on the Activity of Natural Monopolies in
Transportation of Oil and Oil Products via Trunk Pipelines, which
functions as a communication platform for PJSC Transneft and the
consumers of its services. Within the framework of this organization,
issues of tariff formation of PJSC Transneft, its investment program,
and financial results are discussed. TATNEFT makes relevant
proposals and collaborates on the initiatives discussed at the
Consumer Council.
• In 2017, the Company joined ATIEL (Technical Association of the
• The Company, in collaboration with the trade union organization,
European Lubricants Industry).
cooperates with the All-Russian Industry Association of Employers
of the Oil and Gas Industry (OOOR NGP). The Company is currently
considering the conclusion of an industry agreement.
• Since 1998, TATNEFT has been a member of the founders of
the Russian National Committee of the World Oil Council for the
Organization and Holding of World Oil Congresses (RNA MNK).
• Since 2011, the Company has been cooperating with the Chamber
• In 2018, N.U. Maganov, General Director of PJSC TATNEFT,
of Commerce and Industry of the Russian Federation (CCI).
became a member of the Organizing Committee of the Russian
National Committee of the World Energy Council (RNC WEC) for
the preparation and holding of the 25th anniversary World Energy
Congress in Saint Petersburg in 2022. The Company is not a
member of the RNC WEC.
• Since 2017, A. F. Yagafarov, Deputy General Director of TATNEFT,
has been a member of the Presidium of the Caspian Science and
Innovation Council. In 2018, Caspian Dialogue – 2018 was held on
the basis of MGIMO University in Moscow, on the topic: “Potential
for Development of International Cooperation on the Basis of the
Signed Convention on the Legal Status of the Caspian Sea,” which
was attended by employees of the Company (Representative
Office of PJSC TATNEFT in Moscow).
The Company also cooperates with the National Council
for Corporate Governance (NCCG), the Russian Institute of
Directors (RID), and other organizations, public councils, and
associations.
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Annexes
Annex 1. IFRS Consolidated Financial Statements with Independent Auditor’s Report
as of and for the year ended December 31, 2018.
Annex 2. Financial statements of PJSC TATNEFT and independent Auditor’s Report
Annex 3. Report on PJSC Tatneft’s Non-arm’s Length Transactions in 2018.
Annex 4. Report on PJSC Tatneft compliance with the principles and recommendations
of the Corporate Governance Code.
Annex 5. Principal risks.
Annex 6. On the annual report and the underlying regulatory documents constituting the
framework for the current annual report.
Annual Report 2018TATNEFT GroupПРИЛОЖЕНИЯwww.tatneft.ru 148
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Annex 1
IFRS Consolidated Financial Statements
with Independent Auditor’s Report
as of and for the year ended
December 31, 2018.
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Auditor’s report
Independent Auditor’s Report
To the Shareholders and Board of Directors of PJSC Tatneft:
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of PJSC Tatneft and its subsidiaries (together – the “Group”) as at
31 December 2018, and its consolidated financial performance and its consolidated cash flows for the
year then ended in accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Group’s consolidated financial statements comprise:
the consolidated statement of financial position as at 31 December 2018;
the consolidated statement of profit or loss and other comprehensive income for the year then
ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical
requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are
relevant to our audit of the consolidated financial statements in the Russian Federation. We have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
AO PricewaterhouseCoopers Audit
White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047
T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru
Our audit approach
Overview
Materiality
Group
scoping
Overall Group materiality: Russian Roubles (“RUB”) 12,900 million,
which represents 4.7% of profit before tax.
We conducted audit work at 4 significant reporting entities.
The Group engagement team visited Group’s operations in
Almetievsk, Nizhnekamsk and Moscow.
Our audit scope addressed 95% of the Group’s revenues and 94% of
the Group’s absolute value of underlying profit before tax.
Key audit
matters
Key audit matter
Net impairment losses on financial assets.
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where management
made subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other matters
consideration of whether there was evidence of bias that represented a risk of material misstatement
due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out in
the table below. These, together with qualitative considerations, helped us to determine the scope of our
audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, if any, both individually and in aggregate on the consolidated financial statements as a
whole.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 152
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Auditor’s report (continued)
Overall Group materiality
RUB 12,900 million
How we determined it
4.7% of profit before tax
Rationale for the
materiality benchmark
applied
We chose profit before tax as the benchmark because, in our view,
it is the benchmark against which the performance of the Group
is most commonly measured by users, and is a generally accepted
benchmark. We chose 4.7% which is consistent with quantitative
materiality thresholds used for profit-oriented companies in this
industry sector and prior year approach.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit
matter
Net impairment losses on financial assets
Refer to Notes 7, 9 to the consolidated
financial statements
At of 31 December 2018, as part of financial
assets the Group recognises short-term and
long-term loans issued (within Other short-
term financial assets and Other long-term
financial assets of the Consolidated Statement
of Financial Position), and short-term and
long-term accounts receivable.
In accordance with IFRS 9 “Financial
Instruments”, starting from 1 January 2018
the Group management assesses expected
credit losses in relation to other financial
assets and accounts receivables prospectively
and recognises an allowance for credit losses
at each reporting date. The estimate of
expected credit losses represents an unbiased
and probability weighted amount that is
determined by evaluating a range of possible
outcomes, and reflects all reasonable and
supportable information that is available at
each reporting date about past events, current
conditions and forecasts of future economic
conditions.
We performed the following procedures to assess the
appropriateness
and
methodology used in estimating recoverable values:
valuation methods
of
examination, on a sample basis, of the models
and calculations used for the assessment of
credit losses on a collective or individual basis;
analysis of key assumptions used by the
Group’s management when estimating the
current market value of property provided as
collateral under loan agreements. We engaged
our valuation experts to review the valuation of
the current market value of property pledged as
collateral with the Group for the loans issued;
verification of the mathematical accuracy of
discounted cash flow models (if applicable) and
evaluation of the key assumptions used by the
Group’s management in these models.
Key audit matter
How our audit addressed the key audit
matter
Where applicable,
the Group evaluates
information about each debtor's solvency,
obtains experts’ opinions on market values of
property provided as collateral under loan
agreements, prepares discounted cash flow
models, and analyses additional relevant
information.
For the year ended 31 December 2018, the
Group recognised net impairment losses on
financial assets of RUB 14,955 million (Line
“Net impairment losses on financial assets” in
the Consolidated statement of profit or loss
and other comprehensive income).
We focused on this matter because of the
materiality of
the
significance of judgements and estimates
involved in its calculation.
impairment and
the
How we tailored our Group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion
on the consolidated financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls and the industry in which the Group operates.
In establishing the overall approach to the group audit, we determined the type of work that needed to
be performed at reporting units by us, as the group engagement team, or component teams operating
under our instruction. Where the work was performed by the component team of ZENIT Banking Group,
we determined the level of involvement we needed to have in the audit work at this reporting unit to be
able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our
opinion on the Group’s consolidated financial statements as a whole.
We identified the following significant reporting units where we performed full-scope audit procedures:
PJSC Tatneft (parent holding company, corporate centre is located in Almetievsk), JSC TANECO (oil
refinery subsidiary is located in Nizhnekamsk), PJSC Nizhnekamskshina (tires producing subsidiary is
located in Nizhnekamsk) and ZENIT Banking Group (banking subsidiaries, corporate centre is located
in Moscow). In addition, we performed specified audit procedures over selected financial information
at a number of less significant reporting units in order to increase the level of audit comfort.
Other information
Management is responsible for the other information. The other information comprises “Management’s
discussion and analysis of financial condition and results of operations for the three months and the
year ended 31 December 2018” (but does not include the consolidated financial statements and our
auditor’s report thereon), which we obtained prior to the date of this auditor’s report, and PJSC Tatneft
Annual Report 2018 and Quarterly Report of the Equity Securities Issuer for the 1st quarter 2019, which
are expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do
not and will not express any form of assurance conclusion thereon.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 154
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Auditor’s report (continued)
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s report, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
When we read the PJSC Tatneft Annual Report 2018 and Quarterly Report of the Equity Securities Issuer
for the 1st quarter 2019, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group
or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 156
157
Consolidated financial
statements
Consolidated Statement of Financial Position
(In millions of Russian Rubles)
NOTE
31 DEcEmbEr 2018
31 DEcEmbEr 2017
NOTE
31 DEcEmbEr 2018
31 DEcEmbEr 2017
ASSETS
Cash and cash equivalents
Banking: Mandatory reserve deposits with CB RF
Accounts receivable, net
Banking: Loans to customers
Other short-term financial assets
Inventories
Prepaid expenses and other current assets
Prepaid income tax
Banking: 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
6
7
8
9
10
11
7
8
9
12
13
65 489
1 875
80 762
53 797
32 901
50 606
23 090
852
2 360
311 732
2 930
92 508
81 513
637
701 922
3 548
6 498
889 556
42 797
1 916
61 598
44 495
68 925
39 318
23 123
1 027
2 182
285 381
3 439
106 488
52 364
658
651 460
1 502
6 162
822 073
LIABILITIES ANd ShAREhOLdERS’ EquITy
Short-term debt and current portion of long-term debt
Accounts payable and accrued liabilities
Dividends payable
Banking: Other financial liabilities at fair value through profit and loss
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 ASSETS
1 201 288
1 107 454
TOTAL LIABILITIES
ShAREhOLdERS’ EquITy
Preferred shares (authorised and issued at 31 December 2018 and 2017 – 147,508,500 shares;
nominal value at 31 December 2018 and 2017 – RR1.00)
Common shares (authorised and issued at 31 December 2018 and 2017 – 2,178,690,700 shares;
nominal value at 31 December 2018 and 2017 – RR1.00)
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Less: Common shares held in treasury, at cost
(75,483,000 shares at 31 December 2018 and 2017)
Total group shareholders’ equity
Non-controlling interest
TOTAL ShAREhOLdERS’ EquITy
TOTAL LIABILITIES ANd EquITy
14
15
19
16
17
13
14
16
17
12
13
18
19
19
11 953
42 989
50 711
1 190
13 765
183 654
38 771
3 254
533
346 820
3 084
4 660
682
34 338
31 486
3 437
77 687
39 916
41 529
6 032
-
27 971
158 436
27 806
3 563
1 043
306 296
6 896
5 669
478
38 017
27 323
4 046
82 429
424 507
388 725
746
746
11 021
84 437
1 804
683 508
(10 251)
771 265
5 516
11 021
84 437
1 652
624 254
(10 251)
711 859
6 870
776 781
718 729
1 201 288
1 107 454
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 158
159
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
(In millions of Russian Rubles)
Sales and other operating revenues on non-banking activities
24
910 534
681 159
OThER COMpREhENSIVE INCOME/(LOSS) NET Of INCOME TAx:
YEar
ENDED
31 DEcEmbEr 2018
YEar
ENDED
31 DEcEmbEr 2017
NOTE
YEar
ENDED
31 DEcEmbEr 2018
YEar
ENDED
31 DEcEmbEr 2017
NOTE
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
Net impairment losses on financial assets
Net impairment losses on property, plant and equipment and other non-financial assets
Taxes other than income taxes
Maintenance of social infrastructure and transfer of social assets
Total costs and other deductions on non-banking activities
(Loss)/gain on disposals of interests in subsidiaries and associates, net
Other operating gains, net
Operating profit on non-banking activities
12
12,24
5,7,9
12
13
12
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
Credit loss allowance
Operating expenses
Loss arising from dealing in foreign currencies, net
Other operating expense, net
Total net interest, fee and commission and other operating income/(expenses) and gains/
(losses) on banking activities
22,23,24
22,23
8
OThER INCOME/(ExpENSES)
Foreign exchange gain/(loss), net
Interest income on non-banking activities
Interest expense on non-banking activities, net of amounts capitalised
Share of results of associates and joint ventures
Total other income, net
pROfIT BEfORE INCOME TAx
INCOME TAx
Current income tax expense
Deferred income tax expense
Total income tax expense
pROfIT fOR ThE pERIOd
28
21
21
24
13
(132 215)
(76 080)
(688)
(36 952)
(49 700)
(30 520)
(14 955)
(5 874)
(293 162)
(5 613)
(645 759)
(1 842)
488
263 421
23 259
(11 132)
(1 310)
(10 019)
(205)
(36)
(123 517)
(70 984)
(1 143)
(35 925)
(48 327)
(24 885)
(15 156)
(356)
(194 316)
(5 427)
(520 036)
109
1 343
162 575
30 964
(14 342)
(8 685)
(7 498)
(27)
(1 220)
557
(808)
7 936
5 497
(3 590)
(32)
9 811
(1 618)
6 494
(3 095)
(10)
1 771
273 789
163 538
(58 015)
(4 226)
(62 241)
(34 227)
(5 419)
(39 646)
211 548
123 892
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments
Gain on debt financial assets at fair value through other comprehensive income, net
Unrealised holding gain on available-for-sale securities (for comparatives only)
(76)
44
-
476
-
133
Items that will not be reclassified to profit or loss:
Loss on investments in equity financial assets at fair value through other comprehensive income,
net
Actuarial gain/(loss) on employee benefit plans
Other comprehensive income
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
(150)
334
152
211 700
211 812
(264)
211 548
211 964
(264)
211 700
94,11
93,89
2 103
148
-
(250)
359
124 251
123 139
753
123 892
123 498
753
124 251
54,73
54,32
2 103
148
19
19
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 160
161
Consolidated Statement of Changes in Equity
(In millions of Russian Rubles)
BALANCE AT 1 jANuARy 2017
Profit for the year
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Treasury shares
Acquisitions
Disposals
Business combinations
Acquisition of non-controlling interest in subsidiaries
Disposal of non-controlling interest in subsidiaries
Dividends declared (Note 19)
BALANCE AT 31 dECEMBER 2017
Effect of initial application of IFRS 9 (Note 5)
RESTATEd BALANCE AT 1 jANuARy 2018
Profit/(loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Acquisition of non-controlling interest in subsidiaries
Disposal of non-controlling interest in subsidiaries
Dividends declared (Note 19)
NumbEr Of sharEs
(ThOusaNDs)
sharE
capiTal
aDDiTiONal
paiD-iN capiTal
TrEasurY
sharEs
acTuarial
(lOss)/GaiN ON
EmplOYEE
bENEfiT plaNs
2 250 718
-
-
-
(2)
(92)
90
-
-
-
-
2 250 716
-
2 250 716
-
-
-
-
-
-
11 767
-
-
-
-
-
-
-
-
-
-
11 767
-
11 767
-
-
-
-
-
-
85 224
-
-
-
-
-
-
-
(787)
-
-
84 437
-
84 437
-
-
-
-
-
-
(10 250)
-
-
-
(1)
(32)
31
-
-
-
-
(10 251)
-
(10 251)
-
-
-
-
-
-
(1 621)
-
(250)
(250)
-
-
-
-
-
-
-
(1 871)
-
(1 871)
-
334
334
-
-
-
BALANCE AT 31 dECEMBER 2018
2 250 716
11 767
84 437
(10 251)
(1 537)
aTTribuTablE TO GrOup sharEhOlDErs
fOrEiGN
currENcY
TraNslaTiON
aDjusTmENTs
uNrEalisED
hOlDiNG
GaiNs/(lOssEs)
ON availablE-fOr-
salE sEcuriTiEs
(fOr cOmparaTivEs ONlY)
GaiN/(lOss)
ON fiNaNcial
assETs aT fair
valuE ThrOuGh
OThEr cOmprE-hENsivE
iNcOmE, NET
1 201
-
476
476
-
-
-
-
-
-
-
1 677
-
1 677
-
(76)
(76)
-
-
-
1 601
1 713
-
133
133
-
-
-
-
-
-
-
1 846
(1 846)
-
-
-
-
-
-
-
-
rETaiNED
EarNiNGs
TOTal
sharEhOlDErs’
EquiTY
NON-cONTrOlliNG
iNTErEsT
TOTal
EquiTY
615 477
123 139
-
123 139
-
-
-
-
-
-
(114 362)
703 511
123 139
359
123 498
(1)
(32)
31
-
(787)
-
(114 362)
5 393
753
-
753
-
-
-
97
787
(145)
(15)
708 904
123 892
359
124 251
(1)
(32)
31
97
-
(145)
(114 377)
624 254
(6 959)
711 859
(6 959)
6 870
(2 048)
718 729
(9 007)
617 295
211 812
-
211 812
-
-
(145 599)
704 900
211 812
152
211 964
-
-
(145 599)
4 822
(264)
-
(264)
(48)
1 052
(46)
709 722
211 548
152
211 700
(48)
1 052
(145 645)
-
-
-
-
-
-
-
-
-
-
1 846
1 846
-
(106)
(106)
-
-
-
1 740
683 508
771 265
5 516
776 781
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 162
163
Consolidated Statement of Cash Flows
(In millions of Russian Rubles)
OpERATINg ACTIVITIES
Profit for the year
Adjustments:
YEar
ENdEd
31 dECEmbEr 2018
YEar
ENdEd
31 dECEmbEr 2017
NOTE
211 548
123 892
Net interest, fee and commission and other operating (income)/expenses and (gains)/losses
on banking activities
Depreciation, depletion and amortization
Income tax expense
Net impairment losses on financial assets
Net impairment losses on property, plant and equipment and other non-financial assets
Loss on disposals of interests in subsidiaries and associates, net
Effects of foreign exchange
Equity investments gain net of dividends received
Change in provision for impairment of financial assets (for comparatives only)
Interest income on non-banking activities
Interest expense on non-banking activities, net of amounts capitalised
Other
Changes in operational working capital, excluding cash:
5,7,9
12
Accounts receivable
Inventories
Prepaid expenses and other current assets
Securities 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 income/(expenses) and gains/(losses)
on banking activities
Adjustments:
Provision for loan impairment
Provision for losses on credit related commitments
Change in fair value of financial assets
Other
Changes in operational working capital on banking activities, excluding cash:
Mandatory reserve deposits with Central Bank of Russian Federation
Due from banks
Banking loans to customers
Due to banks and Central Bank of Russian Federation
Banking customers accounts
Debt securities issued
Financial assets at fair value through profit or loss
Other assets and liabilities
(557)
30 520
62 241
14 955
5 874
1 842
1 445
32
-
(5 497)
3 590
807
(27 786)
(11 015)
132
504
4 011
10 939
73
808
24 885
39 646
15 047
356
-
(504)
10
3 462
(6 494)
3 095
(559)
1 245
(5 997)
66
(106)
(6 265)
4 071
375
303 658
197 033
557
1 310
(551)
917
165
41
(589)
(11 107)
(16 149)
18 413
(2 298)
4 989
-
(808)
8 685
-
-
(1 842)
72
8 371
15 861
15 181
(18 961)
(1 098)
(534)
(2 620)
Net cash (used)/provided by banking operating
activities before income tax
(4 302)
22 307
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 outflow on acquisition of subsidiaries
Cash inflow from disposal of subsidiaries and associates, net of disposed cash
Purchase of available-for-sale financial assets (for comparatives only)
Purchase of financial assets at fair value through other comprehensive income
Purchase of held to maturity investments (for comparatives only)
Purchase of financial assets at amortised cost
Proceeds from disposal of available-for-sale financial assets (for comparatives only)
Proceeds from disposal of financial assets at fair value through other comprehensive income
Proceeds from redemption of held to maturity investments (for comparatives only)
Proceeds from redemption of financial assets at amortised cost
(Purchase)/proceeds from sale of non-current assets held for sale
Proceeds from/(Purchase of) investments in associates and joint ventures
Proceeds from redemption of bank deposits
Placement of bank deposits
Proceeds from redemption of loans and notes receivable
Issuance of loans and notes receivable
Change in restricted cash
YEar
ENdEd
31 dECEmbEr 2018
YEar
ENdEd
31 dECEmbEr 2017
NOTE
(58 150)
(846)
5 396
(35 144)
(160)
6 236
245 756
190 272
(97 945)
1 693
(173)
20
-
(35 086)
-
(20 965)
-
36 574
-
43 658
170
10
21 314
(21 053)
4 282
(24 068)
-
(84 986)
1 744
(3 300)
-
(32 399)
-
(59 038)
-
19 379
-
13 680
-
901
(738)
33 399
(994)
1 343
(1 316)
3
9
9
Net cash used in investing activities
(91 569)
(112 322)
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 164
165
Consolidated Statement of Cash Flows
(continued)
(In millions of Russian Rubles)
fINANCINg ACTIVITIES
Proceeds from issuance of debt from non-banking activities
Repayment of debt from non-banking activities
Issuance of bonds
Redemption of bonds
Proceeds from subordinated debt
Repayment of subordinated debt
Dividends paid to shareholders
Dividends paid to non-controlling shareholders
Purchase of treasury shares
Proceeds from sale of treasury shares
Proceeds from issuance of shares by subsidiaries
Net cash used in financing activities
Net change in cash and cash equivalents
Effect of foreign exchange on cash and cash equivalents
YEar
ENdEd
31 dECEmbEr 2018
YEar
ENdEd
31 dECEmbEr 2017
NOTE
28
28
28
28
19
19
25 920
(49 466)
-
(6 979)
-
(1 359)
(100 920)
(46)
-
-
-
25 107
(5 434)
2 365
(25 740)
194
-
(108 479)
(15)
(32)
31
18
(132 850)
(111 985)
21 337
1 355
(34 035)
(274)
CASh ANd CASh EquIVALENTS AT ThE BEgINNINg Of ThE pERIOd
42 797
77 106
CASh ANd CASh EquIVALENTS AT ThE ENd Of ThE pERIOd
65 489
42 797
Notes
to the Consolidated
Financial Statements
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 (Note 27).
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 2018 and 2017 the government of Tatarstan
controls about 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 preparation
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 financial instruments
categorised at fair value through profit or loss (“FVTPL”) and at fair
value through other comprehensive income (“FVOCI”).
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.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements
166
167
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 the
Company and 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 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”.
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 other comprehensive income and 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 2018 and 2017 was RR 69.47
and RR 57.60 to US $, respectively. Average rate of exchange for
the years ended 31 December 2018 and 2017 were RR 62.71 and
RR 58.35 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
within non-current assets. If the total of consideration transferred,
non-controlling interest recognised and previously held interest
measured is less than the fair value of the net assets of the
subsidiary, the difference is recognised directly in the profit and
loss for the year.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the cost cannot be
recovered.
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 recognised at cost. Dividends received from associates
and joint ventures reduce the carrying value of the investment in
associates and joint ventures. Other post-acquisition changes in
Group’s share of net assets of an associate and joint ventures are
recognised as follows: (i) the Group’s share of 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 recognised
in other comprehensive income and presented separately, (iii) all
other changes in the Group’s share of the carrying value of net
assets of associates or joint ventures are recognised in 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.
fINANCIAL INSTRuMENTS – KEy MEASuREMENT TERMS
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The best evidence
of fair value is the price in an active market. An active market is
one in which transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information
on an ongoing basis. Fair value of financial instruments traded in
an active market is measured as the product of the quoted price
for the individual asset or liability and the number of instruments
held by the Group. This is the case even if a market’s normal daily
trading volume is not sufficient to absorb the quantity held and
placing orders to sell the position in a single transaction might
affect the quoted price.
Valuation techniques such as discounted cash flow models
or models based on recent arm’s length transactions or
consideration of financial data of the investees are used to
measure fair value of certain financial instruments for which
external market pricing information is not available. Fair value
measurements are analysed by level in the fair value hierarchy
as follows: (i) level one are measurements at quoted prices
(unadjusted) in active markets for identical assets or liabilities,
(ii) level two measurements are valuations techniques with all
material inputs observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices),
and (iii) level three measurements are valuations not based on
solely observable market data (that is, the measurement requires
significant unobservable inputs). Transfers between levels of the
fair value hierarchy are deemed to have occurred at the end of the
reporting period. Refer to Note 28.
Transaction costs are incremental costs that are directly
attributable to the acquisition, issue or disposal of a financial
instrument. An incremental cost is one that would not have been
incurred if the transaction had not taken place. Transaction costs
include fees and commissions paid to agents (including employees
acting as selling agents), advisors, brokers and dealers, levies by
regulatory agencies and securities exchanges, and transfer taxes
and duties. Transaction costs do not include debt premiums or
discounts, financing costs or internal administrative or holding
costs.
Amortised cost (“AC”) is the amount at which the financial
instrument was recognised at initial recognition less any principal
repayments, plus accrued interest, and for financial assets less
any allowance for expected credit losses (“ECL”). Accrued interest
includes amortisation of transaction costs deferred at initial
recognition and of any premium or discount to the maturity amount
using the effective interest method. Accrued interest income
and accrued interest expense, including both accrued coupon
and amortised discount or premium (including fees deferred at
origination, if any), are not presented separately and are included in
the carrying values of the related items in the consolidated statement
of financial position.
The effective interest method is a method of allocating interest
income or interest expense over the relevant period, so as to achieve
a constant periodic rate of interest (effective interest rate) on the
carrying amount. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts (excluding
future credit losses) through the expected life of the financial
instrument or a shorter period, if appropriate, to the gross carrying
amount of the financial instrument.
The effective interest rate discounts cash flows of variable
interest instruments to the next interest repricing date, except for
the premium or discount which reflects the credit spread over the
floating rate specified in the instrument, or other variables that are
not reset to market rates. Such premiums or discounts are amortised
over the whole expected life of the instrument. The present value
calculation includes all fees paid or received between parties to the
contract that are an integral part of the effective interest rate. For
assets that are purchased or originated credit impaired (“POCI”)
at initial recognition, the effective interest rate is adjusted for credit
risk, i.e. it is calculated based on the expected cash flows on initial
recognition instead of contractual payments.
fINANCIAL INSTRuMENTS – INITIAL RECOgNITION
Financial instruments at FVTPL are initially recorded at fair
value. All other financial instruments are initially recorded at fair
value adjusted for transaction costs. Fair value at initial recognition
is best evidenced by the transaction price. A gain or loss on initial
recognition is only recorded if there is a difference between fair value
and transaction price which can be evidenced by other observable
current market transactions in the same instrument or by a valuation
technique whose inputs include only data from observable markets.
After the initial recognition, an ECL allowance is recognised for
financial assets measured at AC and investments in debt instruments
measured at FVOCI, resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery
within the time frame established by regulation or market convention
(“regular way” purchases and sales) are recorded at trade date,
which is the date on which the Group commits to deliver a financial
asset. All other purchases are recognised when the entity becomes
a party to the contractual provisions of the instrument.
fINANCIAL ASSETS – CLASSIfICATION ANd SuBSEquENT
MEASuREMENT – MEASuREMENT CATEgORIES
The Group classifies financial assets
in the following
measurement categories: FVTPL, FVOCI and AC. The classification
and subsequent measurement of debt financial assets depends
on: (i) the Group’s business model for managing the related assets
portfolio and (ii) the cash flow characteristics of the asset.
fINANCIAL ASSETS – CLASSIfICATION ANd SuBSEquENT
MEASuREMENT – BuSINESS MOdEL.
The business model reflects how the Group manages the assets
in order to generate cash flows – whether the Group’s objective
is: (i) solely to collect the contractual cash flows from the assets
(“hold to collect contractual cash flows”,) or (ii) to collect both the
contractual cash flows and the cash flows arising from the sale of
assets (“hold to collect contractual cash flows and sell”) or, if neither
of (i) and (ii) is applicable, the financial assets are classified as part
of “other” business model and measured at FVTPL.
Business model is determined for a group of assets (on a portfolio
level) based on all relevant evidence about the activities that the
Group undertakes to achieve the objective set out for the portfolio
available at the date of the assessment. Factors considered by the
Group in determining the business model include the purpose and
composition of a portfolio, past experience on how the cash flows
for the respective assets were collected, how risks are assessed
and managed, how the assets’ performance is assessed and how
managers are compensated. Refer to Note 4 for critical judgements
applied by the Group in determining the business models for its
financial assets.
fINANCIAL ASSETS – CLASSIfICATION ANd SuBSEquENT
MEASuREMENT – CASh fLOw ChARACTERISTICS
Where the business model is to hold assets to collect contractual
cash flows or to hold contractual cash flows and sell, the Group
assesses whether the cash flows represent solely payments of
principal and interest (“SPPI”). Financial assets with embedded
derivatives are considered in their entirety when determining whether
their cash flows are consistent with the SPPI feature. In making this
assessment, the Group considers whether the contractual cash
flows are consistent with a basic lending arrangement, i.e. interest
includes only consideration for credit risk, time value of money,
other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or
volatility that is inconsistent with a basic lending arrangement,
the financial asset is classified and measured at FVTPL. The
SPPI assessment is performed on initial recognition of an asset
and it is not subsequently reassessed. Refer to Note 4 for critical
judgements applied by the Group in performing the SPPI test for its
financial assets.
fINANCIAL ASSETS – RECLASSIfICATION
Financial instruments are reclassified only when the business
model for managing the portfolio as a whole changes. The
reclassification has a prospective effect and takes place from the
beginning of the first reporting period that follows after the change
in the business model. The entity did not change its business model
during the current and comparative period and did not make any
reclassifications.
fINANCIAL ASSETS IMpAIRMENT –
CREdIT LOSS ALLOwANCE fOR ECL
The Group assesses, on a forward-looking basis, the ECL for
debt instruments measured at AC and FVOCI and for the exposures
arising from loan commitments and financial guarantee contracts,
for contract assets. The Group measures ECL and recognises
Net impairment losses on financial and contract assets at each
reporting date. The measurement of ECL reflects: (i) an unbiased
and probability weighted amount that is determined by evaluating
a range of possible outcomes, (ii) time value of money and (iii) all
reasonable and supportable information that is available without
undue cost and effort at the end of each reporting period about
past events, current conditions and forecasts of future conditions.
Debt instruments measured at AC and contract assets are
presented in the consolidated statement of financial position net
of the allowance for ECL. For loan commitments and financial
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169
guarantees, a separate provision for ECL is recognised as a
liability in the consolidated statement of financial position. For debt
instruments at FVOCI, changes in amortised cost, net of allowance
for ECL, are recognised in profit or loss and other changes in
carrying value are recognised in OCI as gains less losses on debt
instruments at FVOCI.
The Group applies a three stage model for impairment, based
on changes in credit quality since initial recognition. A financial
instrument that is not credit-impaired on initial recognition is
classified in Stage 1. Financial assets in Stage 1 have their ECL
measured at an amount equal to the portion of lifetime ECL that
results from default events possible within the next 12 months
or until contractual maturity, if shorter (“12 Months ECL”). If the
Group identifies a significant increase in credit risk (“SICR”) since
initial recognition, the asset is transferred to Stage 2 and its ECL
is measured based on ECL on a lifetime basis, that is, up until
contractual maturity but considering expected prepayments, if
any (“Lifetime ECL”). Refer to Note 28 for a description of how
the Group determines when a SICR has occurred. If the Group
determines that a financial asset is credit-impaired, the asset is
transferred to Stage 3 and its ECL is measured as a Lifetime ECL.
The Group’s definition of credit impaired assets and definition
of default is explained in Note 28. For financial assets that are
purchased or originated credit-impaired (“POCI Assets”), the
ECL is always measured as a Lifetime ECL. Note 28 provides
information about inputs, assumptions and estimation techniques
used in measuring ECL.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables. To measure the
expected credit losses, trade and other receivables have been
grouped based on shared credit risk characteristics and the
days past due. The Group calculates expected credit losses on
trade receivables based on historical data assuming reasonable
approximation of current losses rates adjusted on forward-looking
information.
fINANCIAL ASSETS – wRITE-Off
Financial assets are written-off, in whole or in part, when the
Group exhausted all practical recovery efforts and has concluded
that there is no reasonable expectation of recovery. The write-off
represents a derecognition event. The Group may write-off financial
assets that are still subject to enforcement activity when the Group
seeks to recover amounts that are contractually due, however,
there is no reasonable expectation of recovery.
fINANCIAL ASSETS – dERECOgNITION
The Group derecognises financial assets when (a) the assets
are redeemed or the rights to cash flows from the assets otherwise
expire or (b) the Group has transferred the rights to the cash flows
from the financial assets or entered into a qualifying pass-through
arrangement whilst (i) also transferring substantially all the risks
and rewards of ownership of the assets or (ii) neither transferring
nor retaining substantially all the 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 additional restrictions on the sale.
fINANCIAL ASSETS – MOdIfICATION
The Group sometimes renegotiates or otherwise modifies the
contractual terms of the financial assets. The Group assesses
whether the modification of contractual cash flows is substantial
considering, among other, the following factors: any new contractual
terms that substantially affect the risk profile of the asset (e.g. profit
share or equity-based return), significant change in interest rate,
change in the currency denomination, new collateral or credit
enhancement that significantly affects the credit risk associated
with the asset or a significant extension of a loan when the borrower
is not in financial difficulties.
If the modified terms are substantially different, the rights
to cash flows from the original asset expire and the Group
derecognises the original financial asset and recognises a new
asset at its fair value. The date of renegotiation is considered
to be the date of initial recognition for subsequent impairment
calculation purposes, including determining whether a SICR has
occurred. The Group also assesses whether the new loan or debt
instrument meets the SPPI criterion. Any difference between the
carrying amount of the original asset derecognised and fair value
of the new substantially modified asset is recognised in profit
or loss, unless the substance of the difference is attributed to
a capital transaction with owners.
In a situation where the renegotiation was driven by financial
difficulties of the counterparty and inability to make the originally
agreed payments, the Group compares the original and revised
expected cash flows to assets whether the risks and rewards of
the asset are substantially different as a result of the contractual
modification. If the risks and rewards do not change, the modified
asset is not substantially different from the original asset and
the modification does not result in derecognition. The Group
recalculates the gross carrying amount by discounting the
modified contractual cash flows by the original effective interest
rate (or credit-adjusted effective interest rate for POCI financial
assets), and recognises a modification gain or loss in profit or
loss.
fINANCIAL LIABILITIES – MEASuREMENT CATEgORIES
Financial liabilities are classified as subsequently measured at
AC, except for (i) financial liabilities at FVTPL: this classification is
applied to derivatives, financial liabilities held for trading (e.g. short
positions in securities), contingent consideration recognised by
an acquirer in a business combination and other financial liabilities
designated as such at initial recognition and (ii) financial guarantee
contracts and loan commitments.
fINANCIAL LIABILITIES – dERECOgNITION
Financial liabilities are derecognised when they are extinguished
(i.e. when the obligation specified in the contract is discharged,
cancelled or expires).
An exchange between the Group and its original lenders of debt
instruments with substantially different terms, as well as substantial
modifications of the terms and conditions of existing financial
liabilities, are accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The
terms are substantially different if the discounted present value of
the cash flows under the new terms, including any fees paid net
of any fees received and discounted using the original effective
interest rate, is at least 10% different from the discounted present
value of the remaining cash flows of the original financial liability.
In addition, other qualitative factors, such as the currency that
the instrument is denominated in, changes in the type of interest
rate, new conversion features attached to the instrument and
change in loan covenants are also considered. If an exchange
of debt instruments or modification of terms is accounted for as
an extinguishment, any costs or fees incurred are recognised as
part of the gain or loss on the extinguishment. If the exchange or
modification is not accounted for as an extinguishment, any costs
or fees incurred adjust the carrying amount of the liability and are
amortised over the remaining term of the modified liability.
Modifications of liabilities that do not result in extinguishment are
accounted for as a change in estimate using a cumulative catch up
method, with any gain or loss recognised in profit or loss, unless
the economic substance of the difference in carrying values is
attributed to a capital transaction with owners.
fINANCIAL LIABILITIES dESIgNATEd AT fVTpL
The Group may designate certain liabilities at FVTPL at initial
recognition. Gains and losses on such liabilities are presented in
profit or loss except for the amount of change in the fair value that is
attributable to changes in the credit risk of that liability (determined
as the amount that is not attributable to changes in market
conditions that give rise to market risk), which is recorded in OCI and
is not subsequently reclassified to profit or loss. This is unless such
a presentation would create, or enlarge, an accounting mismatch,
in which case the gains and losses attributable to changes in credit
risk of the liability are also presented in profit or loss.
An impairment allowance estimated using the expected credit loss
model is recognised in profit or loss for the year. All other changes
in the carrying value are recognised in OCI. When the debt security
is derecognised, the cumulative gain or loss previously recognised
in OCI is reclassified from OCI to profit or loss.
