SUSTAINABLE
ENERGY
FUTURE
Annual Report 2020
Contents
The 2020 Annual Report of PJSC TATNEFT n.a. V.D Shashin was approved by the
Annual General Meeting of Shareholders on June 25, 2021, Minutes No.34.
About our Company _________________________________________________________________________________ 4
Corporate governance _________________________________________________________________________ 122
Company Mission and Values __________________________________________________________________________________ 6
Production assets and operation regions ________________________________________________________________________ 8
Business model _____________________________________________________________________________________________ 10
TATNEFT Group main segment-forming subdivisions and enterprises ______________________________________________ 12
Macroeconomics and competitive environment _________________________________________________________________ 14
Integration of sustainable development practices into the company’s activities ______________________________________ 38
Company’s Membership in Industry Associations ________________________________________________________________ 40
Support for International and National Economic, Environmental, and Social Initiatives _______________________________ 41
Board of Directors’ Report on Company’s
Development Performance by Main Business-Streams ______________________________42
Joint Address to the Shareholders, Investors and Partners ________________________________________________________ 44
Company capitalization ______________________________________________________________________________________ 48
Consolidated assets of TATNEFT Group ________________________________________________________________________ 49
Financial performance of TATNEFT Group ______________________________________________________________________ 50
Context of Activities — Sustainable Development _______________________________________________________________ 54
Resource capacity ___________________________________________________________________________________________ 57
2020 key operating performance ______________________________________________________________________________ 60
Trading and logistics _________________________________________________________________________________________ 62
Petroleum product sales ______________________________________________________________________________________ 63
Fuel Filling Station network ____________________________________________________________________________________ 64
Heat & power generation _____________________________________________________________________________________ 66
Tire business _______________________________________________________________________________________________ 67
Investment program _________________________________________________________________________________________ 68
Fundraising _______________________________________________________________________________ 76
Growth strategy _____________________________________________________________________________________________ 78
System of key performance indicators __________________________________________________________________________ 80
Exploration and production ___________________________________________________________________________________ 82
Oil and gas refining __________________________________________________________________________________________ 94
Retail business _____________________________________________________________________________________________ 100
Petrochemical complex ______________________________________________________________________________________ 104
Tire business _______________________________________________________________________________________________ 105
Machine building ___________________________________________________________________________________________ 110
LLC Tatneft-Presskompozit ___________________________________________________________________________________112
Energy ____________________________________________________________________________________________________ 114
Energy and resource efficiency ______________________________________________________________________________ 116
Logistics support ___________________________________________________________________________________________ 119
Banking business ___________________________________________________________________________________________ 121
Corporate governance system _______________________________________________________________________________ 124
Corporate governance structure _____________________________________________________________________________ 129
General meeting of shareholders _____________________________________________________________________________ 131
Board of Directors __________________________________________________________________________________________ 134
Committees of the Board of Directors _________________________________________________________________________ 152
Sole executive body ________________________________________________________________________________________ 160
Management board _________________________________________________________________________________________ 161
Corporate secretary _________________________________________________________________________________________ 168
Internal audit _______________________________________________________________________________________________ 170
Revision Commission _______________________________________________________________________________________ 176
Risk management and internal control_________________________________________________________________________ 178
Insider information protection Procedures and regulations _______________________________________________________ 184
Information policy ___________________________________________________________________________________________ 185
Prevention and regulation of potential conflicts of interest ________________________________________________________ 186
Anti-corruption policy _______________________________________________________________________________________ 188
Corporate cyber security policy _______________________________________________________________________________ 192
Interaction with shareholders and investors ____________________________________________ 194
Shareholders’ equity ________________________________________________________________________________________ 196
Protection and ensurance of shareholders’ rights _______________________________________________________________ 204
Interaction with shareholders _________________________________________________________________________________ 206
Sustainable development ______________________________________________________________________208
Sustainable Development Management System ________________________________________________________________ 210
Human Rights ______________________________________________________________________________________________ 212
Responsibility to stakeholders ________________________________________________________________________________ 213
Health, safety, and environment in view of climate change _______________________________________________________ 214
Personnel __________________________________________________________________________________________________ 224
Appendices to the Annual Report 2020 ___________________________________________________234
Annex 1. IFRS Consolidated Financial Statements and Independent Auditor’s Report _______________________________ 236
Annex 2. Report on compliance of PJSC TATNEFT n.a. V.D. Shashin with
the corporate governancecode guidelines of the Bank of Russia _________________________________________________ 318
Annex 3. Principal risks ______________________________________________________________________________________ 338
Annex 4. On the annual report and the underlying regulatory
documents constituting the framework for this annual report _____________________________________________________ 348
Contact details _____________________________________________________________________________________________ 354
2
3
About
our Company
TATNEFT Group is one of the leading producers of the Russian fuel and energy
industry with about 80 years of experience, including in the status of a public
joint-stock company with a more than 25 year-listing on the international stock
market. The vertical integration strategy of the full production cycle is being
implemented in the Group's status. The main assets of the Company are located
within the Russian Federation, business projects are carried out in the domestic
and foreign markets.
The corporate business model is built in compliance with the long-term sus-
tainable development strategy and provides a value chain based on the vertical
integration of the full production cycle of the Group enterprises with an optimal
distribution of the balance in oil and gas production, oil refining, and petrochem-
icals to achieve maximum operational profitability. TATNEFT is one of the lead-
ing Russian oil and gas producers. The strategy of full production cycle vertical
integration is implemented in the Group status. The Company’s main assets are
located in the Russian Federation, business projects are implemented in both
domestic and foreign markets.
The Company makes a particular focus on maintaining a favorable environment
and mitigating the climate change impacts while placing a high priority on the
social aspects. Corporate responsibility and security stand the fundamental prin-
ciples for the Company.
The landmark guidance for the Company is the UN Action Plan “Transforming
our World: The 2030 Agenda for Sustainable Development.” As a party to the
UN Global Compact, TATNEFT integrates 10 principles and 17 Sustainable
Development Goals into its business model.
The geography of shareholders spans over 30 countries. The securities of PJSC
TATNEFT listed at the top-tier quotation level of the Moscow Exchange and other
leading international stock exchanges are among the most sought-after and prof-
itable investment instruments as well as forms of capital accumulation.
4
5
Company Mission and Values
2030 Strategy
The implementation of the Company Strategy involves sustainable growth aspects and ensuring favor-
able 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 the Company’s activities.
Steady growth of
company value
High dividend yield
High level of corporate
responsibility
Corporate governance:
• Highly effective organizational structure
• Best practice in forms of governance and organization of business
processes
• Highly qualified and competent personnel
• High-quality asset structure
Technological leadership:
• Building strong technological base
• Digital integration in all production and management processes
• Proprietary research and engineering complex
Business planning:
• Strategic planning
• Efficient investment project management
• High operating effectiveness
• Gaining higher margin ratio within the value chain
• Integration of sustainable development risk assessment, climatic
and environmental impacts into strategic and operational planning
Sustainable Development:
• Commitment to 17 UN Sustainable Development Goals
• Corporate social responsibility
• Keen sense of environmental responsibility
• Priority in human life and health
About our Company
Company’s Mission
Company’s key objective
The Company’s mission is to ensure continuous develop-
ment in the status of one of the largest vertically integrat-
ed Russian producers of oil and gas, petroleum products,
and petrochemicals based on effective management of
shareholders’ assets, rational use of natural resources,
and corporate social responsibility.
The Company’s key objective is to ensure the most
efficient monetization of reserves and direct profits
earned to create new lucrative points of value growth
and diversify the business, which would ensure the
Company sustaining a strong position and profitability
beyond the 2030 horizon.
Our priority is propelling the growth of shareholder value of the Company through
increased free cash flows and distributions to shareholders
Strong competitive edge
in the industry
Strong financial
resilience — focus on
profit margin growth
High corporate
governance and business
planning standards
Balanced investment policy
Scenario planning with built-in protection from sharp oil price fluctuations and
macroeconomic volatility.
Planning of business growth and free cash flow with scenario planning variability
Guaranteed progressive
dividend policy
Provision of investment
programs in line with
development strategy
Capital distribution potential
as oil price advances
The Company’s stance pursues that only balancing be-
tween these aspects, abiding by high ethical principles, and
developing social partnership can ensure harmonious and
effective business development.
The Company is fully aware of its responsibility to its share-
holders, investors, partners, employees, and the public as a
whole, recognizes its equal liability for operating performance,
health, safety, and environmental compliance, and takes all
measures to ensure long-term sustainable development.
The Company’s consistent actions allow ensuring profitable oil and gas production, sustaining a high level of hydrocarbon
resource life, developing effectively our own oil refining and petrochemicals as well as building up our innovative potential,
and deploying advanced digital solutions to create a reliable technological base for the Company.
6
7
Annual Report 2020 Production assets
and operation regions
The Company provides management processes — from ob-
taining resource development licenses to selling oil, oil and
gas refining products, and petrochemicals both in the do-
mestic market and for export — as well as the manufacturing
of equipment used for oil production, oil and gas treatment
and processing, and rendering engineering, supply, and con-
struction services for oil, gas, and petrochemistry projects.
Since Q4 2016, the structure of TATNEFT Group also includes
the banking segment — Zenit Banking Group.
TATNEFT Group encompasses nearly 60 thousand employ-
ees working at enterprises located in the Russian Federation
and abroad. The Company’s key assets are located in the
territory of the Russian Federation with the main focus in the
Republic of Tatarstan. The main subsidiaries operate in the
Russian Federation, except for Tatneft-Europe AG operating
in Switzerland.
Business projects are implemented in both domestic and
foreign markets. The business infrastructure is formed
by the geographical proximity of production facilities and
efficient logistics. The Company headquarters is located in
Almetyevsk, the Republic of Tatarstan. The company has rep-
resentation offices in Moscow, Kazan, Ukraine, the Republic
of Iraq, the Republic of Uzbekistan as well as branches in
Libya and Turkmenistan.
The Company’s resource base includes one of the
world’s largest oil fields — the Romashkinskoye, Novo-
Elkhovskoye, Bavlinskoye, Bondyuzhskoye, Pervomayskoye,
Sabanchinskoye, Arkhangelskoye, and Ashalchinskoye oil
fields are also among the Company’s major assets.
Outside Tatarstan, the Company carries out its explora-
tion and production activities in the Ulyanovsk Region, the
Samara Region, the Orenburg Region, Nenets Autonomous
District, and the Republic of Kalmykia.
The largest capacities, such as the TANECO refining
complex and the KAMA TYRES production are located
in Nizhnekamsk. The Company is currently developing a
petrochemical complex in close proximity to these facilities.
The retail chain for the sale of petroleum products includes
819 filling stations operating in Russia as well as in Belarus,
Uzbekistan, and Ukraine. TATNEFTsupplies engineering,
technology, and equipment to Armenia, Kazakhstan, Libya,
Turkmenistan, Turkey, Uzbekistan, and Estonia.
The main generating facilities of the Group are located in
the South-East of Tatarstan and include the capacities of the
Nizhnekamsk CHPP and Almetyevsk Heating Networks.
The company develops high-tech production of composite
materials at facilities OOO Tatneft-Presscomposite located
within the Special Economic Zone "Alabuga". Mechanical
engineering is aimed at providing the Company's enterprises
with specialized equipment.
* Details on the structure of TATNEFT Group, subsidiaries of PJSC
TATNEFT are provided further in the Annual Report, Financial
Performance Section, as per IFRS.
About 60
thous. employees
110
Enterprises
working at the enterprises located
within the Russian Federation and
abroad.
TATNEFT Group
Our Global Reach
Bondyuzhskoye
Pervomayskoye
Arkhangelskoye
Novo-Elkhovskoye
Romashkinskoye
Ashalchinskoye
Sabanchinskoye
Bavlinskoye
Nenets Autonomous District
the Ulyanovsk Region
the Republic
of Kalmykia
the Samara Region
the Orenburg Region
Russia
Belarus
Ukraine
Uzbekistan
Largest oil fields and the
core operations within
the Republic of Tatarstan
Exploration and
production outside
the Republic of Tatarstan
TATNEFT filling stations
regional reach
About our Company
Nizhnekamsk
Almetyevsk
Core operations within
the Republic of Tatarstan:
oil field development,
oil and gas refining,
tire business,
power generation,
machine building
Russia
Estonia
Belarus
Ukraine
Kazakhstan
Oil field development
Oil and gas refining
Oil and gas production chemicals
Distribution network
Tire business
Power generation
Machine building
Equipment and technology
supply, engineering
Banking segment
Libya
Company exported
(2020 year-end data)
56% 43% 32% 43
Crude oil sold
Tire products
Petroleum
product sold
Countries global
supply coverage
8
9
Annual Report 2020
Business model
Capital
(resources)
Financial
rub 1.26 tln
Consolidated asset value
rub 103.3 bln
Investments
Social and reputational
10 countries
Of company’s global reach
Active participant of the un global compact
Human
About 62 thous
Employees highly qualified personnel
Intellectual
rub 2.4 bln
Resource base
Oil production
Oil and gas refining
Oil and gas chemicals
1,3
bln tonnes
Hydrocarbon
reserves
26,014
bln tonnes
Oil production
230,3
thous. barrels per day
Average daily refining
of crude oil
Lucrative production
propelling new
growth points
We are developing our production capaci-
ties on an ongoing basis to make it possible
to convert the hydrocarbon reserves into
products with high added value.
The Company business model is built on the
full vertical integration principle powered by
strong discipline in the capital management,
ensuring the most efficient monetization
of reserves, and directing profit to create
new promising points of growth in value that
would increase the Company’s profitabil-
ity within the scope of 2030 Strategy and
beyond the horizon of 2030, taking into ac-
count all sustainable development aspects.
UPSTREAM
Ensuring the growth of production volumes
and replenishing reserves
• Strengthening the resource base
• Expansion of geographical reach of
producing assets
• Development of field with hard-to-recover,
DOWNSTREAM
Production of much-in-demand highly
competitive refined products and pet-
rochemicals, powered by the qualitative
strengthening of asset structure and improv-
ing the operating performance of business
segments:
Investments in r&d and pilot tests
including superviscous (SVO), oil
• Selling oil and petroleum products,
including for export and in the domestic
market
• Oil refining
• Oil and gas production chemicals
• Tire business
• Heat and power generation
• Machine building
• Engineering
Created and distributed economic value, rub mln
Revenue
Income from financial investments
Direct economic value created
OPEX
Payments to capital suppliers
Payments to the state
Social investments
Distributed economic value
Retained economic value
Natural
rub 16.1 bln
Investments in environmental activities
Operational
110 enterprises
Diversified structure of full cycle assets
Determination, as well as the list
of capitals, is provided under the
International Integrated Reporting
Standard published by the
International Integrated Reporting
Council (IIRC).
10
Selling oil and petroleum
products Export and
domestic market
16,8 mln tonnes
Of crude oil sold
13,3 mln tonnes
Of petroleum products sold
Retail network
4 142 thous. tonnes
Retail sales of fuel petroleum
products
Tire business
11,9 mln pcs
Of tires produced
Heat & power generation
1,5 bln kW*h per year
Electricity generation
Machine building
rub 4.3 bln
Product output for 2020
Value creation
rub 1.185 tln
Banking segment
rub 8.5 bln
Balance of interest and
commission income and
expenses for banking
operations
Building an effective banking structure
with a strong reputation in the financial
community in key systems such as cor-
porate, investment, and private banking.
Comprises PJSC ZENIT Bank and its
subsidiaries (ZENIT Banking Group).
Since Q4 2016, ZENIT Banking Group
is subject to consolidation for the pur-
poses of the financial statements of the
TATNEFT Group.
720 677
4 428
725 105
286 678
80 909
223 454
20 990
658 815
66 290
About our Company
Capital
(resources)
Financial
rub 187.3 bln
Adjusted EBITDA
rub 103.5 bln
Profit attributable to group’s shareholders
13 %.
ROACE
95,7 млрд руб.
Free cash flow
Social and reputational
rub 344.4 bln
Accrued taxes, charges, and contributions
rub 20.2 bln
Social investments
rub 130 bln
Tatneft brand value
Human
19,236 employees
Trained
28
Corporate training programs
Intellectual
5 846
Intellectual property items
Natural
rub 11.3 bln
Environmental expenses
Reducing environmental impacts to ensure
self-restoring capacity of ecosystems
Operational
+ 12,2%
Petroleum products output growth
+ 11,4%
Crude oil refining growth
+ 5,8%
Tire output growth
11
The Company creates added value, i.e., the direct economic value created and distributed, for all stake-
The difference between the created and distributional values is explained by the retention of the share of
holders, namely: shareholders, investors, employees, contractors, state authorities, and local communi-
the economic value, which is used for the further development of the TATNEFT Group's business, as well as
ties. The direct economic value generated and allocated reflects the subsequent revenue distribution by
a significant contribution to the social projects.
groups of stakeholders.
Annual Report 2020 TATNEFT Group main segment-forming
subdivisions and enterprises
Upstream
Tatneft-Production
NGDU Almetyevneft
NGDU Aznakaevskneft
NGDU Bavlyneft
NGDU Jalilneft
NGDU Yelhovneft
NGDU Leninogorskneft
NGDU Nurlatneft
NGDU Prikamneft
NGDU Yamashneft
Oil and gas refining and sales
of crude oil and oil products
Crude Oil and Petroleum Products Sales Department
Tatneft Oil Gas Processing Department
Elkhovsky Oil Refinery
JSC TANECO
JSC Nizhnekamsktekhuglerod
LLC Tatneft-AZS-Tsentr
LLC Tatneft-AZS-Zapad
LLC Tatneft-AZS-Ukraine
LLC Tatneft-AZS-Tashkent
LLC Tatneft-AZS-Severo-Zapad
LLC Tatneft-Trans
FLLC Tatbelnefteprodukt
JV LLC TATNEFT-UNG*
PJSC TATNEFT as Group Corporate Center
Oil producing subsidiaries
and affiliates
LLC Tatneft-Samara
OJSC Kalmneftegaz
LLC TATNEFT-NAO
JSC KalmTatneft*
CJSC Yambuloil*
LLC New Oil Production Technologies*
PJSC TATNEFT Board of Directors
Management Board Executive Office
General Director
Support for core operations
Tatneftesnab Department
Tatar Geological Exploration Department
Well Service Department
Construction Projects Implementation Department
Bugulma Mechanical Plant
LLC UPTZh PPD
LLC Tatneft Trade and Technology House
LLC Tatneft-Neftekhimservis
* Enterprises operating based on
partnership with other companies
12
About our Company
Petrochemical production
LLC MC TATNEFT-Neftekhim
PJSC Nizhnekamskshina
LLC Nizhnekamsk Truck Tire Plant
JSC Nizhnekamsk Mechanical Plant
LLC Trading House KAMA
LLP KamaTyresKZ
JSC Yarpolimermash-TATNEFT
LLC Tatneft-Presskompozit
JSC Tolyattisintez
LLC Tolyattikauchuk
Information, research and technology,
and organizational support
TatNIPIneft
Technological Development Center
Modeling Center
Business Service Center
LLC STC TATNEFT (in Skolkovo)
LLC SPC Oil and Gas
JSC Neftekhimproekt
JSC TatNIIneftemash
LLC TATITNEFT
LLC Processing Center
PEI CPE PTC-TATNEFT
JSC Volzhsky Research Institute
of Hydrocarbon Raw Materials
Heat & power generation
Social sector
Electric Grid Management Center
LLC Nizhnekamsk CHP
LLC TATNEFT-Energosbyt
JSC Almetyevsk Heating Networks
Social Asset Management Department
TATNEFT Charitable Foundation
LLC Tatneft-URS
Banking sector
PJSC Bank ZENIT
and its subsidiaries
Branches and representative offices
Representative office in Moscow, the Russian Federation
Representative office in Baghdad, the Republic of Iraq
Representative office in Kiev, Ukraine
Representative office in the Republic of Uzbekistan
Branch office in Libya
Branch office in Balkanabad, Turkmenistan
PJSC TATNEFT is the corporate center of the Group, coordinating the activities of enterprises that form the Company’s busi-
ness segments. The management is organized based on a single mission and development priorities while respecting the fair
interests of all stakeholders of the Group.
The main industry peers are all Russian oil majors, including Rosneft, PJSC LUKOIL, PJSC Surgutneftegas, PJSC Gazprom
Neft, and PJSC ANK Bashneft as well as international oil companies. The company competes with oil companies for the right to
supply crude oil and petroleum products, as well as tire products, technologies, equipment, and engineering services, to both
Russian and the international market. In the domestic market, the Company is a supplier of heat and power energy, composite
materials, etc.
13
Annual Report 2020 Macroeconomics
and competitive
environment
About our Company
Main challenges and assessment of the
impact on the Company development
The year 2020 was marked by significant events that
were critical for the global economy and the oil and gas
industry:
• The pandemic caused the deepest global recession in the
world economy since World War II. Country markets took
a hit from lockdowns, quarantine measures (closure of
shopping centers, etc., catering systems, etc.), reduced
trade, reduced tourist traffic, higher unemployment, a
decrease in the volume of remittances, etc.;
• Freezing of economic activity during the period of
widespread lockdowns caused a sharp decline in energy
consumption and demand for energy, at the same time,
due to the decline in trade turnover between countries,
some regions face a shortage of oil and gas raw materials,
which has been an additional impetus for the development
of alternative energy;
• The pandemic accelerated the revision of the climate
agenda.
The energy sector has entered an era of carbon transforma-
tion — 2020 was the beginning of the Decade of Renewable
Energy. The cost of green electricity continues to decline
as a whole, making it an increasingly attractive alternative to
hydrocarbons.
According to the International Renewable Energy Agency
(IRENA), the total amount of renewable energy generating
capacity worldwide at the end of 2020 was 2,799 GW, an
increase of 261 GW or 10.3% over 2019. Hydropower ac-
counted for 43% of RES capacity, while wind and solar power
accounted for 26% each. In 2000, renewables accounted for
21.8% of the total electric generating capacity commissioned;
in 2020, renewables (mainly wind and solar power) account-
ed for 82% of new electric generating capacity worldwide, up
from 73% a year earlier.
The green revolution is led by China. The construction of
record-breaking amounts of RES capacity in 2020 was mainly
driven by investments from China and the US: 52% of new
RES capacity was installed in China — 136 GW, of which 72
GW were wind farms and 49 GW were solar farms. In the US,
29 GW of renewable power plants were commissioned, which
is almost 80% more than in 2019. The share of electricity
generation in Europe in 2020 exceeded the share of fossil
fuels for the first time in history — 38% of all electricity was
generated from renewables, compared to 37% from fossil
fuels (according to the annual report of Ember, the British
think tank, and Agora Energiewende, the German institute). In
2020, one-fifth of electricity in the EU was generated by wind
and solar power plants.
New RES capacities are added in a sustained and ongoing way
W
G
200
180
160
140
120
100
80
60
40
20
0
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
China
Europe
USA
India
Other
Sources: IEA, VTB Capital
14
15
The Paris Agreement (an initiative of the United Nations
Framework Convention on Climate Change, UNFCCC,
represented by almost every country in the world) is the main
initiative of the carbon transition.
The European Union, the main apologist for the implemen-
tation of the goals of the Paris Agreement in terms of decar-
bonization of production and products, is exerting increasing
pressure on the market every year. The European Green
Deal, adopted in December 2019, aims to achieve a 50–55%
reduction in emissions by 2030 compared with 1990 levels,
and CO2 emissions should be zero by 2050.
The EU, in achieving its climate goals, aims to introduce a
mechanism of customs carbon adjustment or carbon border
adjustment mechanism (CBAM) on imported products —
primarily, an initiative aimed at preventing carbon leakage
(increased greenhouse gas emissions by countries outside
the EU) due to European countries moving their businesses
there to optimize climate-related costs. However, the CBAM
is expected to have an impact on the economies of countries
and companies with predominantly commodity exports to the
EU, while increasing competition.
In November 2020, the European Roundtable on
Climate Change and Sustainable Transition (ERCST)
published a “Summary of stakeholder responses to the
public consultation on the EU carbon border adjust-
ment,” at this stage of the CBA mechanism does not
provide for its extension to either oil and gas producers
or refineries and covers:
• Steel, fertilizer, cement, and electricity production;
• The tax can be applied to the entire industry or individual
products (including semi-finished products) that are
imported into the EU;
• The tax applies to Scope 1 and Scope 2 emissions;
• Benchmarks will be used to determine the emissions
contained in imported products (e.g., the average carbon
intensity of producers in the EU or the average GHG
emissions of the 10% most efficient producers in the EU);
• Taxable businesses will be required to buy allowances
from a certain pool outside the ETS intended for imported
products, which will reflect the price within the ETS.
Refining, one of the most energy-intensive industries
(second only to iron and steel), which accounted for 19% of
the EU’s CO2 emissions in 2018, is not included in the final
CBA document. It is possible that oil refining (i.e. imports of
petroleum products) will eventually be included in the bill (to
be published in June 2021), but exploration and production
(imports of oil and gas) will most likely not appear in it, since
the industry generates only 10% of total methane emissions,
which has never been considered energy-intensive produc-
tion in the EU.
There are 64 carbon pricing schemes (emission markets and
taxes) already in place or planned to be launched, covering
22.3% of global greenhouse gas emissions. In Europe, there
is a system of emissions trading — EU ETS (Emissions Trading
System, ETS), which is quite developed and is the world’s first
largest carbon market, covering 29 European countries and
45% of greenhouse gas emissions in the region (estimated at
more than EUR 51.4 billion per year).
The ETS applies to many industries, including power gen-
eration and air transportation, a market in which polluting
companies can buy (or receive for free, through a special
mechanism) emission allowances. The ETS applies only to
direct greenhouse gas emissions (Scope 1).
Russia has also begun preparing to launch a similar mech-
anism — a regional pilot project on Sakhalin, whose main
parameters will be determined by June 2021, when the draft
will be submitted to the State Duma. According to the pub-
lished roadmap, the first transaction to sell CO2 units could
be carried out in July 2022.
The price of carbon varies greatly across countries and
regions of the world: in Mexico and Kazakhstan circa USD
1 per tonne CO2, in China USD 5–6 per tonne CO2, in the
European Union EUR 25–27 per tonne CO2, in Sweden
USD 119 per tonne CO2. The High-Level Commission on
Carbon Prices, co-chaired by Nobel laureates J. Stiglitz and
N. Stern, believes that to meet the goals of the Paris Climate
Agreement, global average prices must be brought to USD
40–80 per tonne CO2 in 2020 and USD 50–100 per tonne
CO2 by 2030. Therewith, their model calculations show that
this is not the limit. The price of carbon will only increase as
climate policies become more stringent.
Environmental protection is part of the responsible busi-
ness trend (ESG — doing business in accordance with the
sustainable development principles) that has become active
in 2020. The ESG principles are used by the investor commu-
nity to decide whether to invest in responsible business. ESG
investors must actively influence companies’ sustainability
decisions aimed at minimizing environmental, social, and
corporate risks.
The Investor Group for the Cooperative Development of
Principles for Responsible Investment (PRI). In 2018 PRI
established minimum requirements for participants. The most
important of these is to consider the ESG principles when
analyzing and making an investment decision for more than
50% of assets under management. In 2020, the number of
PRI participants exceeded 3,500. The volume of assets under
their management was more than USD 103 trillion, which was
USD 59 trillion in 2015. Since 2020, decisions on investing
amounts of more than USD 50 trillion (50% of USD 103 tril-
lion) must be based on ESG principles.
Thus, ESG-investors influence the decisions made by
companies. In 2020, PIMCO, a major American investment
company, did not buy social bonds of Russian Railways, as
50% of the freight turnover of Russian Railways accounts for
coal and petroleum products. That is, the “carbon footprint”
is evaluated by investors not only in terms of production itself
(Scope 1) but also in terms of the entire chain of suppliers
and customers (Scope 2, 3).
¹ The Paris Agreement pursues three global goals such as holding the increase in global temperature on the planet (must be kept well below
2°C above the pre-industrial level (1861-1900), improving the ability of mankind to adapt to the changes already taking place, redirecting
financial flows towards combating the climate change.
2 CBAM is expected to be introduced in the EU from 2023.
The same pressure is exerted on the energy sector by banks,
primarily in the EU: they consistently adopt strategies to
reduce the amount of investment in the hydrocarbon busi-
ness. As part of its new climate strategy, Société Générale
announced a 10% reduction in oil and gas lending by 2025.
As part of the same strategy, the Company has already
stopped lending to offshore oil and gas production in the US.
Deutsche Bank said in its new lending policy that it would
suspend lending to the coal mining sector and reduce lend-
ing limits to the oil and gas sector by 2025.
Such pressure has forced major international companies
(primarily European) to change their development strategies,
focusing on a gradual transition to a carbon-free business
model. In particular, BP and Total announced changes in
their strategies (down to production cuts). American com-
panies embarked on setting ambitious goals to reduce
emissions — ExxonMobil is cutting investments in production
and increasing investments in green technologies. Pioneer
Natural Resources, the largest US independent oil and gas
producer operating in the Permian Basin, has pledged to
reduce emissions in production by a quarter by the end of the
decade.
PJSC TATNEFT also aims to become carbon-neutral by 2050;
the 2030 goal is to reduce CO2 emissions by 20%.
Significant global business challenges:
• Introduction of lockdowns in certain regions of the world as
a result of successive waves of the coronavirus pandemic,
the emergence of new vaccine-resistant strains of the virus;
• Slow recovery of global consumption of LHCs as a result
of the pandemic. Consumption is expected to grow by
5–7 MBPD at year-end, which is estimated at 97 MBPD at
year-end (equal to 2016 levels), resumption of 2019 levels is
expected by 2023;
• Limitation of oil production within the framework of the
OPEC+ deal effective from May 1, 2020, to May 1, 2022.
In total, the participants of the OPEC+ deal and part of the
G20 producers are expected to reduce production at the
level of 20 MBPD. The volume of production of LHCs in the
Russian Federation under the deal in 2021 is expected at
the level of 10.6 MBPD, which is 1 MBPD lower than the
level of 2019 (11.61 MBPD in 2019);
• Increasing the importance of the global climate agenda —
the introduction of environmental taxes, EU lobbying for the
introduction of CBA, tightening the requirements of ESG
investors;
• The greatest volatility in oil prices in recent years and price
uncertainty until 2025 against the backdrop of an unstable
market;
About our Company
• Uncertainty with the timing of recovery from the global
economic crisis and restoration of pre-crisis levels of
hydrocarbon consumption;
• Drop in oil production margins;
• Tightening noncompetitive methods of economic struggle,
including sanctions of the US and its allies;
• Escalating competition of producers in the markets,
resulting from technology development (including in the
field of shale oil and gas production);
• Slowing the growth and changing the structure of global
energy demand, including the gradual replacement of
hydrocarbons with other types of energy;
• Deterioration of the traditional oil quality, field depletion,
the need to involve in the development of unconventional/
hard-to-recover oil reserves;
• Direct or indirect discrimination of Russian FEC companies
in foreign markets by changing regulations, including under
the pretext of climate and environmental policies, as well as
politically motivated diversification of energy imports;
• Increased competition between conventional energy and
renewable energy may weaken the influence of major
producers, changing geopolitics and trade routes.
The main threats and risks of the domestic Russian oil
market are:
• Limitation of oil production in Russia under the OPEC+
deal;
• Reduction of oil refining as a result of a drop in exports and
a drop in demand on the domestic market (the reduction
of export and domestic market supplies will cumulatively
amount to);
• Increase of tax burden on the oil industry in the Russian
Federation;
• Deterioration of the FEC mineral resource base as existing
fields are depleted;
• Increased costs, including transport and capital costs,
as well as risks of mining projects due to the need to
develop remote oil and gas provinces with undeveloped
infrastructure;
• Increasing demand for highly qualified personnel that meet
the current and future level of technological development
in the FEC sector;
• Introduction of the Oil Quality Bank in the Russian
Federation;
• Introduction of new sanctions against the Russian
Federation.
¹ LHCs- liquid hydrocarbons. In addition to oil and gas condensate (their share is 95%), the global demand is met by the GTL (gas-to-liquid)
and CTL (coal-to-liquid) products and biofuels.
16
17
Annual Report 2020 Oil market
The COVID-19 pandemic led to the sharpest decline in the oil
and gas and energy industries. Demand for LHCs fell by 9.5%
at year-end, with the largest decline occurring in Q2 — ac-
cording to OPEC data, demand fell to 83.7 MBPD (Q2 2019
demand was 98.56 MBPD).
Exploration activity declined. Oil prices dipped below USD 15
per bbl in April 2020 before stabilizing around USD 40-45 per
bbl in the second half of the year.
Having faced falling demand due to COVID-19 and a global
oversupply of oil and gas, the world’s oil and gas companies
have been forced to resort to widespread job cuts and large
borrowings to pay dividends and cover costs. According to
preliminary expert estimates, investment in the upstream
sector in 2020 declined by more than 30%.
The epidemic has driven down global oil consumption in
2020 to 2013 levels and shifted long-term oil demand expec-
tations downward. Oil consumption is still projected to peak
in 2035–2040 in the baseline scenario, with demand project-
ed to be 2–3 MBPD below pre-crisis projections.
In 2020, the OPEC+ deal, which had been in force for several
years, was essentially broken, followed by the conclusion of a
new agreement, informally called OPEC++, or OPEC+ 2.0. In
March 2020, the extension of the OPEC+ deal was derailed,
with Saudi Arabia unleashing a price war that led to a collapse
in oil prices amid a dramatically evolving global pandemic
situation. A new round of talks at the level of OPEC+ and G20
took place on April 9–12. As a result, the deal participants
agreed on production cuts by all participating countries.
The total amount of production cuts was estimated at 15–20
MBPD. Thanks to the new OPEC deal, the oil set to stabilizing
by the summer of 2020, with Brent crude prices climbing to
USD 40 per bbl. The new OPEC+ deal also proved its effec-
tiveness in December 2020 — during the OPEC+ ministerial
meeting, it was decided to increase oil production by 0.5
MBPD from January 2021, which means that the production
reduction from January 2021 was reduced to 5.8 MBPD
instead of the previously agreed 7.2 MBPD.
The market responded to OPEC+ decision to increase oil
production was not in the traditional form of slumping stock
prices, as it happened in the past years, but rather positive-
ly — oil, futures, and stock quotes started to grow. In one
month, the stock growth rates of ExxonMobil reached 27%,
Chevron — 37%, ConocoPhillips — 49%, and Royal Dutch
Shell — 60%. The rise in quotations was fueled by encour-
aging news on trials and certification of vaccines against
COVID-19.
Despite some positive developments in the oil and gas indus-
try, the International Energy Agency (IEA) does not expect a
quick recovery in oil demand. The agency forecasts that de-
mand for the raw material will increase in 2022 to 99.4 MBPD,
approaching the level of 2019 (according to IEA demand was
99.7 MBPD). Global oil consumption will recover to pre-
COVID levels by 2023, rising to 104.1 MBPD by 2026 in the
baseline scenario. All of the demand growth will come from
developing countries, and from a sectoral perspective, 70%
of the increase will come from petrochemicals, which have
demand for ethane, LPG, and naphtha, while gasoline de-
mand is unlikely to recover to 2019 levels and jet fuel demand
will slowly recover by 2024. The IEA notes that, in response to
stronger government policies on low-carbon development,
minimizing harmful emissions from key operations, especially
methane emissions, is becoming a priority for oil companies.
Other low-carbon technologies include carbon capture,
low-carbon hydrogen and biofuel production, and offshore
wind power.
Oil production in the US (one of the important indicators in
the industry in recent years) has also undergone significant
changes — according to the EIA, at year-end, production
decreased by 7.6% from 12.3 MBPD to 11.32 MBPD after
several years of active growth. In 2021, production is project-
ed to be below the 2020 level at 11.0 MBPD. A slight increase
is expected in 2022–2023, and as the global economy recov-
ers, production could rise to 14.5 MBPD by 2025. Thereafter,
moderate growth will continue, which will plateau out in 2030
at 15.8 MBPD.
According to experts, the focus of US shale companies has
now shifted from actively increasing production to maintain-
ing financial discipline, generating positive free cash flow and
return on investment in response to investors’ demands. In
2020, several US shale oil producers successively declared
bankruptcy: Whiting Petroleum, Extraction Oil & Gas, industry
pioneer Chesapeake Energy, Oasis Petroleum — 57 compa-
nies as of early fall 2020. Pioneer Natural Resources, a US
shale producer, bought shale producer DoublePoint Energy
for USD 6.4 billion. The deal was Pioneer’s second major
acquisition after it announced in October that it was buying
Parsley Energy for USD 4.5 billion. The acquisition will allow
Pioneer to strengthen its position in the Permian Basin, the
biggest US shale play.
With US President J. Biden in office, the US is poised to re-
turn to the Iran nuclear deal and lift sanctions. On December
3, 2020, Joe Biden officially confirmed the willingness of
the future administration to work on the return of the United
States to the JCPOA on the Iranian nuclear program. Iranian
President H. Rouhani said on December 6, 2020, that the
country is preparing to step up oil production as soon as pos-
sible — in 2021 the country plans to produce 4.5 MBPD of oil
and gas condensate, of which circa 2.2 MBPD are budgeted
About our Company
for domestic consumption next year and 2.3 MBPD for export
(Iran is estimated to have sold an average of 600–700 TBPD
of oil in 2020).
Libya aims to increase oil production to 1.4 MBPD by the end
of 2021. According to the EIA, production at year-end 2020
was 0.36 MBPD (1.1 MBPD in 2019), production increased
in Q4 to 1.24 MBPD in December 2020. Libya’s Q1 produc-
tion was 1.2 MBPD. Currently, Libya, along with Iran and
Venezuela, has an exception to the OPEC+ deal and does
not have any restrictions on oil production volumes. Libya’s
rapid recovery of oil production in the fall of 2020 has not put
serious pressure on global oil prices. Although volatility in the
global oil market remains high, an increase in exports from
Libya should not have a significant impact on oil prices.
Potential risks hampering the achievement of the projected
volumes of global oil supplies to the market can be associat-
ed with a reduction in investment in mining. Rystad Energy
estimates that they declined by more than 30% in 2020,
but are on track to recover to 2019 levels by 2024-2025. To
meet global oil demand, future oil production spending must
average USD 380 billion per year over the long term. Taken
together, this translates into USD 12.6 trillion (in 2020 dollars)
of long-term oil-related investment needs.
* EIA - U. S. Energy Information Administration
Global crude oil consumption estimates: forecast comparison for 2019 vs 2020
Exploration and Production Expenditures, bln USD
d
p
b
n
m
l
112
110
108
106
104
102
100
98
2025
2030
2040
IEA-2019
IEA-2020
OPEC-2019
OPEC-2020
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
2
0
3
0
2
1
3
0
2
2
3
0
2
3
3
0
2
4
3
0
2
5
3
0
2
6
3
0
2
7
3
0
2
8
3
0
2
9
3
0
2
0
4
0
2
1
4
0
2
2
4
0
2
3
4
0
2
4
4
0
2
5
4
0
2
6
4
0
2
7
4
0
2
8
4
0
2
9
4
0
2
0
5
0
2
Africa
Europe
Asia Pacific
Latin America
Commonwealth of Independent States
North America
Middle East
350
300
250
200
150
100
50
0
Source: IEA (STEPS baseline scenario), OPEC (baseline scenario)
Source: IHS
18
19
Annual Report 2020
Forecasts:
According to pessimistic expert estimates, COVID-19 will
have a deep and lasting impact on oil demand and prices,
which will persist for the next 10 years.
• The OPEC deal has proven its effectiveness and will
continue after 2022;
• Libya plans to increase production;
• Venezuela will gradually recover production in the period
from 2022 to 2027;
• Lifting sanctions on Iran will increase production growth;
• Iraq will reach a capacity of 6 MBPD in the early 2030s;
• Brazil will peak in deepwater production in the mid-2030s;
• The maximum potential oil production of the US is 15.8
MBPD and is expected to be reached by the early 2030s;
• Production in Russia will begin to decline in the mid-2020s
and will reach 523 mln tonnes in 2030 (560 mln tonnes in
2019);
• Demand for gasoline and diesel fuel depends on the size of
the road vehicle fleet and electric vehicle sales will account
for 60% of all new vehicle sales in 2040;
• No other global recessions, conflicts, or sanctions regimes
will have a significant impact on production or demand.
The balance of the global oil market
Most experts are of the opinion that after the market bot-
toms out in 2020, the market will start recovering in 2021,
and by 2023, demand will return to 2018–2019 levels. The
International Energy Agency (IEA) forecasts global oil
demand to reach 96.7 MBPD in 2021, a 5.7 MBPD increase
on last year. OPEC forecasts oil demand at 96.46 MBPD, an
increase of 5.95 MBPD from 2019. EIA forecasts demand in
2021 at 97.7 MBPD.
Oil market balance in 2010–2020 with a forecast through 2022
2,5
2,0
1,5
1,0
0,5
0,0
-0,5
-1,0
-1,5
97,0
95,9
97,4
96,9
0,5
92,3
94,1
93,9
0,3
1,1
91,3
-0,1
0,0
- 0,6
89,1
88,5
87,4
87,4
0,1
90,4
90,3
98,5
98,0
100,6
99,8
0,8
101,2
2,1
100,6
97,7
94,3
96,7
-0,4
-0,6
1,0
-0,2
92,2
101,3
101,1
103,0
101,0
99,0
97,0
95,0
93,0
91,0
89,0
87,0
85,0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Supply and demand balance, mln bpd
Global supply for liquid hydrocarbons, mln bpd
Global demand for liquid hydrocarbons, mln bpd
Source: Energy information administration of the US Department of Energy as of April 6, 2021
Oil reserves of the OECD countries
World oil demand in 2020 decreased by 8.9% or 9.0 MBPD
against 2019 levels. As a result of the April 2020 oil demand
collapse of 20.1 MBPD, OECD commercial oil and petro-
leum product inventories exceeded the 5-year average by
almost 200 MBPD. However, thanks to the action of the
OPEC deal, the decline in oil production allowed stocks to fall
by early 2021, which translated to an annual average of 158
MBPD, well below 2016 levels when stocks reached a record
363 MBPD as a result of the US production build-up, uncoor-
dinated action by OPEC members and the fall in the price of
oil to USD 27 per bbl.
1 Organization for Economic Cooperation and Development (eng. abbr., OECD). As of December 2020, the organization has
37 member states, including most EU member states. OECD member states account for circa 60% of global GDP.
20
OECD oil reserves
About our Company
forecast
112
3,6
3,4
3,2
3,0
2,8
2,6
2,4
2,2
2,0
64
69
48
47
45
46
31
81
57
67
55
45
67
64
61
40
19
120
100
80
60
40
20
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
OECD commercial reserves of oil and petroleum products, bln bbl
Brent forecast since April 2020 - futures, USD per bbl (right scale)
OECD 5-year average commercial reserves of oil and petroleum products, bln bbl
Brent, USD per bbl (right scale)
Oil Demand Dynamics by Global
Regions and Forecast for 2021 and
through 2030
Analysts present long-term projections of oil supply and de-
mand with the climate agenda in scenarios for implementing
the Paris Agreement to limit global temperature rise — global
temperature increases must be kept well below 2°C above
pre-industrial levels (1861–1900), and preferably within 1.5°C.
In particular, in its new long-term forecast, World Oil Outlook
2045 (WOO 2020), OPEC notes that the market has under-
gone unprecedented changes since the publication of WOO
2019. Policies regarding energy supply and demand will
become more stringent in the long run. The global energy
landscape will be shaped by new technological advances.
The new OPEC forecast is based on the following
premises:
• Oil demand growth will recover to 2019 levels in 2023 in the
medium term and reach 103.7 MBPD by 2025.
• Long-term global GDP growth will average 2.9% per year;
• The global population will grow to 9.5 billion people by
2045;
• The global economy in 2045 will be more than twice as
large as in 2019.
• Long-term oil demand will increase by 9.4 MBPD by 2045
from 2019 levels, reaching 109.1 MBPD. Oil demand in
non-OECD countries is expected to increase by 22.2
MBPD over this period, while in OECD countries it is
expected to decrease by 13 MBPD by 2045.
Dynamics of oil demand by country/region
during 2014–2019 and IEA forecast until
2040, MBPD.
98,45 0,38 0,04
1,15 0,75 0,04
-0,01
5,65 106,40
120
100
80
60
40
20
0
7
1
0
2
A
S
U
e
p
o
r
u
E
i
a
n
h
C
i
a
s
A
f
o
t
s
e
R
s
e
i
r
t
n
u
o
c
r
e
h
t
O
9
1
0
2
e
d
w
d
l
r
o
w
i
s
e
i
r
t
n
u
o
c
D
C
E
O
r
e
h
t
O
Source: Energy information administration of the US
Department of Energy
.
.
.
e
t
a
t
S
(
l
i
o
d
l
r
o
W
0
4
0
2
21
Annual Report 2020
Global Oil Price Dynamics (Brent,
Urals)
In 2020, the oil market is facing the toughest challenge. The
breakdown of the deal by the parties to the OPEC+ deal in
March 2020, Saudi Arabia’s price war, and the resulting un-
controlled growth of production — coupled with the onset of
the pandemic and the collapse of demand — led to a record
fall in the price of oil.
April 20, 2020, was a “Black Monday” — for the first time in
history, the price of WTI oil fell to negative (USD -37.6 per bbl),
dropping by almost USD 60 per bbl during the day, which was
due to the filling of the oil storage facility at Cushing’s Hub
(Oklahoma, USA) and the specifics of trading futures con-
tracts. Following the fall in the price of WTI, Brent fell by more
than 25% to USD 20.2 per bbl. The price of Russian Urals
crude fell to USD 7 per bbl. The last time Russian oil was so
cheap was in December 1998. But there was no market col-
lapse. After a brief fall in quotes, the market began a gradual
growth. The renewed OPEC+ deal balanced the oil market.
Russian Urals crude in 2020, following Brent quotes and
usually trading at an average discount of USD 1.5–2 per bbl
to Brent, was trading at a record premium to North Sea Brent
of USD 2.55 per bbl in Europe in June 2020. The premium
reached this level for the first time in the history of Argus
monitoring (since September 1994). The price of Russian oil
was supported by the information on the decrease of Urals
shipments in July by more than 40% due to the reduction of
crude production in Russia within the framework of OPEC+
Price for Brent and Urals oil
deal. The Urals price was additionally supported provided by
the record drop in demand for gasoline and, consequently, for
light grades of oil, which are predominantly used to produce
gasoline and naphtha, as well as lower supply in the market
of medium-sulfur oil grades (which include the Urals grade)
and high-sulfur grades (due to a significant reduction in the
supplies of similar raw materials by Saudi Arabia), which pro-
duce diesel and fuel oils that turned out to be more in demand
during the pandemic.
At the end of 2020, the average annual price of Brent and
Urals oil remained almost unchanged — USD 41.67 per bbl for
the benchmark and USD 41.74 per bbl for the Russian grade.
According to the analysts’ consensus forecast for April 1,
2021, the average annual price of Brent oil in 2021 is expected
to be USD 63 per bbl, quotes can range from USD 46 to USD
73 per bbl (source: Refinitiv).
According to the updated April 2021 forecast of the Ministry
of Economic Development in 2021, the Urals price is expected
to top at USD 60.3 per bbl, after which it will set to declining
gradually: USD 56.2 per bbl in 2022, USD 54.8 per bbl in
2023, to USD 54.2 per bbl in 2024.
Long-term futures contracts through 2029 forecast an aver-
age annual Brent price of USD 66.0 per bbl in 2021, USD 57.8
per bbl in 2025, USD 57.3 per bbl in 2029.
111,80
108,9
115
110
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
78,9
71,4
74,6
58,8
67,03
63,5
65,63
63,4
46,9
46,9
45,9
29,0
20,2
Jan.14
Jul.14
Jan.15
Jul.15
Jan.16
Jul.16
Jan.17
Jul.17
Jan.18
Jul.18
Jan.19
Jul.19
Jan.20
Jul.20
Jan.21
Brent, USD per bbl
Urals, USD per bbl
Source: Refinitiv (Platts)
Crude oil price, average per year
100
99,0
97,6
About our Company
Dynamics of USD/RUB and EUR/RUB
exchange rate
In February, the Russian Federation’s federal budget deficit
increased considerably, despite the growth of oil prices. The
beginning of the year saw continuing growth in oil prices: in
January, compared with December, the dollar prices in-
creased by 10%, while the ruble exchange rate has remained
stable, which allowed increasing the oil and gas revenues
of the federal budget in February by almost 10%. This was
offset by a seasonal decrease in oil and gas revenues.
Therewith, the federal budget expenditures in February
increased by 18% relative to January, resulting in the accu-
mulated deficit for the two months already exceeding RUB
600 billion.
Dynamics of USD/RUB and EUR/RUB exchange rate
100
80
60
40
20
2014
2015
2016
2017
2018
2019
2020
2021
USD-RUB exchange rate movements
EURO-RUB exchange rate movements
Source: Central Bank of the Russian Federation
RUB exchange rate dynamics in comparison with oil price dynamics, USD per barrel
120
110
100
90
80
70
60
50
40
30
20
111,8
65,2
47,8
77,9
65,8 64,3
57,9
46,7 44,7
46,4
81,0
67,3
65,9
57,4
65,1
34,4
4
1
.
l
i
r
p
A
4
1
.
y
u
J
l
4
1
.
y
r
a
u
n
a
J
5
1
.
l
i
r
p
A
5
1
.
y
u
J
l
4
1
.
r
e
b
o
t
c
O
5
1
.
y
r
a
u
n
a
J
30,7
5
1
.
r
e
b
o
t
c
O
6
1
.
y
r
a
u
n
a
J
6
1
.
l
i
r
p
A
6
1
.
y
u
J
l
6
1
.
r
e
b
o
t
c
O
7
1
.
y
r
a
u
n
a
J
7
1
.
l
i
r
p
A
7
1
.
y
u
J
l
8
1
.
l
i
r
p
A
8
1
.
y
u
J
l
7
1
.
r
e
b
o
t
c
O
8
1
.
y
r
a
u
n
a
J
8
1
.
r
e
b
o
t
c
O
9
1
.
y
r
a
u
n
a
J
9
1
.
l
i
r
p
A
9
1
.
y
u
J
l
9
1
.
r
e
b
o
t
c
O
0
2
.
y
r
a
u
n
a
J
74,0
74,3
62,2
31,8
0
2
.
l
i
r
p
A
0
2
.
y
u
J
l
0
2
.
r
e
b
o
t
c
O
1
2
.
y
r
a
u
n
a
J
23
52,4
51,5
43,5
42,1
54,2
53,1
71,1
69,8
64,3
63,5
Urals, USD per bbl
41,7
41,7
2014
2015
2016
2017
2018
2019
2020
40
22
Source: RUB exchange rate — Central Bank of the Russian Federation, Brent quotes — Refinitiv
Brent, USD per bbl
Brent
RUB-USD exchange rate
Annual Report 2020 GDP Dynamics of Major Economies
On March 11, 2020, the WHO¹ declared a coronavirus pan-
demic. The lockdowns and forced shutdowns severely affect-
ed the world economy — the sad result of last year was the
drop in GDP of all major economies of the world except China.
The US economy continued recovery in Q4 2020 after the
shock caused by COVID-19, with its pace weakening against
the background of the second wave. On an annualized basis,
the decline in US GDP as a whole for 2020 showed a record
fall since 1946 of 3.5% year-over-year. The US Federal
Reserve predicts that GDP in 2021 will increase by 6.5%,
which could be the highest since 1984 when the economy
grew by 7.2%.
The FED continues to pursue an ultra-soft monetary policy, the
regulator has kept the base rate around zero, promising not to
raise it above 0.25% per year until long-term inflation expecta-
tions reach the 2% level and the labor market has fully recov-
ered. Over the next two years, the rate will average 0.1%, and
over the long term, the FED predicts it will rise to 2.5%.
In early April, US President J. Biden unveiled an infrastructure
plan that calls for investing more than USD 2 trillion over the
next eight years. The plan includes the introduction of a new
standard for the power generation sector, designed to reduce
emissions in the power sector to zero by 2035. The cost of
implementing the plan is planned to be covered over 15 years
by increasing the corporate tax rate from 21% to 28% as well
as by increasing the tax on foreign profits of companies.
In 2020 the Eurozone economy (the region’s GDP as a
whole) declined 6.6% year-over-year (2019 saw GDP growth
of 1.3%). At the end of March 2021, the ECB decided to ac-
celerate its bond-buying program to prevent rising borrowing
costs that threaten the Eurozone’s economic recovery. The
increase in bond yields is associated with the activation of re-
flationary trade on global markets amid encouraging outlook
for the US economic recovery and the tightening of quaran-
tine measures in the euro area.
GDP Growth Dynamics, %
S&P 500, the American broad market index has exceeded
4,000 points for the first time in history. This came after US
President Joe Biden unveiled an eight-year, US 2.3 trillion
plan for infrastructure and industry in the country. Under the
plan, USD 621 billion will be allocated to modernize transpor-
tation infrastructure, USD 400 billion to support the elderly
and people with disabilities, USD 300 billion to support the
industrial sector, USD 213 billion to repair and build affordable
housing, and USD 100 billion to develop broadband net-
works. The initiative is expected to be financed by increasing
the corporate tax rate from 21% to 28%.
The Chinese economy was the only major economy in the
world to avoid a recession due to the coronavirus pandem-
ic — growth was a modest 2.3% in 2020, the lowest since
1976. The economy grew slowly, and as early as Q4 2020 the
country’s GDP grew by 6.5% over the same period last year.
In 2021, GDP is projected to grow by more than 6%.
By the end of 2020, the Russian economy’s GDP was down
3.0% from its 2019 level, facing a shock from the pandemic
and related quarantine restrictions as well as a strong decline
in oil demand. This is the lowest since 2009 when the econ-
omy contracted at an annual rate of 7.8%. In its April global
economic forecast, the IMF raised Russia’s GDP growth
estimates from the 3.0% expected in January to 3.8% at the
end of 2021.
The Central Bank of Russia maintains a GDP growth forecast
of 3–4% in 2021. Due to a slightly smaller contraction last
year and higher demand, the economy as a whole could
reach pre-pandemic levels as early as the second half of
2021. First and foremost, this will be due to a stronger recov-
ery in household consumption. It will be supported by rising
disposable incomes, retail lending, and a declining savings
rate.
The IMF estimates that global GDP will grow 6.0% in 2021,
4.4% in 2022. Favorable factors for the economy are con-
sidered significant progress in controlling the COVID-19
pandemic, a vaccination program that could lead to herd
15%
10%
5%
0%
-5%
-10%
Russia
USA
Eurozone
China
India
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
1 WHO — World Health Organization
Sources: Refinitiv, IMF, HIS
About our Company
immunity in the near future as well as widespread economic
support measures in the US and Europe. China, India, and
the United States are expected to be the drivers of the global
recovery this year.
Despite assumptions of a gradual recovery from the crisis,
it is too early to talk about the disappearance of the COVID
threat — the pandemic is not slowing down globally. The
epidemic situation is worsening, quarantine restrictions are
being extended or tightened, and the dynamics of economic
activity remain uneven across countries and regions. Risks
of the spread of new strains (British, Brazilian, Indian) are
increasing, as a contribution, the risks of global economic
recovery are increasing.
Consumer Price Growth Dynamics of
Major Economies
The decline in annual inflation to 4% may be delayed un-
til early 2022. Given the monetary policy pursued, annual
inflation will return to the Bank of Russia target (near 4%) in
the first half of 2022 and will remain at this level thereafter.
The observed nature of inflationary pressure confirms the
advisability of returning to a neutral monetary policy.
The medium-term inflation dynamics is significantly influ-
enced by fiscal policy. Under the baseline scenario, the
Bank of Russia proceeds from the parameters of the federal
budget and budgets of the subjects of the Federation, as
reflected in the Main Lines of Budget, Tax, and Customs Tariff
Policy for 2021 and for the planning period of 2022 and 2023,
as well as the declared deadlines for the completion of an-
ti-crisis measures of the Government and the Bank of Russia.
The Bank of Russia will take into account the impact on the
forecast of possible decisions on the investment of the liquid
part of the National Wealth Fund above the threshold level of
7% of GDP.
Consumer Price Growth Dynamics of Major Economies, %
18
16
14
12
10
8
6
4
2
0
-2
2014
2015
2016
2017
2018
2019
2020
2021
Russia
USA
Eurozone
China
India
Sources: Refinitiv
24
25
Annual Report 2020 Oil and Condensate Production in
Russian Federation
In 2020, oil production was circa 512.8 mln tonnes at year-end.
The fall in production against the level of 2019 was a record 8.5%
or 47.5 mln tonnes (in 2019 production was 560.3 mln tonnes).
Among oil companies, all vertically integrated oil companies
saw a decrease in production by 2020 vs. 2019, with the largest
reduction observed for PJSC Bashneft — by 30.7% or 5.7 mln
tonnes and totaled 12.9 mln tonnes, for PJSC TATNEFT — by
12.7% or 3.8 mln tonnes and totaled 26.01 mln tonnes, for
PJSC Lukoil — by 10.6% or 9.0 mln tonnes and totaled 73.4 mln
tonnes.
Oil and gas condensate production in Russia in 2020 decreased
by 47.65 mln tonnes against the level of 2019 and amounted to
512.8 mln tonnes. This was the lowest level since 2011 when
production was 511.4 mln tonnes. The decrease in production
resulted from restrictions under the new OPEC+ deal, effective
since May 2020, amid weakening demand for energy resourc-
es due to the COVID-19 pandemic. All major companies have
reduced significantly their oil and gas condensate production by
the end of the year.
PJSC Surgutneftegaz also reduced production by 9.9%, or
6 mln tonnes, and Rosneft by 8.2%, or 16 mln tonnes. PJSC
Gazprom Neft reduced its production the least among vertically
integrated oil companies — 0.6% or 0.3 mln tonnes.
Rosneft reduced production at brownfields in the European part
of Russia and Western Siberia, on Sakhalin as well as produc-
tion at its East Siberian divisions (Vankorsky cluster, Krasnoyarsk
Territory). At the same time, some of Rosneft’s subdivisions de-
veloping new fields increased production: JSC Tyumenneftegaz
increased its production by 118% or 975,000 tonnes to 1.8 mln
tonnes, and LLC Taas-Yuryakh Neftegazodobycha, a joint ven-
ture of Rosneft, BP (20%), and a consortium of Indian compa-
nies (29.9%), increased production by 18%, or 848,000 tonnes
to 4.82 mln tonnes. Production of PJSC Bashneft, a Rosneft
subsidiary, decreased across the company by 5.74 mln tonnes
to 12.93 mln tonnes, with the main reduction coming from the
main production region in Bashkortostan as part of the OPEC+
deal. PJSC Slavneft, owned on a parity basis by Rosneft and
Gazprom Neft, also significantly reduced its production by 4.27
mln tonnes to 9.71 mln tonnes due to the reduction in produc-
tion by PJSC Slavneft-Megionneftegaz.
PJSC Lukoil reduced production in 2020 by almost 8.69 mln
tonnes compared with the previous year to 73.43 mln tonnes.
The biggest reduction was reported by LLC Lukoil-Western
Balance of the Russian Oil Market
Siberia — 4.81 mln tonnes to 29.39 mln tonnes. The indica-
tors of Lukoil-Komi subdivision decreased by 2 mln tonnes to
14.1 mln tonnes and those of Lukoil-Perm by 893,000 tonnes
to 14.05 mln tonnes. LLC Ritek also decreased its production
significantly: by 596,000 tonnes to 5.45 mln tonnes.
PJSC Surgutneftegaz decreased production last year by 6 mln
tonnes compared to the level of 2019, to 54.75 mln tonnes. The
decrease in production took place at the company’s areas in the
Ural Federal District by 6.55 mln tonnes to 44.87 mln tonnes. At
the same time, production at new fields in Yakutia increased by
542,000 tonnes to 9.88 mln tonnes.
PJSC TATNEFT also markedly reduced its production in 2020 by
3.8 mln tonnes to 26.01 mln tonnes.
PJSC Gazprom Neft reduced production less than other ver-
tically integrated oil companies — by 1.68 mln tonnes to 2019
level to 44.25 mln tonnes. The production of JSC Tomskneft,
owned by Rosneft and PJSC Gazprom Neft on a parity basis,
decreased most noticeably, with total production decreasing by
3 mln tonnes to 5.1 mln tonnes. Production by PJSC Gazprom
Neft at brownfields in Western Siberia and the Yamalo-Nenets
Autonomous District also decreased. According to the results of
the year, production of LLC Gazprom Neft-Yamal developing the
Novoportovskoye field (Yamalo-Nenets Autonomous District)
decreased by 191,000 tonnes to 7.71 mln tonnes. At the same
time, LLC Meretoyakhaneftegaz (Yamalo-Nenets Autonomous
District) increased production at new fields by 220,000 tonnes
compared to 2019, up to 224,000 tonnes.
PJSC Russneft also reduced production in 2020 by 722,000
tonnes compared to 2019 to 6.4 mln tonnes.
Last year PJSC Novatek reduced the production of oil and
condensate by 409,000 tonnes to 2019 level to 8.03 mln tonnes
due to a decrease in the performance of Yamal LNG, in which
PJSC Novatek and LLC Yargeo own a stake. LLC Yargeo
reduced its figures by 253,000 tonnes to 2.99 mln tonnes, and
Yamal LNG by 229,000 tonnes to 1.16 mln tonnes. Production
at the Yuzhno-Tambeyskoye field (Yamalo-Nenets Autonomous
District) of Yamal LNG decreased against the background of
warm spring weather, which had a negative effect on the opera-
tion of infrastructure located in the permafrost zone.
JSC Neftegazholding reduced production volumes by only
56,000 tonnes to 2 mln tonnes last year.
527
534
547
547
556
560
513
Export from Russia
292
289
286
287
291
290
273
Supplies to domestic markets in Russia
241
262
254
257
258
266
233
Oil & condensate production, mln tonnes
600
400
200
0
26
2,5%
7,3%
5,3%
10,0%
-3,1%
1,7%
0,8%
-0,1%
0,9%
-3,6%
2,1%
8,1%
0,9%
-1,5%
Year-over-year production growth, %
50,0%
30,0%
1,0%
0,7%
1,4%
4,1%
11,6%
0,4%
11,0%
2,7%
10,0%
-10,0%
-30,0%
-50,0%
-70,0%
-90,0%
2013
2014
2015
2016
2017
2018
2019
About our Company
4,0%
2,0%
0,0%
-2,0%
-4,0%
-6,0%
-8,0%
-10,0%
-8,2%
-10,6%
-9,9%
-12,7%
-30,7%
-5,2%
-8,5%
2020
Rosneft
Tatneft
Lukoil
Bashneft
Gasprom-neft
SurgutNG
Other
Russia altogether (right scale)
Source: CCA FEC
Production share of Companies, %
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
21,0%
20,8%
20,8%
21,7%
22,8%
23,2%
23,5%
24,0%
24,9%
3,0%
5,1%
3,1%
5,0%
3,4%
5,0%
11,9%
11,7%
11,7%
6,1%
6,1%
6,4%
16,3%
16,4%
16,4%
3,7%
5,1%
11,5%
6,4%
16,0%
3,9%
5,2%
11,3%
3,8%
5,3%
11,1%
3,4%
5,3%
11,0%
3,3%
5,3%
2,5%
5,1%
10,8%
10,7%
6,9%
7,2%
7,1%
7,0%
7,6%
15,2%
14,9%
14,8%
14,7%
14,3%
36,7%
36,7%
36,2%
35,4%
34,7%
34,5%
34,9%
34,8%
34,9%
2012
2013
2014
2015
2016
2017
2018
2019
2020
Rosneft
Tatneft
Lukoil
Bashneft
Gasprom-neft
SurgutNG
Other
Source: CCA FEC
TATNEFT’s share in total Russian oil and condensate production was 5.07% (5.3% in 2019).
2014
2015
2016
2017
2018
2019
2020
Source: CCA FEC
PJSC TATNEFT decreased production of conventional oil by 16.3% or 4.4 mln tonnes to 22.6 mln tonnes in 2020, while produc-
tion of super viscous oil (SVO) increased by 24.7% or 0.6 mln tonnes to 3.4 mln tonnes.
27
Annual Report 2020 TATNEFT Group’s share in total Russian oil and condensate production
Structure of oil exports from the Russian Federation, % (total share)
About our Company
2012
2013
2014
2015
2016
2017
2018
2019
2020
TATNEFT Group’s crude oil and condensate production
26,3
26,4
26,5
27,2
28,7
28,9
29,5
29,8
26,0
Conventional oil
Super-viscous oil
TATNEFT Group’s oil production share in Russia’s total crude oil
and condensate output
26,2
26,3
26,3
26,9
27,8
27,3
27,6
27,06
22,6
0,1
0,1
0,2
0,4
0,8
1,6
1,9
2,74
3,4
5,08% 5,05% 5,04% 5,10% 5,24% 5,29% 5,31% 5,32% 5,07%
Oil exports from the Russian
Federation and supplies to the domes-
tic market
The US sanctions against Iranian and Venezuelan medium
crude exporters in 2020, as well as Saudi Arabia’s restriction
on medium crude supplies, have increased interest in Urals
over the past year in many regions, but the catastrophic drop
in demand due to the pandemic in the world as a whole has
also affected Russian exports. With the pandemic and the
OPEC+ deal to curb oil production, oil exports from Russia in
2020 decreased by 12.6% or 33.7 mln tonnes, the reduction
occurring in all areas of supply, but not uniformly.
Exports to non-CIS countries decreased by 11.8%, or 29.4
mln tonnes, to 219.2 mln tonnes. Despite the overall de-
cline in exports, the share of exports to non-CIS countries
in total exports has been growing steadily for 8 years and
at year-end was 94.3%, up almost 1% on 2019 levels. In
2020, exports to non-CIS countries by pipeline of Russian
Structure of Russian oil exports from the
Russian Federation, mln tonnes
raw materials decreased by 13.1% or 26.4 mln tonnes and
amounted to 176 mln tonnes, the lowest level since 2004.
Export supplies outside pipeline transportation (mainly by
sea) amounted to 43.6 mln tonnes, a decrease of 3 mln
tonnes or 6.5%. Despite the overall decline in exports,
shipments through the port of Murmansk increased by
1.6% or 0.2 mln tonnes due to increased production at
Novoportovskoye field of PJSC Gazprom Neft. Non-pipeline
exports have maintained the trend of recent years, with the
share of exports to non-CIS countries increasing by 1.1% to
19.9% in 2020.
Crude oil exports to the CIS countries decreased by 24.1%
or 4.2 mln tonnes to 13.3 mln tonnes. The share of exports
to the CIS countries has been steadily decreasing for several
years in a row — it was 5.7% at year-end 2020 (6.6% in 2019).
254
257
258
18
35
18
42
18
45
266
18
47
233
13
44
201
197
195
202
176
9,3%
10,5%
8,6%
11,8%
7,1%
14,8%
7,0%
17,5%
7,0%
18,8%
6,6%
18,7%
5,7%
19,9%
80,7%
72,5%
85,2%
82,5%
81,2%
81,3%
80,1%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2014
2015
2016
2017
2018
2019
2020
non-CIS countries through pipeline
non-CIS countries outside pipeline
CIS countries
Source: CCA FEC
In 2020, the downward trend remained in crude shipments in
the eastern direction via the main pipelines, while westward
supplies of raw materials fell by 20.3% or 26.2 mln tonnes
over the year and reached 103 mln tonnes, exports to the
East decreased slightly — by 0.3% or 0.2 mln tonnes and
virtually remained at the 2019 level, which is explained by
existing contracts with China to supply a guaranteed amount
of oil. Therewith, some of the oil from the Western direction
was shipped to China: almost half of the supplies to China
were shipped in January 2020 — 2.3 mln tonnes, in February
supplies decreased to 520,000 tonnes due to the spread of
COVID-19 in the country. Demand began to recover in March,
with shipments of Urals reaching circa 1.2 mln tonnes. In
April, more than 2.1 mln tonnes were shipped, or circa 24% of
all Urals sea exports. The shipments grew due to the resto-
ration of refining in the country and the fall in Urals prices.
China increased its purchases of raw materials amid high re-
fining margins, while Urals prices fell relative to the North Sea
Brent Crude, which made the Russian grade more attractive
relative to the competing medium sulfur Oman grade.
Share of Oil Exports from Russia, mln tonnes
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total export from the Russian Federation
239,7
234,9
240,9
261,6
254,2
257,0
257,7
266,2
232,5
Non-CIS resources of the Russian
Federation
211,5
206,8
218,4
239,0
236,1
238,9
239,7
248,6
219,2
Non-CIS by pipeline
189,6
184,1
176,3
173,3
201,2
197
195
Non-CIS non-pipeline
21,83
22,71
Transit resources by pipe to non-CIS
22,8
20,1
22,8
19,3
28,19
34,88
41,72
45,12
18,7
19,9
19,6
18,6
CIS countries
- by pipeline
- non-pipeline
28,2
28,1
22,5
22,6
18,1
18,1
18,0
27,8
0,4
26,4
1,6
21,5
1,0
22,0
18,1
18,1
18,1
0
0
0
0
202
46,6
19,9
17,6
17,6
0
176
43,6
19,7
13,3
13,3
0
TATNEFT Group share in the volume of oil export from the Russian Federation
2016
2017
2018
2019
2020
non-CIS countries through pipeline
non-CIS countries outside pipeline
CIS countries total exports from RF
TATNEFT Group oil export from the Russian Federation,
mln tonnes
Export to non-CIS
Export to CIS
Source: CCA FEC
TATNEFT Group’s share in oil export to the share of
the total export from the Russian Federation
2012
2013
2014
2015
2016
2017
2018
2019
2020
12,5
12,5
9,7
11,6
13,0
15,5
12,4
11,7
9,2
11,9
11,4
0,62
1,05
8,4
1,3
10,3
1,3
11,9
1,1
14,2
11,2
10,5
1,2
1,2
1,2
8,3
0,9
4,8% 4,9% 4,0% 4,4% 5,1% 6,0% 4,8% 4,40% 3,96%
28
29
Annual Report 2020 TATNEFT Group’s oil supplies to the domestic market of
the Russian Federation (for refining)
TATNEFT Group’s share in oil supply to the total
supply to the domestic market of the Russian
Federation
2012
2013
2014
2015
2016
2017
2018
2019
2020
13,7
13,7
15,6
15,0
14,6
12,9
16,5
18,2
16,9
IMO requirements and the pandemic have had an impact on
the refining sector as well: in oil refining, the trend of reducing
the share of dark oil products in the production structure of
5,1% 5,0% 5,3% 5,2% 5,1% 4,5% 5,7% 6,28% 6,17%
Oil refining and production of base products in the Russian Federation, mln tonnes
TATNEFT Group’s crude oil exports decreased by 21.3% or 2.5
mln tonnes in 2020. The share in the volume of crude oil ex-
ports from the Russian Federation decreased to 3.96% (4.4%
in 2019). Shipments to the domestic market were also down by
7.5% or 1.4 mln tonnes. TANECO’s own refinery accounted for
the largest share of shipments: shipments doubled or were up
by 3.9 mln tonnes — to 7.5 mln tonnes.
Share of TATNEFT Group in the volume of oil shipments to the domestic
market of the Russian Federation
TATNEFT Group’s share in oil export and supply to the domestic market to
total share in RF
5,1%
5,0%
4,8%
4,9%
5,3%
4,0%
5,2%
4,4%
5,1%
5,1%
6,3%
6,2%
6,0%
5,7%
4,8%
4,4%
4,5%
4,0%
6,5%
6,0%
5,5%
5,0%
4,5%
4,0%
3,5%
2012
2013
2014
2015
2016
2017
2018
2019
2020
TATNEFT Group’s oil exports share as a share of total exports from RF
TATNEFT Group’s oil supply share to the total supply to RF domestic market
Ratio of TATNEFT Group’s domestic and export oil supplies to own production
47,5%
47,1%
36,4%
42,6%
45,4%
53,4%
41,9%
39,3%
35,4%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
About our Company
Fuel consumption and vehicle fleet
Production and supply of petroleum
products in Russia
In 2020, the volume of primary oil refining in the Russian
Federation decreased by 5.3% or 15.2 mln tonnes, compared
to 2019 level and was up to 270 mln tonnes.
Russian refineries remained as a result of modernizing pro-
duction capacities and improving the quality of the product
basket. By the end of 2020, fuel oil production decreased by
11.1% or 5.1 mln tonnes and reached a record low of 40.8
mln tonnes.
265
272
72
69
38
75
72
39
300
250
200
150
100
50
0
289
283
281
280
287
285
76
77
38
71
76
39
55
76
40
50
77
39
46
77
39
46
78
40
270
41
78
38
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total oil refining in RF, mln. t
Production of commercial
heating fuel oil in RF, mln. t
Production of diesel fuel
in RF, mln. t.
Production of gasoline
in RF, mln. t.
Source: CCA FEC data
Gasoline production (RON) was down by 4.5% or 1.8 mln tonnes
and reached 38.4 mln tonnes due to the commissioning of large oil
refineries in 2020 at the Antipinsky oil refinery and at JSC TANECO
plant and the growth of gasoline production at LLC Gazprom
Neftekhim Salavat.
Production of diesel fuel (Df) in 2020 decreased insignificantly by
0.4% or 0.3 mln tonnes and was 78.0 mln tonnes.
In 2020, the regulation of domestic prices for gasoline was legislat-
ed, which led to a drop in domestic fuel prices below export parity.
The introduced damper compensated for the decline below the
level of export parity only partially.
Gasolines
2012
2013
2014
2015
2016
2017
2018
2019 2020
Gasoline production in the Russian Federation, mln tonnes
38,2
38,7
38,3
39,2
40,0
39,2
39,5
40,2
38,4
Gasoline exports from the Russian Federation
3,6
4,3
4,3
4,7
4,9
4,1
3,8
5,2
5,4
Supplies to the domestic gasoline market in the Russian Federation
34,3
34,1
33,1
34,6
34,9
35,2
35,6
35,0
33,0
Diesel fuel
2012
2013
2014
2015
2016
2017
2018
2019 2020
DF production in the Russian Federation, mln tonnes
69,4
72,0
77,3
76,1
76,3
76,9
77,5
78,4
78,0
DF export from the Russian Federation, mln tonnes
34,9
37,5
44,1
45,1
43,7
43,7
42,0
39,4
42,2
DF supplies to the domestic market in the Russian Federation, mln tonnes
32,5
32,3
31,5
31,3
32,5
32,8
35,7
38,9
35,7
Fuel oil
2012
2013
2014
2015
2016
2017
2018
2019 2020
Commercial fuel oil production of in the Russian Federation, mln tonnes
71,9
74,5
76,3
71,1
54,9
49,8
46,4
45,9
40,8
Fuel oil export from the Russian Federation, mln tonnes
56,9
57,3
53,5
53,8
42,0
39,4
32,8
31,4
31,9
Fuel oil supplies to the domestic market in the Russian Federation, mln
tonnes
11,4
12,8
19,8
15,3
12,8
10,3
12,3
12,0
7,9
Jet kerosene
2012
2013
2014
2015
2016
2017 2018
2019 2020
Jet kerosene production in the Russian Federation, mln tonnes
10,0
10,3
10,9
Export of jet kerosene from the Russian Federation, mln tonnes
Jet kerosene supplies to the Russian domestic market, mln tonnes
2,7
7,3
1,5
8,9
0,8
10,0
9,7
1,1
8,6
9,6
1,1
8,5
11,1
12,7
12,5
10,4
1,0
1,3
0,9
10,1
11,4
11,6
0,6
9,9
52,1%
51,9%
58,8%
55,0%
50,9%
44,7%
55,8%
61,1%
64,8%
3,6
4,3
3,0
2,0
0,1
0,0
2012
2013
2014
2015
2016
2017
2018
2019
2020
Exports share to own production, %
Share of domestic oil supplies (to own production)
30
31
Annual Report 2020 Oil Industry Tax Regulation
Excess-Profits Tax Groups
About our Company
Following global economic trends, the Russian oil industry in 2020 was limited in its
development by the pandemic, the effect of the OPEC+ deal, and Saudi Arabia’s price war.
In 2020, oil production decreased by 8.5% or 47.5 mln tonnes to 2011 levels (511.4 mln
tonnes) to 512.8 mln tonnes.
One of the significant events of 2020 was the revision of the tax legislation.
4. The reduced MET rate is also canceled for enterprises
carrying out field exploration at their own expense.
5. Changes concerning AIT. According to the new law, the
amount of unit costs in calculating the minimum AIT tax
base will be RUB 7,140 until December 31, 2023 (the
previous deadline was 2021). It will reach RUB 8,600 from
January 1, 2024.
6. The reduction factor 0.7 to the MET rate for companies,
which as of July 1, 2001, were exempt from paying mineral
replacement contributions, ceased to be effective.
Simultaneously with the decision to abolish the benefits,
targeted measures were introduced to compensate part of
the losses under the new tax conditions, in particular, for the
AIT Group 2 fields located on the Yamal Peninsula, and the
Romashkinskoye field, between 2021 and 2023, a deduction
of RUB 12 billion per year from MET is provided, provided that
the oil price is higher than the base price set in the Russian
budget (the oil cut-off price set in the Russian budget for
2021 is USD 43.3 per bbl).
Taxation of the industry
The budget deficit as a result of the pandemic and falling
oil prices forced the Government of the Russian Federation
once again to revise the taxation system for the industry. On
September 30, the State Duma passed in the third and final
reading draft laws on introducing amendments to the Tax
Code of the Russian Federation to adjust the parameters of
the additional income tax (AIT) as well as on abolishing sever-
al privileges for the mineral extraction tax (MET).
In October 2020 laws that changed the parameters of the
AIT pilot system, abolished benefits for depleted fields and
high-viscosity oil with the possibility of switching to AIT were
approved (signed by the President): Federal Law No. 325-FZ
On Amendments to Article 3–1 of the Law of the Russian
Federation on Customs Tariff dated 15.10.2020; Federal
Law No. 342-FZ On Amendments to Chapters 254 and 26
of Part Two of the Tax Code of the Russian Federation dated
15.10.2020).
Under the new laws, several previously existing incentives
were abolished and the AIT perimeter was expanded, which
already from 2021 will increase fivefold to 230 mln tonnes or
almost half of the total oil production in the country. The result
of all the changes will be the withdrawal of RUB 650 billion of
cash flow from the industry over five years.
Changes in accordance with the amendments to the
Tax Code:
1. Cancellation of benefits for the reduced MET rate for de-
posits with depletion of more than 80% (shortfall in budget
revenue were estimated at RUB 232 billion for 2019). It is
proposed to transfer depleted fields to the AIT regime, the
budget will receive additionally RUB 80 billion.
2. Cancellation of the MET exemption for super viscous oil
(SVO), which could contribute RUB 77.9 billion to the
budget in 2021.
3. Cancellation of the reduced export duty rate for extra-vis-
cous oil, which used to be 10% of the standard rate, and
for oil produced at 15 fields with special physical and
engineering characteristics. In 2020, according to the
calculations of the Ministry of Finance, the shortfall in rev-
enue from the provision of this SVO benefit was estimated
at RUB 14.7 billion, in 2021 the additional income from the
abolition of the benefit is estimated at RUB 18.99 billion.
32
I Group
II Group
III Group
4.6 mln tonnes
25.0 mln tonnes
14.8 mln tonnes
investment of RUB 46 bln
investment of RUB 138 bln
investment of RUB 54 bln
Includes greenfields in Yakutia, the
Irkutsk Region, the Krasnoyarsk
Territory, NAO and north of the Yama-
lo-Nenets Autonomous Okrug,
as well as in the Caspian Sea region,
NAO and north of the Yamalo-Nenets
Autonomous Okrug, as well
in the Caspian Sea (fields that, before
the adoption of the law, could qualify
for a special customs duty formula to
be applied)
Approved list of oil fields for a special
customs duty formula to be applied
according to Note 8 of the Commodity
Nomenclature for Foreign Economic
Activities
Includes brownfields in the Tyumen
region, Khanty-Mansi Autonomous
Okrug, Yamalo-Nenets Autonomous
Okrug, Komi with 0,1 to 0,8 depletion
rates as of 01.01.2017 within the total
annual oil and gas condensate produc-
tion limit of 15 million tonnes according
to the closed list, which includes 39
licensed areas
IV Group
V Group
1.3 mln tonnes
investment of RUB 3 bln
Includes greenfields in the Tyumen
region, Khanty-Mansi Autonomous
Okrug, Yamalo-Nenets Autonomous
Okrug, Komi with the less than 0,05
reserves depletion rate. At the same
time, the subsoil area’s initial recovera-
ble reserves as of 01.01.2017 cannot
exceed 30 million tonnes, and the total
reserves attributable to all fields
transferred to the Excess-Profits Tax
application amount to 150 million
tonnes
Includes fields in the north of the
Krasnoyarsk Territory, Yakutia and
Chukotka with the less than 0,001
reserves depletion as of 01.01.2019
33
Annual Report 2020 It is estimated that as a result of the abolition of benefits, the
total negative effect for the industry will amount to more than
RUB 650 billion during 2021–2025.
The oil industry is one of the key sectors of the Russian
economy (the volume of investments in 2019 amounted to
RUB 1.3 trillion), and taking into account the multiplier effect
on related industries, the decision to increase the tax burden
affects the entire economy.
In February 2021, the heads of oil-producing regions with a
large share of brownfields and hard-to-recover oil reserves,
the Khanty-Mansi Autonomous District and Tatarstan, sent a
letter to the President of the Russian Federation, requesting
to reduce the tax burden, as companies with a significant
portfolio of mature assets, which also have super viscous
oil production (PJSC TATNEFT and PJSC Lukoil) took the
hardest hit. Annual investments in the development of high-
ly-depleted fields in the Khanty-Mansi Autonomous District
amount to circa RUB 200 billion, in Tatarstan, circa RUB 110
billion have already been invested in super viscous oil (SVO)
projects, in Komi, over RUB 240 billion. The head of state is
asked to introduce special tax regimes for noncommercial
reserves, otherwise, in 2–3 years, the rate of oil production in
traditional provinces will decrease significantly. In particular,
it is proposed to expand the AIT perimeter, to make depleted
fields a separate group for AIT tax, providing for the possibility
of including the costs of developing related businesses — oil
refining, petrochemicals, etc. - in its calculation. And starting
from 2022, it is also proposed that the fields of extra-viscous
and high-viscosity oil with a lower MET should also be isolat-
ed into a separate group. MET reduction is also proposed for
hard-to-recover reserves, the heads of the regions are ask-
ing to reduce the base MET rate for noncommercial reserves
by 10–15% and to cancel the increasing coefficient of RUB
428 per tonne introduced in 2017 for them. It is also proposed
to expand the criteria for the application of reduced MET for
List of changes to oil production taxation
Unit costs for minimum tax base
7 140 rub per tonne until 2023
8 600 rub per tonne starting 2024
Excess-Profits Tax
Coefficient Kg, in MET (II Group)
Multiplying coefficient
Kg=1 for LU from Kkan=1 as at 01.01.21
Kg=1,95 during 2021 -2023 for LU in Yamal
Kg=1,2 during 2021 -2023 for LU in individual areas in KhMAD
Tax base reduction due to prior year losses
50% during 2021 – 2023
100% starting 2024
Loss indexation
Before 01.01.2020 – 16,3%
After 01.0102020 – 7% (II –IV Group)
– 10% (I Group)
3-d Group extension, deduction for
depleted zones
Possibility to transfer to 3-d Group LU for which Kv<1 and transfer of oil fields located within the North
Caucasian Federal District and the Sakhalin Region
Deduction from MET for 2-d Group
The deduction of up to 12 bln rub per year is applied for 2-d Group’s fields located in the Yamal
Peninsular until the amount totals 36 bln rub.
Tax benefit for production of oil with
viscosity of over 200 mPa*s and under 10
000 mPa*s
Common Taxation System
The reduction coefficient is abolished – Kkan=0 in MET
Tax benefit for over 10 000 mPa*s viscosity
oil export
Zero Kc coefficient in MET and 10 % reduction coefficient in export duty tax calculation formula are
abolished
Tax benefit for depletion rate
Reduction coefficient is abolished – Kv in MET
Deduction from MET for over 10 000 mPa*s
viscosity oil
The deduction of costs for operations and safety associated with super viscous oil production is granted
for the Romashkinskoye oil field during 2021-2023 in amount of up to 12 bln rub per year. It is applied
until the deduction amount totals 36 bln rub.
Deduction from MET at Priobskoye oil field
A tax credit is granted for oil production in the northern part of the Priobskoye oil field in the amount of up
to 45,96 bln rub per year until 31.12.2032. It is applied until totaling 459,6 bln rub.
Reduction 0,7 coefficient to MET
Abolition of application of 0,7 coefficient to MET for companies exempted as of July 1, 2001 from
reserves replacement payments
Source: VYGON Consulting
34
About our Company
The implementation of the project envisages the construc-
tion of over 770 km of trunk pipelines and 7,000 km of in-field
pipelines. This will seriously change the situation in the pipe
products market.
According to estimates of leading investment banks, Bank of
America and Goldman Sachs, given the current oil price the
cost of the project could be circa USD 70 billion, excluding
the LNG component. If the price situation is favorable and
risks are lowered, the project’s value may exceed USD 100
billion; if the LNG component is included, the overall project
estimate may rise to USD 115–120 billion.
In September, within the framework of draft amendments to
the Tax Code, the Government of the Russian Federation de-
cided to lower the oil price threshold at which Rosneft could
claim a tax deduction for the Vostok Oil project to USD 25 per
bbl. Previously, the company could count on benefits only if
oil was worth more than the budgeted base level (USD 42.5
per bbl in 2020). Lowering the threshold will provide Rosneft
with tax benefits for this project in the amount of circa RUB 60
billion per year at current prices.
Another landmark event in 2020 is the commissioning by
PJSC Gazprom Neft of an oil pipeline to pump oil from the
Chayandinskoye oil and gas condensate field into the Eastern
Siberia – Pacific Ocean (ESPO) oil pipeline. This will enable
the company to increase the ESPO blend export volume from
Kozmino. The pipeline with an overall capacity of 1.5 mln
tonnes per year oil connected the Chayandinskoye field with
Gazprom’s pipeline, which takes the feed to Transneft’s Orgul
oil pumping station NPS-11 for further delivery to the ESPO
pipeline. December 2019 – March 2020, feedstock from
the field was delivered by truck to the gas treatment facility
of Gazprom Dobycha Noyabrsk for delivery to Gazprom’s
pipeline.
The Chayandinskoye field’s hydrocarbons density is circa
862.8–882.4 kg/m³ (28.14–31.74 °API), and its sulfur content
exceeds 0.90%. Before delivery to ESPO, raw HCs are blend-
ed with gas condensate to bring the oil’s quality character-
istics in line with Transneft’s requirements. Market players
note that the companies will continue blending oil from the
area with condensate, but they do not rule out that increased
pumping from the Chayandinskoye field will increase the
sulfur content and density of the ESPO blend (the average
density of ESPO blend in 2020 was 845.4 kg/m3 (35.09°API),
and the sulfur content was 0.53% (the ceiling level is 0.65%).
Gazprom Neft may increase exports of ESPO blend to 4.5–5
mln tonnes in 2021, compared to 3.47 mln tonnes in 2020.
small fields in the Khanty-Mansi Autonomous District from 5
to 20 mln tonnes of oil as well as to introduce several other
incentive measures.
The Ministry of Finance confirmed it is ready to fine-tune the
oil industry’s fiscal system and to dialogue with oil producers:
the Ministry of Finance will develop parameters for a separate
added income tax (AIT) group for extra-viscous oil by the end
of 2021; with the tax regime to be introduced in 2024.
Another significant industry event in 2020–2021 is Rosneft’s
Vostok Oil project. On February 11, 2020, Igor Sechin,
Rosneft CEO, presented the project to President Vladimir
Putin. The project includes the Vankorsky cluster (15
fields, the largest of which are Suzunskoye, Tagulskoye,
Lodochnoye, and Vankorskoye fields), the Zapadno-Irkinsky
area (Rosneft), the Payakhskaya group of fields (JSC
Neftegazholding), and the fields of the Vostochno-Taymyrsky
cluster. The total investment in the project is estimated at
more than RUB 10 trillion.
The confirmed liquid hydrocarbons resource base of the
project is 6 bln tonnes (44 bln barrels). This is comparable
with the resource base of Permian, the largest US shale play
(6.3 bln tonnes), but with a much higher reserve density (17
mln BOE per km² in the Vostok Oil project vs. 0.1 mln BOE in
the US shale basin). The Vostok Oil project’s fields oil supply
potential is estimated at 30 mln tonnes by 2024 and up to 100
mln tonnes by 2030. Therewith, Vostok Oil’s oil has premium
characteristics, superior to those of the Middle East grades
and the benchmark Brent grade (density — less than 400
API, sulfur content — 0.05%). Therefore, Argus estimates
its sale premium to be USD 10 to USD 12 per barrel. A big
advantage of the project is also the possibility of direct oil
supplies (without using pipeline infrastructure) both to Europe
and other regions of the Atlantic Basin and to promising mar-
kets in the Asia-Pacific.
The Vostok Oil project will become a true development driver
for the whole Russian economy. Its implementation will cre-
ate tens of thousands of new jobs. According to estimates of
independent experts (KPMG), the multiplier effect of “Arctic”
investments will exceed RUB 30 trillion by 2038, giving im-
petus to the development of related sectors of the economy,
such as mechanical engineering, metallurgy, electric power
engineering, road construction, shipbuilding.
Calculations by specialists of the Institute of Economic
Forecasting of the Russian Academy of Sciences show
that implementation of the project creates additional
incentives for localization of production of high-tech
equipment and provides an increase in domestic de-
mand for products of various industries equivalent to
2% of GDP per year.
To organize the export of products from the Vostok Oil proj-
ect, an order was placed at the Zvezda shipyard for a series
of 10 high ice-class tankers with a deadweight of 120,000
tonnes, adapted for operation on the Northern Sea Route. A
total of 50 vessels of different classes are planned to be built
in the interests of the project.
35
Annual Report 2020 Key macroeconomic factors in 2020
and 2021
Current global economic growth forecasts primarily depend
on new quarantine restrictions, cheap liquidity from central
banks and assistance from finance ministries, the effect
of the OPEC+ deal, and the pace of industrial production.
The expansionary monetary policy of central banks (FED,
ECB, BoJ) has become one of the key factors in exiting the
acute phase of the corona crisis. Central banks and finance
ministries plan to maintain support for those affected by the
recession, although the scale of support may decrease.
At the end of March 2021, business activity in the global
industry showed positive dynamics. Despite another wave
of the coronavirus, the industrial PMI reached a ten-year
high (55 points) in some regions. The growth leader in the
index was the Eurozone (62.5 points), where production and
orders are growing at an unprecedented rate in the nearly
24-year history of PMI surveys, but manufacturers are facing
shortages and delays in supplies caused, among other
things, by a local factor — the blockage of the Suez Canal. In
the US, manufacturing activity also continued expanding in
March (59.1 points), while China’s index is at its lowest level
since last May but still in expansionary territory (50.6 points).
China’s GDP and industrial production continue to grow
strongly.
In 2021, the growth of the Russian economy will be under-
pinned by the improved prospects of the global economic
recovery in the context of additional budget support mea-
sures in some countries, which will accelerate the growth of
demand for Russian export goods. The medium-term eco-
nomic growth path will be significantly influenced by the pace
of vaccination in Russia and the world, the effectiveness of
vaccines against new strains of the virus, the nature of private
demand recovery, and the trajectory of fiscal consolidation.
On March 19, 2021, the Board of Directors of the Bank of
Russia decided to raise the key rate by 25 basis points, to
4.50% per annum. The growth rate of consumer prices in
Q1 is higher as compared to the Bank of Russia’s forecast.
Domestic demand is recovering steadily and faster than
previously expected, outpacing output growth in several
sectors. External demand expectations are also improving
on the back of additional budget support measures in many
countries and an increase in the rate of vaccination of the
population. Inflationary expectations of the population and
businesses remain at an elevated level. The balance of risks
has shifted towards the pro-inflationary ones.
On April 1, 2021, the size of the National Wealth Fund (NWF)
reached circa RUB 13.8 trillion, or USD 182.3 billion, which
is equivalent to circa 12% of Russian GDP. The cut-off point
under the budget rule in 2021 is USD 43.3 per bbl. In the
middle of March, the Ministry of Finance of Russia prepared
new rules of investment of the NWF in projects. These rules
are currently under consideration and are awaiting further
approval.
S&P 500, the American broad market index has exceeded
4,000 points for the first time in history. This came after US
President Joe Biden unveiled an eight-year, US 2.3 trillion
plan for infrastructure and industry in the country. Under the
plan, USD 621 billion will be allocated to modernize transpor-
tation infrastructure, USD 400 billion to support the elderly
and people with disabilities, USD 300 billion to support the
industrial sector, USD 213 billion to repair and build affordable
housing, and USD 100 billion to develop broadband net-
works. The initiative is expected to be financed by increasing
the corporate tax rate from 21% to 28%.
US and China
US President Joe Biden is more likely to settle trade and po-
litical differences with China. Sanctions, including attacks on
Chinese IT companies, may be lifted. A revision of the trade
agreement aimed at reducing the US balance sheet deficit is
likely. It is assumed that at first the duties will not be changed.
The PRC market accounts for a significant share of the reve-
nue and production chain of the US automotive industry and
many technology and industrial companies.
Brexit
In 2021, the UK will finally leave the EU. The deal must be
reached by the end of the year. The baseline scenario as-
sumes the limitation of tariffs and the absence of trade quo-
tas. If an agreement is not reached, the trade relationship be-
tween Britain and the EU will suffer — it will return to the WTO
framework. As a result, tariffs on exports to the EU would rise,
the pound would depreciate, and the inflow of direct invest-
ment into the UK economy would weaken. According to the
forecast of S&P Global Ratings, if an agreement is reached,
the UK GDP will grow by 6% in 2021. Otherwise, it will grow
by 4.6%. In a negative scenario, the European economy, and
therefore the world economy as a whole, will suffer.
Volatility in global stock markets remains elevated.
About our Company
Key factors in the development of the
industry in 2020
1. Reduction of oil production under the OPEC+ deal;
2. Encouragement of oil production in Western Siberia;
3. The Arctic development (the Northern Sea Route) is
almost half as long as the traditional routes for exporting
hydrocarbons to the attractive APR market, and its
development has been declared one of the key tasks of
Arctic development. According to the May Decree of the
President, the cargo traffic on the NSR must grow to 80
mln tonnes per year by 2024);
Key factors in the development of the
industry in 2021
1. Revisiting investment opportunities and current operating
costs as a result of changes in tax legislation and produc-
tion limitations under the OPEC+ deal;
2. Search for optimal solutions for further recovery of
production, provided for by the OPEC+ deal (including the
development of a mechanism for drilled but uncompleted
wells);
3. Increasing oil recovery factor, smart field;
4. Working out the issue of incentives for hard-to-recover
reserves and high-viscosity oil;
5. Proposal of a mechanism for cross-border regulation of
carbon dioxide emissions in the EU in mid-2021 with its
subsequent introduction from 2023;
6. Revision of strategies taking into account changes in
the global market model against the backdrop of state-
ments by trading partners regarding plans for an energy
transition;
7. Search for options to reduce carbon footprint;
8. Improvement of rankings in ESG ratings and introduction of
environmental KPIs;
9. Revision of strategies for the development of the refining
segment (including petrochemicals) in the context of the
effects of COVID-19 on the dynamics of the expected
consumption of petroleum products in certain regions of
the world as well as the process of the energy transition.
4. Monitoring of the implementation of the “big tax maneuver”
completion and the introduction of the tax on additional
income;
5. Stabilization of oil quality in the system of main oil pipelines
in order not to worsen the quality of supplies to domestic
refineries;
6. Meeting the growing requirements for reducing the carbon
footprint and preserving the environment;
7. Adapting to new IMO requirements.
In 2021, the General Scheme of the oil industry development
until 2035 is expected to be approved. The General Scheme
contains four forecast oil production scenarios. The forecast
is based on the design and technical documentation for each
of more than 2.5 thousand existing fields or fields planned for
development until 2035, updated to reflect the current plans
of oil companies.
At the first stage of implementation of the General scheme,
until 2025, the total capital investment in oil production, ex-
cluding gas condensate, will be (depending on the scenario)
RUB 6.3–8.23 trillion. At the second stage, in 2026–2035,
capital investments will amount to RUB 14.61–19.02 trillion.
In terms of oil refining, the General Scheme developed three
development scenarios. All of them ensure the fulfillment
of the goals and objectives of the Energy Strategy: reliable
provision of the domestic market with motor fuels, increas-
ing the level of modernization and output of light petroleum
products, increasing the volume of exports of light petroleum
products. The expected range of primary oil refining volumes
through 2035 will be from 248 to 302 mln tonnes per year.
Depending on the scenario, the light product yield will be
from 71% to 74%.
The peak consumption of gasoline and diesel fuel in the do-
mestic market is projected to peak on the horizon until 2035,
after which consumption will gradually decline. This is due
to both improved engine efficiency and the spread of other
fuels. Therewith, jet fuel consumption is projected to grow.
36
37
Annual Report 2020 Integration of sustainable development
practices into the company’s activities
TATNEFT member of the UN Global
Compact since december 12, 2019
About our Company
1
2
The company makes a statement
regarding ESG factors and the
SDGs of their importance
but does not point out the specific
aspirations or objectives in this regard.
The company makes a statement
regarding ESG factors and SDGs
and provides quality information
regarding its aspirations or goals
to achieve them.
2018-2019
• Reporting in the field of corporate responsibility as per GRI.
• Statement of accession to the UN Global Compact and SDGs
• Determination of the vector of corporate actions on the SDGs
• Statement of accession to the UN Global Compact and SDGs
• Determination of the vector of corporate actions on the SDGs
• Reporting in the field of corporate responsibility as per GRI.
2020
3
The company defines
quantitative KPIs for ESG
factors and priority SDGs.
• Determination of the vector of corporate actions on the SDGs
• Prioritization of 10 SDGs
• Determination of quantitative KPIs for the priority SDGs
• Consideration of priority SDGs by the Board of Directors
• Reporting in the field of corporate responsibility as per GRI.
2020-2021
The company defines quantitative
KPIs and targets for ESG factors
and priority SDGs.
• Determination of quantitative KPIs for the priority SDGs
• Consideration of priority SDGs by the Board of Directors
• Setting targets for achieving the SDG by 2030
• Reporting in the field of corporate responsibility as per GRI.
2021-2022
The company connects KPIs for
ESG factors and priority SDGs with
its impact on society, with full
integration into the business model
• Tatneft member of the UN Global Compact since December 12, 2019
• Determination of quantitative KPIs for the priority SDGs
• Consideration of priority SDGs by the Board of Directors
• Setting targets for achieving the SDG by 2030
• Integration of the SDGs into the Company’s business model
• Formation of a corporate strategy for sustainable development
• Reporting in the field of corporate responsibility as per GRI.
4
5
38
Integration of 10 principles and 17 Sustainable Development Goals into the Company’s corporate activities in
the interests of inclusive development of the economy, territories, and society as a whole.
Development of corporate programs taking into account the UN Action Plan
“Transforming Our World. The 2030 Agenda for Sustainable Development.”
No poverty
Reduced inequalities
End hunger, achieve food security and im-
proved nutrition, and promote sustainable
agriculture
Sustainable cities and communities
Healthy lives and promote well-being for all at
all ages
Responsible consumption and production
Quality education
Climate Action
Gender equality
Life below water
Clean water and sanitation
Life on land
Affordable and clean energy
Justice and strong institutions
Economic growth, employment, decent work
conditions
Partnerships for the goals
Industry and innovation
Integration of the SDGs into the company’s business model
The Company is developing a system for integrating the Sustainable Development Goals into the value chain and an operating
model, taking into account the compliance of the target values with the indices of the Global Indicators System developed by
the Interagency Group of Experts on SDG Indicators (IAEG-SDGs).
39
Annual Report 2020 Company’s Membership in
Industry Associations
The Company is involved in the activities of several indus-
try associations and unions aiming at constructive inter-
action with other industry participants and development
of stance on key issues of the fuel and energy sector.
• The Company is a member of the Union of Oil and Gas
Producers of Russia (SNP), the General Director of the
Company is a member of the Council of the Union Board. The
SNP Union 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 the government
decisions.
• Since 1998, the Company has been a member of the Russian
National Committee of the World Petroleum Council on
Organizing and Holding World Petroleum Congresses (RNC
WPC). In particular, two World Petroleum Congresses were
organized with the participation of PJSC TATNEFT representatives
— the 21st Congress in 2014 in Moscow and the 22nd Congress
in 2016 in Istanbul.
• On June 24–26, 2019, the 6th Future Leaders Forum of the World
Petroleum Council was held in Saint Petersburg, where the
Company’s delegation of young specialists took an active part.
• The 23rd World Petroleum Congress was scheduled for holding in
Houston on December 6–10, 2020, which the TATNEFT dele-
gation was planning to participate in. The WPC was postponed
to December 2021 due to the novel coronavirus pandemic
outbreak.
In 2020, the representatives of PJSC TATNEFT did not participate
in the events held by the RNC WPC.
• In 2011, the Company signed the quadripartite agreement
with the Federal Antimonopoly Service of Russia,
the Federal Environmental, Industrial, and Nuclear
Supervision Service of Russia, and the Federal Agency
on Technical Regulating and Metrology aimed at quality
improvement of petroleum products supplied to commodity
markets of the Russian Federation and efficient modernization
of refineries. The Company fulfills its obligations under the
agreement ahead of schedule.
• Since 2011, the Company’s representatives have been serving
on the Working Group under the Ministry of Energy of the
Russian Federation on monitoring the situation related to
petroleum products production and consumption in the
Russian Federation, established to prevent an uncontrolled
increase in the price of petroleum products and ensure stable
and consistent supply of petroleum products to the domestic
market of the Russian Federation.
• Since 2011, the Company has been cooperating with the
Chamber of Commerce and Industry of the Russian
Federation.
• Since 2014, the Company has been an active participant
in the Consumers Council work on the activities of natural
monopolies in the crude oil and petroleum products transpor-
tation via trunk pipelines, which functions as a communications
platform of PJSC TRANSNEFT and its services consumers.
Within the efforts of this organization, the tariff formation issues
of PJSC TRANSNEFT, its investment program, and financial
results are discussed. The Company makes relevant proposals
and is considering initiatives discussed at the Consumer
Council.
• Since 2003, PJSC TATNEFT has been cooperating with the
• Since 2015, the representatives of the Company have been
Russian Union of Industrialists and Entrepreneurs (RSPP).
The General Director of PJSC TATNEFT is a member of the
Management Board of the RSPP; the Company representatives
participate in the RSPP Committees: Energy Policy and Energy
Efficiency Committee, Labor Market and Social Partnership
Committee, Industrial Safety Committee.
• Since 2003, the Company has been cooperating with NPP
Miners of Russia. The General Director of PJSC TATNEFT is a
member of the Supreme Mining Council.
• Since 2008, A.F. Yagafarov, Deputy General Director of PJSC
TATNEFT, has been a member of the Board of Directors of
JSC Saint Petersburg International Mercantile Exchange
(SPIMEX), which allows the Company to promptly obtain
information on the activities of the SPIMEX Exchange and make
relevant proposals.
• In collaboration with the Trade Union Organization, the Company
cooperates with the All-Russian Industrial Association of Oil
and Gas Industry Employers (PJSC TATNEFT is not a member
of the Association). On 11.12.2019, the Ministry of Energy of the
Russian Federation held the solemn signing of the Industrial
Agreement on Oil and Gas Industry Organizations for 2020–2022,
attended by A.V. Novak, Minister of Energy of the Russian
Federation.
serving on the Working Group under the Ministry of Energy
of the Russian Federation on monitoring the quality of
crude oil transported via the oil trunk pipeline system,
created to stabilize the crude oil quality in the oil trunk pipeline
system and prevent deterioration of the crude oil quality
supplied to domestic refineries. The active position of PJSC
TATNEFT within the scope of efforts of the Working Group
enabled delivering several positive results, including increased
limit values of sulfur content in the export lines within the regular
traffic scheme. In 2019, the Ministry of Energy of the Russian
Federation and TANECO JSC concluded an Agreement on
Modernization of Oil Refinery Facilities for Oil Re-Refining
for the amount of RUB 106.5 billion investments, and later (in
the same year) they signed an additional agreement to amend
the current agreement with JSC TANECO on oil refinery facilities
modernization, regarding the timing of the commissioning of
several facilities and the relevant scope of funding.
• In 2019, the Company joined the Working Group on Transition
of Oil and Gas Companies to the Goods Labeling and
Traceability System in the Russian Federation.
• The Company’s specialists participate in the work of the
Eurasian Union of Experts on Subsoil (EUES) to enable the
comprehensive use of existing competencies to ensure fair and
high-quality appraisal of mineral reserves.
About our Company
Support for International and National
Economic, Environmental, and Social
Initiatives
Since 2019, the Company is a member of the UN Global
Compact, adhering to 10 Principles on Human Rights, Labor,
Environment, Anti-Corruption and integrating 17 Sustainable
Development Goals into its activities.
As part of the official events marking the 75th anniversary
of the United Nations, the Company, among other Global
Compact participants, signed the “Business Leaders
Statement for Renewed Global Cooperation,” which
affirms business support for international cooperation across
countries, sectors, and generations to adapt to changing
circumstances, including the COVID-19 pandemic, economic
uncertainty, climate change, and other factors of impact on
the Sustainable Development Goals. The Statement was
presented to the UN Secretary-General during the UN
Private Sector Forum on September 21, 2020.
In 2020, we have focused our sustainability actions on
the 10 SDGs to which we can most effectively contribute,
taking into account the specific nature of the Company’s
business. We prioritize SDG 3 “Good Health and Well-
Being,” SDG 4 “Quality Education,” SDG 6 “Clean Water and
Sanitation,” SDG 7 “Affordable and Clean Energy,” SDG 9
“Industrialization, Innovation, and Infrastructure,” SDG 11
“Sustainable Cities and Communities,” SDG 12 “Sustainable
Consumption and Production,” SDG 13 “Climate Action,”
SDG 15 “Life on Land,” SDG 17 “Partnerships for the Goals.”
We are implementing our corporate practices in line
with the new Global Compact Strategy — “Accelerating
Business Action to Achieve Sustainable Development
Goals and More Ambitious Climate Goals” — adopted
for the period 2021–2023. Following the Roadmap of this
Strategy, we are strengthening our contribution to collec-
tive action and integrating new indicators into our practices,
including factors related to climate and human rights with
an assessment of the Company’s compliance with relevant
global conventions and agreements.
TATNEFT is a member of the “National Network of the
UN Global Compact in Russia” Association. In 2020, a
representative of the Company joined the Governing Council
of the Association. In December 2020, a corporate volun-
teer movement to promote the SDGs among young people
was initiated at the Company’s Youth Forum on Sustainable
Development and will be part of the Volunteer Movement
Program of the National Network of the UN Global Compact
in Russia. The Company is a party to in a large-scale proj-
ect “SDG Ambition. Global Level SDG Ambition” initiated
by the UN Secretary-General in January 2020 at the World
Economic Forum in Davos.
As part of interaction with the state in the field of sustainable
development, TATNEFT participates in the Interdepartmental
Working Group for the development of investment activi-
ties and attraction of extra-budgetary funds in sustainable
development projects under the Ministry of Economic
Development of the Russian Federation. The Company also
implements environmental and social programs as part of the
National Projects.
The Company’s key sustainable development initia-
tives include taking urgent action to combat climate
change, as enshrined in the Paris Agreement. In 2020,
the Company announced a transition to carbon neutrality by
2050. We adhere to international standards and guidelines in
developing the greenhouse gas emission management sys-
tem: GreenHouseGas (GHG) protocol — on measurement,
control, and disclosure of emissions, including supply chains;
TCFD Implementation Guide —carbon footprint reporting
and we provide data for CDP climate rating. In assessing
the scope of emissions accounting, we intend to expand the
application of the World Business Council for Sustainable
Development (WBCSD) and World Resources Institute
(WRI) Greenhouse Gas Protocol Corporate Standard for
Accounting and Reporting, as well as the PAS series of stan-
dards. The Company takes into account the activities of the
International Petroleum Industry Environmental Conservation
Association (IPIECA) and the Oil and Gas Climate Initiative
(OGCI). We believe these initiatives are essential to prog-
ress towards the energy sector decarbonization goals and
sustainable development in general. The paramount step
for TATNEFT in 2020 was to join SBTi, a group of leaders of
the international initiative for setting science-based goals, to
contribute to preventing the rise of the planet’s temperature
by more than 1.5 degrees Celsius.
As part of the formation of carbon regulation in Russia and
the development of its most effective mechanisms, the
Company interacts with all stakeholders, including participa-
tion in the efforts of the Committee of the Russian Union of
Industrialists and Entrepreneurs on climate policy and carbon
regulation and the Committee of the Russian Chamber of
Commerce and Industry on environmental management and
ecology.
In 2020, as part of preparations for the Business 20 Summit
(G20) at the highest political level, the Company participat-
ed in the task forces of the Business 20 (B201): “Energy,
Sustainability, and Climate,” “The Future of Employment and
Education,” “Digitalization,” “Finance and Infrastructure.”
Note: B20 is one of the key social partners of the Group of
Twenty (G20), representing the interests of the global business
community and companies of the G20 countries.
40
41
Annual Report 2020 Our goal is to reach
a carbon neutrality by 2050
The Company has set the intermediate targets:
• Reducing emissions by 10% by 2025
• Reducing emissions by 20% by 2030
from the baseline year 2016;
from the baseline year 2016;
Board of Directors’
Report on Company’s
Development
Performance by
Main Business-
Streams
The Company contributes to a sustainable
energy future on an ongoing basis in
the context of the transition of the
world economy to a low-carbon path of
development.
42
43
Joint Address to the
Shareholders, Investors
and Partners
Of the President of the Republic of Tatarstan,
Chairperson of the Board of Directors
Rustam N. Minnikhanov
and
Chief Executive Officer,
Chairperson of the Management Board of PJSC TATNEFT
Nail U. Maganov
Dear shareholders,
investors, and partners!
The reporting year 2020 was full of events that impacted both
the global and domestic economy of the Russian Federation.
Oil production restrictions under the OPEC+ agreement,
decline in oil and oil products price caused by a decreased
demand during the pandemic, as well as the decisions to
change the taxation of the oil industry related to the increase
in government spending, affected the performance of the
Company's financial and economic activities. However, mea-
sures taken timely to diversify capital investments, implement
projects for continuous improvement of processes and sig-
nificant optimization of costs allowed to reduce the negative
impact of external factors.
The value of the consolidated assets of TATNEFT Group in the
reporting year increased by 2%, amounting to 1 263 billion
rubles. The key driver of strengthening the structure and
growth in asset value was the expansion of the “Refining and
Oil and Oil Product Sales segment”.
Year-end consolidated revenue amounted to 720,7 billion
rubles. The profit of the Group's shareholders was 103,5
billion rubles. The company consistently demonstrates a high
level of profitability and a low level of debt burden. Adjusted
EBITDA amounted to 187,3 billion rubles, return on equity
(ROACE) - 13%.
The Company was ranked 6th in the oil and gas sector in the
Boston Consulting Group (BCG) Value Creator Ranking with
a Total Shareholder Return (TSR) 19%.
In compliance with the Company’s dividend policy, the Board
of Directors recommended to allocate 50% of the year-end
net profit of TATNEFT Group to the payment of dividends.
The Company's investment policy is implemented based on
the principle that ensures the growth of value for sharehold-
ers and the implementation of tasks for long-term develop-
ment of TATNEFT Group in the context of transition of the
world economy to a low-carbon path of development. We
keep strict control over the financial discipline of investment
projects and monitor the return on the assets used. In 2020,
the volume of investments in the Company amounted to
103,3 billion rubles. This is below the level of 2019 by 20,3%
due to reduction in well interventions as it is necessary to
comply with the requirements of the OPEC+ agreement. Over
80% of the investments was directed to the most capital-in-
tensive business areas: oil and gas processing and oil and
gas chemistry, as well as oil exploration and production.
In 2020, oil production plans were revised. In 2019, oil
production reached almost 30 million tonnes and its further
growth was expected. In 2020, due to OPEC+ restrictions, 26
million tonnes were produced. At the same time, the Group
has sufficient potential to implement its Strategy.
Our efforts are focused on additional exploration of oilfields
discovered earlier and finding new fields in the regions of
traditional oil and gas production in the Republic of Tatarstan.
At the beginning of 2021, the hydrocarbons reserves of the
TATNEFT Group, according to an independent assessment
done by the consulting company Miller and Lents, based on
forecasted oil prices, amounted to 1 300,1 million tonnes of
oil equivalent, including 927,4 million tonnes of oil equivalent
of proven reserves.
Diversification of investments to oil refining provided main-
tenance for the Company’s economic stability under the
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
difficult macroeconomic conditions of the last year. The en-
terprises of the refining block processed 13 million tonnes of
feedstock, put three units into operation at TANECO. The total
production of oil and gas products amounted to 12,5 million
tonnes. The share of oil product sales in 2020 was more than
40% of all net revenue. In 2021, we plan to launch six new
units and production facilities. The total processing volume of
petroleum feedstock will increase to 14,5 million tonтуs per
year.
In the context of growing demand of society for clean and
affordable energy, we constantly improve the characteristics
of the produced petroleum products and petrochemicals.
The production of Euro-6 gasoline is expected to increase.
With the commissioning of the second delayed coking unit,
the volume of feedstock processed across the Company will
reach 16 million tonnes per year.
In 2020, over 5 million tonnes of petroleum products were
sold through the Company's retail network. Fuel quality and
customer service allowed Tatneft's network to be one of the
few in the industry to exceed pre-crisis indicators. Currently,
819 filling stations operate under the corporate brand within
Russia and abroad. In the coming years, we plan to increase
the number of filling stations in the regions of Russia.
The tire complex also retains its leading position in terms of
its market share. Under the situation where car production all
over the world was suspended, KAMA TIRES increased sales
by 18% and sold 12 million pieces of tire products. In 2021,
it is planned to expand the product range and sell about 13
million tires.
We see a significant potential for business expansion in
the development of tire production outside of Russia. In
Kazakhstan, the joint construction of a plant for the pro-
duction of high-quality passenger car, light truck and truck
all-steel tires has begun. The products will be supplied both
to Russia and to the countries of Central Asia. Completion of
construction is scheduled for 2022.
The petrogaschemical production of the Company has
reached the maximum level for the last 12 years. In 2020, 208
thousand tonnes of rubbers and 163 thousand tonnes of fuel
additives to gasoline were produced.
Power generation facilities were integrated into the business
model of the Company, which provide a full cycle of gener-
ation, transmission and sale of heat and electricity. In 2020,
heat energy was generated by 16% more versus 2019.