Investments in debt securities are carried at FVTPL if they
do not meet the criteria for AC or FVOCI. The Group may also
irrevocably designate investments in debt securities at FVTPL on
initial recognition if applying this option significantly reduces an
accounting mismatch between financial assets and liabilities being
recognised or measured on different accounting bases.
OffSETTINg fINANCIAL INSTRuMENTS
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position only when there is
a legally enforceable right to offset the recognised amounts, and
there is an intention to either settle on a net basis, or to realise the
asset and settle the liability simultaneously. Such a right of set off
(a) must not be contingent on a future event and (b) must be legally
enforceable in all of the following circumstances: (i) in the normal
course of business, (ii) in the event of default and (iii) in the event of
insolvency or bankruptcy.
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 AC because: (i) they are held for collection of contractual
cash flows and those cash flows represent SPPI, and (ii) they are
not designated at FVTPL. Features mandated solely by legislation,
such as the bail-in legislation in certain countries, do not have an
impact on the SPPI test, unless they are included in contractual
terms such that the feature would apply even if the legislation is
subsequently changed.
MANdATORy RESERVE dEpOSITS wITh ThE CB Rf
Mandatory cash balances with the CBRF are carried at AC and
represent non-interest bearing mandatory reserve deposits, which
are not available to finance the Group’s day to day operations, and
hence are not considered as part of cash and cash equivalents for
the purposes of the consolidated statement of cash flows.
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 due on fixed or determinable dates. Amounts
due from other banks are carried at AC when: (i) they are held for
the purposes of collecting contractual cash flows and those cash
flows represent SPPI, and (ii) they are not designated at FVTPL. Due
from banks that mature within three months or less from the date of
placement are included in cash and cash equivalents.
INVESTMENTS IN dEBT SECuRITIES
Based on the business model and the cash flow characteristics,
the Group classifies investments in debt securities as carried at
AC, FVOCI or FVTPL. Debt securities are carried at AC if they are
held for collection of contractual cash flows and where those cash
flows represent SPPI, and if they are not voluntarily designated at
FVTPL in order to significantly reduce an accounting mismatch.
Debt securities are carried at FVOCI if they are held for collection
of contractual cash flows and for selling, where those cash flows
represent SPPI, and if they are not designated at FVTPL.
Interest income from these assets is calculated using the
effective interest method and recognised in profit or loss.
INVESTMENTS IN EquITy SECuRITIES
Financial assets that meet the definition of equity from
the issuer’s perspective, i.e. instruments that do not contain
a contractual obligation to pay cash and that evidence a residual
interest in the issuer’s net assets, are considered as investments
in equity securities by the Group. Investments in equity securities
are measured at FVTPL, except where the Group elects at initial
recognition to irrevocably designate an equity investments at
FVOCI. The Group’s policy is to designate equity investments as
FVOCI when those investments are held for strategic purposes
other than solely to generate investment returns. When the FVOCI
election is used, fair value gains and losses are recognised in OCI
and are not subsequently reclassified to profit or loss, including
on disposal. Impairment losses and their reversals, if any, are not
measured separately from other changes in fair value. Dividends
continue to be recognised in profit or loss when the Group’s right
to receive payments is established except when they represent
a recovery of an investment rather than a return on such investment.
LOANS ANd AdVANCES TO CuSTOMERS
Loans and advances to customers are recorded when the Group
advances money to purchase or originate a loan due from a customer.
Based on the business model and the cash flow characteristics, the
Group classifies loans and advances to customers into one of the
following measurement categories: (i) AC: loans that are held for
collection of contractual cash flows and those cash flows represent
SPPI and loans that are not voluntarily designated at FVTPL, and (ii)
FVTPL: loans that do not meet the SPPI test or other criteria for AC or
FVOCI are measured at FVTPL.
Note 28 provides information about inputs, assumptions and
estimation techniques used in measuring ECL.
LOAN COMMITMENTS
The Group issues commitments to provide loans in the course
of its banking activities. These commitments are irrevocable or
revocable only in response to a material adverse change. Such
commitments are initially recognised at their fair value, which is
normally evidenced by the amount of fees received. This amount is
amortised on a straight line basis over the life of the commitment,
except for commitments to originate loans if it is probable that the
Group will enter into a specific lending arrangement and does not
expect to sell the resulting loan shortly after origination; such loan
commitment fees are deferred and included in the carrying value of
the loan on initial recognition. At the end of each reporting period,
the commitments are measured at (i) the remaining unamortised
balance of the amount at initial recognition, plus (ii) the amount
of the loss allowance determined based on the expected credit
loss model, unless the commitment is to provide a loan at a below
market interest rate, in which case the measurement is at the higher
of these two amounts.
The carrying amount of the loan commitments represents a
liability. For contracts that include both a loan and an undrawn
commitment and where the Group cannot separately distinguish the
ECL on the undrawn loan component from the loan component, the
ECL on the undrawn commitment is recognised together with the
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 170
171
loss allowance for the loan. To the extent that the combined ECLs
exceed the gross carrying amount of the loan, they are recognised
as a liability.
SuBORdINATEd dEBT
Subordinated debt can only be paid in the event of a liquidation
after the claims of other higher priority creditors have been met.
Subordinated debt is carried at AC.
fINANCIAL guARANTEES
Financial guarantees require the Group in the course of its
banking activities to make specified payments to reimburse the
holder of the guarantee for a loss it incurs because a specified
debtor fails to make payment when due in accordance with
the original or modified terms of a debt instrument. Financial
guarantees are initially recognised at their fair value, which is
normally evidenced by the amount of fees received. This amount
is amortised on a straight line basis over the life of the guarantee.
At the end of each reporting period, the guarantees are measured at
the higher of (i) the amount of the loss allowance for the guaranteed
exposure determined based on the expected loss model and (ii) the
remaining unamortised balance of the amount at initial recognition.
In addition, an ECL loss allowance is recognised for fees receivable
that are recognised in the statement of financial position as an asset.
SALE ANd REpuRChASE AgREEMENTS
ANd LENdINg Of SECuRITIES
Sale and repurchase agreements (“repo agreements”), which
effectively provide a lender’s return to the counterparty, are
treated as secured financing transactions. Securities sold under
such sale and repurchase agreements are not derecognised.
Securities sold under repo agreements are presented as other
financial assets carried at FVTPL, FVOCI, AC. The corresponding
liability is presented within amounts “Due to other banks and CB
RF” or “Customer accounts”.
Securities purchased under agreements to resell (“reverse
repo agreements”), which effectively provide a lender’s return to
the Group, are recorded as “Due from other banks” or “Banking
loans and advances to customers”, as appropriate. The difference
between the sale and repurchase price, adjusted by interest and
dividend income collected by the counterparty, is treated as
interest income and accrued over the life of repo agreements
using the effective interest method.
NOTES RECEIVABLE
Notes receivable are included in “Other financial assets” and
are carried at AC if: (i) they are held for collection of contractual
cash flows and those cash flows represent SPPI, and (ii) they are
not designated at FVTPL.
TRAdE ANd OThER RECEIVABLES
Trade and other receivables are recognised initially at fair value
and are subsequently carried at AC using the effective interest
method.
TRAdE ANd OThER pAyABLES
Trade payables are accrued when the counterparty performs its
obligations under the contract and are recognised initially at fair value
and subsequently carried at AC using the effective interest method.
duE TO OThER BANKS ANd CB Rf
Amounts due to other banks and CB RF are recorded
when money or other assets are advanced to the Group by
counterparty banks. The non-derivative liability is carried at AC.
If the Group purchases its own debt, the liability is removed from
the consolidated statement of financial position and the difference
between the carrying amount of the liability and the consideration
paid is included in gains or losses arising from retirement of debt.
CuSTOMER ACCOuNTS
Customer accounts are non-derivative liabilities to individuals,
state or corporate customers and are carried at AC.
issued
dEBT SECuRITIES ANd BONdS ISSuEd
Debt securities
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 carried at AC. 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 recognised as a gain or
loss on redemption of debt.
NON-CuRRENT ASSETS CLASSIfIEd AS hELd fOR SALE
Non-current assets are classified in the statement of financial
position as “Non-current assets held for sale” if their carrying amount
will be recovered principally through a sale transaction within twelve
months after the end of the reporting period. Assets are reclassified
when all of the following conditions are met: (a) the assets are
available for immediate sale in their present condition; (b) the Group’s
management approved and initiated an active programme to locate
a buyer; (c) the assets are actively marketed for sale at a reasonable
price; (d) the sale is expected within one year and (e) it is unlikely that
significant changes to the plan to sell will be made or that the plan
will be withdrawn. Non-current assets classified as held for sale in the
current period’s statement of financial position are not reclassified
or re-presented in the comparative statement of financial position to
reflect the classification at the end of the current period.
Non-current assets held for sale are measured at the lower of its
carrying amount and fair value less costs of disposal. If the fair value
less costs of disposal of an asset held for sale is lower than its carrying
amount, an impairment loss is recognised 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 of disposal is recognised to the extent of the
cumulative impairment loss that was previously recognised in relation
to that specific asset.
pRECIOuS METALS
The Group has a practice of taking delivery of precious metals
and selling them within a short period after delivery, for the purpose
of generating a profit from short-term fluctuations in price or
dealer’s margin. Precious metals are carried at purchase price
from CB RF and are subsequently measured at fair value based on
London precious metals exchange.
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.
If there is an indication that the assets, goods or services
relating to a prepayment will not be received, the carrying value of
the prepayment is written down accordingly and a corresponding
impairment loss is recognised in the profit or loss for the year.
MINERAL ExTRACTION TAx
Mineral extraction tax (MET) on crude oil is defined monthly
as an amount of volume produced per fixed tax rate (RR 919 per
ton in 2018 and 2017, respectively) adjusted depending on the
monthly average market prices of the Urals blend and the RR/
US $ average exchange rate for the preceding month, taking into
account the features of oil production. MET liabilities are lower for
fields whose depletion rate exceeds 80% of their proved reserves as
per the Russian classification of reserves and resources, as a result
of using a reduction factor that depends on the level of depletion.
The Company saves 3.5% at a field for each percent of depletion
above the 80% threshold. In addition, lower MET is envisaged for
small fields via application of a factor that characterises the volume
of reserves. The amount of tax relief for depleted and small fields
is calculated using the base MET rate of RR 559 per tonne
(in 2017 - RR 559 per tonne).
Furthermore, the zero MET tax rate is applied to the production of
highly viscous crude oil (with viscosity of 10,000 Megapascal second
in reservoir conditions) and oil produced from Domanic productive
sediments. In addition, another relief in the form of a lower MET is
available for production of highly viscous oil with viscosity in the range
from 200 to 10,000 Megapascal second (in reservoir conditions) and
for production of oil in the Nenets Autonomous Okrug (via application
of Kkan ratio that characterises the production area and oil properties.
The saving in these circumstances is calculated using the base MET
tax rate of RR 559 per tonne (in 2017 - RR 559 per tonne).
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% (starting from
1 January 2019 – 20%) 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. Where provision has been made for the
ECL of receivables, the impairment loss is recorded for the gross
amount of the debtor, including VAT.
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 recognised 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 capitalised.
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 capitalised as
exploration and evaluation assets on a “field by field” basis pending
determination of whether proved reserves have been found.
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.
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.
ОpROpERTy, pLANT ANd EquIpMENT
Property, plant and equipment are carried at historical cost
of acquisition or construction less accumulated depreciation,
depletion, amortization and impairment.
Proved oil and gas properties include the initial estimate of
the costs of dismantling and removing the item and restoring the
site on which it is located. The cost of maintenance, repairs and
replacement of minor items of property are expensed when incurred
within operating expenses; renewals and improvements of assets
are capitalised and depreciated during the remaining useful life.
Cost of replacing major parts or components of property, plant and
equipment items are capitalised and the replaced part is retired.
Advances made on property, plant and equipment and
construction in progress are accounted for within Construction in
progress.
Long-lived assets, including proved oil and gas properties at
a 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 of disposal 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 petrol stations. Impairment losses are recognised 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 amortised cost or fair value, less cost of disposal.
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 the straight-line basis over the period of each
license validity.
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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
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.
dEBT
Debt is recognised initially at fair value, net of transaction costs
incurred and is subsequently carried at AC using the effective
interest method.
INTEREST INCOME ON NON-BANKINg ACTIVITIES
Interest income on non-banking activities is recognised on
a time-proportion basis using the effective interest method.
This method defers, as part of interest income, all fee received
between the parties to the contract that are an integral part of the
effective interest rate, all other premiums.
Fees integral to the effective interest rate include origination
fees received by the Group relating to the creation or acquisition of
a financial asset.
For financial assets that are originated or purchased credit-
impaired, the effective interest rate is the rate that discounts the
expected cash flows (including the initial expected credit losses)
to the fair value on initial recognition (normally represented by the
purchase price). As a result, the effective interest is credit-adjusted.
Interest income is calculated by applying the effective interest
rate to the gross carrying amount of financial assets, except for (i)
financial assets that have become credit impaired (Stage 3), for
which interest revenue is calculated by applying the effective interest
rate to their AC, net of the ECL provision, and (ii) financial assets that
are purchased or originated credit impaired, for which the original
credit-adjusted effective interest rate is applied to the AC.
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 recognised using the projected unit
credit method.
The cost of providing pensions is accrued and charged to
staff expense within operating expenses in the Consolidated
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 arises as the
actuarial gains or losses from changes in assumptions and from
experience adjustments with regard to post employment benefit
plans are recognised immediately in other comprehensive income.
Actuarial gains and losses related to other long-term benefits are
recognised immediately in the profit or loss for the year.
Past service costs are recognised as an expense immediately.
Plan assets are measured at fair value and are subject to
certain limitations. Fair value of plan assets is based on market
prices. When no market price is available the fair value of plan
assets is estimated by different valuation techniques, including
discounted expected future cash 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.
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 recognised as an
increase or decrease of the cost of the relevant asset.
The Group’s petrochemical, refining and marketing and
distribution operations are carried out at large manufacturing
facilities and fuel outlets. The nature of these operations is such
that the ultimate date of decommissioning of any sites or facilities
is unclear. Current regulatory and licensing rules do not provide for
liabilities related to the liquidation of such manufacturing facilities or
of retail fuel outlets. Management therefore believes that there are
no legal or contractual obligations related to decommissioning or
other disposal of these assets.
INCOME TAxES
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 recognised in profit or loss for the year, except if it is recognised in
other comprehensive income or directly in equity because it relates
to transactions that are also recognised, in the same or a different
period, in other comprehensive income or directly in equity.
Current tax is the amount expected to be paid to, or recovered
from, the taxation authorities in respect of taxable 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. In accordance
with the initial recognition exemption, deferred taxes are not
recorded for temporary differences on initial recognition of an asset
or a liability in a transaction other than a business combination if the
transaction, when initially recorded, affects neither accounting nor
taxable profit.
Deferred tax assets for deductible temporary differences and
tax loss carry forwards are recorded only to the extent that it is
probable that the temporary difference will reverse in the future and
there is sufficient future taxable profit available against which the
deductions can be utilised.
Deferred tax balances are measured at tax rates enacted or
substantively enacted at the end of the reporting period, which are
expected to apply to the period when the temporary differences
will reverse or the tax loss carry forwards will be utilised. Deferred
tax assets and liabilities are netted only within the Consolidated
Taxpayer Group or individual companies of the Group.
Income tax penalties expense and income tax penalties payable
are included in Taxes other than income tax in the consolidated
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
The Group’s business activities include sales of crude oil and
refined products, sales of tires and petrochemical raw materials.
Revenues are recognized at a point in time when control over
such products has transferred to a customer, which refers to ability
to direct the use of, and obtain substantially all of the remaining
benefits from the products. Transfer occurs when the products have
been shipped to the specific location, the risks of obsolescence and
loss have been transferred to the customer, and either the customer
has accepted the products in accordance with the sales contract,
the acceptance provisions have lapsed, or the group has objective
evidence that all criteria for acceptance have been satisfied.
The Group considers indicators that customer has obtained
control of an asset, which include, but are not limited to the
following: the Group has a present right to payment for the
products; the Group has transferred physical possession of the
products; the customer has legal title to the products; the customer
has the significant risks and rewards of ownership of the products;
the customer has accepted the products. Not all of the indicators
need to be met for management to conclude that control has
transferred and revenue could be recognized. Management uses
judgement to determine whether factors collectively indicate that
the customer has obtained control.
When the consideration includes a variable amount, minimum
amounts must be recognized that are not at significant risk of reversal.
The sales price is determined on a provisional basis, and the fair
value of the final sales price adjustment is re-estimated continuously
with changes in fair value recognized as an adjustment to revenue.
The group operates a chain of own petrol (gas) stations selling
refined products. Revenue from the sale of products is recognized
when a group entity sells a product to the customer. Payment of the
transaction price is due immediately when the customer purchases
the fuel. Since no right of return, no refund liability recognized.
discretionary dividends are both classified as equity.
Revenues from providing services are recognized in the period
Dividends paid to shareholders are determined by the Board of
directors and approved at the annual or extraordinary 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 fROM CONTRACTS wITh CuSTOMERS
Revenues represent the fair value of consideration received or
receivable for the sale of goods and services in the normal course of
business, net of discounts, export duties, value-added tax and excise.
in which the services are rendered.
A receivable is recognized when the goods are delivered as this
is the point in time that the consideration is unconditional because
only the passage of time is required before the payment is due.
No significant element of financing is deemed present as the sales
are made with short-term credit terms consistent with market
practice. As a consequence, the group does not adjust any of the
transaction prices for the time value of money.
RECOgNITION Of INTEREST, fEE ANd COMMISSION
INCOME ANd ExpENSE ON BANKINg ACTIVITIES
Interest income and expense are recognised on an accrual
basis calculated using the effective interest method. . This method
defers, as part of interest income or expense, all fees paid or
received between the parties to the contract that are an integral
part of the effective interest rate, transaction costs and all other
premiums or discounts.
Fees integral to the effective interest rate include origination fees
received or paid by the entity relating to the creation or acquisition
of a financial asset or issuance of a financial liability, for example
fees for evaluating creditworthiness, evaluating and recording
guarantees or collateral, negotiating the terms of the instrument
and for processing transaction documents. Commitment fees
received by the Group to originate loans at market interest rates are
integral to the effective interest rate if it is probable that the Group
will enter into a specific lending arrangement and does not expect
to sell the resulting loan shortly after origination. The Group does
not designate loan commitments as financial liabilities at FVTPL.
For financial assets that are originated or purchased credit-
impaired, the effective interest rate is the rate that discounts the
expected cash flows (including the initial expected credit losses)
to the fair value on initial recognition (normally represented
by the purchase price). As a result, the effective interest is
credit-adjusted.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 174
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Interest income is calculated by applying the effective interest
rate to the gross carrying amount of financial assets, except for (i)
financial assets that have become credit impaired (Stage 3), for
which interest revenue is calculated by applying the effective interest
rate to their AC, net of the ECL provision, and (ii) financial assets that
are purchased or originated credit impaired, for which the original
credit-adjusted effective interest rate is applied to the AC.
Fee and commission income is recognised over time on
a straight line basis as the services are rendered, when the
customer simultaneously receives and consumes the benefits
provided by the Group’s performance. Such income includes
recurring fees for account maintenance, account servicing
fees, account subscription fees, premium service package fees,
portfolio and other asset management advisory and service fees,
wealth management and financial planning services, or fees for
servicing loans on behalf of third parties, etc. Variable fees are
recognised only to the extent that management determines that
it is highly probable that a significant reversal will not occur.
Other fee and commission income is recognised at a point in
time when the Group satisfies its performance obligation, usually
upon execution of the underlying transaction. The amount of fee
or commission received or receivable represents the transaction
price for the services identified as distinct performance obligations.
Such income includes fees for arranging a sale or purchase of
foreign currencies on behalf of a customer, fees for processing
payment transactions, fees for cash settlements, collection or
cash disbursements, as well as, commissions and fees arising
from negotiating, or participating in the negotiation of a transaction
for a third party, such as the acquisition of loans, shares or other
securities or the purchase or sale of businesses.
TRANSpORTATION ExpENSES
Transportation expenses recognised in the consolidated
statements of profit or loss and other comprehensive income
represent all expenses incurred by the Group to transport crude oil
and refined 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.
Accounting policies applicable to the comparative period
ended 31 december 2017 that were amended by IfRS 9 and
IfRS 15, are as follows.
fINANCIAL ASSETS
All financial assets are initially recognised when an entity
becomes a party to the contract, they are recognised 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 Group initially recognises loans and receivables
on the date that they are originated. All other financial assets are
recognised initially on the trade date, which is the date that the Group
becomes a party to the contractual provisions of the instrument. 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 amortised 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 recognised
as selling, general and administrative expenses in the consolidated
statement 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
recognised at fair value. These balances are subsequently re-
measured at amortised 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 recognised 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 recognised 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
recognised 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 derecognised 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 recognised 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. Foreign
exchange gains/losses on available-for-sale debt securities are
reflected in profit or loss for the year. All other elements of changes
in the fair value are recognised in other comprehensive income
until the investment is derecognised or impaired, at which time the
cumulative gain or loss is reclassified from other comprehensive
income to profit or loss for the year. Impairment losses are
recognised in profit or loss for the year when incurred as a result
of one or more events (“loss events”) that occurred after the initial
recognition of investment securities available for sale.
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 recognised in the other comprehensive
income) is recognised 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 amortised 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 AMORTISEd COST
Impairment losses are recognised 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 recognised 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 recognised using the effective interest method.
fINANCIAL LIABILITIES
All financial liabilities are recognised 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 recognised initially at fair value.
Subsequent to initial recognition, these financial liabilities are
measured at amortised cost using the effective interest method.
A financial liability is derecognised 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 recognised 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 recognised
amounts, and there is an intention to either settle on a net basis, or
to realise the asset and settle the liability simultaneously.
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.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 176
177
INTEREST INCOME ON NON-BANKINg ACTIVITIES
Interest income on non-banking activities is recognised on
a time-proportion basis using the effective interest method.
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.
Note 4: Critical accounting estimates and
judgements in applying accounting policies
The Group makes estimates and assumptions that affect the
amounts recognised in the consolidated 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 recognised 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;
• Accounting of investments in JSC “National Non-State Pension
• Financial assets impairment;
• Financial assets classification;
• Financial instruments fair value estimation..
Fund”;
Proved reserves are estimated by reference to available
geological and engineering data and only include volumes for
which access to market is assured with reasonable certainty.
Estimates of oil and gas reserves are inherently imprecise, require
the application of judgment and are subject to regular revision,
either upward or downward, based on new information such as
from the drilling of additional wells, observation of long-term
reservoir performance under producing conditions and changes
in economic factors, including product prices, contract terms or
development plans. The Group estimates its oil and gas reserves
in accordance with rules promulgated by the Oil and Gas Reserves
Committee of the Society of Petroleum Engineers (SPE) for proved
reserves.
Changes to the Group’s estimates of proved 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
capitalised exploration drilling costs being written off in the profit
and loss for the year.
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 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 capitalised
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.
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.
Management reviews the appropriateness of the assets’ useful
economic lives and residual values at the end of each reporting
period. 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 recognised 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:
impacT ON DEcOmmissiONiNG prOvisiON
chaNGE iN
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
Discount
rate
+1%
-1%
(7 207)
9 353
(8 457)
11 148
Information about decommissioning provision is presented
in Note 12.
IMpAIRMENT Of pROpERTy, pLANT ANd EquIpMENT
At 31 December 2018 management assessed whether there
is any indication of impairment of long-lived assets. As result
impairment of exploration assets was recognised (Note 12). Based
on the stable financial performance, absence of significant adverse
changes in economic and market environment and in interest rates
the management believes that there is no indication of impairment of
other long-lived assets as of 31 December 2018 and 2017.
ACCOuNTINg Of INVESTMENTS
IN jSC “NATIONAL NON-STATE pENSION fuNd”
As at 31 December 2018 and 2017 the Group has 74.46%
of shares of JSC “National Non-Governmental Pension Fund”.
The Group does not exercise either control or significant influence
over JSC “National Non-Governmental Pension Fund” based on
corporate governance and pension legislation. These investments
are presented within financial assets carried at FVOCI as
at 31 December 2018 (within available-for-sale investments as
at 31 December 2017).
fINANCIAL ASSETS IMpAIRMENT
ECL measurement. Calculation and measurement of ECLs is an
area of significant judgement, and implies methodology, models
and data inputs. The following components of ECL calculation
have the major impact on credit loss allowance for ECLs:
default definition, significant increase in credit risk (SICR), probability
of default (PD), exposure at default (EAD), loss given default (LGD),
macromodels and scenario analysis for credit impaired loans. The
Group regularly reviews and validates models and inputs to the
models to reduce any differences between expected credit loss
estimates and actual credit loss experience. Refer to Note 28.
Significant increase in credit risk (SICR). In order to determine
whether there has been a significant increase in credit risk, the Group
compares the risk of a default occurring over the life of a financial
instrument at the end of the reporting date with the risk of default at the
date of initial recognition. The assessment considers relative increase
in credit risk rather than achieving a specific level of credit risk at the
end of the reporting period. The Group considers all reasonable and
supportable forward looking information available without undue cost
and effort, which includes a range of factors, including behavioural
aspects of particular customer portfolios. The Group identifies
behavioural indicators of increases in credit risk prior to delinquency
and incorporated appropriate forward looking information into
the credit risk assessment, either at an individual instrument, or on
a portfolio level. Refer to Note 28.
fINANCIAL ASSETS CLASSIfICATION
Business model assessment. The business model drives
classification of financial assets. Management applied judgement
in determining the level of aggregation and portfolios of financial
instruments when performing the business model assessment.
When assessing sales transactions, the Group considers their
historical frequency, timing and value, reasons for the sales and
expectations about future sales activity. Sales transactions aimed
at minimising potential losses due to credit deterioration are
considered consistent with the “hold to collect” business model.
Other sales before maturity, not related to credit risk management
activities, are also consistent with the “hold to collect” business
model, provided that they are infrequent or insignificant in
value, both individually and in aggregate. The Group assesses
significance of sales transactions by comparing the value of the
sales to the value of the portfolio subject to the business model
assessment over the average life of the portfolio. In addition, sales
of financial asset expected only in stress case scenario, or in
response to an isolated event that is beyond the Group’s control,
is not recurring and could not have been anticipated by the Group,
are regarded as incidental to the business model objective and do
not impact the classification of the respective financial assets.
The “hold to collect and sell” business model means that assets
are held to collect the cash flows, but selling is also integral to
achieving the business model’s objective, such as, managing
liquidity needs, achieving a particular yield, or matching the
duration of the financial assets to the duration of the liabilities that
fund those assets.
The residual category includes those portfolios of financial
assets, which are managed with the objective of realising cash
flows primarily through sale, such as where a pattern of trading
exists. Collecting contractual cash flow is often incidental for this
business model.
Assessment whether cash flows are solely payments of
principal and interest (“SPPI”). Determining whether a financial
asset’s cash flows are solely payments of principal and interest
required judgement.
The time value of money element may be modified, for example,
if a contractual interest rate is periodically reset but the frequency
of that reset does not match the tenor of the debt instrument’s
underlying base interest rate, for example a loan pays three months
interbank rate but the rate is reset every month. The effect of the
modified time value of money was assessed by comparing relevant
instrument’s cash flows against a benchmark debt instrument with
SPPI cash flows, in each period and cumulatively over the life of the
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 178
179
instrument. The assessment was done for all reasonably possible
scenarios, including reasonably possible financial stress situation
that can occur in financial markets.
The Group identified and considered contractual terms that
change the timing or amount of contractual cash flows.
The SPPI criterion is met if a loan allows early settlement and the
prepayment amount substantially represents principal and accrued
interest, plus a reasonable additional compensation for the early
termination of the contract. The asset’s principal is the fair value
at initial recognition less subsequent principal repayments, i.e.
instalments net of interest determined using the effective interest
method. As an exception to this principle, the standard also allows
instruments with prepayment features that meet the following
condition to meet SPPI: (i) the asset is originated at a premium
or discount, (ii) the prepayment amount represents contractual
per amount and accrued interest and a reasonable additional
compensation for the early termination of the contract, and (iii) the
fair value of the prepayment feature is immaterial at initial recognition.
The Group’s loans, primarily to real estate developers, have cash
flows that highly depend on performance of the underlying assets.
The loans are carried at FVTPL where management determined that
such loans are in substance non-recourse.
The instruments that failed the SPPI test are measured at FVTPL
are described in Note 8.
fINANCIAL INSTRuMENTS
fAIR VALuE ESTIMATION
Financial instruments carried at FVTPL or FVOCI 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 recognised in the
consolidated statement of profit or loss and other comprehensive
income on initial recognition unless the value is based on
valuation technique that uses only data from observable markets.
Subsequent gains or losses are only recognised 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 28.
Accounting judgements applicable to the comparative period
ended 31 December 2017 that were amended by IFRS 9, are as
follows:
(for comparatives only);
• Impairment of loans to customers on banking activities
• Impairment of other loans (for comparatives only);
• Impairment of available-for-sale equity
• Held-to-maturity financial assets (for comparatives only).
(for comparatives only);
investments
hELd-TO-MATuRITy fINANCIAL ASSETS
(fOR COMpARATIVES ONLy)
Management applies judgement in assessing whether financial
assets can be categorised as held-to-maturity. In making this
judgement, the Group evaluates its intention and ability to hold the
assets to maturity. If the Group fails to keep these investments to
maturity other than in certain specific circumstances – for example,
selling an insignificant amount close to maturity – it will be required
to reclassify the entire class as available-for-sale. The investments
would, therefore, be measured at fair value rather than amortised
cost. Furthermore, the Group would not be able to classify any
financial assets as held-to-maturity for the following two annual
reporting periods.
IMpAIRMENT Of LOANS
TO CuSTOMERS
ON BANKINg ACTIVITIES
(fOR COMpARATIVES ONLy)
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 behaviour, 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.
IMpAIRMENT Of OThER LOANS
(fOR COMpARATIVES ONLy)
The Group also regularly reviews its other loans issued to
assess impairment. In determining whether an impairment loss
should be recorded in profit or loss, the Group makes judgements
as to whether there is any observable data indicating that there
is a measurable decrease in the estimated future cash flows for
borrowers. To assess future cash flows, management of the Group
analyses the information on the debtor’s solvency, requests expert
estimates regarding the market value of the collateral provided,
builds (where possible) models of discounted expected cash
flows, requests additional information to estimate the probability of
non-repayment of the relevant debt in the terms established by the
contracts.
IMpAIRMENT Of AVAILABLE-fOR-SALE EquITy
INVESTMENTS (fOR COMpARATIVES ONLy)
The Group determines that available-for-sale equity investments
are impaired when there has been a significant or prolonged
decline in the fair value below its cost. This determination of what
is significant or prolonged requires judgement. In making this
judgement, the Group evaluates among other factors, the volatility
in share price. In addition, impairment may be appropriate when
there is evidence of changes in technology or a deterioration in the
financial health of the investee, industry and sector performance, or
operational or financing cash flows.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 180
181
Note 5: adoption of new or revised
standards and interpretations
AdOpTION Of IfRS 9
The Group has adopted IFRS 9, Financial Instruments, with a
date of transition of 1 January 2018, which resulted in changes in
accounting policies for recognition, classification and measurement
of financial assets and liabilities and impairment of financial assets.
The Group elected not to restate comparative figures and
recognised any adjustments to the carrying amounts of financial
assets and liabilities at the date of initial application in the opening
retained earnings of the current period. Consequently, the revised
requirements of the IFRS 7, Financial Instruments: Disclosures,
have only been applied to the current period. The comparative
period disclosures repeat those disclosures made in the prior year.
Details of the specific IFRS 9 accounting policies applied in the
current period are described in Note 3.
The impact of the IFRS 9 adoption on the Group is disclosed
below:
mEasurEmENT caTEGOrY ias 39 as
aT 31 DEcEmbEr 2017
mEasurEmENT caTEGOrY ifrs 9 as
aT 1 jaNuarY 2018
rEmEasurEmENT
fiNaNcial assETs
caTEGOrY
amOuNT
rEclassificaTiON
Ecl
OThEr
caTEGOrY
amOuNT
CASh ANd CASh EquIVALENTS
Cash on hand and in banks
Term deposits
Due from banks
loans and receivables
loans and receivables
loans and receivables
Banking: Mandatory reserve
deposits with CB RF
loans and receivables
ACCOuNTS RECEIVABLE
Trade receivables
Other financial receivables
loans and receivables
loans and receivables
Banking: Loans to customers
loans and receivables
29 219
11 906
1 672
1 916
59 075
5 771
150
983
-
-
-
-
-
-
-
-
-
-
- amortised cost
- amortised cost
- amortised cost
- amortised cost
-
(54)
- amortised cost
- amortised cost
(15 316)
(6 834)
- amortised cost
Banking: Loans to customers
loans and receivables
-
15 316
-
(717) fvOci
OThER fINANCIAL ASSETS
Bank deposits
Due from banks
REPO with banks
Notes receivable
Loans to employees
Other loans
Other loans
Held-for-trading financial assets
Held-for-trading financial assets
Available-for-sale financial assets
Held to maturity financial assets
Held to maturity financial assets
loans and receivables
loans and receivables
loans and receivables
loans and receivables
loans and receivables
loans and receivables
loans and receivables
fvTpl
fvTpl
available-for-sale
held-to-maturity
held-to-maturity
302
1 183
459
456
1 558
11 321
-
8 501
-
41 705
55 805
-
-
-
-
-
-
(1 559)
1 559
(1 028)
1 510
(482)
(854)
854
-
-
-
-
(354)
(1 569)
-
-
-
(193)
(201)
-
- amortised cost
- amortised cost
- amortised cost
- amortised cost
- amortised cost
- amortised cost
- fvTpl
9 fvTpl
- fvOci
- fvOci
- amortised cost
(153) fvTpl
29 219
11 906
1 672
1 916
59 075
5 717
128 833
14 599
302
1 183
459
456
1 204
8 193
1 559
7 482
1 510
41 030
54 750
701
The following table reconciles the prior period’s closing
provision for impairment measured in accordance with incurred
loss model under IAS 39 to the new credit loss allowance measured
in accordance with expected loss model under IFRS 9 at 1 January
2018:
mEasurEmENT
caTEGOrY
ias 39
ifrs 9
provision for impairment
under ias 39 or ias 37
at 31 December 2017
EffEcT
rEmEasurEmENT
rEclassificaTiON
credit loss allowance
under ifrs 9
at 1 january 2018
ACCOuNTS RECEIVABLE
Trade receivables
Other financial receivables
Banking: Loans to customers
Banking: Loans to customers
OThER fINANCIAL ASSETS
Bank deposits
Notes receivable
Loans to employees
Other loans
Other loans
loans and receivables
amortised cost
loans and receivables
amortised cost
loans and receivables
amortised cost
loans and receivables
fvTpl
loans and receivables
amortised cost
loans and receivables
amortised cost
loans and receivables
amortised cost
loans and receivables
amortised cost
loans and receivables
fvTpl
Available-for-sale financial
assets
available-for-sale
Held to maturity financial assets held-to-maturity
Credit related commitments
fvOci
amortised cost
(1 676)
(2 419)
(4 925)
(2 357)
(5 547)
(318)
(1 420)
(7 490)
(404)
-
-
(248)
-
(54)
(6 834)
-
-
-
(354)
(1 569)
-
(193)
(201)
(710)
-
-
-
2 357
-
-
-
-
-
-
-
-
(1 676)
(2 473)
(11 759)
-
(5 547)
(318)
(1 774)
(9 059)
(404)
(193)
(201)
(958)
TOTAL
(26 804)
(9 915)
2 357
(34 362)
As a result of adoption of IFRS 9 “Financial instruments” the
Group discloses gains / losses from accrual / reversal of provision
of financial assets determined in accordance with requirements
of IFRS 9 in “Net impairment losses on financial assets” of the
Consolidated Statement of Profit or Loss and Other Comprehensive
Income for 2018 year. All other gains / losses from accrual / reversal
of provision of other assets are disclosed in “Net impairment losses
on property, plant and equipment and other non-financial assets”.
Comparable information was reclassified appropriately as follows.
fsli
amOuNT fOr 2017 YEar
bEfOrE chaNGEs
chaNGEs
afTEr chaNGEs
Net impairment losses on financial assets
Net impairment losses on property, plant and equipment and other non-financial assets
Loss on impairments of property, plant and equipment and other assets
-
-
(15 512)
(15 156)
(356)
15 512
(15 156)
(356)
-
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements
182
183
The effect of the transition to IFRS 9 on equity is as follows:
Opening equity balance under IAS 39 at 31 december 2017
Recognition of ECL under IFRS 9 for financial assets at AC
Recognition of ECL under IFRS 9 for financial assets at FVOCI
Recognition of ECL under IFRS 9 for credit related commitments
Remeasurement of loans and advances at FVTPL
Other remeasurement
Deferred tax
Total effect of initial application of IfRS 9
Including attributable to non-controlling interest
Revised opening balance under IfRS 9 at 1 january 2018
Also starting from 2018 year net impairment losses on accounts
receivable are disclosed in “Net impairment losses on financial
assets” of the Consolidated Statement of Profit or Loss and Other
Comprehensive Income, whereas in 2017 year they were disclosed
in “Selling, general and administrative expenses” in amount
RR 1,591 million of the Consolidated Statement of Profit or Loss
and Other Comprehensive Income.
AdOpTION Of IfRS 15
The group has adopted IFRS 15 Revenue from Contracts
with Customers from 1 January 2018. In accordance with the
transition provisions in IFRS 15, the Group has elected simplified
transition method with the effect of transition to be recognised
as at 1 January 2018. The Group applies IFRS 15 retrospectively
only to contracts that are not completed at the date of initial
application. An impact on the Group’s consolidated financial
statements from the adoption of the new standard on 1 January
2018 is not significant. Contract assets are not significant for the
Group. Contract liabilities are presented as Advances received
from customers in Note 15.
In addition to IFRS 9 and IFRS 15, the following amended
standards became effective for the Group from 1 January 2018,
but did not have any material impact on the Group:
• Amendments to IFRS 2, Share-based Payment (issued on 20
June 2016 and effective for annual periods beginning on or after
1 January 2018).
• Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts ≪ Amendments to IFRS 4 (issued on 12 September
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).
• Annual Improvements to IFRSs 2014-2016 cycle ≪ Amendments
to IFRS 1 an IAS 28 (issued on 8 December 2016 and effective
for annual periods beginning on or after 1 January 2018).
• IFRIC 22 ≪ Foreign Currency Transactions and Advance
Consideration (issued on 8 December 2016 and effective for
annual periods beginning on or after 1 January 2018).
• Transfers of Investment Property ≪ Amendments to IAS 40 (issued
on 8 December 2016 and effective for annual periods beginning
on or after 1 January 2018).
Certain new standards, interpretations and amendments to
standards have been issued that are mandatory for the annual
periods beginning on or after 1 January 2019 or later, and which
the Group has not early adopted.
718 729
(9 012)
(193)
(710)
(717)
(144)
1 769
(9 007)
(2 048)
709 722
IfRS 16, LEASES (ISSuEd ON 13 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
recognise: (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 statement of profit or loss and other
comprehensive income. 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.
The Group decided that it will apply the standard from its
mandatory adoption date of 1 January 2019 using the modified
retrospective method, without restatement of comparatives. Right-
of-use assets mainly will be represented by the right to use oilfield
equipment obtained under lease agreements and will be evaluated
at the amount of the lease liability on adoption.
As at 31 December 2018 the Group has non-cancellable lease
commitments of RR 6,119 million. A reconciliation of the operating
lease commitments disclosed in Note 26 to the recognised liability
is as follows:
31 DEcEmbEr 2018 / 1 jaNuarY 2019
Total future minimum lease payments for non-cancellable
operating leases (Note 26)
6 119
Future lease payments that are due in periods subject to
lease extension options that are reasonably certain to be
exercised
Effect of discounting to present value
Total lease liabilities
20 875
(11 576)
15 418
The Group expects to recognise right-of-use assets in the
amount of the lease liabilities. The amount may be adjusted upon
completion of the assessment regarding the lease terms.
The activity of the Group as a lessor is not material and, therefore,
will not have a significant impact on the financial statements.
• Amendments to the Conceptual Framework for Financial
Reporting (issued on 29 March 2018 and effective for annual
periods beginning on or after 1 January 2020).
• Definition of a business – Amendments to IFRS 3 (issued on 22
October 2018 and effective for acquisitions from the beginning
of annual reporting period that starts on or after 1 January
2020). The amendments revise definition of a business.
• Definition of materiality – Amendments to IAS 1 and IAS 8
(issued on 31 October 2018 and effective for annual periods
beginning on or after 1 January 2020).The amendments clarify
the definition of material and how it should be applied by
including in the definition guidance that until now has featured
elsewhere in IFRS. In addition, the explanations accompanying
the definition have been improved.
IfRIC 23 «uNCERTAINTy OVER INCOME TAx
TREATMENTS» (ISSuEd ON 7 juNE 2017
ANd EffECTIVE fOR ANNuAL pERIOdS
BEgINNINg ON OR AfTER 1 jANuARy 2019)
IAS 12 specifies how to account for current and deferred tax,
but not how to reflect the effects of uncertainty. The interpretation
clarifies how to apply the recognition and measurement
requirements in IAS 12 when there is uncertainty over income tax
treatments. An entity should determine whether to consider each
uncertain tax treatment separately or together with one or more
other uncertain tax treatments based on which approach better
predicts the resolution of the uncertainty. An entity should assume
that a taxation authority will examine amounts it has a right to
examine and have full knowledge of all related information when
making those examinations. If an entity concludes it is not probable
that the taxation authority will accept an uncertain tax treatment,
the effect of uncertainty will be reflected in determining the related
taxable profit or loss, tax bases, unused tax losses, unused tax
credits or tax rates, by using either the most likely amount or the
expected value, depending on which method the entity expects
to better predict the resolution of the uncertainty. An entity will
reflect the effect of a change in facts and circumstances or of new
information that affects the judgments or estimates required by the
interpretation as a change in accounting estimate.
Examples of changes in facts and circumstances or new
information that can result in the reassessment of a judgment or
estimate include, but are not limited to, examinations or actions
by a taxation authority, changes in rules established by a taxation
authority or the expiry of a taxation authority’s right to examine
or re-examine a tax treatment. The absence of agreement
or disagreement by a taxation authority with a tax treatment,
in isolation, is unlikely to constitute a change in facts and
circumstances or new information that affects the judgments and
estimates required by the Interpretation. The interpretation is not
expected to have a material impact on the Group’s consolidated
financial statements.
The following other new standards and interpretations are not
expected to have any material impact on the Group’s consolidated
financial statements when adopted:
• Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture – Amendments to IFRS 10 and IAS 28
(issued on 11 September 2014 and effective for annual periods
beginning on or after a date to be determined by the IASB);
• IFRS 17 «Insurance Contracts» (issued on 18 May 2017 and
effective for annual periods beginning on or after 1 January
2021). IFRS 17 replaces IFRS 4, which has given companies
dispensation to carry on accounting for insurance contracts
using existing practices. As a consequence, it was difficult for
investors to compare and contrast the financial performance
of otherwise similar insurance companies. IFRS 17 is a single
principle-based standard to account for all types of insurance
contracts, including reinsurance contracts that an insurer holds.
• Prepayment Features with Negative Compensation –
Amendments to IFRS 9 (issued on 12 October 2017 and effective
for annual periods beginning on or after 1 January 2019).
• Amendments to IAS 28 “Long-term Interests in Associates and
Joint Ventures” (issued on 12 October 2017 and effective for
annual periods beginning on or after 1 January 2019).
• Annual Improvements to IFRSs 2015-2017 cycle ≪ amendments
to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December
2017 and effective for annual periods beginning on or after
1 January 2019).
• Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement” (issued on 7 February 2018 and effective for annual
periods beginning on or after 1 January 2019). The amendments
specify how to determine pension expenses when changes to
a defined benefit pension plan occur.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 184
185
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
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 28.
Note 7: accounts receivable
Short-term and long-term accounts receivable comprise
the following:
ShORT-TERM ACCOuNTS RECEIVABLE:
Trade receivables
Other financial receivables
Other non-financial receivables
Less credit loss allowance
Total short-term accounts receivable
LONg-TERM ACCOuNTS RECEIVABLE:
Trade receivables
Other financial receivables
Less credit loss allowance
Total long-term accounts receivable
Total trade and other receivables
Итого торговая и прочая дебиторская задолженность
Fair value of short-term and long-term accounts receivable is
presented in Note 28.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables.
The credit loss allowance for trade and other receivables is
determined according to provision matrix presented in the table
below. The provision matrix is based the number of days that an
asset is past due, with a distribution to portfolios of receivables,
homogeneous in terms of credit risk. In addition to the number of
days that an asset is past due, types of products sold, geographical
specificity of distributional channels and other factors were taken
into account.
aT 31 DEcEmbEr 2018 aT 31 DEcEmbEr 2017
42 340
22 078
1 071
65 489
29 219
11 906
1 672
42 797
aT 31 DEcEmbEr 2018 aT 31 DEcEmbEr 2017
79 088
8 150
144
(6 620)
80 762
1 569
3 063
(1 702)
2 930
58 696
5 025
191
(2 314)
61 598
2 055
3 165
(1 781)
3 439
83 692
65 037
Analysis by credit quality of trade and other receivables is as
follows:
Уровень Убытков
валовая балансовая
стоимость
ожидаемые кредитные
Убытки за весь срок
TRAdE RECEIVABLES
current
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total trade receivables (gross carrying amount)
Credit loss allowance
Total trade receivables (carrying amount)
OThER RECEIVABLES
current
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total other receivables (gross carrying amount)
Credit loss allowance
Total other receivables (carrying amount)
0,197%
89,34%
0,59%
89,68%
0,735%
100%
0%
100%
78 244
798
88
1 527
80 657
(2 240)
78 417
5 168
12
-
6 033
11 213
(6 082)
5 131
(157)
(713)
(1)
(1 369)
(37)
(12)
-
(6 033)
The following table explains the changes in the credit loss
allowance for trade and other receivables under simplified ECL
model between the beginning and the end of the annual period:
Balance at 1 january 2018
New originated or purchased
Other movements
Total credit loss allowance charge in profit or loss for the period
Write-offs
FX movements
TraDE
rEcEivablEs
(1 676)
(734)
-
(734)
228
(58)
2018
OThEr
rEcEivablEs
(2 419)
(3 635)
(53)
(3 688)
25
-
Balance at 31 december 2018
(2 240)
(6 082)
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 186
187
Analysis by credit quality of trade and other receivables is as
follows:
Note 8: banking: Loans to customers
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
TraDE
rEcEivablEs
OThEr
rEcEivablEs
TraDE
rEcEivablEs
OThEr
rEcEivablEs
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
Natural monopoly entity
Russian construction companies
unrated
including related parties
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 dETERMINEd TO BE IMpAIREd (gROSS)
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total individually impaired
Less provision for impairment
TOTAL
21 373
8 252
14 160
15 910
4 732
5 170
325
8 322
2 697
78 244
85
88
-
173
713
-
1 527
2 240
(2 240)
78 417
-
-
-
-
-
-
-
5 168
369
5 168
12
-
-
12
-
-
6 033
6 033
(6 082)
5 131
14 188
5 392
12 933
14 383
3 718
-
625
7 512
2 374
58 751
279
45
-
324
-
-
1 676
1 676
(1 676)
59 075
-
-
-
-
-
-
-
4 678
590
4 678
67
11
26
104
-
-
3 599
3 599
(2 419)
5 962
Movements in the impairment provision for trade and other
receivables during 2017 are as follows:
provision for impairment at 1 january
Provision for impairment during the year
Foreign exchange gain
Change in Group structure
pROVISION fOR IMpAIRMENT AT 31 dECEMBER
2017
TraDE
rEcEivablEs
OThEr
rEcEivablEs
(1 409)
(302)
25
10
(1 676)
(333)
(2 371)
-
285
(2 419)
Loans to legal entities
Loans to individuals
Loans to customers at AC before impairment
Credit loss allowance
Total loans to customers at AC
Loans to customers at FVTPL
Total loans to customers
Less: long term loans at FVTPL
Less: long term loans at AC
Less: credit loss allowance for long term loans
Total short term loans to customers and current portion of long term
loans to customers at AC
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
106 538
39 935
146 473
(13 069)
133 404
12 901
146 305
(12 901)
(85 905)
6 298
53 797
122 699
35 566
158 265
(7 282)
150 983
-
150 983
-
(112 579)
6 091
44 495
As at 31 December 2018 and 2017 the Group granted loans to
20 and 17 customers totalling RR 51,743 million and RR 50,314
million respectively, which individually exceeded 5% of the Bank
ZENIT equity.
As at 31 December 2018 and 2017, the total amount of pledged
loans to legal entities is RR 1,742 million and RR 3,297 million
and loans to individuals is RR 5,422 million and RR 5,985 million
respectively. The loans are pledged against the funds accounted
within Due to banks and CB RF.
The Group holds a portfolio of loans and advances to customers
that does not meet the SPPI requirement for AC classification under
IFRS 9. Dominant features that failed SPPI test were the following:
the amount of net operating cash flows according to business-plan
is not sufficient to fully repayment of loans within the period specified
in loan contract; the time value of money is not compensated to
the Bank, interest payments will be performed in the end of loan
contract; amount of collateral is not sufficient for repayment of loan.
As a result, these loans and advances were classified as at
FVTPL from the date of initial recognition. Loans and advances to
customers at FVTPL are measured taking into account the credit
risk. The carrying amount presented in the consolidated statement
of financial position best represents the Group’s maximum exposure
to credit risk arising from loans and advances to customers.
Loans and advances to legal entities which due to transition
to IFRS 9 were reclassified at fair value through profit or loss, at
1 January 2018 amounted to RR 14,599 million (31 December
2017: these loans were measured at amortised cost, their carrying
amount being RR 17,673 million before impairment provision, the
provision amounting to RR 2,357 million). The fair value of loans
and advances to customers, including a breakdown by fair value
hierarchy level, is disclosed in Note 28. Information on related party
balances is disclosed in Note 25.
Movements in the provision for loan impairment during the year
ended 31 December 2018 are as follows:
Credit loss allowance as at 1 january 2018
Net provision for credit loss allowance during the period
Credit loss allowance as at 31 december 2018
lOaNs
TO lEGal ENTiTiEs
lOaNs
TO iNDiviDuals
(10 605)
(928)
(11 533)
(1 154)
(382)
(1 536)
TOTal
(11 759)
(1 310)
(13 069)
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 188
189
Movements in the provision for loan impairment during the year
ended 31 December 2017 are as follows:
provision for loan impairment at 1 january 2017
Net provision charge for loan impairment during the period
Loans and advances to customers written off during the period
Cession
FX translation
provision for loan impairment as at 31 december 2017
lOaNs
TO lEGal ENTiTiEs
lOaNs
TO iNDiviDuals
(1 030)
(8 194)
-
2 336
167
(6 721)
(137)
(491)
41
26
-
(561)
TOTal
(1 167)
(8 685)
41
2 362
167
(7 282)
Risk concentrations by customer industry within the customer
loan portfolio are as follows:
Trade
Manufacturing
Construction
Services
Food
Finance
Agriculture
Oil and gas
Individuals, including:
mortgage loans
consumer loans
car loans
plastic cards overdrafts
other
Other
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
GrOss bOOk
valuE
sharE iN cusTOmEr
lOaN pOrTfOliO, %
GrOss bOOk
valuE
sharE iN cusTOmEr
lOaN pOrTfOliO, %
28 943
24 471
16 542
22 877
1 474
12 080
1 538
2 533
39 936
25 333
13 247
846
479
31
8 979
18,16%
15,35%
10,38%
14,35%
0,92%
7,58%
0,97%
1,59%
25,06%
15,90%
8,31%
0,53%
0,30%
0,02%
5,63%
28 480
24 676
23 996
29 298
3 547
7 907
1 187
1 376
35 566
23 347
10 634
999
585
1
2 232
18,00%
15,59%
15,16%
18,51%
2,24%
5,00%
0,75%
0,87%
22,47%
14,75%
6,72%
0,63%
0,37%
0,00%
1,41%
TOTAL LOANS TO CuSTOMERS BEfORE
IMpAIRMENT
159 373
100%
158 265
100%
Loans to customers’ credit quality analysis is presented
in Note 28.
Note 9: Other financial assets
Other short-term financial assets comprise the following
as at 31 December 2018:
fINANCIAL ASSETS AT AC
Notes receivable (net of credit loss allowance of RR 249 million as of 31 December 2018)
Other loans (net of credit loss allowance of RR 261 million as of 31 December 2018)
Bank deposits (net of credit loss allowance of RR 5,544 million as of 31 December 2018)
Due from banks
REPO with banks
Securities held by the Group (net of credit loss allowance of RR 47 million as of 31 December 2018):
Russian government and municipal debt securities
Corporate debt securities
Securities pledged under sale and repurchase agreements (net of credit loss allowance of RR 37 million
as of 31 December 2018):
Russian government and municipal debt securities
Corporate debt securities
fINANCIAL ASSETS AT fVTpL
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Corporate shares
Derivatives
fINANCIAL ASSETS AT fVOCI
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Corporate shares
TOTAL ShORT-TERM fINANCIAL ASSETS
aT 31 DEcEmbEr 2018
136
3 220
11
997
537
4 632
675
3 957
8 267
2 272
5 995
4 017
287
2 018
186
1 526
11 084
176
10 719
189
32 901
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 190
191
Other short-term financial assets comprise the following as
at 31 December 2017:
Other long-term financial assets comprise the following as
at 31 December 2018:
aT 31 DEcEmbEr 2017
aT 31 DEcEmbEr 2018
LOANS ANd RECEIVABLES
Notes receivable
Loans
Bank deposits (net of provision for impairment of RR 5,547 million as at 31 December 2017)
Due from banks
REPO with banks
hELd-fOR-TRAdINg fINANCIAL ASSETS
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Corporate shares
Securities pledged under sale and repurchase agreements:
Russian government and municipal debt securities
Corporate debt securities
AVAILABLE-fOR-SALE fINANCIAL ASSETS
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Securities pledged under sale and repurchase agreements:
Russian government and municipal debt securities
Corporate debt securities
hELd TO MATuRITy INVESTMENTS
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Securities pledged under sale and repurchase agreements:
Russian government and municipal debt securities
Corporate debt securities
TOTAL ShORT-TERM fINANCIAL ASSETS
1
455
2
956
459
6 006
1 564
4 265
177
2 495
1 022
1 473
6 680
12
6 668
3 976
1 052
2 924
32 362
238
32 124
15 533
2 191
13 342
68 925
The fair value of financial assets and valuation techniques used
are disclosed in Note 28.
As at 31 December 2018 and 31 December 2017 RR 10,083
million and RR 19,757 million of due to banks was received under
sale and repurchase agreements, fair value of securities pledged
amounts to RR 8,268 million and RR 22,004 million.
Corporate bonds consist of Russian Ruble, US Dollar and Euro
denominated bonds and Eurobonds issued by Russian banks and
companies.
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.
Municipal bonds consist of Russian Ruble denominated
bonds issued by regional and municipal authorities of the Russian
Federation.
Corporate shares at FVTPL include quoted shares of Russian
companies and banks. At 31 December 2018 unquoted securities
at FVOCI include investment in AK BARS Bank ordinary shares
(17.24%) in the amount of RR 7,300 million. At 31 December 2017
investment in AK BARS Bank ordinary shares was included to
available-for-sale financial assets.
Investment fund units are solely presented with investment in
closed mutual investment rental fund AK BARS – Gorizont. The
main assets of this fund are the land plots located in Tatarstan
Republic. The Group does not exercise significant influence over
this investment and therefore accounts for it as a financial assets at
FVOCI (2017: available-for-sale investment).
fINANCIAL ASSETS AT AC
Notes receivable (net of credit loss allowance of RR 318 million as of 31 December 2018)
Loans to employees (net of credit loss allowance of RR 1,776 million as of 31 December 2018)
Other loans (net of credit loss allowance of RR 17,746 million as of 31 December 2018)
Bank deposits
Due from banks
Securities held by the Group (net of credit loss allowance of RR 138 million as of 31 December 2018):
Russian government and municipal debt securities
Corporate debt securities
fINANCIAL ASSETS AT fVTpL
Other loans
Securities held by the Group:
Corporate shares
fINANCIAL ASSETS AT fVOCI
Securities held by the Group:
Russian government and municipal debt securities
Corporate shares
Corporate debt securities
Investment fund units
TOTAL LONg-TERM fINANCIAL ASSETS
Other long-term financial assets comprise the following
as at 31 December 2017:
LOANS ANd RECEIVABLES
Notes receivable (net of provision for impairment of RR 318 million as at 31 December 2017)
Loans to employees (net of provision for impairment RR 1,420 million as at 31 December 2017)
Other loans (net of provision for impairment of RR 7,894 million as at 31 December 2017)
Bank deposits
Due from banks
AVAILABLE-fOR-SALE fINANCIAL ASSETS
Securities held by the Group:
Corporate shares
Russian government and municipal debt securities
Corporate debt securities
Investment fund units
hELd TO MATuRITy INVESTMENTS
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
TOTAL LONg-TERM fINANCIAL ASSETS
320
1 046
25 450
646
1 018
19 867
2 301
17 566
117
757
757
32 292
36
12 317
6 851
13 088
81 513
aT 31 DEcEmbEr 2017
455
1 558
10 866
300
227
31 049
12 824
1 711
3 558
12 956
7 909
3 732
4 177
52 364
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 192
193
The following table discloses the changes in the credit loss
allowance and gross carrying amount for other loans carried at
amortised cost between the beginning and the end of the reporting
period:
In December 2018 the Group entered into a transaction to acquire
the rights of certain Russian government controlled banks under the
credit facilities extended to NEFIS Group, a leading Russian household
chemicals, oil and fats manufacturer. Total rights in the amount of
RR 21,506 million were accounted as other loans in other long-term
financial assets carried at amortised cost at 31 December 2018.
crEDiT lOss allOwaNcE
GrOss carrYiNG amOuNT
sTaGE 1
sTaGE 2
sTaGE 3
TOTal
sTaGE 1
sTaGE 2
sTaGE 3
TOTal
(12-months
Ecl)
(lifetime Ecl
for sicr)
(lifetime Ecl
for credit
im-paired)
(12-months
Ecl)
(lifetime Ecl
for sicr)
(lifetime Ecl
for credit
im-paired)
Other loans
At 1 January 2018
-
(232)
(8 827)
(9 059)
49
1 768
15 435
17 252
Movements with impact on credit loss allowance charge for the period:
Transfers:
- to credit-impaired
(from Stage 1 and Stage 2 to Stage 3)
Net remeasurement of credit loss allowance
within the same stage
New originated or purchased
Total movements with impact on credit loss
allowance charge for the period
-
-
-
-
36
(36)
-
(17)
(323)
(8 273)
(703)
(8 290)
(1 026)
(304)
(9 012)
(9 316)
Movements without impact on credit loss allowance charge for the period:
Disposals
Reclassification from other financial assets
6
(13)
-
-
1 296
(921)
1 302
(934)
-
-
34
34
-
-
(195)
195
-
-
22 407
-
751
-
23 192
22 212
946 23 192
(263)
2 500
(3 171)
7 167
(3 434)
9 667
AT 31 dECEMBER 2018
-
(543)
(17 464)
(18 007)
83
26 217
20 377 46 677
Note 10: Inventories
Materials and supplies
Crude oil
Refined oil products
Petrochemical supplies and finished goods
TOTAL INVENTORIES
Note 11: Prepaid expenses and other current assets
Prepaid expenses and other current assets are as follows:
Prepaid export duties
VAT recoverable
Advances
Prepaid transportation expenses
Other
pREpAId ExpENSES ANd OThER CuRRENT ASSETS
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
17 640
12 003
11 621
9 342
50 606
13 692
8 745
12 541
4 340
39 318
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
3 818
7 873
8 670
1 752
977
23 090
3 003
6 817
10 534
1 247
1 522
23 123
Note 12: Property, plant and equipment
Oil aND Gas
prOpErTiEs
builDiNGs aND
cONsTrucTiONs
machiNErY aND
EquipmENT
cONsTrucTiON
iN prOGrEss
TOTal
COST
As of 31 december 2016
Additions
Disposals
Changes in Group structure
Transfers
Changes in decommissioning provision
As of 31 december 2017
dEpRECIATION, dEpLETION ANd AMORTISATION
As of 31 december 2016
Depreciation charge
Disposals
Changes in Group structure
Transfers
As of 31 december 2017
331 486
-
(697)
-
46 438
5 101
382 326
152 505
11 328
(610)
-
5 133
168 356
197 502
-
(599)
214
(1 045)
-
196 072
33 978
4 852
(123)
25
(4 968)
33 764
131 525
-
(954)
(647)
15 015
-
144 939
59 231
7 440
(924)
(657)
(165)
64 925
168 815
88 514
(1 760)
5
(60 408)
-
195 168
-
-
-
-
-
-
829 328
88 514
(4 010)
(428)
-
5 101
918 505
245 714
23 620
(1 657)
(632)
-
267 045
NET BOOK VALuE
As of 31 december 2016
As of 31 december 2017
COST
As of 31 december 2017
Additions
Disposals
Changes in Group structure
Transfers
Changes in decommissioning provision
As of 31 december 2018
dEpRECIATION, dEpLETION ANd AMORTISATION
As of 31 december 2017
Depreciation charge
Disposals
Changes in Group structure
Transfers
As of 31 december 2018
NET BOOK VALuE
As of 31 december 2017
As of 31 december 2018
178 981
213 970
163 524
162 308
72 294
80 014
168 815
195 168
583 614
651 460
382 326
-
(3 060)
-
24 377
(6 253)
397 390
168 356
14 363
(2 156)
-
(1 204)
179 359
196 072
-
(1 453)
(726)
26 969
-
220 862
33 764
6 783
(454)
(216)
3 699
43 576
144 939
-
(1 669)
(679)
14 938
-
157 529
64 925
9 999
(982)
(607)
(2 495)
70 840
195 168
95 761
(4 832)
103
(66 284)
-
219 916
-
-
-
-
-
-
918 505
95 761
(11 014)
(1 302)
-
(6 253)
995 697
267 045
31 145
(3 592)
(823)
-
293 775
213 970
218 031
162 308
177 286
80 014
86 689
195 168
219 916
651 460
701 922
Additions for the year include construction of TANECO refinery
complex and superviscous oil fields facilities.
Within construction in progress there are advances for
construction of RR 15,318 million and RR 10,047 million at 31
December 2018 and 2017, respectively.
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 developed oil and gas reserves.
The 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 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 2038 and 2090,
with other production licenses expiring between 2019 and 2105.
The economic lives of several of the Group’s licensed fields extend
beyond the dates of licenses expiration. Under Russian law, the
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 194
195
Group is entitled to renew the licenses to the end of the economic
lives of the fields, provided certain conditions are met.
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.
At 1 january 2017
Additions
Reclassification to development assets
Charged to expense
At 31 december 2017
Additions
Reclassification to development assets
Charged to expense
At 31 december 2018
17 069
2 091
(640)
-
18 520
2 018
(642)
(3 178)
16 718
SOCIAL ASSETS
During the years ended 31 December 2018 and 2017 the Group
transferred social assets with a net book value of RR 21 million and
RR 9 million, respectively, to local authorities. At 31 December 2018
and 2017 the Group held social assets with a net book value of RR
9,232 million and RR 6,025 million, respectively, all of which were
constructed after the privatization date.
The social assets comprise mainly dormitories, hotels, gyms
and other facilities. The Group may transfer some of these social
assets to local authorities in the future, but does not expect these
to be significant. The Group incurred social infrastructure expenses
of RR 5,592 million and RR 5,418 million for the years ended 31
December 2018 and 2017, respectively, for maintenance that
mainly relates to housing, schools and cultural buildings.
dECOMMISSIONINg pROVISIONS
The following table summarizes changes in the Group’s
decommissioning provision for the year:
Changes in the net book value of exploration and evaluation
assets are presented below:
For the years ended 31 December 2018 and 2017, operating
and investing cash flows used for exploration and evaluation
activities amounted to RR 688 million and RR 2,018 million and RR
1,143 million and RR 2,091 million, respectively.
Balance at the beginning of period
Unwinding of discount
New obligations
Release of existing obligations
Changes in estimates
Balance at the end of period
Less: current portion of decommissioning
provisions (Note 15)
Long-term balance at the end of period
2018
2017
38 081
2 936
630
(308)
(6 882)
34 457
30 406
2 603
1 905
(31)
3 196
38 081
(119)
34 338
(64)
38 017
In 2018 and 2017 the Group recorded the change in estimate
for oil and gas properties decommissioning primarily due to the
change in discount rate and expected long-term inflation rate.
Key assumptions used for evaluation of decommissioning
provision were as follows:
Discount rate
Inflation rate
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
8,75%
4,21%
7,70%
4,00%
Note 13: Taxes
Income tax expense comprises the following:
Deferred income taxes are reflected in the consolidated
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
statement of financial position as follows:
Current income tax expense
Deferred income tax expense
Income tax expense for the year
(58 015)
(4 226)
(62 241)
(34 227)
(5 419)
(39 646)
Presented below is reconciliation between the provision for
income taxes and taxes determined by applying the statutory tax
rate 20% to income before income taxes:
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
Profit before income tax
273 789
163 538
Theoretical income tax expense at
statutory rate
Increase due to:
(54 758)
(32 708)
Non-deductible expenses, net
Other
Income tax expense
(7 653)
170
(62 241)
(7 076)
138
(39 646)
At 31 December 2018 no provision has been made for taxable
temporary differences of RR 62,453 million (2017: RR 40,070
million) of undistributed earnings of certain subsidiaries. These
earnings have been and will continue to be reinvested. These
earnings, except for undistributed earnings of subsidiaries
operating in a tax free jurisdictions, could become subject to
additional tax of approximately RR 1,185 million (2017: RR 880
million) if they were remitted as dividends.
Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities
recognised for financial reporting purposes and such amounts
recognised for statutory tax purposes.
Deferred tax assets (liabilities) are comprised of the following:
Tax loss carry forward
Decommissioning provision
Prepaid expenses and other current
assets
Accounts receivable
Long-term loans and certificates of
deposits
Long-term investments
Other
deferred income tax assets
Property, plant and equipment
Inventories
Accounts receivable
Long-term investments
Other liabilities
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
3 281
6 868
278
230
2 131
395
1 333
3 517
7 603
166
-
-
74
2 001
14 516
(39 602)
(2 824)
-
(15)
(13)
13 361
(36 681)
(1 914)
(494)
(11)
(82)
deferred income tax liabilities
(42 454)
(39 182)
Net deferred tax liability
(27 938)
(25 821)
Deferred income tax asset
3 548
1 502
Deferred income tax liability
(31 486)
(27 323)
Net deferred tax liability
(27 938)
(25 821)
Deferred tax assets are recognised 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 utilised.
TAx LOSSES CARRy fORwARd
At 31 December 2018, the Group had recognised deferred income
tax assets of RR 3,281 million (RR 3,517 million at 31 December 2017)
in respect of unused tax loss carry forwards of RR 16,405 million (RR
17,587 million at 31 December 2017). 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 2018 to 2021. 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 realised.
The Group doesn’t have any unrecognised potential deferred tax
assets in respect of deductible temporary differences.
The Group is subject to a number of taxes other than income taxes,
which are detailed as follows:
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED 31
DEcEmbEr 2017
Mineral extraction tax
Property tax
Penalties and interest
Other
Total taxes other than income taxes
284 118
6 680
73
2 291
293 162
186 585
5 896
123
1 712
194 316
For mineral extraction tax for fields whose depletion rate exceeds
a certain threshold the Group received a tax relief of approximately
RR 52.2 billion and RR 30.4 billion for the years ended 31 December
2018 and 2017, respectively.
At 31 December 2018 and 2017 taxes payable were as follows:
Mineral extraction tax
Value Added Tax
Excise
Export duties
Property tax
Other
Total taxes payable
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
21 692
7 622
2 683
2 493
1 549
2 732
38 771
20 030
2 789
1 118
1 344
774
1 751
27 806
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 197
Note 15: accounts payable and accrued liabilities
Trade payables
Other payables
Total financial liabilities within trade and other payables
Salaries and wages payable
Advances received from customers
Current portion of decommissioning provisions (Note 12)
Other accounts payable and accrued liabilities
Total non-financial liabilities
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
25 728
1 013
26 741
4 465
6 197
119
5 467
16 248
22 366
3 400
25 766
3 374
8 003
64
4 322
15 763
ACCOuNTS pAyABLE ANd ACCRuEd LIABILITIES
42 989
41 529
Revenue in amount of RR 8,003 million was recognised in the
current reporting period related to the contract liabilities as at 1
January 2018.
The fair value of each class of financial liabilities included in
short-term trade and other payables at 31 December 2018 and
2017 is presented in Note 28.
Note 16: banking: due to banks and Cb rF
Term deposits from other banks
Term deposits from CB RF
REPO
Correspondent accounts and other banks’ overnight deposits
Total due to banks and CB Rf
Less: long term due to banks and CB RF
TOTAL ShORT TERM Of duE TO BANKS ANd CB Rf
Within due to banks and CB RF at 31 December 2018 and 2017
there are RR 16,523 million and RR 16,514 million respectively
of correspondent accounts and term deposits from four Russian
banks, which individually exceeded 5% of the Bank ZENIT equity.
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
4 073
2 731
10 083
1 538
18 425
(4 660)
13 765
5 994
6 826
19 757
1 063
33 640
(5 669)
27 971
196
Note 14: debt
ShORT-TERM dEBT
Bonds issued
Subordinated debt
Debt securities issued
US $75 million 2011 credit facility
US $144.5 million 2011 credit facility
EUR 55 million 2013 credit facility
RR 40,000 million 2017 сredit facility
Other debt
Total short-term debt, including current portion of long-term debt
LONg-TERM dEBT
Bonds issued
Subordinated debt
Debt securities issued
Other debt
Total long-term debt, net of current portion
Fair value of debt is presented in Note 28. Maturity and currency
analysis of debt is presented in Note 28. Debt issued to related
parties is presented in Note 25.
CREdIT fACILITIES
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.
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
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. In accordance with credit facility terms
repayment of the debt is performed in USD. 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 2016 this credit facility was
assigned to Citibank Europe plc, UK Branch with credit facility details
remaining.
In December 2017 the Company entered into revolving credit
facility with differentiated interest rates for up to RR 40,000 million.
The credit facility is arranged by Sberbank and expires in 2020. In
December 2017 the Company received a loan under this credit
facility at rates ranging from 6.91% to 7.44% which was fully repaid
in February 2018. In March 2018 the Company received a new loan
under this credit facility at rate 6,60 % per annum which was fully
repaid in April 2018.
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
1 056
2 160
1 061
1 397
2 932
2 353
-
994
11 953
-
1 420
69
1 595
3 084
6 836
-
3 330
1 508
2 917
2 364
20 955
2 006
39 916
906
4 492
98
1 400
6 896
BONdS ISSuEd
At 31 December 2018 and 2017 bonds issued are bonds
denominated in Russian Rubles issued by Bank ZENIT that
mature between 2019 and 2025 and between 2018 and 2025,
respectively. At 31 December 2018 and 2017 the annual coupon
rates on these securities range from 7.5% to 8.0% and 8.5% to
10.75% respectively. The majority of bonds allow early repurchase
at the request of the bond holder as set in the respective offering
documents. In addition, the issuer at any time with the consent
of the bond holder, may purchase/repay the bonds early with the
possibility of subsequently placing the bonds in the market. Such
purchase/repayment of the bonds does not constitute an early
redemption.
SuBORdINATEd dEBT
At 31 December 2018 and 2017 subordinated debt is presented
by two and three subordinated loans raised by Bank ZENIT
respectively. Subordinated loans bear interest at rates ranging from
6.5% to 9.5% and mature from 2019 to 2024 at 31 December 2018
and 2017.