As part of solving the strategic task of expanding the range
of innovative products, more and more preference is giv-
en to fiberglass. This material is optimal from the ecology
standpoint; when producing fiberglass products, the carbon
footprint is 6,5 times less than in the production of metal
products. The pipes and cable systems produced by the
Company are used in the development of oil fields, in the
construction of an oil refinery complex and infrastructure
facilities, and are also sold to third-party customers.
Strengthening the technological basis of TATNEFT Group
is based on digital solutions, a comprehensive transition to
innovative digital forms of management and organization
of business processes. At the beginning of 2020, a single
Center of Competence and Responsibility for key IT pro-
cesses was formed on the basis of the established TATNEFT-
Digital Development subdivision. As part of the digitalization
program, projects have been started on a wide range of
processes - from oil reserves calculation and planning well
construction to shipment of oil products and the development
of digital twins.
In 2020, the TATNEFT Group provided over 60 thousand jobs
within 110 enterprises in the Russian Federation and abroad.
As part of the implementation of the HR strategy, we focus
on the tasks of training and improving the competence of
personnel, improving the motivation system, forming per-
sonnel reserve. We pay great attention to corporate cul-
ture and youth policy. A significant HR project in 2020 was
the discovery of new specialties and the development of
44
45
Annual Report 2020
our own human resources to meet new challenges. Thus,
the Company has organized a targeted program "School
of Business Analytics" to train one of the most demanded
professions, which allows to quickly identify problems and
determine ways how to resolve them.
Considering that the Company implements large invest-
ment projects, including those outside Russia, TATNEFT has
launched a special training program for project related work.
The Corporate University of the Company implements profes-
sional retraining programs.
When managing industrial safety issues at production facili-
ties, we use a risk-based approach. Much attention is paid to
programs to prevent occupational injuries, train personnel on
a complex of long-term and preventive measures. 1,4 billion
rubles were allocated for labor protection measures in 2020.
In its activities, the Company strictly adheres to the funda-
mental principles of Human Rights, including the right to a
safe environment.
Protection of life and health of people, a favorable environ-
ment are among the key priorities. The company acts in
accordance with the Policy on industrial safety, labor and
environmental protection, taking into account climate change
and modern international practice, is guided by the principles
of recognizing the priority of human life and health to produc-
tion activities, a high level of industrial safety, ensuring the
potential for self-healing of ecosystems, and reducing carbon
footprint.
The expenses of TATNEFT Group aimed at ecological safety
and environmental protection in 2020 amounted to 11,3 billion
rubles.
The sustainable energy future of the Company is inextricably
linked with the transition of the world economy to a low-car-
bon path of development and actions to prevent climate
change. The TATNEFT Group is implementing projects
focused on the task of reducing the carbon footprint and
integrating this task into business processes. The company
actively uses in its activities the mechanisms of international
platforms and standards on climate initiatives.
Energy efficient production processes, a model of rational
resource consumption and high environmental performance
of the Company's products contribute to a continuous re-
duction in specific emissions of greenhouse gases into the
atmosphere.
The company shares and integrates into its business model
the 17 Sustainable Development Goals adopted by the UN
for the period of up to 2030. These are climate challenges,
decarbonization and clean energy challenges, resource
efficiency, innovation and infrastructure opportunities. A sig-
nificant mechanism in the implementation of the Sustainable
Development Goals on climate and the principles of the UN
Global Compact is TATNEFT's joining the SBTi international
initiative (Science Based Targets initiative) on the platform of
“Ambitious corporate actions to prevent the planet's tempera-
ture from exceeding 1,5 degrees Celsius” (Business Ambition
for 1,5C). TATNEFT Group plans to shift to carbon neutrality
by 2050 with a phased reduction in the intensity of green-
house gas emissions along the entire value chain.
As part of efforts to reduce its carbon footprint, since 2000,
TATNEFT Group has been implementing a program for
planting and reforestation, taking into account the absorptive
capacity of green spaces, as well as measures to improve the
efficiency of green planting management, taking into account
biodiversity and the development of a circular economy. In
2020, 1,98 million seedlings were planted, which, according
to preliminary expert estimates, will compensate for 660
thousand tonnes of CO2-eq. emissions of greenhouse gases
(when trees reach their maturity age). In total, 12 million
trees have been planted since the commencement of the
Program. The company plans to automate monitoring of the
Reforestation Program with an assessment of the absorp-
tive capacity and biodiversity of forests. In the future, the
Company plans to go through the procedure of validation
of the Reforestation Program and regularly verify the results
achieved in offsetting greenhouse gas emissions.
TATNEFT "is one of the largest taxpayers in the main region of
its operations, which plays an important role in ensuring the
income of the federal and regional budgets. This contributes
to the stable socio-economic development of the territories
where our enterprises are located. In addition, within the
framework of targeted corporate programs, the Company
annually makes social investments that are directed to the
development of healthcare, science and education, the
cultural environment, preservation of the spiritual heritage,
and support for sports. At the end of 2020, the investments of
TATNEFT Group, which have a social orientation or compo-
nent, exceeded 20 billion rubles. The key role in this process
is played by the TATNEFT Charitable Foundation.
The year 2020 started for the Company with a serious chal-
lenge caused by outbreak of the new coronavirus infection.
TATNEFT made every effort to prevent the spread of the ep-
idemic. During the period of restrictions, the Group's enter-
prises were the first in Tatarstan to cancel business trips and
transfer their offices to work remotely.
Some of the life support enterprises were transferred to a
special regime, where employees worked in isolation from
the outside world, supplying water, electricity and heat to
residential buildings and production facilities. The enterpris-
es of continuous cycle (mining, processing, etc.) continued
their work around the clock with the use of increased sanitary
protection measures.
As part of the prevention of COVID-19 on his own, the
Company organized the production of protective equipment
to combat coronavirus infection and donated protective suits
and masks to hospitals in Tatarstan designated as hospitals
for the treatment of coronavirus patients, and supplied ambu-
lance stations, central regional hospitals and social workers.
Since 2021, the tax conditions affecting the activities of the
Company have changed. To replenish the state budget
during the crisis, the Russian Government decided to abolish
differential taxation, including depleted fields, high-viscosity
and super-viscous oil reservoirs. This required the investment
program to be revised in this direction. Under the current tax
system, putting new ultra-viscous structures in production is
not economically efficient, therefore, only the structures that
have already been put in operation continue to be developed
in the ultra-viscous oil fields. We are making every effort to
change the situation for the better. We are negotiating with
federal executive authorities to cost-effectively involve addi-
tional reserves of extra-viscous oil in the development, and
improve conditions for depleted fields. Assistance to projects
such as ultra-viscous oil is beneficial to everyone, and first-
of-all to the government, as it provides a significant multiplier
effect.
Under conditions of high price volatility and uncertainty, the
results achieved confirm effectiveness of the Company's
business model and management’s program-oriented ac-
tions aimed at increasing business margins, effective building
of business processes and maintaining steady financial, eco-
nomic and social situation. The value chain is constantly be-
ing improved, which includes those created due to increasing
the share of innovative solutions, strict adherence to quality
and safety standards.
The Board of Directors makes decisions aimed at the long-
term successful development of the Company. Consistently
implementing our plans, we carefully assess the business
challenges associated with the transition of the world econo-
my to a carbon-neutral development path. Global changes in
preventing climate change require that we diversify busi-
ness processes and actively strengthen internal reserves to
increase our competitiveness. The company will make every
effort to meet the challenges.
We would like to thank our shareholders, investors, partners,
and employees of the TATNEFT Group enterprises for their
joint activities and we look to the future with optimism!
President of the Republic of
Tatarstan, Chairman of the Board of
Directors of PJSC TATNEFT
Rustam N. Minnikhanov
General Director, Chairman
of the Management Board of
PJSC TATNEFT
Nail U. Maganov
46
47
Company
capitalization
RUB1,186 trillion
USD 16,1billion
Total market capitalization by the
end of 2020
Total market capitalization by the
end of 2020
At the end of 2020, the total market capitalization (market value of ordinary and preferred shares) of the Company decreased
by RUB 577.5 billion as compared to that of the end of 2019, which amounted to RUB 1.185 trillion. In U.S. dollar terms, total
market capitalization fell by 43.3% to USD 16.1 billion.
Capitalization for the period of 2010–2020
1097
965
716,6
307,6
344,6
475
471,6
513,4
1763,4
1684,6
1185,9
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
The main reason for the decline in capitalization is the current global epidemiological situation,
which has caused a decline in oil demand, against the background of oil production restrictions
under the OPEC+ agreement.
48
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Consolidated assets of
TATNEFT Group
rub 1,26 trillion
rub 23,1 bln
Consolidated asset value
+ vs. 2019
Assets of TATNEFT Group by segments, bln rub*
1 201
1 240
1 263
1 107
122
251
27
367
340
140
253
33
406
369
139
232
34
451
384
146
209
35
508
365
2017
2018
2019
2020
Exploration and production
Refining and sale of oil and
oil products
Petrochemistry
Banking
Corporate and other
Value and structure of TATNEFT Group
consolidated assets in 2011 and 2020, %
Value and structure of TATNEFT Group
consolidated assets in 2011 and 2020,
bln rub
100
100
1263
13,8
4,3
34,5
47,4
11,6
16,6
2,8
40,2
28,8
628
86
27
217
298
2011
2020
2011
2020
Exploration and production
Refining and sale of oil and oil products
Exploration and production
Refining and sale of oil and oil products
Petrochemistry
Banking
Corporate and other
Petrochemistry
Banking
Corporate and other
* Comparison for the period from 2011 is justified by the stage of development of proprietary oil refining ca-
pacity at the TANECO complex
146
209
35
508
365
49
Annual Report 2020 Financial performance of
TATNEFT Group
Free cash flow, bln rub
Added value dynamics, bln rub
152,8
147,8
105,3
95,7
45,7
200
150
100
50
0
662
678
459
2016
2017
2018
2019
2020
2018
2019
2020
The decline in added value is due to the oil production restrictions introduced in 2020, the overall “temporary
shutdown” of the market of goods and services due to the pandemic, and the drop in oil prices.
Share of added value in total output
800
600
400
200
0
66%
Share of added value in total output
459 bln rub
Added value of TATNEFT Group in 2020
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
TATNEFT Group taxes, bln rub
119
187
284
299
176
2016
2017
2018
2019
2020
TATNEFT Group taxes, %
35
6
2
40
6
2
62
7
60
2
7
2
34
8
2
Mineral extraction tax (MET)
Income tax expenses
Property tax
Other
80%
Mineral extraction tax (MET)
15,7%
Income tax expenses
3,5%
Property tax
0,8%
Other
Consolidated revenue & EBITDA
Net consolidated revenue from nonbanking
activities, bln rub
Adjusted EBITDA, bln rub
932,3
1000
910,5
681,2
720,7
800
600
400
200
0
328,4
314,8
174,4
200,8
187,3
1000
800
600
400
200
0
51
The analysis of the value chain and its structure shows the key role of the oil production segment (it accounted for circa 90% of
the total scope in 2020).
580,1
In the structure of the Company’s added value, the largest share in 2020 accounts for taxes and fees making circa 50%, while
the production profit is circa 30%, and wages and depreciation are 6% and 14%, respectively.
The production profit as part of the Company’s added value in 2020 amounted to RUB 129 billion, which is half as high as the
previous year. The return on added value (the share of production profit in added value) in 2020 was 28%.
50
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Annual Report 2020 Revenue by segment
Revenue by segment (less the intersegment
revenue), bln rub
Revenue by product, bln rub
934
955
16
23
52
24
23
48
739
36
18
54
371
399
338
293
472
461
712
13
31
50
257
361
588
13
8
45
241
281
910
30
51
932
39
48
721
50
53
355
378
681
25
49
242
580
25
45
212
323
295
474
467
298
365
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Exploration and production
Petrochemistry
Oil
Petrochemicals
Refining and sale of oil and
oil products
Corporate and other
Oil products
Other
Banking operations
RUB 725,1 BLN
Direct economic value created
RUB 658,8 BLN
Distributed economic value
RUB 66,29 BLN
Retained economic value
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Creating value for
stakeholders
Shareholders and Investors
The Company provides one of the highest
rates of dividend yield
The Company pursues the progressive dividend policy,
considering dividends as one of the key indicators of
investment appeals for shareholders, and strives to
maximize the dividends through steady growth of busi-
ness profit margins. The funds appropriated for divi-
dends account for at least 50% of the net profit defined
under RAS or IFRS, whichever is higher.
Dividend yields on shares, %
(preferred, ordinary)
12,34%
10,3%
6,59%
6,97%
3,61%
In 2020, we generated RUB 95.7 bln of free cash flow.
This made it possible for us to pay out the 2020 half-
year interim dividends in the amount of RUB 23.122
million. Altogether, the 2020 dividends, including the
interim dividends previously earned, are proposed for
distribution in the amount of RUB 150.118 million.
14,84%
12,43%
17,68%
10,42%
8,61%
2015
2016
2017
2018
2019
Dividend yields on
ordinary shares
Dividend yields on
preferred shares
Dividend yields on shares
Data sourced by the Moscow Exchange
84,91%
84,91%
64,47%
65,47%
10,96%
10,96%
22,81%
22,81%
39,94%
39,94%
2015
2016
2017
2018
2019
Dividend yields on
ordinary shares
Dividend yields on
preferred shares
/*For the detailed dividend policy, refer to 198-203
50% net profit as per RAS will be 2020 dividend amount
RUB 831,6 bln
2020 share capital
52
53
Annual Report 2020 Context of Activities — Sustainable
Development
We are highly committed to maximizing the shareholder value while keeping the
balance of interests of all stakeholders and create shared value
TATNEFT historically adheres to the principles of corporate responsibility and implements
large-scale programs to preserve the natural ecosystem, improve the quality of life and
develop social infrastructure in the territories of its operation.
Strict compliance with the legislation and the industry standards concerning the Company’s
operations.
Adherence to the code of ethics, including dedication to supporting diversity and inclusive
culture in the corporate environment.
Stakeholders
Shareholders and Investors
Product and service consumers
TATNEFT Group employees
Contractors
Local communities
State
The activities of the Company as one of the major taxpayers
in the principal operation region play an important role in pro-
viding proceeds to federal and regional budgets that promote
the stable socioeconomic development of the regions, create
quality jobs, improve living standards and welfare of the pop-
ulation, build social infrastructure, increase added value, and
develop related industries.
We are propelling the progress in sustainable development
together with our communities taking into consideration the
standpoint of the stakeholders concerning all aspects of the
Company’s corporate, operating, and social activities.
Basic principles of the Company: recognizing that human
life and health takes priority over production activities; high
level of industrial safety; ensuring the self-restoring capacity
of ecosystems, mitigating negative impacts on the environ-
ment and carbon footprint for sustainable energy future. The
Company reduces the man-induced burden on the environ-
ment in a comprehensive manner.
The Company has made significant progress in improving the
industrial and environmental safety of its operations since the
early 2000s. This is due to the effective internal standards,
safety culture, and continuous improvement of working
conditions. The Company sets a goal of “zero performance,”
aimed at preventing industrial accidents and adverse envi-
ronmental impacts.
rub 344,4 bln
Total accrued taxes, charges, and contributions
RUB 20,2 bln
Social investments
circa 60 thousand
Jobs
RUB 11,3 bln
Environmental expenditures
RUB 1,4 bln
Spent for occupational safety
0,2
Lost time injury frequency
rate (LTIFR)
54
55
Annual Report 2020 Specific GHG emissions (Scope 1,2) by main activities
Resource capacity
TATNEFT Group
hydrocarbon reserves
1,3
bln toe
including
927,4
mln toe
Propelling improved reserve replenishment performance is a key driver
for the 2030 Strategy.
The hydrocarbon reserve additions are ensured through sustainable use of natural resources
and strict compliance with environmental and industrial safety to apply best practices and
technologies for prospecting and exploring oil fields.
Specific GHG emissions in oil production,
Specific GHG emissions in oil production,
kg per tonne of oil produced
kg per bbl of oil produced
134,72
134,99
18,38
18,41
2019
2020
2019
2020
Specific GHG emissions in oil and gas
Specific GHG emissions in heat and power
processing, kg per tonne of reference fuel
generation, tonne per mln kWh
87,26
79,38
299,92
295,43
2019
2020
2019
2020
Calculations are made per GRI 305-4 GHG emissions intensity
Planting of vegetation, pcs
1 281 718
1 226 294
1 129 223
1 170 530
662 550
1 980 484
1 612 363
1 379 900
2013
2014
2015
2016
2017
2018
2019
2020
Associated Petroleum Gas Utilization across TATNEFT Group, %
96,24 %
95,93 %
95,98 %
2018
2019
2020
56
57
Annual Report 2020 Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Turnover of proved oil and condensate reserves across
TATNEFT Group in 2020, thousand tonnes*
Proved developed producing
net oil reserves
Proved developed non-producing
net oil reserves
At the end of
2020
At the end of
2019
Change (incl.
production), %
422,510
452,040
-0,77
336,947
344,498
-2,19
Proved undeveloped net oil reserves
132,646
143,792
-7,75
Proved net oil reserves
892,103
940,329
-2,36
*The reserves estimates used the scenarios as of year-end 2019 for constant prices and as of year-end 2020 for projected
prices
In 2020, there was a decline in proved oil reserves as compared
to 2019 by -48,227 million tonnes (-5,1%), probable oil reserves
by -7,222 million tonnes (-2,2%), and a rise in possible oil re-
serves by +3,691 million tonnes (+10,1%).
The oil reserve decline in 2020 was mainly caused by the re-
vised tax assessment for depleted fields and highly viscous and
super-viscous oil fields.
The exploration management processes aim to effectively im-
plement the Company’s resource base replacement programs,
reducing the time and improving the quality of development of
oil fields for commercial production with the integration of intel-
lectual and high-tech capabilities.
The Company’s advantage is its rich and prolific hydrocarbon
resources. Thus, the Company’s existing resource base makes
it possible to maintain its current production level for more than
30 years.
TATNEFT Group resource
capacity
TATNEFT Group oil and condensate reserves*
Oil & Condensate
Proved Reserves
892,103
mln tonnes
including unconventional
oil reserves
23,030
mln tonnes
Oil & Condensate
Probable Reserves
320,958
mln tonnes
including unconventional
oil reserves
34,912
mln tonnes
Oil & Condensate
Possible Reserves
40,119
mln tonnes
including unconventional
oil reserves
35,693
mln tonnes
Altogether, 1,253 billion tonnes, including 93,635 million tonnes of unconventional oil reserves.
*The reserves estimates as of year-end 2020 used the projected price scenario
TATNEFT Group’s hydrocarbon reserves**
Proved Reserves
Probable Reserves
Possible Reserves
927,404
mln TOE
including unconventional
oil reserves
23,232
mln TOE
332,433
mln TOE
including unconventional
oil reserves
35,088
mln TOE
40,301
mln TOE
including unconventional
oil reserves
35,700
mln TOE
Altogether, 1,300 billion tonnes of oil equivalent (TOE), including 94,020 million tonnes of oil
equivalent of unconventional oil reserves.
** including gas reserves (42 722 mln m3 of proved reserves, 13 887 mln m3 of probable reserves and
220 mln m3 of possible reserves) converted into tonnes of oil equivalent
Total net contingent resources across TATNEFT Group***
1C resources
2C resources
3C resources
91 972
thousand tonnes
oil and condensate
6 652
million m³
gas
133 048
thousand tonnes
oil and condensate
11 210
million m³
gas
286 054
thousand tonnes
oil and condensate
55 118
million m³
gas
*** Contingent resources as per the SPE-PRMS classification are quantities of hydrocarbons estimated as of a given date,
that can be potentially recovered from known accumulations using development projects, but are not yet considered
commercially recoverable due to one or more contingencies.
58
59
Annual Report 2020 Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
2020 key operating
performance
The oil production restrictions under the OPEC+ agreement during the period starting from 2018 have had a significant impact
on the Company’s oil production output, and additional restrictions introduced in 2020 due to the global epidemiological situ-
ation entailed a decrease in production.
Oil and gas production
Refining and product output
TATNEFT Group production, mln tonnes
Average daily oil production, kbpd
Oil refining, kbpd
Petroleum product output, mln tonnes
28,7
28,9
29,5
29,8
26,0
30
24
18
12
6
0
558,3 564,8 576,4 581,5
506,3
600
480
360
240
120
0
230,3
206,7
179,3
179,0
163,3
235
188
141
94
47
0
11,5
10,3
9,3
8,5
8,9
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
TATNEFT Group gas production, mln
m³
997,8
945,3 925,3
1009,6
831,4
1100
880
660
440
220
0
Average daily gas production, kboe
Gas product output, mln tonnes
Tire production, mln pcs
16,0
15,2
14,9
16,3
13,4
20
16
12
8
4
0
1,2
1,1
1,2
1,2
1,03
14,6
12,9
11,5
10,3
10,9
1,5
1,2
0,9
0,6
0,3
0,0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
60
12,0
9,6
7,2
4,8
2,4
0,0
15
12
9
6
3
0
61
Annual Report 2020 Trading and logistics
The Company ensures the optimal balance of distribution of oil supplies to increase operating profitability in the market
environment.
In 2020, TATNEFT Group exported 56.4% of all its crude oil sold to both the CIS and non-CIS countries (as compared
to 59.6% in 2019).
The key driver for the lowered sales revenue was the plunge in global oil prices as well as the drop in oil sales. Meanwhile, the
Company supplies its own refineries with the feedstock to load their capacities in full. The Company enjoys the services of JSC
Transneft, a state monopoly and the operator of the Russian system of trunk oil pipelines, to transport its oil for export.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Petroleum
product sales
The Group’s total petroleum product sales in 2020 amounted to 13.3 million tonnes. In 2020, the revenue from petroleum
product sales for the TATNEFT Group amounted to RUB 322.7 billion, which is down 14.7% from 2019. The decrease in reve-
nue is mainly due to the decreased prices for petroleum products, partially offset by an increase in sales of petroleum products
with further expansion of output at JSC TANECO.
Crude oil sales, mln tonnes
Net revenue from crude oil sales, bln rub
TATNEFT Group petroleum product
sales, mln tonnes
TATNEFT Group petroleum product sales
revenue, bln rub
22,1
21,8
20,3
20,1
16,8
25
20
15
10
5
0
474,3 466,7
365,2
298,1
294,9
500
400
300
200
100
0
10,9
10,5
12,0
11,3
13,3
15
12
9
6
3
0
378,5
355,0
322,7
241,7
212,3
400
320
240
160
80
0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Crude oil sales shares by supply directions, %
Petroleum product sales shares by supply directions, %
Domestic market
CIS countries
Non-CIS countries
39
5
56
27
6
67
38
6
56
40
6
54
43
6
51
Domestic market
CIS countries
Non-CIS countries export
55
2
43
52
4
44
50
5
45
57
3
40
57
4
39
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
TATNEFT Group crude oil sales revenue shares excluding export duties by
supply destinations, %
TATNEFT Group petroleum product sales revenue shares excluding export duties and excise
taxes by supply directions, %
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Domestic market
CIS countries
Non-CIS countries
34
5
61
25
6
69
35
6
59
37
6
57
40
6
54
Domestic market
CIS countries
Non-CIS countries export
58
3
39
52
5
43
52
6
42
59
4
37
In 2020, circa 91% (77% in 2019) of crude oil export was transported via the Druzhba pipeline owned by Transneft (primarily to
Poland and Slovakia), 8% (18% in 2019) of oil export was shipped through Primorsk (the Baltic Sea port of Russia) and 1% (5%
in 2019) was shipped through Novorossiysk (the Black Sea port of Russia).
62
64
5
31
63
Annual Report 2020
Fuel Filling Station network
Petroleum product sales
Retail petroleum product sales, ktonnes
Average daily sales per station, tpd
5 137
4 142
3 455
2 575 2 677
6000
4800
3600
2400
1200
0
9,1
7,6
8,0
12,0
10,2
9,6
9,9
7,2
4,8
2,4
0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
retail petroleum product
sales growth
24%
708 stations
Retail network
growth in average daily sales
per station
3%
111 stations
Outside the Russian Federation
64
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
TATNEFT fuel filling
station network locations
Priorities for our fuel filling station network development are focused on
continuous improvement of environmentally friendly properties of products
and operating processes of filling station complexes, rational consumption of
resources, and reduced greenhouse emissions.
Leningrad Region
St. Petersburg
Pskov Region
Smolensk Region
Tver Region
Vologda Region
Arkhangelsk Region
Kaluga
Region
Moscow
and
Moscow Region
Yaroslavl
Region
Tula Region
Vladimir Region
Ryazan Region
Lipetsk Region
Nizhny Novgorod Region.
Voronezh Region
The Republic
of Mordovia
Penza Region
Mari El Republic
Chuvash
Republic
Krasnodar Region
Rostov
Region
Volgograd
Region
Ulyanovsk
Region
Samara
Region
Stavropol Region
Udmurtia
Republic
of Tatarstan
Republic
of Bashkortostan
Chelyabinsk
Region
Sverdlovsk Region
Belarus
Ukraine
Uzbekistan
Kemerovo Region
65
Annual Report 2020 Heat & power generation
Tire business
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
The power-generating capacities are integrated into the Company’s business model and
ensure a full cycle of generation, transmission, and sale of thermal and electric energy.
The generated energy is supplied to the Company’s facilities (providing generation), external
consumers (commercial generation), and the population.
1,5 bln kW*h per year
Electric power generation
Electric power generation
2,2
1,45
1,2
1,5
1,5
3
2
1
0
2016
2017
2018
2019
2020
4,703 mln gcal
Heat energy sold in 2020
The energy capacities existing in the Group’s
asset portfolio allow increasing the level of verti-
cal integration through reducing the dependence
of in-house energy needs on external market
conditions and optimizing electricity costs at
production facilities while developing commercial
generation (supplies to external consumers) and
new growth points, including clean energy.
Proprietary research and development solutions, cutting-edge technologies, and
production capacities.
Over 45 years in the market
Full production business cycle
17
22
400
certified t&s centers in the world
certified t&s centers in Russia
Over 400 commodities
93
contractors globally
993
contractors in Russia
11,9 mln tires
sold in 2020
Tire market
31%
36%
27%
2018
2019
2020
69%
64%
73%
Export market
Russian market
66
67
Annual Report 2020 Investment program
Investment Portfolio
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
The contribution to the sustainable growth of the Company’s value is attained
through investments in economically viable and highly competitive projects
yielding a high profit margin as well as development and implementation of
cutting-edge technologies.
The Company’s investment program is focused on
achieving strategic goals, including improved profit-
ability of business operations, hydrocarbon produc-
tion growth, additions to reserves, development of the
in-house oil and gas processing and petrochemicals
segment, tire business, fuel filling station network, and
getting new projects launched on time and within the
budget limits. The key priority of investment activities
is to increase investment and operational efficiency,
providing technological solutions aimed at minimizing
the adverse impact on the environment and assess-
ing the social impacts of the Company’s investment
projects. The investment volumes presented in this
section are drawn up based on the accounting data
per the Russian accounting standards.
2020 Investment Program
Implementation
In 2020, the Company invested RUB 103.25 billion,
including RUB 96.1 billion of capital investments. The
year-to-year decrease of the investment program in
2020 amounted to RUB 26.3 billion (-20.3%). The key
drivers of the drop in the investment volume were the
reduction of geological and technical measures, the
signing of the OPEC+ agreement to cut oil production,
the absence of the major asset acquisition projects,
and the intensive development of oil refining. Most of
the investments (81%) were allocated to the two most
capital-intensive business lines: oil exploration and
production, including SVO; development of oil and
gas refining and petrochemistry.
rub 128 bln
In 2021, the Company plans to invest
Company’s investment volume (bln rub)
129,6
97,8
103,25
2018
2019
2020
rub 103,25 bln
Total investments in 2020
Assimilation of CAPEX, bln rub
99,9
96,1
91,2
2018
2019
2020
rub 96,1 bln
CAPEX assimilation in 2020
In the structure of the 2020 investment program, the main investments are allocated
to the Exploration and Production segment at the rate of 29% of total investments,
including the operations within the Russian Federation (RUB 21.03 billion), at the
super viscous oil fields (RUB 6.647 billion), projects abroad (RUB 2.315 billion),
and the Oil and Gas Refining and Petrochemicals segments at 52% of the total
investments (RUB 53.654 billion), accordingly.
29%
Exploration and production of oil and gas in the
oil fields of the Republic of Tatarstan (including
super viscous oil fields), outside the Republic
of Tatarstan and Russia
15%
Development of power generation,
tire, retail businesses, machine
building, and service subsidiaries
4%Social projects, corporate
projects
52%
Oil and gas refining and petrochemicals
The Company maintains a balance of investments in strategic projects in key business segments,
which corresponds to the achievement of strategic and current operational and business goals.
Since 2020, the Company calculates changes in greenhouse gas emissions for investment
projects according to the Methodology of the Administration of Environmental Protection and
Ecology with estimates for Scope 1, Scope 2, and Scope 3.
68
69
Annual Report 2020 2020 investment projects
Exploration and production
Program for conventional oil exploration and produc-
tion within the Republic of Tatarstan
In 2020, the Company’s investment program was implement-
ed according to a stress scenario associated with a reduction
in oil production under the OPEC+ agreement, a decline in oil
prices, and the coronavirus pandemic.
Oil production under the well intervention program amounted
to 1,391 thousand tonnes (+2% to the plan), the efficiency of
investment for the time worked is 2,094 tonnes per million ru-
bles, with the plan of 1,497 tonnes per million rubles (+40%).
The “light” well intervention operations are the most efficient,
in particular, well workover and hydraulic fracturing with
relatively low costs of the work. The efficiency of investments
therein amounted to 4,889 tonnes per million rubles and
2,450 tonnes per million rubles, respectively.
In the current year, 76 in-fill and horizontal in-fill wells were
drilled. The average increase in oil production for those wells
was 4.3 tonnes per day.
The key to ensuring stable production is to preserve the
resource and increase the productivity of the well stock. In
this regard, the Company focuses on the improvement of
approaches and technologies in the field of well repair and
enhanced oil recovery. Special attention is paid to hydraulic
fracturing. In 2020, hydraulic fracturing was performed at 272
wells, with an increase in oil production of 4.4 tonnes per day
per well, and additional oil production totaling 238 thousand
tonnes.
The well intervention investment program for 2021 amounts
to RUB 9.9 billion, with planned oil production of RUB 838
thousand, planned investment efficiency for the time worked
of 1,472 tonnes per million rubles.
Development of super viscous oil fields
In 2020, RUB 6.6 billion were invested in the development
of super viscous oil fields, of which RUB 1.2 billion were
invested in drilling and RUB 5.4 billion — in the oil field
arrangement. Additionally, 4 domes were brought into the
development. In total, 24 domes were in production. The best
opportunity and priority for the project development is well
grid compaction.
The investment program worth RUB 3.9 billion was shaped
for 2021. In 2021, the domes will be completed, and oil pro-
duction will reach a maximum value of 3.663 million tonnes
per year. For 12 months of 2020, the actual SVO output
amounted to 3.375 million tonnes.
Oil exploration and production program outside the
Republic of Tatarstan and within the Russian Federation
Strategically, the Company is focused on expanding its
resource base and oil production outside of the Republic
of Tatarstan. In 2020, RUB 4.2 billion were invested in the
project. Of these, 37% accounted for drilling production and
exploration wells, circa 47% for seismic exploration and the-
matic exploration work, 9% for well interventions.
Within the framework of the consortium of PJSC TATNEFT,
PJSC Gazpromneft, and PJSC Lukoil, LLC New Oil Production
Technologies (LLC NOPT) was established to explore and ex-
tract hard-to-recover hydrocarbon reserves in the Orenburg
Region. The portfolio of assets of LLC NOPT, a joint venture,
includes the Savitsky and Zhuravlevsky license areas. In
2020, the funds amounting to RUB 1.1 billion of investments
were allocated.
For 2021, it is planned to invest RUB 3.8 billion in projects
for the oil production development outside the Republic of
Tatarstan.
Oil and gas refining
Oil refineries and petrochemical plants complex
In 2020, as part of the JSC TANECO’s Oil Refineries and
Petrochemical Plants Complex construction project, the
investments were spent totaling RUB 45,5 billion; it is planned
to allocate RUB 49.8 billion for the project implementation in
2021.
During 2020, the following facilities were commissioned:
“Heavy coking gas oil hydrotreatment plant,” “Sulfolane
extractive distillation,” “Medium distillate hydrotreatment plant
with a capacity of 3,700 thousand tonnes per year for raw
materials of the Complex of Refineries and Petrochemical
Plants,” 32 U&O facilities. Planned maintenance of the
process equipment of visbreaker plants and the visbreaking
vacuum unit was performed, operational tests of light raw
materials processing (LGC and LVG), process equipment of
hydrocracking plants, oils production, and delayed coking
were conducted, and comprehensive testing of the equip-
ment of the medium distillate hydrotreatment plant was initiat-
ed on working media.
In 2020, the Company mastered the production of premium
TANECO EURO-6 AI-92, AI-95, AI-98, AI-100 gasoline as
per STO 78689379-50-2020, with a reduced sulfur content
and a minimum content of olefin hydrocarbons; EURO-6
premium diesel fuel as per STO 78689379-51-2020, with a re-
duced sulfur content (up to 5 ppm) and minimum content of
polycyclic aromatic hydrocarbons; MGA-18 industrial-grade
hydraulic oil as per STO 78689379-59-2020, intended for
the lubrication of lightly loaded, high-speed components
and mechanisms as a hydraulic fluid; RMD 80 marine fuel as
per GOST 32510-2013; a low-viscosity component of drilling
mud according to STO 78689379-66-2020, intended for the
preparation of a wide range of hydrocarbon-based solu-
tions suitable for any drilling conditions. In December, the
first batches of the following oils were received: SAE 5W-40
TATNEFT Profi and SAE 5W-40 TATNEFT Progress semi-syn-
thetic motor oils, SAE 0W-30 TATNEFT Luxe and SAE 0W-30
TATNEFT Luxe PAO synthetic motor oils, SAE 5W-40 TATNEFT
Premium semi-synthetic motor oil.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Activities for the production of antiseptic liquid and the use
of LHG as a component in the production of gasoline were
initiated.
In January 2020, commissioning works were performed at
the heavy coking gas oil hydrotreatment plant, as well as a
fixed running at 100% load using the design raw materials.
In 2021, the company plans to complete construction and
installation works and commence comprehensive testing of
hydrogen-3 production units, catalytic cracking, pilot hydro-
conversion unit, delayed coking unit-2, gas fractionation unit,
isowaxing, lubricants production, and related U&O facilities.
Tatneftgasprocessing Division and Elkhovsky Oil
Refinery
In 2020, investment spending for the business unit amounted
to RUB 0.909 billion, including as follows: RUB 0.67 billion for
the GPP projects; RUB 0.141 billion for Elkhovsky Oil Refinery
projects; RUB 0.68 billion for the MGPP projects.
The construction and installation operations were performed
as follows: refurbishment of the raw gas compressor unit;
construction of the plant-wide flare system; updating of safe-
ty systems at MGPP; modular wood biomass rapid pyrolysis
unit; Elkhovsky Oil Refinery refurbishment; replacement
of power transformers 6/0.4-2x1500 kVA in the 1,500 kVA
UTS; refurbishment of Elkhovsky Oil Refinery engineering
networks.
In 2021, it is planned to commission the following facilities:
“Construction of the Plant-Wide Flare System,” “Updating
of Safety Systems at MGPP,” “Elkhovsky Oil Refinery
Refurbishment. Replacement of power transformers 6/0.4-
2x1,500 kVA in the 1,500 kVA UTS,” “Modular Wood Biomass
Rapid Pyrolysis Unit,” “OPR-3554 Automated Control System
of Domestic Production,” “Linking of the SDA Experimental
Laboratory Unit.”
Retail sales network of fuel filling stations
Business lines Retail and Small-Scale Wholesale Trade,
Trading and Logistics
The investment program for the retail business of petroleum
products sales is focused on the construction, purchase of
new facilities, refurbishment, updating of existing retail sales
network facilities to increase the margin profitability and com-
petitive qualities of the retail network, including increasing
motor fuel sales as well as expanding the potential of related
services. In 2019, the funds amounting to RUB 3.44 billion
were spent on those endeavors.
In 2020, the retail sales network grew by 19 modern, high-
tech filling stations in a new format, TATNEFT expanded its re-
gions of presence, acquired 1 facility in the Lipetsk Region, 6
in the Republic of Mordovia, and 2 mirror-located multifunc-
tional service areas (MFA) were built in the Ryazan Region on
the 306th km of the M-5 Ural highway. In the regions where
the Company operates, the retail network expanded by 10
filling stations: 5 in the Republic of Tatarstan, 2 in the Nizhny
Novgorod Region, and 3 in the Samara Region.
In 2021, the Company is considering the development in
new promising regions and the opening of new markets. The
retail network expansion is planned in the following regions:
the Voronezh, Tambov, Saratov, and Lipetsk Regions, the
Republic of Bashkortostan, the Republic of Mordovia, the
Kirov Region, and the Perm Territory. The network growth is
envisioned at 6 sites without expanding the geography. The
Company plans to refurbish/rebrand 74 filling stations in a
new format. In 2021, it is planned to implement investment
projects amounting to RUB 4.4 billion in this area.
Tire business
In 2020, as part of the Tire Business investment program
implementation, investments of RUB 3.7 billion were allocat-
ed. In 2021, it is planned to implement investment projects
amounting to RUB 16.4 billion in this business line.
The increase in the investment program in 2021 is associated
with the implementation of strategic projects aimed at de-
veloping tire production, upgrading existing equipment, and
improving the energy efficiency of production.
The most significant of the current investment projects:
• all-steel truck tire output expansion at the 1-st stage
• by 300 thousand pieces per year. The project cost is 4,6
billion rubles. Investments of 0,3 billion rubles are planned
for 2021.
• Increase in the production of all-steel truck tires at the 2-nd
stage
• by 1,2 million pieces per year, bringing the total production
output to 2.8 million tires per year. The project cost is 19,3
billion rubles. The investments of 10,5 billion rubles are
planned for 2021.
70
71
Annual Report 2020 reduce the cost of products, make more rational use of raw
materials and energy resources, reduce the amount of flue
gases, and reduce the concentration of harmful substances
in the atmosphere.
In 2021, RUB 1,175 billion are planned to be allocated in this
area.
Oil and gas chemistry — LLC Tolyattikauchuk
The enterprise became part of the Company in October 2019.
2020 was the year of integration. As part of the Tire Business
investment program implementation, LLC Tolyattikauchuk
disbursed investments of RUB 0.47 billion.
In 2020, the following projects were commissioned: reduc-
tion of butadiene losses in the BBF separation circuit (the
project cost was RUB 14.2 million); improvement of the
quality of manufactured LPG (the project cost was RUB 5.7
million); installation of a line for the withdrawal of acetylene
hydrocarbons from the extraction rectification reserve unit
(the project cost was RUB 1.5 million); organization of a
closed discharge system in the D-1-I-1 department, heat and
power department (the project cost was RUB 10.4 million).
The investment program for 2021 includes projects for devel-
opment, IT infrastructure maintenance, and communication.
It is planned to spend RUB 1.4 billion. Priority projects are
increasing the IIF production by reducing isobutylene losses,
construction of an automobile terminal for the discharge of
hydrocarbons.
• Setting up of large-size tire production (25 to 35 inches
all-steel and combined tires);
The project cost is 3,2 billion rubles.
The investments of 1,9 billion rubles are planned for 2021.
• Output expansion of modern passenger car and light truck
tires by 1.2 million tires per year (up to 6,2 million units per
year by 2021). The project cost is 1.6 billion rubles. The
investments of 0.04 billion rubles are planned for 2021.
Power generation
In 2020, the power generation segment spending amounted
to RUB 6.3 billion.
In 2021, it is planned to implement investment projects
amounting to RUB 8.1 billion in this business line. The invest-
ment program seeks to develop, refurbish, supply heat to
the tire complex production facilities, and sustain the existing
capacities of LLC Nizhnekamsk CHP and JSC APTC. The
most significant existing investment projects are as follows:
refurbishment of the installed TGME-464 power boilers of the
Nizhnekamsk CHP for the petroleum coke combustion in the
form of dust from the DCU of JSC TANECO (RUB 3.7 billion
spent, the plan for 2021 is RUB 5.8 billion); process pipeline
rack for heat supply to households in the form of steam and
hot water (investments in the amount of RUB 1.4 billion spent,
the plan for 2021 is RUB 0.9 billion).
Composite materials
In 2020, LLC Tatneft-Presskompozit, implemented projects
for the capital construction of a dust collection system at pro-
duction sites in the amount of RUB 2.4 million, the purchase
of equipment not included in the construction budget in the
amount of RUB 22.6 million, and innovation activities amount-
ing to RUB 24.5 million.
In 2021, an investment program in the amount of RUB 0.56
billion is planned in this field, including RUB 0.4 billion for the
“Organization of Production of Exterior Parts of the KAMAZ
Cabin” project and RUB 0.05 billion for innovation activities.
JSC Nizhnekamsktekhuglerod
In 2020, as part of the JSC Nizhnekamsktekhuglerod invest-
ment program implementation, investments of RUB 0.067
billion were spent.
In 2020, the following measures were implemented: updating
of the compressor station; replacement of the air heater on
the 4th process flow; replacement of the air heater on the 1st
process flow.
In 2021, the Company plans to complete the following
projects: laying of chemically demineralized water from
LLC Nizhnekamsk CHP to JSC Nizhnekamsktekhuglerod;
updating of the building of raw material preparation site.
For the period 2021–2025, the Company plans to modern-
ize the existing production facilities, including the gradual
replacement of existing obsolete technological flows with
new modern ones, which will improve the quality of products,
72
73
Annual Report 2020 Investment process organization
The Company shapes a high-quality investment portfolio based on the ranking of target
investment priorities and the selection of high-performance, least risky, and forward-looking
projects in accordance with internal criteria established in all business lines. As part of the
implementation of the Sustainable Development Goals, the key environmental, climate, and
social impacts are factored into the investment planning.
Project portfolio management process
The Company’s investment management process is integrat-
ed with planning for achieving strategic goals at the corporate
level, management of business planning, budgeting, report-
ing, financial control, project management, and corporate
governance.
Currently, the work is moving ahead to improve the require-
ments for investment project passports with consideration
made to the assessment of the impact of investment proj-
ects on greenhouse gas emissions. An additional section
— “Carbon Footprint Reduction/Increase” has been added
to the standard passport of investment projects to reflect
information on changes in greenhouse gas emissions.
Pursuant to the Decision of PJSC TATNEFT Board of Directors
(Minutes No. 4 dated 25.08.2020), the basic feasibility study
of the project shall be additionally conducted, with due con-
sideration of greenhouse gas emissions.
Key principles for sound and effective investment
decision-making
• Shaping of best and highly profitable project programs in
alignment of the Company’s development goals, search
(creation) and implementation of cutting edge technolo-
gies, and minimization of investment risks;
• Substantiation and reasonable sufficiency in determining
investment needs;
• Using the state support instruments;
• Improving the level of performance discipline in the
projects preparation and implementation;
• Improving the skills and competence of personnel involved
in the investment management process;
• Ensuring the Company’s accountability in environmental
and industrial safety, ensuring safe working conditions,
health protection, improving the quality of life of employees
and their families, contributing to the economic and social
development of the regions of operation, and creating
favorable living conditions therein;
• Management of changes including analysis of deviations
which enables to maximize the managerial influence
capabilities;
• Monitoring of the investment phase and post-investment
monitoring is monitoring of performance indicators of
investment projects, programs in the investment phase and
during the operation of the investment targets up to the
breakeven point;
• Analysis of the results, followed by using its deliverables as
the input data for the continuous improvement process;
• Contribution to the growth of the Company’s value by
investing in effective and competitive projects, shaping an
optimal and highly profitable project program, taking into
account the Company’s development goals, searching for
(creating) and implementing cutting-edge technologies,
and minimizing investment risks;
• Ensuring that investment decisions on each investment
project and program are made in accordance with corpo-
rate requirements;
• Ensuring the manageability of the implementation process
of the investment project and program in accordance with
corporate requirements.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
for investment activities define the objectives, tasks, scope
of duties and powers of the investment committees and
introduce the requirements for the format of preparation,
justification, and defense of the materials on the investment
programs and projects.
The investment committees have approved business invest-
ment programs that meet the strategic development goals of
the TATNEFT Group until 2030.
Unified corporate bank for investment projects
The Company’s investment project bank consolidates current
investment initiatives and investment projects in all business
streams, enabling the provision of comprehensive ranking
of projects and prediction of net present value for future
periods with the change modeling capability. Transparency
and historical preservation of expert opinions on the current
projects enable the improvement of the quality of decisions
to be made in the future.
In 2020, the Company invested in the development of its
projects, taking into account the risk assessment of external
drivers influencing upon the oil market situation and the previ-
ously unpredictable consequences of the COVID-19 spread,
while maintaining the main volume of investments in strate-
gically important projects to ensure that the 2030 Strategy
goals are achieved.
Company’s investment portfolio ranking and rating
criteria
• Alignment with the Strategy;
• Economic efficiency;
• Risk level;
• Project readiness for implementation;
• A realistic timeline for project delivery
• Environmental, climate, and social impacts;
• Best possible net present value.
Investment risk management
To improve the efficiency of investments, there is an ongoing
process in place to identify, analyze, and evaluate risks as
well as develop measures to minimize them, so that the proj-
ect could achieve a sustainable financial result.
Multifactor risk assessment is based on expert and statistical
assessment of the most significant risks. Risk assessment
and multivariate modeling of the investment project per-
formance is carried out taking into account the correlation
factors of inputs.
Investment Committee
To ensure the effective planning of the investment program
and oversee putting it into practice as well as monitor risks,
the Investment Committee operates in the Company. The
process of preparing investment projects has a two-tier
investment program reviewing system: The first corporate
tier Investment Committee and the second-tier Investment
committees by business lines such as “Exploration and
Production,” “Refining and Marketing,” “Other structural
subdivisions and subsidiaries.” The Company’s standards
74
75
Annual Report 2020 Fundraising
Credit ratings as of 31.12.2020
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Debt portfolio
The Company takes a conservative approach to lending
structuring with the focus on minimizing risks and benefiting
from favorable financial leverage.
As part of the state support in 2020, TATNEFT Group
actively participated in raising concessional, including
subsidized, loans:
The main criteria for selecting long-term credit instruments
are as follows: the expected credit amount, lending term,
and target orientation. Raising long-term loans to finance the
investment program assures that the loan terms are con-
formant to the main investment parameters of a particular
project. A high priority is given to the possibility of structuring
loans with the repayments to be made out of additional cash
flows generated from the implementation of new investment
projects. Currently TATNEFT Group has experience in effi-
cient structuring of the long-term debt financing.
The credit limits are open and maintained in 12 major Russian
banks. The Company regularly monitors the main factors of
impact on the lending market and, as appropriate, strives
to take measures to manage market risks, including those
related to interest rate changes.
Due to the good credit history, high credit ratings, and low
debt level, the Group has access to various debt financing
instruments, such as: short-term revolving credit facilities, bi-
lateral loans, syndicated loans, subsidized loans, ECA loans,
ruble-denominated bonds, and Eurobonds.
• Under Decree No. 191 of the Government On State
Support for Industrial Enterprises Implementing Corporate
Programs to Improve Competitiveness dated 23.02.2019,
a loan of circa RUB 10 billion was received from LLC
Nizhnekamsk Truck Tire Factory for the modernization
of export production of all steel cord truck tires and the
creation of giant tire production in the Russian Federation;
• Under Decree No. 582 of the Government On Approval of
the Rules for Granting Subsidies from the Federal Budget
to Russian Credit Organizations to Compensate for Lost
Income on Loans Issued in 2020 to Systemic Organizations
to Replenish their Working Capital dated 24.04.2020, RUB
1,150 million were raised;
• Under Decree No. 696 of the Government On Approval of
the rules for Granting Subsidies from the Federal Budget
to Russian credit Organizations to Compensate for Lost
Income on Loans Issued in 2020 to Legal Entities and
Individual Entrepreneurs to Resume their Activities dated
16.05.2020, aimed to support businesses affected by
Covid-19, RUB 228 million were raised.
The Group’s debt portfolio as of the end of 2020 (ZENIT
Banking Group excluded) is primarily comprised of
borrowed funds:
• In rubles, RUB 15.0 billion as exchange-traded bonds of
PJSC TATNEFT and RUB 0.99 billion as subsidized loan of
LLC Nizhnekamsk Truck Tire Factory.
• In U.S. dollars, USD 52.3 million as loans under the
guarantees of Export Credit Agencies (ECAs), raised by
JSC TANECO during the construction of the oil refining
complex and USD 25.72 million as a subsidized loan to LLC
Nizhnekamsk Truck Tire Factory;
• In euro, EUR 39.26 million as a subsidized loan to LLC
Nizhnekamsk Truck Tire Factory.
Rating agency
Credit rating level
Outlook on credit rating
Fitch Ratings CIS Limited
-Long-Term Credit Rating “BBB-”
Stable
-Short-Term Credit Rating “F3”
Moody’s Investors Services
-Long-Term Credit Rating “Ваа2”
Stable
Date of assigning
(confirmation)
Assigned on 18.04.2014;
Confirmed on 08.05.2020
Assigned on 13.02.2019;
Last regular review: 14.12.2020
Expert RA
Credit rating -ruAAA (as per national
scale for the Russian Federation)
Stable
Assigned on 19.07.2017;
Confirmed on 15.04.2020
2020
In May 2020, Fitch Ratings affirmed TATNEFT’s BBB- credit
rating with a stable outlook. According to Fitch Ratings,
confirmation of the credit rating reflects, inter alia, the
Company’s low debt level, significant oil production as
well as large proved reserves. For the Fitch Ratings press-
release confirming TATNEFT’s credit rating, refer to https://
www.fitchratings.com/research/ru/corporate-finance/fitch-
podtverdilo-rejting-tatnefti-na-urovne-bvb-prognoz-stabil-
nyj-12-05-2020.
In April 2020, the Expert RA rating agency affirmed the
TATNEFT credit rating at ruAAA. The rating outlook is stable.
When confirming the credit rating at the highest level on the
national scale, Expert RA noted the strong business pro-
file of the TATNEFT Group, the low level of debt that allows
withstanding stressful conditions, and the strong forecast
liquidity. For the press release of Expert RA on the confirma-
tion of the TATNEFT rating, refer to https://www.raexpert.ru/
releases/2020/apr15a/
Moody’s has published information on the completion of the
regular review of the TATNEFT Group credit rating without
any rating actions in December 2020. For the Moody’s press
release on the completion of the periodic review of the
credit rating (in English), refer to https://www.moodys.com/
research/Moodys-announces-completion-of-a-periodic-
review-of-ratings-of--PR_435684
76
77
Annual Report 2020 Growth strategy
The Company’s strategy focuses
on long-term and sustainable
development of the Company.
TATNEFT is implementing its Strategy-2030 based on a stable financial
structure and effective investment portfolio, while pursuing the goal
of maximizing free cash flows and continuously improving the assets’
operational indicators and performance.
3
Strengthening the technological capacities and capabilities with effective
investment in the development and modernization of the production operating
base through the accumulation of digital high-tech solutions, development of new
and novel tools and techniques, and improving the efficiency of used equipment
and technologies — as a single platform for managing the production operations
of a new generation at all stages of the value chain.
2
Ramping up the output of profitable oil and gas production shifting from production stabilization to
sustainable organic growth, enhanced oil recovery at licensed fields under development, and extensive
development of new fields, including super viscous oil and hard-to-recover oil, in the Republic of
Tatarstan, while cutting down operating and investment costs per unit.
• Asset life > 30 years;
• Reserve replacement rate >100%;
• Oil production growth up to 38.4 mln tonnes per year.
Expanding the geographical reach and the resource base outside the
Republic of Tatarstan and the Russian Federation, including gaining the
access to oil and gas reserves with the possibility of forming strategic
alliances as well as developing new markets for selling product outputs.
1
78
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
7
Ensuring sustainable development based on a high level of
corporate social responsibility, industrial and environmental
safety, and the environmental balance in the course of the
production and business operations.
6
Keeping up with a leading position in the Russian tire market and developing
new market niches through effective implementation of marketing programs,
improving the quality and expanding the product slate.
• Production output and sales growth according to market conditions in the
2030 horizon
5
Improving the efficiency of the retail network for the sale of petroleum products, ensuring
the sale of more than 50% of gasoline and diesel fuel produced at the Company’s
refineries, through fuel filling stations and small wholesale; updating the brand concept
and unique trading offer with increasing service standards and the development of
accompanying services.
4
Boosting the output and sales of competitive finished products with high added value that
meet the world environmental standards and future market requirements, development of
Company’s proprietary refining and petrochemical capacities.
• Ramp-up of crude refining capacities up to 15.7 mln tonnes per year;
• Oil conversion ratio 99%;
• Light product yield 89%;
• Premium product output growth;
• Optimized sales logistics;
• Optimum balance of crude and petroleum product sales.
* due to a significant change in external conditions and the emergence of new challenges and
opportunities, the Board of Directors decided to update the Company’s Strategy in 2021.
79
Annual Report 2020 Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
• A key role in the control system is assigned to ensuring
free cash flow in the businesses and across the Group as a
whole;
• Performance management technology is focused on
gaining higher profitability of implemented projects;
• Significant indicators include the "Performance efficiency
of managers", which demonstrates the results of personal
contribution, the involvement of leaders, and commitment
to the Company's values;
• Increased monitoring and work on KPIs related to the
effectiveness of the development of the Sustainable
Development Goals.
At the end of 2019, PJSC TATNEFT joined the UN Global
Compact and supported the international initiative in sustain-
able development.
In 2020, active work began on the implementation of the
commitments made aimed at economic growth and quality
of life.
To realize the maximum opportunities for each goal, project
programs are open, the leaders are identified among manag-
ers with high competencies.
Project teams, following the compass of the SDGs, determine
the development benchmark and shape goals and objectives
to be implemented.
It is planned to provide target levels of efficiency in the KPI
system, defining the goal-setting through the formation of
roadmaps of measures to integrate the SDGs into the activi-
ties of specific segments of the Company.
The Company supports all the sustainable development
goals.
The main ones are identified, the implementation of which is
directly related to business goals and new global challenges.
These are climate challenges, decarbonization and clean
energy challenges, resource efficiency, innovation, and infra-
structure opportunities.
Understanding the severity of environmental issues and the
importance of changing corporate thinking, special atten-
tion is paid to the decarbonization course and reducing the
carbon footprint.
Starting from 2020, the KPI system provides for the indica-
tor "Reduction of greenhouse gas emissions" for several
managers.
In 2021, this indicator will be decomposed for managers of all
business activities.
Changes are envisaged in the assessment of the effective-
ness of the Company's investment projects, in terms of the
impact of changes in CO2 emissions.
These principles and approaches to setting goals for moni-
toring performance achievement are translated into all large-
scale projects.
The development of the corporate KPI system for sustainable development activities is based on
the assessment of the achievement of the target values for the SDGs defined in the Company as
priorities for the period up to 2030, with monitoring of intermediate values and their integration
into the value chain, investment and operational activities of the Company.
The targets are set in accordance with the System of Global Indicators developed by the Inter-
Agency Expert Group on SDG Indicators (IGE-SDGs).
System of key
performance indicators
The success of our strategic ambitions depends on the quality and timely assessment of the
competitive environment, economic, political, social, and environmental factors, trends and
uncertainties as well as the assessment of compliance with our business model. We develop
competitive projects by constantly reviewing and monitoring our investment portfolio, while
generating higher cash flows from operations and cutting down costs.
The Company uses scenario planning, taking into account the multifactor nature of forecast
data. Our business plans are focused on creating and maintaining a competitive edge.
We continuously develop our risk management and internal control system, which ensures
identifying risk drivers and responding promptly to them.
The Company’s management remuneration is aligned with evaluating the achievement of
strategy goals based on the performance indicators that meet the expectations and serves
the best interests of shareholders.
System of key performance indicators and
their achievement assessment
Since 2017, the Company has been operating a corporate
motivation system based on key performance indicators.
Setting up of the KPI system in the TATNEFT Group was ap-
proved by the resolution of the Company's Board of Directors
(Resolution No. 3 of 26.09.2018).
Performance indicators are integrated into the overall corpo-
rate governance system by goals.
KPIs remain consistent with the objectives of the long-term
Strategy 2030 and are formalized based on the Value Tree
model, synchronized with business plans and with all existing
corporate improvement tools.
The KPI system, as a tool for monitoring the success of ful-
filled tasks, makes it possible to objectively assess the impact
of management on the business results.
During the pilot implementation and testing, the KPI system
was transferred to the top management level (about 100
positions).
Every year, the coverage perimeter is expanded to lower
management levels in the hierarchy.
The number of participants in the program includes more
than 500 managers, the library of current KPIs has more than
3 500 benchmarks.
The top-tier goals of the Company are focused on a struc-
tured hierarchical scheme of the Value Tree, the elements of
which cover the main business activities and areas of impact
(operations, investment activities, and management system
improvement).
The effectiveness of management in each segment of the
Company's business activities is characterized by quantita-
tive and qualitative indicators that are integrated into the KPI
system for the annual period and assigned to responsible
positions.
On average, the number of KPIs for managers is 4-5 metrics.
By its structure, up to 30-40% of KPIs are group (corporate
teamwork results) and 60-70% are individual (business initia-
tives and project indicators).
To improve the effectiveness of the incentive system
for achieving annual performance and, as a result, the
Company's Strategic Goals, the Board of Directors adopted
the results of the implementation of the KPI system from 2017
to 2020 and approved the initiative for its further development
and expansion of the perimeter coverage (Decision No. 4 of
20.12.2020).