Bank ZENIT is obliged to comply with certain financial covenants
in relation to subordinated loan maturing in December 2024 bearing
an interest rate of 9.5%. At 31 December 2018 Bank ZENIT was in
compliance with these covenants.
Information about subordinated loans received by Bank ZENIT
from Deposit Insurance Agency (DIA) within the Russian Federation
Government programme for additional capitalisation of Russian
banks is presented in Note 28.
dEBT SECuRITIES ISSuEd
At 31 December 2018 and 2017 debt securities are promissory
notes issued by Bank ZENIT at a discount to nominal value and
interest bearing promissory notes denominated in Russian Rubles
and US Dollars. Maturity dates of these promissory notes vary from
2019 to 2028.
As at 31 December 2018 and 2017 non-interest-bearing
promissory notes of the aggregate nominal value of RR 469 million
and RR 505 million respectively were issued by the Group for
settlement purposes and mature primarily on demand.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 198
199
Note 17: banking: Customer accounts
Note 18: 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
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
577
347
22 385
37 679
14 958
108 390
184 336
(682)
612
639
19 963
27 390
12 489
97 821
158 914
(478)
TOTAL ShORT-TERM CuSTOMER ACCOuNTS
183 654
158 436
Within customer accounts at 31 December 2018 and 2017 there
are RR 48,549 million and RR 8,171 million of current/settlement
accounts and term deposits from 19 and 3 customers respectively,
which individually exceeded 5% of the Bank ZENIT equity.
Risk concentrations by customer industry within customer
accounts are as follows:
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
carrYiNG
valuE
sharE iN cusTOmEr
lOaN pOrTfOliO, %
carrYiNG
valuE
sharE iN cusTOmEr
lOaN pOrTfOliO, %
Individuals
Finance
Oil and gas
Trade
Services
Manufacturing
Construction
Other
123 348
20 479
3 659
8 097
10 886
5 801
4 741
7 325
66,91%
11,11%
1,99%
4,39%
5,91%
3,15%
2,57%
3,97%
110 310
11 709
2 575
6 051
13 165
7 581
5 257
2 266
TOTAL CuSTOMER ACCOuNTS
184 336
100%
158 914
69,41%
7,37%
1,62%
3,81%
8,28%
4,77%
3,31%
1,43%
100%
Other long-term liabilities are as follows:
Change in the defined benefit obligation amount:
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
2018
2017
Pension liability
Other long-term liabilities
3 287
150
4 040
6
Total other long-term liabilities
3 437
4 046
pENSION LIABILITIES
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” (the 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 of service
upon reaching official retirement age (according to the Law 350-
FZ on amending the appointment and payment of pensions), and
for management are based upon employment contract terms. 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 obliged to pay other 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:
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
Discount rate
Rate of increase in salary levels
Actuarial rate of NPF
8,70%
5,35%
3,00%
7,38%
6,01%
3,00%
Statutory insurance contributions rate
30,85%
30,77%
Defined benefit obligation at beginning year
Effect of exchange rate changes
Current service cost
Interest cost
Benefits paid
Remeasurement (gains)/losses:
Actuarial gains arising from changes in
financial assumptions
Actuarial (gains)/losses arising from changes
in demographic assumptions
Actuarial (gains)/losses – Experience
Curtailment
5 717
2
141
374
(396)
(757)
(252)
(1)
(646)
5 442
(11)
119
340
(455)
(77)
295
64
-
defined benefit obligation
at the end of the year
4 182
5 717
The amounts recognised in profit or loss are as follows:
Service cost
Net interest expense
Remeasurement losses/(gains):
Actuarial gains arising from changes in
financial assumptions
Actuarial (gains)/losses arising from
changes in demographic assumptions
Actuarial gains – Experience
Total included in ‘employee benefits
expense’
2018
2017
64
251
(151)
(96)
(68)
119
208
(20)
54
(29)
-
332
The amounts recognised in other comprehensive income are as
follows:
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 recognised in the
consolidated statement of financial position.
Amounts recognised in the consolidated statement of financial
position:
Remeasurement (gains)/losses:
Actuarial gains arising from changes in
financial assumptions
Actuarial (gains)/losses arising from
changes in demographic assumptions
Actuarial losses – Experience
Effect of exchange rate changes
2018
2017
(606)
(157)
427
2
(57)
241
77
(11)
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
Total included in other comprehensive
income
(334)
250
Present value of defined benefit
obligation
Less: Fair value of plan assets
Net defined benefit liability
4 182
(895)
3 287
5 717
(1 677)
4 040
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 200
201
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 have 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
NON-CONTROLLINg INTEREST
Non-controlling interest is adjusted by dividends declared and
paid by the Group’s subsidiaries amounting to RR 46 million and RR
15 million at 31 December 2018 and 2017, respectively.
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
211 812
(136 057)
(9 542)
66 213
123 139
(106 900)
(7 462)
8 777
2 103
148
2 251
94,11
93,89
2 103
148
2 251
54,73
54,32
Reconciliation of the opening and closing balances of plan
Plan assets structure:
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
Russian corporate bonds and equity
securities of Russian issuers
Russian government and regions bonds
Bank deposits
Foreign government securities
Other
Total plan assets
52,37%
23,37%
23,13%
0,93%
0,20%
100%
57,99%
17,83%
21,97%
2,11%
0,10%
100%
Based on Group’s best estimate expected contributions to be
paid during the next annual reporting period are RR 579 million.
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). 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 2018 and 2017, the Company had
a statutory current profit of RR 197,523 million and RR 100,022
million, respectively.
In December 2018, the shareholders of the Company approved
the payment of interim dividends for the nine months ended 30
September 2018, including previously paid interim dividends for
the six months ended 30 June 2018, in the amount of RR 52.53
per preference and ordinary share. Dividends will be paid in the
beginning of 2019.
In September 2018 the shareholders of the Company approved
the payment of interim dividends for the six months ended 30 June
2018 in amount of RR 30.27 per preference and ordinary share.
Dividends were paid in the fourth quarter of 2018.
In June 2018 the shareholders of the Company approved the
payment of dividends for the year ended 31 December 2017 in
amount of RR 39.94 per preference and ordinary share, including
previously paid interim dividends for the nine months ended 30
September 2017 in the amount of RR 27.78 per preference and
ordinary share. Dividends were paid in the third quarter of 2018.
In June 2017 the shareholders of the Company approved the
payment of dividends for the year ended 31 December 2016 in
amount of RR 22.81 per preference and ordinary share. Dividends
were paid in the third quarter of 2017.
assets’ fair value:
Plan assets at beginning of year
Interest income
Contributions
Benefits paid
Actuarial (losses)/gains
Curtailment
plan assets at year end
2018
2017
1 677
124
112
(89)
(360)
(569)
895
1 586
132
136
(193)
16
-
1 677
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.
Note 19: Shareholders’ equity
AuThORISEd ShARE CApITAL
At 31 December 2018 and 2017 the authorised and paid 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:
• the amendment of the dividends payable per preferred share;
• the issuance of additional shares with rights greater than the
• and the liquidation or reorganization of the Company.
current rights of preferred shareholders; and
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 preferred dividends
are either not declared, or declared but not paid. 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.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 202
203
Note 20: Employee benefit expenses
Note 22: Interest income and expense on banking activity
Wages and salaries
Statutory insurance contributions
Pension costs – defined benefit plans (Note 18)
Other employee benefits
TOTAL EMpLOyEE BENEfIT ExpENSE
Employee benefit expenses are included in operating expenses,
selling, general and administrative expenses and maintenance of
social infrastructure and transfer of social assets, other expenses
and operating expenses on banking activities in the consolidated
statement of profit or loss and other comprehensive income.
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
34 567
9 793
-
1 837
46 197
31 135
8 872
332
1 390
41 729
Note 21: Interest income and interest expense
on non-banking activities
Interest income on non-banking activities comprises the
following:
Interest income from loans and receivables (for comparatives only)
Interest income from financial assets at AC
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-te
TOTAL INTEREST ExpENSES ON NON-BANKINg ACTIVITIES
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
-
5 225
272
5 497
6 319
-
175
6 494
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
(593)
(2 936)
(61)
(3 590)
(425)
(2 603)
(67)
(3 095)
INTEREST INCOME
Loans to customers
Due from banks
Securities at AC
Held-to-maturity investments (for comparatives only)
Correspondent accounts
Financial assets held-for-trading (for comparatives only)
Securities at FVTPL
Available-for-sale financial assets (for comparatives only)
Securities at FVOCI
Total interest income on banking activity
INTEREST ExpENSE
Term deposits of individuals
Term deposits of legal entities
RUR-denominated bonds issued
Subordinated debt
Term placements of banks
Debt securities issued
Total interest expense on banking activity
NET INTEREST INCOME ON BANKINg ACTIVITy
Note 23: Fee and commission income
and expense on banking activity
Settlement transactions
Cash transactions
Operations with foreign currencies
Guarantees issued
Transactions with securities
Asset management
Other
Total fee and commission income on banking activity
Settlement transactions
Cash transactions
Transactions with securities
Operations with foreign currencies
Commission on guarantees received
Other
Total fee and commission expense on banking activity
NET fEE ANd COMMISSION INCOME ON BANKINg ACTIVITy
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
15 518
436
2 286
-
39
-
339
-
867
19 485
(4 389)
(2 005)
(614)
(466)
(2 455)
(48)
(9 977)
9 508
22 644
1 820
-
1 209
40
528
-
1 080
-
27 321
(5 771)
(2 674)
(2 011)
(921)
(1 736)
(117)
(13 230)
14 091
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
2 499
501
392
234
37
8
103
3 774
(874)
(164)
(34)
(24)
(12)
(166)
(1 274)
2 500
2 048
607
396
319
24
12
237
3 643
(797)
(124)
(65)
(21)
(8)
(97)
(1 112)
2 531
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 204
205
Note 24: 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:
• Exploration and production consists of exploration, development,
extraction and sale of own crude oil. Intersegment sales consist
of transfer of crude oil to refinery and other goods and services
provided to other operating segments;
• Refining and marketing comprises purchases and sales of crude
oil and refined products from third parties, own refining activities
and retailing operations;
• Petrochemical products include production and sales of tires
and petrochemical raw materials and refined products, which
are used in production of tires;
• Banking segment includes operations of Banking Group ZENIT.
Other sales include revenues from ancillary services provided
by the specialised subdivisions and subsidiaries of the Group,
such as sales of oilfield equipment and drilling services provided
to other companies in Tatarstan, revenues from the sale of auxiliary
petrochemical related services and materials as well as other
business activities, which do not constitute reportable business
segments.
The Group evaluates performance of its reportable operating
segments and allocates resources based on segment earnings,
defined as profit before income tax not including interest income,
expense on non-banking activities, and gains from equity
investments, 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 2018, revenues of RR 98,183
million or 11% of the Group’s total sales and operating revenues is
derived from one external customer.
For the year ended 31 December 2017, revenues of RR 72,733
million or 11% and of RR 71,616 million or 11% of the Group’s
total sales and operating revenues is derived from two external
customers.
These revenues represent sales of crude oil and are attributable
to the exploration and production segment and refining and
marketing segment. Management does not believe the Group is
dependent on any particular customer.
SEgMENT EARNINgS
For the year ended 31 December 2018 and 2017 corporate and
other loss includes loss on impairments of financial assets, charity,
maintenance of social infrastructure and transfer of social assets.
From the 1 January 2018 Tatneft Group includes Head Office
administrative expenses in the corporate and other loss. For the prior
periods administrative expenses were included in the Exploration
and Production segment results. Management believes that
changes made meet the criteria of relevant and reliable information.
Changes made are disclosed retrospectively in the consolidated
financial statements, administrative expenses in the amount
of RR 6,846 million were included in the corporate and other losses.
Segment earnings
Exploration and production
Refining and marketing
Petrochemicals
Banking
Total segment earnings
Corporate and other
Other income
profit before income tax
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
267 320
33 867
3 634
269
305 090
(41 112)
9 811
273 789
179 577
15 969
2 409
(3 155)
194 800
(33 033)
1 771
163 538
SEgMENT SALES ANd OThER OpERATINg REVENuES
Reportable operating segment sales and other operating
revenues are stated in the following table:
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
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
Elimination of intersegment sales
Total sales and other operating revenues
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
167 694
28 395
270 966
4 908
191 912
663 875
-
183 497
183 497
20 565
20 565
7 282
150 960
158 242
8 579
1 239
372 122
33 316
10 418
3 806
4 248
994
52 782
19 485
3 774
23 259
91 781
20 781
244 947
4 131
113 245
474 885
418
126 576
126 994
12 267
12 267
7 289
102 809
110 098
7 670
1 031
258 060
35 655
8 648
2 255
3 091
973
50 622
27 321
3 643
30 964
1 112 038
15 900
(194 145)
814 531
12 841
(115 249)
933 793
712 123
(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.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 206
207
SEgMENT ASSETS
As of 31 December 2018 corporate and other includes RR
41,059 million of property, plant and equipment, RR 24,341 million
of securities at FVOCI, RR 49 million of debt securities at AC and RR
22,378 million of bank deposits at AC.
As of 31 December 2017 corporate and other includes RR
33,496 million of property, plant and equipment, RR 23,556 million
of available-for-sale investments, RR 23,994 million of investments
held to maturity and RR 12,208 million of bank deposits.
The Group’s assets and operations are primarily located and
conducted in the Russian Federation.
Assets
Exploration and production
Refining and marketing
Petrochemicals
Banking
Corporate and other
TOTAL ASSETS
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
Total depreciation, depletion and amortization
AddITIONS TO pROpERTy, pLANT ANd EquIpMENT
Exploration and production
Refining and marketing
Petrochemicals
Banking
Corporate and other
Total additions to property, plant and equipment
For the years ended 31 December 2018 and 2017 additions
to property, plant and equipment of exploration and production
segment are shown net of RR 6,253 million decrease and
RR 5,101 million increase, respectively, associated with changes
in the decommissioning provision.
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
368 991
406 407
32 923
252 854
140 113
340 525
366 804
26 820
251 444
121 861
1 201 288
1 107 454
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
15 797
11 595
1 687
326
1 114
30 520
39 361
41 235
1 731
596
6 585
89 508
13 850
8 434
1 781
244
576
24 885
41 313
39 246
2 428
2 489
8 117
93 593
Note 25: 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. The Group enters into transactions with related parties
based on market or regulated prices.
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
Other services
Other purchases
At 31 December 2018 and 2017 the outstanding balances with
associates, joint ventures and other related parties were as follows:
ASSETS
Accounts receivable, net
Banking: Loans to customers
Other financial assets
Notes receivable
Other loans receivable
Prepaid expenses and other current assets
due from related parties short-term
Long-term accounts receivable
Loans to customers
Other financial assets
Available for sale (for comparatives only)
Securities at FVOCI
Other loans receivable
due from related parties long-term
LIABILITIES
Accounts payable and accrued liabilities
Banking: Customer accounts
due to related parties short-term
Banking: Customer accounts
due to related parties long-term
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
14
250
302
905
579
11
255
139
896
574
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
148
193
249
51
276
917
114
-
-
5 249
912
6 275
(61)
(1 668)
(1 729)
-
-
534
20
-
-
553
1 107
280
21
3 400
-
2 443
6 144
(169)
(1 711)
(1 880)
(165)
(165)
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 208
209
gOVERNMENT RELATEd COMpANIES
At 31 December 2018 and 2017 the outstanding balances with
Government related companies were as follows:
The amounts of transactions for each period with Government
related companies are as follows:
ASSETS
Cash and cash equivalents
Banking: Mandatory reserve deposits with CB RF
Accounts receivable
Banking: Loans to customers
Other financial assets
Bank deposits
Available-for-sale (for comparatives only)
Securities at FVOCI
Held-to-maturity (for comparatives only)
Securities at AC
Trading securities (for comparatives only)
Securities at FVTPL
Other loans receivable
Prepaid expenses and other current assets
due from related parties short-term
Long-term accounts receivable
Loans to customers
Other financial assets
Bank deposits
Available-for-sale (for comparatives only)
Securities at FVOCI
Held to maturity (for comparatives only)
Securities at AC
Other loans receivable
Advances for construction
due from related parties long-term
LIABILITIES
Accounts payable and accrued liabilities
Banking: Due to banks and CB RF
Banking: Customer accounts
Debt
Other debt
due to related parties short-term
Debt
Subordinated debt
Other debt
Banking: Due to banks and CB RF
due to related parties long-term
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
16 810
1 875
6 795
7 496
-
-
10 209
-
8 349
-
1 679
40
5 067
58 320
1 221
500
346
-
11 001
-
8 192
192
1 430
22 882
(1 420)
(100)
(6 298)
(3 121)
(10 939)
-
-
(2 631)
(2 631)
12 678
1 916
2 306
2 415
1
8 006
-
37 795
-
5 095
-
120
6 579
76 911
1 086
1 991
-
10 680
-
6 781
-
174
3 510
24 222
(873)
(4 771)
(2 418)
(21 580)
(29 642)
(2 141)
(13)
(2 055)
(4 209)
Sales of crude oil
Sales of refined products
Other sales
Interest income
Interest expense
Purchases of refined products
Purchases of electricity
Purchases of transportation services
Other services
Other purchases
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
1 132
20 965
4 287
4 988
1 019
34 184
16 691
23 831
4 485
3 822
-
11 093
4 476
4 132
1 484
34 461
14 384
26 729
4 426
1 340
In December 2018 the Group entered into a transaction to
acquire the rights of certain Russian government controlled banks
under the credit facilities extended to NEFIS Group (Note 9).
COMpENSATION TO KEy MANAgEMENT pERSONNEL
The key management personnel of the Group includes members
of the Board of Directors and the Management Board of PJSC
Tatneft.
As of 31 December 2018 and 2017 total remuneration, including
pension cost, for key management personnel was RR 1,089 million
and RR 903 million, respectively.
At 31 December 2018 and 2017 key management personnel
customer accounts in Bank ZENIT amounted to RR 31,290 million
and RR 26,312 million, respectively.
Note 26: Contingencies and commitments
CApITAL COMMITMENTS
As of 31 December 2018 and 2017 the Group has outstanding
capital commitments of approximately RR 38,327 million and RR
42,758 million, respectively, mainly for the construction of the
TANECO refinery complex and superviscous oil fields facilities
construction. These commitments are expected to be paid between
2019 and 2022.
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
14).
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 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.
The Russian economy continues to be negatively impacted by
ongoing political tension in the region and international sanctions
against certain Russian companies and individuals. Firm oil prices,
low unemployment and rising wages supported a modest growth of
the economy in 2018.
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.
The future economic development of the Russian Federation is
dependent upon external factors and internal measures undertaken
by the government to sustain growth, and to change the tax, legal
and regulatory environment. Management believes it is taking all
necessary measures to support the sustainability and development
of the Group’s business in the current business and economic
environment.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements
210
211
OpERATINg LEASE COMMITMENTS
Where the Group is the lessee, the future minimum lease
payments under non-cancellable operating leases are as follows:
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
Less than one year
More than one year and less than five years
More than five years
2 849
2 980
290
2 867
1 266
301
Total operating lease commitments
6 119
4 434
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:
aT 31 DEcEmbEr
2018
aT 31 DEcEmbEr
2017
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
18 810
20 467
271
26 421
14 525
1 676
39 548
42 622
(426)
(66)
(29)
(658)
(806)
(250)
Total credit related commitments
38 287
41 648
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 transports substantially all of the crude oil that it sells
in export and local markets through trunk pipelines in Russia that
are controlled by Transneft, the state-owned monopoly owner and
operator of Russia’s trunk crude oil pipelines. The Group’s crude
oil is blended in the Transneft pipeline system with other crude oil of
varying qualities to produce an export blend commonly referred to
as Urals. There is currently no equalization scheme for differences
in crude oil quality within the Transneft pipeline system and the
implementation of any such scheme or the impact of it on the
Group’s business is not currently determinable.
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
27 November 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 a
request for annulment of the award in the Court of Appeal in Paris,
France (seat of arbitration), which on 29 November 2016 rejected
the request for annulment. In March 2017 Ukraine filed a cassation
appeal against the Paris Court of Appeal decision of 29 November
2016 rejecting its request for annulment. Tatneft filed a motion with
the Court of Cassation to exclude Ukraine’s cassation appeal from
the Cassation Court docket without prejudice due to Ukraine’s
failure to perform the decision of the Court of Appeal requiring
Ukraine to compensate Tatneft’s legal expenses in relation to the
(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 requested from the Court of
Appeals permission to appeal the judgement of 8 November
2016. Tatneft’s appeal was heard by the Court of Appeals at the
end of July 2017. On October 18 the Court of Appeals found that
Tatneft’s claim should not have been dismissed by the High Court
and that the case may proceed to trial. The trial has been listed for
autumn 2020.
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 consolidated
financial statements. 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 2018 the Group had approximately RR 5,116
million of assets associated with its Libyan operations of which RR
4,899 million is related to capitalised exploration costs, RR 210
million of inventories and RR 7 million of cash. As of 31 December
2017 the Group had approximately RR 5,759 million of assets
associated with its Libyan operations of which RR 5,545 million is
related to capitalised exploration costs, RR 210 million of inventories
and RR 4 million of cash.
appeal and commence performance of the tribunal’s award. On 9
November 2017, Tatneft’s motion was granted.
At this time, it is not clear whether and when the cassation appeal
will be heard. Filing of the cassation appeal does not preclude
Tatneft from commencing enforcement of the award. Accordingly,
Tatneft has commenced recognition and enforcement procedures
in relation to this arbitration award in the USA, England and the
Russian Federation. In March 2017, Tatneft filed a petition to
recognize and enforce the award in the U.S. District Court for
the District of Columbia, which is now pending and is subject to
various procedural actions by Tatneft and Ukraine. On 19 March
2018, the U.S. District Court for the District of Columbia denied
Ukraine’s challenge to the U.S. court’s jurisdiction, Ukraine’s
motion to stay the enforcement proceedings pending the outcome
of the French proceedings and Ukraine’s motion for jurisdictional
discovery. On 17 April 2018, Ukraine appealed this decision to
the United States Court of Appeals for the District of Columbia
Circuit; the District Court has stayed proceedings on Ukraine’s
remaining objections to enforcement of the award in the United
States pending this appeal. The hearing before the United States
Court of Appeals took place on 28 November 2018. The United
States Court of Appeal reserved the decision and proceedings are
now pending the decisions by this court.
In April 2017, Tatneft filed an application for recognition of
the award and permission to enforce the award in the High Court
of England and Wales. In May 2017, the High Court approved
Tatneft’s application to enforce the award, however the order
granting Tatneft’s application and the enforcement procedure
are subject to challenge by Ukraine. Ukraine challenged the
jurisdiction of the English courts to consider Tatneft’s petition for
recognition and enforcement of the award and a hearing on this
threshold issue was held in the High Court of England and Wales
in June 2018. On 13 July 2018, the High Court rejected Ukraine’s
challenge to jurisdiction in its entirety. Ukraine was granted the
permission to appeal the High Court’s judgment to the Court
of Appeals solely on one ground while all other grounds were
rejected). The appeal is scheduled for hearing in May 2019. Any
remaining objections of Ukraine to recognition and enforcement
in England and Wales are stayed pending the appeal.
On 27 June 2017 the Arbitration Court of the City of Moscow
terminated the proceedings in relation to Tatneft’s application
for recognition and enforcement of the award due to Ukraine’s
alleged jurisdictional immunity and lack of effective jurisdiction
of the Arbitration Court of the City of Moscow to consider the
application. On 22 August 2017, the Arbitration Court of the
Moscow District overturned this ruling. Tatneft’s petition for
enforcement of the award was returned to the Arbitration Court
of the City of Moscow for further consideration. Several hearings
took place in 2017-2018. On 22 June 2018 the Arbitration Court
of the City of Moscow transferred the case for consideration by
the Arbitration Court of Stavropol Region because Ukraine’s
property was identified in that region. Tatneft appealed this ruling
to the Arbitration Court of the Moscow District. On 2 August 2018,
the Arbitration Court of the Moscow District upheld the ruling
of the Arbitration Court of the City of Moscow. On 28 February
2019 the Arbitration Court of Stavropol Region recognised the
award and gave permission to enforсe it in Russia. The ruling of
the Arbitration Court of Stavropol Region has entered in force
immediately. Ukraine may appeal this ruling to the Arbitration
Court of the North Caucasian District within one month from the
date of its issuance.
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
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 212
213
Note 27: Principal subsidiaries
Set out below are the Group’s principal subsidiaries at 31
December 2018. The joint-stock companies as listed below (except
for PJSC «Nizhnekamskshina») have share capital consisting solely
of ordinary shares. The proportion of ownership interests held equals
to the voting rights held by Group. PJSC «Nizhnekamskshina» has
share capital consisting of ordinary and preference shares. 82%
of voting right and 84.5% of ownership interest are held by the
Group, 18% of voting rights and 15.5% of ownership interest are
held by non-controlling interests. 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
Bank ZENIT
Tatneft Europe AG
TANECO
Nizhnekamskshina
Nizhnekamskiy zavod shin CMK
Trade House Kama
Tatneft-AZS Centr
Tatneft-AZS-Zapad
Banking operations
Export oil sales
Oil refinery
Tires production
Tires production
Tires sales
Oil products sales
Oil products sales
The summarised financial information relating to the subsidiaries
with material non-controlling interest was as follows:
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
% 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
71,89
100
100
84,5
100
100
100
100
28,11
-
-
15,5
-
-
-
-
71,89
100
100
84,5
100
100
100
100
28,11
-
-
15,5
-
-
-
-
yEAR ENdEd 31 dECEMBER 2018
Bank ZENIT
Nizhnekamskshina PJSC
Total
ИтОгО
yEAR ENdEd 31 dECEMBER 2017
Bank ZENIT
Nizhnekamskshina PJSC
currENT
assETs
NON-currENT
assETs
currENT
liabiliTiEs
NON-currENT
liabiliTiEs
rEvENuE
prOfiT
121 300
1 576
133 315
3 783
224 675
6 567
8 233
-
23 347
20 368
122 876
137 098
231 242
8 233
43 715
322
237
559
123 503
1 135
129 344
4 195
211 321
6 789
13 148
-
35 414
16 652
1 146
167
TOTAL
124 638
133 539
218 110
13 148
52 066
1 313
Note 28: Financial risk management
fINANCIAL RISK MANAgEMENT
OBjECTIVES ANd pOLICIES
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.
The table below summarises the Group’s exposure to foreign
currency exchange rate risk as of 31 December 2018.
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 and financial instruments price risk.
а) Currency risk
The Group operates internationally and is exposed to currency
risk arising from various currency exposures primarily with respect
to the US Dollar. Foreign exchange risk arises from assets,
liabilities, commercial transactions and financing denominated in
foreign currencies.
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
REPO with banks
Notes receivable
Loans to employees
Other loans
Securities at FVTPL
Securities at FVOCI
Securities at AC
Total financial assets
fINANCIAL LIABILITIES
Trade and other financial payables
Trade payables
Dividend payable
Other payables
Banking: Other finance liabilities FVPL
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
25 249
22 078
29
-
1 875
42 750
5 130
131 907
310
168
537
456
1 046
28 517
3 149
38 773
18 718
320 692
25 727
50 711
933
1 190
1 056
2 160
981
-
1 754
15 212
144 070
533
244 327
14 353
-
657
-
-
35 299
1
8 220
347
428
-
-
-
270
1 625
4 603
14 048
79 851
1
-
80
-
-
1 420
149
6 682
835
3 087
33 764
-
46 018
2 738
-
385
-
-
368
-
6 178
-
1 419
-
-
-
-
-
-
-
11 088
-
-
-
-
-
-
-
-
-
126
6 502
-
6 628
42 340
22 078
1 071
-
1 875
78 417
5 131
146 305
657
2 015
537
456
1 046
28 787
4 774
43 376
32 766
411 631
25 728
50 711
1 013
1 190
1 056
3 580
1 130
6 682
2 589
18 425
184 336
533
296 973
NET BALANCE ShEET pOSITION
76 217
33 833
4 460
114 510
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 214
215
The table below summarises the Group’s exposure to foreign
currency exchange rate risk as of 31 December 2017.
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
russiaN rublE
us DOllar
OThEr
TOTal
YEar ENDED 31 DEcEmbEr 2018
YEar ENDED 31 DEcEmbEr 2017
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
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
Total financial liabilities
21 748
11 906
1 501
-
1 916
34 733
5 751
136 085
302
330
456
1 558
10 769
6 147
37 681
48 831
319 714
21 543
6 032
3 312
7 742
2 161
1 491
20 955
1 556
31 233
125 344
256
221 625
4 255
-
171
-
-
23 934
14
13 958
-
1 285
-
-
552
2 354
3 520
6 974
57 018
352
-
88
-
2 331
1 937
6 789
1 486
1 758
27 208
-
41 949
3 216
-
-
-
-
408
6
940
-
27
-
-
-
-
503
-
5 100
471
-
-
-
-
-
-
364
649
6 362
-
7 846
29 219
11 906
1 672
-
1 916
59 075
5 771
150 983
302
1 642
456
1 558
11 321
8 501
41 705
55 805
381 832
22 366
6 032
3 400
7 742
4 492
3 428
27 744
3 406
33 640
158 914
256
271 420
NET BALANCE ShEET pOSITION
98 089
15 069
(2 746)
110 412
For the year ended 31 December 2018 the Group recognised RR
21,483 million and RR 13,547 million foreign exchange gains and
losses respectively in the consolidated statement of profit or loss
and other comprehensive income (for the year ended 31 December
2017: RR 10,257 million and RR 11,875 million, respectively).
US Dollar strengthening by 10%
US Dollar weakening by 10%
impacT ON prOfiT
bEfOrE Tax
3 376
(3 376)
impacT
ON EquiTY
2 701
(2 701)
impacT ON prOfiT
bEfOrE Tax
1 501
(1 501)
impacT
ON EquiTY
1 200
(1 200)
b) Interest rate risk
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 repricing 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 below, 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 of Bank ZENIT 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
of Bank ZENIT review current interest rate gaps and assess
resulting effects of interest rate risk on the Group’s interest margin
and economic capital.
The interest rate risk measurement system provides the ability
to evaluate a risk profile from two different, but complementary
points of view. From the economic value point of view the effect
of changes in interest rates and the associated volatility of the
present value of all future cash flows is considered and is calculated
as the change in the sensitivity of fair value using a shock effect
on the interest rate curve. From the profit point of view the effect
generated by measuring interest rates on net profit in the form of
interest and, therefore, on the associated effect on net interest
income on a 1-year horizon is analysed. Interest rate risk reporting
is compiled and reported to the Bank ZENIT’s Management Board
on a quarterly basis.
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:
31 december 2018
Total financial assets
Total financial liabilities
Net interest sensitivity gap
31 december 2017
Total financial assets
Total financial liabilities
Net interest sensitivity gap
DEmaND aND lEss
ThaN 1 mONTh
frOm 1 TO 6
mONThs
frOm 6 TO 12
mONThs
frOm 1 TO 5
YEars
mOrE ThaN
5 YEars
NON-sENsiTivE
TOTal
73 319
41 385
31 934
41 463
46 508
(5 045)
20 961
57 113
(36 152)
92 419
44 540
47 879
77 018
65 755
11 264
34 751
82 390
(47 639)
37 788
50 466
(12 678)
74 011
12 359
61 652
54 469
1 560
52 909
56 817
3 489
53 328
129 000
105 867
23 133
411 631
296 973
114 658
101 447
56 961
44 486
381 832
271 420
110 412
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 216
217
The table below summarises the effective average year end
interest rates, by major currencies (US Dollars, Russian Rubles),
for financial instruments outstanding as of 31 December 2018 and
2017. 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.
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
russiaN rublE
us DOllar
russiaN rublE
us DOllar
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
Securities at FVTPL
Financial assets at fair value through profit or loss (for
comparatives only)
Securities at FVOCI
Available-for-sale financial assets (for comparatives only)
Securities at AC
Held to maturity investments (for comparatives only)
fINANCIAL LIABILITIES
debt
Bonds issued
Subordinated debt
Debt securities issued
Credit facilities
Other debt
Banking: Other financial liabilities at fair value through profit
and loss
Banking: Due to banks and CB RF
Banking: Customer accounts
6,26%
7,96%
1,20%
8,30%
13,00%
1,20%
0,10%
3,19%
9,25%
5,56%
-
7,76%
-
9,18%
-
7,73%
6,50%
2,92%
-
5,24%
7,90%
7,58%
5,46%
0,30%
-
-
6,60%
1,60%
-
-
-
-
7,89%
-
5,86%
-
6,11%
-
-
9,50%
2,30%
4,18%
2,91%
-
2,00%
2,80%
7,31%
7,39%
7,40%
11,71%
13,00%
8,18%
0,10%
3,19%
8,32%
-
9,31%
-
8,31%
-
9,33%
9,90%
7,10%
5,40%
7,17%
1,90%
-
7,90%
7,40%
0,76%
-
-
6,91%
-
1,14%
-
-
-
-
6,44%
-
8,10%
-
8,92%
-
8,80%
1,90%
3,10%
2,90%
-
2,50%
1,70%
The following table presents a sensitivity analysis of interest rate
risk on banking and non-banking financial assets and liabilities:
YEar ENDED 31 DEcEmbEr 2018
YEar ENDED 31 DEcEmbEr 2017
impacT ON prOfiT
bEfOrE Tax
impacT
ON EquiTY
impacT ON prOfiT
bEfOrE Tax
Increase by 100 basis points
Decrease by 100 basis points
(1 147)
1 147
(917)
917
(659)
659
impacT
ON EquiTY
(527)
527
с) 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.
Financial instruments price risk for financial instruments held
within 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.
The Group assesses on a regular basis potential scenarios
for future fluctuation in commodity prices and their impacts on
operational and investment decisions.
Financial instruments price risk is managed primarily through daily
mark-to-market procedures, sensitivity analysis and control of limits
established for various types of financial instruments.
However, in the current environment management estimates
may materially differ from actual future impact on the Group’s
financial position. Actual results, and the impact on the Group’s
operations and financial position, may differ from management’s
estimates of potential scenarios.
finanCial instruments priCe risk management
Financial instruments price 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.
Sensitivity to changes in other prices is estimated using the Value
at Risk (VaR) methodology. This is a way to assess potential losses
that may occur at a risk position as a result of changes in market rates
and prices in a certain period of time with a given level of confidence.
VaR estimates in respect of financial assets at fair value through
profit or loss and available-for-sale financial assets as of 31 December
2018 and 2017 are as follows:
YEar ENDED 31 DEcEmbEr 2018
YEar ENDED 31 DEcEmbEr 2017
impacT ON prOfiT
bEfOrE Tax
impacT
ON EquiTY
impacT ON prOfiT
bEfOrE Tax
impacT
ON EquiTY
Fixed income securities price risk
Equity securities price risk
TOTAL pRICE RISK
104
12
116
83
10
93
105
-
105
84
-
84
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 218
219
CREdIT RISK
The Group exposes itself to credit risk, which is the risk that
one party to a financial instrument will cause a financial loss for the
other party by failing to meet an obligation.
Exposure to credit risk arises as a result of the Group’s lending
and other transactions with counterparties, giving rise to financial
assets and off-balance sheet credit-related commitments.
The Group’s maximum exposure to credit risk is reflected in the
carrying amounts of financial assets in the consolidated statement
of financial position. For financial guarantees issued, commitments
to extend credit, undrawn credit lines and export/import letters of
credit, the maximum exposure to credit risk is the amount of the
commitment.
The estimation of credit risk for risk management purposes
is complex and involves the use of models, as the risk varies
depending on market conditions, expected cash flows and the
passage of time. The assessment of credit risk for a portfolio of
assets entails further estimations of the likelihood of defaults
occurring, the associated loss ratios and default correlations
between counterparties.
expeCted Credit loss (eCl) measurement.
EAD is an estimate of exposure at a future default date,
taking into account expected changes in the exposure after the
reporting period, including repayments of principal and interest,
and expected drawdowns on committed facilities. The EAD on
credit related commitments is estimated using Credit Conversion
Factor (“CCF”). CCF is a coefficient that shows the probability of
conversion of the committed amounts to an on-balance sheet
exposure within a defined period.