In 2020, the Company transformed the system of perfor-
mance management and evaluation of KPI achievement.
The Company plans to expand the target setting system to
cover all of the Group's controlled subsidiaries.
Changes have been made to the procedures for setting goals
for the Company's top management:
80
81
Annual Report 2020
Exploration and production
Exploration operations in the Company remain the basis for
replenishing of recoverable reserves, and also influences the
diversification of the “production” portfolio, contributing to the
development of new regions and technologies. The Company
keeps up with the goal of 100 % replenishment of cost-effec-
tive recoverable reserves.
Inorganic growth, i.e., the purchase of assets outside the
Republic of Tatarstan, in particular, in the regions of TATNEFT
operation (the Samara and Orenburg Regions, Nenets
Autonomous District), and outside of Russia (Turkmenistan,
Uzbekistan, Kazakhstan, etc.) plays an important role in the
process of replenishing reserves.
The planned increase in oil production in the amount of 38
million tonnes until 2030 will be achieved due to the success-
ful implementation of the projects of the Company’s current
“production” portfolio. The achievement of an increase in
oil production is possible if the OPEC+ restrictions are lift-
ed, but the Company is looking for opportunities to achieve
this even if such restrictions are retained in the long term.
Projects continue to be implemented for the development of
the Romashkinskoye field, the production of super viscous oil,
the involvement of low-permeable carbonate reservoirs in the
Republic of Tatarstan, and the improvement of the efficiency
of field development through high-tech drilling and the use of
tertiary enhanced oil recovery methods.
Due to adverse constraints, a set of optimization measures
was implemented in 2020 to mitigate the consequences of the
pandemic and improve the efficiency of the geological and
technical operations carried out, to minimize losses in operat-
ing cash flow in the medium term.
The drivers of efficiency growth identified in the Strategy-2030
include the involvement of reserves by drilling along the com-
paction grid of wells, drilling complex horizontal wells with “smart
injection,” improving hydraulic fracturing technologies (including
multistage hydraulic fracturing), reducing the specific operating
costs per tonne of oil produced as well as introducing digital
technologies in all stages of field development. In addition, the
Company is actively engaged in the development of carbonate
reservoirs for the successful implementation of strategic plans
for oil production and increasing the resource base.
By the end of 2020, the production replacement target has been 100% fulfilled thanks to the reserve additions within the Republic of Tatarstan and
beyond. According to the statistical reports on Form 6-gr (according to the Russian classification), in 2020, the recoverable oil reserve additions
across the TATNEFT Group in all categories (A+B1+C1+B2+C2) amounted to 36,906 million tonnes. Including by category (A+B1+C1) – 28,973 million
tonnes and by category (B2+C2) - 7,933 million tonnes. Per Order No. 477 of 01.11.2013. "On approval of the classification of reserves and resources
of oil and combustible gases" of the Ministry of Natural Resources and Ecology of the Russian Federation effective 01.01.2016, a new classification of
reserves and forecast resources of oil and combustible gases has been put into effect. According to the reserve categorization requirements, the new
classification takes into account only the most proved reserves, which corresponds to international classifications. According to this classification,
oil and gas reserves are divided into categories based on the degree of commercial development and the degree of geological study as follows: A
(producing, developed), B1 (producing, undeveloped, explored), B2 (producing, undeveloped, estimated), C1 (explored) and C2 (estimated).
Exploration operations within the Republic of Tatarstan
Within the Republic of Tatarstan, the Company holds 68 licens-
es, of these, 37 mineral exploration and extraction licenses,
27 geological study licenses, including mineral prospecting
and appraisal, mineral exploration and extraction, 4 geological
study licenses, including mineral prospecting and appraisal.
meters. Seismic surveys were performed using 2D in the
amount of 280 lin km, and 3D in the amount of 399 km2 in the
fields and exploration areas of the Company.
Construction of 7 exploration wells is completed in 2020. The
success ratio of exploratory drilling is 86%. .
The exploration operations provided for in the license agree-
ments for the Company’s license areas are fully performed.
In 2020, the quantity of 29.506 million tonnes of oil was added
to the recoverable oil reserves in the Republic of Tatarstan for
all categories (A+B1+C1+B2+C2), including the incremental
reserves through exploration that amounted to 21.940 million
tonnes.
The total meterage of prospecting and exploratory drilling
amounted to 8.3 thousand meters, including exploratory drill-
ing of 4.3 thousand meters, and prospecting of 4.0 thousand
In 2021, the Company plans to increase oil reserves in
the Republic of Tatarstan by 27.0 million tonnes, of which
16.2 million tonnes are expected due to prospecting.
The Company plans to invest in geological exploration
in the territory of the Republic of Tatarstan up to RUB
1.4 billion, while having 7 exploratory wells drilled with
a total meterage delivery of 10.5 thousand meters of
rock and 3D CDP seismic surveys conducted with the
coverage of 157 km²
82
Following the seismic surveys, 2 new structures — Yuzhno-
Tukmakskaya, with prospective resources for the Do catego-
ry of 1324/598 Ktonnes, and Pesochnaya, with prospective
resources for the Do category of 187/43 Ktonnes, located in
the Romashkinsky and Novo-Elkhovsky license areas were
prepared for deep drilling.
In 2020, the cost of geological exploration works performed in
the TATNEFT licensed areas within the Republic of Tatarstan
amounted to over RUB 1 billion.
86%
Success ratio
of exploratory drilling in Tatarstan
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Exploration operations outside the
Republic of Tatarstan
Outside the Republic of Tatarstan, the Company holds 38
licenses, of these, 18 mineral exploration and extraction li-
censes, 16 geological study licenses, including mineral pros-
pecting and appraisal, mineral exploration and extraction, 4
geological study licenses, including mineral prospecting and
appraisal.
In 2020, the exploration operations were carried out by 6
subsidiaries and affiliated companies within the Ulyanovsk,
Orenburg, and Samara Regions, the Nenets Autonomous
District, and the Republic of Kalmykia.
The prospecting and exploratory drilling meterage outside
Tatarstan was delivered in the amount of 12.2 thousand me-
ters in 2020. The funding amounted to over RUB 2 billion. The
prospecting and exploration drilling success is 100%.
The Company conducted 3D CDP seismic surveys with the
coverage of 574 km2 — the funding amounted RUB 1,152.7
million. The total amount of financing for prospecting outside
of the license areas of the TATNEFT Group amounted to RUB
4,569 million.
Over 2020, the additions to the recoverable oil reserves for
all categories (A+B1+C1+B2+C2) in the Nenets Autonomous
District amounted to 2.263 million tonnes, with 1,971 million
tonnes added through exploration efforts; in the Samara
Region for all categories (A+B1+C1+B2+C2) — 4.600 million
tonnes, including the reserves additions through exploration
totaling 2.831 million tonnes; in the Ulyanovsk Region for
all categories (A+B1+C1+B2+C2) — 0.153 million tonnes,
with all reserves added through reassessment efforts; re-
serves additions for all categories (A+B1+C1+B2+C2) in the
Orenburg Region amounted to 0.384 million tonnes, includ-
ing the reserves increment through exploration that amount-
ed to 0.036 million tonnes.
100%
Success ratio of exploratory drilling outside
Tatarstan
12,2 thousand m
Exploratory drilling meterage
outside Tatarstan in 2019
In 2020, 2 deposits were discovered in the Samara Region.
The total initial balance reserves of oil in C1+C2 categories
are 1,989 Ktonnes.
The Staritskoye oil field was discovered following the 3D
CDP seismic survey and drilling of the exploratory well No.
130 within the Moiseevsky license area in the Koshkinsky
District of the Samara Region. The field has two oil accumu-
lations: in the deposits of the Dankovo-Lebedyansky horizon
of the Devonian system and the Bashkir tier of the carbon-
iferous system. When testing well No. 130 in the intervals of
the Dankovo-Lebedyansky horizon, an oil inflow with a flow
rate of circa 5 tonnes per day was obtained. In general, the
initial balance reserves of oil in the C1+C2 categories for the
Staritsky field amounted to 236 Ktonnes.
The Otradnoye oil field was discovered following the 3D
CDP seismic survey and drilling of 3 exploratory wells Nos.
342, 343, and 361 within the Cheremshansky license area
in the Chelno-Vershinsky District of the Samara Region. The
field has 6 oil accumulations: in the deposits of the Vereiskian
horizon and the Bobrikovskian horizon of the carboniferous
system. When testing wells Nos. 342, 343, and 361 in the
intervals of the Bobrikovskian horizon, oil inflows with a flow
rate of up to 3.5 tonnes per day and the Vereiskian horizon
up to 5.6 tonnes per day were obtained. In general, the
initial balance reserves of oil in the C1+C2 categories for the
Otradnoye field amounted to 1,753 Ktonnes.
In 2020, as part of a consortium of PJSC TATNEFT with PJSC
Gazpromneft and PJSC Lukoil, the Savitsky and Zhuravlevsky
subsurface areas in the Orenburg Region were acquired.
The acquired oil reserves of the Zhuravlevsky field in C1
category amount to 2,487/987 Ktonnes and dissolved gas in
C1 category —35 million m3, with the estimated oil reserves
in D1 category of 2.2 million tonnes, and gas in D1 category
of 0.4 billion m3; at the Savitsky license area, the prospec-
tive oil resources for the Do category amount to 14,306/5,587
Ktonnes with the estimated oil reserves for the Dl category
amounting to 11.4 million tonnes, for the D1 category — 8.4
million tonnes, gas for the D1 category — 3.0 billion m3.
The possible resources of Domanic deposits in the case of
geological success will amount to R50 — 2.227 billion tonnes
for the Savitsky area, and for the Zhuravlevsky area: R50 —
362.3 million tonnes.
Exploration
36,906 mln tonnes
2020 total incremental oil reserves
for TATNEFT Group
In 2021, it is planned to drill 7 exploration
wells outside the Republic of Tatarstan with
a total penetration of 14.65 thousand meters
of rocks, perform 2D CDP seismic exploration
in the amount of 259 lin km, 3D CDP — in the
amount of 339 km².
83
Annual Report 2020 Geological prospecting technologies
The Company is active in applying and implementing
new effective methods of exploration and study of
reservoir properties, modern analytical equipment,
and best practices of leading Russian and foreign
companies.
From 2014 to 2020, the Neuroseism Research and Production
Center of TGRU (Tatar Geological Prospecting Division), which
is part of PJSC TATNEFT, developed new software tools and
methodological techniques to adapt and optimize the patented
Neuroseism technology (Russian patents No. 2094828 and
No. 2158939) — a special modification of the Neuroseism-
Foreground. This modification is intended for predicting the oil
content of the Domanic deposits within the Franco-Famen car-
bonate complex. The copyright to the Neuroseism-Foreground
is registered with the Federal Service for Intellectual Property as
“The Domanic hydrocarbon probability determination method”
(Certificate No. 2020616990 dated 30.06.2020).
A new Wavelet-Selector software suite and methodological
techniques, which allow for the adaptation and optimization of the
Wavelet analysis technology for seismic data to predict param-
eters of reservoir properties of productive deposits, have also
been developed. The copyright to the Wavelet-Selector software
is registered with the Federal Service for Intellectual Property as
“The technique to determine porosity and permeability prop-
erties of rocks based on seismic survey data” (Certificate No.
2020619180 dated 13.08.2020).
In 2020, when performing work on neurocomputer analysis in the
high-level programming languages Python and C++, the follow-
ing software products were developed:
• Computer software: “Program for preparing files for truncated
coordinates recalculation,” which allows the user to create
a file with the truncated coordinates entered and prepared
for recalculation from SK-63 to SK-42 in the PhGeoCalc
program. The copyright to the “Program for preparing files for
truncated coordinates recalculation” software is registered with
the Federal Service for Intellectual Property (Certificate No.
2021611710 dated 03.02.2021);
• Computer software: “File preparation program” designed to
speed up and facilitate the process of preliminary preparation
of field seismic materials for input into the ProMax software
set. The copyright to the “File preparation program” software
is registered with the Federal Service for Intellectual Property
(Certificate No. 2021610696 dated 18.02.2021);
• “Program for working with dat files” computer software, which
allows the user to create a file for constructing a reflecting
horizon, featuring the optimization of the number of points for
constructing and recalculating the coordinates of these points
in the SK-42 system, taking into account the truncation en-
tered. The copyright to the “Program for working with dat files”
software is registered with the Federal Service for Intellectual
Property (Certificate No. 2021612446 dated 17.02.2021);
• “Program for working with SVO data” computer software which
performs the search for the required material (maps, well
passports, well bindings, core description, GIS data, and other
types of information on super viscous oil fields), which is located
on an electronic data carrier. The copyright to the “Program for
working with SVO data” software is registered with the Federal
Service for Intellectual Property (Certificate No. 2021612412
dated 17.02.2021).
In 2021, the following computer programs were developed: au-
tomation of task replication for the ProMAX application software;
automation of seismic profile intersection point determination;
automation of well and seismic profile location determination;
simplification of forecast results downloading in the Neuroseism
program.
In 2020, exploration and geochemical studies on the hydrocar-
bon component passive adsorption technology were continued,
which increased performance significantly and led to a reduction
in the scope of subcontracted work. According to the patented
geochemical technology (patents of the Russian Federation No.
2478944, 2499285), research was completed at the Zapadno-
Alexandrovsky, Irgizsky, Izyumovsky, Rubezhinsky license areas
of LLC Tatneft-Samara. The obtained geochemical data allowed
for the assessment of the oil capacity and to rank the most prom-
ising sites.
A pyrolytic plant has been introduced that allows performing a
pyrolytic method of analyzing core material taken from uncon-
ventional reservoirs to assess the HTR capacity. This provides
a solution to the current problems of studying the oil-generat-
ing properties of kerogen and substantiating the conditions of
Domanic deposit reservoirs for estimating and reestimating oil
field reserves, gradually increasing the scope of research works
performed in-house.
In 2021, the Company plans to complete the development of the
analytical part of the research methodology on the Frontier EGA/
PY-3030D pyrolyzer, which is equipped in combination with the
GCMS-2020 gas chromatographymass spectrometer. In addition
to the core organic matter pyrolysis data, the new equipment
allows the user to conduct chromatographic analysis of hydrocar-
bons after grinding the core sample before and after extraction
with the identification of the component composition of C7-C40
hydrocarbons, with the data obtained being processed statistical-
ly with a reference to GIS data.
The core analysis of the Severo-Almetyevskaya 21159 B well
was completed for the depth range of 1534-1548m (D3f3ev-lv)
D3dm and 1548-1571m (D3f3vr) D3dm in the Upper and Middle
Devonian section, corresponding to Domanic type sites, conver-
gence in the analysis data on Frontier EGA/PY-3030D (equipment
of the Tatar Geological Prospecting Division) and reproducibility
with the data of the VNIGNI (All-Russian Research Geological Oil
Institute) Rock-Eval laboratory were verified. Work will continue on
the core study of well 26 of the Kuzminovsky license area.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Technologies and solutions in oil field development
Technology of application of hydrophobic
(invert) emulsion systems for improved oil
recovery from water-flooded heterogeneous
reservoirs (mges-m)
In 2020, the Company performed 562 EOR treatments (of these,
386 treatments were done in injection wells, and 176 — in the
producing wells). The incremental EOR production totaled 1.97
million tonnes of oil, including converted wells, the additional
production from wells was 280.9 thousand tonnes in 2020.
The improved efficiency is achieved through a comprehensive
approach, including introduction of new technologies, replace-
ment of chemical components in the EOR technologies with
better performing ones.
The Company has developed and applied a technology for using
hydrophobic (invert) emulsion systems to increase oil recovery
from water-flooded heterogeneous reservoirs (MGES-M).
The MGES-M technology is designed to manage the develop-
ment of oil fields or their areas where the reservoirs have different
permeability and water flooding was used for a long time with the
technique of selective isolation of water saturated interlayers.
The technological process is implemented by pumping a
two-component emulsion system developed at the TatNIPIneft
Institute, based on an emulsifier and mineralized water with a
step-by-step increase of water content.
The mechanism of the MGES-M technology is based on in-si-
tu creating of the emulsion with a high hydrophobic capability,
resistant to erosion, increasing filtration resistance of the wa-
tered (most permeable) reservoir intervals, which leads to better
conformance control and, consequently, improved reservoir
displacement coverage.
As a result of the application of the MGES-M technology at 244 in-
jection wells, the total current technological effect yielded 382.613
thousand tonnes (1,568.1 tonnes per well job).
Surfactant-polymer flooding technologies
In 2020, the Company continued its works on the implementation
of surfactant-polymer flooding technology at the Company’s
facilities. According to calculations based on the geological and
hydrodynamic model, the introduction of the surfactant-polymer
composition injection technology will increase the RF (recovery
factor) at the Company’s mature fields by an estimated 5%.
Formation hydraulic fracturing
Hydraulic fracturing is the basic well stimulation technique in the
Company. The Company has extensive experience in hydraulic
fracturing operations. Over the past few years, hydraulic fracturing
operations have increased multiple times reaching over 800 wells.
The incremental production using hydraulic fracturing in 2020,
taking into account converted wells, reached 1.8 million tonnes of
oil. Altogether, the Company performed more than 7,000 hydrau-
lic fracturing jobs with cumulative additional oil production of 21.1
million tonnes.
The dynamic growth of efficiency was achieved through an inte-
grated approach including: detailed analysis of the current state
of development, high-quality interpretation of available produc-
tion data on the operation of fields; modern digital analytical tools
involved in the design of hydraulic fracturing and bottom-hole
treatment implemented as part of simulator software products;
assessment and consideration of the impact of the space be-
tween wells during the work to stimulate the inflow; correct selec-
tion of technology tools for a specific reservoir treatments with the
existing restrictions; the development of modern fracturing fluid
and acid compositions for specific producing reservoir targets.
Complex and multicomponent acid treatment
technology
Taking into account the significant share of the current re-
serves of PJSC TATNEFT, which are concentrated in carbonate
deposits, the urgency of developing advanced technological
methods for increasing oil recovery from heterogeneous car-
bonate reservoirs tends to increase every year.
The incremental production using bottom-hole treatment, taking
into account converted wells, totaled 1.18 million tonnes of oil
in 2020. The Company has performed more than 4,000 bot-
tom-hole treatment jobs with cumulative additional oil production
of 4.6 million tonnes.
In the areas of automation and digitalization, a digital simulator is
being developed for modeling and optimal design of acid treat-
ment and acid hydraulic fracturing in heterogeneous carbonate
and terrigenous reservoirs, taking into account the presence of
natural crack systems, individual geological and technical con-
ditions of wells, and their integration with corporate information
systems. To improve the efficiency, planning, monitoring, and
analysis of well intervention operations, the GTM-Expert informa-
tion and analytical system is being developed.
Technology of dynamic matrix acid treatment of
wells
The Company continues to improve acid formulations. The tech-
nology is aimed at improving the efficiency of bottom-hole treat-
ment by increasing the depth of impact with the use of adaptive
acid compositions and digital design tools. The effect is achieved
due to the ability to control the channel structure.
According to the results of the work, the average well flow rate is
95% higher than the base indicator for the standard bottom-hole
treatment technology. The efficiency of investments increased by
70.5%, NPV — by 106%. In 2021, the technology is being tested
as the main engineering solution on the existing well stock.
84
85
Annual Report 2020 Oil and gas production
One of the Company’s primary strategic goals is to shift oil production from stabilization to
sustainable growth at its licensed fields in Tatarstan.
The Company seeks to fully utilize the existing potential of oil
fields, accumulated technological experience and competen-
cies to strengthen its position in both the Russian and global
energy markets.
The upstream business comprises the Company’s oil and gas
production subdivisions and subsidiaries. Most of the oil and
gas exploration and production activities are concentrated
within the Company and are managed centrally by the Tatneft-
Upstream Division.
The Company aims to change the structure of oil production in
favor of high-margin products, with improving the structure of
the investment program towards the highest-net-present-value
activities for the duration of the effect and optimizing operat-
ing costs through the implementation of the IDP program, the
improved IT projects complex efficiency, and implementation
of innovative technologies.
To ensure maximum efficiency of field development, digital
modeling (Digital Twins) of producing assets is carried out,
which enables reliable determining their hydrocarbon potential
and manage the oil field development with maximum efficien-
cy. A Digital Twin of an oil field is a virtual analogue of a real
development target, which reflects all main parameters and
processing of oil field operation online using digital platform
of 3D-visualization technology. This makes allows for remote
management of the production facilities according to their
specific features and peculiarities of the landscape.
The Company has fulfilled the conditions for curbing oil pro-
duction under the effective OPEC+ agreement. The total oil
output for the TATNEFT Group in 2020 was 26.0 million tonnes
with an average daily production of 506.3 thousand barrels per
day.
The Company uses advanced EOR techniques and intelligent
production management methods.
Extending economic life of oil field
development
A favorable economic condition for the development of the
Company’s oil fields is the use of differentiated MET rates and
benefits on the customs duty on oil. The application of lower
MET rates and lower export customs duty rates for oil is a good
incentive for the development of the Company’s oil fields.
In 2020, the Company applied lowering MET rates:
• For subsoil areas with over 80% depletion rates;
• For super viscous oil with viscosity of 10,000 mPa*a and
more (in situ conditions);
• For oil produced from the Domanic accumulations;
• For small subsoil areas with reserves (STOOIP) less than 5
million tonnes and depletion of less or equal to 5%;
• For SVO fields with in-situ viscosity of more than 200 and
less than 10,000 mPa*s.
Improved efficiency, oil and gas production
profitability control
The Company strives to unlock the maximum potential of oil
accumulations, utilize efficiently the amassed knowledge and
experience, and strengthen the Company’s industry position
with maintaining the ecosystem balance. In 2020, the opti-
mization of operating costs amounted to RUB 2.2 billion with
overachieving the target by 29% due to the implementation
of regulatory measures, shifting the complicated well stock
from the ESP to the beam pumping units, the introduction of
anti-corrosion pipes (MPT-K) In 2020, the implementation of
the most effective geological and technical measures allowed
increasing the NPV per ruble of investments by 66% as com-
pared to actual results of 2020.
86
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Oil and gas production
One of the Company’s primary strategic goals is to shift oil pro-
duction from stabilization to sustainable growth at its licensed
fields in Tatarstan.
However, due to OPEC+ restrictions imposed in 2020, the
Company’s oil production was cut to 26 million tonnes.
Nevertheless, the production potential is preserved and with
the easing of restrictions, the Company is ready to return to the
earlier established production rates.
The Group’s total oil production amounted to 26.0 million tonnes
(including conventional oil — 22.3 million tonnes, super viscous
oil — 3.4 million tons; subsidiaries — 0.3 million tonnes) with
an average daily production of 506.3 thousand barrels per day.
The Company fulfilled the requirements for reducing produc-
tion under the existing OPEC+ agreement, which hindered the
possibility of production growth.
TATNEFT Group oil production structure, mln tonnes
TATNEFT Group oil production
Conventional oil
Super viscous oil*
2018
29,5
27,6
1,9
2019
29,8
27,1
2,7
2020
26,0
22,6
3,4
with viscosity of more than 10,000 MPa*s
TATNEFT Group production, mln
Average daily oil production, kbpd
tonnes
29,5
29,8
26,0
576,4
581,5
506,3
2018
2019
2020
2018
2019
2020
Production of associated petroleum gas for the Group in 2020 totaled 831.4 million m³ (associated petroleum gas production of
PJSC TATNEFT — 787.459 million m³, LLC Tatneft-Samara — 43.959 million m³), with the average daily gas production in oil equiv-
alent at 13.4 thousand barrels of oil per day.
In 2021, the Company plans to produce associated petroleum gas in the amount of 797.4 million m³.
TATNEFT Group associated
Average daily gas production
Production of NGL*,
petroleum gas production,
rate, thous. boe per day
ktonnes
mln m3
1009,6
925,3
831,4
16,3
14,9
13,4
321,8
321,1
274,1
2018
2019
2020
2018
2019
2020
2018
2019
2020
* excluding JSC TANECO NGL
87
Annual Report 2020
2018 to 2020 drilling, thous. m
TATNEFT Group average daily oil production rate of active producing
wells vs. New wells, tonnes per day
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Production drilling:
PJSC TATNEFT
subsidiaries
Exploratory drilling:
PJSC TATNEFT
subsidiaries
Total:
PJSC TATNEFT
subsidiaries
2018
750,7
738,3
12,4
28,6
20,3
8,3
758,6
20,7
2019
816,5
801,2
15,3
44,4
34,7
9,7
835,9
25,0
TATNEFT Group target vs. Actual oil production
performance, mln tonnes
Indicator
Conventional oil
SVO
Subsidiaries
Oil production
Target
22,283
3,366
0,314
25,962
Actual
22,320
3,375
0,319
26,014
TATNEFT Group well stock as of 01.01.2021, pcs
Well stock purpose
Operating producing wells
Active producing wells
Inactive producing wells
Testing and waiting-on-testing producing wells
Operating injectors
Active injectors
2020
586,3
586,3
0
22,0
16,3
5,7
602,6
5,7
Deviation
0,2
0,3
1,6
Well Count
24 599
21 815
2 560
224
11 443
10 670
14
12
10
8
6
4
2
0
11,5
10,2
7,2
4,2
4,5
5,0
2018
2019
2020
2018
2019
2020
Average daily oil production rate of
new active operating wells
Average daily oil production rate of a
new well
In 2020, the TATNEFT Group fields’ daily oil production per operating well averaged 5.0 tonnes per day, per new
well — 7.2 tonnes per day
TATNEFT Group average daily oil production, tonnes per day
2018
2019
2020
80 915
81 638
71 075
0
20000
40000
60000
80000
100000
During the reporting year, the construction of 478 wells was
completed. 256 wells were developed and commissioned,
with additional production of 333.8 thousand tonnes in 2020.
The commissioning of 222 undeveloped wells is scheduled
for 2021.
In 2021, given the oil production restrictions under the
OPEC+ agreement, oil production is planned at the level of
26,314 thousand tonnes, including conventional oil — 22,357
thousand tonnes, super viscous oil — 3,663 thousand
tonnes, while well intervention jobs are scheduled for 2,240
wells. Drilling and development of 27 horizontal wells was
carried out at the Averyanovskaya, Yuzhno-Ashalchinskaya,
and Yuzhno-Ekaterinovskaya SVO accumulations. All wells
have been put into development. The cost of implementing
the SVO project amounted to RUB 6,634 million.
88
89
Annual Report 2020 Oil production in the Republic
of Tatarstan
The Company produces most of its oil output from conventional oil fields located in the
Republic of Tatarstan. Currently, the major oil production comes from two unique and six
largest oil fields, namely: Romashkinskoye, Novo-Elkhovskoye, Ashalchinskoye, Bavlinskoye,
Bondyuzhskoye, Pervomayskoye, Sabanchinskoye, Arkhangelskoye.
Oil production by major oil fields for
2018–2020 ktonnes
Fields
2018
2019
2020
Romashkinskoye
15 494
14 789
12 030
Novo-Elkhovskoye
2 780
2 938
2 529
Ashalchinskoye
1 071
1 205
1 160
Bavlinskoye
1 207
1 163
Bondyuzhskoye
Pervomayskoye
Sabanchinskoye
Arkhangelskoye
239
310
537
237
231
315
558
262
787
180
259
444
206
Super viscous oil field
development
The Company produces super viscous oil at the Ashalchinsky
field in the Republic of Tatarstan, using simultaneous injection
of steam into production and injection wells.
In 2020, super viscous oil production totaled 3,375 thousand
tonnes. At the year-end, the daily oil production reached 9,998
tonnes. In general, since the beginning of development, the
total production of super viscous oil has amounted to 11.465
million tonnes.
SVO production, tonnes
SVO production, tonnes
1 949 430
2 735 090
3 375 007
2018
2019
2020
SVO production since
the development
commencement
5 354 560
8 089 650
11 464 657
24 super viscous oil accumulations of the Sheshminian hori-
zon are under development and in production. In the report-
ing year, 1 SVO accumulation (Studeno-Klyuchevskoye) was
commissioned, drilling and equipment of infill horizontal wells
was completed at 3 SVO accumulations (Averyanovskaya,
Yuzhno-Ashalchinskaya, Yuzhno-Ekaterinovskaya), and work
on their development by steam injection is underway.
As of 01.01.2021, at the SVO fields the operating well stock
comprised 944 horizontal wells (including 27 wells drilled in
2020), 2,881 appraisal wells were drilled (including 333 wells
drilled in 2020). The operating producing well count consists
of 400 wells, including 371 paired wells and 29 cyclic steam
stimulation wells. The operating injection well count consists
of 509 wells, including 465 paired, 44 cyclic steam stimula-
tion wells.
The work is proceeding at the super viscous oil field facilities
to deploy the existing technologies and seek new solutions
focused on the improved super viscous oil reservoir man-
agement. Currently, the efficient technologies have been
developed to bring wells to delivering the projected flow rate:
thermogel compositions; reservoir acid treatment with a
complex acid composition; pre-treatment with a solvent.
Another promising area is technologies for increasing devel-
opment efficiency. Currently, the areal injection of solvents is
being tested, and the injection of foam systems is expected
to be pilot-tested.
An important area of work to produce the reserves from less
than 10 meter thickness and complex geology reservoirs is
the development of technologies such as polymer flooding,
steam and gas injection, and thermoshaft method of recover-
ing super viscous oil.
In 2021, it is planned to complete the SVO-3200 project, as
well as further develop the SVO project through the construc-
tion and development of in-fill horizontal wells and the com-
missioning of an additional section of the Moroznaya SVO
accumulation. The costs are estimated as RUB 795.3 million.
Well count, pieces
Daily SVO production, tonnes per day
Operating wells
2018
2019 2020
803
938
944
Daily SVO production as at the year end
5 675
8 492
9 998
Active injectors
396
452
509
2018
2019
2020
Active operating wells, pcs
258
362
400
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Oil production outside the Republic
of Tatarstan
The Company continues to expand its presence outside the
Republic of Tatarstan.
During 2018–2020, the TATNEFT Group operated 16 oil fields
outside the Republic of Tatarstan, in the Samara Region.
In the Samara Region, the oil production came from 127 wells
and amounted to 319 thousand tonnes. In the Samara region,
3 new production wells were commissioned with the average
flow rate at 5.8 tonnes per day.
Key indicators
Oil production, thousand tonnes
Average daily active well oil production rate
Average daily new well oil production rate, tonnes per day
2018
341
7,9
10,5
2019
329
7,4
15,2
2020
319
7,3
5,8
Turkmenistan
As part of cooperation with SC Turkmennebit, the work was
underway in 2020 to implement the production program for
improving oil recovery at the wells of SC Turkmennebit in
Turkmenistan.
The number of well workover teams was increased from 3 to
12, and more than 500 jobs were created. In 2020, workovers
were completed at 66 wells, including 43 wells accepted
into the production fund, additional oil production for 2020
amounted to over 93 thousand tonnes, totaling 294.8 thou-
sand tonnes since the contract commencement.
In 2021, the Company plans to commence with the imple-
mentation of a production program to increase the well
intervention operations at 250 wells of SС Turkmennebit with
the expansion of the territory of joint activities as well as to
implement services in the field of in-fill drilling at old wells.
Construction and commissioning of the oil-well tubing main-
tenance section in Turkmenistan was completed.
Uzbekistan
As part of implementation of the Cooperation Agreement with
JSC Uzkimyosanoat and the Memorandum of Сooperation
with JSC Uzbekneftegaz, the work has been organized to put
in practice the decisions stipulated in the Minutes of meet-
ings between PJSC TATNEFT, JSC Uzbekneftegaz, and JSC
Uzkimyosanoat.
The projects are being implemented in various business lines.
In 2021, the Company plans to develop cooperation with the
Republic of Uzbekistan in various business lines. In particular,
two qualification bids were submitted for participation in tenders
for rendering oil field services with undistributed risk for 5 and
23 hydrocarbon (HC) fields. Confirmation of the qualification of
PJSC TATNEFT for the first round of the tender was received, a
confidentiality agreement was signed, and information is under
confirmation. The decision of the Uzbek party is pending on the
second qualification bid.
Libya
Since 2014, the project in Libya has been suspended until
cessation of military operations and stabilization of the politi-
cal situation. At the moment, the main 3D seismic operations
have been completed in the 82/4 area, and the seismic data
are being processed and interpreted.
Syria
Via its branch TEPI AG, the Company has contractual obliga-
tions for the Block 27 exploration and development in Syria.
Oil production has been suspended since 2011. For the time
being, contacts and consultations with the Ministry of Energy
of Russia and the Syrian side on the terms of resuming the
project are underway. The Company does not plan to resume
any production activities in the Syrian Arab Republic until
the cessation of hostilities and stabilization of the political
situation.
Kazakhstan
On 12.11.2019, PJSC TATNEFT and JSC OC KazMunayGas
signed a roadmap to ensure the integration of advanced
experience and technologies of PJSC TATNEFT into the oil
and gas industry of the Republic of Kazakhstan. Within the
framework of the roadmap, the establishment of a joint ven-
ture between PJSC TATNEFT and JSC OC KazMunayGas is
negotiated as well as the implementation of cooperation proj-
ects in exploration, field development, deliveries of TATNEFT
Group equipment and products. In 2020, the scope and
types of delivery of goods and services were determined,
quotations were sent, and the supply terms were agreed
upon. Regarding the exploration and oil and gas production
projects, the perimeter of assets for the upcoming coop-
eration was determined, information on fields and licensed
territories is currently being studied.
90
91
Annual Report 2020
Pilot test operations to identify and develop oil accumula-
tions in the domanic deposits
Digital modeling in reserve
development
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
In 2020, work continued on the study and development of
subsurface resources containing unconventional hard-to-re-
cover reserves, which include Domanic productive deposits
and SVO.
Additional exploration work in Domanic deposits was per-
formed at the wells of NGDU Leninogorskneft (4 wells Nos.
13849, 13954, 17362, and 14048 of the Romashkinskoye
field (Abdrakhmanovskaya square), NGDU Prikamneft (2
wells: No. 726I of the Saraylinsky field and well No. 1472 of the
Pervomayskoye field). Following the works performed, the
target efficiency was achieved.
As regards the core study, microanalysis of the composi-
tion and geochemical properties of rock samples from well
No. 21159 B of Domanic deposits (NGDU Almetyevneft) was
carried out, and the Temporary Guidelines for Estimating Oil
Reserves in Domanic Productive Deposits are being updated.
As part of the work at the Domanik and Bitum testing sites at
Kuzminovsky-1, Elaursky, and Bulgarsky subsurface areas, ex-
ploration and geological study projects are being carried out.
On the Kuzminovsky-1 area, the following work commenced
in 2020: “Assessment of rocks attribution to Domanic-type
deposits as unconventional reservoirs, following the compre-
hensive study of physical and lithological properties (for the
evidence base of preferential reserves when estimating and
reestimating reserves). Study of core, sludge, and fluids of
Domanic deposits following well drilling (including well No. 26
R of the Kuzminovsky area).” In 2020, the first stage of work
was completed including the following: core gamma-spec-
trometry, longitudinal slabbing, photographing in daylight and
under ultraviolet light, followed by comparison and macro
description.
At the Elaursky area (the Bitum testing site), a set of core stud-
ies was conducted to isolate bitumen and determine its vis-
cosity, for the core obtained during drilling of well No. 34001.
As part of the final stage of the “Development of Oil Recovery
Technology Based on Laboratory Testing of Core, Water, and
Oil from Carbonate Bituminous Reservoirs at the Elaursky
area” R&D project, the Company has decided to conduct pilot
testing (for steam and solvent injection) at the above well. To
test the technology and equipment to involve the SVO reserves
in the carbonate reservoirs in the development, well No. 34001
of the Elaursky area was steam-injected for the 1st cycle.
For the Shugurovskaya SVO deposit, after electromagnet-
ic GPR pulse sounding, the “Additional Exploration of the
Shugurovskaya Oil Deposit of the Romashkinskoye field”
project was developed.
The activities titled “The Development of Research and
Engineering Solutions to Develop Unconventional Reservoirs
(Domanic deposits) and Hard-to-Recover Oil Reserves (bi-
tuminous oil) Based on Experimental Research” were carried
out under the Federal Target Program (FTP) of the Ministry of
Education of the Russian Federation.
At wells Nos. 2800 and 2805 (Zavolzhsky suprahorizon) of the
Bavlinskoye field, the technology with the use of low-viscosity
hydraulic fracturing fluid was applied in the development of
Domanic deposits. Works on hydraulic fracturing in the wells
were performed without complications in the normal mode.
At wells Nos. 2255 and 3102 (Zavolzhsky suprahorizon) of the
Bavlinskoye filed, the technology with the use of KC-FTSP-2,
KC-3(1:1) acid compositions was used. At four wells Nos.
13000, 13003, 13004, 13005 of the Severo-Ashalchinsky up-
heaval (Sheshminian horizon) of the SVO deposit, the technol-
ogy of injection of RTNN-7 solvent into cyclic steam stimulation
wells was used for the development of bituminous deposits.
In the periodic mode, 75 m3 of solvent was injected into the
reservoir with steam in each well, after which it was stopped for
thermal capillary impregnation and a liquid extraction cycle.
Digital modeling in the reserve development is the process
of integrated field modeling (IM), a mathematical descrip-
tion of the processes in the components of the hydrocarbon
production system, including the reservoir, wells, and surface
facility development.
The use of the “Reservoir model – Well model –
Surface Pressure Maintenance System Model –
Economics” IM is a concept of digital development
based on the application of a new systemic approach.
Geohydrodynamic
Modeling Team.
Petrophysicist + seismicist
+ geologist + developer
Limitations
Specialist in borehole
production and injection
technology,
Modeler-Developer
I
n
t
e
g
r
a
t
i
o
n
O
p
t
i
i
m
z
a
t
i
o
n
Reservoir
model
Well
model
Economics
Surface
Pressure
Maintenance
System
Model
i
L
m
i
t
a
t
i
o
n
s
G
e
o
m
e
t
r
y
a
n
d
d
e
s
g
n
i
o
f
w
e
l
l
s
,
p
r
e
s
s
u
r
e
d
r
o
p
Economic
modeling expert.
Economist
Injection volumes,
set of equipment
Limitations
Surface pressure
maintenance network
specialist
Modeler-Developer
Surface pressure
maintenance system
Well
Reservoir
Control and
measurement system
Surface pressure
maintenance system
Extraction, collection,
and preparation system
Well
Reservoir
The objective in the development of a field is to fully involve the
capacity of the deposit in the drainage process.
The development of the concept to optimize the waterflooding
system with the use of IM requires formalization and solution
of tasks and stages: creation of a geological and hydrody-
namic model (GHM) of the reservoir or site; creation of Well
models; creation of a model of the surface pressure mainte-
nance system for the site or for an site sector; integration of
the surface pressure maintenance system with the GHM of the
oil site and well models; pressure maintenance; improvement
of competencies in the field of modeling the system “Injection
Pump Station – Water Pipelines – Wells – Reservoir”; conduct
of a complex nodal analysis of injection wells, specifica-
tion of operation parameters, determination of optimization
measures; planning of technological indicators of oil object
development, taking into account the mutual influence of the
components included in the integrated model; analysis of site
development indicators and choosing the optimal scenario for
practical implementation; impact of the collection network on
the performance of wells; identification of problem areas in the
collection network; accounting for injection network restric-
tions; accounting for the interference of wells with different
characteristics, located on the same cluster site; correct
accounting for group restrictions on oil production.
Optimization of the pressure maintenance system is a
comprehensive approach (project). The basic princi-
ple is to find a common solution between the reservoir
potential, well conditions and the limitations of the
surface pressure maintenance infrastructure, taking
into account the economic criteria of the project under
consideration.
92
93
Annual Report 2020
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Oil and gas refining
TANECO Complex
The “Oil and gas refining” business line incorporates the production facilities of JSC TANECO (main oil refining
output), Tatneftgasprocessing Division (including Elkhovsky Oil Refinery), and JSC Nizhnekamsktehuglerod. The
downstream operations are organized at four production sites in the immediate logistical proximity to the oil pro-
duction facilities in the Nizhnekamsk and Almetyevsk Districts of the Republic of Tatarstan.
Key strategy objectives:
• Bringing the refined oil to 15.7 million tonnes per year;
• Increasing the output of environmental class K5 products
that meet the requirements for Euro-6 engines;
TATNEFT Group oil refining, thousand barrels
per day
230,3
206,7
• Search for new opportunities for the growth of the business
line, including through the development of new lines;
179,0
163,3
• Improving the environmental situation in the region of op-
eration through the use of the best available technologies
and the sale of environmentally friendly products;
• Ensuring safe working conditions for employees involved in
the production or related to the production activities of the
Neftegazopererabotka enterprises.
JSC TANECO oil conversion ratio, %
Light product yield, %
99,05
98,98
99
83,64
80,87
75,0
2018
2019
2020
2018
2019
2020
In 2020, over 11.35 million tonnes of crude oil were pro-
cessed at the TANECO Complex’s facilities, the output of pe-
troleum products amounted to 12.1 million tonnes. Besides,
during the year, the vacuum gasoil was delivered from third
parties in the amount of 0.121 million tonnes to operate the
hydrocracking unit at higher process utilization rate, of which
0.0078 million tonnes came from Elkhovsky Oil Refinery.
TANECO Complex refining output, ktonne
Processing of feedstock, including:
- Oil
- Gas condensate/Heavy mixed stabilized sulfurous condensate
2018
8 609
8 605
4
2019
10 060
10 058
2
2020
11 350
11 306
44
2017
2018
2019
2010
2020 TANECO Complex main product slate
Complex development outlook
Processing depth
JSC TANECO oil conversion ratio — 99% (as per MB report)
Despite the impact of the restrictive
measures taken due to the coronavirus
pandemic, which affected the oil
refining operations throughout 2020, the
production performance indicators for the
downstream business were fully met.
Oil conversion ratio in Russia — 84%
Oil conversion ratio in the US — 97%
Oil conversion ratio in Europe — 95%
0%
100%
* data from the minutes of the meeting of the
Association of Oil Refiners
• Diesel fuel EURO
• Unleaded gasoline
• Aviation kerosene
• NGL
• Stable natural gasoline
• Technical kerosene
• Heating gasoil/gas condensate distillate type I / II
• Diesel oil cut
• Hydrotreated diesel oil cut
• Hydrotreated petroleum fuel/compound of lubricating oils
• Industrial gas granulated sulfur
• Anode grade petroleum coke
• TATNEFT isoparaffin base oil HVI-2 (TANECO base 2)
• TATNEFT isoparaffin base oil VHVI-4 (TANECO base 4)
• Heavy coking gas oil
The positive dynamics of the TANECO Сomplex development
is steadily progressing through the improved efficiency of
the current operations and timely new production launches,
allowing for the expansion of the output and slate of products,
enhancing the oil conversion ratios, and increasing light
product yield.
Planned start-ups and process unit capacities:
• Catalytic cracking unit — 1,100 Ktonnes per year
• Hydrogen production unit — 3,100 Ktonnes per year
• Gas fractionation plant — 350 Ktonnes per year
• Delayed coking unit-2 — 2,000 Ktonnes per year
• Pilot tar hydroconversion unit — 50 Ktonnes per year
• Diesel fuel isodewaxing unit — 1,300 Ktonnes per year
• Lube stock plant — 40 Ktonnes per year
94
95
* 11,3 million tonnes do not include gas, semi-finished products and losses.
Annual Report 2020 New product launch
TANECO technologies
In 2020, commissioning works were started on a modular
plant for rapid pyrolysis of wood biomass, designed for pro-
cessing wood chips, sawdust, and plant biomass by thermal
decomposition without oxygen access.
The following projects are planned to be implemented in
2021:
• "Construction of the diesel fuel isodeparaffinization plant".
This unit is designed to produce stable arctic diesel fuel
with a low pour point temperature.
• "Modernization of the lube base stock plant to produce a
base oil with a viscosity of 6 cSt at 100 °C". The project is
aimed at upgrading the existing lube base stock plant to
produce a new product.
• Creation of digital twins of CDU-VDU-7, CDU-VDU-6,
hydrocracking units. The "digital twin of the process plant"
is a software solution aimed at finding non-obvious tech-
nological dependencies of oil refining processes. The goal
of the digital twin is to further develop the most marginal
fractions/end products, based on the current interests of
the enterprise.
Key business projects and events in 2020
New product launch
In January 2020, commissioning works were performed at
the heavy coking gas oil hydrotreatment plant, as well as a
fixed running at 100% load using the design raw materials
(HGC+HVG).
In 2020, the production of premium TANECO EURO-6 AI-92,
AI-95, AI-98, AI-100 gasoline according to STO 78689379-
50-2020, distinguished by a low sulfur content and a mini-
mum content of olefin hydrocarbons, was launched.
In February, the use of LHG of section 4100 as a component
in the production of gasoline was started.
In March 2020, the production of RMD 80 marine fuel as per
GOST 32510-2013 was launched.
In March, the monthly volume of crude oil refining exceeded
1 million tonnes for the first time ever. The production of anti-
septic liquid was started.
In April, the heavy gas oil coking hydrotreatment and sulfo-
lane extractive distillation units were commissioned.
In June, the overhaul of the process equipment of the vis-
breaking units and the visbreaking vacuum unit was per-
formed successfully, and the delivery of light vacuum gas oil
from Elkhovsky Oil Refinery for the additional loading of the
hydrocracking unit commenced.
In August, operational tests of light feedstock (LGC and LVG)
refining were carried out at section 4200.
In November, a comprehensive testing of the medium distil-
late hydrotreating plant equipment was started on working
media, and in December, the plant was commissioned.
In the second half of the year, the scheduled maintenance of
process equipment for hydrocracking, hydrogen production,
oils production, and delayed coking was successfully carried
out.
In 2021, the company plans to complete construction and
installation works and commence with comprehensive testing
of hydrogen-3 production units, catalytic cracking, pilot hy-
droconversion unit, delayed coking unit-2, gas fractionation
unit, isodeparaffinization, lubricants production, and related
U&O facilities.
Production of EURO-6 premium diesel fuel as per STO
78689379-51-2020, distinguished by a reduced sulfur
content (max. 5 ppm) and a minimum content of polycyclic
aromatics, was launched.
In May 2020, TANECO launched the production of MGA-18
industrial-grade hydraulic oil according to STO 78689379-59-
2020, which is intended for the lubrication of lightly loaded,
high-speed components and mechanisms, in machines and
mechanisms of industrial equipment, as a hydraulic fluid.
In September, the first batch of SAE 5W-40 TATNEFT
Premium semi-synthetic motor oil was received.
In November 2020, TANECO launched the production of a
low-viscosity component of drilling mud according to STO
78689379-66-2020. This product is designed for the prepara-
tion of a wide range of hydrocarbon-based solutions suitable
for all drilling conditions.
In December, the first batches of the following oils were re-
ceived: SAE 5W-40 TATNEFT Profi and SAE 5W-40 TATNEFT
Progress semi-synthetic motor oils, SAE 0W-30 TATNEFT
Luxe and SAE 0W-30 TATNEFT Luxe PAO synthetic motor oils.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Elkhovsky oil refinery
In 2020, the oil refining amounted to 504,818 tonnes, the
conversion ratio was 53.32%, and the light product yield was
33.84%.
In 2020, Elkhovsky Oil Refinery accepted 504,818 tonnes
of crude oil for processing, including 502,703 tonnes from
NGDU Elkhovneft and 2,115 tonnes from LLC Tatneft-Samara
(Irgizskoye oil field), which resulted in the refining output of
244,247 tonnes of finished products. The targeted output of
219,648 tonnes of petroleum products was outperformed
attaining 111.2%.
The Tatneftgasprocessing Division’s gas collection system
received gas in the amount of 2.254 mln m3.
In 2021, it is planned to continue works on the implementation
of projects for the construction, refurbishment, and updating
of GPP and Elkhovsky Oil Refinery facilities. The following
facilities will be commissioned: “Construction of the Plant-
Wide Flare System,” “Retrofitting and Upgrading of Safety
Systems at MGPP,” “Updating of the 1,500 kVA UTS with the
Replacement of Power Transformers 6/0.4-2x1,500 kVA at
Elkhovsky Oil Refinery,” “Updating of Engineering Networks
at Elkhovsky Oil Refinery,” “Implementation of the System
of Automated Control of In-House Production Processes at
Elkhovsky Oil Refinery.”
Main processing facilities
The unit oil refining plant consists of the following pro-
cess units:
• Atmospheric and vacuum distillation of crude oil;
• Straight-run gasoline hydrotreating;
• Gasoline catalytic reforming;
• Benzene-free component unit for commercial
gasolineproduction;
• Diesel fuel hydrotreating;
• Amine scrubbing of hydrocarbon gases;
• Elemental sulfur recovery;
• Road construction bitumen production;
• Engineering support unit: flare system, supply of fuel gas,
nitrogen, process air, process water, steam.
The feedstock and product facility includes the follow-
ing sites:
• The refinery tank battery for commodity acceptance and
storage consists of 4 vertical steel tanks RVS-5000 and 4
tanks of 200 m3 capacity;
• Commercial Regular-92 gasoline unit;
• Two finished product release outlets;
• Adhesive production unit.
2020 product slate
• Diesel fuel;
• Regular-92 gasoline;
• Heating gasoil;
• Light vacuum gasoil;
• Elemental sulfur;
• Industrial solvent.
2020 key business projects
• Implementation of the system of automated control of
in-house production processes at Elkhovsky Oil Refinery;
• Introduction of the advanced process control system at the
ELOU-AVT unit;
• Organization of shipment and refining of Elkhovsky Oil
Refinery LVG at the facilities of JSC TANECO;
• Improving Elkhovsky Oil Refinery operational efficiency by
optimizing the expenses for underground storage facilities
and overhaul.
Product quality
All manufactured products comply with the requirements of
regulatory documents.
96
97
Annual Report 2020 TATNEFTGASPROCESSING
DIVISION (UTNGP)
The Tatneftgasprocessing Division is a single technological
complex that performs the APG and NGL treatment, storage,
and processing operations as well as the shipment of processed
products. UTNGP is engaged in processing of associated petro-
leum gas and wide fraction of light hydrocarbons (APG and NGL)
extracted together with crude oil from the Company’s oil fields
ensuring the gas utilization at the rate of 95% in accordance with
the requirements of the legislation of the Russian Federation.
The Tatneftgasprocessing Devision’s existing capacities enable
performing the entire complex of gas processing operations: gas
purification from hydrogen sulfide and carbon dioxide; dehydra-
tion; gas separation into individual fractions — ethane, propane,
isobutane, isopentane, pentane-isopentane fractions, and frac-
tions of normal butane and stable natural gasoline as well as dry
topped gas and gas sulfur.
In 2020, the supply of oil gas to the GPP amounted to 713.5
million m3 of gas. The integrated oil processing unit processed
NGL in the quantity of 271.6 thousand tonnes, with additional JSC
TANECO NGL processing amounting to 32.1 thousand tonnes.
250.2 million m3 of high-sulfur gas was delivered for sweeting.
Works were completed on the refurbishment of the raw gas com-
pressor unit, the construction of the plant-wide flare system, the
updating of safety systems at MGPP, and the linking of the solvent
deasphaltation (SDA) experimental laboratory unit.
• Topped gas compressor unit 7/8 of the plant with 10 GKN-
type gas-engine compressors;
• Finished product storage unit;
• Discharge and filling railway elevated platforms (5/6 and
7/8), designed for simultaneous filling or discharge of 30
railway tanks on each platform. The capacity of each filling
and discharge elevated platform is 300 thousand tonnes of
products per year;
• Feedstock and finished product warehouses Nos. 1, 2, 3;
• Fuel and reagent storage unit.
• Flare gas disposal unit;
• Air compressor station;
• Nitrogen-oxygen station for oxygen and nitrogen
generation;
• Recirculating and fire-extinguishing water supply systems
with sewage treatment plants and Zayskaya water intake
station.
Product slate
• Flammable natural gas;
• Hydrocarbon liquefied fuel gases;
Production facilities
• 4 NGL pumping stations with a system of product pipelines;
• Ethane fraction;
• Propane fraction;
• The Minnibaevskaya sour gas-sweeting plant with elemen-
• Isobutane fraction;
tal sulfur recovery;
• Bavlinskaya sour gas-sweeting plant with elemental sulfur
recovery;
• Gas desulfurization unit with the capacity of 1 billion m3
per year (the unit includes a pilot plant for the sour gases
utilization to produce elemental sulfur);
• Raw gas compressor unit 7/8 of the plant with K-380 type
centrifugal compressors;
• Gas dehydration and sweetening unit to remove moisture
and carbon dioxide;
• Low-temperature condensation and rectification plant;
• Cascade refrigeration unit;
• Cryogenic plant for deep processing of dry topped gas;
• GFU-2 and GFU-300 gas fractionation plants;
• Normal butane fraction;
• Isopentane fraction;
• Stable natural gasoline;
• Technical-grade sulfur;
• Technical-grade oxygen gas;
• Technical-grade nitrogen.
Product quality
All manufactured products comply with the requirements of
regulatory documents.
98
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Nizhnekamsktekhuglerod
The Company’s carbon black production capacity is one of the largest among the Russian
industrial enterprises.
The produced carbon black is highly competitive relative to
its foreign counterparts, as a component in rubber manu-
facture, and is used as a filler for plastic goods. The quality
of the products is world-class. A wide range of carbon black
grades contributes to the extensive geography of product
sales both within the country and for export. The line of car-
bon black grades produced by the Company includes more
than 14 commodity items. The plant produces the following
carbon black grades: N-115, N-121, N-134, N-220, N-234,
N-330, N-324, N-326, N-339, N-375, N-376, P-242, P-243,
P-245, P-234. The finished product is delivered to consum-
ers in special hopper-carbon black cars (42–47 tonnes
each), packaged in plastic or paper bags (22–25 kg each)
or in big-bags.
In total, the plant has 5 technological streams for the pro-
duction of active and semi-active carbon black grades. The
production capacity is 134.4 thousand tonnes per year: for
active grades — 78.7 (1, 2, 5 process streams), for semi-ac-
tive grades — 55.6 (3, 4 process streams).
The consumers of carbon black products are the enterpris-
es that produce industrial rubber goods.
In 2020, the carbon black production amounted to 120
thousand tonnes. Total sales amounted to 119.3 thousand
tonnes. In 2020, the carbon black importers were more than
10 countries. Primarily, the deliveries were made to Belarus,
Poland, Germany, Turkey, Serbia, Romania, Slovakia,
Switzerland, etc.
Carbon black production for 2018—2020, ktonnes
2018
2019
2020
0%
134,4
112,0
120
2020 carbon black sales, ktonnes
Main carbon black supply
destinations in 2020, %
Sales destination
Sales volume
Sales destination
PJSC TATNEFT Tire Business
55,9
Tire business
Domestic market
Export
19,0
Domestic market
44,4
Export
Nizhnekamsktekhuglerod almost completely provides its production ca-
pacities with its own electric energy. The transition to the self-generated
power supply has significantly reduced the cost of production and helps to
improve the environmental situation in the region.
150%
%
47
16
37
99
Annual Report 2020 Retail business
The Company’s retail and sales network is the key chan-
nel for promoting highly competitive products of PJSC
TATNEFT, that is gasoline and diesel fuel of its own produc-
tion with improved performance characteristics. The rapid
development of the TATNEFT fuel stations is facilitated by
ongoing upgrading and modernization of the fuel filling
station along with the introduction of advanced energy- and
resource-saving technologies aimed at preserving and
improving the environment.
The 2030 development strategy is focused on improving the
“quality” of the filling station network, developing accompa-
nying services and transforming filling stations into “service
centers.” The competitive strategy is based on the renewal
of unique fuel and nonfuel supply at filling stations for target
customers.
Introduced in 2019 as part of the tax maneuver, the “damp-
er” allowed to stabilize the situation in the retail fuel market
in Russia, which ensured a sustainable retail margin and
positive EBITDA dynamics in 2020.
Given the market parameters for 2019–2020, it is possible to
plan not only the asset quality improvement provided for in
the Strategy, but also the filling stations network expansion
in the Russian Federation.
The output produced at the TANECO
Complex such as diesel fuel and a
slate of gasolines, which are delivered
directly from the Refinery, is one of the
signature lines of the TATNEFT Company.
The assured quality and environmental
characteristics meet high standards of
petroleum products.
By the year-end 2020, the Company’s retail sales network
incorporated 819 fuel filling stations located in Russia,
Ukraine, Uzbekistan, and Belarus, in particular: 33 regions of
the Russian Federation — 708 filling stations, the Republic of
Belarus — 18 stations, Ukraine — 91 stations, Uzbekistan — 2
stations.
The Company considers its fuel filling station network as the
main channel for selling gasoline and diesel fuel of its own
production. In 2020, the Company increased its network by
19 advanced, high-tech filling stations, while extending its
presence to the Lipetsk Region by 1 filling station, and the
Republic of Mordovia by 6 stations, with 22 renovated filling
stations. In the Ryazan Region, 2 mirror-located multi-
functional service areas (MSAs) were built. In the regions
where the Company operates, the filling station network has
increased by 10 gas stations: in the Republic of Tatarstan by
5, in the Nizhny Novgorod Region by 2, and in the Samara
Region by 3. As of the year-end, 25 franchised filling stations
operate under the TATNEFT brand. The Company contin-
ues to integrate Neste filling stations network comprising 75
filling stations and 1 tank farm — acquired in 2019 — into the
TATNEFT filling station network.
The new assets will help increase the sales of fuel produced
by the Company in the domestic market. In 2021, it plans
to further develop promising regions and open new sales
markets, expand the network of TATNEFT filling stations, in
particular, in the Voronezh, Tambov, Saratov, Lipetsk, Kirov
Regions as well as in the Republic of Bashkortostan, the
Republic of Mordovia, and the Perm Territory.