PD an estimate of the likelihood of default to occur over a given
time period. LGD is an estimate of the loss arising on default. It is
based on the difference between the contractual cash flows due
and those that the lender would expect to receive, including from
any collateral. It is usually expressed as a percentage of the EAD.
The expected losses are discounted to present value at the end
of the reporting period. The discount rate represents the effective
interest rate (“EIR”) for the financial instrument or an approximation
thereof.
Expected credit losses are modelled over instrument’s lifetime
period. The lifetime period is equal to the remaining contractual
period to maturity of debt instruments, adjusted for expected
prepayments, if any. For loan commitments and financial guarantee
contracts, it is the contractual period over which an entity has
a present contractual obligation to extend credit.
Management models Lifetime ECL, that is, losses that result
from all possible default events over the remaining lifetime
period of the financial instrument. The 12-month ECL, represents
a portion of lifetime ECLs that result from default events on a
financial instrument that are possible within 12 months after the
reporting period, or remaining lifetime period of the financial
instrument if it is less than a year.
The ECLs that are estimated by management for the purposes
of these financial statements are point-in-time estimates,
rather than through-the-cycle estimates that are commonly
used for regulatory purposes. The estimates consider forward-
looking information, that is, ECLs reflect probability weighted
development of key macroeconomic variables that have
an impact on credit risk.
The ECL modelling does not differ for Purchased or Originated
Credit Impaired (“POCI”) financial assets, except that (a) gross
carrying value and discount rate are based on cash flows that were
recoverable at initial recognition of the asset, rather than based
on contractual cash flows, and (b) the ECL is always a lifetime
ECL. POCI assets are financial assets that are credit-impaired
upon initial recognition, such as impaired loans acquired in a past
business combination.
Credit risk management
Credit risk is the single largest risk for the Group’s business;
management therefore carefully manages its exposure to credit risk.
An assessment is performed at each reporting date to identify
a significant increase in credit risk since initial recognition of
a financial instrument. Such assessment is performed on the basis
of qualitative and quantitative information:
• Quantitative assessment is performed on the basis of a change
in risk of default arising over the expected lifetime of a financial
asset.
• Qualitative assessment implies that a number of factors are
important for assessing significant increase in credit risk
(restructuring indicative of problems, establishing favourable
schedule for repaying loan interest and principal, significant
changes in expected results of operations and behaviour of a
borrower and other material changes).
Financial assets move from Stage 1 to Stage 2 if there is one or a
combination of the following factors:
• financial assets are over 30 days overdue;
• credit rating deteriorates;
• there are early warning indicators of an increase in credit risk; a
need to change previously agreed on terms of the agreement
to create more favourable environment for a customer due to
his inability to meet current liabilities because of the customer’s
financial position; full or partial refinancing of the current debt
which would not be required if the client did not experience
financial difficulties;
• a customer has no rating at the reporting date;
• information on future changes in assets that may result
in credit losses not considered in the rating systems is identified
(e.g. military conflicts in the region that may have a significant
impact on future credit quality).
A default is recognised if one or a combination of the following
events occur:
presumption);
• financial assets are over 90 days overdue (a rebuttable
• a default rating is assigned;
• restructuring indicative of problems is undertaken;
• a favourable schedule for repaying interest and principal with
payments to be made at the end of the term is granted.
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 expected credit losses. 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.
Credit risk analysis for accounts receivable is presented in Note
7.
The Group performs an ongoing assessment and monitoring
of the risk of default. In addition, as part of its cash management
and credit risk function, the Group 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’s credit risk policies prescribe its acceptance only
through formalized procedures and only based on decisions of
the authorized collegial body. The Bank ZENIT has a system of
credit committees responsible for making credit decisions, the
main objective of which is to create a high-quality loan portfolio
that ensures the implementation of the strategy, credit policies and
risk management policies. The credit committees of Bank ZENIT,
authorized to make credit decisions, have a clear segmentation
according to business lines, lending segments and the amount of
authority.
Credit committees and their level of responsibility in respect of
approval of maximum exposures on a borrower or group of related
Fitch, Moody`s), mapped to the internal scale of the Bank ZENIT.
The system of internal ratings has been applied by Bank
ZENIT since 1999 and is continuously updated and developed.
The information accumulated over this period provides a sound
ground for assessment of ratings migration and allows the Group to
calibrate corresponding parameters of default probability.
The Group updates and validates internal models and
approaches on a periodic basis, but at least once a year. For the
purpose of information disclosure, assets are grouped in one of the
4 credit quality rating categories in order of credit quality deterioration
(credit risk increase) in accordance with the approaches outlined
below:
The Group does not enter into transactions with an initial rating
of III or IV.
In order to monitor the credit risk, responsible employees of
credit departments prepare regular reports based on a structured
analysis of the Client’s business and financial performance.
Management obtains and analyses all information about significant
risks related to customers with deteriorating creditworthiness.
(tranches);
Credit risk monitoring has an important role in maintaining the
quality of loans at least as good as at the moment of credit limits
approval, in preventing losses on the formed portfolio in excess of
planned norms and consists in:
discussions (meetings) with the borrower by business managers;
• maintaining constant contact and holding regular risk-focused
• structured and continuous monitoring of the implementation of
• carrying out, with an established frequency, regular inspections
financial and non-financial covenants using the control register;
of the volume, type and conditions of maintenance of the
pledged items, its validity and insurance;
activities of the borrower and monitoring its financial position;
• conducting a quarterly analysis of the financial and economic
• monitoring of proper loan maintenance and repayment
• compulsory comprehensive annual review of the risk limit
established for the Client in order to re-approve, increase or
reduce it (in case of negative trends in the borrower’s activity, in
its sector, in the economy as a whole, etc.);
• analysis of actual exposures versus established limits;
• control over compliance with internal policies, procedures,
instructions and orders issued by respective management
bodies;
adequacy of risk assessment and forecast;
in
• monitoring of macroeconomic parameters in order to check the
• portfolio analysis showing trends
levels of default,
concentrations, diversifications by borrowers or groups of
borrowers, products, industries, countries, etc.
In order to ensure financial stability, forecast expected losses,
plan capital requirements, calculate risk-appetite limits, the Group
performs periodic stress-testing of credit risk. The stress-testing
tool includes regression models based on macroeconomic factors.
A mandatory condition for the application of regression models is
their high quality, confirmed by the results of validation.
The Group’s divisions carry out loan maturity analysis and follow-
up control over overdue balances.
For more detailed analyses please refer to
https://www.zenit.ru/rus/about_bank/disclosure/financial-statements/
ThE NamE Of ThE cOmmiTTEE
maximum ExpOsurE allOwED TO bE
apprOvED, rr milliON
Credit committee
Credit committee on small and
medium-sized business borrowers
Credit committee on retail lending
Not limited*
400
90
* Within the limits of standards N6 and N25
borrowers are as follows:
The Group structures the level of credit risk it undertakes by placing
the appropriate limits. Limits are set by the Group on an individual
(for example, for specific customers and counterparties), group and
portfolio basis (for example, industry and regional limits, limits on
types of operations, etc.).
Internal regulations on financial analysis and risk assessment
are created and applied to each segment of the lending activity,
including lending to legal entities, individuals, small and medium-
sized businesses and other categories of borrowers.
To reduce the level of risk, the Group accepts collateral in the
form of pledges, sureties and guarantees. In case of acceptance of a
surety, the Group performs a financial analysis of the guarantor. The
assessment of collateral is performed internally by special division
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.
Credit risk for off-balance sheet financial instruments is defined
as the possibility of sustaining a loss as the result of another party
to a financial instrument failing to perform in accordance with the
terms of the contract. The Group uses the same credit policies in
assuming conditional obligations as it does for on balance sheet
financial instruments, through established credit approvals, risk
control limits and monitoring procedures.
Risk management departments monitor compliance with the
requirements of external and internal polices of risk assessment,
credit decision making, authority to make credit decisions, and
work with collaterals.
To quantify the credit risk, the Group uses internal models (rating
systems). In the absence of a model, the assessment can be carried
out in one of the alternative ways:
• based on the average values obtained on the internal statistics;
• using external ratings of international rating agencies (S&P,
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 220
221
Credit risk analysis on Banking and non-Banking operations
of the group
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 Fitch
Rating and as AAA to BBB- for Standard and Poor’s Rating,
respectively;
• non-investment (speculative) grade ratings classification
referred to as Ba1 to C for Moody’s Investment Services, as BB+
to B- for Fitch Rating and as BB+ to D for Standard and Poor’s
Rating, respectively.
raTiNG GrOup
pD iNTErval
cOrrEspONDiNG raTiNGs
Of ExTErNal iNTErNaTiONal
raTiNG aGENciEs
s&p \ fiTch
mOODY`s
DEscripTiON
I
II
III
IV
0,00%…2,40%
«AAA»…«B+»
«Aaa»…«B1»
2,40%…26,50% «B»…«B-»
«B2»…«Caa3»
26,50%…65,80% «CCC»…«C»
«Ca»…«C»
100,00%
«D»
«D»
Rating group I, characterized by the best credit quality and low
probability of default.
There are no events (trends) associated with the Clients’ activities that
can have a negative and (or) threatening effect their financial stability
and (or) solvency in the near future.
Rating group II, characterized by acceptable credit quality and a
certain probability of default.
There may be negative events (trends) associated with the Clients’
activities that can affect their financial stability and (or) solvency in the
near future.
Rating group III, characterized by doubtful credit quality and a high
probability of default.
As a rule, there are negative and (or) threatening events (trends)
associated with the Clients’ activities that can affect their financial
stability and (or) solvency in the near future.
Rating group IV, default category includes Clients that fall under the
criteria of the Bank’s definition of default.
Redemption is unlikely.
The following table contains an analysis of the credit risk
exposure of cash and cash equivalents including mandatory reserve
deposits with CB RF. The carrying amount as at 31 December 2018
also represents the Group’s maximum exposure to credit risk on
these financial assets.
sTaGE 1
(12-months Ecl)
sTaGE 2
(lifetime Ecl
for sicr)
sTaGE 3
(lifetime Ecl for credit
im-paired)
pOci
TOTal
CASh ON hANd ANd CASh IN BANKS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
31 721
4 030
6 589
42 340
-
42 340
TERM dEpOSITS wITh ORIgINAL MATuRITy Of LESS ThAN ThREE MONThS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
duE fROM BANKS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
MANdATORy RESERVE dEpOSITS wITh CB Rf
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
6 468
15 610
-
22 078
-
22 078
-
1 071
-
1 071
-
1 071
1 875
-
-
1 875
-
1 875
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 721
4 030
6 589
42 340
-
42 340
6 468
15 610
-
22 078
-
22 078
-
1 071
-
1 071
-
1 071
1 875
-
-
1 875
-
1 875
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements
222
223
The following table contains an analysis of the credit risk
exposure of other financial assets carried at AC and at FVOCI for
which ECL allowance is recognised other than cash and cash
equivalents including mandatory reserve deposits with CB RF,
loans to customers and accounts receivable. The carrying amount
as at 31 December 2018 also represents the Group’s maximum
exposure to credit risk on these financial assets.
sTaGE 1
(12-months Ecl)
sTaGE 2
(lifetime Ecl
for sicr)
sTaGE 3
(lifetime Ecl for credit
im-paired)
pOci
TOTal
sTaGE 1
(12-months Ecl)
sTaGE 2
(lifetime Ecl
for sicr)
sTaGE 3
(lifetime Ecl for credit
im-paired)
pOci
TOTal
NOTES RECEIVABLE
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
OThER LOANS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
LOANS TO EMpLOyEES
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
BANK dEpOSITS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
duE fROM BANKS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
-
-
-
-
-
-
-
-
83
83
-
83
-
-
-
-
-
-
346
-
311
657
-
657
333
1 599
83
2 015
-
2 015
-
-
456
456
-
456
-
-
26 217
26 217
(543)
25 674
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
566
566
(566)
-
-
-
20 377
20 377
(17 464)
2 913
-
-
2 822
2 822
(1 776)
1 046
-
-
5 544
5 544
(5 544)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 022
1 022
(566)
456
-
-
46 677
46 677
(18 007)
28 670
2 822
2 822
(1 776)
1 046
346
5 855
6 201
(5 544)
657
333
1 599
83
2 015
-
2 015
REpO wITh BANKS
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
dEBT SECuRITIES AT AC
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
dEBT SECuRITIES AT fVOCI
Investment grade rating
Non-investment grade rating
Unrated
gross carrying amount
Credit loss allowance
Carrying amount
537
-
-
537
-
537
32 938
35
-
32 973
(221)
32 752
15 662
1 677
478
17 817
(124)
17 693
-
-
-
-
-
-
3
10
1
14
-
14
-
-
89
89
-
89
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
537
-
-
537
-
537
32 941
45
1
32 987
(221)
32 766
15 662
1 677
567
17 906
(124)
17 782
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements
224
225
The table below shows credit quality of assets other than loans
to customers and accounts receivable as of 31 December 2017:
NEIThER pAST duE NOR IMpAIREd
Cash and cash equivalents
Cash on hand and in banks
Term deposits
Due from banks
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
Other loans
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held to maturity investments
Less: provision for impairment
iNvEsTmENT
GraDE raTiNG
NON-iNvEsTmENT
GraDE raTiNG
uNraTED
TOTal
3 114
8 012
-
-
-
-
-
-
1 952
4 360
21 681
-
-
-
-
-
-
-
-
-
9 188
3 859
1 672
-
1
1 613
-
-
3 191
12 509
29 924
-
-
30
-
-
-
318
-
(348)
16 917
35
-
1 916
301
-
456
3 260
3 358
11 870
4 200
-
5 547
-
318
2 978
15 955
298
19 602
-
(22 114)
29 219
11 906
1 672
1 916
302
1 613
456
3 260
8 501
28 739
55 805
-
5 547
30
318
2 978
15 955
298
19 920
-
(22 462)
TOTAL CREdIT RISK
39 119
61 957
64 897
165 973
Within short term bank deposits there are RR 5,400 million
of deposits placed with Tatfondbank. In March 2017, by the order of
CB RF the license to conduct banking operations was withdrawn from
Tatfondbank. At 31 December 2018 and 2017 the Group created
a provision for impairment of deposits placed with Tatfondbank
in the amount of RR 5,400 million.
LIquIdITy RISK
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 on non-banking activities.
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
The objective of liquidity risk management is to ensure the stable
operations of all banks of the Group, the possibility of uninterrupted
operations in accordance with the Group’s business plans,
including the timely fulfilment of all obligations to customers and
counterparties related to making payments, as well as minimising
the negative impact on financial results, own funds (capital), the
Group’s reputation for a possible liquidity deficit. Also, the priority
objective of liquidity risk management is to ensure that all banks of
the Group comply with the mandatory liquidity ratios established by
the Central Bank of Russia.
The Group’s approach to banking operations
liquidity
management is to ensure, as far as possible, that it will have
sufficient liquidity to meet its liabilities when due under both
ordinary and stressed conditions, without incurring unacceptable
losses or damaging the Group’s reputation.
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 Assets and Liabilities
To maintain instant liquidity, limits are open on Bank ZENIT by
a significant number of Russian banks. In addition, the liquidity
risk is minimized by the Bank ZENIT’s ability to raise funds from
the Bank of Russia within the framework of the refinancing system
and state support for the financial sector, as well as established
liquidity management policies and technologies that provide for
stress approaches in estimating future cash flows.
In accordance with the Group’s Liquidity Management Policy,
the basic principle of liquidity management is risk limiting, in
particular, using the required liquid assets limit. If necessary
(changing the financial situation in the markets or at Bank ZENIT),
other limits (for counterparties, financial instruments, etc.) included
in the Bank ZENIT’s limit structure can be used to manage liquidity.
liquidity analysis for Banking and non-Banking operations
of the group
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 2018:
Management Committee (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::
renewal arrangements as at the date of the respective test;
• current structure of assets and liabilities including any known
• amounts, maturity and liquidity profiles of transactions projected
• current and projected characteristics of liquid assets which
include, apart from cash and cash equivalents, amounts due
from other banks and certain financial assets held-for-trading;
by business units;
• and relevant external factors.
day;
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. For managing current liquidity (with a 1-day
horizon) the following methods are used:
• reallocation of cash between accounts with other banks;
• collection of information from business and other supporting
units on large transactions (both proprietary and customer
based);
• purchase and sale of certain financial assets in liquid portfolios;
• accelerating closure of trade positions;
• estimation of minimum expected cash inflow during a business
• and daily control over the balance of cash and estimated
liabilities to be settled on demand.
In order to optimize liquidity management procedures, Bank
ZENIT allocates instant (intraday) and emergency liquidity
management. The monitoring of the current and forecasted state of
urgent liquidity is carried out by the Bank’s Treasury daily on the basis
of calculating the sufficiency of highly liquid assets to cover planned
and unplanned outflows and meeting resource requirements for a
period of up to 30 days. In the normal course of business, liquidity
reports reflecting the current and projected structure of assets and
liabilities, taking into account the model of daily minimum balance
on current accounts by currency based on an analysis of historical
dynamics, as well as expected future cash flows are regularly
reported to ALCO. Liquidity management decisions made by the
ALCO are implemented by treasuries as part of their duties.
The share of liquid assets is maintained at a level sufficient to
meet obligations to customers and counterparties of Bank ZENIT,
which can significantly reduce liquidity risks and non-market
funding rates.
fINANCIAL LIABILITIES
Trade and other financial payables
Trade payables
Dividend payable
Other payables
Banking: Other financial liabilities at fair value through profit
and loss
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 26)
TOTAL
lEss ThaN
1 YEar
bETwEEN
1 aND 5 YEars
OvEr
5 YEars
TOTal
25 728
50 711
1 013
1 190
945
2 498
1 051
6 682
964
15 386
170 869
533
38 929
316 499
-
-
-
-
59
1 966
76
-
1 625
4 660
38 753
-
-
47 139
-
-
-
-
193
2 125
4
-
-
-
8
-
-
2 330
25 728
50 711
1 013
1 190
1 197
6 589
1 131
6 682
2 589
20 046
209 630
533
38 929
365 968
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 226
227
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 2017:
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 26)
TOTAL
lEss ThaN
1 YEar
bETwEEN
1 aND 5 YEars
OvEr
5 YEars
TOTal
22 366
6 032
3 400
8 369
528
3 364
28 349
2 039
29 695
170 337
256
12 924
287 659
-
-
-
-
5 543
108
-
1 612
5 919
2 824
-
13 028
29 034
-
-
-
-
2 102
4
-
-
20
-
-
469
2 595
22 366
6 032
3 400
8 369
8 173
3 476
28 349
3 651
35 634
173 161
256
26 421
319 288
fAIR VALuES
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an ordinary transaction between market
participants at the measurement date. The estimated fair values
of financial instruments are determined with reference to various
market information and other valuation techniques as considered
appropriate.
The different levels of fair value hierarchy have been defined as
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly or
indirectly.
Level 3 – Unobservable inputs for the asset or liability.
These inputs reflect the Group‘s own assumptions about the
assumptions a market participant would use in pricing the asset
or liability.
follows:
Level 1 – Quoted prices in active markets for identical assets or
liabilities that Group has the ability to assess at the measurement date.
RECuRRINg fAIR VALuE MEASuREMENTS
The levels in the fair value hierarchy into which the recurring fair
value measurements are categorised are as follows:
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Investment property
TOTAL
aT 31 DEcEmbEr 2017
fair valuE
lEvEl 1
8 096
16 944
-
25 040
lEvEl 2
-
8 998
-
8 998
lEvEl 3
405
15 763
871
17 039
carrYiNG valuE
8 501
41 705
871
51 077
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 2018:
Banking: Loans to customers at FVTPL
Securities at FVOCI
Securities at FVTPL
Other loans at FVTPL
Investment property
fair valuE hiErarchY
valuaTiON TEchNiquE aND kEY iNpuT DaTa
Level 3
Level 2,
Level 3
Level 2,
Level 3
Level 3
Level 3
Discounted cash flow models adjusted at credit risk
Quoted prices for similar investments in active markets, net assets
valuation, comparative (market) approach /
Publicly available information, comparable market prices/ discounted
cash flow models adjusted at credit risk
Quoted prices for similar investments in active markets, net assets
valuation, comparative (market) approach /
Publicly available information, comparable market prices / discounted
cash flow models adjusted at credit risk
Discounted cash flow models adjusted at credit risk
Market data on comparable objects adjusted in case of differences from
similar objects
Banking: Loans to customers at FVTPL
Securities at FVTPL
Other loans at FVTPL
Securities at FVOCI
Investment property
Banking: Other financial liabilities at FVTPL
aT 31 DEcEmbEr 2018
fair valuE
lEvEl 1
-
2 320
-
18 056
-
(1 190)
-
2 265
-
9 227
-
-
TOTAL
19 186
11 492
lEvEl 2
lEvEl 3
fair valuE hiErarchY
valuaTiON TEchNiquE aND kEY iNpuT DaTa
carrYiNG valuE
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 2017:
13 043
189
117
16 092
918
-
30 359
13 043
4 774
117
43 375
918
(1 190)
61 037
Held-for-trading financial assets
Available-for-sale financial assets
Investment property
Level 2,
Level 3
Level 2,
Level 3
Level 3
Quoted prices for similar investments in active markets, net assets
valuation, comparative (market) approach /
Publicly available information, comparable market prices
Quoted prices for similar investments in active markets, net assets
valuation, comparative (market) approach /
Publicly available information, comparable market prices
Market data on comparable objects adjusted in case of differences from
similar objects
There were no changes in valuation technique for Level 2 and
Level 3 recurring fair value measurements during the year ended
31 December 2018 and 2017.
There have been no transfers between Level 1, Level 2 and Level
3 during 2018 and 2017 year.
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 228
229
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:
RECONCILIATION Of LIABILITIES ARISINg
fROM fINANCINg ACTIVITIES
The table below sets out an analysis of the movements in the
Group’s liabilities from financing activities for each of the periods
presented. The items of these liabilities are those that are reported
as financing in the statement of cash flows:
ASSETS
Cash and cash equivalents
Cash on hand and in banks
Term deposits
Due from banks
Banking: Mandatory reserve deposits with CB RF
Accounts receivable
Trade receivables
Other financial receivables
Banking: Loans to customers at AC
Other financial assets
Bank deposits
Due from banks
REPO with banks
Notes receivable
Loans to employees
Other loans at AC
Held to maturity investments (for comparatives only)
Securities at AC
Total financial assets
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
aT 31 DEcEmbEr 2018
aT 31 DEcEmbEr 2017
fair
valuE
carrYiNG
valuE
fair
valuE
carrYiNG
valuE
lEvEl 1
lEvEl 2
lEvEl 3
lEvEl 1
lEvEl 2
lEvEl 3
5 451
-
-
1 875
36 889
22 078
1 071
-
-
-
-
-
42 340
22 078
1 071
1 875
6 587
-
-
1 916
22 632
11 906
1 672
-
-
-
-
-
29 219
11 906
1 672
1 916
-
-
-
-
596
78 417
4 535
- 133 404
78 417
5 131
133 404
-
-
-
-
-
-
-
31 276
38 602
657
2 015
537
-
-
-
-
1 490
-
-
-
456
1 046
28 670
-
-
65 333 246 528
-
-
-
272
-
500
25 456
50 711
513
1 056
-
-
-
-
1 526
-
3 580
1 130
-
-
16 899
- 182 970
-
-
-
-
-
6 682
2 589
-
-
533
657
2 015
537
456
1 046
28 670
-
32 766
350 463
25 728
50 711
1 013
1 056
3 580
1 130
6 682
2 589
18 425
182 970
533
-
788
59 075
4 983
- 150 983
59 075
5 771
150 983
-
-
-
-
-
-
-
-
55 805
-
64 308
302
1 183
459
-
-
-
-
-
-
-
-
456
1 558
11 321
-
-
38 942 228 376
-
-
-
-
-
-
7 742
-
-
-
-
1 054
-
4 492
3 428
-
-
32 437
- 158 914
-
-
22 366
6 032
3 400
-
-
-
27 744
3 406
-
-
256
302
1 183
459
456
1 558
11 321
55 805
-
331 626
22 366
6 032
3 400
7 742
4 492
3 428
27 744
3 406
33 640
158 914
256
TOTAL fINANCIAL LIABILITIES
2 582 205 351
86 484
294 417
8 796 199 271
63 204
271 420
liabiliTiEs arisiNG as a rEsulT Of fiNaNciNG acTiviTiEs
shOrT-TErm
aND lONG-TErm DEbT
bONDs i
ssuED
subOrDiNaTED
DEbT
TOTal
At 31 december 2016
12 041
32 698
4 497
49 236
Cash flow movement, including:
Proceeds from issuance of debt
Repayment of debt
Issuance of bonds
Redemption of bonds
Interest accrued
Interest paid
Foreign exchange adjustments
Other non-cash flows
At 31 december 2017
Cash flow movement, including:
Proceeds from issuance of debt
Repayment of debt
Issuance of bonds
Redemption of bonds
Interest paid
Foreign exchange adjustments
Interest accrual
Other non-cash flows
At 31 december 2018
25 107
(5 434)
-
-
(160)
(504)
425
(325)
31 150
25 920
(49 466)
-
-
-
1 012
654
-
9 270
-
-
2 365
(25 740)
(2 011)
-
2 011
(1 581)
7 742
-
-
-
(6 979)
(602)
-
614
281
1 056
-
-
-
-
(921)
(298)
921
293
4 492
-
-
-
(1 359)
-
(19)
466
-
3 580
25 107
(5 434)
2 365
(25 740)
(3 092)
(802)
3 357
(1 613)
43 384
25 920
(49 466)
-
(8 338)
(602)
993
1 734
281
13 906
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 the total Group
shareholders’ equity as shown in the consolidated statement of
financial position. The amount of capital that the Group managed as
of 31 December 2018 was RR 771,265 million (2017: RR 711,859
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.
The carrying amounts of financial assets and liabilities carried
at amortised 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.
Consolidated total borrowings excluding borrowings of Bank ZENIT:
Credit facilities
Other debt
Notes payable
YEar ENDED
31 DEcEmbEr 2018
YEar ENDED
31 DEcEmbEr 2017
9 271
6 682
2 589
-
31 410
27 744
3 406
260
Consolidated shareholders’ equity
771 265
711 859
debt to capital employed ratio, %
(Consolidated total borrowings / Consolidated shareholders’ equity)
1,20%
4%
Annual Report 2018TATNEFT GroupANNEXESAnnex 1. IFRS Financial Statements 230
www.tatneft.ru
231
Banking operations Capital management
The Bank ZENIT’s objectives when managing capital are (i) to
comply with the capital requirements set by the Central Bank of the
Russian Federation, (ii) to safeguard the Group’s ability to continue
as a going concern and (iii) to maintain a sufficient capital base
to achieve a capital adequacy ratio based on the Basel Accord
of at least 8%. Compliance with capital adequacy ratios set by
the Central Bank of the Russian Federation is monitored by the
Management of Bank ZENIT on a daily basis. Other objectives of
capital management are evaluated annually.
Under the current capital requirements set by the Central Bank
of Russia, banks have to maintain a ratio of regulatory capital to
risk weighted assets (“statutory capital ratio”) above a prescribed
minimum level. Bank ZENIT is also subject to minimum capital
requirements established by loan covenants, including capital
adequacy level of 8% calculated in accordance with Basel I
and IFRS, and Tier 1 capital adequacy ratio of 6%. Bank ZENIT
has complied with all externally imposed capital requirements
throughout 2018 and 2017.
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 IFRS 9 and IAS 39 if securities are loaned under an agreement
to return them to the transferor, they are not derecognised because
the transferor retains substantially all the risks and rewards of
ownership. Accordingly, the obligation to return the securities
should not be recognised. Therefore, OFZ and the subordinated
loan received from DIA are not recognised within assets and
liabilities in the consolidated statement of financial position.
These subordinated loans are accounted for in capital adequacy
ratio calculation in accordance with Bank of Russia’s Regulation
No. 395-P.
Annex 2
Financial statements under
the Russian accounting standards
Annual Report 2018TATNEFT Groupwww.tatneft.ruANNEXES 232
233
Auditor’s report
Independent Auditor’s Report
Attn.: the Shareholders and Board of Directors of PJSC TATNEFT named after V.D. Shashin
Opinion
In our opinion, the attached accounting statements present fairly in all material respects the financial
standing of PJSC TATNEFT named after V.D. Shashin (hereinafter referred to as the “Company”) as of
December 31, 2018, as well as its financial results and cash flows for the year ended on that date, in
compliance with the rules for drafting the accounting statements, established in the Russian Federation.
Subject of audit
Profit and Loss Statement for the year ended on that date;
We have audited the Company’s accounting statements, which include:
• Balance Sheet as of December 31, 2018;
•
• Capital Statement for the year ended on that date;
• Cash Flow Statement for the year ended on that date;
• Notes to the Balance Sheet and the Profit and Loss Statement.
Grounds for expressing the opinion
We conducted our audit in accordance with the International Standards on Auditing (ISA). Our respon-
sibility under these standards is described further in the Auditor’s Responsibility for the Audit of
Accountant Statements section.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide the grounds
for our opinion.
Independence
We are independent in respect of the Company, in accordance with the Code of Ethics for Professional
Accountants developed by the International Ethics Standards Board for Accountants (IESBA Code) and
the ethical requirements of the Code of Professional Ethics for Auditors and the Rules of Independence
of Auditors and Audit Organizations, applicable to our audit of accounting statements in the Russian
Federation, and we have fulfilled other ethical obligations in accordance with these requirements and
the IESBA Code.
Joint Stock Company PricewaterhouseCoopers Audit (JSC PwC Audit)
10 Butyrsky Val Str., Business Center Belaya Ploschad, Moscow, 125047, Russia
Telephone: +7 (495) 967-6000, Fax: +7 (495) 967-6001, www.pwc.ru
Our auditing methodology
Overview
Materiality
Key audit issues
•
•
Materiality at the level of the Company’s accounting statements as a
whole: 12.6 billion rubles, which amounts to 5% of profit before tax.
Provision for bad and doubtful debt.
When planning the audit, we defined the materiality and assessed the risks of material misstatements in
accounting statements. In particular, we analyzed, in which areas the management made subjective
judgments, for example, with respect to significant accounting estimates, which implied the application
of assumptions and consideration of future events, which due to their nature, give rise to uncertainty.
We also have considered the risk of the management’s circumvention of internal controls, including,
inter alia, an assessment of whether there are signs of management bias that creates the risk of material
misstatement due to fraud.
We defined the scope of the audit in such a way, that we could perform the works sufficient to express
our opinion on the accounting statements as a whole, taking into account the Company’s structure,
accounting processes, and controls as well as the specifics of the industry, in which the Company
operates.
Materiality
The scope of our audit was determined based on our application of materiality. The objective of the audit
was to obtain reasonable assurance that the accounting statements are free from material misstate-
ments. Misstatements may arise as a result of fraud or error. Misstatements are considered material if
they could reasonably be expected to affect, individually or collectively, the users’ economic decisions
made on the grounds of these accounting statements.
Based on our professional judgment, we have established certain quantitative thresholds for materiali-
ty, including for materiality at the level of the Company’s accounting statements as a whole, as indicated
in the table below. Using these values and taking into account qualitative factors, we determined the
scope of our audit, as well as the nature, timing, and scope of our audit procedures, and assessed the
impact of misstatements (those individual and taken in aggregate), if any, on the accounting statements
as a whole.
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements
234
235
Auditor’s report (continued)
Materiality at the level
of the Company’s accounting
statements as a whole:
12.6 billion rubles
How we defined it
5% of profit before tax
Justification for the level
of materiality we applied
We decided to use profit before tax as a base indicator to deter-
mine the level of materiality because we believe that this base
indicator is most often considered by the users to assess the Com-
pany’s activities results and, furthermore, is a generally accepted
base indicator. We established materiality at 5%, which falls
within the range of acceptable quantitative thresholds of materi-
ality, which are applicable to profit-driven enterprises in this
industrial sector, and corresponds to the approach applied in the
previous year.
Key audit issues
Key audit issues are those issues, which according to our professional judgment, were the most signifi-
cant for our audit of the annual accounting statements for the current period. These issues were consid-
ered in the context of our audit of accounting statements as a whole and when forming our opinion on
these statements, and we do not express a separate opinion on these issues.
Key audit issue
Audit procedures performed regarding
the key audit issue
Provision for bad and doubtful debt
Refer to Note IV.13 (text part) to the Balance Sheet
and the Profit and Loss Statement
As a result of
the assessment conducted
as of December 31, 2018, the Company set up
a provision for bad and doubtful debts in the
amount of 16,881 million rubles (12,483 million
rubles in 2017), presented in line 2350 “Other
expenses” of the profit and loss statement, with
respect to the following assets:
- Interest-free loans granted to subsidiaries and
affiliates engaged in oil and gas exploration,
accrued interest, and penalties;
- Interest-free loans granted to other related
parties;
- Advances issued under agency agreements.
In accordance with the Regulation on Accounting
and Reporting in the Russian Federation approved
by Order No. 34n of the Ministry of Finance dated
July 29, 1998, the Company sets up the provision
for bad and doubtful debts in the case when receiv-
ables are deemed doubtful with the provision
amount allocated to the financial results. Doubtful
receivables are the Company’s receivables that are
not repaid or are highly unlikely to be repaid
within the term established by the agreement and
not secured by the relevant guarantees.
To identify doubtful receivables, the Company
analyzes the information on the debtors solvency,
request expert assessments on the market value of
the collateral provided, builds (if applicable) and
analyzes the models of expected discounted cash
flows, requests additional information, on the
grounds of which the probability of failure to repay
the relevant debt within the term established by
the agreements is assessed.
We have evaluated the methodology applied by
the Company for calculating the provision for
bad and doubtful debts for its compliance with
the rules for drafting the accounting statements,
established in the Russian Federation.
We tested the agreements on interest-free loans
granted by the Company as well as the agency
agreement, under which a provision for bad and
doubtful debts was created on an individual
basis. We have performed the following proce-
dures:
•
Testing whether the debt was classified
as doubtful in a timely manner;
•
•
•
Analyzing the critical assumptions
used by the Company’s management in
assessing the current market value of
property and rights to claim provided
as collateral under loan agreements. To
analyze the current market value of
property and rights to claim that are
pledged for loans granted, we have
engaged our evaluation experts;
the
Analyzing
reasonableness of
critical assumptions used in the models
of technical and economic feasibility
studies in the context of fields, such as
the production volume, hydrocarbon
prices, the value of production costs;
Verifying the mathematical accuracy of
the models of discounted expected cash
flow.
We have assessed the macroeconomic assump-
tions used by management, which include, for
forecasts, by
example, hydrocarbon price
comparing them with the data of the consensus
forecast of the investment banks.
Our procedures for verifying the reasonableness
of the production cost values used by the man-
agement included discussions with the Compa-
ny’s technical specialists on the composition of
the relevant costs, the sources of information for
their forecasting and verification with these
sources.
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements
236
237
Auditor’s report (continued)
Key audit issue
Audit procedures performed regarding
the key audit issue
For the debts of subsidiaries and affiliates engaged
in oil and gas exploration, the Company also shall
analyze the technical and economic feasibility
studies for each field of operation of subsidiaries
and affiliates.
We paid significant attention to this issue due to
the fact that the management made significant
judgments in assessing the amount of the provi-
sion for bad and doubtful debts, which is substan-
tial for the Company’s accounting statements for
2018.
We also compared the information on the hydro-
carbon production volume, according to the
technical and economic feasibility studies with
the data of the forms of statistical monitoring of
the state and changes in reserves and resources of
hydrocarbons (6-GR) of subsidiaries and affili-
ates, and confirmed that, for the purposes of
calculating the provision, the technical and
economic feasibility studies were used, the
volume of production in which does not exceed the
amount of reserves according to the 6-GR forms.
Having considered the results of our procedures,
we did not reveal any material misstatements in
the amount of the provision for bad and doubtful
debts, which is recognized by the Company and
presented in the attached accounting state-
ments.
Other information
The management shall be responsible for other information. Other information includes the Company’s
Annual Report 2018 and the Issuer’s Quarterly Report Q1 2019 (but does not include accounting state-
ments and our audit report on these statements), which are expected to be provided to us after the date
of this audit report.