The rapid development of the TATNEFT filling stations net-
work is facilitated and supported by ongoing modernization
of the fuel filling stations along with expansion of accompany-
ing services. Additional control measures for petroleum prod-
ucts are being put in place. A conceptual solution of Format
200+ for the location of filling stations on land plots with an
area of 1.6 hectares has been developed.
The Company is developing infrastructure to support electric
vehicles — 7 filling stations are equipped with fast charging
units. Alternative types of heating are used, including pellet
boilers, heat pumps, and solar panels.
In 2021, the Company intends to expand the network of fast-
charging stations for electric vehicles to 16, develop the sale
of compressed natural gas at 3 filling stations, upgrade 74
and build 6 filling stations, create filling-station heating using
a solar collector, and introduce energy-saving Smart Grid
technologies.
100
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Fuel filling stations count
Total, including
Russian Federation
Ukraine
Republic of Belarus
Republic of Uzbekistan
2018
711
602
91
18
2019
802
691
91
18
2
2020
819
708
91
18
2
Retail petroleum product sales,
ktonnes
Average daily sales at operating filling
stations, tpd per station
5 137
4 142
3 455
9,9
10,2
9,1
2018
2019
2020
2018
2019
2020
24%
Retail petroleum
product sales growth
3,03%
Filling station average daily
sales growth
TATNEFT retail petroleum product sales, ktonnes
Indicators
Sales volume:
RSS
Russian Federation, including
LLC Tatneft-AZS-Tsentr
LLC Tatneft-AZS-Zapad
OOO Tatneft-AZS-North-West
FLLC Tatbelnefteprodukt
LLC Tatneft-AZS-Ukraine
LLC Tatneft-AZS-Tashkent
2018
2019
2020
2018
2019
2020
Retail
Small wholesale
1 858
1 759
1 106
653
-
68
31
-
2 075
1 970
1 221
749
-
76
28
0,3
2 478
2 371
1 209
840
322
64
27
16
1 597
1 568
849
719
-
5
24
-
2 006
1 981
898
1 083
-
4
21
-
2 659
2 628
1 078
1 537
13
4
27
-
101
Annual Report 2020 Accompanying services
In the strategic concept for the development of the fuel
filling station network, one of the ways to improve efficiency
and competitiveness is the development of accompanying
services. During the refurbishment of existing facilities and
construction of new ones, novel formats are implemented in
the filling station complexes with the retail space areas of 60,
90, and 150 m2, including cafe zones, drive-throughs, con-
venience stores, as well as new forms of rendering additional
services.
In 2020, the number of robotic car wash posts at the TATNEFT
filling stations increased, barista services at filling stations,
food delivery from filling stations, and the sale of goods using
fuel cards were introduced.
The Company develops digital services. For example, in
2020, three filling stations were equipped with “smart home”
systems, and pilot testing of online energy monitoring sys-
tems is underway.
In 2020, to improve the level of customer service, a system
of uniform standards is in place throughout the network, and
employee training and control checks are carried out on a
regular basis.
In 2021, the Company plans to introduce online fuel pay-
ment cards, create catering points based on unique reci-
pes in the Dark Kitchen format, create an electric scooter
rental network, organize online sales and purchases in the
Marketplace system, and introduce a robot assistant at filling
stations.
Petroleum product quality control system
The Company has an effective system of petroleum product
quality control in place, which allows guaranteeing high quali-
ty fuel at TATNEFT filling stations to its customers. The work is
organized in accordance with the requirements of the current
rules and regulations in all process operations (acceptance,
storage, transportation, and release) and is provided by a
multilevel control system, using cutting-edge equipment,
advanced technologies, technical means, and software sys-
tems (Info-Oil, AutoGraph, Terrasoft, Intraservice).
During 2020, more than 17 thousand samples of petroleum
products were collected from all gas stations and tank farms.
The Company analyzed more than 100 thousand indicators in
11 specialized laboratories with the involvement of 3 mobile
laboratories which equipment allows for prompt determining
more than 15 indicators for gasoline and 10 indicators for
diesel fuel by express methods.
Environment
The priority direction for the fuel station network
development is to constantly improve the
environmental characteristics of products and
processes of fuel station complexes, taking into
account the corporate model of responsible resource
consumption and reducing the negative impact on
the environment.
To control environmental indicators and reduce the impact on
the environment, the Company implements comprehensive
measures covering the entire fuel station network. In partic-
ular, the measures are aimed at reducing emissions to the
atmosphere through capturing and processing of hydrocarbon
vapors. The first stage of the project is to equip fuel stations
with a system for recirculating hydrocarbon vapors (vapors are
gathered while loading petroleum products into tank trucks
and stock tank farms, then the vapors are captured in the
light hydrocarbon vapor recovery unit). The second stage is
equipping tank farms and refineries with units for collecting
and processing vapor-air mixture. Then all fuel-filling pumps at
filling stations will be equipped with gas return systems.
To optimize energy consumption, pellet boilers are installed
at filling stations that operate on wood wastes; creation of a
natural filling station air conditioning system in the summer,
introduction of Smart Grid energy-saving technologies with the
ability to monitor and control systems. All products sold within
the fuel filling station network have the required certificates
and permits. Over the past year, nonconformities were not
revealed. Currently, the Company is working on the action plan
for shifting to environmentally friendly packaging and labels.
To create a favorable environment in the area of its op-
erations, the Company is implementing the “Forest from
Filling Stations” greening program: as of 2020, the total
area of planted forests was 5,805 hectares.
ISO standards compliance and fuel filling
station certification
Currently, the retail chain enterprises are taking measures
to ensure compliance with ISO standards — Environmental
Management Systems (ISO 14001:2015) and Occupational
Safety and Health Management Systems (ISO 45001:2018). In
2020, a project was implemented to introduce IMS in the Retail
Business sector.
Informing consumers of goods and services
The Company uses all available communication channels to
inform consumers on its products and services through the
quality certificates for petroleum products and goods being
sold, proactive information plates and signage, promotional or
informational material (printed materials, models on the video
monitors, audio and video advertising) that are easily available
at our fuel stations and describe the composition and proper-
ties of the products being sold, the procedures for the safe use
and disposal, and the impacts on the environment. Information
is also posted on the Company’s website, in social networks,
and mobile app. On the same resources, customers may get
feedback from the designated network specialists.
During the reporting period, there were no deficiencies in the
quality of products sold and the impact of products and ser-
vices on the health and safety of customers and visitors.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
All motivated inquiries are registered in the Terrasoft system
with further breaking down into one of 4 types (comment,
request, complaint, claim) and classification by one of 15
parameters (payment calculations for fuel, related service,
service culture, promotions, equipment integrity, fuel filling
accuracy, etc.). The customer is provided with our feedback
via the received information channel (phone call, email,
etc.) within 6 business days. If a more detailed inspection is
required by a joint decision of the supervisor of the subsidiary
and a designated specialist, the term may be extended to 21
business days.
The response time in social media for requests and inquires
that do not require registration and subsequent official verifi-
cation may take from a few hours to 2–3 calendar days. A full
review of the correctness of providing feedback is performed
monthly with a random check of customer satisfaction with
the response.
Customer loyalty programs
The Company conducts dozens of promotional and incen-
tivizing events at gas stations and in the regions where it
operates.
Federal incentivizing events: All-Russian “AydaNaAZS”
campaign, New Year’s “We fill with gifts,” “Fill in some good
luck,” “100th anniversary of the TASSR,” events under the
Champion Club loyalty program, promotions with suppliers of
accompanying goods
Image-making and promotional events: “Forest from Filling
Stations” environmental campaign, sponsorship of sports
teams: HC Ak Bars, KAMAZ-Master, HC Neftyanik, spon-
sorship of the Masterslavl development project for children,
sponsorship of the Green Fitness project, sponsorship of the
ART-Sabantuy artistic contest, Open Days and field presen-
tations at the largest enterprises of the regions of operation,
children’s matinees, federal and regional holiday events
(February 23, March 8, May 9, etc.).
Local incentivizing events: Night Drive, Weekend Discount,
We are Happy to See Everybody.
In 2020, the Company promoted the Champion Club loyalty
bonus program offering the ability to segment the customer
base and personalize the offer.
Customer satisfaction surveys
Regular surveys to assess customer satisfaction and brand
health indicators (knowledge – consumption – loyalty) are
performed once a quarter using Mediascope* statistical
database. All this allows us to build a communicative strategy
of consumer work, organize promotional events that are in
demand, and consequently, have a positive impact on loyalty
and demand.
* Mediascope is a technology research company, the leader
of the Russian market of media research and monitoring of
advertising and mass media.
Personal data of customers
The Company strictly oversees the mechanisms for ensur-
ing the principle of consumer privacy right and protection of
personal data of the customers in our fuel filling stations and
is guided by the Constitution and federal laws of the Russian
Federation regulating these activities. The customer infor-
mation base is formed as part of the loyalty program to notify
customers of marketing promotions and inform them on the
network operation. The information database comprises the
persons who have consented to their personal data process-
ing and subsequent receipt of notifications from the fuel filling
station network.
Feedback
To ensure quality control of the filling station network opera-
tion, the feedback mechanisms are set up and maintained in
a fast-track manner (reception, processing, and response):
• Customer feedback book that is available at all our filling
stations
• 24/7 hotline of the TATNEFT retail sales network:
8-800-5555-911
• 24/7 PJSC TATNEFT hotline: 8-800-100-4-112
• Feedback form on the retail sales network website
azs.tatneft.ru
• Email: tn@88001004112.ru
• Retail Network social media accounts (https://vk.com/azs.
tatneft, https://www.facebook.com/azs.tatneft, https://
twitter.com/AZS_TATNEFT, https://ok.ru/azs.tatneft,
https://www.instagram.com/azs.tatneft/)
• PJSC TATNEFT official page in social media.
• Corporate social network (CSN): https://kss.tatneft.ru/
• Collecting reviews from third-party platforms (maps,navi-
gators, and feedback sites)
• Customer polls
102
103
Annual Report 2020 Petrochemical complex
Tire business
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
The petrochemical sector represents new business growth
points with high long-term potential. By investing in the petro-
chemical industry, the Company reduces the Group’s market
risks through diversification, gains additional synergies with its
refineries and gas processing plants, and increases the stabili-
ty of generated cash flows and its profit margins.
The enterprises of this business segment managed to achieve
the planned indicators under the production program, despite
the deterioration of the market conditions in the petrochemical
and consumer industries (primarily in terms of demand from
the automotive and tire industries).
Key risks:
• Slowing global demand for plastic due to changes in
consumer behavior and the concern for nature;
• Slowing demand growth due to the economic crisis caused
by the COVID-19 pandemic;
• Increased competition in the petrochemical products market
in the Russian Federation, and consequently, an oversatura-
tion of markets and a drop in margins;
• Increased project implementation time due to the global
epidemiological situation.
The implementation of the first stage of the PJSC TATNEFT pet-
rochemical complex development is planned on the territory
of the Almetyevsk District of the Republic of Tatarstan and in-
cludes the construction of a maleic anhydride production unit
(UPMA), a propane dehydrogenation unit, and the production
of polypropylene. The maleic anhydride unit with a capacity of
50 thousand tonnes per year is planned for launch at the gas
processing plant (UTNGP), the remaining units (the propane
dehydrogenation unit with a capacity of 280 thousand tonnes
per year, the propylene polymerization unit with a capacity of
270 thousand tonnes per year) will be launched at the UTNGP
facilities.
In 2020, as part of the implementation of the projects provided
for by the first stage of the petrochemical complex develop-
ment, the UPMA construction project passed all the required
examination procedures and obtained a construction permit.
Working documentation is currently being developed, equip-
ment deliveries are underway, the site has been prepared for
construction works.
The project for the construction of a propane dehydrogena-
tion plant and the production of polypropylene is at the design
stage, and works are underway with Process Licensors to
develop basic projects. After receiving the basic project docu-
mentation from the Licensors, the Company will start develop-
ing the project documentation. Currently, works are underway
on a detailed study of sales markets.
The development of the tire business of PJSC TATNEFT, the in-
crease in its share in the Russian market in integration with the
development of the rubber business of LLC Tolyattikauchuk,
aimed at expanding the range of elastomers and creating its
own raw material production assets, the development of the
import-substituting latex sector is currently one of the factors
opposed to the impact of market challenges.
LLC Tolyattikauchuk
It is one of the largest enterprises in the petrochemical com-
plex of Russia, located in Tolyatti, the Samara Region.
The core activity of the enterprise is the production of syn-
thetic rubbers of various brands, which is the raw material for
tires and rubber products. It is one of the 10 largest exporters
in the Samara Region.
The structure of the enterprise includes 6 main production
facilities for the manufacture of synthetic rubbers, monomers,
and intermediate products and 2 auxiliary production facil-
ities for providing energy resources and equipment repair.
The enterprise also includes a commodity and raw materials
workshop and an electric automation and measurement
workshop.
Currently, at the Tolyatti site, works are underway to optimize
the existing technological processes for the production of
rubbers and monomers as well as to improve the quality
indicators of products.
Production capacities of the enterprise:
• Production of copolymer rubbers with a capacity of 60
thousand tonnes per year;
• Production of butyl rubber with a capacity of 75 thousand
tonnes per year;
• Production of butadiene with a capacity of 80 thousand
tonnes per year and high-octane gasoline additive with a
capacity of 39.2 thousand tonnes per year;
• Isoprene production with a capacity of 90 thousand tonnes
per year and production of MTBE with a capacity of up to
120 thousand tonnes per year
• Production of isoprene rubbers with a capacity of 82
thousand tonnes per year;
• Production of isobutylene-isobutane fraction with a
capacity of 165 thousand tonnes per year and isobutylene
with a capacity of 60 thousand tonnes per year.
Product range
The main products of LLC Tolyattikauchuk are synthetic rub-
bers of various grades. The company also produces hydro-
carbon fractions, products of organic and inorganic synthe-
sis, monomers, polymers, additives for automobile gasoline.
104
The Company’s tire business operates under the single
KAMA TYRES production brand and combines a range of tire
brands.
PJSC Nizhnekamskshina:
• Tires of the passenger and light-truck range;
Strategic tasks:
• Increasing the market share in the tire market of Russia
due to the growth in sales in the most promising segments,
bringing the tire sales volume to 18.1 million pcs by 2030.
• Consolidation of all steel cord (R20+) and Viatti tires
in a more marginal B-price segment through effective
marketing, service support and a value proposition for
consumers. About 55% of the tires will be positioned in the
B-segment (the current level is 27%).
• Withdrawal of KAMA EURO from brand portfolio, launch of
the new KAMA PRO tire brand.
• Optimization of procurement activities.
Key risks:
• Increased competition from foreign companies and
Russian manufacturers;
• Low rates of economic growth in the Russian Federation
and the purchasing power of the population, which will
hinder the growth of the tire market;
• Reduced demand for tire products (due to the global
recession caused by the COVID-19 pandemic);
• Increase in prices for certain types of raw materials;
• Increased project implementation time due to the global
epidemiological situation.
The production complex includes enterprises engaged in the
manufacture of tire products — PJSC Nizhnekamskshina,
LLC Nizhnekamsk Truck Tire Factory, LLC KaMaRetred, LLP
KamaTyresKZ1; enterprises servicing the tire production
facilities, namely JSC NMZ, JSC Yarpolimermash-Tatneft,
LLC STC Kama, LLC Energoshinservis; enterprises supply-
ing feedstock and materials and selling tire products — LLC
Trading House KAMA with stand-alone regional divisions and
a subsidiary; a social enterprise — LLC SBO Shinnik.
Enterprises have production facilities that produce the follow-
ing types of output:
• Industrial-grade tires.
LLC Nizhnekamsk Truck Tire Factory:
• All steel cord truck tires;
• Multipurpose truck tires;
• Agricultural tires.
The compact location of tire plants makes it possible to pro-
vide semi-finished products to the KAMA TYRES enterprises
(production of rubber compounds, textile wing belts, etc.),
ensuring their smooth operation. The presence of an in-
house synthetic rubber producer makes it possible to provide
tire plants with raw materials of required quality in a timely
manner to produce competitive tires.
In early 2020, the functions of the sole executive body of LLC
KaMaRetred and LLC SBO Shinnik were transferred to LLC
Managing Company TATNEFT-Neftekhim.
As part of the project for the construction of a new tire
plant in the Republic of Kazakhstan, LLP KamaTyresKZ,
a joint venture, was established with the participation of
the Government of the Republic of Kazakhstan, LLC MC
TATNEFT-Neftekhim, LLP Allur Tyres, JSC Allur Group of
Companies, and PJSC TATNEFT.
The establishment of the joint venture involves construc-
tion of a new plant in Kazakhstan with a capacity of 3 million
passenger car and light truck tires and 0,5 million truck tires
per year. The project will create over 1 100 jobs. The tires will
be used for the primary equipment of vehicles, produced
in Kazakhstan, for the domestic market and also for export.
Generally, the new tire manufacture in Kazakhstan will aim to
saturate the market throughout Central Asia.
The project is supported by the Republic of Kazakhstan and
involves the implementation of a comprehensive set of State
support measures, including co-financing of the project, the
provision of investment preferences and the implementation
of a set of measures to protect the tire market in the Republic
of Kazakhstan and support for the domestic producer.
*production is scheduled to start in 2022.
105
Annual Report 2020 Strategic capabilities of the joint tire
company:
2020 key business
projects
• market-share gain in the Republic of Kazakhstan;
• Increase in production of Viatti tires by 1.2 million tires per
• ensuring access to the markets of the Ural, Siberia, Far
East regions of the Russian Federation and Central Asia,
including through the creation of its own distribution
network;
year (up to 6.2 million tires by 2021)
• Organization of production of tires for all-terrain vehicles
(ATVs), go-karts, motorcycles at the facilities of PJSC
Nizhnekamskshina
• integration into the TATNEFT Group's products and raw
• Increase in the production of all steel cord tires by 300
thousand pieces per year
• Increase in the production of all steel cord tires to 2.8
million pieces per year
• Organization of the production of giant all steel cord and
multipurpose tires
Within the framework of the investment program of KAMA
TYRES enterprises, projects aimed at improving the quality
and expanding the range of tire products, increasing capacity
to meet market demand (passenger, light-truck and truck
tires) were implemented in 2020. Introduction of passenger
car and light truck tires (excl. high-speed tires), sticky anide
mesh fabric in breaker screen layer into production has re-
sulted in a number of benefits to ensure the required level of
rubber-to rubber-cord bond strength
materials supply chain, and synergy effects from associat-
ed projects (localization of raw materials, etc.);
• creation in the future of a complex of enterprises on the
basis of a new plant in Kazakhstan (production of tire
products, mechanical plant, collection and recycling of
waste tires for recycling, etc.);
• development of tire product brands, including taking into
account the cultural, climatic and economic characteristics
of neighbouring countries
In 2020, despite a 12% decline in the tire market, KAMA
TYRES managed to increase sales volumes by 18% com-
pared to 2019 due to the distribution system and sales policy
(stability and predictability of price programs for DM and ex-
port) and nonprice incentive methods. KAMA TYRES actively
develops its online store and sales of products through direct
sales channels (ATEs, malls, car dealerships, tenders, retail
network).
In the reporting year, the tire output amounted to 10.9 million
pieces, while the sales reached 11.9 million pieces.
Tire output dynamics, million pieces
Period
2018
2019
2020
Passenger-car, light-truck
Truck
Aagricultural, other
Production
11,2
3,2
0,2
7,4
2,7
0,2
7,9
2,8
0,2
14,6
10,3
10,9
Tire sales dynamics, million pieces
Period
2018
2019
2020
Passenger-car, light-truck
Truck
Aagricultural, other
Production
10,4
3,0
0,2
7,0
2,8
0,2
8,8
2,9
0,2
13,6
10,0
11,9
* sale of tires produced by
PJSC NIZHNEKAMSKSHINA, LLC NZGSH.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Primary tire product types
15,2%
Combine truck tires,
agricultural tires, others
11,9%
All steel cord truck tires
24,9%
Viatti passenger car tires
and light truck tires
48,0%
KAMA passenger car tires
and light truck tires
Major consumers of parts assemblage market
5%
PJSC NEFAZ
6%
Other
11%
JSC AZ URAL
11%
LLC UAZ
21%
LLC Sollers Ford
21%
LLC Automobile plant GAZ
25%
PJSC KAMAZ
Tire supply directions, mln pcs
Tire deliveries for parts assemblage
Tire market
Aftermarket
Parts assemblage
Export
Total sales
2018
2019
2020
8,8
0,6
4,2
5,8
0,6
3,6
13,6
10,0
8,0
0,6
3,3
11,9
KAMA TYRES enterprises supply tires to car assembly plants
for new automobile output.
The main consumers are PJSC KAMAZ, LLC GAZ Automobile
Plant, LLC UAZ, JSC URAL Automobile Plant, LLC Sollers
Ford, PJSC NEFAZ.
Shares in the Russian tire market, %
Tire group
Passenger car tires
Light-truck tires
Truck tires
Agricultural tires, others
Market share of KAMA
TYRES in the Russian market
In 2020
15
20
38
5
Export
CIS market makes up 67 %.
Non-CIS market makes up 33 %.
The geography of deliveries of KAMA TYRES products
includes 43 countries (13 CIS countries and 30 non-CIS
countries).
3 new export markets were captured: Austria, Panama, and
Singapore.
In the Republic of Kazakhstan, there is a subsidiary company
LLC TH Kama, which sells Kama Tyres products.
106
107
Annual Report 2020 Tire goods quality assurance
Customer awareness
Customer satisfaction surveys
Customer complaint response system
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Tire goods quality control system
The product quality management system being in place at
the KAMA TYRES enterprises assures the sale of tire goods
that meet the needs of consumers and comply with the re-
quirements of the current legislation.
Processes are managed within the process model of the
Corporate QMS in accordance with ISO 9001 and IATF 16949
(hereinafter referred to as the CQMS). Improvement in the
quality of production is a priority in the development of KT
enterprises according to the Integrated Management System
Policy. Quality improvement is carried out on the basis of the
PDCA cycle at all enterprises levels.
The system of product management and quality control is
specified in the production management plans developed
following the risk analysis of products and manufacturing pro-
cesses in accordance with the FMEA methodology (analysis
of the types and consequences of potential failures).
The quality of tire products is assured by the quality certif-
icates and the certificates of compliance with the require-
ments of technical regulations of the Customs Union.
Tire compliance with the established requirements is verified
by the results of the annual audit of finished products, includ-
ing by consumers.
All products manufactured by the KAMA TYRES enterprises
are compliant with the requirements of regulatory documents
(GOST, TU), as well as the requirements of UN Regulations No.
30, 54, 106, and 117 (international standards), CU TR 018/2011
on the safety of wheeled vehicles, CU TR 031/2012 on agricul-
tural and forestry tractors and trailers thereto.
A safety data sheet is developed for each component in the
tire.
Tests of the feedstock, materials, and finished products are
conducted in the laboratories of the Testing Center of LLC STC
Kama.
No information or claims regarding the product adverse
impacts on human health as well as the relevant fines and
warnings were received in 2020.
Mandatory input control of raw materials is carried out in
accordance with the approved plan, which sets controlled
parameters and check-up frequency. The procedure for input
quality control of raw materials and their release into produc-
tion is regulated by a special standard of the enterprise.
The Company provides its consumers with the information on
product composition, safe use and disposal procedure, and
product impacts on the environment.
Our tire consumers are informed via the official websites of
the Tire Complex and the TATNEFT Company and various
information and advertising channels.
User guidance and operational instructions for automobile
tires, their correct installation and dismantling on the rim are
posted in the “Useful links” section on the corporate website
www.td-kama.com/ru/.
There are no cases of noncompliance with regulatory re-
quirements and voluntary codes concerning information on
the properties of products and services at the KAMA TYRES
enterprises.
Types and forms of tire product customer awareness:
1. TV advertising — advertising videos in the seasons (spring,
autumn);
2. Advertising on the radio — broadcast of advertising audio
clips in the seasons (spring, autumn) of the Viatti brand;
3. Promotion on the Internet (SEO-promotion, SMM, SERM,
targeted advertising, etc.), technical support for corporate
and product sites (KAMA TYRES, Viatti). Online Store
promotion www.kamatyres.shop;
4. Outdoor advertising on filling station sites throughout the
Russian Federation — city formats, posters (Viatti and
KAMA PRO trademarks);
5. Participation in all-Russian and international exhibitions: 2
events in 2020 (KAMA PRO);
6. To actively promote KAMA TYRES, Viatti, KAMA PRO
brands, a large-scale PR campaign was developed and
carried out, including posting in the media, in specialized
print and online publications, posting on social media,
maintaining the company’s, market, global news, and
proposing news to the media;
7. Sports marketing: partnership with leading Russian hockey
and football teams, support for motor sports (KAMA
TYRES, Viatti).
Monitoring of information related to consumers’ perception
of tire goods, the fulfillment of their requirements and expec-
tations is carried out routinely through:
• Receiving inquiries from consumers via the customer
feedback system on the websites and bidding platform of
LLC KAMA Trading House;
• Obtaining information from social media;
• Surveys of consumers of goods and services in the
Tyre&Service trade and service centers;
• Surveys of retailers and members of the Viatti on-line club;
• Targeted survey of consumers (parts assemblage, sec-
ondary market, export) at least once every six months in
accordance with the requirements of IATF 16949:2016 and
specific requirements of consumers.
Following the analysis aimed at identifying the satisfaction
level decrease trends, the Permanent Quality Committee
(PQC) decision determines areas for improvement.
All consumer complaints regarding products during the
warranty period are subject to review in accordance with the
procedure established in the regulatory documents, which
provide for:
• Registration of information;
• Examination of claim products at the manufacturer or di-
rectly at the consumer’s location, with resolving the matter
following the analysis corresponding to the consequences
(or potential consequences) of noncompliance;
• Establishing the causes of noncompliance;
• Initiating corrective actions, if necessary.
The tire manufacturers together with LLC Trading House
Kama and LLC STC Kama, examine consumers’ complaints
and operational failures, including any returned parts, and
initiate problem solving and corrective actions to prevent
recurrence. The 8D method is used to solve problems with
configuration claims. The 8D reports are communicated to
the consumer and the relevant departments of the KAMA
TYRES enterprises.
There are following promotions to attract additional consum-
ers: a free tire fitting when purchasing Viatti tires; a non-price
incentive loyalty programme for retailers and administrators
of Viatti Club retail outlets (all year round); an extended
quality guarantee programme for Viatti tires (all year round);
a "Cashback from Viatti" promotion - 10% of the price of a set
of Viatti tires purchased is returned to the customer.
When making communications with tire consumers, the
KAMA TYRES enterprises follow the feedback practice
according to all the rules and regulations of the Law on
Advertising. There were no complaints regarding the adver-
tising campaigns, and there was no such practice.
In the reporting year, no fines were imposed for noncompli-
ance with legislation and regulatory requirements concerning
the provision and use of tire products.
Enterprises are fully compliant with the tire waste disposal
standards.
108
109
Annual Report 2020 Machine building
The development strategy of the TATNEFT Group’s machine
building business is focused on providing the Company’s
enterprises with the specialized equipment
Plant design capacity
For machine building*
Development strategy:
Equipment type
Design capacity
• Consistently meeting the needs of the Company’s produc-
tion and processing assets for pipe coating, high-quality
equipment, and maintenance services;
• Ambitious 3.6-fold production growth by 2030;
• A significant increase in the share of sales accounted for
by external consumers by 2030, including through the
expansion of the range of products and the development of
new types of services.
Key risks:
Heat exchange products
Pressure vessels
Chain drives
Devices and means of automation
(metering stations, CQCS)
Water injection distribution manifold
Air cooling devices
pcs
288
216
840
48
96
429
tonnes
1 634,93
2 005,92
5 902,62
187,7
267,03
3 023,60
• Tougher competition among product manufacturers;
Total for machine building
1 773
12 567,07
• Stricter requirements in customer requests through formal-
ized specific/individual product quality requirements;
• Optimization of VIOC investment programs in connection
with the pandemic and restrictions on oil production.
Bugulma Mechanical Plant (BMZ) manufactures mechanical
goods for oil and gas production, refining, petrochemicals,
power energy generation, and other industries. The manufac-
tured equipment includes air cooling units, heat exchangers,
oil field equipment, anti-corrosion coatings, pressure ves-
sels, process operating units for the gas and oil industry. The
goods (equipment) are supplied to the Company’s produc-
tion sites as well as to the domestic market and for export.
In 2020, Bugulma Mechanical Plant produced goods, works,
and services worth RUB 4,302 million.
The plant provided maintenance and repair services for RUB
115 million, EBITDA margin for third-party orders reached
7.6% in the reporting year.
In the structure of the order portfolio, 66% fell on orders from
PJSC TATNEFT, 34% — from third-party enterprises, which
was due to the maximum utilization of the plant capacities
for the production of equipment for the Construction Project
Delivery Department of PJSC TATNEFT intended for JSC
TANECO.
* The design capacity of the production facility is calculated based
on a 7-day week, 30 working days per month, and round-the-clock
operation.
For piping production*
Equipment type
Design capacity per year, km
Pipe products
Electric welding pipe
Total for piping production
4 842
5 256
10 098
*1. The capacity of Bandera-1 and Bandera-2 is calculated
based on a 7-day week, 30 working days per month, and 11 hour
operation.
*2. The performance on the Bandera-1 line is calculated without
regard to the loss of time for the replacement of the forming heads.
*3. The design capacity of Tubescope-1 and Tubescope-2 is cal-
culated based on a 7-day week, 30 working days per month, and
round-the-clock operation.
*4. The capacity of MPT-K is calculated based on a 7-day week, 30
working days per month, and 11 hour operation.
*5. The capacity of the Electric Welding Line is calculated based on
a 10 m/min speed, 7-day week, 30 working days per month, and
round-the-clock operation.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Bugulma Mechanical Plant has launched a unit for automated
cutting of holes in the bodies of heat exchangers and tanks,
which ensures high quality and accuracy of cutting, high
productivity, reduces the time for manufacturing assembly
units by eliminating defects, increases the accuracy of the
operation, the quality of assembly of heat exchange and
tank equipment, reduces the assembly cycle by 9.53%. The
plant has mastered the technology of manufacturing heat
exchange partitions using laser cutting technology, which
ensures high quality and accuracy of products as well as high
productivity, reduces the time for manufacturing compo-
nents, while eliminating several machining operations, allows
the plant to produce parts with a complex geometric outline,
while observing the dimensions and technical requirements
with high accuracy.
The production of partitions for heat exchangers at the laser
cutting unit allowed the plant to reduce the time for the pro-
duction of components (by 4.36 hours) with no loss of quality
or technical characteristics of the products, and to reduce
the production cycle of heat exchangers by 6.23%.
The 2020 output amounted to RUB 4.3 billion. The activities
of the business line are related to oil production. The reduc-
tion of investment programs in oil production in the past year
was offset by an increase in production volumes for the oil
refining industry, which allowed the Company to increase
production volumes for oil equipment by 76% and air cooling
devices — by 17%.
To improve the efficiency of the business stream, organiza-
tional changes are planned in 2021.
Bugulma Mechanical Plant plans to supply about 150
units of primary static equipment to JSC TANECO, deliver
equipment to PJSC Sibur Holding (for LLC Sibur Tobolsk),
PJSC NOVATEK (for JSC Articgaz), Rosneft (for JSC
Novokuybyshevsky Oil Refinery, Syzran Refinery JSC),
to the CIS region (the Republic of Kazakhstan) (for LLP
TEMIRMASH Pavlodar Plant). It plans to deliver products,
works, and services for RUB 5,298 million, including RUB
2,348 million for the enterprises of the TATNEFT Group,
taking into account the supplies within the “Exploration and
production” and “Oil and gas refining” business lines, and
RUB 2,950 million for third-party customers.
Product slate:
• Air coolers
• Heat exchangers
• Pressure vessels
• Oil field equipment
• Process operating units for the gas and oil industry
• Flare units
• Pipe products
• Small-batch products
• Maintenance services
Primary production types
• Mechanical procurement production
• Assembly production
• Welding production
• Pipe production
• Foundry production
• Heat treatment and pressure treatment of metals
• Design and technological support
• After-sales service
2020 key business projects
• Production digitalization
• Reducing metal consumption of air cooling and oil
equipment
• Increasing the capacity of machine building stage 1
• In-house production of pipe products
• Relining of used tubing
• Launching the application of internal anticorrosive coatings
on electric-welded straight-seam pipes manufactured by
BMZ
• Maintenance and repair of BPU wires by the BMZ service
department
rub 4,3 bln
Product output for 2020
110
111
Annual Report 2020 LLC Tatneft-Presskompozit
To increase the added value in the product supply chain,
the Company develops a high-tech production of com-
posite materials at its Tatneft-Presskompozit facilities
located in the Alabuga Special Economic Zone. The pro-
duction uses fiberglass manufactured by LLC P-D TATNEFT
Alabuga-Steklovolokno.
The composite materials have a variety of advantages — such
as strength, corrosion resistance, light weight, durability, low
electrical and thermal conductivity — do not interfere with the
propagation of electromagnetic fields and radio frequency
waves, etc.
The Company selects the technologies and product range to
gain the maximum synergistic effect and import substitution
of foreign analogues in the Russian market. The Company
uses its output products (such as pipes, cable systems) in
the development of oil fields, construction of the TANECO
Oil Refinery plants and units, and building of infrastructure
facilities.
The key sales markets for the products of LLC Tatneft-
Presskompozit are oil, gas, and petrochemical industry,
infrastructure projects implemented in the conditions of sea
climate and the Far North, automobile, train-car building, and
electrical industries.
The main consumers of the company’s products are: PJSC
GAZPROM, PJSC Lukoil, PJSC Gazprom Neft, Rosneft, JSC
OC KazMunayGas, JSC Kaspiy Neft, PC Belarusneft, small oil
producing companies, PJSC KAMAZ, LLC JCC Shchekinoazot,
PJSC KuibyshevAzot, PJSC PhosAgro, PJSC Uralkali, JSC
MCC Eurochem, JSC Uralelectromed, etc.
Fiberglass pipe market vs. TNPC share in Russian oil and gas industry, mln rub and %
52%
54%
58%
59%
59%
56%
56%
90
243
132
590
90
255
136
620
30
232
128
562
20
221
125
515
200
152
374
200
118
368
210
121
459
2019
2020
2021
2022
2023
2024
2025
LLC Tatneft-Presskompozit
LLC Fiber Glass Rus
Tatneft-Presskompozit market share
LLC Fiberglass Pipes Plant
Other (Imports)
60%
48%
36%
24%
12%
0%
1500
1200
900
600
300
0
112
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Output products
Smc compounds (glass fiber filled press
materials)
The design capacity of the equipment is 1 line with a capacity
of 8,000 tonnes per year. SMC is used primarily in produc-
tion of low-profile products with high mechanical strength
requirements (elements of cabins and bodies of automobiles,
interior elements of passenger transport, electrical cabi-
nets, seats, lamp cases, and parts of products for electrical
engineering, medical, and household appliances). Tatneft-
Presskompozit participates in the program for the moderniza-
tion of the KAMAZ truck model range, since the SMC material
is used in the manufacturing of the main elements of the K5
cabin exterior of KAMAZ trucks.
Fiberglass pultrusion profiles
The design capacity of the equipment is 5 lines with a total
capacity of 1,000 tonnes per year. The enterprise produces
fiberglass cable trays of solid and ladder type; fences; fiber-
glass service platforms; fiberglass structures based on the
fiberglass profiles.
Fiberglass pump and compressor, casing,
linear pipes, and fittings produced by the
winding method, with diameters 50–300 mm
and working pressure of up to 27 MPa
The design capacity of the equipment is 1 line with a capacity
of 450 km per year. Fiberglass pipes and fittings are designed
for the petrochemical industry and are used as downhole tu-
bular (pump-compressor and casing), injection, production,
for disposal of chemical waste and observation wells; as part
of oil field pipelines (linear), for transportation of oil emul-
sions, gas-saturated oil, gas condensate, including those
with a high content of H2S and CO², as well as for chemical
production pipelines for transportation of salts, acids, and
other chemicals.
The most significant benefit of composite
materials is their environmentally friendly
properties and low carbon footprint. CO2
emissions from construction of fiberglass
pipelines an average of 6.5 times lower than
emissions from construction of steel pipelines,
taking into account production of pipes and
construction and installation works.
113
Annual Report 2020 Energy
The utilities are integrated into the business model of the
Company and provide a full cycle of generation, transmis-
sion, and sale of heat and electric energy. The power and
heat energy is supplied to provide its own facilities (supplying
generation), external consumers (commercial generation),
and households.
The power energy capacities operated by the TATNEFT Power
Grid Management Center consists of 18,597 substations,
including 313 substations with 35–110 kV voltage, 18,284
transformer substations with 6 (10) kV voltage. At 35–110
kV substations, power transformers with a total capacity of
2,858.6 MVA are in operation.
The total length of 6–220 kV overhead (aerial-cable) lines is
17,446.838 km.
In 2020, the total power generation amounted to 1.45
billion kW*hour, including 1.33 billion kW*hour supplied
to Nizhnekamsk CHP, and 0.125 billion kW*hour to the
Almetyevsk Heating Networks.
The heat energy was generated in the amount of 4,864,089
Gcal. The increase in the heat energy output in 2020 by 16%
is due to an increase in power take-off for the newly intro-
duced TANECO Complex plants and an increase in con-
sumption in PJSC Nizhnekamskneftekhim, as compared to
2019.
The main generating facilities of the Group are located in
the southeast of Tatarstan and include the capacities of the
Nizhnekamsk CHP and the Almetyevsk Heating Networks.
The existing energy capacities in TATNEFT Group’s asset
portfolio allows increasing the extent of vertical integration,
reducing the dependence of its own energy needs on exter-
nal market conditions, and optimizing power energy costs at
the production facilities with the simultaneous development
of commercial power generation (power energy supplies to
external consumers) and new growth points, including clean
energy.
Strategic goals:
• Reliable energy supply of oil and gas production, refining,
and petrochemical facilities of the TATNEFT Group while
minimizing the cost of maintaining energy assets;
• Reducing adverse impacts on the environment.
Key risks:
• Growth of tariffs for heat and electricity at a rate lower than
the actual cost inflation;
• Competitors’ shift to cheaper fuels;
• Reduced heat and electricity consumption due to possible
economic slowdown;
• Drop on electricity prices due to the significant introduction
of new generating capacities in the Russian Federation.
The installed electric power capacity as at the beginning of
2020 was 748 MW, and heat capacity was 3,402.47 Gcal per
hour.
Installed electric power and heat
capacities
Enterprise
Installed capacity
electric power, MW Heat, Gcal per hour
LLC Nizhnekamsk
CHP
Almetyevsk Heating
Networks (JSC APTS),
including
Super viscous oil
production
724
24
1 580,0
566,790
-
1 255,68
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Nizhnekamsk CHP heat and power outputs
Indicators
Heat energy output
UoM
Gcal
Electric power generation
thous. KWh
actual in 2018
actual in 2019
actual in 2020
planned for 2021
3 590 659
1 167 444
3 418 876
1 407 573
4 064 761
1 328 473
4 782 443
1 725 443
Heat and power energy generated by the Almetyevsk Heating Networks
Indicators
UoM actual in 2018
actual in 2019
actual in 2020 planned for 2021
Heat energy generation (heat carrier – hot water)
Gcal
Electric power generation (MV1 and HV voltage level)
thous. KWh
791 151
87 939
780 909
799 328
124 171
124 728
844 574
159 732
The development of the Company’s electric grid capac-
ities is aimed at increasing the network equipment loads
through connecting third-party consumers to the Company’s
networks; improving the reliability of the external power
supply scheme and power supply of internal networks of the
businesses of the TATNEFT Group.
TATNEFT Group power and heat sales for 2018–2020
Fuel and Energy Resource
Electric power sales
Heat sales
UoM
bln kWh
mln Gcal
2018
1,23
4,4
2019
1,5
4,1
2020
1,478
4,703
At the power generation facilities, the works are underway
to increase the energy conservation efficiency and perform
updating of existing capacities. The programs were aimed
at improving the technical and economic performance of
the main and auxiliary equipment, increasing reliability and
ensuring competitive edge in the electric power market.
The intelligent Smart Grid technologies were used, combin-
ing management, control, and monitoring tools, information
technologies, and communication tools that simultaneously
provide the flow of electricity and information from power
source to consumers. These included a predetermined
level of reliability and quality of power supply to consumers,
reduction of electricity losses in the power grid elements,
minimum operating costs, creating conditions for consumers
to optimize their electricity use costs.
One of the directions for deployment of intelligent gener-
ation support platforms is the Digital Substation creation,
which allows creating automated substations where control,
relay protection, automation, measurement, and metering
functions are provided in digital format, including power and
switching equipment control devices as well as self-diagnos-
tics of their technical conditions.
Dispatch control is provided based on an automated sys-
tem of a single digital platform which allows controlling the
functions of reliable and economical supply of electric and
thermal energy of the required quality to all its consumers,
taking into account the potential for load growth and compli-
ance with regulatory requirements to the quality of electricity
in a normal grid scheme and in repair schemes.
At the Nizhnekamsk CHP, programs are underway to diversify
sources of raw materials to increase the operational efficiency
of the plant and reduce its dependence on the market condi-
tions for raw materials. The counter-pressure turbine operat-
ing with the use of a steam-power cycle is being converted
to work with the use of a steam-gas cycle due to the super-
structing of the generating facility with a gas turbine, within the
framework of the DPM-shtrikh state program. Three mini-ther-
mal power plants are in operation in the Almetyevsk Heating
Networks. The heat generated at the mini-CHP is used for the
needs of hot water supply to consumers, and electric energy
is used for the in-house needs of boiler houses and pumping
stations. The surplus is sold to the external electric grid for the
needs of the PJSC TATNEFT business units.
In 2020, the construction of a ramp with process pipelines
for the supply of heat in the form of steam and hot water to
the tire complex was completed, the refurbishment of the in-
stalled power boilers of the Nizhnekamsk CHP for burning oil
coke in the form of dust from the delayed coking unit of JSC
TANECO was completed, the construction of a gas turbine
unit at the Nizhnekamsk CHP was initiated.
It is planned to ensure the efficient operation of power
equipment and reliable power supply to consumers in 2021
— by increasing electricity generation by 431 million kWh (an
increase of 30%) and heat by 763 thousand Gcal (an increase
of 16%).
114
115
Annual Report 2020 Energy and resource efficiency
Improved Energy Efficiency and Energy
Saving Policy
The company is implementing the target-focused
resource saving program 2020–2023, which includes
the energy saving program. The program goal is to
curb the costs for fuel and energy resources through
their rational use and improved energy efficiency of the
production operations.
As a result of the implementation of the Energy Saving
Program for 2020, the TATNEFT Group enterprises saved
over 108 thousand tonnes of conventional fuel, an equivalent
of RUB 728.4 million. The most cost-efficient business lines
are processing, oil and gas refining, transport, technology of
oil and gas production, reservoir pressure maintenance.
In 2020, the Company approved and put into effect the
Policy of the TATNEFT Group in the field of integrated
management system, which incorporates the provisions
of the energy management system.
The main objectives in this area are as follows: continuous im-
provement of energy efficiency, improvement of energy efficien-
cy and energy-saving management processes in all types of
production activities, cost reduction through the deployment of
advanced innovative energy-efficient technologies and rational
use of energy resources, development, implementation, oper-
ation, and continuous improvement of the Energy Management
System compliant with the requirements of ISO 50001-2018.
The 2021 Improved Energy Efficiency and Energy Saving
Program is targeted to attain not less 2% of the baseline of 2020
(in tonnes of oil equivalent), which amounts to RUB 789 million.
TATNEFT Group Fuel and Energy Consumption, mln tonnes
4,000
3,800
3,600
3,400
3,200
3,537
3,490
0,048
2018
3,798
3,710
0,088
2019
3,942
3,746
0,196
2020
0,800
0,600
0, 400
0, 200
0, 000
Cumulative effect from the Improved Energy
Efficiency and Energy Saving Program, mln tonnes
Basic consumption, mln
tonnes of oil equivalent
Actual consumption, mln
tonnes of oil equivalent
of oil equivalent
TATNEFT Group Fuel and Energy Consumption, bln rub
29,7
28,9
0,843
2018
33,6
32,2
1,404
2019
33,1
30,9
2,132
2020
10,000
7,500
5,000
2,500
0
Cumulative effect from the Improved Energy
Basic fuel and energy con-
Actual fuel and energy con-
Efficiency and Energy Saving Program, bln rub
sumption, bln rub
sumption, bln rub
35,0
31,5
27,5
23,7
20,0
116
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
The company has set a target to increase the annual effect of the energy efficiency and energy
saving programme to 2,2% by 2030, relative to the previous year's actual consumption of fuel and
energy resources.
The Company's 2030 target for the use of renewable energy sources is to use up to 10% of the
TATNEFT Group's total electricity production
Renewable energy
The development of renewable energy, such as solar and
wind power, is of undisputed importance.
TATNEFT intends to develop these activities and is consider-
ing best opportunities and lucrative projects.
Currently, the main share (89%) of energy production from
renewable energy sources in the TATNEFT Group is account-
ed for heat generation from pellet boilers, 11% accounts for
electricity generation from small hydroelectric power plants
at Karabash Reservoir, and 1% is generated by solar power
plants in the Company’s retail and sales network. In 2020,
the total energy produced from renewable energy sources
was 1,221.2 tonnes of oil equivalent or 0.14 % of the TATNEFT
Group’s total energy production.
Investments in the amount of RUB 6,705 thousand were
allocated to conduct instrumental studies to assess the wind
and solar energy potential of the Company’s territory of
operation..
The Company’s strategy gives weight to the renewable
energy sources and recognizes their significance for
bringing a cleaner, low-carbon energy future.
TATNEFT Group fuel and energy consumption
Fuel and Energy Resource
UoM
2018
2019
2020
Consumption
in kind
Costs,
million RUB
Consumption
in kind
Costs,
million RUB
Consumption
in kind
Costs,
million RUB
Electric power, including
thous. KWh
4 412 301
Industrial consumption
thous. KWh
4 394 890
Heat energy*, including
Industrial consumption
Gcal
Gcal
334 789
290 745
Natural gas, including.
thous. m³
704 689
Industrial consumption
thous. m³
704 433
12 489
543
2 964
4 643 109
4 623 697
319 353
268 800
874 750
874 344
14 237
531
3 822
3 625 798
3 611 949
232 134
187 047
953 372
952 566
11 421
415
4 188
Gasoline (total) including:
tonnes
2 799,02
122,264
2 849,6
127,487
2 497,24
114,521
AI-80
AI-92
AI-95
AI-98
Diesel fuel
Gas
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
138,7
1 759,43
896,8
4,09
2 407,1
631
5,512
75,212
41,324
0,217
99,107
19,054
69,2
2 056,6
710,55
13,25
2,897
90,563
33,306
0,721
0,8
0,034
1 999,6
90,340
485,4
11,44
23,496
0,651
3 088,5
132,387
4 289,6
190,521
840
23 969
1 003,5
33 147
* Thermal energy for super viscous oil production is included in the natural gas purchases.
117
Annual Report 2020 TATNEFT Group fuel and energy consumption
Fuel and Energy Resource
UoM
2018
2019
2020
Consumption
in kind
Costs,
million RUB
Consumption
in kind
Costs,
million RUB
Consumption
in kind
Costs,
million RUB
Electric power, including
thous. KWh
6 027 682
Industrial consumption
thous. KWh
5 990 446
Heat energy*, including
Industrial consumption
Gcal
Gcal
3 468 154
3 421 156
Natural gas, including.
thous. m³
1 990 178
Industrial consumption
thous. m³
1 989 696
16 833, 077
3 314,468
8 732,258
6 267 991
6 126 577
3 722 179
3 683 207
2 126 429
2 126 023
18 775, 841
3 739,357
9 649, 622
5 180 874
5 168 262
4 061 473
4 016 708
2 233 479
2 232 691
16 425,429
4 295,605
10 222,532
Gasoline (total) including:
tonnes
3 984,03
170,636
3 868,41
168,339
3 443,5
153,341
AI-80
AI-92
AI-95
AI-98
Diesel fuel
Gas
tonnes
tonnes
194,96
7,798
101,97
2 431,31
101,828
2 632,66
tonnes
1 353,24
60 ,772
1 120,53
tonnes
4,52
0,238
13,25
4,294
112,171
51, 154
0,721
0,9
0,039
2 541,3
112,043
889,8
40,606
11,5
0,653
tonnes
4 154,26
169,976
4 811,08
201,585
6 142,6
266,433
tonnes
691,73
20,373
971,8
26,337
1 073
34,799
* Thermal energy for super viscous oil production is included in the natural gas purchases.
To improve rational energy consumption, the Company advances its energy efficiency and energy saving management
processes in all production activities through advanced innovative energy-efficient technologies and rational use of
energy resources.
108 thous. tonnes
Oil equivalent saved in 2020
>
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Logistics support
The Company buys and sells a significant amount of goods
and services. It selects its suppliers according to the unified
rules, mainly based on open e-bidding. Each potential suppli-
er has an opportunity to participate in the tender procedure
with the mandatory confirmation of compliance with the
established criteria.
The Company increases transparency by adhering to stricter
standards in its operations in comparison with industry
standards and by making publicly available the information
on service pricing and payments to the budget in the form of
taxes. We cooperate with our suppliers to increase the trans-
parency of their activities.
In its activities, the Company is guided by the Russian legisla-
tion and internal documents. In 2020, a Unified Standard was
introduced that defines the principle of goods procurement
for the needs of the Company and its subsidiaries.
Currently, the bulk of the supply chain is domestic producers
of goods and services. One of Company’s priorities is work-
ing with local suppliers.
In 2020, as part of the 2020 Logistics Strategy implementa-
tion, 21 projects were completed, including 14 category strat-
egies, the main risks of logistics processes were identified,
the inventory replenishment analytics system was introduced,
the centralization of procurement processes was complet-
ed, and KPIs for key participants in logistics processes were
established.
Company’s trade and procurement platform
The Company’s trade and procurement platform provides a
unified bidding system for all TATNEFT Group enterprises,
service and contracting organizations, being the only free
platform in the Russian Federation for bidding procedures.
The Company conducts electronic tenders in an open form
for depersonalized description of product properties. This
allows the Company to create an active competitive environ-
ment in each procurement case.
To control the transparency of procurements, the Trade
Platform has a module for monitoring the timing and effi-
ciency of the procurement process according to regulated
indicators, a module for auditing the supplier, a module for
counterparty due diligence check prior to the contract con-
clusion (PEST analysis of suppliers is conducted, an assess-
ment is performed of political, economic, sociocultural, and
technological factors affecting the supplier and the deliver-
ables, an audit of the technical and technological prepared-
ness of suppliers is conducted). Optimization of the terms of
competitive procedures was achieved with the transition to
one-stage tenders.
In 2020, the Company developed and implemented the
following measures in the Trade and Procurement Platform
system of PJSC TATNEFT: a module for checking suppliers
according to the criteria of the economic security division;
automated receipt of technical-part protocols and procure-
ment decision; integration with the Kontur.Fokus was config-
ured for updating counterparty statuses. The price monitor-
ing module was improved to provide the possibility to verify
the price monitoring protocols, and the procedure for open
online discussions of technical specifications was introduced.
As part of the development of the TATNEFT Group material
and technical resources (MTR) procurement ecosystem, the
following algorithms (web services) have been developed):
transfer of data on illiquid MTR inventories from the account-
ing systems of the TATNEFT Group; on the transmission of
the counterparty unreliability label (stop list) to the record
systems of the TATNEFT Group.
Total number of
quotations received
Total price of all
published lots
Total number of all
published lots
Number of contracts and
specifications executed
40 525
53 612 936 306
6 723
10 006
118
119
Annual Report 2020 Procurement activities
In 2020, the Company concluded more than 10 thousand
contracts and specifications thereto with 1,057 suppliers, to-
taling RUB 28.2 billion (VAT excluded). 50 % of all orders were
placed with the enterprises of the Republic of Tatarstan. Import
contracts accounted for 1.5 %, including 1.47% for the pur-
chase of personal protective equipment (PPE) and equipment
for the production of PPE to combat the spread of coronavirus
infection.
The low share of import contracts indicates a steady decline in
the Company’s import dependence.
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 today, there are over 800 price books covering about
150 thousand stock-list items, which accounted for 84% of the
total procurement in 2020 (81% in 2019).
Procurement structure by product categories, %
25%
Pipe products
15%
Oil field equipment
13%
Rolled stock and
metalwork
2%
Computer equipment
3%
Transport, special machinery
3%
Construction materials
4%
PPE
5%
Other
7%
Power / electrical
equipment
7%
Isolating devices
8%
Chemicals
8%
Maintenance, supply,
and medicine
Reuse of materials, tonnes
Cardboard packaging material
Wood packaging material
Total packaging waste
Completely recycled waste from
packaging materials
0,9
3,3
4,2
0,9
Within the framework of the Procurement Centralization Project, a single information and
regulatory space is being formed, which will ensure the manageability of the procurement
system to improve the efficiency of working capital utilization. For these purposes, a project to
create a procurement ECOSYSTEM has been initiated.
Board of Directors’ Report on Company’s Development Performance by Main Business-Streams
Banking business
The banking business is new in the TATNEFT Group portfolio
and is represented by the companies of Zenit Banking Group.
In May 2020, the Banking Group was reorganized, and the
Bank merged with PJSC Spiritbank and JSC Bank ZENIT
Sochi. As of 01.01.2021, the Bank has 116 service points in 50
cities of presence, 3.3 thousand employees, 547 thousand
retail customers, 14 thousand SME customers, and 1.5 thou-
sand major corporate customers.
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 primary objective is to create a sustainable,
market-oriented, profitable business and a liquid asset —
powered by ZENIT Banking Group.
The banking business strategy provides for the transition to
the most crisis-resistant model — the universal bank model,
with the primary focus on increasing profit margins to the
level of average market indicators and increasing business
competitiveness with moderate risk appetite; most promising
products and segments with the greatest potential for reve-
nue growth and implementation of the development business
model; the Group banks integration.
In 2020, the Banking Group managed to maintain its busi-
ness performance indicators at an acceptable level, despite
increased market risks. In the context of the pandemic and
restrictive measures in the economy, the Bank paid special
attention to customer support measures, which required the
creation of additional reserves and affected the business re-
turn margin. The Bank’s interest margin increased from 2.3%
in 2019 to 2.9% in 2020.
2020 key business projects
• Projects of the group’s subsidiaries integration program:
technological integration into ZENIT Banking Group (ZBG),
automation of operations in financial markets, migration
to a single processing center, withdrawal of processes
from the NBS automated banking system (technological
integration of 4 subsidiary banks);
• Terminal processing network maintenance model modifi-
cation (shift of the ZBG terminal network to unified external
support);
• Automation of liquidity calculations based on the EGAR
front office system for the Treasury (liquidity management
based on the EGAR front office system for the Treasury);
• Customer data improvement (CDI) (“gold cards” of individ-
ual clients, individual entrepreneurs, and legal entities for
the purposes of official reporting).
Generally, the Bank met the crisis plan for the year. The key
success factors were the fulfilment of operating income,
reduction of expenses and maintaining the quality of the port-
folio despite the crisis period.
The Bank's actual financial result for 2020 was RUB 2,9 bln,
while the financial result before reserves and income tax in-
creased by 60% compared to 2019 and amounted to RUB 0,6
bln. In a challenging macroeconomic environment, the Bank
achieved a 27% year-on-year increase in net interest income
and a 19% increase in net fee and commission income.
2021 business projects
• Development of the Champion Club (Ecosystem) program
(creating a platform and connecting partner services to the
ecosystem);
The Bank has implemented an anti-crisis program to re-
duce costs and projects, as a result of which the CIR has
decreased compared to the previous year. The key success
factor was the achievement of operating income (+12%
growth to 2019).
• Loyalty program, partner installment plan, including
TATNEFT (transition to bonus accrual, the ability to join the
partner loyalty program, including the ability to organize
lending to individual customers of PJSC TATNEFT, under
the installment plan);
• iBank system development (introduction of new products
and services: service showcase; fast payment system;
document designer);
• Implementation of the NSFR structural liquidity metric
calculation based on the FOS (development and improve-
ment of the liquidity risk management system, calculation
and control of structural liquidity).
120
121
Annual Report 2020 Corporate
governance
1, 263 trillion rub
Value of consolidated assets as of 31.12.2020
3 396
Publications about the Company’s corporate actions in the federal
media in 2020
3 829
Publications about the Company’s transactions, projects, and
investments in the federal media in 2020
122
123
Corporate governance system
The Company’s corporate governance is aimed at ensuring
the long-term sustainable growth of its shareholder value.
Corporate governance refers to a set of relationships
between shareholders, the Board of Directors, the
Company’s executive bodies, the Company’s employ-
ees, consumers of the Company’s products, and other
stakeholders, which sets the rules and procedure for
making corporate decisions that ensure the governance
and control of the Company’s activities.
The Company’s corporate governance system is fo-
cused on the sustainable growth of the shareholder val-
ue in the long term and implies, among other things, the
need to take into account the multifaceted economic,
financial, macroeconomic, technological, environmen-
tal, and social aspects of the Company’s activities when
making decisions.
The corporate governance model of the Company is
built upon the strong engagement of its shareholders,
the Board of Directors, top managers, executive bodies,
employees, business partners, and local communities
in the areas the Company operates to make strategically
aligned decisions, ensure effective asset management,
high operational and financial performance, increase
investment attractiveness and gain a competitive edge
for long-term continuous creation of economic value
and sustainable development.