Our opinion regarding accounting statements does not apply to other information, and we will not
provide a conclusion expressing assurance in any form, regarding this information.
In connection with our audit of accounting statements, our responsibility is to familiarize ourselves with
the above-mentioned other information upon its provision and to consider whether there are material
inconsistencies between other information and accounting statements or the knowledge we obtain in
the course of the audit and whether other information contains any possible material misstatements.
If we come to the conclusion that the Company’s Annual Report 2018 and the Issuer’s Quarterly Report
Q1 2019 contain material misstatements, we should communicate this to the persons responsible for
corporate governance.
Responsibility for accounting statements of the management and persons responsible
for corporate governance
The management shall be responsible for the preparation and fair presentation of these accounting
statements in accordance with the rules for drafting the accounting statements, established in the
Russian Federation and for such internal control system as the management deems appropriate to
enable the preparation of accounting statements free from material misstatement due to fraud or error.
When preparing accounting statements, the management shall be responsible for assessing the ability
of the Company to continue as a going concern, for disclosing, as appropriate, the data relating to going
concern, and for drafting the statements based on the going concern assumption, unless the manage-
ment intends to liquidate the Company, to cease its operations or has no other viable alternative but to
liquidate the Company or cease its operations.
The persons responsible for corporate governance shall be liable for the supervision of the preparation
of the Company’s accounting statements.
Auditor’s responsibility for conducting the audit of accounting statements
Our objective is to obtain reasonable assurance that the accounting statements are free from material
misstatements, due to fraud or error, and to issue an auditor’s report that represents our opinion.
Reasonable assurance is a high degree of assurance, but it is not a guarantee that the audit conducted in
accordance with ISA always reveals material misstatements, if any. Misstatements may result from
fraud or errors and are considered material if they could reasonably be expected to affect, individually
or collectively, the users’ economic decisions made on the grounds of these accounting statements.
Within the scope of the audit conducted in accordance with ISA, we exercise professional judgment and
maintain professional skepticism throughout the audit. Besides, we perform the following:
•
Identify and assess the risks of material misstatement of accounting statements, due to fraud or
error; design and perform audit procedures to respond to those risks; obtain audit evidence that is
sufficient and appropriate to provide the grounds for our opinion. The risk of failure to detect a
material misstatement resulting from fraud is higher than the risk of failure to detect a material
misstatement resulting from an error, since fraud may involve collusion, forgery, intentional omis-
sions, misrepresentation, or circumventing the internal control system;
• Obtain insight of the internal control system relevant to the audit in order to develop audit proce-
dures appropriate to the circumstances but not for the purpose of expressing an opinion on the effec-
tiveness of the Company’s internal control system;
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements
238
239
Auditor’s report (continued)
• Assess the appropriateness of the accounting policies applied and the reasonableness of accounting
estimates and the corresponding disclosure of information prepared by the management;
• Conclude on the appropriateness of the application by the management of the going concern
assumption and, on the grounds of the audit evidence obtained, conclude on the existence of a mate-
rial uncertainty related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we come to the conclusion that a material uncertainty exists,
we must draw attention in our audit report to the appropriate disclosures in the accounting state-
ments or, if such disclosures are inadequate, modify our opinion. Our conclusions are based on the
audit evidence obtained prior to the date of our audit report. However, future events or conditions
may lead to the Company losing its ability to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the accounting statements, including
disclosures, and whether the accounting statements present the underlying transactions and events
in a manner ensuring their fair presentation.
We share information with persons responsible for corporate governance by communicating to them,
inter alia, the information about the planned scope and timing of the audit as well as major comments
on the audit results, including on significant deficiencies in the internal control system, identified by us
in the course of the audit.
We also provide persons responsible for corporate governance with a statement that we have complied
with all relevant ethical requirements for independence and have informed these persons about all
relationships, as well as on other matters that can reasonably be considered to have an influence on the
auditor’s independence and, where necessary, about the relevant precautions.
Among the issues, which we have communicated to the parties responsible for corporate governance, we
identify the issues that were the most significant for the audit of the accounting 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
presented in our report, as it can be reasonably assumed that the negative consequences of the disclo-
sure of such information will exceed the socially significant benefit from its disclosure.
Maksim Evgenievich Timchenko is the Head of the Assignment, which resulted in the issuance of this
auditor report of an independent auditor.
March 26, 2019
Moscow, the Russian Federation
M.E. Timchenko, Head of the Assignment (Qualification Certificate No. 01-000267),
Joint Stock Company PricewaterhouseCoopers Audit
Audited entity:
Public Joint Stock Company TATNEFT
named after V.D. Shashin
Independent auditor
Joint Stock Company
PricewaterhouseCoopers Audit
Registered by the Ministry of Finance of the Republic of Tatarstan
under No. 632 on January 21, 1994
An entry in the Unified State Register of Legal Entities was made
on July 18, 2002, state registration number: 1021601623702
Registered by the Moscow Registration Chamber
under No. 008.890 on February 28, 1992
An entry in the Unified State Register of Legal Entities was made
on August 22, 2002, state registration number: 1027700148431
75 Lenina Str., Almetyevsk, 423450,
the Republic of Tatarstan, the Russian Federation
Member of Russian Union (Association) of Auditors,
Self-regulated Organization of Auditors
Primary Registration Number of Entry in the Register of Auditors
and Audit Organizations: 12603050547
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements
240
241
Financial statements
of Tatneft PJSC for 2018
balance Sheet
RUB ‘000
assETs
liNE cODE
as Of 12/31/2018
as Of 12/31/2017
as Of 12/31/2016
liabiliTiEs
liNE cODE
as Of 12.31.2018
as Of 12.31.2017
as Of 12.31.2016
I. NON-CuRRENT ASSETS
Intangible assets
Research and development results
Intangible development assets
Tangible development assets
Plant, property and equipment
including capital investment in progress
advances issued for the acquisition and construction of fixed assets
Income-bearing investments in tangible assets
Financial investments
Deferred tax assets
Other non-current assets
including assets from liquidated obligations
TOTAL for Section I
II. CuRRENT ASSETS
Inventory
including raw materials and supplies
work in progress costs
finished products and goods for resale
goods shipped
other inventories and expenses
Value added tax on acquired valuables
Receivables
including nondelinquent accounts receivable
(due beyond 12 months after the reporting date)
including buyers and customers
advances paid
other debtors
including nondelinquent accounts receivable
(due in the 12 months after the reporting date)
including buyers and customers
advances paid
other debtors
Financial investments (except for cash equivalents)
Cash and cash equivalents
Other current assets
TOTAL for Section II
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
1 519 494
939 972
4 265 212
2 292 250
256 510 046
115 195 430
8 920 829
4 323 952
92 381 756
-
39 324 481
29 418 486
401 557 163
65 781 674
12 085 489
1 518 853
27 274 632
22 724 492
2 178 208
3 617 822
332 674 500
203 639 972
104 673
98 572
203 436 727
129 034 528
77 536 010
3 266 296
48 232 222
3 340 306
28 850 530
5 097 762
439 362 594
882 443
792 200
4 320 885
2 561 503
233 442 786
100 782 153
4 760 324
4 199 156
92 578 452
-
51 612 371
29 818 978
390 389 796
48 115 981
9 873 466
971 862
24 839 505
7 669 809
4 761 339
3 919 516
267 690 805
163 426 232
718 656
205 258
162 502 318
104 264 573
61 981 366
5 373 018
36 910 189
28 418 509
10 866 389
1 735 899
360 747 099
465 285
632 054
4 288 829
2 376 749
207 448 974
87 916 754
4 575 908
4 776 524
253 078 329
-
47 200 643
28 996 993
520 267 387
37 573 010
7 319 776
421 525
22 924 361
2 398 102
4 509 246
3 386 647
88 128 999
4 686 487
436 418
822 812
3 427 257
83 442 512
64 239 889
6 843 389
12 359 234
55 736 376
21 949 639
1 259 705
208 034 376
BALANCE (ASSETS)
1600
840 919 757
751 136 895
728 301 763
III. CApITAL ANd RESERVES
Authorized capital (contributed capital, authorized fund, contributions of partners) 1310
1320
Shares repurchased
1340
Revaluation of non-current assets
1350
Additional capital (without revaluation)
1360
Reserve capital
1370
Retained profit (uncovered loss)
1300
TOTAL for Section III
2 326 199
-
13 111 718
328 409
116 310
638 788 515
654 671 151
2 326 199
-
11 673 571
318 908
116 310
591 617 946
606 052 934
2 326 199
-
11 294 898
320 092
1 328 926
609 147 154
624 417 269
IV. LONg-TERM LIABILITIES
Borrowings
Deferred tax liabilities
Estimated liabilities
Other liabilities
TOTAL for Section IV
V. ShORT-TERM LIABILITIES
Borrowings
Payables
including suppliers and contractors
debt in respect of insurance premiums
taxes and duties payable
advances received
profit due to shareholders (owners)
other creditors
Deferred revenues
Estimated liabilities
Other liabilities
Total for Section V
BALANCE
1410
1420
1430
1450
1400
1510
1520
1521
1522
1523
1524
1525
1526
1530
1540
1550
1500
370 000
11 394 242
34 346 312
-
46 110 554
370 000
10 435 625
38 026 536
-
48 832 161
370 000
10 272 462
30 330 233
392
40 973 087
16 036 104
121 654 847
22 081 257
594 348
32 121 047
5 095 325
52 222 838
9 540 032
238 436
2 208 665
-
140 138 052
32 212 379
61 779 884
17 057 659
172 200
25 945 577
6 957 711
6 031 506
5 615 231
136 631
2 122 906
-
96 251 800
4 207 953
56 573 009
21 155 447
545 876
19 498 095
8 403 106
149 472
6 821 013
55 757
2 074 688
-
62 911 407
1700
840 919 757
751 136 895
728 301 763
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements 242
243
Profit and Loss Statement for 2018
liNE iTEm
Revenue
Cost of sales
Gross profit (loss)
Selling expenses
Administrative expenses
Mineral exploration and evaluation expenses
Profit (loss) on sales
Income from shareholdings
Interest receivable
Interest payable
Other income
Other expenses
Profit (loss) before taxation
Current income tax
including permanent tax liabilities (assets)
Changes in deferred tax liabilities
Changes in deferred tax assets
Other
Adjusted income tax for the consolidated group of taxpayers
Net profit (loss)
Surplus on revaluation of fixed assets not included in net profit (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 only
Basic earnings (loss) per share
Diluted profit (loss) per share
liNE cODE
fOr
12 mONThs Of 2018
fOr
12 mONThs Of 2017
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
793 237 174
(474 524 138)
318 713 036
(46 274 869)
(7 607 310)
(40 291)
264 790 566
2 931 884
5 073 049
(3 094 329)
64 911 548
(80 732 987)
253 879 731
(55 494 136)
(5 676 807)
(958 617)
-
77 890
17 946
197 522 814
1 525 515
9 501
199 057 830
581 536 880
(369 978 929)
211 557 951
(43 247 042)
(6 845 911)
(111 085)
161 353 913
5 406 388
7 611 763
(2 667 738)
17 001 048
(56 902 170)
131 803 204
(31 728 773)
(5 531 295)
(163 163)
-
28 466
82 482
100 022 216
474 114
(1 184)
100 495 146
86,35
-
43.21
-
Material aspects of accounting policies
and presentation of information in financial
statements
MAIN AppROAChES TO ThE pREpARATION
Of ANNuAL fINANCIAL STATEMENTS
Accounting records are kept by the Company in accordance
with Federal Law No.402-ФЗ dated December 6, 2011 “On
Accounting,” “Regulations for Accounting and Reporting in the
Russian Federation” approved by Order of the Ministry of Finance
of the Russian Federation No. 34н dated July 29, 1998, current
Russian Accounting Standards (RAS), as well as the accounting
policy of the Company. The Company’s financial statements for
2018 were prepared in accordance with the above Law, accounting
regulations and policy. The annual financial statements for 2018
were drawn up according to the forms developed and approved by
the Company in accordance with Order of the Ministry of Finance of
the Russian Federation No. 66н dated July 2, 2010, “On Corporate
Accounting Forms”. The reported financials are presented in
thousands of Russian rubles.
ASSETS ANd LIABILITIES dENOMINATEd
IN fOREIgN CuRRENCy
Accounting of assets and liabilities denominated in foreign
currency is kept in accordance with RAS 3/2006 “Accounting of
Assets and Liabilities Denominated in Foreign Currency” approved
by Order of the Finance Ministry of the Russian Federation No. 154н
dated November 27, 2006.
The exchange rate difference is reflected in the accounting
records and reporting in the reporting period in which payment
obligations are due or for which the financial statements are drawn
up.
The exchange rate difference arising from the conversion of
the organization’s assets and liabilities denominated in foreign
currency used in business outside the Russian Federation into
rubles is credited to the company’s capital surplus.
INTANgIBLE ASSETS
Intangible assets include computer software programs; databases;
inventions; utility models; trademarks and service marks; licenses for
mineral geological exploration and production; licenses for mineral
production, mineral exploration, evaluation and prospecting expenses
(transferred from the intangible exploration assets after confirmation
of the commercial viability of oil production in the field).
Intangible assets are reflected in accounting records at
historical value in the 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
intangible assets used in production, performance of works or
rendering of services, for administrative purposes.
The cost of intangible assets is repaid by the straight-line
depreciation method at the rates determined on the basis of their
established useful lives.
Depreciation is not charged for intangible assets with
an indefinite useful life.
Depreciation is performed through the accumulation of
appropriate amounts in a separate account. Depreciation on
intangible assets is reflected in the accounting period which they
pertain to, and it is charged regardless of the company’s operating
results in the reporting period.
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
adjustments are reflected in the accounting records and reporting
as changes in estimates.
Intangible assets of homogeneous groups at fair market value
are not revaluated.
The exchange rate difference on other operations is charged
against the financial performance of the organization as other
income and expenses. Currency exchange gains and losses are
recognized in the Profit and Loss Statement minimized in lines
“Other income” or “Other expenses.”
ExpENSES fOR RESEARCh,
dEVELOpMENT ANd ENgINEERINg
Expenses for research, development and engineering are
accounted for in the amount of actual expenses incurred during
performance of these works.
When accounting for business transactions in foreign currencies,
the official exchange rate of the foreign currency to the ruble valid
on the date of transaction was applied. Cash in foreign currency
accounts at banks and on hand, financial assets (except for shares)
and settlement funds in foreign currencies (except for the funds
received, advances paid and prepayment or earnest money) are
reflected in the financial statements as amounts calculated on the
basis of the official exchange rates valid on the reporting date. The
currency exchange rates amounted to RUB 69.4706 to USD 1.00
as of December 31, 2018 (RUB 57.6002 as of December 31, 2017;
RUB 60.6569 as of December 31, 2016), RUB 79,4605 to EUR
1.00 (RUB 68.8668 as of December 31, 2017; RUB 63.8111 as of
December 31, 2016).
The expenses for research, development and engineering that
have produced positive results and started to be implemented are
written off as expenses of ordinary activities starting with the month
following the month when the company started the actual application
of the mentioned work results in manufacturing (work performance,
service rendering) or for administrative needs of the company.
The expenses for research, development and engineering for
which a positive result is obtained are written off on a straight-line
basis over the useful life of the R&D deliverables (which should not
exceed 5 years).
The expenses for research, development and engineering that
have not produced positive results are written off as other expenses
in the reporting period.
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements 244
245
ExpLORATION ASSETS
The Company includes the following exploration assets as part
equipment (except for data equipment) based on the current
(replacement) value at the end of the reporting period.
of tangible exploration assets:
• the cost of the acquisition and construction of prospecting,
exploration and advance producing wells and other oil field
facilities;
• the cost of the acquisition and installation of equipment for
prospecting, exploration and advance producing operation
wells.
The Company includes the following types of exploration costs
as a part of intangible exploration assets:
• the cost of licenses for geological study of subsurface, licenses
• the cost of mineral prospecting, evaluation, and exploration: the
for geological exploration and production of mineral resources;
cost of geological, geochemical, geophysical works, the cost of
acquiring geological information on the subsurface from third
parties, including state authorities, and the cost of drilling key,
appraisal and structural wells.
Tangible exploration assets are depreciated on a straight-line
basis over their useful lives.
Depreciation costs for tangible exploratory assets are included
in the cost of mineral prospecting, evaluation and exploration for
relevant licensed subsoil areas.
Intangible exploration assets in the form of licenses for
geological subsoil study are depreciated on a straight-line basis
over the period of the respective licenses. Depreciation costs for
the above assets are included in the cost of mineral prospecting,
evaluation and exploration for relevant subsoil areas.
Acquisition costs incurred for exploration and mining licenses, as
well as the cost of mineral prospecting, evaluation and exploration
are not depreciated until the commercial feasibility of crude oil
production is confirmed in the relevant licensed subsoil areas of
mineral resources and the order on commercial field development
is approved.
The commercial feasibility of crude oil production is considered
to be confirmed at the moment of approval of the initial field
development plan in the licensed subsoil area of mineral resources.
The Company checks exploration assets for impairment
annually as of December 31, as well as if they are derecognized
upon confirmation of the commercial feasibility of oil production in
the relevant licensed subsoil area.
For the purpose of checking exploration assets for impairment,
the said assets are categorized by subsoil areas of mineral
resources indicated in the licenses.
Impairment loss of exploration assets is reflected in the profit
and loss statement in the line code “Other expenses.” Furthermore,
the Company applies the reversal of impairment loss to exploration
assets.
The Company derecognizes exploration assets in relation to a
certain licensed subsoil area of mineral resources when confirming
commercial feasibility of oil production in the relevant licensed
subsoil area or recognizing lack of prospects of mineral resources
production in this area.
When confirming the commercial feasibility of oil production
in the licensed subsoil area of mineral resources, the Company
reclassifies exploration assets as follows::
• tangible exploration assets included in fixed assets at residual
• intangible exploration assets included in intangible assets at
value;
residual value.
fIxEd ASSETS
Land plots, buildings, facilities, machinery, equipment, transport
vehicles and other relevant assets of over 12 months service life
and cost over RUB 40,000 are reflected in the fixed assets.
The Company, once a year, revalues fixed assets (industrial-
purpose buildings; facilities, such as pipelines, machinery and
Fixed assets accounted before January 1, 2002 are
depreciated based on uniform depreciation rates approved by
Decree of the USSR Council of Ministers dated October 22,
1990, No. 1072 “On Uniform Depreciation Rates of Fixed Assets
of the USSR National Economy” and those accounted after
January 1, 2002 - at the rates calculated on the basis of useful
life determined according to the classification of fixed assets
included in the depreciation groups, approved by the Decree of
the Government of the Russian Federation No. 1 dated January 1,
2002, except for fixed assets acquired for lease, as well as those
included in the engineering complex for the production of electric
energy by low-grade steam turbines and aircraft, the useful life
of which is determined on the basis of the lease period and the
planned period of their operation according to the reports of
special commission.
TYpEs Of fixED assETs
Buildings
Facilities, including:
Wells
Machinery and equipment
usEful lifE Of assETs (NumbEr Of YEars)*
bEfOrE
jaNuarY 1, 2002
afTEr
jaNuarY 1, 2002
25-50
10-25
10-15
5-15
8-31
2,5-31
6-14
1-26
Depreciation is calculated by the straight-line method.
Depreciation is not charged on land plots and land use facilities.
The historical value of fixed assets at which they were included
in the accounting records can be changed in the cases of further
construction, further equipping, renovation, modernization, partial
retirement and revaluation of the fixed assets.
Renovation costs of fixed assets are included at actual costs and
are reflected in the reporting period in which they were incurred.
The line “Capital investment in progress” includes the costs
of construction and installation works, acquisition of buildings,
facilities, equipment (including equipment requiring assembly) and
other tangible durable assets, materials for the construction of fixed
assets, and other capital works and expenses. This line reflects the
cost of capital facilities before they are commissioned or decided
to be sold, after which these assets are transferred into fixed assets,
income-yielding investments in tangible assets or other non-current
assets.
Fixed assets intended for lease are reflected in the line “Income-
bearing investments in tangible assets”.
OThER NON-CuRRENT ASSETS
Other non-current assets include assets from liquidated
obligations, the costs of implementing the exploration and
production sharing agreement, construction in progress, which the
management has decided to sell.
fINANCIAL INVESTMENTS
Financial investments are accepted for accounting at historical
cost.
Financial investments defining the current 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 the current market value is
not determined are reflected in the financial statements as of the
reporting date at cost less the amount of the formed provision for
* The useful lives of fixed assets acquired for leasing, as well as those included
in the engineering complex for the production of electric energy by low-grade
steam turbines and aircraft, may differ from the periods indicated in the table
above.
their impairment. The investment depreciation provision is created
based on the amount of the difference between the investment’s
book value and their estimated value if the results of the impairment
test confirm a sustained significant decrease in the value of
financial investments.
Financial investments are reflected in current assets if the
expected duration of their possession is less than 12 months after
the reporting date. Other financial investments are included in non-
current assets.
The accounting unit of financial investments may be a
contribution to the charter capital, loan agreement, bank deposit
agreement, securities issue package, etc., depending on the
nature of the financial investments, the procedure for their
acquisition and use.
Upon 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:
• the historical value of the first-time purchased financial assets
• at historical value of each accounting unit of financial
(FIFO method) upon disposal of shares or bonds;
investments upon disposal of promissory notes.
Upon disposal of financial investments for which the current
market value is determined, their value is determined by the
company on the basis of the last assessment.
Income and losses from the disposal of financial investments are
reflected in the profit and loss statement as part of other income
and expenses.
INVENTORIES
The “Raw materials and supplies” line of the balance sheet
reflects raw materials, basic and auxiliary materials, purchased
semifinished products and components, fuel, packaging, spare
parts, construction and other materials.
Inventories also include assets that meet the conditions
necessary for recognizing them as fixed assets valued at no more
than RUB 40,000 per unit.
Inventories are recognized in the amount of the actual costs of
their acquisition, except for value added tax and other recoverable
taxes (except as provided for by the legislation of the Russian
Federation). Inventories are disposed of at average cost.
Inventories that are obsolete, wholly or partially have lost their
original quality, or whose current market value has decreased, are
reflected in the balance sheet less the inventory reserve.
Raw materials and materials transferred to processing on an
as-needed basis continue to be accounted for in raw materials
and materials of the Company separately. Monthly raw materials
and materials that have passed through all processing stages are
recognized as part of finished products..
fINIShEd pROduCTS, gOOdS
ANd SALES ExpENSES
Finished products are reflected in the balance sheet at the
actual decreased production cost excluding management
expenses.
When shipping oil, petroleum products and gas products, the
valuation is carried out based on the average cost method for each
group of products.
Sales expenses are written off under the Company’s financial
and operational activities without differentiating between sold and
unsold products.
gOOdS ShIppEd
The balance sheet item “Goods shipped” reflects shipped
products for which the title was not transferred to buyers.
This line also reflects real estate transferred to the buyer under
a handover certificate before state registration of the title transfer.
OThER INVENTORIES ANd ExpENSES
The line “Other inventories and expenses” includes expenses
associated with the extraction of super viscous oil produced before
the start of production. These expenses are written off evenly over
the period of oil production at the relevant development site, but
not for more than 2 years, starting from the first day of the month
following the month production starts.
RECEIVABLES
Trade receivable (reflected as part of accounts receivable)
is determined on the basis of the prices established by contracts
concluded between the Company and buyers (customers) taking
into account all discounts (surcharges). Uncollectible receivables
are written off the balance sheet if they are proven to be so.
Accounts receivable that are not paid when due or which
will most likely not be paid within the time frame stipulated in
contracts and not secured by respective guarantees are shown
after deduction of accrued provisions for doubtful debts. The
provision is set up for each doubtful debt (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
quarter.
Income and expenses incurred in the formation and recovery of
the doubtful debts provision within one financial year are reflected in
the profit and loss statement minimized in “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) to be deducted (paid) in accordance with tax
legislation.
CASh ANd CASh EquIVALENTS
In accordance with RAS 23/2011 “Statement of Cash Flows”
approved by Order of the Ministry of Finance of Russia No. 11н
dated February 2, 2011, 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 qualifies bank deposits placed for maximum
period of 3 months as cash equivalents.
In the Statement of Cash Flows:
• cash balances and cash equivalent balances in foreign currency
at the beginning and at the end of the reporting period are
expressed in rubles for the amount determined in accordance
with RAS 3/2006 “Accounting for Assets and Liabilities Whose
Value is Expressed in Foreign Currency” approved by Order of
the Ministry of Finance of Russia No. 154н dated November
27, 2006. Differences arising due to the conversion of the
company’s cash flows and cash equivalents in foreign currency
exchange rates on different dates are reflected in the statement
of cash flows as the effects of changes in foreign exchange rates
against the ruble.
• indirect taxes (VAT and excise duties) as part of the proceeds
from buyers and customers, payments to suppliers and
contractors and payments to the budget system of the Russian
Federation or reimbursement out of it are reflected as balanced
result being part of other income (payments) for the current
activity in the line “Other income” (“Other payments”);
• proceeds from the sale of products and goods contain customs
• interest-free loans granted to subsidiaries and affiliates are
mainly related to the capital investment financing, and therefore,
based on the principle of rationality, the movement of all loans
issued to subsidiaries and affiliates is reflected in cash flows from
investment activities.
duties;
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements 246
247
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 making 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
investments, short-term investments (up to three months)
using the proceeds from borrowed funds, cash flows on loans
received by the Company from subsidiaries - participants of the
Treasury system, etc.)
• cash flows on short-term deposits (more than three months but
less than one year) that are classified as financial investments.
Cash flows on deposits are disclosed in Table 3 “Financial
Assets” in the Explanation to the balance sheet and profit and
loss statement.
AuThORIZEd CApITAL, SuRpLuS CApITAL
ANd RESERVE CApITAL
Authorized capital is reflected in the amount of the nominal value of
ordinary and preferred shares.
The surplus capital of the Company includes exchange differences
arising from the conversion of the company’s assets and liabilities
expressed in foreign currency used in business outside the Russian
Federation into rubles. In addition, the amount of the revaluation
less the subsequent markdown of the fixed assets as a result of the
revaluation attributed to the surplus capital is reflected in the line
“Revaluation of non-current assets”. Revaluation surplus in case of the
fixed asset item disposal is transferred from the surplus capital to the
retained earnings of the Company.
In accordance with the legislation, the Company established
a reserve fund in the amount of 5% of the authorized capital formed
out of the Company’s net profits. The reserve fund is intended to cover
losses of the Company, for bonds redemption, and repurchase of the
Company’s shares in case other funds are unavailable.
In accordance with the constituent documents, the Company
creates an employee share ownership fund, which is formed out
of the Company’s net profits. Contributions to this fund are made in
accordance with the method approved by the “Tatneft Regulations on
Bonus Certificates.” The fund was not established in 2017, 2018.
ESTIMATEd LIABILITIES
The Company recognizes 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 interest deductions and the actual salaries expense. The
interest deductions under the estimated liability are calculated by the
ratio of the annual planned expenditure for year-end remuneration
payment to the planned amount of salaries expenses.
The Company also acknowledges in its accounting the estimated
liability for unused vacations by employees.
The estimated liability for 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 amount.
The actual amount of the vacation allowance (including the
compensation amount for unused vacation) accrued to the
employee in the accounting is prescribed to the unused vacation
payment due to the recognized amount of the estimated liability for
unused vacation.
An inventory of the estimated liability for unused vacation
payment is carried out as of the last day of each quarter. The results
of this inventory are reflected by the estimated liability adjustments.
In accordance with the requirements of the regulations (Federal
Law No. 2395-1 “On Subsoil,” No. 7-ФЗ “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 provisions for
decommissioning liabilities 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 immovable oil and gas
assets. Estimated decommissioning and restoration liabilities are
calculated by groups of the fields. The estimated liability is recorded
at the present (discounted) cost.
To calculate the estimated liability as of December 31, 2018,
the Company used the following key assumptions: discount rate -
8.75% (as of December 31, 2017 - 7.71%), inflation rate - 4.21%
(as of December 31, 2017 - 4.0%), discount period - from 15 to 31
years depending on the field (as of December 31, 2017 - from 16
to 32 years).
Accrued estimated liabilities at initial recognition, as well as the
newly introduced fixed assets are included in the “Other non-current
assets.”
Depreciation of assets on decommissioning liabilities is accrued
on a monthly basis in proportion to the oil production volume. The
amount of monthly depreciation is determined for each group
of the fields and the Oil & Gas Production Division based on the
amount of oil produced during the current month and the amount
of assets on the decommissioning liabilities attributable to 1 ton
of oil reserves on deposits of the group at the end of the previous
reporting period.
The accrual of discount due to the increased present value as we
approach the period of performance estimated liability is recorded
in the profit and loss statement in the “Interest payable”.
Adjustment of estimated decommissioning and restoration
liabilities due to the review of core indicators of calculation (forecast
inflation rate, discounted rate, discounted period) is recorded in the
profit and loss statement in “Other expenses” and “Other income”.
LOANS ANd BORROwINgS
In accordance with RAS 15/2008 “Accounting of Expenses
on Loans and Borrowings” approved by Order of the Ministry of
Finance of Russia No. 107нn dated October 6, 2008, the principal
amount of the loan (credit) received from the lender is accounted
for in accordance with the terms of the loan agreement (credit
agreement) in the amount of actually received monetary assets or
in the cost estimate of other items stipulated by the contract.
Loan and borrowing indebtedness, as well as accrued interest
are reflected in the balance sheet line of “Borrowings.”
Loan and borrowing indebtedness, as well as accrued interest
is subdivided in the accounting into short-term indebtedness (the
repayment period of which 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 on received loans and borrowings directly attributable
to the acquisition and/or construction of the investment asset
are included in the cost of this asset and are repaid through
depreciation.
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 termination of the acquisition,
construction and (or) manufacturing of the investment asset, or the
start of use of the investment asset.
CORRECTION Of ERRORS
IN ACCOuNTINg ANd REpORTINg
An error identified in accounting and reporting is recognized to
be significant if the ratio of the error to the numerical 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 a minimum of five percent. Otherwise, the error is insignificant.
REVENuE RECOgNITION
Revenue from sales of goods, products (completing work,
rendering services) is recognized during the product title transfer to
the customers (completing work, rendering service). Revenues are
reflected in the accounting statements less value added tax, excise
duties and customs duties.
Other income includes income which is not included in revenue:
revenue from the sale of fixed assets, assets under construction and
other assets, foreign currency, income from changes in estimates of
liquidated fixed assets and restoration of natural resources, exchange
differences, and other similar income.
ExpENSES
Administrative expenses include the Executive office expenses.
At the end of the month the indicated expenses are fully written
off to the debit of account 90 “Sales”, i.e. are fully recognized in
the reporting period without distribution to the balances of work in
progress and finished products.
Other expenses include expenses which are not related to the
manufacture and sales of products, completion of work, rendering
of services, purchase and sale of goods.
forms
The Company
ACCOuNTINg fOR pROfITS TAx
The Company has been a responsible member of the
consolidated group of taxpayers (hereinafter referred to as the
“CGT”) from January 1, 2012. As of the date of the agreement, the
CGT included four members. Since 2016, the list of participants
has been expanded to five members.
independently
the accounting
information on income tax in accordance with RAS 18/02 “Profit
Tax Accounting” approved by Order of the Ministry of Finance
of Russia dated November 19, 2002 No. 114н. In this regard,
the temporary and permanent differences are determined by
the Company based on its revenues and expenses included
in the tax base 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 reflected in the profit and loss statement in 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 contract
on CGT establishment in the profit and loss statement, is reflected
in line 2465 “Adjusted tax on profit for the consolidated group of
taxpayers” and included in the determination of net income (loss)
of the Company without participating in generating profit (loss)
before taxation.
The outstanding amount of CGT income tax on the CGT as a
whole, to be paid by the Company as a responsible CTG member to
the budget, is reflected in the Company’s balance sheet in line 1523
“Taxes and fees payable.” The overpaid amounts of CGT income tax
to the budget is reflected in the balance sheet in 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 line
1238 “Other debtors” and short-term liabilities in 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 members in the framework of
the contract on CGT establishment with account 78 “Settlements
with CGT members.”
When preparing financial statements, the balanced (net)
amounts of deferred tax asset and deferred tax liability are reflected
in the balance sheet.
Annual Report 2018TATNEFT GroupANNEXESAnnex 2. RAC Financial Statements 248
www.tatneft.ru
249
Annex 3
Report on PJSC Tatneft’s Non-arm’s
Length Transactions in 2018
The present report lists transactions carried out by PJSC Tatneft
n.a. V.D.Shashin (hereinafter the Company, PJSC Tatneft) in 2018,
which are recognised by the Federal Law on Joint-Stock Companies
No 208-FZ of 26/12/1995 as non-arm’s lengths transactions.
Persons listed herein are recognised as interested in the
transactions as of the transaction date.
Годовой отчет 2018Группа «Татнефть»www.tatneft.ruANNEXES 250
www.tatneft.ru
251
PJSC Tatneft’s non-arm’s length
transactions in 2018
cOuNTEr parTY
iNTErEsTED parTiEs
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
TraNsacTiON apprOval Or
raTificaTiON DaTE
20/07/2018
GOvErNaNcE bODY Of ThE
cOmpaNY ThaT maDE ThE
DEcisiON rEGarDiNG ThE
TraNsacTiON
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
EssENTial TErms Of ThE TraNsacTiON
Subject matter:
purchase and sale of immovable assets
Immovable property: Kerosene hydrotreater.
Title 007, Section 1500.
Transaction value: RUB 6,365,756,825.99
Transaction date: 27/06/2018
Subject matter:
purchase and sale of immovable assets.
Immovable asset: Diesel hydrotreater.
Title 007, Section 1600.
Transaction value: RUB 6,883,141,862. 35
Transaction date: 27/06/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Flare unit. Title 077/1,
Section 0740.
Transaction value: RUB 1,851,678,035. 63
Transaction date: 01/09/2018
Subject matter:
purchase and sale of immovable assets.
Immovable asset: Fire extinguishing pump station
with fire water storage tanks. Title 189,
Section 7740
Transaction value: RUB 567,759,797. 04
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets.
Immovable asset: Analytical laboratory
of petrochemical plant (lab building 2),
Title 097, Section 9250.
Transaction value: RUB 862,286,874. 63
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Intersectional connections and
outdoor plumbing system. Title 011, Section 2000.
Transaction value: RUB 1,316,310,209. 33
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Aromatics reforming unit. Title
011, Section 2100.
Transaction value: RUB 5,464,582,367. 94
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets.
Immovable asset: Catalyst recovery block.
Title 011, Section 2150.
Transaction value: RUB 1,604,597,375. 70
Transaction date: 21/11/2018
cOuNTEr parTY
iNTErEsTED parTiEs
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
TraNsacTiON apprOval Or
raTificaTiON DaTE
20/07/2018
GOvErNaNcE bODY Of ThE
cOmpaNY ThaT maDE ThE
DEcisiON rEGarDiNG ThE
TraNsacTiON
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
20/07/2018
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
13.02.2019
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
TANECO
Joint Stock
Company
PJSC Tatneft
n.a. V.D. Shashin
as a controller
of AO TANECO
13.02.2019
Board of Directors
of PJSC Tatneft
n.a. V.D. Shashin
EssENTial TErms Of ThE TraNsacTiON
Subject matter:
purchase and sale of immovable assets
Immovable asset: Heavy aromatics splitter.
Title 011, Section 2200.
Transaction value: RUB 3,275,478,309. 93
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Paraxylol and fuel blending pump
station. Title 052/1, Section 8751
Transaction value: RUB 678,136,183. 89
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Distribution transformer
substation. Title 124/39.
Transaction value: RUB 916,037,270. 32
Transaction date: 21/11/2018
Subject matter:
purchase and sale of immovable assets
Immovable asset: Feedstock Depot of the
Aromatics Production. Title 028/1.
Transaction value: RUB 799,049,864 04
Transaction date: 21/11/2018
Explanatory Information:
The present report is to be published by the Company pursuant to
the Articles 52 and 81 of the Federal Law on Joint-Stock Companies
208-FZ of 26/12/1995.
The report is also to be included in the materials to be distributed
among the persons entitled to participate the Company’s annual
general meeting of shareholders for information purposes.
The report on PJSC Tatneft’s non-arm’s length transactions
carried out in 2018 is to be signed by the General Director of the
Company and is subject to approval by the Board of Directors
during preparation for the AGM. Reliability and accuracy of the
information in the report is to be confirmed by the Company’s
Revision Committee.
Major transactions in the reporting year
In 2018, the Company did not carry out any transactions that the
Federal Law on Joint-Stock Companies No 208-FZ of 26/12/1995
would recognise as major transactions.
Annual Report 2018TATNEFT GroupANNEXES 252
www.tatneft.ru
253
Annex 4
Report on PJSC Tatneft compliance with
the principles and recommendations of the
Corporate Governance Code
The present report is compliant with the Bank of Russia’s
Regulation on Disclosure by Securities Issuers No 454-P
of 30/12/2014, Chapter 70 and describes how the Company
observes the principles and recommendations of the Corporate
Governance Code of the Bank of Russia (hereinafter the Code) for
joint-stock companies with listed securities.
Full text of the Corporate Governance Code is available at the
website of the Bank of Russia at http://www.cbr.ru/finmarkets/files/
common/letters/2014/inf_apr_1014.pdf.
The PJSC Tatneft compliance evaluation was guided by the
recommendations in the Bank of Russia’s letter requiring that joint-
stock companies are to disclose in the annual report their reports
on compliance with the Corporate Governance Code’s principles
and recommendations (Letter No IN-06-52/8 of 17 February 2016).
This Corporate Governance Compliance Report was considered
by the PJSC TATNEFT Board of Directors at the meeting in May 22,
2019. (Minutes No. 13 dated May 22, 2019) as part of 2018 Annual
report.
The Board of Directors acknowledges that the information and
data disclosed herein contain complete and accurate information
with regard of PJSC TATNEFT compliance with the guidance of the
Corporate Governance Code in 2018.
The Company’s corporate governance model and practice is set
out in the Corporate Governance Section of this Report.
Corporate
Governance
Principle
№
Compliance
Evaluation
Criteria
Compliance
Status
Comments
on Noncompliance
1.1. The Company shall ensure equal and fair treatment of all shareholders as they exercise their right to participate in the governance of the Company.
1.1.1. The company should create most
favourable conditions for its shareholders
enabling them to participate in the general
meeting and develop informed opinions
on issues on its agenda, as well as provide
them with the opportunity to coordinate
their actions and express their opinions on
issues being discussed.
1.1.2. General meeting notification proceedings
and provision of materials should enable the
shareholders to get properly prepared for
participation in the meeting.
1.1.3. During the preparation for and holding
of the general meeting, the shareholders
should be able to freely and timely receive
information about the meeting and its
materials, to pose questions to members
of the company’s executive bodies and
board of directors, and to communicate
with each other.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
1. An internal documents of the Company that regulates
holding of the general meeting and approved by the
general meeting of shareholders is publicly available.
2. The Company provides communication channels such
as the hotline, email or a forum in the internet that allow
shareholders to share their opinions or ask questions
regarding the meeting agenda during preparation for the
general meeting. The Company undertook such actions
before every general meeting that took place in the
reporting period.
1. The general meeting notification and agenda are posted
online no later than 30 days prior to the meeting date.
2. The notification indicates the venue of the meeting and
documents to be presented to attend the meeting.
3. Shareholders have been provided with access to the
information about who proposed agenda items and who
nominated candidates for the Board of Directors and the
Revision Committee of the Company.
1. In the reporting period, shareholders could ask questions
to the members of the Board of Directors and the Executive
Board of the Company before and during the annual
general meeting.
2. The opinion of the Board of Directors (including
dissenting opinions included in the meeting minutes)
on each agenda item of general meetings, held in the
reporting period, was included in the package of materials
for the general meeting of shareholders.
3. The Company provided to eligible shareholders access
to the list of persons entitled to participate in the general
meeting, from the date the Company had it, in all general
meetings held in the reporting period.
1.1.4. There should be no unjustified difficulties
preventing shareholders from exercising
their right to demand that a general meeting
be convened, nominate candidates to the
company’s governing bodies, and to place
proposals on its agenda.
1. In the reporting period, shareholders had the opportunity
to propose items for the annual general meeting agenda
within at least 60 days after the end of the calendar year.
2. In the reporting period, the company has not refused
to accept shareholders’ agenda proposals or nominations
for the company’s bodies on grounds of typos or other
immaterial issues.
Full compliance
Partial
compliance
Noncompliance
1.1.5. Each shareholder should be able
to freely exercise his or her right to
vote in a straightforward and most
convenient way.
1. The internal document (internal policy) of the Company
contains provisions that each participant of the general
meeting can, before the end of the meeting, demand a
copy of the ballot, that he/she has filled in, authenticated
by the ballot-counting committee.
1.1.6. Procedures for holding a general meeting
set by the company should provide equal
opportunity to all persons present at the
general meeting to express their opinions
and ask questions that might be of interest
to them.
1. Sufficient time was provided for presentations on
agenda items and as well as the discussion time during
general meeting of shareholders held in the form of joint
attendance in the reporting period.
2. Candidates for the governance and control bodies of
the Company, whose nomination was put to vote, were
available for answering shareholders’ questions at the
meeting.
3. When making decisions regarding preparation and
holding of the general meetings of shareholders, the
Board of Directors considered the option of using
telecommunicational means for enabling shareholders to
participate in the general meetings in the reporting period
remotely.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Explanation for item 1: The Company’s Articles of
Association provide for 55 calendar days after the end
of financial year when shareholders can propose topics
for the AGM agenda.
Pursuant to the recommendation of the Corporate
Governance Code, the Company has proposed to the
General Meeting of Shareholders 2019 to approve
amendments to the Articles whereby the period shall be
extended to 60 days.
Item 2 is fully complied with.
ANNEXESГодовой отчет 2018Группа «Татнефть» 254
www.tatneft.ru
255
Corporate
Governance
Principle
№
Compliance
Evaluation
Criteria
Compliance
Status
Comments
on Noncompliance
Corporate
Governance
Principle
№
Compliance
Evaluation
Criteria
Compliance
Status
Comments
on Noncompliance
1.2 Shareholders are given equal and fair possibility to participate in the Company’s profit through receiving dividends.
2.1 The board of directors shall be in charge of strategic management of the company, determine major principles and philosophy of a risk management and internal control
system within the company, monitor the activity of the company’s executive bodies, and performs other key functions.
1.2.1. The company should develop and put in
place a transparent and clear mechanism
of determining the size of dividends and
their payment.
1.2.2. The company should not decide to pay
dividends if such decision, while formally
compliant with laws, is unjustified from
the economic point of view and may lead
to misrepresentation of the company’s
performance.
1.2.3. The company should not allow deterioration
of dividend rights of its existing
shareholders.
1.2.4. The company should strive to rule out any
ways for its shareholders to obtain any
profit or gain at the company’s expense
other than dividends and distributions of its
liquidation value.
1. The Company has developed a dividend policy that has
been approved by the Board of Directors and disclosed.
2. If the dividend policy of the Company uses the
Company’s performance indicators for determining the size
of dividends, then relevant provisions of the dividend policy
take into account consolidated indicators of the financial
statements.
1. The Company’s dividend policy contains clear indications
of financial and economic circumstances when the
Company shall not pay dividends.
1. In the reporting period, the Company has not undertaken
any actions that would lead to deterioration of dividend
rights of its existing shareholders.
2. The track of dividend payments reflects the Company’s
consistency in terms of ensuring high level of dividend yield
while striking a balance between short-term (earnings in
the form of dividend payouts) and long-term (investment
into the development of the Company) interests of
shareholders.
In order to rule out any ways for its shareholders to obtain
any profit or gain at the company’s expense other than
dividends and distributions of its liquidation value, the
internal documents of the Company set out controls
that ensure timely identification and approval procedure
for transactions with persons affiliated (associated) with
substantial shareholders (persons who have the right to
exercise their voting shares rights), when the law formally
does not recognise such transactions as interested party
transactions.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
1.3. The system and practices of corporate governance should ensure equal terms and conditions for all shareholders owning shares of the same class (category) in a company,
including minority and foreign shareholders as well as their equal treatment by the company.
1.3.1. The company should create conditions
which would enable its governing bodies
and controlling persons to treat each
shareholder fairly, in particular, which
would rule out the possibility of any
abuse of minority shareholders by major
shareholders.
1.3.2. The company should not undertake any
actions that will or might result in artificial
reallocation of corporate control therein.
1. In the reporting period, the procedures for managing
potential conflict of interest of substantial shareholders
have been effective, and the conflicts among shareholders,
if they took place, were given sufficient attention by the
Board of Directors.
1. There either were no quasi-treasury shares, or they did
not participate in voting in the reporting period.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
The Company prevents all actions that result or may
result in artificial reallocation of corporate control.
The structure of the shareholder capital is such that
61% of voting shares are in free circulation of minority
shareholders. Total quasi-treasury stock of the
Company makes up minimal 3.19% of voting shares,
and voting under this package cannot substantially alter
voting results. Votes are equally distributed among all
candidates to the governance and control bodies so
that none has an advantage. The voluntary nature of
such approach is equivalent of voluntary renunciation
of voting under quasi-treasury stock in principle. Based
on the above, the Company believes that in essence, it
fully complies with the requirement not to undertake any
actions that result or may result in artificial reallocation
of control.
The Company regularly considers various ways of using
the financial instrument of quasi-treasury shares, but to
date it has not finalised its long-term policy in respect of
this instrument.
1.4. The shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the possibility to freely dispose
of such shares in a non-onerous manner.
1.4.1. Shareholders should be provided with
reliable and efficient means of recording
their rights in shares as well as with the
possibility to freely dispose of such shares
in a non-onerous manner.
1. The quality and reliability of the Company’s registrar’s
performance on managing the register of shareholders
meet the needs of the Company and its shareholders.
Full compliance
Partial
compliance
Noncompliance
2.1.1. The board of directors should be
responsible for decisions to appoint and
dismiss (members) of executive bodies,
including due to their failure to properly
perform their duties. The board of directors
should also procure that the company’s
executive bodies act in accordance with an
approved development strategy and main
business goals of the company.
1. The Articles of Association authorise the Board of
Directors to appoint and dismiss members of the executive
bodies and to determine terms of contracts with them.
2. The Board of Directors has considered the progress
report of the individual executive body and members of the
collegial executive body on the Company’s strategy.
Full compliance
Partial
compliance
Noncompliance
2.1.2. The board of directors should establish key
long-term targets of the company’s activity,
evaluate and approve its key performance
indicators and principal business goals, as
well as evaluate and approve its strategy
and business plans in respect of its core
activities.
1. In the reporting period, at its meetings, the Board
of Directors considered matters related to the progress
and revision of the strategy, approval of financial and
business plan (budget) of the Company, as well
as considered criteria and indicators (interim indicators
included) of implementation of the strategy and
business plans.
2.1.3. The board of directors should determine
principles of and approaches to creation of
the risk management and internal control
system in the company.
2.1.4. The board of directors should determine
the company’s policy on remuneration due
to and/or reimbursement of costs incurred
by its board members, members of its
executive bodies and other key managers.
1. The Board of Directors determines the principles and
approaches to risk management and internal controls in
the Company.
2. The Board of Directors has conducted an evaluation of
the risk management and internal controls system of the
Company in the reporting period.
1. The Company has developed and put in place
a policy (policies), approved by the Board of Directors,
on remuneration and reimbursement of costs
(compensation) due to the members of the
Board of Directors, executive management
and other key company managers.
2. In the reporting period, the Board of Directors has
considered matters related to the concerned policy
(policies).
2.1.5. The board of directors should play a key
role in prevention, detection and resolution
of internal conflicts between the company’s
bodies, shareholders and employees.
1. The Board of Directors plays a key role in prevention,
detection and resolution of internal conflicts.
2. The Company has developed a system for identifying
transactions associated with conflicts of interest and a set
of measures for resolving such conflicts.
2.1.6. The board of directors should play
a key role in procuring that the company
is transparent, discloses information in
full and in due time, and provides its
shareholders with unhindered access
to its documents.
1. The Board of Directors has approved a regulation on
information policy.
2. The Company has identified persons who are
responsible for implementing the information policy.
2.1.7. The board of directors should monitor the
company’s corporate governance practices
and play a key role in its mandatory
corporate actions.
1. In the reporting period, the Board of Directors has
considered an issue related to corporate governance
practices in the Company.
2.2. The board of directors should be accountable to the company’s shareholders.
2.2.1. Information about the board of directors’
work should be disclosed and provided to
the shareholders.
1. The annual report of the Company for the reporting
period includes information about directors’ attendance of
the meetings of the Board of Directors and committees.
2. The annual report contains information about key
performance evaluation results of the Board of Directors
held in the reporting period.
2.2.2. The chair of the board of directors must
be available to communicate with the
company’s shareholders.
1. The Company has a transparent procedure whereby
shareholders can send the Chair of the Board of Directors
their questions and opinions on them.
Full compliance
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Noncompliance
Full compliance
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compliance
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Full compliance
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compliance
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Full compliance
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Full compliance
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compliance
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Full compliance
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2.3. The board of directors should be an effective and professional governing body of the company capable of fair and independent judgements
and making resolutions in the best interests of the company and its shareholders.
2.3.1. Only persons with impeccable business and
personal reputation should be elected to
the board of directors; such persons should
also have knowledge, skills, and experience
necessary to make decisions that fall within
the jurisdiction of the board of directors and
to perform its functions efficiently.
2.3.2. Members of the board of directors should
be elected through a transparent procedure
enabling shareholders to obtain information
about respective candidates sufficient for
them to form an opinion of the candidates’
personal and professional qualities.
2.3.3. The composition of board of directors
should be balanced, in particular, in terms
of qualifications, expertise, and business
skills of its members. The board of directors
should enjoy the confidence of the
shareholders.
2.3.4. The membership of the board of directors
of the company must enable the board to
organize its activities in a most efficient
way, in particular, to create committees of
the board of directors, as well as to enable
substantial minority shareholders of the
company to elect a candidate to the board
of directors for whom they would vote.
1. The Board of Directors evaluation procedure adopted by
the Company includes, inter alia, assessment of the Board
members’ professional qualifications.
2. In the reporting period, the Board of Directors (or its
nominations committee) has assessed the candidates for
the Board of Directors in order to verify that they possess
the necessary experience, knowledge, business reputation,
lack of conflict of interest, etc.
1. In all general meetings of shareholders held in the
reporting period, where the meeting agenda included
issues of the election of the Board of Directors, the
Company provided shareholders with biographical details
of all candidates for the Board of Directors, results of
evaluation of the candidates performed by the Board of
Directors (or its nomination committee), as well as the
information on whether candidates meet independence
criteria as per recommendations 102 - 107 of the Code,
and the written consent of the candidates to be elected for
the Board of Directors.
1. In the course of evaluation of the Board of Directors
carried out in the reporting period, the Board analysed
its own needs in terms of professional qualifications,
experience and business skills.
1. In the course of evaluation of the Board of Directors
carried out in the reporting period, the Board has
considered an issue of alignment of its membership size to
the needs of the Company and interests of shareholders.
2.4. The board of directors should include a sufficient number of independent directors.
2.4.1. An independent director should mean any
person who has professional skills and
expertise and is capable of independent
and fair judgement, independent of the
influence of the company’s executive
bodies and any groups of its shareholders
or other stakeholders. It should be noted
that, under normal circumstances, a
candidate (or an elected board member)
may not be recognised to be independent,
if he/she is associated with the company,
any of its substantial shareholders, material
trading partners or competitors, or the
government.
2.4.2. It is recommended to evaluate whether
candidates nominated to the board of
directors meet independence criteria as well
as to review, on a regular basis, whether
or not independent board members meet
the independence criteria. When carrying
out such evaluation, substance should take
precedence over form.
1. In the reporting period, all independent members of the
Board of Directors met all independence criteria indicated
in the recommendations 102 - 107 of the Code, or were
recognised as independent by the resolution of the Board
of Directors.
1. In the reporting period, the Board of Directors (or
the Board’s nominations committee) formed an opinion
about independence of each candidate for the Board and
presented a relevant statement to the shareholders.
2. In the reporting period, the Board of Directors (or the
Board’s nominations committee) has considered, at least
once, independence of current members of the Board of
Directors whom the Company presents in its annual report
as independent directors.
3. The Company has developed procedures that determine
what a member of the Board of Directors shall do in
the event he/she ceases being independent, including
promptly communicating the loss of independence to the
Board of Directors.
Full compliance
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compliance
Noncompliance
Full compliance
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2.4.3. At least a third of the elected members
of the Board consists of Independent
Directors.
1. Independent Directors make up a third of the elected
members of the Board of Directors.
2.4.4. Independent directors should play a key
role in prevention of internal conflicts in the
company and performance by the latter of
mandatory corporate actions.
1. Independent directors (with no conflict of interest)
preliminary assess mandatory corporate action associated
with possible conflict of interest, and the assessment
results are presented to the board of directors.
The membership of the Board of Directors has been
composed to balance and align the interests of minority
and majority shareholders, as well as the Company itself
needed for highly professional managers to participate
in the Board. The Board of Directors has three
independent directors and in the future, the Company
intends to increase the number of independent directors
to a third of the Board membership.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
2.5. The chair of the board of directors facilitates the most effective functioning of the board of directors.
2.5.1. Either the board of directors is chaired
by an independent director, or one of
the independent directors is appointed
as a senior independent director who
coordinates work of the independent
directors and liaises with the chair of the
board of directors.
1. The Board of Directors is chaired by an independent
director, or one of the independent directors is appointed
as a senior independent director.39
2. The roles, rights and responsibilities of the Chair of the
Board of Directors (and the senior independent director,
where applicable) shall be duly prescribed in the internal
documents of the Company.
Full compliance
Partial
compliance
Noncompliance
Explanation for item 1: The Chair of the Board
of Directors is a non-executive director elected
unanimously by all members of the Board of Directors
as the most competent Board member, who is a
knowledgeable professional with significant leadership
experience and of impeccable business and personal
reputation.
Presently, the independent directors have decided
not to identify a senior independent director. All
independent directors have equal rights to interact with
the Chair of the Board of Directors.
Every corporate year, independent directors are
offered to elect a senior independent director. The
Company offers to do so on a voluntary basis, but
regularly explains this recommendation of the Corporate
Governance Code.
Full compliance of item 2.
2.5.2. The board chair should ensure that board
meetings are held in a constructive
atmosphere and that any items on the
meeting agenda are discussed freely. The
chairman should also monitor fulfilment of
decisions made by the board of directors.
2.5.3. The chair of the board of directors should
take any and all measures as may be
required to provide the board members in
a timely fashion with information required to
make decisions on issues on the agenda.
1. The performance of the Chair of the Board of Directors
was evaluated as part of the performance evaluation of the
Board of Directors carried out in the reporting period.
1. The internal documents of the Company provide that it is
the duty of the Board of Directors Chair to take measures
to provide the Board members with materials on Board
meetings agendas.
Full compliance
Partial
compliance
Noncompliance
Full compliance
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compliance
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2.6. board members must act reasonably and in good faith in the best interests of the company and its shareholders, being sufficiently informed, with due care and diligence.
2.6.1. Board members should make decisions
considering all available information, in the
absence of a conflict of interest, treating
shareholders of the company equally, and
assuming normal business risks.
1. The internal documents of the Company provide that a
member of the Board of Directors shall notify the Board of
Directors if he/she has a conflict of interest in respect of
any item on the meeting agenda of the Board or a Board’s
committee before the beginning of the discussion of the
concerned item.
2. The internal documents of the Company provide that a
Board member shall abstain from voting on any items in
respect of which he/she has a conflict of interest.
3. The Company has a procedure in place that allows the
Board of Directors to obtain professional consultations on
matters within its scope at the expense of the Company.
2.6.2
.
Rights and duties of board members should
be clearly stated and documented in the
company’s internal documents.
1. The Company has approved and published an internal
document that clearly states the rights and duties of the
members of the Board of Directors.
Full compliance
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compliance
Noncompliance
Full compliance
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compliance
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2.6.3. Members of the board of directors should
have sufficient time to perform their duties.
1. Individual attendance at the meetings of the Board
of Directors and its committees, as well as time allotted
to preparation for the meetings, were covered in the
performance evaluation of the Board of Directors carried
out in the reporting period.
2. The internal documents of the Company provide that
members of the Board of Directors shall notify the Board
about their intention to become a member of governance
bodies in other companies (besides the Company’s
controlled and subsidiary companies), as well as of such
appointments.
Full compliance
Partial
compliance
Noncompliance
2.6.4. All board members should have equal
opportunity to access the company’s
documents and information. Newly elected
board members should be provided with
sufficient information about the company
and work of its board of directors as soon
as practicable.
1. The internal documents of the Company provide that
members of the Board of Directors have the right to have
access to documents and make requests concerning the
Company and its controlled companies, and the executive
bodies of the Company shall provide requested information
and documents.
2. The Company has a formal onboarding programme for
newly elected members of the Board of Directors.
Full compliance
Partial
compliance
Noncompliance
2.7. meetings of the board of directors, board members’ preparation and participation therein ensure effectiveness of the board.
2.7.1. It is recommended to hold meetings of
the board of directors as needed, with
due account of the company’s scope of
activities and its then current goals.
1. The Board of Directors has met at least six times in the
reporting year.
2.7.2. It is recommended to develop a procedure
for preparing for and holding meetings of
the board of directors and set it out in the
company’s internal documents. The above
procedure should enable the shareholders
to get prepared properly for such meetings.
1. The Company has approved an internal document that
sets out the procedure for preparing for and holding Board
of Directors meetings, which also stipulates that meeting
notification should be made, as a rule, at least 5 days
before the meeting date.
2.7.3. The form of a meeting of the board of
directors should be determined with due
account of importance of issues on the
agenda of the meeting. Most important
issues should be decided at the physical
meetings.
1. The articles of association or internal documents of the
company provide that more important issues (according to
the list in the recommendation 168 of the Code) shall be
considered in physical meetings.
2.7.4. Decisions on most important issues relating
to the company’s business should be made
at a meeting of the board of directors by a
qualified majority vote or by a majority vote
of all elected board members.
1. The articles of association of the company provides
that decisions on most important issues listed in the
recommendation 170 of the Code shall be made at a
meeting of the board of directors by a qualified majority
vote of at least three quarters of the votes or by a majority
vote of all elected board members.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Historically, resolutions on more important issues are
made based on responsible awareness of the members
of the Board of Directors, as a rule, unanimously. Due to
the fact, that there are no restrictions on formalising this
approach, the Company has proposed to the General
Meeting of Shareholders 2019 to approve amendments
to the Articles of Association, that regulate the quorum
for resolutions on most important matters in accordance
with the Code’s recommendations.
2.8. The board of directors should form committees for preliminary consideration of most important issues of the company’s business.
2.8.1 For the purpose of preliminary consideration
of any matters of control over the
company’s financial and business activities,
it is recommended to form an audit
committee comprised of independent
directors.
1. The Board of Directors has set up an Audit Committee
consisting solely of independent directors.
2. The internal documents of the Company specify the
objectives of the Audit Committee, including the objectives
indicated in the recommendation 172 of the Code.
3. At least one Audit Committee member, who
is an independent director, has experience and expertise
in preparing, analysing, evaluating and auditing accounting
(financial) statements.
4. The Audit Committee has met in the reporting year
at least once a quarter.
Full compliance
Partial
compliance
Noncompliance
Clarification for item 1: The Audit Committee consists
of three independent directors, one of whom has
experience and expertise in preparation, analysis,
evaluation and audit of accounting (financial) statements
(Yu.L.Levine, Committee chair).
The Board of Directors decided to increase the
membership of the Committee by adding a non-
executive director who is also experienced and
knowledgeable in preparation, analysis, evaluation
and audit of accounting (financial) statements (R.R.
Gaizatullin).
The Company reviews membership of the Committee
on an annual basis, and possible changes are presently
directly associated with the structure of the Board of
Directors (clarification in the item 2.4.3 herein).
2.8.2 For the purpose of preliminary consideration
of any matters of development of efficient
and transparent remuneration practices, it
is recommended to form a remuneration
committee comprised of independent
directors and chaired by an independent
director who should not concurrently
be the board chairman.
1. The Board of Directors has a Remuneration Committee,
which consists solely of independent directors.
2. The Remuneration Committee is chaired by
an independent director who is not a Board
of Directors Chair.
3. The internal documents of the Company specify
the objectives of the Remuneration Committee, including
the objectives indicated in the recommendation 186
of the Code.
Full compliance
Partial
compliance
Noncompliance
Clarification for item 1: The Human Resource and
Remuneration Committee of PJSC Tatneft Board of
Directors has three independent directors and is chaired
by an independent director (R.Steiner).
The Board of Directors decided to increase the
Committee membership by adding a non-executive
director (R.K.Sabirov). The increase is due to the fact
that the Committee also functions as the Nominations
Committee (for appointments and human resource).
The Company reviews membership of the Committee
on an annual basis, and possible changes are presently
directly associated with the structure of the Board of
Directors (clarification in the item 2.4.3 herein).
2.8.3 For the purpose of preliminary consideration
of any matters relating to human resources
planning (making plans regarding successor
directors), professional composition and
efficiency of the board of directors, it
is recommended to form a nominating
committee (a committee on nominations,
appointments and human resources) with a
majority of its members being independent
directors.
1. The Board of Directors has set up a Nominations
Committee (or its functions indicated in the
recommendation 186 of the Code are delegated to another
Committee), and most of its members are independent
directors.
2. The internal documents of the company specify the
objectives of the Nominations Committee (or another
Committee which performs its functions), including the
objectives indicated in the recommendation 186 of the
Code.
Full compliance
The objectives of the Nominations Committee are
delegated to the HR and Remuneration Committee.
Partial
compliance
Noncompliance
2.8.4 Taking account of its scope of activities
and levels of related risks, the board of
directors of a company has made sure that
its committees’ membership is fully aligned
to the business goals of the company.
Additional committees are either in place, or
were not deemed as necessary (a Strategy
Committee, a Corporate Governance
Committee, an Ethics Committee, a
Risk Management Committee, a Budget
Committee, a Committee on Occupational
Health and Environment, etc.)
2.8.5 The composition of the committees should
be determined in such a way that it would
allow a comprehensive discussion of issues
being considered on a preliminary basis
with due account of differing opinions.
1. In the reporting period, the Board of Directors of the
Company has considered alignment between membership
of the Board’s committees and the business goals of the
Company. Additional committees have either been set up,
or deemed as unnecessary.
Full compliance
Partial
compliance
Noncompliance
1. Board of Directors’ committees are headed by
independent directors.
2. The internal documents (policies) of the company have
provisions that persons who are not members of the Audit
Committee, Nominations Committee and the HR and
Remuneration Committee can attend committee meetings
only at the invitation of the respective chair.
Full compliance
Partial
compliance
Noncompliance
2.8.6 The chairs of the committees should inform
the board of directors and its chair of the
work of their respective committees
on a regular basis.
1. In the reporting period, committee chairs have regularly
reported about their work to the Board of Directors.
Full compliance
Partial
compliance
Noncompliance
2.9 The board of directors conducts performance evaluation of the board of directors, its committees and members.
2.9.1 Performance evaluation of the board
of directors should be aimed at determining
how effectively the board of directors,
its committees and board members
work and whether their work meets the
company’s needs, as well as at making
their work more intensive and identifying
areas of improvement.
1. Self-evaluation or external evaluation of the Board of
Directors conducted in the reporting period included
evaluation of the work of Committees, individual members
of the Board of Directors and the Board in general.
2. The results of self-evaluation or external evaluation of the
Board of Directors conducted in the reporting period were
considered at a physical meeting of the Board.
Full compliance
Partial
compliance
Noncompliance
Clarification for item 1: Due to the differences of opinion
of the Company and the Bank of Russia on this matter,
we believe that for public companies it is mandatory to
have an audit committee, a remunerations committee
and a nominations committee; the requirements for
these committees are clearly stated in the Corporate
Governance Code and the Company follows them.
The Corporate Governance Committee is not a
mandatory arm of the Board of Directors, and the
Code’s restriction on the number of independent
directors (at least three) creates a conflict whereby
the same directors may be members in different
committees, which can undermine the quality of their
contribution to the work of committees. Therefore, the
membership of the Corporate Governance Committee
and its chair (N.U.Maganov) follow the recommendation
on the Committee membership in line with the
Committee’s goals and possibility of quality discussion
of considered matters taking into account different
opinions.
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2.9.2 Performance of the board of directors,
its committees and members, should be
evaluated regularly, at least once a year.
An independent company (a consultant)
should be engaged for an independent
evaluation of the board of directors carried
out at least once in three years.
1. For the purposes of an independent performance
evaluation of the Board of Directors, in the last three
reporting periods the Company has at least once engaged
an independent company (a consultant).
Full compliance
Partial
compliance
Noncompliance
Performance of the Board of Directors is evaluated
on a regular basis once a year; the evaluation takes
the form of a formal self-evaluation and the results are
considered by the Audit Committee and Corporate
Governance Committee with the involvement of
independent directors.
The self-evaluation survey is based on a methodology
similar to the RAEX (Expert RA) methodology used since
01/06/2014.
The results are disclosed in the annual report and are
available to shareholders and all stakeholders.
The Company has not engaged an independent
company for the evaluation in the last three years for
rational reasons associated with quality changes in the
Company (development, approval and implementation
of the corporate long-term strategy) and good financial
and production performance.
The Company finds it reasonable to carry out an
independent evaluation in the event the structure of the
Board of Directors changes (clarification in the item
2.4.3 herein).
3.1 The company’s corporate secretary shall be responsible for effective communication with its shareholders, coordination of the company’s efforts
to protect the rights and interests of its shareholders, and support of efficient work of its board of directors.
3.1.1 The corporate secretary should have
knowledge, experience, and qualifications
adequate for the scope of responsibilities,
as well as an impeccable reputation and
should enjoy the trust of the shareholders.
3.1.2 The corporate secretary should be
sufficiently independent of the company’s
executive bodies and be vested with powers
and resources required to perform his/
her tasks.
1. The Company has adopted and disclosed an internal
document - the Regulation on Corporate Secretary.
2. The Company’s website and the annual report provide
biographical details of the corporate secretary, with the
same degree of detail as for the members of the Board of
Directors and the executive management.
1. The Board of Directors approves appointment, dismissal
and benefits of the corporate secretary.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
4.1.4 The company should determine the
reimbursement (compensation) policy,
which specifies which costs are subject
to reimbursement and the level of service
that members of the board of directors,
executive management and other key
company officers can claim. Such policy
can be a component of the company’s
remuneration policy.
1. The remuneration policy (policies) or other internal
documents of the company set out the rules for
reimbursement of expenses to the members of the
Board of Directors, executive management and other key
managers of the company.
Full compliance
Partial
compliance
Noncompliance
4.2. The system of remuneration of members of the board of directors makes sure that financial interests of the directors are aligned
with long-term financial interests of the shareholders.
4.2.1. The company pays fixed annual
remuneration to the members of the board
of directors.
The company does not pay remuneration
for participation in certain Board meetings
or the Board’s committees’ meetings.
The company does not engage short-term
motivation methods and offer additional
financial incentives towards members of the
board of directors.
4.2.2. Long-term ownership of the company’s
shares are most conducive to alignment of
financial interests of the board members
with long-term interests of the shareholders.
At the same time, the company does not
link performance to the right to sell shares,
and members of the board of directors do
not participate in stock option plans.
4.2.3. The company does not provide for any
additional payments or compensation in the
event of early resignation due to change
of control over the company or other
circumstances.
1. Fixed component of the annual remuneration has been
the only monetary remuneration for the members of the
Board of Directors for working in the Board of Diretors in
the reporting period.
Full compliance
Partial
compliance
Noncompliance
1. If the internal document (documents) - remuneration
policy (policies) of the company stipulate provision
of shares of the company to the members of the Board
of Directors, there should be provisions and clear rules
for stock ownership by members of the Board of Directors
aimed at incentivising long-term ownership of such stock.
Full compliance
Partial
compliance
Noncompliance
1. The Company does not provide for any additional
payments or compensation in the event of early resignation
due to change of control over the Company or other
circumstances.
Full compliance
Partial
compliance
Noncompliance
4.1 The level of remuneration paid by the company should be adequate to enable it to attract, motivate, and retain persons having required skills and qualifications.
remuneration due to board members, the executive bodies, and other key managers of the company should be paid in accordance with a remuneration policy
approved by the company.
4.3. The system of remuneration of members of executive management and other key company officers provides for relation between remuneration
and the Company’s performance and personal contribution to the performance of the Company.
4.1.1 It is recommended that the level of
remuneration paid by the company to its
board members, executive bodies, and
other key managers should be adequate
to motivate them to work efficiently and
enable the company to attract and retain
knowledgeable, skilled, and duly qualified
persons. The company should avoid setting
the level of remuneration any higher than
necessary, as well as an excessively large
gap between the level of remuneration of
any of the above persons and that of the
company’s employees.
4.1.2 The company’s remuneration policy
should be developed by its remuneration
committee and approved by the board
of directors. With the help from its
remuneration committee, the board of
directors should monitor implementation
of and compliance with the remuneration
policy by the company and, should this be
necessary, review and amend it.
4.1.3 The company’s remuneration policy
contains transparent mechanisms of
determining the remuneration size for
the members of the board of directors,
executive bodies and other senior officers
of the company and also regulates all
types of payments, benefits and privileges
granted to the mentioned persons.
1. The Company has approved an internal document
(documents) - policy (policies) on remuneration for the
members of the Board of Directors, executive bodies
and other key managers, which clearly describes the
remuneration framework.
Full compliance
Partial
compliance
Noncompliance
1. In the reporting period, the Remuneration Committee has
reviewed the remuneration policy (policies) and its (their)
implementation practices, and, where necessary, provided
relevant recommendations to the Board of Directors.
Full compliance
Partial
compliance
Noncompliance
1. The Company’s remuneration policy (policies) contains
transparent mechanisms of determining the remuneration
size for the members of the Board of Directors, executive
bodies and other key company officers and also regulates
all types of payments, benefits and privileges granted to the
mentioned persons.
Full compliance
Partial
compliance
Noncompliance
4.3.1. Members of executive bodies and other key
managers of the company are remunerated
in a manner than ensures reasonable and
sound ratio of fixed remuneration and
variable remuneration that depends on
the company’s performance and personal
(individual) contribution of the employee.
4.3.2. The company has implemented a plan
of long-term incentives for members of
executive management and other key
company officers using the company’s
stock (stock options or other financial
derivatives, where underlying asset is the
company’s shares).
4.3.3. The compensation (the golden parachute)
to be paid by the company in the event of
early termination of powers of executive
managers or other key company officers
by the company in the absence of any
misconduct by them, does not exceed
the double of the fixed part of the annual
remuneration.
1. In the reporting period, annual performance indicators
approved by the Board of Directors were factored in in
determining the variable component of the remuneration of
the members of executive bodies and other key managers
of the company.
2. In the course of the last evaluation of the system of
remuneration of members of executive bodies and other
key managers of the company, the Board of Directors
(the Remuneration Committee) assured that the company
applies effective ratio of fixed and variable components of
remuneration.
3. The company provides for a procedures that ensures
that bonuses received by members of the executive bodies
and other key managers illegitimately are returned back to
the company.
1. The Company has a long-term incentives plan for
members of executive management and other key
company officers using the Company’s stock (financial
derivatives based on the Company’s shares).
2. The long-term incentive programme for members of
executive bodies and key managers of the company
provides that the right to sell shares or other financial
instruments provided under the programme is granted not
earlier than three years after their provision. At the same
time, the Company links corporate performance to the right
to sell shares.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
1. The compensation (the golden parachute) to be paid by
the Company in the event of early termination of powers
of executive managers or other key company officers by
the Company in the absence of any misconduct by them,
has not exceeded in the reporting period the double of the
fixed part of the annual remuneration.