The corporate governance system complies with the
legislation of the Russian Federation and meets the
requirements for the issuers of the securities with the
shares included in the top-tier quotation list of the
Moscow Exchange and follows the rules of other stock
exchanges, the Company’s securities are traded at, as
well as observes the legal rights of its shareholders and
maintains a high level of information disclosure.
The Company maintains a clear division of powers and
delineation of responsibilities of the governance and ex-
ecutive bodies, assessment of the performance of their
functions and duties, effective risk management and in-
ternal control mechanisms, prevention of corporate con-
flicts, counteraction of corruption and corporate fraud,
and respect for the fundamental principles of human
rights and ethical standards. The Company maintains
best corporate practices following the guidance of the
Bank of Russia’s Corporate Governance Code and the
G20/OECD principles of corporate governance. It also
pays due consideration to the international and national
standards and regulatory documents relevant to various
aspects of good governance.
In March 2021, TATNEFT received confirmation of its active status as a member of the UN
Global Compact based on the results of the first year of joining the largest international
initiative on sustainable development.
Historically, TATNEFT has been strongly committed to
the principles of high corporate responsibility providing
the alignment of the corporate interests with the UN
Global Compact Agenda for sustainable development.
This means that business decision-making abides by
the fundamental ethical principles and human rights,
the objectives of preserving a favorable environment,
reducing the carbon footprint, improving social infra-
structure, expanding innovation opportunities, ensur-
ing economic growth, and improving the quality of life
in the regions and areas where the TATNEFT Group’s
entities carry out their operations. The goal-oriented
programs are implemented based on an open dialogue
with the local community and stakeholders, which
improves the targeting of the Company’s initiatives and
decision-making transparency.
The Company sees much potential for combining the
efforts of all participants in the Global Compact to in-
tegrate corporate experience and actions in achieving
the sustainable development goals, which improves
the corporate practice effectiveness in general.
Corporate governance
The management of the sustainable development pillars is based upon the Company’s
actions aligned with the UN fundamental principles and sustainable development goals,
global trends in sustainable development, and national and regional development priorities.
TATNEFT is recognized as the corporate transparency leader among the biggest
Russian companies*
* According to the rating of the Russian Regional Network for integrated reporting as of year-end of 2019.
Improving information openness is an important factor in business sustainability. As a public company, TATNEFT is
well aware of its responsibility to all stakeholders and strives to provide maximum full information about its busi-
ness activities, financial results, and socially significant information, including implementing the UN Sustainable
Development Goals.
Corporate governance principles
1
Serving the legitimate interests of
shareholders and pari passu in ex-
ercising their rights in the Company
governance.
2
Delineation of powers and determi-
nation of responsibility of the gover-
nance bodies and executive bodies
in the Company governance
3
Functioning of a highly professional
and effective Board of Directors,
including a sufficient number of
independent directors
4
Full accountability of the
Company’s governance bodies to
the shareholders
5
Balance and effectiveness of the
internal control and risk manage-
ment system
6
Progressive and transparent divi-
dend policy
7
Information transparency and dis-
closure on all material events and
the most significant aspects of the
Company’s activities for the share-
holders and all interested parties
8
Ensuring long-term sustainable
development of the Company
9
Commitment to fundamental hu-
man rights principles
10
Implementation of sustainable de-
velopment Goals, development of
ESG practices, and socially respon-
sible investments
11
Openness to innovative
technologies
12
Anti-Corruption
13
Compliance with ethical stan-
dards and maintaining an impec-
cable business reputation of the
Company
14
Oversight of major corporate ac-
tions, including those in the con-
trolled organizations
15
Open interaction with all partici-
pants in corporate relations
124
125
Annual Report 2020 Strategic corporate governance objectives
The Company builds its corporate governance on the integration of key priorities that form a
single platform for managing the Company’s shareholder value and maximizing the profitability
of the asset structure.
1
Improving the Company’s investment attractiveness
and shareholder value through the long-term sustain-
able development with integration of the 17 Sustainable
Development Goals of the UN Global Compact and
ESG factors
2
Building an efficient strategic and investment planning
process, implementation of production and business
plans, and operational performance
3
Constructive engagement of shareholders and inves-
tors with the Board of Directors and executive bodies
for joint task-setting and effective decision-making
4
Professional and ethical responsibility of members of
the Board of Directors and executive management
bodies, officers, and employees of the Company
The main internal documents defining the corporate
governance system
Corporate governance
Articles of Association of PJSC
Regulations on the General Meeting
Regulations on the Board of
Regulations on the Audit Committee
TATNEFT n.a. V.D. Shashin
of Shareholders of PJSC TATNEFT
Directors of PJSC TATNEFT n.a. V.
of the Board of Directors of PJSC
n.a. V.D. Shashin
D. Shashin
TATNEFT n.a. V. D. Shashin
5
An integrated system to ensure a high level of staff
competence, effective incentive mechanisms, and a
KPI system
6
Safeguarding and improving the quality and structure
of assets by improving the ownership and organization-
al structure
Regulations on the HR and
Regulations on the Corporate
Regulations on the General Director
Regulations on the Management
Remuneration Committee of the
Governance Committee of the Board
of PJSC TATNEFT n.a. V. D. Shashin
Board of PJSC TATNEFT n.a. V. D.
Board of Directors of PJSC TATNEFT
of Directors of PJSC TATNEFT n.a. V.
Shashin
n.a. V. D. Shashin
D. Shashin
7
Development of an integrated risk management and
internal control system
8
Integration of social aspects, industrial and environ-
mental safety issues into the Company’s Strategy and
its current operations
9
Maintaining a high business reputation of the Company
10
Prevention and resolution of corporate conflicts
Regulations on the Revision
Regulations on Corporate Secretary
Regulations on the Internal Audit
Corporate Governance Code of
Commission the Board of Directors
of PJSC TATNEFT n.a. V. D. Shashin
Management of PJSC TATNEFT n.a.
PJSC TATNEFT n.a. V.D. Shashin
of PJSC TATNEFT n.a. V. D. Shashin
V.D. Shashin
11
Providing high quality products and services
12
Ensuring transparency of the Company’s activities and
information openness
The Company strives to comply with corporate governance standards, as this is one of the most
critical conditions for high efficiency and sustainability of the business and the basis for socially
responsible management of the Company’s activities.
Regulations on the Dividend Policy of
Regulations on the Information Policy
Regulations on Information
The TATNEFT Group Regulation
PJSC TATNEFT n.a. V. D. Shashin
of PJSC TATNEFT
Disclosure to Shareholders of PJSC
TATNEFT n.a. V. D. Shashin
126
127
Regulations on the procedure for access to the insider information of PJSC TATNEFT
n.a. V.D. Shashin, the information privacy and confidentiality protection rules, and
oversight of compliance with the legislation of the Russian Federation and the
European Union and the internal documents adopted thereunder
Annual Report 2020 Improving corporate governance practices in 2020
In the reporting year, many efforts were made to im-
prove the internal corporate procedures and practices
and pursue sustainable development practices.
In the reporting year, the Company developed and ap-
proved a Risk Management and Internal Control Policy
to delineate responsibilities and powers in risk manage-
ment and internal control in the Company’s governance
system. The policy is based on generally accepted
concepts and best practices in risk management and
internal control, including the integrated concept to
establish the COSO internal control system, the COSO
ERM risk management concept within the framework
of the recommendation of the Treadway Commission’s
Committee of Sponsoring Organizations.
In the light of the Bank of Russia’s corporate gover-
nance reform, one of the features of which is the control
of the entire chain of persons who have a significant
influence on each other, the Company’s Board of
Directors approved a new version of the TATNEFT Group
Regulation in November 2020. The Regulation sets out
the scope, structure, general standards, and principles
of the corporate governance in the TATNEFT Group.
Also, in 2020, the Company’s Board of Directors ap-
proved the “Regulation On the Procedure for Corporate
Interaction of PJSC TATNEFT named after V. D. Shashin
with Controlled and Affiliated Organizations”, which
defines the powers and procedure for the Company’s
activities in exercising its rights with respect to its con-
trolled and related organizations to ensure effective
interaction in planning, forming and controlling cor-
porate actions on issues that require determining the
Company’s position.
Company’s corporate governance compliance
85%
compliance with the provisions of the Corporate
Governance Code recommended by the Bank of
Russia
15%
partial compliance with the Code
guidance*
*The results of the assessment of compliance with the Bank of Russia Code guidance are shown in Annex
4 to the Annual Report.
Compliance of the company’s corporate practices with the guidance of the
bank of russia’s corporate governance code*
18%
15%
15%
2018
2019
2020
82%
85%
85%
Full Compliance
Partial Compliance
* The values of compliance of the Company’s corporate practices with the Bank of Russia’s Corporate Governance Code have
been adjusted in line with the guidance published by the Bank of Russia on 17.03.2021 to improve the assessment performed
by public joint-stock companies of the compliance of their corporate governance practices with the principles of the Corporate
Governance Code.
Corporate governance
Corporate governance structure
A well-functioning corporate governance system is an important factor in the
sustainable development and successful implementation of the strategy to create
the Company’s shareholder value
The Company has a well-developed corporate gover-
nance system, which is based on international stan-
dards of corporate conduct and business ethics, the
requirements of Russian legislation, the requirements
of the listing rules of PJSC Moscow Exchange, and the
principles of the Corporate Governance Code recom-
mended for application by the Bank of Russia (herein-
after referred to as the Code).
The corporate governance system of the Company is
aimed at ensuring the legitimate rights and interests of
shareholders and other interested parties, effective as-
set management and increase of share capital, growth
of capitalization and dividend yield, maintenance of
long-term economic growth based on effective man-
agement of corporate resources and risk control.
General Meeting of Shareholders
Revision
Committee
Independent
Auditor
Board of Directors
Corporate
Secretary
Internal Audit
Management
Management
Board
General
Director
Management
Board
Chairman
Corporate Governance
Committee
Human Resources and
Remuneration Committee
Audit Committee
The Investment Committee
Budget Committee
Human Resources Management Committee
Ethics and Corporate Culture Committee
128
129
Annual Report 2020 The Board of Directors of PJSC TATNEFT performs
the key functions for strategic management of the
joint-stock company and oversight of the executive
bodies and plays a crucial role in improving the system
and practice of the corporate governance based on
the principle of continuity and advanced international
standards.
considerations to sustainable development aspects.
The authority to implement the production plans, eco-
nomic, environmental, and social goals and objectives
is delegated to the Company’s management with
overseeing at the level of the Board of Directors and its
Committees, the Management Board, and the General
Director.
The chief executive officer of the Company is the
General Director of PJSC TATNEFT. The collegial exec-
utive 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 oversight of the financial and economic ac-
tivities of the Company is carried out by the Revision
Commission.
Planning of financial and operational targets is inte-
grated into a unified corporate governance system
of the Group under the Development Strategy and
key decisions made by the Board of Directors with
The management of the sustainable development pil-
lars is based upon the Company’s actions aligned with
the UN fundamental principles and sustainable devel-
opment goals, global trends in sustainable develop-
ment, and national and regional development priorities.
Responsibility for the Company’s strategic planning
and business operations is shared between among
the Board of Directors, the General Director and the
Management Board, as well as at the level of author-
ities of the executive managers in charge of the busi-
ness streams with the performance management and
motivation mechanisms based on the KPI system.
Management of
the TATNEFT Group
The Company operates as a Group. PJSC TATNEFT
is the corporate center of the Group, coordinating the
business operations of the enterprises that form the
Company’s business streams and business segments.
The Company strengthens the mechanisms for the
interaction of the controlled companies as the partic-
ipants in the corporate environment of the TATNEFT
Group, as practical strategic management tools, includ-
ing the oversight of significant corporate actions in the
controlled organizations. In 2020, the Regulation on the
Procedure for Corporate Interaction of PJSC TATNEFT
named after V. D. Shashin with Controlled and Affiliated
Entities was updated, and a new version of the TATNEFT
Group Regulation was approved.
Ensuring the uniform principles of corporate governance
and transparency of the TATNEFT Group’s activities, the
Company develops a system of consistent corporate
standards to implement the corporate strategy, increase
shareholder value, and successfully grow the TATNEFT
Group into a single system.
The Company develops a unified corporate information
platform for managing controlled companies. It ex-
pands the integration of common corporate standards
for the TATNEFT Group’s entities, including the ESG
practices and consolidation of actions to implement the
Sustainable Development Goals.
Corporate governance
General meeting of shareholders
The General Meeting is the supreme governing body of the Company. It operates under the
regulatory legal acts of the Russian Federation, the Articles of Association, and internal
documents of the Company.
The General meeting may be held in the form of a joint atten-
dance gathering of shareholders to discuss items on the agenda
and make decisions on matters put to the vote or in the form of
an absentee voting meeting. The Company may hold the General
Meeting of shareholders with an option to fill out electronic bal-
lots online via the Internet.
The Annual General Meeting of shareholders
of the Company, which took place in 2020,
in compliance with the requirements of the
current legislation of the Russian Federation*
related to the prevention of the spread of
coronavirus infection, was held in the form of
absentee voting.
*Federal Law No. 50-FZ of 18.03.2020 “On the Acquisition by the
Government of the Russian Federation of the Ordinary Shares of
Sberbank of Russia from the Central Bank of the Russian Federation
and Invalidation of Certain Provisions of Legislative Acts of the
Russian Federation”).
The General Meeting of shareholders makes decisions on signifi-
cant issues of the Company’s activities.
The General Meeting of shareholders delegates the overall
management of the Company to the Board of Directors. The
procedure for holding the General Meeting of shareholders
fully ensures the observance of the rights of shareholders. The
procedure for preparing, convening, holding, and summing
up the results of the general meeting of shareholders of the
Company is defined by the Regulation “On the General Meeting
of Shareholders of PJSC TATNEFT named after V. D. Shashin.”
The Company holds an annual general meeting of shareholders
once a year, not earlier than two, and not later than six months
after the end of the fiscal year. In addition to the annual gen-
eral meeting, extraordinary meetings of shareholders may be
convened. The information is made available to the shareholders
regarding the general shareholders’ meeting agenda items in the
amount and within the timeframe sufficient for them to choose
a well-grounded stance on the considered matters and make
decisions on participation in the meeting and the form of such
participation.
The annual general meeting at all times must consider issues
related to the election of members of the Board of Directors and
the Revision Commission, approval of the auditor, approval of the
annual report, annual accounting (financial) statements, appro-
priation of profit, including payments (declarations) of dividends,
and losses as of reporting year-end, and approval of internal
documents regulating the activities of the Company’s governing
bodies. Shareholders make decisions on the most important
issues of the Company’s activities. The Federal Law requirements
specify the full list of matters reserved to the general meeting of
shareholders No. 208-FZ of December 26, 1995, “On Joint-
Stock Companies.” When electing the Board of Directors, the
Company gives its shareholders the detailed background of each
candidate such as biography, experience, and skills, and strives
to ensure that the candidates are personally present at the gen-
eral meeting of shareholders held in the form of joint attendance
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 company’s ongoing corpo-
rate policy and production and business activities 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 and dissenting opinions of members
of the Board of Directors, if any.
Decisions on the agenda items of the general meeting of share-
holders are made by voting by ballots under the current legisla-
tion and the Company’s Articles of Association. When drafting
the meeting’s decisions, it is necessary to indicate by what
majority votes decisions were made, and dissenting opinions
are recorded. The minutes are signed by The Chairman and
Secretary of the meeting. During the preparation for and holding
the general meeting, the shareholders can freely and timely
receive information about the meeting and its materials, pose
questions to members of the company’s executive bodies and
the Board of Directors, and communicate.
The Company provides its shareholders
with any available means of
communication such as hotline and
e-mail options, making it possible for
the shareholders to ask questions about
their share ownership, dividend payout
procedure, etc., as well as express
opinions and send questions about the
agenda during the preparations for the
General meeting of shareholders.
130
131
Annual Report 2020 The general meetings of shareholders held in 2020:
Type of meeting:
Annual general meeting of shareholders
Format of the meeting:
Absentee voting
Meeting date:
June 17, 2020
Type of the meeting:
Format of the meeting:
Date of the event:
Extraordinary general meeting of shareholders
Absentee voting
September 30, 2020
Corporate governance
The decisions taken by the Extraordinary
General Meeting of Shareholders:
1. Approve the annual report of PJSC TATNEFT n.a.
V.D.Shashin for 2019.
4. Elect the following individuals to the Board of
Directors of PJSC TATNEFT n.a.V. D. Shashin:
1. AGLIULLIN Fanil Anvarovich
2. GAIZATULLIN Radik Raufovich
2. Approve the annual accounting (financial) state-
3. GERECS Laszlo
ments of PJSC TATNEFT n.a. V. D. Shashin for 2019.
3. Approve the appropriation of profit (including pay-
ment (declaration) of dividends) of PJSC TATNEFT
n.a. V. D. Shashin by the year-end reporting re-
sults,as follows:
• determine that the amount of dividends on ordinary shares
based on the results of 2019 is 0% of the share par value,
excluding previously paid dividends based on the results of
six and nine months of 2019 in the amount of 6447% of the
share par value;
• effect the payment of dividends on preferred shares based
on the results of 2019 in the amount of 100% of the share
par value, excluding previously paid dividends based on
the results of six and nine months of 2019 in the amount of
6447% of the share par value;
• the remaining net profit after payment of dividends for 2019
is to be recognized as undistributed.
Set June 30, 2020, as the record date on which the persons
entitled to dividends are determined. The dividends are to be
paid in cash.
4. GLUKHOVA Larisa Yurievna
5. LEVIN Yuri Lvovich
6. MAGANOV Nail Ulfatovich
7. NURMUKHAMETOV Rafail Saitovich
8. SABIROV Rinat Kasimovich
9. SOROKIN Valery Yuryevich
10. SYUBAEV Nurislam Zinatulovich
11. TAKHAUTDINOV Shafagat Fakhrazovich
12. KHALIMOV Rustam Khamitovich
13. KHISAMOV Rais Salikhovich
14. STEINER Rene Frederic
5. Elect the following individuals to the Revision
Commission of PJSC TATNEFT n.a.V. D. Shashin:
1. BORZUNOVA Ksenia Gennadyevna
2. GALEEV Azat Damirovich
3. GILFANOVA Guzal Rafisovna
4. ZALYAEVA Salavat Galiaskarovich
5. KUZMINA Venera Gibadullovna
6. RAKHIMZYANOVA Lilya Rafaelovna
7. FARKHUTDINOVA Nazilya Rafisovna
8. SHARIFULLIN Ravil Anasovich
6. Approve the auditor of PJSC TATNEFT named after
V. D. Shashin to perform the mandatory audit of
the annual financial statements for 2020 prepared
in accordance with the Russian and international
accounting standards, for one year, the Joint-Stock
Company PricewaterhouseCoopers Audit (JSC “PvK
Audit”).
The decisions taken by the extraordinary
General meeting of shareholders:
1. Make the dividend payment for the six (6) months of
2020 as follows:
а) on the PJSC TATNEFT preferred stock in the amount of
994% to the par value;
б) on the PJSC TATNEFT ordinary stock in the amount of
994% to the par value.
2.Set October 12, 2020, as the record date on which
the persons entitled to dividends are determined.
The dividends are to be paid in cash.
All decisions adopted by the general meeting of shareholders in 2020 have been implemented.
The quorum of general meetings of shareholders for 2016 - 2020
June 24, 2016
Annual General Meeting of Shareholders
June 23, 2017
Annual General Meeting of Shareholders
December 12, 2017
Extraordinary General Meeting of Shareholders
June 22, 2018
Annual General Meeting of Shareholders
September 28, 2018
Extraordinary General Meeting of Shareholders
December 21, 2018
Extraordinary General Meeting of Shareholders
June 21, 2019
Annual General Meeting of Shareholders
September 13, 2019
Extraordinary General Meeting of Shareholders
December 19, 2019
Extraordinary General Meeting of Shareholders
June 17, 2020
Annual General Meeting of Shareholders
September 30, 2020
Extraordinary General Meeting of Shareholders
63,53 %
61,97 %
66,69 %
59,91 %
63,66 %
66,35 %
62,97 %
65,44 %
67,67 %
64,86 %
61,61 %
132
133
Annual Report 2020 Board of Directors
On June 21, 2019, the General Meeting of shareholders elected the Board of Directors of PJSC TATNEFT from the candi-
dates who have sufficient professional background in strategic management, knowledge and skills, as well as personal
qualities to adopt well-balanced and objective decisions on the Company’s growth and development with the membership
that meets the scope of activities, interests, and needs of the Company.
Composition of the Board of Directors
At the first meeting of the Board of Directors of PJSC
TATNEFT following the annual general meeting of share-
holders held on June 21, 2019, Rustam N. Minnikhanov was
unanimously elected the Chairman of the Board of Directors
by all members of the Board of Directors, as the most influ-
ential member of the Board of Directors with a high level of
professional skills and knowledge, significant background
in management positions, and impeccable business and
personal reputation.
The membership procedure, status, structure, functions,
goals, and objectives, competencies, powers of the Board of
Directors, the work procedures, and engagement with other
governing bodies of the Company are determined by the
Articles of Association and the Regulations on the Board of
Directors of PJSC TATNEFT n.a. V. D. Shashin, and distin-
guished from the competences of the executive bodies of the
Company, which govern its current activities.
The general shareholders’ meeting elects fourteen (14)
members of the Board of Directors by cumulative voting (the
candidates who won the most votes are deemed elected
to the Board of Directors. One member of the Board of
Directors is appointed based on the special “golden share”
right (The Law of the Republic of Tatarstan of 26.07.2004 N
Chairman of Board of Directors
The Chairman of the Board of Directors plays a pivotal
role in ensuring that the Board of Directors and its com-
mittees work effectively and efficiently.
The activity of the Chairman of the Board of Directors is focused
on creating a constructive atmosphere for holding meetings,
free discussion of issues considered by the Board of Directors
to develop the most thoughtful and practical decisions.
The Chairman of the Board of Directors is a non-executive di-
rector. The Chairman of the Board of Directors is not a member
of any of the Board of Directors committee.
The Board of Directors elects the Chairman of the Board
of Directors of the Company from among its members by
a majority vote of the Board of Directors’ total number. The
Chairman carries out his duties under the Company’s Articles of
Association, the Regulations on the Board of Directors of PJSC
TATNEFT n.a. V. D. Shashin, and the Corporate Governance
Code.
The Chairman of the Board of Directors organizes its work, con-
venes and presides over meetings of the Board
of Directors, and arranges for minutes to be kept at such meet-
ings. In the absence of the Chairman of the Board
of Directors, his duties are performed by one of the members
of the Board of Directors upon the decision of the Board of
Directors of the Company.
134
43-ZRT “On Privatization of State Property of the Republic
of Tatarstan,” clause 8.3 of the Company’s Articles of
Association). The Company is to include electing members
of the Board of Directors in the annual general shareholders’
meeting agenda.
The Company provides a transparent procedure for electing
members of the Board of Directors and discloses information
on the Board of Directors’ current composition and candi-
dates to the Board of Directors in advance. When nominat-
ing members of the Board of Directors and its committees,
criteria and factors of professional skills and expertise are
considered, including those in economic, environmental, and
social areas.
At the first meeting after the appointment of the Board of
Directors and the election of the Chairman of the Board of
Directors, the Committees of the Board of Directors are
formed.
The information on the Board of Directors’ composition and
its activities is disclosed on the Company’s official website.
https://www.tatneft.ru/aktsioneram-i-investoram/
sistema-upravleniya-i-kontrolya/sovet- direktorov?lang=ru
Main functions of the Chairman of the Board of
Directors
• organizing the Board of Directors’ operation.
• convening meetings, presiding over meetings.
• drawing up proposals for the task assignment among the
members of the Board of Directors and its Committees.
• ensuring an open discussion of the agenda items and
considering the opinions of all board members.
• identifying key issues to be considered by the Board of
Directors and choosing the best format of the meeting to
discuss the issues.
• representation of the Board of Directors in relations with
shareholders, managers and other stakeholders
In the context of the spread of the COVID-19 infection,
the Board of Directors responded effectively and
promptly to the pandemic outbreak, promptly and
carefully made important decisions in strategic planning,
risk management, information security, key business
processes of the Company, and personnel safety issues.
Corporate governance
Powers and competencies of the Board of Directors
The Board of Directors provides an overall charge of the
Company’s activities, sets up priorities, strategy, and policy of
the Company, authorizes and approves the strategic, long-term,
and medium-term plans and programs of development of the
TATNEFT Group, including investment, borrowings and asset
management, main principles and approaches to the organi-
zation of the system of internal control and risk management,
is responsible for the management of key risks of the Company
affecting the achievement of its strategic targets and takes deci-
sions on key projects and significant transactions oversees the
achievement of strategic objectives, plans, and programs of the
Company promotes timely disclosure of complete and reliable
information on the activities of the Company.
When considering the Company’s Strategy, shaping and ap-
proving plans, budgets, and investment programs, the Board
of Directors regards the sustainable development aspects and
goals in HSE, social policy, and human resource management.
One of the key duties of the Board of Directors is to es-
tablish effective executive bodies and ensure oversight
of their activities. The competence of the Board of
Directors pertains to the following matters.
The competence of the Board of Directors pertains to the follow-
ing matters:
• election of executive bodies, termination of their powers,
and motivation of executive bodies;
• oversight of the Company’s activities based on regular
progress reports of the executive bodies on the implemen-
tation of Strategy and business plans;
• improving the corporate governance system and practice in
the Company;
• convening annual and extraordinary general meetings of
shareholders, as well as matters related to the preparation
of the general meeting of shareholders;
• approval of internal documents of the Company, except for
internal documents with the approvals which are reserved
to the competence of general meeting of shareholders and
executive bodies of the Company;
• approval of the Company’s registrar and the contract terms
with the registrar, and termination thereof
The Board of Directors plays a crucial 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.
The Company ensures that the candidates to the Board of Directors and its committees are nominated and selected
based on diversity, independence, professional skills, and expertise.
Following best corporate practices, the formation of the Board of Directors considers such factors as the national
and gender diversity of the Board members.
The Board of Directors and executive bodies play a crucial role in shaping, setting, approving,
and updating the Company’s goals, values, mission, strategies, policies, and objectives to
achieve economic, environmental, and social benefits.
The Board of Directors works under the approved
plans, inter alia, summarizing the results of activi-
ties, determining the Company’s priorities, preparing
general meetings of shareholders, making decisions
on authorization or subsequent approval of non-arm’s
length transactions and other transactions under the
Articles of Association. To ensure the effective work of
the Board of Directors, the Company accomplishes the
following comprehensive actions:
• Providing information technology resources with a secure
corporate communication link for rapid remote delivery of
information materials to members of the Board of Directors
regarding Board’s meeting agendas;
• Making it possible to hold meetings of the Board of
Directors and its committees in a video-conference format;
• Archival management and storage of Board of Directors’
meeting minutes
• Ensuring that members of the Board of Directors are
aware of and familiar with the internal documentation and
business operations of the Company, including production,
financial and economic, environmental, and social aspects;
• Procedures for keeping the Board of Directors informed,
including critical issues if they arise.
The Company has mechanisms in
place to provide members of the
Board of Directors with information in
the amount and within the timeframe
sufficient for them to make balanced
and objective decisions on the Board of
Directors’ agenda items.
135
Annual Report 2020
Composition of
the Board of Directors
of PJSC TATNEFT
The Composition of the Company’s
Board of Directors is based
on a balance of knowledge, skills and
expertise to ensure effective work.
In 2020, there were the following
changes in the Board of Directors’
membership:
The powers of the members of the Board of
Directors were terminated, namely
Muslimov Renat Khaliullovich
Khamaev Azat Kiyamovich
Corporate governance
MINNIKHANOV Rustam Nurgalievich
Non-Executive Director
Chairman of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors, PJSC TATNEFT*
MAGANOV Nail Ulfatovich
GAIZATULLIN Radik Raufovich
Executive Director
Non-Executive Director
General Director of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Chairman of the Management Board of PJSC TATNEFT
The Audit Committee Member of the Board of Directors of
PJSC TATNEFT
Regulations on the Corporate Governance Committee of
the Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
• Born in 1957
• Born in 1958
• Born in 1964
• 1978 – graduated from Kazan Agricultural Institute
• 1983 – graduated from Moscow Institute of Petrochemical and Gas Industry
• 1985 – graduated from Kazan Agricultural Institute
• 1986 – graduated from Soviet Trade Institute
• 1996-1998 – Minister of Finance of the Republic of Tatarstan
• July 1998-March 2010 – presided over the Government of the Republic of
n.a. Ivan Gubkin
• June 2002 – Present, the Head of the Ministry of Finance of the Republic of
• July 2000-November 2013 – First Deputy General Director – Head of Crude
Tatarstan
Oil and Petroleum Product Sales Department of OJSC TATNEFT
• November 2013-Present – General Director of PJSC TATNEFT
Elected to the Board of Directors as follows
Tatarstan
AGLIULLIN Fanil Anvarovich
GLUKHOVA Larisa Yuryevna
• March 2010-Present – President of the Republic of Tatarstan
* As per the Orders of the President of the Republic of Tatarstan No.
80 of 17.02.2020, No. 59 of 27.01.2020 and the letter of the Ministry
of Land and Property of the Republic of Tatarstan No. 1-30 / 2169
of 19.02.2020, by virtue of the special “golden share” right, he was
appointed as a representative of the state (the Republic of Tatarstan)
to the Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
Participation in the governing bodies of other entities:
• Chairman of the Board of Directors of PJSC Bank ZENIT
• Chairman of the Board of Directors of INCO-TEK LLC
• Chairman of the Board of the TATNEFT Charitable Foundation
• Deputy Chairman of the Supervisory Board of the Ak Bars Hockey Academy
n. a. Yu. I. Moiseev
• Member of the Board of Directors of LLC SCE Tatneft-Ak Bars
• Member of the Board of Directors of PJSC Nizhnekamskneftekhim
• Member of the Board of Directors of JSC Tatneftekhiminvest-Holding
• Member of the Board of Directors of Svyazinvestneftekhim JSC
• Member of the Board of Directors of Kontinental Hockey League, LLC
• Member of the Board of Directors of Tatneft Oil AG
• Chairman of the Board of Directors of TNA-Services NV
• Member of the Board of Directors of TAL OIL Ltd
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
none
none
0,000176
none
none
none
136
137
Annual Report 2020 Corporate governance
GERECS Laszlo
Independent Director authorized by the Board
of Directors for the Company’s Climate Policy
LEVIN Yuri Lvovich
Independent Director
STEINER Rene Frederick
Independent Director
SABIROV Rinat Kasimovich
Non-Executive Director
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
The Audit Committee 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
Member of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
Chairman of the HR and Remuneration Committee
of PJSC TATNEFT
The Audit Committee Member of the Board of Directors of
PJSC TATNEFT
Member of the Corporate Governance Committee of the
Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
Member of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
• Born in 1953
• Born in 1953
• Born in 1964
• Born in 1967
• 1977 – graduated from Moscow Institute of Petrochemical and Gas Industry
• 1975 – graduated from the Moscow Financial Institute
• 1989 – graduated from the Higher Technical School of Zurich
• 1991 – graduated from Kazan State University
n.a.Ivan Gubkin
• 1979 – completed postgraduate courses at the Institute of World Economy
• From 1992 Bachelor of Swiss Banking – Zurich
• 1994 – graduated from Kazan State Technological University
• 1995 – graduated from Oxford Business University
and International Relations
• 2011-Present – Co-founder, Head of Private Equity Programs at FIDES
• 1998 – training courses under Presidential Management Training Program
• 2012-31.12.2016 – Managing Director of MOL Oman – Representative Office
• 2001-Present – Managing Partner of BVM Capital Partners Ltd.
Business Partner AG, Switzerland
of MOL Group in Muscat
• 01.01.2017-Present – Managing Director of G Petroconsulting Ltd
• 2012 – completed Master of Business Administration Program at Colorado
State University (USA)
• 2006-June 2010 – Head of the Department for the Petrochemical Complex of
the Cabinet of Ministers of the Republic of Tatarstan
• June 2010-July 2020 – Assistant to the President of the Republic of Tatarstan
• July 2020-Present – General Director of JSC Gazprom Mezhregiongaz Kazan
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
• Independent Advisor (Member of the Reserves Estimation Committee)
• Member of the Management Board of B. V. Murray&Co. Inc
• Vice-Chairman of the Board of Directors of FB Zurich Football Club
• Member of the Board of Directors of PJSC Nizhnekamskshina
MOL Group
• Member of the Board of Directors of Joint-Stock Commercial Bank AK BARS
• Member of the Board of Directors of FIDES Holding AG
• Member of the Board of Directors of JSC Tatneftekhiminvest-Holding
(Public Joint-Stock Company)
• Member of the Board of Directors of Winter Finanz AG
• Member of the Board of Directors of BerlinBlu AG
• Member of the Board of Directors of PJSC Nizhnekamskneftekhim
• Member of the Board of Directors of Fischer Sohne AG
• Member of the Board of Directors of PJSC Kazanorgsintez
• Member of the Board of Directors of Neftekonsorcium CJSC
• Member of the Board of Directors of PJSC “Ukrtatnafta
• Member of the Board of Directors of JSC Kazan Fair
• Member of the Board of Directors of Technology Transfer Center LLC
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
none
none
none
none
none
none
none
none
138
139
Annual Report 2020 Corporate governance
SOROKIN Valeriy Yuryevich
Non-Executive Director
SYUBAEV Nurislam Zinatulovich
Executive Director
TAKHAUTDINOV Shafagat Fakhrazovich
KHALIMOV Rustam Khamisovich
Non-Executive Director
Executive Director
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
• Born in 1964
• 1986 – graduated from Kazan State University
Member of the Corporate Governance Committee of the
Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
Chairman of the Management Board of PJSC TATNEFT
Adviser to the Chairman of the Board of Directors
of PJSC TATNEFT
• 2003-Present – General Director of JSC Svyazinvestneftekhim
• Born in 1960
• Born in 1946
• Born in 1965
Participation in the governing bodies of other entities:
• 2001-17.07.2016 – Head of the Strategic Planning Department – Adviser to the
Industry n.a.Ivan Gubkin
Industry n.a.Ivan Gubkin
• Председатель Совета директоров ПАО «Таттелеком»
• Chairman of the Board of Directors of PJSC Tattelecom
General Director for Foreign Economic Activity, Finance and Banking, PJSC
• 1999-November 2013 – General Director of OJSC TATNEFT
• 2010-2011 – Director of OJSC Tatneft Branch in Libya
TATNEFT
• November 2013-Present – Assistant to the President of the
• 2011-2015 – Head of NGDU Elkhovneft of OJSC TATNEFT
• 1982 – graduated from the Plekhanov Moscow Institute of National Economy
• 1971 – graduated from Moscow Institute of Petrochemical and Gas
• 1987 – graduated from Moscow Institute of Petrochemical and Gas
• Chairman of the Board of Directors of PJSC Ak Bars Bank
• 18.07.2016-Present – Deputy General Director for Strategic Development,
• Chairman of the Board of Directors of First Construction Management LLC
PJSC TATNEFT
• Chairman of the Board of the NGO Alabuga Special Economic Zone
Promotion Foundation
• Chairman of the Board of the NGO Regional Foundation for the TUGAN IL
Participation in the governing bodies of other entities:
Social and Economic Development
• Chairman of the Board of the NGO Physical Culture and Sports Promotion
Foundation
• Member of the Board of the Systemic Medicine Foundation
• Member of the Board of Directors of Svyazinvestneftekhim JSC
• Member of the Board of Directors of JSC Tatneftekhiminvest-Holding
• Member of the Trustee Board of the Investment and Venture Fund of the
Republic of Tatarstan
• Member of the Trustee Board of Kazan (Volga Region) Federal University
• Member of the Trustee Board of the NPO State Housing Fund under the
President of the Republic of Tatarstan
• Member of the Trustee Board of Volga-Capital Non-State Pension Fund JSC
• Member of the Trustee Board of the NPO The Republican Foundation for the
Revival of Historical and Cultural Monuments of the Republic of Tatarstan
• Member of the Trustee Board of the Foundation for Support of Culture and
Sports
• Member of the Trustee Board of the Foundation for Promotion of Comfortable
Environment in the Republic of Tatarstan
• Member of the Supervisory Board of the Interregional Clinical Diagnostic
Center
• Member of the Supervisory Board of the Autonomous Non-Profit
Organization Kazan Open University of Talents 2.0
• Member of the Supervisory Board of the World-Class Scientific and
Educational Center in the Republic of Tatarstan
• Chairman of the Board of Directors of Plant Elastic LLC
• Chairman of the Board of Directors of IDELOIL JSC
• Member of the Board of Directors of Kara-Altyn Enterprise CJSC
• Member of the Board of Directors of URS-Trading House LLC
• Member of the Board of Directors of Carbon-Oil LLC
• Member of the Board of Directors of JSC Aznakaevsky Plant Neftemash
• Member of the Board of Directors of Blagodarov-Oil LLC
• Chairman of the Board of Directors of PJSC Bank ZENIT
• Chairman of the Trustee Board of National Non-State Pension Fund JSC
• Member of the Board of Directors of P-D - Tatneft-Alabuga Steklovolokno
LLC
• Member of the Supervisory Board of Tatneft International Cooperatie U.A.
(Netherlands)
• Member of the Board of the self-regulatory organization National Association
of Non-State
• Pension Funds
• Member of the Board of Directors of PJSC Joint-Stock Commercial Bank AK
BARS
Republic of Tatarstan on the Oil Industry, Adviser to the Chairman of
the Board of Directors of PJSC TATNEFT
• 2015-20.05.2018 – Deputy General Director for Oil and Gas
Development and Production of PJSC TATNEFT
• 21.05.2018-30.06.2019 – First Deputy General Director for Oil and
Gas Exploration and Production of PJSC TATNEFT
Participation in the governing bodies of other entities:
• 01.07.2019-Present – First Deputy General Director for Oil and
• Member of the Board of Directors of JSC National Non-State Pension Fund
• Chairman of the Board of Directors of PJSC Bank ZENIT
• Member of the Board of Directors of JSC Tatneftekhiminvest-Holding
• Chairman of the Board of Directors of Tatoilgas JSC
• Chairman of the Board of Directors of Tatex JSC
Gas Exploration and Production - Head of Tatneft Upstream, PJSC
TATNEFT
• Member of the Board of Directors of Neftekonsorcium CJSC
Participation in the governing bodies of other entities:
• Member of the Board of Directors of Bulgarneft JSC
• Chairman of the Board of Directors of Kara-Altyn Enterprise CJSC
• Chairman of the Board of Directors of JSC Tatnefteprom-Zyuzeyevneft
• Member of the Board of Directors of JSC Tatnefteprom
• Chairman of the Board of Directors of Carbon-Oil LLC
• Chairman of the Board of Directors of Blagodarov-Oil LLC
• Chairman of the Board of Directors of PACKER-BIS LLC
• Member of the Board of Directors of Selengushneft CJSC - until 19.06.2020
• Member of the Board of Directors of VELLoil CJSC - until 19.06.2020
• Member of the Board of Directors of Yambuloil JSC
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
none
none
none
0,116503
0,123914
0,000056
none
none
140
141
Annual Report 2020 Corporate governance
AGLIULLIN Fanil Anvarovich
KHISAMOV Rais Salikhovich
NURMUKHAMETOV Rafail Saitovich
GLUKHOVA Larisa Yurievna
Non-Executive Director
Executive Director
Executive Director
Non-Executive Director
Member of the Board of Directors of PJSC TATNEFT from
17.06.2020
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT from
17.06.2020
• Born in 1975
• Born in 1950
• Born in 1949
• Born in 1976
• 2004 – graduated from the Kazan Law Institute of the Ministry of Internal
• 1978 – graduated from Moscow Institute of Petrochemical and Gas Industry
• 1974 – graduated from Ufa Oil Institute
• 1998 – graduated from Kazan State University
Affairs of the Russian Federation
n.a.Ivan Gubkin
• 30.01.1998-31.01.2020 – Head of NGDU Leninogorskneft of PJSC TATNEFT
• November 21, 2013-June 22, 2017 – Minister of Justice of the Republic of
• 2016-September 2019 – Head of the Security Service-Assistant to the
• October 1997-Present – Deputy General Director-Chief Geologist of PJSC
Tatarstan
President of the Republic of Tatarstan
TATNEFT
• September 2019-present – Minister of Land and Property Relations of the
Republic of Tatarstan
• From June 23, 2017-Present – Head of the State Legal Department of the
Administrative Office of the President of the Republic of Tatarstan
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
• Member of the Board of Directors of Svyazinvestneftekhim JSC
• Chairman of the Board of Directors of Kalmneftegaz OJSC
• Member of the Board of Directors of Okhtin-Oil CJSC
• Member of the Board of Directors of Svyazinvestneftekhim JSC
• Chairman of the Board of Directors of KalmTatneft JSC
• Member of the Board of Directors of New Oil Production Technologies LLC
• Member of the Board of Directors of Yambuloil JSC
• Member of the Trustee Board of the NPO State Housing Fund under the
President of the Republic of Tatarstan
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
none
0.020341
0.021433
0,010465
0,010107
none
none
none
142
143
Annual Report 2020 Balanced composition of
the Board of Directors
The Board of Directors is composed of 15 directors, including three (3) independent directors (20% of the overall
membership of the Board of Directors), seven (7) non-executive directors (46.7% of the overall membership of the
Board of Directors), and five (5) executive Directors (33.3% of the overall membership of the Board of Directors).
3 Independent directors:
LEVIN Yuri Lvovich
GERECH Laszlo
Board of Directors
5
STEINER Rene Frederick
Executive Directors:
MAGANOV Nail Ulfatovich
NURMUKHAMETOV Raphael Saitovich
KHALIMOV Rustam Khamisovich
KHISAMOV Rais Salikhovich
SYUBAEV Nurislam Zinatulovich
7 Non-executive directors:
MINNIKHANOV Rustam Nurgalievich
AGLIULLIN Fanil Anvarovich from 17.06.2020
GLUKHOVA Larisa Yuryevna from 17.06.2020
GAIZATULLIN Radik Raufovich
SABIROV Rinat Kasimovich
SOROKIN Valeriy Yuryevich
TAKHAUTDINOV Shafagat Fakhrazovich
MUSLIMOV Renat Khaliullovich until 17.06.2020
KHAMAEV Azat Kiyamovich until 17.06.2020
The Board of Directors’ composition is well balanced in terms
of membership of independent, non-executive, and execu-
tive Directors. The Company believes that three independent
directors and seven non-executive directors in the Board of
Directors maintain a balance between the interests of various
groups of shareholders, facilitating objectivity in decision-mak-
ing and inspiring investors, shareholders, and other stake-
holders with high confidence in the Company. The participa-
tion of five executive directors ensures a deep integration of
the Board of Directors and executive bodies. The Company
believes that three independent directors are sufficient to sig-
nificantly influence the decision-making process and ensure
flexibility and objectivity in resolving issues. Moreover, the
independence of these directors’ judgments enhances the
Board of Directors’ effectiveness and improves the Company’s
corporate governance system.
Three of the fifteen members of the Board of Directors are
foreign citizens (20% of the Board of Directors’ overall mem-
bership). The presence of foreign directors on the Board
contributes to the strengthening of international business
contacts and the penetration of best business practices into
the established corporate culture of the Company.
Members of the Board of Directors of PJSC TATNEFT have
high skills and knowledge, and professional background in
strategic management, risk management, accounting, and
audit, as well as in the Company’s business streams, sufficient
to make balanced and objective decisions in the best interests
of the Company and its shareholders.
Corporate governance
Independent Directors
Participation of independent directors with high profession-
al backgrounds in the discussion of the issues considered
by the Board of Directors, including those within the scope
of the Board of Directors Committees and interaction with
the management, has a very positive effect on the work
of the Board of Directors and the corporate governance
development.
In 2020, the independent directors made a strong focus upon
the Company’s risk management and internal control system
and other issues according to the Agenda of meetings of the
Board of Directors and its committees.
As part of the Company’s climate planning system develop-
ment, the independent member of the Board of Directors, Mr.
Laszlo Gerecs, was appointed responsible for overseeing the
Company’s activities related to climate change. Mr. Gerecs
has good relevant expertise in this area and interacts with
the Company’s management to discuss actions and plans to
reduce the carbon footprint.
Key specialization of Board members:
Financial investment
LEVIN Yuri Lvovich
STEINER Rene Frederick
Production operations, technology development
KHISAMOV Rais Salikhovich
KHALIMOV Rustam Khamisovich
GAIZATULLIN Radik Raufovich
NURMUKHAMETOV Rafail Saitovich
Company business strategy and asset management
Legal risks
GLUKHOVA Larisa Yurievna
Climate issues
GERECS Laszlo
SOROKIN Valeriy Yuryevich
SYUBAEV Nurislam Zinatulovich
AGLIULLIN Fanil Anvarovich
Risks
TAKHAUTDINOV Shafagat Fakhrazovich
MAGANOV Nail Ulfatovich
Age profile of the Board of Directors
40%
56-65 y.o.
6 members
33,4%
66 + y.o.
5 members
13,3%
35-45 y.o.
2 members
13,3%
46-55 y.o.
2 members
144
145
Annual Report 2020 Duration of service on the Board of Directors
20
24
20
6
MAGANOV Nail Ulfatovich
MINNIKHANOV Rustam Nurgalievich
GAIZATULLIN Radik Raufovich
GERECS Laszlo
less than a year
AGLIULLIN Fanil Anvarovich from 17.06.2020
2
6
23
16
16
24
5
12
23
8
5
less than a year
SYUBAEV Nurislam Zinatulovich
LEVIN Yuri Lvovich
MUSLIMOV Renat Khaliullovich until 17.06.2020
SABIROV Rinat Kasimovich
SOROKIN Valery Yurievich
TAKHAUTDINOV Shafagat Fakhrazovich
KHALIMOV Rustam Khamisovich
KHAMAEV Azat Kiyamovich until 17.06.2020
KHISAMOV Rais Salikhovich
STEINER Rene Frederick
NURMUKHAMETOV Raphael Saitovich
GLUKHOVA Larisa Yurievna from 17.06.2020
1997
2020
Number of members of the Board of
Directors by length of board tenure
All members of the Board of
Directors have significant work
experience in the Company, high
professional reputations and
knowledge, which have a strong
positive impact on consistent
and balanced decision-making.
The current composition of the
Company’s Board of Directors
is sufficiently diversified and
balanced.
53%
Over seven years
8 members
34%
One to seven years
5 members
13%
Less than a year
2 members
Enhancing the ESG professional expertise of the Board members
Members of the Board of Directors strive to improve their professional experience in the economic, environmental, and social
spheres of the Company’s activities, in the context of the implementation of the Sustainable Development Goals of the UN
Global Compact and the Paris Agreement signed under the UN Framework Convention on Climate Change, which regulates
measures to reduce carbon dioxide in the atmosphere from 2020.
To ensure effective information to the Board of Directors, the Company uses modern information and technical resources and
channels, including specialized software in Russian and English.
146
Corporate governance
Succession of the Board of Directors
To shape and maintain an optimal and balanced composi-
tion of the Board of Directors, the Company ensures the
continuity of the Board of Directors, which:
• contributes to maintaining the necessary overall competence
of the Board of Directors when changing its members;
• ensures continuity of experience, best and effective practices
implemented by the Board of Directors;
• makes it possible to systematically and consistently solve
the tasks facing the Board of Directors and manage the
Company’s risks;
• makes it possible to select for work on the Board of Directors
exactly those whose contribution to the work will improve the
Board of Directors’ performance.
specialization meet the challenges of the changing external
environment and the Company’s specifics.
The rotation of the Board of Directors is carried out consistently
and in stages. The Company does not allow changing at a time
more than half of the Board of Directors.
The Corporate Secretary of the Company provides that first-
time elected members of the Board of Directors as soon as
practicable get to know documents and materials pertaining
to the Company’s activities, including the Company’s strategy,
corporate governance system put in place in the Company, risk
management, internal control system, distribution of duties and
responsibilities between the executive bodies of the Company
and other essential information related to the Company’s
activities.
The continuity of the Board of Directors allows considering the
Company’s needs for timely rotation of the Board of Directors
and introducing new members whose skills, experience, and
New members of the Board of Directors are always provided
with explanations on compliance with the confidentiality rules
and protection of insider information.
The Board of Directors meeting attendance in 2020
SURNAME,
Name, Patronymic
30.
01
28.
02
04.
03
24.
03
20.
04
18.
05
25.
05
29.
06
20.
07
17.
08
25.
08
24.
09
28.
10
27.
11
21.
12
Total/
attendance
MINNIKHANOV Rustam
Nurgalievich.
MAGANOV Nail Ulfatovich
SYUBAEV Nurislam Zinatulovich
LEVIN Yuri Lvovich
GAIZATULLIN Radik Raufovich
GERECS Laszlo
MUSLIMOV Renat Khaliullovich
until 17.06.2020
SABIROV Rinat Kasimovich
SOROKIN Valery Yurievich
NURMUKHAMETOV
Raphael Saitovich
TAKHAUTDINOV Shafagat
Fakhrazovich
KHAMAEV Azat Kiyamovich
until 17.06.2020
KHISAMOV Rais Salikhovich
KHALIMOV Rustam Khamisovich
STEINER Rene Frederick
AGLIULLIN Fanil Anvarovich
from 17.06.2020
GLUKHOVA Larisa Yurievna
from 17.06.2020
V
V
О
V
V
V
V
V
V
V
V
V
V
V
V
О
О
V
V
V
V
О
V
V
V
V
V
V
V
О
V
V
О
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
О
V
V
V
V
V
V
О
V
V
О
V
V
V
V
V
О
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
О
V
V
V
V
V
V
V
V
О
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
О
О
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
V
V
V
О
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
15/15
15/15
15/13
15/15
15/14
15/15
О
О
О
О
7/5
V
О
V
V
V
V
V
V
V
V
О
V
V
О
V
V
15/15
15/13
15/13
15/15
О
О
О
О
О
О
О
О
7/7
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
О
V
V
О
V
V
V
V
V
V
V
V
V
V
V
15/13
15/15
15/15
8/7
8/8
* in absentia
147
Annual Report 2020 2020 Board of Directors’ activities
In 2020, the Board of Directors comprehensively considered
the issues of planning and performance of the Company’s
current operational and financial activities as part of the
Strategy 2030 implementation. The impact of macroeconomic
factors was reviewed in the context of continued oil produc-
tion curbs under the OPEC+ Agreement, the consequences
of tax changes in the oil industry, market price fluctuations,
and other factors related to the analysis of long-term trends in
the hydrocarbon market and their impact on the Company’s
development.
High priority issues were related to the possible transition to
excess-profits tax, programs to improve efficiency, increase
margins in the value chain, and optimize costs. The issues of
human resources management, motivation systems, and KPIs
were considered.
Close attention was paid to the COVID-19 pandemic impact
on the Company’s business operations and safeguarding
employee occupational health, industrial safety, and environ-
mental protection.
In the reporting year, the tasks set were fulfilled. The key goals
were achieved despite the external constraints.
In 2020, fifteen (15) meetings of the Board of Directors were
held, including twelve (12) meetings in presentia and three (3)
meetings in absentia. Altogether, more than 90 issues were
considered. In-person meetings addressed issues related to
the Company’s strategy and corporate governance, the elec-
tion of the Chairman of the Board of Directors, authorization
of non-arm’s length transactions, decision-making in prepa-
rations for the Company’s annual and extraordinary general
meetings of shareholders, operational issues, and the invest-
ment program.
12 attendee meetings
3 absentee meetings
91
Number of Meetings held
Number of issues considered
Statistics on the number of issues considered by the Board
of Directors for 2018-2020
79
88
86
5
5
5
2018
2019
2020
in presentia
in absentia
148
Structure of main issues addressed by the Board of Directors in 2020
Corporate governance
Topics of issues
Corporate practice
Company Development Strategy
Investment activity
Audit
Issues related to
the approval of non-arm’s length transactions
Operations
SDGs, Climate, COVID-19
Staff
Internal documents
Finance
TOTAL
Number of issues
addressed
20
5
1
2
11
14
10
2
4
22
91
%
23
5,5
1
2,2
12,1
15,4
10
2,2
4,4
24,2
100
Key topics in the core business stream
addressed by the Board of Directors in 2020
Company strategic development. Strategy 2030
• On the implementation of the Exploration Strategy of PJSC
• On the progress of modernization of the Nizhnekamsk
TATNEFT n.a. V. D. Shashin.
CHPP.
• On the deployment of IT technologies, the IT strategy
implementation results.
• On the TATNEFT Group strategy for compliance with the
standards of the management system in health, safety and
environment ISO 14001: 2015 and ISO 45001: 2018.
Production operations
• On the dynamics of demand and measures to restore the
income of wholesale and retail sales of oil and petroleum
products.
• About the current work in relation to the non-core assets of
the TATNEFT Group.Forecast performance indicators of the
Exploration and Production business stream for 2020.
• On the 2020 exploration program performance across
• The 2019 performance results of the TATNEFT Group’s
PJSC TATNEFT n.a. V. D. Shashin.
companies.
• On the status of project implementation in the Republics of
Sustainabile development
Turkmenistan, Uzbekistan, and Kazakhstan.
• Implementation of the Sustainable Development Goals
• On the implementation of projects for the development
(support) of industrial small businesses, projects for
the creation of the SEZ “ALMA” and the industrial park
“Alabuga-2. Petrochemicals”.
• On the development of the Domanik and Bitumen projects
of PJSC TATNEFT n.a. V. D. Shashin.
• On measures to cut the production of hydrocarbons of the
TATNEFT Group according to the production quotas under
OPEC+agreement.
• On the implementation of the petrochemical complex
development project, 2021 plans and forecasts.
• On external challenges and risks, trends and drivers
affecting the business of the TATNEFT Group.
under the UN Global Compact in the day-to-day operations
of PJSC TATNEFT n.a.V. D. Shashin.
• On the TATNEFT Group’s actions to work with the staff in the
climate change control (UN SDG, Goal 13).
• Key findings from the effects of the COVID-19 pandemic.
On the planned measures to prevent strategic, opera-
tional and managerial risks associated with the spread of
coronavirus infection and ensure the production process’s
continuity.
• On the implementation of the Sustainable Development
Goal “Clean Water and Sanitation” (UN SDG, Goal 6).
149
Annual Report 2020 • Taking urgent measures to combat climate change and its
Audit
consequences.
• Protecting and restoring terrestrial ecosystems and
promoting their sustainable use, sustainable forest man-
agement, combating desertification, halting and reversing
land degradation, and halting biodiversity loss (UN SDG
Goal 15)
• Ensure healthy lives and promote well-being for all at all
ages (UN SDG Goal 3).
• Ensure inclusive and equitable quality education and
promote lifelong learning opportunities for all (UN SDG
Goal 4).
Investment and financial activities
• On the implementation of the investment program for 2019.
• 2019 Budget performance report
• Information on the status of accounts receivable and
accounts payable of PJSC TATNEFT n.a. V. D. Shashin for
2019
• The PJSC TATNEFT financial and operating performance
for the first quarter, the first six months, and the nine
months of 2020.
• The report of the Revision Commission on the audit of
the 2019 financial and business operations of the PJSC
TATNEFT n.a. V.D. Shashin.
• The 2019 summary report of the Board of Directors, the
annual report, the annual accounting (financial) state-
ments, including the appropriation of retained earnings of
PJSC TATNEFT n.a. V.D.Shashin.
• Approval of the 2020 budget by month.
• The 2020 financial and operating forecasts.
• The 2019 TATNEFT Group’s consolidated financial state-
ments prepared as per IFRS and the auditor’s report on the
financials and business operations audit performed by the
Joint Stock Company PricewaterhouseCoopers Audit.
• On the results of the operations of the Internal Audit
Department for 2019. Internal audit project plan and time
budget of the Internal Audit Department for 2020.
Health, safety, and the environment with consider-
ations to the climate change and carbon footprint
reduction
• On the performance of the Exploration and Production
Business Stream of PJSC TATNEFT n.a. V. D. Shashin for
2019, taking into account the improved working processes
to ensure environmental friendliness and sustainability.
• The roadmap for the work program of the Health, Safety,
and Environment Policy with considerations to the climate
change.
The decisions of the Board of Directors can be found on the
Company’s website www.tatneft.ru
In the reporting year, the Board of Directors approved
new versions of internal documents of PJSC TATNEFT:
1. Risk Management and Internal Control Policies of PJSC
TATNEFT n.a. V. D. Shashin.
2. The PJSC TATNEFT n.a. V. D. Shashin Branch in
Turkmenistan:
3. The TATNEFT Group Regulation
4. Regulations on the procedure for corporate engagement
of PJSC TATNEFT n. a. V. D. Shashin with controlled and
affiliated organizations
The Board of Directors has ongoing interaction with the Company’s executive
bodies and the Committees of the Board of Directors on all key management
issues, including audit, evaluation of the activities of the members of the Board of
Directors, human resources development, the KPI system, aspects of sustainable
development, and others.
Corporate governance
The 2020 Board of Directors’ work plans
The Board of Directors approves the work plan with the
agenda for every half-year period. The plan of matters under
consideration is drafted based on the proposals of members
of the Board of Directors, executive bodies, and top
management. The work plan Including at all times as follows:
• oversight of the implementation of the Strategy and
success in achieving targets;
• review of the Company’s plans and results of financial and
business activities;
• evaluating performance of the Board of Directors;
• preparation for and holding General meetings of sharehold-
ers, etc.
The key issues of the Board of Directors’ work plan for
the first half of 2021 include as follows:
• The results of the operations of the Internal Audit
Department for 2020. Internal audit project plan and time
budget of the Internal Audit Department for 2020.
• The progress of the organizational structure reform/im-
provement of the governance structure.
• Ensuring universal access to affordable, reliable, sustain-
able, and modern energy for all (SDG 7).
• Building resilient infrastructure, promoting inclusive and
sustainable industrialization, and fostering innovation (SDG
9).
• Implementation of the investment program for 2020.
• Measures to prevent the spread and mitigate the conse-
quences of the COVID-19 pandemic.
• Activities of the oilfield service companies amid low oil
prices (drilling, workover, construction of pipelines, etc.)
and the actions of PJSC TATNEFT to reduce the risks of
economic and social challenges within the regions where it
operates.
• Making cities and human settlements inclusive, safe,
production patterns (SDG 12).
• The recommendation to the General Annual Meeting of
Shareholders of PJSC TATNEFT of an audit firm to conduct
an audit of PJSC TATNEFT’s financial statements under
IFRS and RAS for 2020.The 2020 financial and business
results of the TATNEFT Group.On the status of the develop-
ment of projects outside the Russian Federation.
• Strengthening the means of implementation and revitalizing
the global partnership for sustainable development (SDG
17).
• The 2020 TATNEFT Group’s consolidated financial state-
ments prepared as per IFRS and the auditor’s report on the
financials and business operations audit performed by the
Joint Stock Company PricewaterhouseCoopers Audit.
• Dividends for 2020 based on the operating performance
results.
• The results of the internal assessment (self-assessment)
of the quality of work of the Board of Directors and its
committees.
• Plans for the production of high-viscosity and ultra-viscous
oil in the new tax regimes. Cost optimization and technical
optimization measures.
• The IT strategy of the TATNEFT Group until 2025 and
the progress of digitalization. The report of the Revision
Commission on the audit of the 2020 financial and busi-
ness operations of the PJSC TATNEFT n.a. V.D. Shashin.
• The key priorities for the work of the committees of the
Board of Directors of PJSC TATNEFT n.a. V. D. Shashin.The
2020 summary report of the Board of Directors, the annual
report, the annual accounting (financial) statements,
including the appropriation of retained earnings of PJSC
TATNEFT n.a. V.D.Shashin.
• On the progress of risk management processes (organi-
zational changes, policies, and regulations, work plan for
2021).
resilient and sustainable (SDG 11).
• The results of the measures taken to increase cash flow
• The annual meeting of shareholders of PJSC TATNEFT
through working capital management.
named after V. D. Shashin.
• Measures to optimize costs across the entire value chain to
• The TATNEFT Group’s environmental program for
2021-2025.
- Prevention and fight against corruption in PJSC TATNEFT
n.a. V. D. Shashin.
• The implemented social policy of PJSC TATNEFT n.a. V. D.
Shashin (social priorities, Charitable Foundation).
• Ensuring the transition to sustainable consumption and
minimize revenue loss implications
• The formation of Committees of the PJSC TATNEFT’s Board
of Directors.
• Other issues.
150
151
Annual Report 2020 Committees of the Board of Directors
Audit committee
Corporate governance
Board of Directors’ committee
membership sizes
The Committee makes recommendations with regard to veri-
fying the completeness, accuracy and fairness of accounting
(financial) statements and other reporting, the reliability and
effectiveness of the internal control and risk management
system, and the independence and objectivity of internal and
external audit functions.
It is a permanent committee.
In order to improve the effectiveness and efficiency
of the decisions taken by the Board of Directors, the
Board of Directors operates three committees in the
Company, which preliminary review the most import-
ant issues on the agenda of the Board of Directors and
prepare appropriate recommendations within their
competence:
• Audit Committee
• Human Resources and Remuneration Committee
• Corporate Governance Committee
The activities of the committees are governed by the
relevant regulations approved by the PJSC TATNEFT
Board of Directors:
• Regulations on the Audit Committee of the Board of
Directors of PJSC TATNEFT n.a. V. D. Shashin
7
• Regulations on the HR and Remuneration Committee of
the Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
• Regulations on the Corporate Governance Committee of
the Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
The committees are fully accountable to the Board of
Directors in their activities. The members of the committees
are approved by the Board of Directors, taking into account
the relevant knowledge and skills, and professional back-
ground of each candidate for committee membership. The
Company provides the Board of Directors with the details of
each candidate’s background, expertise, knowledge, and
skills for a particular committee.
4
4
Audit Committee
Human Resources and Remuneration Committee
Corporate Governance Committee
The Audit Committee and the Human Resources and Remuneration Committee have
a significant membership of independent directors.
Committee members
LEVIN Yuri Lvovich (Chairman)
Independent Director
Member of the Board of Directors of PJSC TATNEFT
Managing Partner of BVM Capital Partners Ltd
Member of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
GERECH Laslo
Independent Director
Member of the Board of Directors of PJSC TATNEFT
Managing Director of G Petroconsultind Ltd
Member of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
STEINER Rene Frederick
Independent Director
The Audit Committee of the Board of Directors of PJSC
TATNEFT consists of three independent directors. Chairman
of the Committee Yu. L. Levin has relevant knowledge and
skills in preparing, analyzing, evaluating, and auditing ac-
counting (financial) statements.
In addition to independent directors, the Audit Committee
includes R. R. Gaizatullin - Minister of Finance of the Republic
of Tatarstan, a member of the Board of Directors with finan-
cial and audit expertise beneficial for the activities of the
Committee.
The members of the Committee have the appropriate knowl-
edge and skills in solving the tasks of the Committee.
Basic functions
• Overseeing the completeness, accuracy, and reliability of
the accounting (financial) statements of PJSC TATNEFT,
including the preparation of the consolidated financial
statements of the TATNEFT Group with the integration of
the financial statements of Bank Zenit.
• Coordination of the work of the external auditors and the
Internal Audit Office and regular review of their reports.
• Organization of an independent assessment of the
performance of the internal audit function and making
suggestions for improving the work of the internal audit
department.
• Verification of the external auditor’s independence.
Member of the Board of Directors of PJSC TATNEFT
• Review and analyze the quarterly, six-month, and annual
Head of Private Equity Programs at FIDES Business
Partner AG.
Chairman of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
GAIZATULLIN Radik Raufovich
Independent Director
Member of the Board of Directors of PJSC TATNEFT
Minister of Finance of the Republic of Tatarstan
financial statements of PJSC TATNEFT, including the audits
by its external auditor.
• Evaluation of candidates for auditors and submission of
recommendations to the Board of Directors on the election
of independent auditors of the PJSC TATNEFT financial
statements under IFRS and RAS.
• Assistance to the Board of Directors in exercising oversight
of the operation of the internal control and risk manage-
ment systems of PJSC TATNEFT.
• Preliminary consideration of non-arm’s length transactions.
There were no changes in the composition
of the Audit Committee during the corporate
year.
There were eight (8) Audit Committee’s meetings held,
including one (1) meeting in person and seven (7) in absentia
with 46 issues considered.
The audit committee activities in 2020
152
153
Annual Report 2020 Statistics on the Board of Directors’
Audit Committee meetings and the issues
addressed for 2018-2020
Ratio of in-presentia and in-absentia
Committee meetings in 2020
46
48
46
1
7
Corporate governance
Human resources and remuneration
committee
The Committee combines duties in terms of performing functions on human resources (nominations) and functions
on remuneration.
The Committee puts together recommendations to the Board
of Directors on the effectiveness of the human resources
policy, the system of nominations and remuneration, the
evaluation of candidates for the membership to the Board of
Directors and the company’s management, the compliance of
independent directors with the independence criteria, as well
as the effectiveness and efficiency of the Board of Directors,
executive bodies and top managers of the Company.
7
7
8
2018
2019
2020
Number of issues
addressed
Number of meetings
in-presentia meetings
in-absentia meetings
Independent Director
Committee members
STEINER Rene Frederick (Chairman)
Main issues considered by the committee for 2018-2020
Subject matter
Review of financial statements with the participation of external auditors
Issues related to the election of external auditors and confirmation of the external auditors’
independence
Issues related to the work of the Internal Audit Department
Issues related to the preliminary review of non-arm’s length transactions
Review of the MSCI report on accounting and corporate governance risks
Issues related to the disclosures on the PJSC TATNEFT financial position in the 2019 Annual Report
On the assessment of the current state of the PJSC TATNEFT corporate governance
Issues related the Company’s sustainable development
Other
Number of
issues 2018
Number of
issues 2019
Number of
issues 2020
14
3
15
4
-
-
-
-
10
10
4
14
3
1
1
1
-
14
11
3
13
3
-
1
1
3
11
The audit committee meeting attendance*
Date of the event
LEVIN Yuri Lvovich
GERECS Laszlo
STEINER Rene Frederick
GAIZATULLIN Radik Raufovich
30.01 In
presentia
23.03 in
absentia
20.04 in
absentia
22.05 in
absentia
29.06 in
absentia
21.07 in
absentia
23.09 in
absentia
24.11 in
absentia
Total
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
V
8/8
8/8
8/8
8/8
* In 2020, the Audit Committee meetings were held mainly in absentia due to the quarantine restrictions imposed to prevent the
spread of the coronavirus infection. All Audit Committee members participated in the meetings or sent a written opinion on the
meeting’s agenda items.
154
Member of the Board of Directors of PJSC TATNEFT
Head of Private Equity Programs at FIDES Business
Partner AG.
The Audit Committee Member of the Board of Directors of
PJSC TATNEFT
GERECS Laszlo
Independent Director
The Audit Committee of the Board of Directors of PJSC
TATNEFT consists of three independent directors.
The Chairman of the Committee is independent director
Rene Frederick Steiner. Since the Committee combines the
Remuneration and Nominations Committee tasks (appoint-
ments, human resources), the Board of Directors decided to
enlarge the Committee’s membership, including an addi-
tional non-executive director (R. K. Sabirov). All Committee
members have the appropriate knowledge, competence, and
skills in solving the Committee’s tasks.
There were no changes in the composition
of the Audit Committee during the
corporate year.
Basic functions of committee
Member of the Board of Directors of PJSC TATNEFT
Performing functions for human resources (nominations):
Managing Director of G Petroconsultind Ltd
The Audit Committee Member of the Board of Directors of
PJSC TATNEFT
• Assessment of the composition of the Board of Directors in
terms of professional qualifications, experience, indepen-
dence of its members, participation in the work;
LEVIN Yuri Lvovich
Independent Director
Member of the Board of Directors of PJSC TATNEFT
Managing Partner of BVM Capital Partners Ltd
Chairman of the Audit Committee of the Board of Directors
of PJSC TATNEFT
SABIROV Rinat Kasimovich
Non-Executive Director
Member of the Board of Directors of PJSC TATNEFT
General Director of Gazprom Mezhregiongaz Kazan JSC
(since July 2020)
Member of the Corporate Governance Committee of the
Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
• Identifying priority areas for strengthening the Board of
Directors’ membership;
• Engagement with all groups of shareholders in the selec-
tion of candidates to the Board of Directors;
• Analysis of professional qualifications and independence
of candidates proposed by shareholders to the Board of
Directors, etc.
Performing of remuneration functions:
• Development and periodic review of the Company’s policy
on remuneration of the Board of Directors members,
executive bodies, and other key management personnel,
including the development of the parameters of the
program for short-and long-term motivation of members of
executive bodies;
• Overseeing the adoption and implementation of the
Company’s remuneration policy and incentive programs;
• Preliminary assessment of the work of the Company’s
executive bodies and other key management personnel at
the year-end and assessing the achievement of the goals
set as part of the motivation program, etc.
155
Annual Report 2020 Activities of the HR and Remuneration Committee in the reporting year
The Committee’s key priorities are as follows:
• improving the effectiveness of the Company’s development
management by drawing out well-informed recommen-
dations to the Board of Directors regarding the personnel
policy, succession policy, the system of appointments and
remuneration of the Company, assessment of the perfor-
mance of the Board of Directors, executive bodies and
other top managers of the Company;
• development and oversight of the implementation of the
Company’s HR policy concerning senior management.
One absentee meeting of the HR and Remuneration
Committee was held in 2020
Main issues considered by the Corporate Governance Committee in 2020
Subject matter
Number of issues
Strategic development of the functional direction of the Personnel Management of the TATNEFT Group
Implementation of the satisfaction assessment system in PJSC TATNEFT
Updated information on the progress of projects in key functional areas
Approval of the Committee meeting schedule and the work plan for 2020
COVID-19: assessment/review of the experience of the last 4 months of the TATNEFT Group
1
1
1
1
1
Statistics on the Board of Directors’ HR and
Remuneration Committee meetings and the
issues addressed for 2018-2020
9
5
5
3
2
1
2018
2019
2020
Number of issues
addressed
Number of meetings
The HR and Remuneration Committee
meeting attendance*
Date of the event
05.11.2020
Total/attendance
STEINER Rene Frederick
SABIROV Rinat Kasimovich
LEVIN Yuri Lvovich
GERECS Laszlo
V
V
V
V
1/1
1/1
1/1
1/1
* The Audit Committee meetings were held in 2020, mainly
in absentia due to the quarantine restrictions imposed to
prevent the spread of the coronavirus infection. All HR and
Remuneration Committee members participated in the
meetings or sent a written opinion on the meeting’s agenda
items.
Corporate governance
Corporate Governance Committee
The Committee assists the Board of Directors in developing
and improving the corporate governance system and practice
across the Company by prior reviewing the corporate gover-
nance issues that fall within the competence of the Board of
Directors, regulating relationships between shareholders, the
Board of Directors and Executive bodies of the Company, as
well as the issues of interaction with legal entities controlled
by the Company and other stakeholders. It is a permanent
committee.
Committee members
MAGANOV Nail Ulfatovich (Chairman)
General Director
Member of the Board of Directors of PJSC TATNEFT
Chairman of the Management Board of PJSC TATNEFT
In 2020, there were changes in the
membership of the Committee as follows:
• the powers of the members of the Management
board were terminated
VALEEVA Nuriya Zufarovna (Minutes of the Board of Directors
No. 2 of 29.06.2020);
Evgeny Tikhturov (Minutes of the Board of Directors No. 10 of
28.02.2020);
• a new member was elected to the Committee:
ALPAROVA Aigul Minkharisovna (Minutes of the Board of
Directors No. 2 of 29.06.2020).
Members of the Committee have relevant knowledge
and skills and expertise in the corporate law, require-
ments of stock market regulators to issuers of the
securities market, international standards of corporate
governance, socially responsible investment, ESG
practices, and Sustainable Development Goals of the
UN Global Compact.
SYUBAEV Nurislam Zinatulovich
ALPAROVA Aigul Minkharisovna
Deputy General Director for Strategic Development of
PJSC TATNEFT
Head of Technical and Economic Information and
Dissemination of Best Practices of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Management Board of PJSC TATNEFT
SABIROV Rinat Kasimovich
MOZGOVOY Vasily Alexandrovich
Member of the Board of Directors of PJSC TATNEFT
Member of the HR and Remuneration Committee of the
Board of Directors of PJSC TATNEFT
PJSC TATNEFT Corporate Finance Assistant to the General
Director
GAMIROV Damir Maratovich
DORPEKO Natalia Yevgenevna
Acting Corporate Secretary
Deputy Head of the Corporate Secretary’s Office of PJSC
TATNEFT
Corporate Consultant to the General Director of PJSC
TATNEFT
156
157
Annual Report 2020 Basic functions of committee
Preparation of recommendations to the Board of
Directors regarding corporate practice issues:
Statistics on the Board of Directors’
corporate governance committee meetings
and the issues addressed for 2018-2020.
• Securities Policy;
• Dividend policy;
• Convocation, preparation, and holding of annual and
extraordinary general meetings of shareholders;
• Amendments to the Articles of Association and other
internal documents of the Company to be approved within
the competence of the General Meeting of Shareholders
and the Board of Directors;
• Analysis and evaluation of the implementation of the
Company’s policy in conflict of interest management;
• Monitoring the reliability and effectiveness of the risk
management and internal control system, etc.
Corporate governance committee
In 2020, the Committee held one meeting.
15
13
2
2
8
1
Corporate governance
Performance assessment of the Board of
Directors and its committees
The Company has a practice in place to assess the perfor-
mance of the Board of Directors, its members and commit-
tees as a whole. It is a regular assessment carried out at least
once a year using a self-assessment procedure.
The assessment is carried out by fifty (50) criteria in five (5)
key components: competence and powers of the Board of
Directors; composition of the Board of Directors; committees
of the Board of Directors; the procedures of the Board of
Directors; the annual general meeting of shareholders.
The assessment technique uses a polling survey of the
Board of Directors members about their activities during
their tenure of office as members of the Board of Directors of
PJSC TATNEFT since their election in the corporate reporting
year. The survey 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 the official
requirements for issuers and are used by the Central Bank of
Russia, the Moscow Exchange, and professional experts).
2018
2019
2020
Distribution of average scores by key components
Number of issues
addressed
Number of meetings
Main issues considered by the corporate governance committee in 2020
Subject matter
Amendments to the Company’s internal documents
The procedure for self-assessment of the members of the Board of Directors
Changes in the current legislation and current corporate governance practices governing the Company’s activities related to the
corporate law
The main trends of investors’ interests in ESG, carbon footprint, climate impact and their disclosure in the Company’s financial
statements
Development of the governance system of controlled companies
Compliance of corporate practices with the Bank of Russia’s Corporate Governance Code and international standards
Preparation for the general meeting of shareholders
Number of issues
2
1
1
1
1
1
1
The corporate governance committee meeting attendance*
Criterion description
Competences and powers of the Board of Directors
Composition of the Board of Directors
Committees of the Board of Directors
Work procedure of the Board of Directors
Annual General Meeting of Shareholders
Assessments analysis (explanation)
2018
4,24
4,30
3,98
4,20
4,41
2019
4,17
4,21
4,00
4,24
4,54
2020
4,38
4,41
4,33
4,35
4,65
In 2020, the Board of Directors ‘ self-assessment was con-
ducted for the reporting corporate year. The self-assessment
results and its analysis were reviewed at an in-person meet-
ing of the Board of Directors. (Minutes No. 12 of 24.04.2019).
Based on the self-assessment results, a positive conclusion
was made regarding the work performance of the Board
of Directors in the reporting corporate year. At the same
time, the Board of Directors’ self-assessment process
reflects the opinion on further improvement of the Board
of Directors’ working mechanisms and development of the
corporate practices. The summarized comments on the
Board of Directors’ activities were submitted to the Corporate
Governance Committee and the HR and Remuneration
Committee.
Date of the event
MAGANOV Nail Ulfatovich
GAMIROV Damir Maratovich
ALPAROVA Aigul Minkharasovna
DORPECO Natalia Evgenievna
MOZGOVOI Vasily Alexandrovich
SABIROV Rinat Kasimovich
SYUBAEV Nurislam Zinatulovich
158
10.04.2020
Total/attendance
The self-assessment includes 50 criteria for five (5) key components
of corporate governance practice
V
V
V
V
V
V
V
1/1
1/1
1/1
1/1
1/1
1/1
1/1
The work quality assessment of the Board of Directors is intended to evaluate the effectiveness
of the Board of Directors, its committees and members, the alignment of their services with the
company’s development needs, and promote the Board of Directors’ better performance and
identify potential improvement areas.
159
Annual Report 2020 Sole executive body
General Director
The PJSC TATNEFT operations are run under the leadership
of the General Director who acts as the sole executive body.
The General Director serves as the Chairman of the PJSC
TATNEFT Management Board.
The General Director serves his duties under the guidance of
the current legislation, the Articles of Association of the PJSC
TATNEFT and the Regulations on the General Director of
PJSC TATNEFT, and the Company’s internal documents and
resolutions of the General Meeting of shareholders and the
Board of Directors of the Company.
The General Director is appointed by the Company’s Board
of Directors. The General Director is accountable to the
Company’s Board of Directors and the Shareholders’
Meeting.
MAGANOV Nail Ulfatovich
General Director
Corporate governance
Management board
The Management Board is a collegial executive body that is in charge of the day-to-day management of the TATNEFT
Company, development, and implementation of the overall development strategy of the Company’s subsidiaries.
Executive bodies governing day-to-day operation of
the company within the competence as defined by
the articles of association of TATNEFT
Since November 2013, the General Director of TATNEFT has been Nail Ulfatovich
Maganov.
General Director
Sole Executive Body
Management Board
Collegial Executive Body
• capital construction;
• economics and finance;
• social development;
• engagement with Federal authorities of the Russian
Federation, ministries, representative offices of foreign
countries and companies;
• representation and upholding of interests in the Federal
Executive Bodies of the Republic of Tatarstan, legislative
and executive authorities, institutions, organizations and
enterprises of the Republic of Tatarstan.
The Deputy General Directors of PJSC TATNEFT manage
the work and bear responsibility for the relevant business
streams of the Company with regard to the strategic and long
term planning, fulfilment of technical and economic targets,
the effective and efficient use of fixed assets, raw materials,
fuel and power, and other resources, production engineering
and workplace management, occupational health and safety
and other business areas of the Company. The duties and
responsibilities are shared between the General Director
and Deputy General Directors under the Company’s internal
organizational and administrative documents.
The General Director is in charge of the Company’s day-to-
day operations, determines the Company’s organizational
structure, oversees the soundness of the Company’s assets
and their practical use, addresses corporate matters related
to the management of the Company’s business structure, the
health, safety, and environmental protection, the develop-
ment of human resources and social guarantees for employ-
ees, as well as the sustainable development and corporate
responsibility.
Per the Regulations, the General Director has the right to
entrust certain matters to the charge of his deputies.
The Company’s organizational and administrative documents
delineate the duties and responsibilities between the General
Director and the Deputy General Directors in terms of orga-
nizing the work in the following areas:
• strategic development;
• core business activities: oil and gas production, geological
exploration, creation of engineering and design base for
the development of oil and gas fields;
• geological prospecting and exploration, and management
of external oil and gas projects;
• workover and drilling, and enhanced oil recovery;
• power generation, mechanics, logistics and transport,
corporate engineering policy;
• telecommunications, information infrastructure, information
security;
• fire prevention, industrial and environmental safety,
occupational health and nature protection;
The Management Board operates under the current legisla-
tion, the Articles of Association of PJSC TATNEFT n. a. V. D.
Shashin and the Regulations on the Management Board of
PJSC TATNEFT n.a. V. D. Shashin and other internal docu-
ments of the Company.
The procedure for forming the Management Board, the
rights, duties and responsibilities of the Management Board
members, and the Management Board operating regula-
tions are established by the Regulations on the Management
Board of PJSC TATNEFT n.a. V. D. Shashin. The contracts
also determine the rights and duties of the Management
Board members entered into on behalf of the Company by
the Chairman of the Board of Directors with each member of
the Management Board.
The Management Board consists of senior managers of the
Company who have the necessary professional background
and managerial experience in the Company’s activities.
The Management Board meetings are held in accordance
with the work plan thereof.
The size of the Management Board is determined by the
Board of Directors.
In 2020, there were the following changes in the Management Board’s
membership:
The powers of the members of the Management Board were terminated
TIKHTUROV Yevgeny Alexandrovich and
IBRAGIMOV Nail Gabdulbarievich (Minutes of the Board of Directors No. 10 of 28.02.2020)
160
161
Annual Report 2020 The Management Board
composition in 2020
Corporate governance
MAGANOV Nail Ulfatovich
GLAZKOV Nikolai Mikhailovich
MUKHAMADEEV Rustam Nabiullovich
SYUBAEV Nurislam Zinatulovich
General Director of PJSC TATNEFT
Chairman of the Management Board of PJSC TATNEFT
Chairman of the Management Board of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Member of the Board of Directors of PJSC TATNEFT
Chairman of the Management Board of PJSC TATNEFT
Deputy General Director for Capital Construction
of PJSC TATNEFT
Deputy General Director for Social Development
of PJSC TATNEFT
Regulations on the Corporate Governance Committee of
the Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
Chairman of the Management Board of PJSC TATNEFT
Deputy General Director for Strategic Development of
PJSC TATNEFT
Member of the Corporate Governance Committee of the
Board of Directors of PJSC TATNEFT n.a. V. D. Shashin
• Born in 1958
• Born in 1960
• Born in 1952
• Born in 1960
• 1983 – graduated from Moscow Institute of Petrochemical and Gas Industry
• 1988 – graduated from Kazan Institute of Engineering and Construction
• 1977 - graduated from Moscow Institute of Petrochemical and Gas Industry
• 1982- graduated from Moscow Institute of National Economy n.a. G.V.
n.a. Ivan Gubkin
• July 2000-November 2013 – First Deputy General Director - Head of Crude
Oil and Petroleum Product Sales Department of OJSC TATNEFT
• November 2013 - present - General Director of PJSC TATNEFT
• 2008-2010 – Head of the Capital Construction Department of OJSC TATNEFT
• 2010-Present – Deputy General Director for Capital Construction of PJSC
TATNEFT
Participation in the governing bodies of other entities:
• Chairman of the Board of Directors of PJSC Bank ZENIT
• Chairman of the Board of Directors of INCO-TEK LLC
• Chairman of the Board of the TATNEFT Charitable Foundation
• Deputy Chairman of the Supervisory Board of the Ak Bars Hockey Academy
n. a. Yu. I. Moiseev
• Member of the Board of Directors of LLC SCE Tatneft-Ak Bars
• Member of the Board of Directors of PJSC Nizhnekamskneftekhim
• Member of the Board of Directors of JSC Tatneftekhiminvest-Holding
• Member of the Board of Directors of Svyazinvestneftekhim JSC
• Member of the Board of Directors of Kontinental Hockey League, LLC
• Member of the Board of Directors of Tatneft Oil AG
• Chairman of the Board of Directors of TNA-Services NV
• Member of the Board of Directors of TAL OIL Ltd
n.a. Ivan Gubkin
Plekhanov
• 2001-04.12.2017 – Deputy General Director for Human Resources and Social
• 2001-17.06.2016 – Head of the Strategic Planning Department - Adviser to
Development of PJSC TATNEFT
the General Director for Foreign Economic Activity and Financial and Banking
• 04.12.2017-31.01.2020 – Deputy General Director for General Issues of PJSC
Issues
TATNEFT
• 18.07.2016-Present – Deputy General Director for Strategic Development,
• 01.02.2020-Present – Deputy General Director for Social Development of
PJSC TATNEFT
PJSC TATNEFT
Participation in the governing bodies of other entities:
Participation in the governing bodies of other entities:
• Member of the Board of Directors of IC Chulpan JSC
• Chairman of the Board of Directors of Plant Elastic LLC
• Member of the Management Board of Tatneft-School Private Educational
• Chairman of the Board of Directors of IDELOIL JSC
Institution
• Member of the Board of Directors of Kara-Altyn Enterprise CJSC
• Member of the Management Board of the OJSC Tatneft Almetyevsk Medical
• Member of the Board of Directors of URS-Trading House LLC
Facility
• Member of the Board of Directors of Carbon-Oil LLC
• Member of the Board of Directors of JSC Aznakaevsky Plant Neftemash
• Member of the Board of Directors of Blagodarov-Oil LLC
• Chairman of the Board of Directors of PJSC Bank ZENIT
• Chairman of the Trustee Board of National Non-State Pension Fund JSC
• Member of the Board of Directors of P-D - Tatneft-Alabuga Steklovolokno LLC
• Member of the Supervisory Board of Tatneft International Cooperatie U.A.
(Netherlands)
• Member of the Board of the self-regulatory organization National Association of
Non-State
• Pension Funds
• Member of the Board of Directors of PJSC Joint-Stock Commercial Bank AK
BARS
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
Equity stake in the
Company %
Person’s ordinary share ownership
in the Company %
0,000176
none
none
none
0,004204
0,004264
none
none
162
163
Annual Report 2020 Management Board tenure
MAGANOV Nail Ulfatovich
22 years
GLAZKOV Nikolai Mikhailovich
9 years
MUKHAMADEEV Rustam Nabiullovich
19 years
SYUBAEV Nurislam Zinatulovich
7 years
Length of service on the Management Board
Age profile of the Management Board
Corporate governance
Activities of the Management Board
In 2020, the Management Board continued delivering on the Company’s Development Strategy following the
Board of Directors’ decisions.
Statistics on Management Board meetings for 2018-2020
56
1 member
One to seven years
1 member
66 +
22
12
28
33
14
3 members
Over seven years
3 members
56-65 y.o.
Management Board meeting attendance in 2020
Structure of issues reviewed by Management Board in 2020
2018
2019
2020
Number of issues addressed
Number of meetings
Date of the event
27.
01
25.
02
25.
02
18.
03
26.
05
01.
06
04.
08
24.
08
26.
08
02.
11
24.
11
24.
11
11.
12
25.
12
Total/
attendance
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
v
14/14
14/14
14/14
14/14
MAGANOV
Nail
Ulfatovich
GLAZKOV
Nikolai Mikhailovich
MUKHAMADEEV
Rustam Nabiullovich
SYUBAEV
Nurislam Zinatulovich
* extraordinary
164
Direction
Corporate matters
Strategy
Budget
Production operations
Local acts
Social issues
Fulfilment of business blocks and KPIs
Sustainable Development Goals
Total
Number
of issues
addressed
6
6
3
12
1
2
1
2
33
%
18, 2%
18, 2 %
9 %
36, 4 %
3, 1%
6 %
3, 1%
6 %
100
165
Annual Report 2020 Remuneration of members of
governing bodies
The Board of Directors sets the Company’s policy on remuneration and/or reimbursement of
costs (compensations) to the members of the Board of Directors, members of its executive
bodies, and other key managers of the Company.
Remuneration of the members of the executive bodies and
other key managers is determined in such a way as to provide
a reasonable and justified ratio between the fixed part of
the remuneration and the variable part of the remunera-
tion, which depends upon the performance results of the
Company and the personal (individual) employee’s contribu-
tion to the final result.
The Remuneration Committee consisting of independent
directors and headed by an independent director who is not
the Chairman of the Board of Directors has been set up for
preliminary review of issues related to establishing effective
and transparent remuneration practices.
When forming a remuneration system and determining the
specific amount of remuneration to the members of the
Company’s governing bodies, it is assumed that the amount
of the remuneration paid should be sufficient to engage, mo-
tivate and retain persons with the relevant professional back-
ground, knowledge, and skills required for the Company.
The remuneration system is based on the principles and
guidelines of the Corporate Governance Code in alignment
with the Company’s current practice of remuneration and
compensation accrual.
The company seeks to establish the remuneration for the
members of the Board of Directors based on the contribution
they make to the Company’s growth and development. An
adequate level of remuneration helps attract highly qualified
candidates and provides compensations for the time and
effort they spend to get prepared for and participate in the
meetings of the Board of Directors.
The system of the management staff
remuneration is formed in alignment with the
Company’s Strategic Goals 2030.
The Company’s management staff motivation policy is aimed
at creating a unified remuneration system with its variable
part linked to the key performance indicators that reflect the
success in achieving the Company’s strategic goals.
Remuneration of the PJSC TATNEFT
Board of Directors’ members
The remuneration is paid out to the members of the PJSC
TATNEFT Board of Directors under the Regulations on
payment of monetary remuneration to the members of the
Board of Directors and the Revision Commission of PJSC
TATNEFT.
The remuneration of the members of the Board of Directors
is made up of the fixed and variable parts. The fixed part
of remuneration is established by the Regulations and is
indexed concurrently with changes in tariffs and salaries of
employees of PJSC TATNEFT.
The variable part of the remuneration for the members
of the Board of Directors is formed depending on fulfill-
ment of the following key performance indicators:
• the year-on-year ratio of the Company’s capitalization;
• dividend costs to net profit ratio (year-on-year);
• amount of additional profitability versus basic profitability.
The amounts of remuneration to be paid to the mem-
bers of the Board of Directors is established by a
decision of the General Meeting of shareholders and
provides for, inter alia, as follows:
• remuneration for serving as a member of the Board of
Directors;
• remuneration for serving as the Chairman of the Committee
of the Board of Directors.
In 2020, the total remuneration paid out to the members of
the Company’s Board of Directors amounted to 289 565 673,
67 rubles, including the remuneration for participation in the
work of the Management Board, salaries, bonuses, and other
types of remuneration. Compensation to the members of
the Company’s Board of Directors amounted to 1 819 487,93
rubles.
Corporate governance
Remuneration of the Management Board
members
The payments are made to the Management Board mem-
bers under the basic terms of the concluded contracts for
the duties performed by a Management Board member, that
include, inter alia, putting decisions in practice made by the
General Meeting of shareholders and the Board of Directors,
participating in making plans for the Company growth and
development, improving efficiency and productivity of the
Company and some of its business units.
In 2020, the total remuneration paid out to the Company’s
Management Board members amounted to 150 873 308,
40 rubles, including the remuneration for participation in the
work of the Management Board, salaries, bonuses, and other
types of remuneration. Compensation to the members of the
Company’s Management Board amounted to 157 568, 00
rubles.
Information on the amount of Remuneration
and Compensation to the Board of Directors
members
Information on the amount of Remuneration
and Compensation to the the Management
Board members
Indicator
2020
Indicator
Remuneration for the service on the management
body
108 178 531,00
Remuneration for the service on the management
body
Salaries
Bonuses
Commissions
17 174 690,21
Salaries
162 607 545,79
Bonuses
0
Commissions
Other types of remuneration
1 604 906,67
Other types of remuneration
TOTAL
Compensations
289 565 673,67
TOTAL
1 819 487,93
Compensations
2020
3 379 382,00
19 851 081,74
117 922 584,12
0
9 720 260,54
150 873 308,40
157 568,00
Note: The amount of remuneration under the IFRS methodology is indicated in Note 26 “Related-party transactions” in the
consolidated financial statements prepared under international financial reporting standards and the independent auditor’s
report. For more information, please refer to the Annual Report, Annex 1.
166
167
Annual Report 2020 Corporate secretary
The main task of the Corporate Secretary is the efficient implementation of
the Corporate policy and organization of efficient communications among
the shareholders, management and control bodies and the Company itself.
The Corporate Secretary ensures the efficient interaction of
the members of the Board of Directors with the Company’s
shareholders and their representatives, with the executive
bodies of the Company, executives and employees of the
divisions of the Company, coordination of the Company’s
actions to protect the rights and interests of the shareholders,
conducting meetings and minutes of meetings of the Board
of Directors.
The Corporate Secretary reports to the Board of Directors, is
appointed and dismissed by the General Director based on
the decision of the Board of Directors.
The duties of the Corporate Secretary are assigned to
Damir Maratovich GAMIROV by the Decision of the Board of
Directors dated November 6, 2017.
GAMIROV Damir Maratovich
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 April 16, 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
Share in the authorized capital of the Company, %
Share of the Company’s ordinary shares owned by the person %
0, 000064
none
The Corporate Secretary enjoys appropriate level of indepen-
dence from the executive bodies of the Company and has
necessary powers and resources to perform his tasks.
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.
Corporate governance
• To participate in improving the system and practice of
corporate governance of the Company, formation of mech-
anisms and regulations of corporate practice, monitoring
their efficiency. To assess efficiency of the corporate gover-
nance system of the Company. To promote development
of the corporate governance system in the subsidiaries and
affiliates in the interests of TATNEFT Group.
Office of the corporate secretary
The scope of competence of the Corporate Secretary
Office includes maintaining an efficient 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 sharehold-
ers and other participants in corporate relations, ensuring the
Company’s interaction with a specialized registrar, deposito-
ries, with government bodies authorized to regulate corpo-
rate relations and the securities market as well as with other
participants of the securities market.
The Office of the Corporate Secretary ensures the organi-
zation 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.
Key functions of the corporate secretary
• To ensure the efficiency of the mechanisms for implemen-
tation by the Company, subsidiaries, and affiliates of the
corporate procedures related to the exercise of the rights
of shareholders and other participants of the Company’s
corporate relations.
• To ensure 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 docu-
ments of the Company.
• To ensure the work of committees of the Board of Directors
of the Company, coordination of their activities.
• To provide for interaction of the Company with the exchang-
es, registrar, depositories, government bodies supervising
corporate relations and securities market, and with other
professional participants of the securities market within the
scope of authorities vested in the Corporate secretary.
• To ensure compliance with the requirements for disclosure
of information, provision of documents and information
upon shareholders’ requests, efficiency control of corpo-
rate mechanisms for disclosure of information, and proper
storage of corporate documents of the Company.
• To compile a list of information classified as insider informa-
tion, work with insiders, control over insiders’ transactions
with securities of the Company.
• To ensure the Company’s interaction with its shareholders
and participate in preventing the corporate conflicts.
• To monitor the Company’s compliance with the require-
ments of corporate legislation, terms of internal documents
of the Company, and shareholders’ rights in the part
related to the competence of the Corporate Secretary,
take the necessary measures to eliminate such violations,
minimize the consequences of such violations.
• To prepare an annual report to the Board of Directors on
the status of corporate governance in the Company and its
development prospects.
• To monitor the Company’s compliance with the require-
ments of corporate legislation, terms of internal documents
of the Company, and shareholders’ rights in the part
related to the competence of the Corporate Secretary,
take the necessary measures to eliminate such violations,
minimize the consequences of such violations.
168
169
Annual Report 2020 Internal audit
The internal audit of the Company is aimed at assessing the
reliability of the Company’s business processes, provides for
identification of internal reserves to improve the efficiency
of the financial and economic activities of PJSC TATNEFT,
including the Group’s companies.
The internal audit is carried out in accordance with the plan
approved by the Board of Directors.
Control inspections
In 2020, as per the annual plan 9 audits were conducted,
following the results of which 151 activities were developed
and monitored. In addition, as instructed by the Company’s
management, the Internal Audit Department took part in
the unscheduled projects on various issues of financial and
economic activities.
The scope areas of internal audit in 2020:
Quality assessment of the internal audit function
• Information security, Data protection;
• Capital Construction and Repair of facilities of Exploration
and Production business area;
• Safekeeping of Property;
• Human Resources management: personnel comprehen-
sive assessment;
• Reservoir pressure maintenance;
• Sales of Tire products;
In the first quarter of 2021, Ernst & Young LLC - Assessment
& Advisory Services assessed the quality of the internal audit
function realized by the Company’s internal audit depart-
ment. Based on the results of the assessment carried out
in accordance with the requirements of the the External
Quality Assessment Manual for the Internal Audit Activity
of the Institute of internal auditors. The activities of the
Company’s internal audit department generally comply with
the International Professional Standards for Internal Audit of
the Institute of Internal Auditors and the Code of Ethics.
• Management of the retail network of fuel filling stations;
Independent Auditor
In order to independently assess the reliability of the account-
ing (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 the assessment carried out by the Audit Committee.
AO PricewaterhouseCoopers Audit was approved as an au-
ditor for compulsory audit of the annual financial accounting
statements for 2020 prepared in accordance with Russian
and International Accounting Standards by the decision of
the Annual General Meeting of Shareholders (Minutes No. 32
dated June 17, 2020).
• In-house production of Machinery business area;
• Organization of Interaction with External services
When preparing the annual plan, the proposals and risks
received as a result of the managers survey of the business
segments and divisions of the Company, the results of previ-
ous audits are taken into account.
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 prog-
ress of elimination of the identified deficiencies.
Internal Audit and Control Principles
Regulation on the Internal Audit Department of PJSC
TATNEFT was approved by the Board of Directors of PJSC
TATNEFT (Decision No. 3, Minutes No. 9 of January 29,
2016). The internal audit function is isolated by the nature of
its activities, it has the necessary independence status. The
internal audit, together with the Board of Directors of PJSC
TATNEFT and the Executive Management of the Company, is
involved in improving the system of internal control and risk
management.
170
171
Annual Report 2020 Control inspections of the internal audit
Audited Item
Subject of Audit
Key Recommendations
Information security,
Data protection
Checking the availability and
compliance with information
security requirements.
Information security risk
management.
Access control and
protection of corporate and
personal data.
Capital Construction
and Repair of facilities
of Exploration &
Production business
area
Design (cost, quality,
expertise).
Formation of the budget
of capital construction
projects and control of their
development.
Formation and control
of compliance with work
schedules.
Develop a target information security model and a roadmap for
the systematic implementation of information security measures.
Rank information systems based on the impact of risks (loss,
distortion or disclosure of data) on the business continuity of the
Company.
Process and store critical data on the resources of your own data
center.
For specialized data, use systems based on industrial data
management systems.
Update the requirements and regulations for data backup.
To update the requirements and regulations for the provision and
termination of access to information resources.
The effect of eliminating these shortcomings may amount to RUB
250-300 million.
Develop a responsibility matrix for the capital construction and
overhaul process.
Appoint managers for the largest construction projects.
When managing construction projects, apply a project-based
approach.
Establish KPIs for meeting deadlines for key milestones in
construction projects.
The start of construction projects is carried out only with the
availability of design and permits.
Sign detailed work schedules at the time of conclusion of
contract agreements. Formalize changes in work schedules in
the form of additional agreements to the contract.
Periodically provide a brief information on the implementation of
work schedules to the company’s management.
Introduce a system for evaluating (rating) construction
contractors. If necessary, develop automated management
systems.
The effect of eliminating deficiencies can be up to RUB 200-300
million.
Safekeeping of
Property
Assessment of the quality
of the inventory of the
company’s property.
Checking the availability
of a mandatory transfer of
property when changing
materially responsible
persons (hereinafter - MOL).
Existence of justification
when writing off fixed assets
(hereinafter - OS).
Conduct unscheduled inventories of property that is not assigned
to the MOL
Determine and formalize the limit for assigning property to one
MOL.
Conduct an internal audit on significant shortages, on the fact of
the dismissal of the MOL without transfer of property, as well as
unreasonable write-off of fixed assets.
Categorize the remains of property (goods and materials, new
and dismantled used equipment) in the warehouses of NGDU
and organize their reliable accounting.
The effect of eliminating deficiencies can be up to RUB 120
million.
Measures taken
Activities are approved.
Activities are being
implemented.
Activities are approved.
Activities are being
implemented.
Corporate governance
Measures taken
Activities are approved.
Activities are being
implemented.
Audited Item
Subject of Audit
Key Recommendations
Human Resources
management:
personnel
comprehensive
assessment
Analysis of the procedure for
a comprehensive assessment
of personnel.
Verification of the existence
and application of evaluation
criteria.
Verification of compliance
with the specified deadlines
and saving the results.
Take into account the availability of general-purpose skills (soft
skills)
Improve the quality of professional assessment, introduce
ranking criteria by importance, improve the algorithm for issuing
an opinion.
To approve the internal algorithm for the basic (mandatory)
screening of candidates according to the criteria of economic
security.
Together with customers, establish target competency models
and criteria for their assessment for different positions.
Discuss the final results of the assessment with the customer in
the form of a candidate’s compliance scale.
Provide detailed feedback to candidates (strengths and
weaknesses).
The minimum effect of eliminating these shortcomings may be
RUB 150-300 million.
In-house production
of Machinery business
area
Activities are approved.
Activities are being
implemented.
Planning and implementation
of the BMZ production
program.
Interaction of BMZ with
subsidiaries (Bummash Plant
LLC and TatNIIneftemash
JSC), which are part of the
Mechanical Engineering
business area (hereinafter
referred to as subsidiaries),
within the framework of
cooperation in fulfilling
orders.
Working capital management.
Extend corporate procurement rules to the activities of
subsidiaries of BN Mashinostroenie.
To calculate the integral quality indicator, apply all complaints and
claims for which it was established that the discrepancy arose
through the fault of BMZ.
Perform factor analysis of the reasons for the excess of actual
stocks over the standards. Develop a corrective action plan.
Develop a procedure for monitoring the timeliness of posting,
transfer and write-off of materials, providing for the possibility of
applying disciplinary measures.
Update the planned cost of BMZ products when costs change by
more than 10%.
The effect of eliminating deficiencies can be up to RUB 100-150
million.
Activities are approved.
Activities are being
implemented.
Continuation of the table on page 174
172
173
Annual Report 2020 Measures taken
Activities are approved.
Activities are being
implemented.
Activities are approved.
Activities are being
implemented.
Control inspections of the internal audit (continued)
Audited Item
Subject of Audit
Key Recommendations
Reservoir Pressure
Maintenance
Evaluation of the
effectiveness of investment in
work performed on injection
wells.
Efficiency of operation of
injection wells.
Reliability of reporting on the
state of the well stock.
Management of the
Retail Network of Fuel
filling stations
Assessment of the
implementation of the BN
Strategy “Retail Business”.
Checking activities and
projects to reduce costs and
increase the profitability of
the business line.
Assessment of the efficiency
of investment development,
analysis of the reasons for the
delay in the construction of
gas stations
Analysis of the effectiveness
of pricing, procurement and
sale of related products.
Analysis of the quality of
services and services,
customer satisfaction,
checking feedback on
requests.
Carry out selective control of the tightness of packers in injection
wells, the reliability of the KIS ARMITS data and the fulfillment of
the instructions. Based on the results of inspections, analyze and
develop measures.
When introducing a packer in order to isolate a breakdown in the
production casing (hereinafter referred to as e / c), increase the
frequency of monitoring the tightness of the packer up to 1 time
per month. If a packer leak is detected, stop the injection well for
24 hours until the leak is eliminated.
To update the methodology for calculating additional production
at injection wells used in the Tatneft-Oil Production system.
Eliminate the calculation of additional production based on
ineffective EOR at injection wells.
Provide monthly monitoring of the efficiency of cross-well
pumping based on reported data on the operation of reacting
production wells.
Analyze the wells in which the technology of simultaneous
production and injection (hereinafter - ORDiZ) was introduced,
identify the reasons for packer leakage. Taking into account the
identified reasons, develop updated criteria for the selection of
wells for the implementation of ORDiZ.
Regulate the procedure for accounting for the stock of injection
wells, including ensuring transparency of information on
the actual number of inactive wells and developing uniform
requirements (criteria) for the procedure for putting injection
wells into inactivity.
The effect of eliminating the deficiencies can amount to more
than RUB 1 billion.
BN’s retail business strategy is not balanced, it is required taking
into account the current position of competitors, expansion of
the filling station network, changes in sales margins and other
factors.
Perform an article-by-article analysis of the cost structure
and performance indicators for unprofitable filling stations. To
focus on the development of filling stations with good potential
and sales volumes, to “clean up” the network of low-profit
unpromising objects.
To shorten the terms of investment development, to set the target
period (period) of typical reconstruction and construction.
To establish step-by-step monitoring of operational risks and
measures for the main processes of BN “Retail Business”.
To develop a marketing strategy for promoting the TATNEFT
filling station network, to establish goals and a procedure for
monitoring costs and effects.
Introduce a maintenance and repair system.
Develop a franchise program under the TATNEFT brand and bring
it to the market.
Eliminate shortcomings in the accounting and processing of
requests, establish feedback.
The effect of eliminating deficiencies can amount to more than
RUB 800 million.
Corporate governance
Measures taken
Activities are approved.
Activities are being
implemented.
Activities are approved.
Activities are being
implemented.
Audited Item
Subject of Audit
Key Recommendations
Sales of Tire products
Formation of plans for the
production and sale of tires.
The applied pricing policy
and the effectiveness of
marketing activities.
Relationship with dealers.
Organization of
Interaction with External
Services
Pricing.
Cost control.
Consider the feasibility of increased production and measures
to promote sales of tires with larger rims with higher profitability
indicators.
Consider the issue of the advisability of applying to buyers of
tire products guarantees for the selection of tires according
to the nomenclature list and the quantity specified in monthly
applications, with the use of options.
To develop and implement for dealers and retail outlets a system
of express assessment of tire products for prompt identification
of factory defects and defects.
Assign the “Dealer” status to customers based on the results
of a check of compliance with the criteria with the issuance of
checklists.
Make an informed decision to terminate dealer agreements for
2020 for defaulting dealers.
The effect of eliminating these shortcomings can amount to RUB
200-300 million.
For interaction with OOO Tatintek:
Provide the return of the overvalued or outstanding work, apply
measures of responsibility to the perpetrators.
Develop a procedure for checking the work performed at the
acceptance stage.
Develop flow charts for maintenance.
For interaction with OOO TNG-Group:
Ensure the return of the cost of the accepted work, not provided
for by the contract, and work at an overvalued value. Apply
measures of accountability to those responsible persons.
For interaction with transport service providers:
On the fact of using equipment for personal purposes, conduct
an internal audit for 2017-2019. Apply measures of accountability
to those responsible.
Check the intended use of vehicles that are not equipped with a
GPS navigation system. Based on the results, make appropriate
decisions.
The effect of eliminating the deficiencies can amount to about
RUB 130 million.
Beginning of the table on page 172
174
175
Annual Report 2020 Corporate governance
Revision Commission
The Revision Commission monitors the financial and eco-
nomic activities of the Company, officials, subdivisions and
services, branches and representative offices. The Revision
Commission is a permanently elected body of the Company.
The Revision Commission is elected by the General Meeting
of Shareholders and accountable thereto. Members of the
Revision 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 Revision Commission activities are regulated by the
Company’s Articles of Association.
The Revision Commission is an elected body of eight mem-
bers by the General Meeting of Shareholders for a term until
the next Annual General Meeting of Shareholders. One mem-
ber of the Audit Commission of the Company is appointed on
the basis of the special right of the “Golden share” (Law of the
Republic of Tatarstan dated July 26, 2004 N 43-ZRT “On pri-
vatization of the state property of the Republic of Tatarstan”).
Any shareholder or any person nominated by a shareholder
may be a member of the Revision Commission.
The audited items of the Revision Commission are the
Company’s activities, including the identification and assess-
ment of risks arising from the results and in the process of the
financial and economic activity.
The Revision Commission inspects the legality of the agree-
ments concluded by the Company, settlements with coun-
terparties, develops recommendations to the Company to
improve the management efficiency of the Company’s assets
and other financial and economic activities of the Company,
reduce financial and operational risks, improve the inter-
nal control system, and confirms the accuracy of the data
included in the Annual Report of PJSC TATNEFT and annual
accounting (financial) statements of the Company, and also
confirms the reliability of the data contained in the report on
interested-party transactions concluded in the reporting year.
The Revision Commission submits the conclusion on the
annual audit results in accordance with the regulations and
procedures of financial reporting and accounting statements
to the Board of Directors no later than forty days before the
Annual Meeting.
Revision commission
Members of the Revision Commission
GILFANOVA Guzal Rafisovna (CHAIRPERSON)
FARKHUTDINOVA Nazilya Rafisovna
RAKHIMZYANOVA Liliya Rafaelovna
• Year of birth: 1967
• Year of birth: 1963
• Year of birth: 1967
• In 1993, graduated from Saint Petersburg State University
• In 1985, graduated from Kazan Financial and Economic Institute
• In 1988, graduated from Kazan Financial and Economic Institute
• In 2005, graduated from Kursk Regional Finance and Economics Institute
• From 2010 to present, Deputy Director for Economics and Finance of OOO
• From 2010 to August 2012, Head of Oil & Gas Production Section,
• From 2013 to present, Deputy Head of the Control and Auditing Department
TagraS-RemService
Hydrocarbons Department, Ministry of Energy of the Republic of Tatarstan
• From August 2012, Head of Oil Production & Refining Department, Ministry of
Industry and Trade of the Republic of Tatarstan
BORZUNOVA Ksenia Gennadievna
• Year of birth: 1980
ZALYAEV Salavat Galiaskarovich
• Year of birth: 1975
SHARIFULLIN Ravil Anasovich
• Year of birth: 1961
• In 2003, graduated from Kazan State Financial and Economic Institute
• In 1999, graduated from Moscow Military Institute of Federal Border Service
• In 1990, graduated from Kazan Financial and Economic Institute
• From 2006 to present, Head of Economics Department of the Ministry of
Land and Property Relations of the Republic of Tatarstan
of the Russian Federation
• From 2002 to present, Leading Legal Counsel of Corporate & Legal Section
of the Legal Department, PJSC TATNEFT
• From 2009 to 2012, Chief Accountant of NGDU Yamashneft
• From 2012 to present, Head of Control and Auditing Department, PJSC
TATNEFT
GALEYEV Azat Damirovich
• Year of birth: 1977
• In 1999, graduated from Kazan State Agricultural Academy
KUZMINA Venera Gibadullovna
YUSUPOVA Sariya Kashibulkhakovna*
• Year of birth: 1946
• Year of birth: 1965
• In 1972, graduated from Moscow Institute of Petrochemical & Gas Industry
• In 1986, graduated from Kazan Financial and Economic Institute
• In 2008, graduated from Ufa State Petroleum Technical University
named after Academician I.M. Gubkin
• From 1991, Deputy Head of Economic Analysis Department, Ministry of
• From 2007 to 2018, Head of Investment Department at NGDU
• From 2002 to 2014, Economist at NIS, OAO TATNEFT
Finance of the Republic of Tatarstan
Aznakayevskneft of PJSC TATNEFT
• From 2018 to December 1, 2019, Deputy Head of NGDU Jalilneft of PJSC
TATNEFT on Economics
• From December 1, 2019 to present, Head of Investment Project Analysis
Office, Investment Department
• From 2014 to present, Labour Veteran
* She was appointed as the State Representative (Republic of Tatarstan) on
the basis of a special right (“Golden share”) to the Revision commission of
the Company by Orders of the President of the Republic of Tatarstan No. 80
dated February 17, 2020, No. 59 dated January 27, 2020 and the letter of the
Ministry of Land Property of the Republic of Tatarstan No. 1-30/2169 dated
February 19, 2020
Conclusion of the Revision
Commission on the results of the
audit of financial and economic
activities, annual financial
statements and the reliability of
the data contained in the annual
report for 2020.
Conclusion of the Revision
Commission on the reliability
of the data contained in the
Report on interested-party
transactions concluded by
PJSC TATNEFT in 2020.
Remuneration of the revision commission members
In 2020, the total amount of remuneration to the members of the Company’s Revision Commission amounted to RUB 21 296 886,31 ,
including remuneration for participation in the work of the Revision Commission, wages, bonuses and other types of remuneration.
Name of indicator
2018
2019
2020
Remuneration for participating in the work of the supervisory body
2 177 921,00
2 784 625, 46
2 103 475,00
Wages
Bonuses
3 211 310, 45
4 306 060,00
4 361 671,25
4 666 232,66
8 358 906,79
14 825 680,81
Other types of remuneration
22 260,29
132 865,94
6 059,25
Total
Compensations
10 077 724, 40
15 582 458, 19
21 296 886,31
0,00
0,00
0,00
176
177
Annual Report 2020 Risk management and
internal control
Risk management is a continuous systematic process
integrated into the strategic and operational manage-
ment of the Company at all levels of its activities in
order to affect a risk to reduce its level, eliminate or
mitigate the consequences of the risk. Risk manage-
ment implies a comprehensive analysis of threats and
opportunities to achieve the business goals and devel-
opment of optimal management decisions by the Board
of Directors, General Director, Management Board,
management and other employees of the Company.
The Company’s risk management and internal control system
is based on a set of organizational measures and procedures
taken to achieve an optimal balance between the growth
of the Company’s value, profitability and risks, to ensure
financial stability and safety of assets, to conduct business
effectively, to comply with legislation, the Company’s Articles
of Association and other internal documents, to prepare time-
ly reliable reports and disclose significant information.
The document regulating the risk management and inter-
nal control in TATNEFT Group is the Risk Management and
Internal Control Policy approved by the Board of Directors of
PJSC TATNEFT (Minutes No. 2 dated June 29, 2020), which
defines the goals, objectives and principles of risk man-
agement, the functions of participants in the corporate risk
management system, as well as the relationship of the risk
management process with the processes of strategic and
investment planning, operational planning, human resources
and labour relations management, supply chain, aspects of
industrial safety, environmental and social activities.
The risk management and internal control system is
aimed at providing reasonable confidence in achieving
the Company’s goals:
• Strategic goals;
• Operational goals aimed at ensuring the effectiveness of
the Company’s financial and economic activities and the
safety of assets;
• Ensuring full compliance of the Company’s activities with
the applicable legal requirements and requirements of
local regulatory documents, protection of legal rights of
shareholders;
• Ensuring timely preparation of reliable financial and
non-financial information;
• Timely and complete disclosure of information and protec-
tion of insider information;
Taking into account the dynamic development of the busi-
ness environment, the constant change in the composition,
quality and intensity of factors that can affect the Company’s
activities, the risk management system is constantly be-
ing improved to ensure a prompt response to emerging
challenges.
The Company continuously develops the risk management
and internal control system based on the generally accepted
concepts and practices, including in accordance with the
“Integrated Concept of Building an Internal Control System”
COSO ERM, the Concept (COSO) “Risk Management of
organizations. Integrated Model”, the Committee of spon-
sored organizations of the Treadway Commission; interna-
tional standards ISO31000 “Risk Management. Principles and
Guidelines”, ISO31010 “Risk Management. Risk Assessment
Methods”, relevant GOST standards and others.
The opportunities offered by the risk
management process assist the Company’s
management in achieving the target
indicators of profitability and efficiency,
as well as to prevent unsustainable use of
resources.
Risk management enables the management
to act effectively in the face of uncertainty
and associated risks, and to seize new
opportunities, increasing the potential for
Company’s value growth.
Target focus:
• Development of a risk management system based on inte-
gration of risk identification and control into the processes
of strategic planning, formation and implementation of the
investment program, operational and financial activities, as
well as identification of economic, environmental and social
risks.
• Interaction with stakeholders to identify financial, industrial,
technological, legal, economic, environmental and social
impacts that can create risks and effective opportunities in
the risk management.
• Analysis of the effectiveness of the risk management
• Ensuring labour protection, industrial safety, regulatory
methods used.
documents on environmental impact, as well as information
and cyber security, personal data protection.
Corporate governance
Levels of ensuring the reliability and efficiency of the risk management and internal control system
Strategic level of
management
• Board of Directors of PJSC TATNEFT
• Audit Committee of the Board of
• Defining the main principles and approaches to the organization of the
Company’s Risk Management and Internal Control System (RMICS).