Full compliance
Partial
compliance
Noncompliance
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Compliance
Evaluation
Criteria
Compliance
Status
Comments
on Noncompliance
Corporate
Governance
Principle
№
Compliance
Evaluation
Criteria
Compliance
Status
Comments
on Noncompliance
5.1. The Company has an effective system in place for managing risks and internal controls that provides reasonable assurance in achieving the Company’s goals.
6.2. The Company discloses relevant and accurate information about the Company in full and in due time to make sure that shareholders and investors
5.1.1. The board of directors should determine
the principles and approaches to risk
management and internal controls in the
Company.
1. The functions of different governance bodies and
divisions of the company in the risk management and
internal controls system are clearly defined in the internal
documents / relevant policies of the company approved by
the Board of Directors.
5.1.2. The company’s executive bodies should
make sure that the Company has an
effective risk management system and
internal controls that function properly.
1. The executive bodies of the company have ensured
distribution of functions and powers in respect of risk
management and internal controls among divisions and
departments heads accountable to them.
5.1.3. The company’s risk management and
internal control system should ensure an
objective, fair and clear understanding
of the current state and prospects of the
Company, the integrity and transparency of
the company’s statements, the soundness
and acceptability of the risks accepted by
the Company.
5.1.4. The board of directors of the company
should do everything necessary to ensure
that the risk management and internal
controls system is effective and in keeping
with the relevant principles and approaches
determined by the Board.
1. The Company has an approved policy on counteracting
corruption.
2. The company has in place a usable method (hotline) for
informing the Board of Directors or the Audit Committee
of the Board of Directors of any breaches of legislation,
internal procedures and the ethics code of the company.
1. In the reporting period, the Board of Directors or the
Audit Committee of the Board of Directors has conducted
an evaluation of the risk management and internal controls
system of the company. The evaluation results are included
in the annual report of the company.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
5.2. For the purposes of regular independent assessment of reliability and effectiveness of the risk management and internal controls system,
as well as corporate governance practices, the Company conducts internal audit.
5.2.1. The company has a separate structural
division or engages an independent
company to conduct internal audit of the
company.
There is a division between functional and
administrative accountability of the internal
audit unit. Functionally, the internal audit unit
is accountable to the board of directors.
1. For the purposes of internal audit, the company has set
up a separate structural division of internal audit, which
is accountable to the Board of Directors or the Audit
Committee, or an independent company is engaged with
the same accountability principle.
5.2.2. The internal audit unit should evaluate
internal controls, risk management system,
and the corporate governance system.
The company should use commonly
accepted internal audit standards.
1. In the reporting period, the internal controls and risk
management system has been evaluated, as part of the
internal audit.
2. The company is using commonly accepted approaches
to the internal control and risk management.
6.1. The Company and its activities are transparent to shareholders, investors and other stakeholders.
6.1.1. The company should develop and implement
an information policy that ensures effective
communication between the company
and its shareholders, investors and other
stakeholders.
6.1.2. The company should disclose the
information about the corporate governance
system and practices, including detailed
information about compliance with the
Code’s principles and recommendations.
1. The Board of Directors of the Company has approved
an information policy aligned 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 in the reporting
period.
1. The company discloses information about the company’s
system of corporate governance and the general
framework of corporate governance used in the company,
including at its corporate website.
2. The company discloses information about membership
of the executive bodies and the Board of Directors,
independence of the members of the Board and their
membership in the Board’s Committees (as defined in the
Code).
3. In the event there is a person who controls the company,
the company publishes a memorandum of the controlling
person regarding the plans of such person in respect of the
corporate governance in the company.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
can make informed decisions.
6.2.1. The company’s disclosure is based on the
principles of regularity, consistency and
timeliness, as well as availability, accuracy,
completeness and comparability of the
disclosed information.
6.2.2. The company avoids a formalistic approach
to disclosure and discloses material
information about its activities, even if such
disclosure is not required legislatively.
1. The information policy of the company defines
approaches and criteria for determining which information
can have a material impact on the valuation of the company
and the value of its securities, as well as procedures
ensuring timely disclosure of such information.
2. If the company’s securities are traded on foreign
organized markets, equivalent material information should
be simultaneously disclosed both in and outside the
Russian Federation.
3. If foreign investors hold a material share in the
company’s capital, the company should, along with
disclosure of information in Russian, disclose information in
a foreign language that is commonly used.
1. In the reporting period, the company has disclosed
annual and interim financial statements prepared under
IFRS standards. The annual report of the company for
the reporting period includes annual financial statements
prepared under IFRS and an auditor’s report.
2. The company discloses full information about the
structure of capital of the company in the annual report
and in the corporate website in compliance with the
recommendation 290 of the Code.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
6.2.3. The annual report, as one of the most
important communication channels with
shareholders and other stakeholders,
should contain information enabling one
to evaluate the company’s performance
results for the year.
1. The annual report of the company contains information
about key aspects of the company’s business and its
financial results.
2. The annual report of the company contains information
about environmental and social aspects of the company’s
activities.
Full compliance
Partial
compliance
Noncompliance
6.3. The Company should provide equal and unhindered access to the information and documents to its shareholders at their request.
6.3.1. The company provides equal and
unhindered access to the information and
documents to shareholders at their request.
1. The company should set forth a procedure for providing
its shareholders with unhindered access to its information
and documents at their request in its information policy.
6.3.2. Information is provided in a manner which
ensures reasonable balance between
interests of individual shareholders and
interests of the company in general, as it is
interested in preserving the confidentiality
of commercial and sensitive information
that may have a significant impact on the
company’s competitive ability.
1. In the reporting period, the Company has always
accommodated shareholders’ requests to provide
information, or when it did not, it provided validated
grounds for the refusal to provide information.
2. In the events specified in the information policy of the
Company, shareholders are notified about the confidential
nature of the information and undertake to ensure its
confidentiality.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
7.1. actions that have or may have a significant impact on the structure of the Company’s equity and financial standing and hence the position of the shareholders (mandatory
corporate action), are carried out on fair terms ensuring observance of the rights and interests of the shareholders as well as other interested parties.
7.1.1. Company reorganisation, acquisition of 30
or more percent of voting shares of the
company (acquisition), major transactions,
increase or decrease of authorised capital,
listing or de-listing of the company’s
shares, as well as other actions that can
significantly change the rights or violate the
interests of shareholders are recognised as
mandatory corporate actions. The articles
of association of the company provides
for a list (criteria) of transactions and other
actions that are mandatory corporate
actions, and such actions are within the
terms of reference of the board of directors
of the company.
1. The Articles of Association of the Company provides for
a list of actions that are mandatory corporate actions and
their criteria. Decisions on mandatory corporate actions
are the scope of the Board of Directors. When such
corporate actions fall in the scope of the General Meeting
of Shareholders according to the current legislation,
the Board of Directors gives shareholders its
recommendations.
2. Company reorganisation, acquisition of 30 or more
percent of voting shares of the Company (acquisition),
major transactions, increase or decrease of authorised
capital, listing or de-listing of the Company’s shares
(not exhaustively) are recognised in the Articles of
Association of the Company as mandatory corporate
actions.
Full compliance
Partial
compliance
Noncompliance
De facto compliance. The Company specifies the list
of mandatory corporate actions in Chapter 9 of the
Corporate Governance Code approved by the Board of
Directors on 20/03/2017.
The Articles of Association of the Company specifies
that decisions on matters related to mandatory
corporate actions are within the terms of reference of
the Board of Directors.
Pursuant to the recommendation of the Corporate
Governance Code, the Company has proposed to the
General Meeting of Shareholders 2019 to approve
amendments to the Articles that specify the list of
mandatory corporate actions criteria.
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Evaluation
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Compliance
Status
Comments
on Noncompliance
7.1.2. The board of directors should play a key
role in passing resolutions or making
recommendations relating to mandatory
corporate actions; for that purpose, relying
on opinions of the company’s independent
directors.
1. The company has provides for a procedure for
independent directors to state their opinion on mandatory
corporate actions prior to their approval.
Full compliance
Partial
compliance
Noncompliance
1. Given the specifics of its business, the Articles of
Association of the Company sets lower, than legislatively
stipulated, criteria for recognising transactions as
mandatory corporate actions.
2. In the reporting period, all mandatory corporate actions
have undergone approval procedure prior to taking place.
Full compliance
Partial
compliance
Noncompliance
7.1.3. When taking any mandatory corporate
actions which would affect rights or
legitimate interests of the company’s
shareholders, equal terms and conditions
should be ensured for all of the
shareholders; if statutory mechanisms
designed to protect the shareholder rights
prove to be insufficient for that purpose,
additional measures should be taken with a
view to protecting the rights and legitimate
interests of the company’s shareholders. In
doing so, the company should not only seek
to comply with the formal requirements
of law but should also be guided by the
principles of corporate governance set out
in this Code.
De facto compliance. There were no mandatory
corporate actions in the reporting year.
Pursuant to the recommendation of the Corporate
Governance Code, the Company has proposed to the
General Meeting of Shareholders 2019 to approve
amendments to the Regulation on the Board of
Directors that set out a procedure for independent
directors’ actions in respect of mandatory corporate
actions.
Complied with de facto. The Corporate Governance
Code approved by the Board of Directors on
20/03/2017, Chapter 9, provides that actions that have
or may have a significant impact on the structure of
the Company’s equity and financial position and hence
the position of the shareholders, are carried out on fair
terms ensuring observance of the rights and interests
of the shareholders as well as other interested parties.
There were no mandatory corporate actions in the
reporting year.
Pursuant to the recommendation of the Corporate
Governance Code, the Company has proposed to the
General Meeting of Shareholders 2019 to approve
amendments to the Articles that specify mandatory
corporate actions criteria.
7.2. The Company provides for a procedure of mandatory corporate actions that allows shareholders to timely receive complete information about such actions,
allows them to influence such actions and guarantees that their rights are observed and adequately protected.
7.2.1. When disclosing information about material
corporate actions, it is recommended to
give explanations concerning reasons for,
conditions and consequences of such
actions.
1. In the reporting period, the company has disclosed
information about mandatory corporate action in a timely
and detailed manner, including grounds and timescale of
such actions.
7.2.2. Rules and procedures in relation to
mandatory corporate actions taken by the
company should be set out in its internal
documents.
1. The internal documents of the Company provide for
a procedure for engaging an independent appraiser for
valuating the assets to be alienated or acquired in a major
transaction or an interested party transaction.
2. The internal documents of the Company provide for
a procedure for engaging an independent appraiser
for evaluating the cost of purchasing or buying out the
company’s stock.
3. The internal documents of the Company provide for an
extensive list of grounds for recognising members of the
Board of Directors or other persons as stated in respective
laws as interested in the company’s transactions.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial
compliance
Noncompliance
Annex 5
Principal risks
Annual Report 2018TATNEFT Groupwww.tatneft.ruANNEXES 266
267
RISK DESCRIPTION
COMPANY RISK MANAGEMENT PRACTICE
RISK DESCRIPTION
COMPANY RISK MANAGEMENT PRACTICE
Strategic risk
The implementation of the Company’s Development Strategy
and the achievement of operational and financial results depend
on multiple factors, including changes in the energy markets,
international and domestic policies, macroeconomics, agreements
between OPEC and other oil producers, legal and tax regulation,
the development of technology and information resources, the
dynamics of the labor market as well as various other factors.
Country and foreign policy risks
The Company is registered in the Russian Federation, where
a significant part of its assets is located. Principal production
activities are carried out in the Republic of Tatarstan, which is a
constituent entity of the Russian Federation. The political situation
in the Russian Federation and, in particular, in the Republic of
Tatarstan is stable.
The Company implements the Development Strategy for the
period up to 2030, formed on the basis of a detailed analysis of the
whole complex of all key factors, which may affect the development
of the Company and the achievement of the planned results.
Decisions of the Company’s management bodies related to the
strategic and current planning and operational activities are made
on the grounds of all available information related to possible
development scenarios and tend to consider all reasonably
foreseeable variations and assumptions used in such planning.
The Company has a high-quality asset structure and a high-
tech foundation, which is improving constantly in accordance with
production tasks, including the development of import-substituting
technologies and equipment.
The Company has a stable management platform for the
implementation of the Strategy and adjusts its plans as and when
required.
The Company’s investments are protected by the relevant Risk
Control Map.
The Company implements a policy of vertical integration and
diversification, which allows for significant reduction (elimination)
of strategic risks, including critical risks, through redistribution of
resources and commodity flows.
The Company adheres to the opinion that the situation in the
region of principal activities and location of key assets of the Group
as a whole is stable.
At the same time, a number of international organizations,
commercial, nongovernmental organizations publish their country
ratings based on the level of political risks. In such ratings, the
Russian Federation may be classified as a country with increased
risks that investors should take into account when investing their
funds in the country’s economy and securities of Russian issuers,
such as the Company.
Rating agencies assess the creditworthiness of the country
based on their own methodologies.
During 2018, the credit ratings of the Russian Federation
assigned by such international agencies as Standard & Poor’s,
Moody’s, and Fitch were at BBB-, Ba1, and BBB-, respectively.
These credit ratings are used by investors to assess the risks
associated with investing in assets in the Russian Federation.
u.S. and Eu sanctions
Since 2014, the United States, the European Union, and
a number of other countries have consistently imposed sanctions
on the Russian Federation, including sectoral sanctions affecting
the activities of individual companies in the energy and other
sectors of the Russian economy.
These sanctions, including their unpredictability, increase the
country risk of the Russian Federation.
In its activities, the Company takes into account the existing
sanctions and monitors them to minimize the adverse effects and
consequences (considering the potential expansion of sanctions,
i.e. various initiatives in the United States to strengthen the
sanctions regime against the Russian Federation), which might
have a selective impact on the Company’s promising projects.
To reduce the risks related to the availability of technologies
and equipment subject to sanctions, the Company implements
consistently the program of import substitution and development of
its own technologies with the localization of equipment production
in the Russian Federation and the engagement of advanced
industry research centers..
Financial risks
Company’s activities are exposed to various financial risks:
market risks (including currency, interest rate, and price risks),
credit risks, and the liquidity risk.
The Company’s financial risk management policy focuses on
risk measurement, assessment, and monitoring procedures as well
as on the selection of the appropriate risk management methods.
For detailed information about financial risks, including those related to the banking segment within TATNEFT Group, see the IFRS Consolidated Financial
Statements, Note 28: Financial Risk Management.
Changes in legislation and regulatory environment
Changes in the applicable legislation, including tax, currency,
customs regulations, etc., may have a significant impact on the
Company’s performance.
Industry risks
Risk of oil and oil product prices
Business efficiency and profitability largely depend on current
prices of oil and oil products as well as on the demand for oil and oil
products. Recently, oil and oil product prices have shown significant
volatility due to multiple factors.
The Company conducts continuous monitoring of changes in
legislation, evaluates and predicts the extent of their impact on
the activities of the Group entities. The Company participates on
a regular basis in working groups to develop draft laws in various
fields of legislation.
The Company conducts continuous monitoring and analysis of
the dynamics of prices and demand for oil and oil products.
The Company’s model of strategic and current planning
provides for appropriate adjustments. Planning is based on a
scenario approach, including variability based on market forecasts.
The Company has the internal potential to redistribute commodity
flows in the event of a significant price difference between domestic
and international markets, demand for crude oil and oil products,
and the ability to reduce or rebalance capital and operating costs
in order to fulfill its obligations in the event of a sharp decline in oil,
gas, and oil product prices.
The Company analyzes the risks of prices and demand for oil
and oil products on the basis of modeling different scenarios.
In terms of demand for oil and oil products, the Company does
not expect that alternative sources of energy will be able to replace
significantly oil and oil products in the medium-term perspective.
Regardless of the development of alternative sources of energy
and a potential increase in the number of electric vehicles, the
demand for oil and oil products will continue to grow (largely due
to the emerging markets). Thus, the Company does not expect any
significant negative changes in the industry in terms of the demand
structure.
Annual Report 2018TATNEFT GroupANNEXESAnnex 5 Principal Risks 268
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RISK DESCRIPTION
COMPANY RISK MANAGEMENT PRACTICE
RISK DESCRIPTION
COMPANY RISK MANAGEMENT PRACTICE
Technical and technological risks
Exploration, development, and equipping of new fields,
maintenance of existing wells, drilling of new ones as well as
preparation, transportation, and processing of oil and gas constitute
an extremely complex and expensive process. Additional expenses
are required for enhanced oil recovery, which is of particular
importance for the Company. In the future, as fields go depleted,
special methods for enhanced oil recovery will play an increasingly
important role.
The Company has started to develop a new line, i.e.
petrochemical industry business.
At the same time, the Company is developing the banking
segment.
In aggregate, the economic efficiency of all business lines of the
Company will largely depend on the Company’s ability to use the
most productive and affordable technologies, including information
technology.
Transportation
As the majority of oil production regions in Russia are located
far from the main markets of oil and oil products, oil companies are
dependent on the maturity of transport infrastructure as well as its
accessibility. The Company transports a significant part of the crude
oil, which it sells in foreign and domestic markets, via the network
of major pipelines under contracts with PJSC Transneft and its
subsidiary structures. A significant part of the oil transported via
the pipeline is headed to seaports for subsequent transportation
by sea. Russian sea terminals have certain limitations associated
with geographic location, weather conditions, and capacity. In
the territory of Russia, oil products are transported mainly by rail.
The railway infrastructure of the Russian Federation is owned
and controlled by JSC Russian Railways. Transneft and Russian
Railways are joint stock companies partially owned by the state.
As the above companies belong to the natural monopolies sector,
their tariff policy is defined by state authorities to ensure a balance
of the interests of the state and those of all parties involved in the
transportation process. The Federal Antimonopoly Service of
the Russian Federation (FAS of Russia) sets the tariffs of natural
monopolies. Tariff rate depends on the route of transportation, size
of shipment, distance to destination, and several other factors. FAS
of Russia reviews tariffs at least once a year.
Industrial and environmental risks
The Company and TATNEFT Group enterprises operate
complex process systems and facilities for production, preparation,
transportation, and processing of oil and gas, which are classified
as especially hazardous production facilities.
The oil and gas sector of the economy is extremely exposed to
industrial and environmental risks, which entail the threat of injury,
potentially pose danger to life, health and are associated with fine
sanctions, etc.
The Company pays special attention to development and
application of cutting-edge technologies in all lines of its business;
as one of the innovation leaders in the industry in Russia, it develops
its own research and production base, interacts with advanced
industry research centers.
Target focus is the technology, which is required to implement
the strategy, effective investment in R&D, and pilot developments.
The Company is actively developing IT infrastructure on the basis
of the new-generation single information platform for production
management, which integrates information flows of all services
at all stages of the value chain. The Company plans to implement
a series of IT projects by 2021, which will increase the efficiency
of business processes.
The region of the Company’s principal activities is not remote in
terms of transport and other infrastructure.
The Company monitors closely the development and
maintenance of transport infrastructure required to deliver oil and
oil products to buyers, as well as the tariff policy, and participates
actively in the relevant industrial discussions and initiatives.
The Company has developed a comprehensive program aimed
at mitigating negative situations associated with industrial and
environmental risks. The Company continuously implements new
technical and organizational measures to minimize the impact of
such risks. The Company provides liability insurance for a number
of facilities.
The Company is committed to becoming a leader in the field of
industrial, labor, and environmental safety of production, minimizing
the impact on the environment, including the impact on the climate.
Comprehensive actions in this field have resulted in the reduction
of environmental footprint to the level where there is a potential
for self-recovery of ecosystems. To improve the efficiency of
industrial and environmental safety management, TATNEFT Group
is currently implementing the management system in accordance
with the latest-generation international standards ISO 14001-2015
and ISO 45001:2018.
Reputational risk related to the quality of products and services
Perception of consumers of the Company’s products regarding
the quality of its products and services affects the sales and
profitability of the relevant business segment.
Geographical and nature-related aspects
Geographical and natural features of the region of the
Company’s principal activities are not characterized by factors that
can have a significant adverse impact on the normal production
activities and plans implementation. At the same time, there is a
potential risk of the impact of these aspects on the production and
economic activities of the Company.
Improving the quality of interaction and establishing long-
term relations with consumers is one of the priorities in creating
a competitive advantage of the Company, based on the quality
control system, high level of services as well as by raising consumer
awareness.
In the course of interaction with consumers of products and
services, the Company adheres to the UN guidelines for the
protection of consumers’ interests and the International Covenant
on Economic, Social, and Cultural Rights.
Quality of products and services
The Company strictly controls compliance with all regulatory
requirements governing the quality of products and services.
Safety of products and services
At all life-cycle stages of the offered products and services,
the Company assesses their impact on health and safety in
order to identify opportunities for improvement and takes a set of
measures to minimize any negative impact of the offered products
and services on the environment. Consumer health and safety
protection includes the provision of products and services that are
safe and do not pose an unacceptable risk of harm when used or
consumed. The Company adheres to a high level of quality and
safety standards.
Information sharing
The Company constantly informs customers and counterparties
about its activities by way of publications and press releases on the
Internet, in the mass media as well as via social media and mobile
applications.
Feedback
The Company has a hotline.
Procedures have been adopted and are in place – to respond
promptly to complaints and claims received via the hotline in order
to address their causes.
Fair and responsible marketing practices
The Company uses only fair marketing practices and protects
consumers from unfair or misleading advertising or labeling. The
Company’s activities in the field of promotion of products and services,
advertising, and marketing comply with the legislation of the Russian
Federation.
When planning its activities, the Company takes into account the
geographical, including climatic, features of the region of operation.
Against the possibility of negative consequences for the Company’s
activities that may be caused by natural disasters, such as floods,
earthquakes, mudflows, hurricane winds, etc., the Company has
approved procedures and policies aimed at the prompt elimination
of such consequences and, in case of emergency, to reduce
the impact of such situations on the life, health, and safety of
employees and residents of the regions of operation as well as on
the production activities of the Company.
There are monitoring procedures that, with the use of the latest
technical means, are aimed at preventing the possibility of adverse
consequences of natural phenomena and informing the population
of the region where the Company carries out its operations about
the possibility of such consequences.
Annual Report 2018TATNEFT GroupANNEXESAnnex 5 Principal Risks 270
271
Annex 6
On the annual report and the underlying
regulatory documents constituting the
framework for the current annual report
The report of Public Joint Stock Company TATNEFT (PJSC
TATNEFT, the Company) for the 2018 calendar year presents the
operating results of the Company and its subsidiaries, which are
collectively referred to as “TATNEFT Group” (the “Group”). The
designations “PJSC TATNEFT,” “TATNEFT Group,” “the Group,”
“TATNEFT,” “the Company,” “we,” and “our” used in the text of this
Report shall be deemed equivalent and refer to TATNEFT Group
as a whole, PJSC TATNEFT, and/or its subsidiaries as the context
may require.
As the parent company of the Group, PJSC TATNEFT has
prepared in this Report the consolidated operating and financial
information for the key business units and main lines of business.
The Report has been prepared with the integrated reporting
elements, which allows reflecting the priority lines of business, as
well as the production, financial, economic, environmental, and
social performance in direct reference to each other. The Company
adheres to the principle that only the balance between these
aspects can ensure effective business development.
In addition to the Annual Report, the Company also plans to
publish the full version of the integrated report in an interactive
format, which will expand significantly the boundaries of the
provision of information on aspects of sustainable development
(ESG).
The Report adheres to the guidelines of the Code of Corporate
Governance approved by the Government of the Russian Federation
and recommended by Bank of Russia Letter No. 06-52/2463 dated
April 10, 2014.
The practice of the Annual Report preparation implies the
establishment of a special Working Group (composed of responsible
managers and specialists of the Company), the formation of
internal administrative documents on the preparation and analysis
of information for the report, interaction with stakeholders. The
PJSC TATNEFT Corporate Secretary Office of participates in the
coordination of actions to prepare the Report and ensures the
feedback on the report from the shareholders, investors, and other
stakeholders.
To ensure the reliability of the information disclosed, the Annual
Report has been agreed on with the lines-responsible services
and reviewed by PWS, an independent auditor. Public Joint Stock
Company TATNEFT Annual Report 2018 has been preliminarily
approved by the Board of Directors of PJSC TATNEFT, Minutes
No. 13 dated May 22, 2019. The reliability of the data presented in
the Annual Report is confirmed by the Audit Commission.
The annual report of TaTNEFT has been formed
based on the following principal documents
1. Federal Laws
- Federal Law No. 39-FZ “On Securities Markets, as amended
on 27.12.2018” dated 27.12.2018;
- Federal Law No. 208-FZ “On Joint Stock Companies, as amended
on 27.12.2018” dated 26.12.1995;
- Federal Law No. 514-FZ “On Amendments to the Federal
Law
‘On Securities Market’ and Certain.
Legislative Acts of the Russian Federation on Improving the Legal
Regulation of the Securities Issue” dated 27.12.2018;
2. Bank of Russia Regulation No. 660-P “On General Meetings
of Shareholders” dated 16.11.2018.
3. Regulation “On Disclosing Information by Securities Issuers”
approved by Bank of Russia Order No. 454-P dated 30.12.2014,
as amended on 25.05 2018;
4. Code of Corporate Governance issued by the Bank of Russia
and recommended by Bank of Russia Letter No. 06-52/2463 dated
April 10, 2014.
5. Bank of Russia Letter No. IN-06-52/8 “On Disclosure in Annual
Reports of Public Joint Stock Companies of Information on
Compliance with the Principles and Recommendations of the Code
of Corporate Governance” dated February 17, 2016.
6. Bank of Russia Letter No. IN-06-28/57 “On Recommendations
on Disclosure in the Annual Report of Public Joint Stock
Companies of Information on Compensation of Members of Board
of Directors (Supervisory Board), members of Executive Bodies,
and Other Key Executives of Public Joint Stock Companies”
dated December 11, 2017.
7. LSE Information Disclosure Standards.
8. G20/OECD Principles of Corporate Governance, as amended
in 2015.
9. UN Global Compact and Sustainable Development Goals, 2030
Agenda for Sustainable Development.
10.
International Integrated Reporting Standard issued by the
International Integrated Reporting Council (IIRC).
11. Series of standards:
of the Institute of Social and Ethical Accountability AA1000; ISO
26000: 2010 Guidance on Social Responsibility; GRI
ANNEXESГодовой отчет 2018Группа «Татнефть» 272
273
List of acronyms
Public Joint Stock Company TATNEFT named after V.D. Shashin throughout the text
of the Report is referred to as PJSC TATNEFT, TATNEFT, the Company.
BIA
ABS
AGFS
ASPI
AB
FFS
AIS
JSC
BVMB
ZBG
BMZ
VOIR
VEB
FEA
GMPS
GMS
GIBDD
SCNS
HS
GOST
Frac
F&L
HEI
RBS
CC
BPS
CHC
CYSS
UBS
EU
UIAS
UNECE
RCT
CJSC
IB
DPI
IS
IT
Business Idea Auction
Automated Banking System
Autogas Fueling Station
Almetyevsk State Petroleum Institute
Anode Bed
Fuel Filling Station
Automated Information System
Joint Stock Company
Basin Water Management Board
ZENIT Banking Group
Bugulma Mechanical Plant (a structural subdivision of TATNEFT)
All-Russian Society of Inventors and Innovators
Vnesheconombank
Foreign Economic Activity
Group Metering Pump Station
Group Metering Station
State Traffic Safety Inspectorate
State Complex Nature Sanctuary
Horizontal Settler
National State Standard
Formation Hydraulic Fracturing
Fuel & Lubricants
Hydraulic Engineering Installations
Remote Banking Services
Community Center
Booster Pumping Station
Children’s Holiday Camp
Children’s and Youth Sports School
Unified Biometric System
European Union
Unified Identification and Authentication System
United Nations Economic Commission for Europe
Reinforced Concrete Tank
Closed Joint Stock Company
Investment Business
Discounted Profitability Index
Information System
Information Technology
CB
CIS
PPS
KFU
CSR
HRS
CDW
MGPP
MICEX
IPS
MPP
MTBR
SME
EOR
MPP
Corporate Business
Corporate Information System
Pad Pumping Station
Kazan (Volga Region) Federal University
Corporate Social Responsibility
Horse-racing School
Corporate Data Warehouse
Minnibayevo Gas Processing Plant
Moscow Interbank Currency Exchange
International Payment Systems
Metal-Plastic Pipes
Mean Time Between Repair
Small and Medium Enterprises
Enhanced Oil Recovery
Multiphase Pump
EMERCOM of Russia
The Ministry of the Russian Federation for Civil Defense,
Emergencies, and Elimination of Consequences of Natural
Disasters
NGDU
MRRT
VAT
Oil and Gas Field Operating Division (a structural subdivision of
TATNEFT)
Mineral Resource Recovery Tax
Value Added Tax
NSSCTF
Nizhnekamsk Solid Steel Cord Tire Factory
R&D
Tubing
ITA
OR & PP
Refinery
OPU
NPCS
STC
PCC
LLC
NCA
PO
PDC
P&IDC
IDC
DC
Research and Development
Oil Well Tubing
Intangible assets
Oil Refining and Petrochemical Plants
Oil Refinery
Oil Processing Unit
National Payment Card System
Science and Technology Center
Petrochemical Complex
Limited Liability Company
Nature Conservation Area
Pilot Operations
Production Dual Completion
Production and Injection Dual Completion
Injection Dual Completion
Dual Completion
Special Economic Zone
AS-tires
All-Steel Tires
SEZ
MPC
APG
RPM
PCP
PS
CD
RB
VSST
RIA
SCS
RYSO
RT
RF
REC
SVO
CPS
CGS
SES
Maximum Permissible Concentration
Associated Petroleum Gas
Reservoir Pressure Maintenance
Polymer Coated Pipes
Power Substation
Chain Drive
Retail Business
Vertical Stainless Steel Tank
Result of Intellectual Activities
Settlement and Cash Services
Regional Youth Social Organization
the Republic of Tatarstan
the Russian Federation
Russian Export Center
Super Viscous Oil
Cathodic Protection Station
Corporate Governance Standard
Secondary Education School
EDMS
Electronic Document Management System
TH
TTH
TS
FEC
TPP
DCU
MC
LHVR
HSOTF
OTF
PWSU
Trading House
Trade Technical House
Technical Specifications
Fuel and Energy Complex
Thermal Power Plant
Delayed Coker Unit
Management Company
Light Hydrocarbon Vapor Recovery
High Sulfur Oil Treatment Facility
Oil Treatment Facility
Initial Water Separation Unit
PFTF for RPM
Process Fluid Treatment Facility for Reservoir Pressure
Maintenance (a subsidiary of TATNEFT)
SRU
UTNGP
Ind.
PRF
Sulfur Recovery Unit
TATNEFTEGAZPERERABOTKA Division (structural subdivision of
TATNEFT)
Individuals
Payroll Fund
PSC
PTC
CDH
NPV
NFI
NII
NGL
EIC
EXIAR
ECU
Processing and Storage Center
Personnel Training Center
Central District Hospital
Net Present Value
Net Fee Income
Net Interest Income
Natural Gas Liquids
Electrical Insulating Connection
Export Insurance Agency of Russia
Electronic Corporate University
AUM (Assets Under
Management)
Assets Under Management
CAPEX (capital
expenditure)
Capital expenses, one-time costs for the acquisition of physical
assets for the business.
Показатель, отражающий эффективность ведения бизнеса.
Рассчитывается как отношение расходов (операционных рас-
ходов) банка за отчетный период к операционной прибыли
(операционным доходам) и выражается в процентах.
CIR
Показатель, который характеризует степень риска банка, опре-
деляется как сумма созданных резервов под кредитные поте-
ри (риск), поделенная на размер кредитного портфеля.
(Cost/Income Ratio)
An indicator that reflects the business efficiency. Calculated as
the ratio of expenses (operating expenses) of the bank for the
reporting period and operating profit (operating income) and
expressed as a percentage.
COR
Электронная коммерция
(Сost of Risk)
The indicator, which characterizes the degree of risk of the bank, is
defined as the amount of provisions for credit losses (risk) divided
by the loan portfolio amount.
CRM
Customer Relationship Management
E-Commerce
(Electronic
Commerce)
Операционные расходы, которые несет компания в процессе
текущей деятельности для обеспечения функционирования.
RAROC
PRIVATE BANKING
(Risk-Adjusted Return
on Capital)
ROE (Return on
Equity)
Risk-adjusted return on capital of the bank.
Return on authorized capital of the bank. Calculated as the ratio of
profit of the bank after tax as of the reporting date and the average
value of the balance sheet capital for the relevant period
OPEX (operational
expenditure)
Operating expenses incurred by the company in the course of its
day-to-day continuous operations to ensure its functioning.
PB (private banking)
TCO (Total Cost of
Ownership)
Total cost of IT-systems ownership
Annual Report 2018TATNEFT GroupANNEXES 274
275
Due to their specific nature, the statements about the future are
subject to inherent risk and uncertainties, both general and specific.
The feasibility of the stated intentions depends, inter alia, on factors
(economic, social, legal) that are beyond the Company’s control.
There is a risk that the future actual results may materially differ from
those plans, objectives, expectations, estimates, and intentions
expressed in such statements or may not be implemented due to
various factors.
Important statements
Information disclosed in this Annual Report contains some
forward-looking statements. Such statements include, inter alia,
plans, tasks, and forecasts of production, including those relating
to the output, products, and services, economic, and financial
indicators, information concerning anticipated or expected
income, profit (loss), net profit (loss) in respect of shares,
dividends, capital structure, and other indicators and ratios as
well as statements concerning the prerequisites, on which we
base our statements. These statements are accompanied by the
wordings “is expected,” “intends,” “is planned,” “will,” “strives,”
“is projected,” “is forecast,” etc.
Note
The text of the Report may contain errors in the calculation of
shares, percentages, amounts due to rounding the calculated
indicators. The data presented in this Report may differ slightly
from the data published previously due to the difference in rounded
figures.
Contact information
Holding Company “Public Joint Stock Company TATNEFT named
after V.D. Shashin (hereinafter referred to as the Company)
was established pursuant to the Decree of the President of the
Republic of Tatarstan “On Measures for transformation of the
state-owned enterprises, entities, and amalgamations into joint-
stock companies” dated 26.09.1992 No.UP-466 and the Law of
the Republic of Tatarstan “On transformation of the national and
communal properties in the Republic of Tatarstan (denationalization
and privatization)”.
The Company was established in June 1994 for an indefinite period.
The Company was registered with the Republic of Tatarstan Ministry
of Finance (Registration No. 632 dated January 21, 1994).
The Company’s activity is focused on a profit-making goal.
puBLIC jOINT STOCK COMpANy TATNEfT
ABBREVIATEd NAME:
pjSC TATNEfT
COMpANy wEB-SITE:
http://www.tatneft.ru
hEAd OffICE:
75, Lenin Street,
Almetyevsk, 425450,
Republic of Tatarstan,
Russian Federation
Phone: +7 (8553) 30-75-68
REpRESENTATIVE OffICE IN MOSCOw:
17, Tverskoy Boulevard, Moscow, 123104
Russian Federation,
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”
Belaya Ploshchad Business Centre,
10, Butyrskiy Val Street, Moscow,
125047, Russian Federation
Phone: +7 (495) 967-60-00
COMpANy’S REgISTRAR:
LLC Euro-Asian Registrar
10, Mira Street, Almetyevsk, 423450
Republic of Tatarstan,
Russian Federation,
Phone: +7 (8553) 22-10-88
Phone: +7 (8553) 30-61-18
REPORT RELEASE MONTH AND YEAR:
May 2019
REPORT PREPARATION TEAM:
Dorpeko N.E. -
Report preparation coordination
Voskoboinikov V.A.
Gaifullina R.R.
Gamirov D.M.
Ganiyev B.G.
Karpov V.A.
Kurochkin D.V.
Matveev O.M.
Mukhamadeev R.N.
Pavlov R.R.
Salahov R.A.
Syubayev N.Z.
Tikhturov E.A.
Khalimov R.H.
Khisamov R.S.
Sharagina O.A.
design and printing
LLC EuroPublicity
Significant statements
Note
The report may contain some inaccuracies in the calculation
of fractions, percent, and amounts when rounding the
estimated values. The data presented in this report may
differ slightly from previously published data due to the
difference in rounded figures.
Annual Report 2018TATNEFT GroupANNEXES
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