Directors
• Corporate Governance Committee of
• Control over the implementation of the risk management and internal control
system, organization of analysis and evaluation of the RMICS effectiveness.
the Board of Directors
• Approval of the main directions of development of RMICS, control of their
implementation.
• Approval of reports on risks of financial and economic activities at the
corporate level.
• Approval of risk appetite.
• Control of RMICS performance and reliability.
Operational level of
RMICS management
• General Director of PJSC TATNEFT
• PJSC TATNEFT Management
• Corporate Governance Committee of
• Formation and maintenance of a control environment that contributes to the
RMICS effective functioning.
• Support for the introduction and implementation of programs to improve the
Company’s Board of Directors
RMICS.
• Authorized person of the Company
on coordination the functioning and
development of the risk management
and internal control system
• Coordination of risk management and internal control processes.
• Development and updating of the methodological base in the field of ensuring
the RMICS processes.
• Department of economic security,
• Coordination of the RMICS processes in the field of controlling corporate fraud
information protection, civil defense
and emergency situations
and corruption.
• Structural divisions of PJSC TATNEFT
that perform separate functions of risk
management and internal control for
business/ functional units within the
framework of the RMICS.
• Implementation of the RMICS elements in business/functional units, in the
business processes of the business/functional units.
Independent
monitoring and
assessment of the
RMICS effectiveness
• Audit Commission of PJSC TATNEFT
• It controls the financial and economic activities of the Company.
• The internal audit service of PJSC
• It performs an independent assessment of the RMICS reliability and
TATNEFT
effectiveness at the corporate and business process level.
Key principle of the risk management system – Precautionary principle
The Company’s principal approach is to assess the likelihood of a risk event occurring and the priority of pre-
ventive measures over reactive ones. The Company adheres to the precautionary principle, which is one of the
basic principles 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.
178
179
Annual Report 2020 In order to ensure the company’s sustainable development, risk management is integrated
into the decision-making mechanisms and management system and in all areas of activity:
Risk management and internal control system
Management of TATNEFT Group
Organizational
sustainability
Business continuity
Safety
• Strategy and planning
• Corporate governance
• Corporate governance
• Compliance with legal requirements
• Investment policy
• Industrial safety
• Corporate governance
• Production processes
• Occupational health and safety
Ensuring the efficiency
of business processes
Quality control
of business processes
Corporate
risk management
• Safety and efficiency of assets
• Technology and intangible assets
• Environmental protection
Key elements of the risk management
Corporate governance
• Information technologies
• Financial results
• Reducing climate impact
• HR issues
• Quality of products and services
• Information and cyber security
• Information security
• Anti-corruption
The corporate risk management system is aimed at identify-
ing potential risks and the possibility of taking timely mea-
sures to eliminate or minimize them, which makes it possible
to adjust the business planning, investment activities and
social policy of the Company.
When analyzing potential risks, external and internal
factors are considered.
• External factors: market, industry, socio-economic, politi-
cal, financial, market and other conditions of the Company
and its subsidiaries and affiliates.
• Internal corporate factors: managerial, production,
personnel, social, environmental and others.
The Company uses forecasting software tools that allow it to
take measures to minimize potential risks. In particular, cor-
porate planning uses various scenarios that allow responding
quickly to external changes and unpredictable impacts.
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 relation-
ship between management KPIs and goals of the risk man-
agement and internal corporate control.
Information on the main results of the assessment of the
effectiveness of the risk management and internal control
system of the Company for 2020, carried out by the Audit
Committee
Based on the audit results, no critical facts
were found on the basis of which it would
be possible to conclude that the system of
internal control and risk management in the
Company is ineffective. Recommendations
were given to address the weaknesses
identified. Corrective actions have been
developed and their implementation is
regularly monitored by the Internal Audit
Department.
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 direct or indirect impact
on the current activities 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
Ensuring internal regulations
Elimination or minimization of risks
Avoiding risks within the framework
of 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
• Planning of risk reduction measures
• Risk monitoring and control of risk reduction measures
180
181
Annual Report 2020 Risk management principles
Internal control
Risk management system infrastructure
Operational and other risks
Corporate governance
The Company carries out works to identify risks of business
processes and introduce control procedures, which con-
tribute to improving the efficiency of business processes,
ensuring the accuracy of financial reporting, compliance
with the legislation and internal regulatory documents of the
Company. Internal control supports the executive bodies in
improving the efficiency of the Company’s management, the
implementation of financial and economic activities.
The risk management and
internal control process helps to
ensure compliance with laws and
regulations, to avoid damage to the
company’s reputation and related
consequences.
To keep risks at an acceptable level,
part of the risks are insured.
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.
Uniformity of the Company’s methodological base:
The risk management system is based on uniform approach-
es and standards for all structural subdivisions and subsidiar-
ies 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 process-
es 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 TATNEFT Group.
Awareness and promptness of communication:
The risk management process is accompanied by the avail-
ability of objective, reliable, and relevant information.
Efficiency:
The Company makes efficient use of resources to implement
the risk management measures.
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.
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 pro-
cedure for their implementation, established by the internal
regulatory documents.
Active management involvement:
The management of the Company and its subsidiaries and
affiliates participates actively and provides support in imple-
mentation and improvement of the risk management system
of TATNEFT Group.
The Company updates systematically operational risks for
business divisions involved in achieving the Company’s
strategic goals. Identification and assessment of operational
risks is aimed at increasing the probability of achieving
medium-term goals and indicators of business plans of
company divisions within 1-3 years, including EBITDA and
production indicators. The list of planned financial and
economic indicators is standardized for the entire scope of
the Company’s business planning. When forming business
plans and sources of financing, the Company takes into
account financial risks, credit risks - when selling products
and services, and applies various financial instruments and
insurance. The Company provides centralized allocation and
monitoring of investment performance, taking into account
liability limits, feasibility and risk information.
Strategic risks
The Company forecasts systematically and takes into
account the main trends, challenges and risks that may
have a significant impact on access to the resource base,
services, equipment and technologies, qualified personnel,
sales markets, etc. over the long term. Global socio-
economic processes, climate change, the state of foreign
policy and government regulation, infrastructure and other
conditions and restrictions that may affect the Company’s
future profile are taken into account.
Information on the main risks is provided in Appendix 5 to
this Annual Report “Main Risks” section
Liability risks insurance of members of
management bodies
The Company insures the liability risks of members of the
Company’s management bodies, including those abroad,
under the terms and in the amounts that are consistent with
the insurance market for such risks in the Russian Federation.
During 2020, the SOGAZ JSC was the insurer of such risks of
the Company.
Events after the reporting date
Since January 2021, the insurance public joint-stock
company INGOSSTRAKH has been insuring the risks of
liability of members of governing bodies.
The distribution of responsibilities, the availability and im-
provement of internal regulatory framework, organizational
measures and coordination allow the risk management
process to be carried out on the company-wide basis. The
risk management infrastructure integrates the risk manage-
ment process with all the Company’s business processes,
including business planning, internal control, and audit. The
Company develops a set of components and mechanisms
that provide the basis for effective risk management and
internal control.
A unified register of risks and control procedures (risk map)
is being formed, quantitative models are being developed
to assess the key risks of the Company. The development,
implementation and unification of control procedures in the
Company’s business processes is underway on an ongoing
basis.
The Company adheres to the principle of continuous im-
provement of the infrastructure and process of the risk man-
agement system based on:
• Distribution of responsibilities for the RMICS
• Improving the internal standard and regulatory base
• Relationship of the RMICS with all business processes
• Sequence of actions
• Internal control
• Monitoring
• Development and implementation of measures for the
quality of risk management.
Current plans to improve the risk management and
internal control system
• Further improving the effectiveness of mechanisms for a
systematic approach to identifying and assessing risks.
• Development of internal procedures for reporting business
process risks.
• Determination of risk appetite based on the Company’s
planned business goals.
• Determination of risk appetite based on the Company’s
impacts on environment, climate, and social factor.
• Development of communication mechanisms of the KPI
management system with the objectives in the field of risk
management and internal corporate control.
• Further integration of the risk management and internal
control system into the supply chain at the level of suppliers
and contractors.
• Implementation of the risk management standards of the
international system ISO 31000:2018.
182
183
Annual Report 2020 Insider information protection.
Procedures and regulations
Information policy
Disclosure of Information
Disclosure of Statements
Corporate governance
the Company’s employees with the access to insider informa-
tion, including through 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 a person responsible for
monitoring compliance with the requirements of the legislation
of the Russian Federation on countering the unlawful use of
insider information and market manipulation.
Insider information protection committee
GAMIROV Damir Maratovich (Chairman) — Acting
Corporate Secretary - Deputy Head of Corporate Secretary
Office, the person responsible for monitoring the compliance
with the Law on Countering the Misuse of Insider Information.
ALPAROVA Aigul Minharisovna — Head of Technical &
Economic Information and Promotion of Best Practices
Department, PJSC TATNEFT (from March 18, 2021)
GLUSHKOV Piotr Andreevich — Advisor to General Director
for International Legal Issues, PJSC TATNEFT
MOZGOVOI Vasiliy Aleksandrovich — Assistant to Director
General for Corporate Finance, PJSC TATNEFT
RAKHMATULLIN Ildar Asylgaraevich — Head of Internal
Audit Department, PJSC TATNEFT (until 18.03.2021)
KHAMADYAROV Rifdar Rifkatovich — Deputy Chairman of
Trade-Union Committee, PJSC TATNEFT (until 18.03.2021)
BESPALOV Alexey Petrovich — Head of Corporate Technical
Policy Department, PJSC TATNEFT (until 18.03.2021)
The list of PJSC TATNEFT insiders is updated upon inclusion or
exclusion of insiders of the Company from it. As of December
31, 2020, the list of PJSC TATNEFT insiders included 14 legal
entities and 255 individuals. During 2020, 31 individuals and 1
legal entity were included in the list of insiders, and 27 individu-
als were excluded.
Notifications on the inclusion of persons in the list/ on the
exclusion of persons from the list of PJSC TATNEFT insiders
are timely sent to insiders of the Company. During 2020, 41
notifications were sent to Company insiders.
In accordance with the trade organizer inquiries (Moscow
Exchange PJSC) to submit the list of insiders, the Company
provided 8 lists of the insiders to the trade organizer in 2020.
PJSC TATNEFT pays special attention to the measures aimed
at preventing inadmissible misuse of the insider information.
In its activities the Company is guided by Federal Law No. 224-
FZ “On Preventing the Illegal Use of Insider Information and
Market Manipulation and on Amending Certain Legislative Acts
of the Russian Federation” dated July 27, 2010, other legislation
of the Russian Federation, and Regulation (EC) 596/2014 of the
European Parliament and Council of the European Union “On
Market Abuse” dated April 16, 2014.
The Company provides all necessary procedures for the pro-
tection of insider information with the relevant internal regula-
tory documents: The Company has enacted the Regulations
for Access to Insider Information of PJSC TATNEFT named
after V.D. Shashin, Rules for protection of its confidentiality
and monitoring compliance with the legislation of the Russian
Federation and the European Union and internal documents
adopted thereunder, the List of information relating to insider
information of PJSC TATNEFT named after V.D. Shashin, the
Rules of interaction of departments and offices of the Executive
office, structural divisions of PJSC TATNEFT named after
V.D. Shashin, when disclosing the information recognized in
accordance with the laws of the Russian Federation and the
European Union and/or the UK as insider information and ma-
terial facts of the issuer of securities governing the procedure:
• circulation of the insider information within the Company;
• access to the insider information;
• disclosure of the 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
596/2014 of the European Parliament and Council of the
European Union dated April 16, 2014, a special procedure ap-
plies 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 regu-
latory authorities and the Company of securities transactions;
a ban on transactions with the Company’s securities in closed
periods.
In accordance with the best international practices, insiders
who are not members of the Company’s management 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. This calendar
is made available on the Company’s website.
On an ongoing basis, the explanatory work is being conducted
on the requirements of the applicable legislation by informing
The Company follows the principles of information transparen-
cy, guarantees the timely provision of essential information to
its shareholders, the investment community and all interested
parties based on:
• Regular and consistent disclosure of information regarding the
main areas of the activity;
• Efficient disclosure of relevant information on the material
events and facts in the Company’s activities;
• Guaranteed accuracy and completeness of the disclosed
information about the Company and its controlled entities
which are of substantial importance within the framework of the
TATNEFT Group;
• Availability of the information to the stakeholders and equal
access to information for similar categories of stakeholders;
• Integrity and consistency of the information disclosed by var-
ious means and/or in various forms, as well as comparability of
disclosed indicators for different periods of time;
• Provision of the financial and other information free from influ-
ence 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 neg-
ative 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 guid-
ed by the Federal Law No. 39-FZ dated April 22, 1996 “On
the Securities Market,” the Federal Law No. 208-FZ dated
December 26, 1995 “On Joint Stock Companies,” Bank of
Russia Regulations No. 454-P dated December 30, 2014 “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
Corporate Governance 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 the Russian and English languages
as well as in the news feed and on the website of the Internet in-
formation agency (JSC Screen) authorized to carry out actions
to disclose information of the Company.
The Company discloses the annual consolidated financial state-
ments together with the auditor’s report, and the consolidated
interim condensed financial statements with the opinion on the
results of the review of the consolidated interim condensed
financial statements. The Company also discloses the annual
financial statements together with the audit’s report and interim
accounting statements.
Transparency of financial statements is one of the key ele-
ments of the corporate governance.
March 27, 2020 - The Company has published the audited
RAS annual accounting statements for 2019 and
March 31, 2020 - audited IFRS consolidated annual financial
statements for 2019;
March 29, 2021 - The Company has published the audited
RAS annual accounting statements for 2020 and
March 31, 2021 - audited IFRS consolidated annual financial
statements for 2020.
Disclosure, distribution, and provision
of information are carried out in the
volume, manner, and within the time
limits established by current russian and
applicable foreign law on information
disclosure by issuers of securities.
Company discloses material information
about the activity and avoids the formal
approach to information disclosure.
100 163
Messages disclosed in
«screen» information
agency
Press releases
published on the
company official site
184
185
Annual Report 2020 Prevention and regulation of potential
conflicts of interest
The Company strives to prevent possible corporate conflicts through transparent corporate
governance procedures and strict adherence to the Code of Corporate conduct.
In the event of any corporate conflict, the Company shall take all possible measures to
resolve it and protect the rights and legitimate interests of shareholders, as well as other
participants in the corporate relations.
Potential conflicts of interest are prevented at all levels of the Company’s management.
The Board of Directors applies procedures aimed at prevent-
ing and managing conflicts of interest. The Company pro-
vides for the information disclosure about conflicts of interest
in case of their occurrence.
The corporate governance system of the Company includes
a framework of rules and procedures aimed at regulating and
eliminating possible conflicts of interest at all management
levels - between management bodies and shareholders, as
well as between the shareholders, if the conflict affects the
interests of the Company, identifying and resolving all pos-
sible general and specific problems, related to the rights of
shareholders at the level of the Board of Directors, Executive
bodies, Top managers and employees of the Company.
This work is carried out in collaboration with the Corporate
Secretary Office with Committees of the Board of Directors,
the Legal Department, the Office of Economic Security, the
Office of Internal Audit and other competent divisions of the
Company.
In the event of conflict of interests, the Company provides
mechanisms of taking all the necessary and possible mea-
sures for its full regulation, as well as creating conditions that
preclude conflict in the future.
Prevention and settlement of corporate conflicts is a part of
the risk management policy and is entrusted to the Board of
Directors and the Corporate Governance Committee of the
Board of Directors. The competence of the executive bodies
of the Company to participate in the consideration and reso-
lution of corporate conflicts is determined by the nature of the
conflict.
In 2020, the Company did not make any transactions recognized as major transactions under
Federal Law No. 208-FZ "On Joint-Stock Companies" dd. 26.12.1995.
The report on the non-arm’s length transactions made by the Company
in 2020 is available on Company’s website: https://www.tatneft.
ru/aktsioneram-i-investoram/raskritie-informatsii/k-sobraniyam-
aktsionerov
Corporate governance
Shareholders
Executive bodies
In order to prevent potential conflicts at the level of share-
holders, the Company provides equal opportunities for
shareholders to exercise the rights provided for by applicable
law. Ensuring the interaction of the Company with sharehold-
ers and participation in the prevention of corporate conflicts
are within the competence of the Board of Directors of the
Company. In addition, the Company organized work on
interaction with shareholders, including clarification of the
position of the Company at the request of shareholders.
Board of Directors
The function of conflict of interest management in the
Company is assigned to the Board of Directors, which is
enshrined in the Regulation on the Board of Directors. To
prevent possible conflicts of interest among members of
the Board of Directors, the Company introduced certain
restrictions and requirements for members of the Board of
Directors. In accordance with the Regulation on Board of
Directors, a member of the Board of Directors must refrain
from actions that will or may lead to a conflict of interest.
When considering agenda items, members of the Board of
Directors assess their possible conflict with the interests of
the Company. On issues that, in the opinion of a member
of the Board of Directors, may result in such a conflict of
interest, the director does not participate in the vote, and if
necessary, does not participate in its discussion. A member
of the Board of Directors shall notify the Chairman of the
Board of Directors of a conflict of interest or the possibility of
its occurrence. Monitoring compliance with the mechanism
to prevent a conflict of interests of members of the Board
of Directors is carried out by the Chairman of the Board of
Directors and independent directors. Independent directors
are required to take all necessary and possible measures to
prevent and resolve conflicts, minimize the consequences of
conflicts between the Company and its shareholders, provide
effective protection for all shareholders in case of violation of
their rights.
In the reporting year, there were no conflicts of interest
among the members of the Board of Directors.
The Chief Executive Officer and members of the Management
Board of the Company should refrain from taking actions
that could lead to conflict of interest, and in the event of such
a conflict should immediately inform the Chairman of the
Management Board/ Chairman of the Board of Directors.
Top managers and employees
The Company considers the conflict of interests at the level of
top managers and employees as situations and circumstanc-
es in which the private interests of an employee or his/her
close persons and/or relatives contradict or may contradict
the interests of the Company and, thus, affect or may affect
the proper performance of their job functions, including his/
her objective decision-making, as well as those that can lead
to harm to the rights, legitimate interests, property and (or)
business reputation of PJSC TATNEFT. Preventive measure
and prevention of conflicts of interest at the level of employ-
ees of the Company is regulated by the Code of Corporate
Governance of the Company, the Code of Corporate Culture,
which defines the concepts of conflict of interest, corruption
actions and regulates the prevention of conflicts of interest,
as well as the Anti-Corruption Policy of the Company and a
number of other internal documents. To prevent a conflict of
interest at the level of the Company’s employees, the rules
for transactions with financial instruments by persons includ-
ed in the list of insiders and the rules for disclosing insider
information have been established and their implementation
is regularly monitored. This procedure is governed by the
“Regulation on the procedure for access to insider informa-
tion of PJSC TATNEFT named after V.D. Shashin, 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 in
accordance with it.
186
187
Annual Report 2020 Anti-corruption policy
Corporate anti-corruption & anti-fraud policy. Approved documents.
The Anti-corruption Policy Standard applies.
The Company has enacted the Anti-corruption Policy adopted by PJSC TATNEFT Board of Directors in 2014 (Minutes No. 3
dated July 25, 2014), which is applied in all the areas of the Company’s activities.
In the anti-corruption activities, the Company is guided by:
• Legislation of the Russian Federation
• Standard for Organization of the Anti-Corruption Policy of JSC Tatneft named after V.D. Shashin
• Regulation on Settlement of Conflict of Interests in PJSC TATNEFT named after V.D. Shashin
• Regulations on accepting and giving gifts in PJSC TATNEFT named after V.D. Shashin
• Regulations on compliance with anti-corruption norms and rules in the process of fulfilling contractual obligations,
• Rules of operation of the Hot Line corporate system,
• Code of Corporate culture for PJSC TATNEFT employees,
• Regulation on verification of suppliers of goods, works and services on economic security criteria,
• Regulation on organization of the contractual work in PJSC TATNEFT named after V.D. Shashin.
The Company carries out its operations under the ISO 37001:2016 international standard
Availability of the company’s anti-corruption
public position
Responsibility for implementation of the
corporate anti-corruption policy
In accordance with the Council of Europe Convention on
Criminal Liability for Corruption, Federal Law No. 273-FZ of
December 25, 2008 “On Combating Corruption”, Decree
of the President of the Russian Federation “On the National
Plan for Combating Corruption for 2018-2020” and the
Standard “Anti-corruption policy of PJSC TATNEFT named
after V.D. Shashin” the Company strictly complies with the
anti-corruption legislation of the Russian Federation, as well
as the anti-corruption legislation of other countries in the
territories of the operation. Information on anti-corruption
activities is available on the official website of PJSC TATNEFT
- www.tatneft.ru
The Company’s anti-corruption position is public.
Responsibility for implementation of the corporate anti-
corruption policy is imposed on the Economic Security
Department, Information Protection, Civil Defense and
Emergency Situations Department, Legal Department,
Internal Audit Department, Control and Audit Department,
Human Resources Department, Personnel Audit Service. In
the entities of TATNEFT Group – the responsibility is laid on
the management of TATNEFT Group organizations.
All employees, regardless of their position, shall be held
liable under the current legislation of the Russian Federation
for failure to comply with the principles and the requirements
of the Anti-Corruption Policy. Persons guilty of violating the
requirements of the Anti-Corruption Policy may be brought
to disciplinary, administrative, civil or criminal liability at the
initiative of the Company, law enforcement agencies or other
persons according to the procedure and on the grounds
stipulated by the legislation of the Russian Federation, the
Company's Articles of Association and internal documents,
employment contracts.
Corporate governance
Description of principles, rules, procedures aimed to prevent corruption in all aspects of the
company activities
Non-acceptance of corruption and prohibition of corrupt
practices
The Company’s activities are based on the prevention of cor-
ruption in all forms and manifestations. All employees, members
of the management bodies of the Company and other persons
acting on behalf of the Company or in its interests, are prohib-
ited directly or indirectly, personally or through any mediation,
from participating in corruption actions regardless of the prac-
tice of doing business in a particular country or region.
TATNEFT does not allow corruption practices, including the
manifestation of conflict of interest, both in relation to represen-
tatives of the state, public organizations, organizations of any
form of ownership, political figures and other third parties, and
in relation to employees of the Company, in any way, including
through abuse of official position in order to derive any personal
benefit.
Inevitability of punishment
The Company investigates all reasonably substantiated reports
of violations of the appropriate procedures to counteract
involvement in corruption activities and prosecutes those
responsible without taking into account their position, term of
work, status with the Company and other relationships with it in
the manner established by applicable law and local regulatory
documents of the Company. The Company makes every pos-
sible reasonable and legal effort to prevent violations as quickly
as possible. The Company makes public information about
individuals who violate the requirements of applicable law and
the Anti-Corruption Policy.
Legitimacy
The Company and its employees are obliged to comply with
the norms of the Russian anti-corruption legislation, as well as
the applicable norms of foreign anti-corruption legislation when
they enter into legal relations falling within the scope of such
legislation.
Top Management Tone
The Company Executives, including the members of manage-
ment bodies, heads of departments, departments and other
divisions of the Company, must declare a strong stand against
any forms and manifestations of corruption at all levels, demon-
strate, implement and comply with it in practice.
Consistency and proportionality
The Company develops and implements a system of appro-
priate procedures to counteract and prevent involvement in
corruption activities. The Company strives to make the proce-
dures as transparent, clear, feasible and reasonably consistent
with the identified risks.
Due diligence principle
The Company carries out monitoring and verification of
counterparties and candidates for positions in the Company
before making a decision on starting or continuing business
relations, or hiring them for reliability, rejection of corruption
and risk of conflict of interest.
Information and training
The Company informs and clarifies the principles and norms
of the applicable law, the Anti-Corruption Policy and other lo-
cal regulatory documents in relation to counteracting involve-
ment in corruption, including the training of the employees on
the basics of countering engaging in corruption and explains
its policies in this area to counterparties.
Monitoring
The Company carries out continuous monitoring of the im-
plemented procedures to combat and prevent involvement
in corruption activities and monitors their compliance. The
Company periodically makes an independent assessment
of the state of the system for counteracting involvement
in corruption, as well as evaluating the compliance of the
Company’s activities with the applicable laws and the Anti-
Corruption Policy. The results of the assessment are reported
to shareholders and the public in the annual report, press
releases and other information materials.
In order to ensure comprehensive security of the trading
and procurement platform, the Company has implemented
the following measures:
• A comprehensive inspection system has been set up,
including access control system, video surveillance,
recording of office phone conversations of the trading and
procurement platform staff;
• The possibility of uncontrolled online access for software
developers of the trading and procurement platform is
excluded;
• Digital footprint analysis procedure has been developed to
identify bidders collusion.
Messages about violations of the Anti-Corruption Policy
can be transmitted in the following ways:
• to the line manager or superior manager;
• to the round-the-clock telephone of the hot line of the
Company;
• to law enforcement agencies.
188
189
Annual Report 2020 Regular risk assessment related to involvement in
corruptions.
The Company identifies, evaluates and periodically re-assess-
es 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.
The Company guarantees confidentiality to all Employees and
other persons who in good faith report corruption risks and
violations. Messages can be sent to: the line manager or supe-
rior manager, the hot line of PJSC TATNEFT, law enforcement
agencies.
Informing personnel about anti-corruption
methods
Web-based informing is realized by releasing a statement
in the Anti-Corruption section of the official website of PJSC
TATNEFT. Anti-corruption conditions are included in all types
of agreements in a separate section.
The Company informs the staff and clarifies the principles
and norms of the applicable law, the Anti-Corruption Policy
and other local regulatory documents in relation to counter-
acting involvement in corruption. Availability of the regulatory
framework contributes to formation of employee behaviour
rules and counteracts their involvement in corrupt activities.
Results of the anti-corruption programs
implementation for the period of 2016-2020
Dynamics of the prevented loss for the period
of 2016-2020 (RUB mln)
Continuous anti-corruption activities have ensured that the
number of corruption cases has been minimised.
Over 100 investigations have been conducted for the last
five years. Disciplinary and other measures were taken
against 96 perpetrators, criminal cases were opened, and
sentences were passed against 13 persons, 13 counterpar-
ties were added to the stop list. 12 cases are currently under
investigation.
67,25
15,86
0,96
1,20
2 255,81
Corporate governance
Hotline information system
The Company effectively operates a special-purpose confiden-
tial channel, through which an employee or an outsider can re-
port 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, labour protection,
quality of products and services, other issues, including those of
corruption nature – “Hotline”.
An independent operator receives calls, with the anonymity pro-
visions of whistleblowers who report violations and corruption.
All applications are checked. The results of the checks are re-
corded in the Internal Audit Department, which has the function
of the Hotline coordinator.
There is a practice of rewarding whistleblowers who provide the
information that has enabled to prevent and/or compensate for
losses due to corruption.
In 2020, the hotline operator received and processed 2000
calls, 25% of them were targeted applications related to identi-
fying deficiencies, violations and thefts.
Number of Hotline applications for the period of 2016-2020
2020
2019
2018
2017
2016
456
323
218
264
229
702
638
787
1398
1696
2016
2017
2018
2019
2020
number of targeted applications
number of applications per year
The Company employees, including the Economic Security, Information Protection, Civil Defense
and Emergencies Department, adhere to fundamental human rights principles. Human Rights
aspects are included in the Company’s personnel development programs.
Anti-monopoly policy
The Company operates in strict accordance with the anti-mo-
nopoly 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.
The Company is constantly improving the internal procedures
aimed at alerting and preventing violations of the current
anti-monopoly legislation, including training of employees in
anti-monopoly regulation.
The main topics of applications: information on violations of corporate procedures, labour
legislation, possible thefts of the Company’s property, social and ethical issues.
Labour
Tender procedures
Corruption/thefts
Image
Environment, HSE
Ethics
3%
2%
24%
14%
9%
48%
Each application was accepted for consideration with the ap-
propriate measures taken, including those aimed at reducing
the risks of violations in the production and economic activities,
as well as improving labour discipline and responsibility of the
employees. Additional control measures were introduced to
prevent previously identified violations in the future.
The hotline number is posted on the website, information
stands, payroll sheets, overalls of the Company’s employees.
Hotline information system
Telephone: 8 800 100 4112
E-mail: tn@88001004112.ru
190
191
Annual Report 2020 Interaction with
shareholders and
investors
rub 103,5 bln
Profit of TATNEFT group shareholders in 2020
4 974
Publications on the securities in federal mass
media in 2020
1 162
Publications on the Company’s financial results
in federal mass media in 2020
194
195
Shareholders’ equity
The Company’s securities have been represented on the
Russian and International stock markets for over 25 years
including the Moscow and London stock exchange.
The Company’s depositary receipts are enlisted in the
London Stock Exchange and are traded in the Xetra system of
the Deutsche Börse group of companies.
The geography of the shareholders’ location covers Russia
(the major part of shareholders), North America, Australia,
European and Asian countries.
The Company’s ordinary and preferred shares, and bonds
enlisted in the Level 1 quotation lists are traded on PJCS
Moscow Exchange. TATNEFT shares are included in the
calculation base of the RTS and MICEX indices which are the
main indicator of the Russian stock market.
Equity capital structure (% of equity capital)
Events after the reporting date
The Company’s shares, as the most demanded stocks,
have been admitted to the organized trading on the Saint-
Petersburg Stock Exchange since 18 March 2021 without
inclusion in the quotation lists.
34%
Legal entities under the control of the Republic of
Tatarstan
38%
Other shareholders
3%
Treasury groups
25%
ADR Program
The total number of shareholders of the Company exceeds
120 thousand shareholders.
There are no shares held by the Company.
The shares held by the legal entities controlled by the
Company account for 3,47% of the Company's authorized
capital.
The total number of ordinary shareholders included in the list
of persons entitled to participate in the general meeting of
shareholders as of 06.09.2020 is 105 473 shareholders.
Shareholders holding shares of 5% or more of the authorized capital, as of 31.03.2021:
Item No. Full name of legal entity
Entity Type
In % of authorized capital
In % of voting (ordinary) shares
1.
2.
Svyazinvestneftekhim
Joint Stock Company
Citibank, N.A.
Owner (in the nominal holding of Joint
Stock Company “Central Depository of
the Republic of Tatarstan”)
Depositary Programs Account (in the
Сentral Depository Nonbanking Credit
Organization, “National Settlement
Depository” Joint Stock Company)
27,232389
29,071778
24,526470
26,187038
Interaction with shareholders and investors
The Company hereby declares that it does not have any
information about the existence of the shares ownership in
excess of five percent, other than those disclosed, as well as
the information about the possible acquisition of the control
by certain shareholders to the extent disproportionate to their
interest in the equity capital of the Company, including the
one on the basis of shareholder agreements or by any other
means.
The company’s equity share is rub 2 326 199 200
Information on each category (type) of shares
Full name of securities
(Kind and Type)
Security issue form
Quantity issued, pcs
Par value of one (1) security (RUB)
State registration number of the issue of
securities
State registration date
ISIN code
Exchange and trading code
Ordinary registered
shares
Preferred registered
shares
Exchange-traded
bonds
Uncertificated
2 178 690 700
RUB 1
Uncertificated
Uncertificated
147 508 500
RUB 1
15 000 000
RUB 1000
1-03-00161-А
2-03-00161-А
4В02-01-00161-А-001З
26.10.2001
26.10.2001
20.12.2019
RU0009033591
RU0006944147
RU000А1018К1
PJSC Moscow Exchange,
TATN
PJSC Moscow Exchange, TATNP
PJSC Moscow Exchange,
RU000A1018K1
In 2020, in accordance with the depositary agreement
between PJSC TATNEFT n.a. V.D. Shashin and the Bank
of New York Mellon the depositary receipts (ADRs) for the
Company’s ordinary stocks have been issued for circula-
tion in foreign markets, 6 ordinary shares in one ADR, with
ISIN code US8766292051. The main trading platform of the
Company’s ADRs trading is the London Stock Exchange
(trading code - ATAD). The Company’s ordinary shares of
24.53% of the share capital are deposited for conversion into
American Depositary Receipts (ADRs).
Investment potential of the securities
PJSC TATNEFT Securities have been circulating in the
Russian and international stock markets for more than 25
years. The Company’s shares are traded at the Moscow
Exchange PJSC (first level quotation list), and at the London
Stock Exchange as the American Depositary Receipts
(ADRs).
Events after the reporting date.
At the beginning of 2021 the Company decided to change
its depositary bank. Since February 18, 2021 the depositary
bank for the Company’s ADR programme is Citibank, N.A.
When selecting a depository bank both the terms of the
depository bank’s support for attracting new investors,
expanding cooperation with them, maintaining a high level of
corporate governance and implementing new best practice
were considered, as well as the possibilities of developing
cooperation in other areas. As a result of this assessment,
Citibank, N.A. was identified as a preferred candidate for the
depositary bank function for the Company’s ADR programme.
Shares (ordinary, including ADRs and preferred) of PJSC
TATNEFT are included in many stock indices, reflecting both
the size of TATNEFT as a Company with a large capitalization
and high rates of return, including:
Ordinary and preferred shares:
Ordinary shares:
ADRs:
Moscow Exchange Index, Moscow
Exchange Oil and Gas Index, RTS
Index, RTS Oil and Gas Index.
Moscow Exchange blue chip index,
MSCI Russia, MSCI Russia 10/40,
MSCI Emerging Markets EMEA, MSCI
Emerging Markets Quality Index.
FTSE Russia IOB, MSCI Russia ADR/
GDR Index, S&P/ BNY Mellon Russia
Select DR Index, MVIS Russia Index.
196
197
Annual Report 2020
The total trading volume of ordinary shares during the main
trading amounted to RUB 665 742 648 977; the average daily
volume - RUB 2 662 970 596.
The volume of over-the-counter transactions with preferred
shares amounted to RUB 14 554 088 028 rubles; the average
daily turnover - RUB 72 049 941.
The volume of over-the-counter transactions with ordinary
shares amounted to RUB 34 712 149 462 rubles; the average
daily turnover - RUB 139 968 345.
The total trading volume of preferred shares through the
Moscow Exchange, taking into account over-the-counter
transactions, amounted to RUB 170 919 687 015.
The total trading volume of ordinary shares through the
Moscow Exchange, taking into account over-the-counter
transactions, amounted to RUB 718 613 808 116.
The total trading volume of preferred shares during the main
trading amounted to RUB 156 365 598 987; the average daily
volume - RUB 625 462 396.
The main exchange trading volume of TATNEFT ADRs
amounted to USD 2 943 762 218,38 (average daily turnover –
USD 11 589 615,03); including over-the-counter transactions
and other transactions through the London Stock Exchange,
the total trading volume amounted to USD 3 252 009 232,94
dollars or USD 12 803 185,96 per day.
PJSC TATNEFT stock prices (preferred, ordinary) for the
period of 2011-2020
737,90
759,40
736,60
478,80
427,00
365,00
315,50
522,00
512,2
475,0
218,00
208,20
226,55
235,00
198,10
158,16
88,02
105,15
121,70
134,60
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Ordinary ( RUB)
Preferred ( RUB)
Closing price on the last trading day of the year
Dividend policy
The Company adheres to a progressive dividend policy recognizing dividends as one of the key indicators of
investment attractiveness for shareholders, and seeks to increase dividends based on the consistent growth of
business profitability.
The Board of Directors of the Company determines the rec-
ommended for the general meeting of shareholders amount
of dividends on the basis of economically sound approach to
the distribution of profits and maintaining a balance of short-
term (income generation) and long-term (development of the
Company) interests of shareholders.
The principles and conditions for making decisions on pay-
ment (announcement) of dividends, the procedures used to
determine the amount and dividends payment are specified
by the Regulation on the Dividend Policy of PJSC TATNEFT
approved by the Board of Directors of the Company (Minutes
No.9 Decision No. 7 dated January 01, 2018). The Regulation
is based on observance of the rights of shareholders stipu-
lated by the legislation of the Russian Federation and best
corporate governance practices
The Board of Directors of the Company, when determining
the amount of dividend recommended to the general meeting
of shareholders (per share), is governed by the amount of the
Company’s net profit and assumes that the amount allocated
to dividends is at least 50% of the net profit determined in ac-
cordance with Russian Accounting Standards (RAS) or IFRS,
whichever is the larger. With that, the Board of Directors
takes into account, based on information received from the
executive bodies, the duties and investment program of the
Company, the need in working capital and required reserves
for normal business operations, and assumes that free cash
that is formed after funding the specified investment pro-
gram, execution liabilities and other needs of the Company
can be distributed in the form of dividends.
In June 2020, dividends were approved at the level of 96.2%
of RAS net profit (by 2019 year-end results), and according to
the results of 6 months of 2020, the level of dividend pay-
ments amounted to 100% of RAS net profit.
Dividends per share, rub
Preferred
Ordinary
Interaction with shareholders and investors
84,91
84,91
65,47
64,47
39,94
39,94
22,81
22,81
22,24*
22,24*
1,00
1,00
1,00
1,00
1,00
0,10
0,10
0,30
0,90
1,00
4,60
4,60
5,65
5,65
4,42
4,42
6,56
6,56
5,02
5,02
7,08
7,08
8,60
8,23
8,60
8,23
10,58
10,96
10,58
10,96
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
* with the dividends proposed for approval by the annual general shareholders’ meeting
According to the 2020 year-end results, it was recommended
to allocate RUB xxx billion xxx million to pay dividends which
is xxx % of the RAS net profit obtained (with the rounding
to two decimal places after the comma of the dividend per
share). The Company’s cash flows provide the payment of
this amount of dividends without creating a source deficit for
implementing the investment program, conduct of operating
activities and the fulfillment of existing obligations.
Based on the results of 2020, the Board of Directors recom-
mends the annual general meeting of shareholders of PJSC
TATNEFT to make a decision on the payment of dividends on
preferred and ordinary shares, taking into account previously
paid dividends for 6 months in the amount of xxx% to the par
value of preferred and ordinary shares. Taking into account
the fact that for 6 months of 2020, PJSC TATNEFT, in accor-
dance with the decision of the general meeting of sharehold-
ers held on September 30, 2020, accrued interim dividends
in the amount of RUB 23 billion 122 million, additional divi-
dends for 2020 year will amount to RUB xxx billion xxx.
Dividend yield on shares for the 2015 – 2019 period
(preferred, ordinary)
14,84
12,34
12,43
10,3
17,68
10,42
8,61
6,59
6,97
3,61
2015
2016
2017
2018
2019
Ordinary
Preferred
Source: Moscow Stock Exchange
198
199
Annual Report 2020 Dividend payout history for the last five completed financial years
Year (period)
for 2015
for 2016
For 9 months
of 2017
For the 4. Q
2017
For 2017
Total:
Total amount of accrued dividends
(RUB billion)
Total amount of dividends paid
(RUB billion)
25,495
53,061
64,622
28,287
92,909
25,468
53,006
64,561
28,26
92,821
Year (period)
Total amount of accrued dividends
(RUB billion)
Total amount of dividends paid
(RUB billion)
for 6 months of
2018
for 9 months of
2018
For the 4. Q
2018
For 2018
Total
70,414
51,781
75,322
197,517
70,342
51,725
75,247
197,314
Ordinary shares (% of par value)
1096%
2281%
2778%
1216%
3994%
Ordinary shares (% of par value)
3027%
2226%
3238%
8491%
Interaction with shareholders and investors
Ordinary shares (Dividends amount)
Preferred shares (% of par value)
Preferred shares (Dividends amount)
Dividends (% of net profit)
Date of the decision to pay dividends
The date on which persons that have (had) the right
to receive dividends are (were) determined
Date of actual payment
10,96
1096
10,96
30
22,81
2281
22,81
50,6
27,78
2778
27,78
75
12,16
1216
12,16
75
39,94
3994
39,94
75
Annual General Meeting of Share-
holders at the end of 2017, which
was held on 22.06.2018,
Minutes No. 26 dated 27.06.2018
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 at
the end of 2016,
which was held
on 23.06.2017,
Minutes No.
24 dated
28.06.2017
Extraordinary
General Meeting
of Sharehold-
ers based on
the results of 9
months of 2017,
which took place
on 12.12.2017,
Minutes No. 25
dated 14.12.2017
08.07.2016
07.07.2017
23.12.2017
06.07.2018
To nominal hold-
er - 22.07.2016
To shareholders
registered in
the register of
shareholders -
12.08.2016
To nominal hold-
er - 21.07.2017
To shareholders
registered in
the register of
shareholders -
11.08.2017
To nominal hold-
er - 15.01.2018
To shareholders
registered in
the register of
shareholders -
05.02.2018
To nominal holder - 20.07.2018
To shareholders registered in the
register of shareholders - 10.08.201
30,27
3027
30,27
75
22,26
2226
22,26
75
32,38
3238
32,38
100
84,91
8491
84,91
100
Annual General Meeting of Share-
holders at the end of 2018, which
was held on 21.06.2019, Minutes
No. 29 dated 25.06.2019.
Extraordinary
General Meeting
of Sharehold-
ers based on
the results of 6
months of 2018,
which was held
on 28.09.2018,
Minutes No.
27 dated
29.09.2018.
Extraordinary
General Meeting
of Sharehold-
ers based on
the results of 9
months of 2018,
which was held
on 21.12.2018,
Minutes No.
28 dated
24.12.2018.
12.10.2018
09.01.2019
05.07.2019
To nominal holder - 19.07.2019
To shareholders registered in
the register of shareholders -
09.08.2019
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
Ordinary shares (Dividends amount)
Preferred shares (% of par value)
Preferred shares (Dividends amount)
Dividends (% of net profit)
Date of the decision to pay dividends
The date on which persons that have (had) the right
to receive dividends are (were) determined
Date of actual payment
Continuation of the table on page 202
200
201
Annual Report 2020 Dividend payout history for the last five completed financial years (continued)
Year (period)
Total amount of accrued dividends
(RUB billion)
Total amount of dividends paid
(RUB billion)
6 months
2019
9 months
2019
4 Q of 2019
For 2019
Total:
93,304
56,666
0, 147
150,118
93,206
56,612
0,147
149,965
Ordinary shares (% of par value)
4011%
2436%
Ordinary shares (Dividends amount)
Preferred shares (% of par value)
Preferred shares (Dividends amount)
Dividends (% of net profit)
Date of the decision to pay dividends
40,11
4011
40,11
100
24,36
2436
24,36
100
Extraordinary
General Meeting
of Sharehold-
ers based on
the results of 6
months of 2019,
which was held
on 13.09.2019
Minutes No.
30 dated
16.09.2019.
Extraordinary
General Meeting
of Sharehold-
ers based on
the results of 9
months of 2019,
which was held
on 19.12.2019,
Minutes No. 31
dated 23.12.2
019.
0%
0
100
1,00
96,2
6447
64,47
6547
65,47
96,2
Annual General Meeting of Share-
holders at the end of 2019 which
was held on 17.06.2020,
Minutes No. 32 dated 17.06.2020
The date on which persons that have (had) the right
to receive dividends are (were) determined
Date of actual payment
27.09.2019 г.
30.12.2019
30.06.2020
To nominal holder - 14.07.2020 To
shareholders registered in the regis-
ter of shareholders - 04.08.2020
To nominal hold-
er - 11.10.2019
To shareholders
registered in
the register of
shareholders-
01.11.2019
To nominal hold-
er - 21.01.2020
To shareholders
registered in
the register of
shareholders -
11.02.2020
Interaction with shareholders and investors
Year (period)
6 months of 2020
For 2020 Total:*
Total amount of accrued dividends
(RUB billion)
Total amount of dividends paid
(RUB billion)
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
23,122
23,102
994
9,94
994
9,94
100
—
—
2224
22,24
2224
22,24
—
Extraordinary General Meeting
of Shareholders based on the results
of 6 months of 2020, which was held
on 30.09.2020,
Minutes No. 33 dated 30.09.2020
Annual General Meeting of Shareholders for
the year 2020
The date on which persons that have (had) the right
to receive dividends are (were) determined
12.10.2020
Date of actual payment
To nominal holder – October 26,
2020. To shareholders registered in
the register of shareholders – No-
vember 17, 2020.
—
—
* PJSC TATNEFT Board of Directors made a decision to recommend the General Meeting of Shareholders to approve payment of divi-
dends for 2020 on preferred and ordinary shares in the amount of ХХХХ% (taking into account previously paid dividends for 6 months)
of the par value (Minutes No. ХХХХХХ)
* The Board of Directors of PJSC TATNEFT (Minutes No. 12 of 28.04.2021) decided to recommend to the General Meeting of
Shareholders to determine the dividend payment for 2020, taking into account previously paid dividends based on the six-month results
as follows:
• on the preferred stock in the amount of 2224% to the par value;
• on the ordinary stock in the amount of 2224% to the par value.
Beginning of the table on page 200
202
203
Annual Report 2020 Protection of share rights
The Company provides reliable and secure methods of re-
cording share rights, involving a professional registrar to keep
records.
The Company’s Registrar
The organization that registers the rights to equity securi-
ties of PJSC TATNEFT is Eurasian Registrar Limited Liability
Company, 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 trans-
fer-agent points are open in 52 regions of the greatest pres-
ence 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 com-
prehensive 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 ac-
tions is available at http://eard.ru
The Company along with the Registrar regularly informs
shareholders about the need to update the information
on shareholders contained in the register of sharehold-
ers of PJSC TATNEFT.
The Company together with the Registrar annually sends
shareholders letters notifying them of the need to amend the
register of shareholders of the Company in the event that the
shareholder has changed address and bank details, or other
data necessary for payment of dividends to shareholders.
The Company also searches for “sleeping” shareholders or
their heirs.
Protection and ensurance of
shareholders’ rights
The Company has created a multi-level system for protecting the shareholders’
rights of the Company.
Guarantees of the shareholders’ rights
Provided by law and listing rules
The company provides all the terms for the
shareholders to implement their rights
In accordance with the legislation of the Russian Federation,
the shareholders of the Company are entitled to:
• vote at the General Meeting of Shareholders on the
principle of “one share - one vote” when 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 the shareholders have at least 2% of voting
shares);
• The right to participate in the management of the Company
by voting at the General Meeting of Shareholders of PJSC
TATNEFT.
• The right to participate in the formation of the Board of
Directors of PJSC TATNEFT in accordance with the condi-
tions stipulated by the legislation of the Russian Federation.
• The right to receive part of the Company’s profits in the
form of dividends.
• The right to receive the necessary information about the
• exercise the preemptive right when placing shares and
Company on a timely and regular basis.
equity securities convertible into shares;
• The right to free and unhindered disposal of shares, reliable
• receive dividends declared by the Company in proportion
methods of recording rights to shares.
to the number of shares owned by the shareholder;
• get acquainted with the information and materials present-
ed in preparation for the General Meeting of Shareholders;
• obtain information on the Company’s activities of the upon
request and in accordance with the conditions established
by the legislation of the Russian Federation;
• investment power to freely dispose of shares;
• exercise other rights established by the legislation of the
Russian Federation.
The Company has enacted the Regulations
on providing information to the shareholders.
The Regulation establishes the procedure
and deadlines for providing the shareholders
and persons exercising share rights, as well
as their representatives of documents and
copies of such documents.
Key principles of interaction with the
company 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.
Constant interaction of the Company’s manage-
ment with all shareholders in order to effectively man-
age the Company and ensure its sustainable and dynamic
development.
Constant improvement of existing and development of
new mechanisms and forms of interaction with share-
holders, increasing the efficiency and quality of interaction,
taking into account the emergence of new shareholders,
setting new tasks by shareholders.
Identification and resolution of all possible general
and specific problems associated with the exercise of the
shareholders’ 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 share-
holders, if the conflict affects the interests of the Company,
to fully resolve the conflict, as well as creating conditions that
preclude future conflicts.
204
205
Annual Report 2020 Interaction with shareholders
Interaction with institutional investors
Interaction with shareholders and investors
Ensuring the confidence of shareholders and investors in the effectiveness of their investments, long-term and
steady growth of shareholder value is a key aspect of TATNEFT's corporate practice.
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.
The Company's interaction with shareholders and investors
is based on the availability of responsible managers and key
employees of the Company to communicate with sharehold-
ers, investors, and stock market analysts, as well as consul-
tants to institutional investors on voting issues, discussing
development plans and results of the Company's activities.
The Company's interaction with shareholders and investors
is carried out through telephone conferences, group and
individual meetings, including investment conferences, visits
to the Company and special trips (roadshows) of authorized
representatives of the Company to the main international
financial centers.
In order to ensure implementation of the corporate
rights, as well as effective interaction with sharehold-
ers in the Company, several communication channels
are operated:
• Round-the-clock Hotline for PJSC TATNEFT shareholders:
Telephone number 8 800 100 4 112.
• Multichannel phone numbers for receiving and processing
oral inquiries: 8 (8553) 37-37-71; 8 (8553) 37-37-39.
• Postal address for receiving written inquiries: 75 Lenina
Str., Almetyevsk 423450, Republic of Tatarstan, Russian
Federation
• E-mail for sending electronic messages: ocb@tatneft.ru.
• Fax: 8 (8553) 37-35-08
History of shareholder inquiries in 2016-2020
No. Desription
1.
2.
3.
4.
5.
6.
7.
8.
Updating personal data
Registration of inheritance rights
Selling and redemption of shares
Dividend payment
Providing 2-NDFL certificate
Issues related to general meeting of shareholders
Notary, court inquiries
Other issues
Total
2016
Number of
inquiries
2017
Number of
inquiries
2018
Number of
inquiries
2019
Number of
inquiries
2020
Number of
inquiries
203
150
57
1 265
103
43
61
83
228
169
70
317
228
92
1 466
2 008
119
50
69
96
158
71
96
131
349
257
100
2496
98
168
61
203
615
354
255
3965
128
624
109
596
1 965
2 266
3 101
3732
6840
In 2020 - 2021 the Company sent 3,850 letters to the shareholders whose dividends had been returned
to the Company by the Russian Post due to non-receipt by recipients more than 2 times.
In 2020, the PJSC TATNEFT Corporate Secretary's Office received 6 840 enquires from shareholders.
PJSC TATNEFT is one of the largest public companies in
Russia and its shares are actively traded on Russian and
international stock exchanges. Among the shareholders of
TATNEFT are large international investors, including sover-
eign funds that manage pension savings and private capital.
Recently, the number of domestic investors, both legal enti-
ties and individuals, has been increasing.
The Company actively interacts with investors informing them
about the results and plans of the TATNEFT Group, strategic
initiatives and prospects for the business value growth, as
well as the actions of the TATNEFT Group to achieve the goals
of sustainable development.
Traditionally, the investors meetings were held in the face-to-
face meeting format, but the COVID-19 pandemic has led to
the transition of almost all the meetings into the online format.
This led to a significant increase in communications with in-
vestors and analysts. During 2020, there were over 100 meet-
ings with investors and analysts held. In June and November,
Mr Nail U. Maganov, General Director of the Company and
other TATNEFT top managers held the online meetings with
investors and analysts. After the publication of IFRS financial
results, webcasts were conducted. The Company represen-
tatives met with investors and analysts on a regular basis
using video communication platforms, both independent-
ly and in the framework of virtual conferences organized
by international and Russian investment banks, including
Goldman Sachs, J.P. Morgan, UBS, Bank of America, VTB
Capital, Sber CIB, Renaissance Capital, Wood & Co., ATON
and others. TATNEFT took part in the special online meetings
for Russian investors organized by VTB and Sber banks.
The Company has a special-purpose telephone line and
e-mail address for investors. Dialogues are regularly con-
ducted with analysts of the “selling side” of investment com-
panies and banks.
In 2020, TATNEFT shares were covered by more than 15
analysts from the “selling side” of investment banks and
companies.
In general during 2020, the Company’s specialists answered
more than 1,500 questions and inquiries from investors and
analysts. Most of the questions concerned the Company’s
actions during the pandemic period, the impact of the crisis
on investment and dividend policies, initiatives and forecasts
for the recovery of the Company’s value, changes in taxation
of the industry, progress in the area of sustainable develop-
ment goals.
Structure of investors and analysts
inquiries in 2020:
Inquiry Description
Performance indicators and plans (production and refining)
Company Strategy and its implementation
Financial results
Taxation of the industrial business
Sustainable development (social policy, ecology and climate change
mitigation, corporate governance)
Tackling the coronavirus pandemic (COVID-2019)
Dividends and dividend policy
Other macroeconomic conditions and development of the industry
%
15
10
5
20
10
10
25
5
The opinions of investors and analysts are promptly brought
to the attention of the responsible managers, discussed
and taken into account when making decisions. The Board
of Directors of the Company, the Corporate Governance
Committee and the Audit Committee of the Board of
Directors are constantly informed about the work on interac-
tion with investors.
Most of the inquiries were answered during the direct com-
munications and correspondence with investors and ana-
lysts based on the published information; answers to some
questions were prepared with the involvement of responsible
services of the Company and were sent in writing or commu-
nicated orally. The main language of communication with in-
vestors and analysts is English. The Company has organized
the process of prompt preparation of answers to investor
inquiries in various areas of activity. Responses are provided
in written and oral form with the mandatory disclosure and
publication of any information that is material and may affect
the value of the Company’s securities.
During 2020, the Company prepared and published 4
presentations:
• Presentation for the virtual meeting with investors and
analysts, June 2020.
• Presentation of IFRS operating results for Q2 2020
• Presentation for investors and analysts for the virtual
meeting on November 5, 2020
• IFRS Results of TATNEFT Group activities for Q3 2020
Materials for shareholders and investors, including the press
releases, presentations, Annual Report and integrated report
taking into account the aspects of the Company’s sustainable
development, significant facts about decisions of the Board
of Directors of the Company, are available on the corporate
website www.tatneft.ru.
In order to achieve the highest possible quality of interaction
with the shareholders, the Company strives to use the most
reliable methods and forms of communication, including
advanced information technologies.
206
207
Annual Report 2020 Sustainable
Development
10 Sustainable
17 Goals
Development Principles of the UN Global Compact
TATNEFT has historically adhered to the principles of high corporate responsibil-
ity and alignment of corporate interests with the UN Global Compact Agenda for
Sustainable Development. This means that making any business decisions we take
into account the objectives of preserving the environment, reducing the carbon foot-
print, improving social infrastructure, expanding innovative opportunities, economic
growth, and improving the life quality in the territories of TATNEFT Group enterprises’
operation. Targeted programs are implemented based on open dialogue with the
local community and stakeholders, which increases the targeting of the Company’s
initiatives and transparency of decision-making.
208
209
Sustainable Development
Management System
The Company’s strategy includes aspects of sustainable
growth and ensuring of favorable economic and social con-
ditions for business development based on the most rational
use of all types of resources and creating of value for stake-
holders at each stage of activity.
The Company's priority Goals include the following: SDG 3
"Good Health and Well-Being", SDG 4 "Quality Education",
SDG 6 "Clean Water and Sanitation", SDG 7 "Affordable
and Clean Energy", SDG 9 "Industrialization, Innovation
and Infrastructure", SDG 11" Sustainable Cities and
Communities", SDG 12 "Responsible Consumption and
Production", SDG 13 "Climate Action", SDG 15 "Life on Land",
SDG 17 "Partnerships to achieve the Goals".
The Company adheres to
10 Principles 17 Goals
of Sustainable Development
of the UN Global Compact.
Economic aspect
Innovations
Compliance with the UN goals:
Compliance with the UN goals:
• Participation in the development of the national fuel and
energy complex infrastructure.
The Company’s strategy is based on the principles of innova-
tive development.
• Job creation.
• Added value creation.
• Assistance to local economies.
• Introduction of innovations.
• Ensuring financial and economic stability of the Group’s
enterprises.
• Development of the in-house research and production
base integrated with the leading industry research centers.
The target focus includes the technologies required to imple-
ment the Strategy for overcoming challenges that hinder its
achievement. The Company develops and implements con-
sistently 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 extensive experience with innovative
scientific potential in all fields of the Company’s activities.
Sustainable Development
Environmental aspect
Social aspect
Compliance with the UN goals:
Compliance with the UN goals:
• Environment protection.
• Use of recyclable materials.
• Law compliance.
• Respect for human rights.
• Use of environmentally friendly sources of energy.
• Positive public opinion.
• Energy saving.
• Waste treatment.
• 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 compliant with the potential
of natural ecosystems for self-recovery.
• Increasing the level of health and safety, reducing injuries,
accidents, occupational diseases.
• Reduction of man-induced burden and maintenance of
• Quality management.
• Provision of high quality goods and services.
• Continuous improvement of product quality.
• Striving to follow changing demands of consumers.
• Provision of reliable information on the Company’s
products.
• Assistance in the socioeconomic development of the
regions of the Company’s operation.
• Support for local communities in the areas of presence.
• Development of human capital in the territories of the
Company’s operation.
• Addressing socially significant issues in the territories of
the Company’s operation through cooperation with local
communities.
natural environment and human habitat in a favorable state.
• Promotion of education, culture, and sports.
• Rational use, restoration, and protection of natural resourc-
• Support for vulnerable social groups.
es, biodiversity conservation.
• Combating climate change.
• Ensuring competitive compensation and social benefits for
employees.
• Implementation of the world’s best practices in the field of
• Development and training of personnel, formation of
environmental safety.
personnel reserve.
• Good working conditions.
• Development of effective corporate communication with all
stakeholders.
• Implementation of best social practices.
210
211
Annual Report 2020 Human Rights
Responsibility to stakeholders
Sustainable Development
TATNEFT has historically recognized the importance
and value of the fundamental human rights and free-
doms proclaimed by the UN and throughout its activi-
ties, it observes the responsibility commitments con-
cerning the principles of human rights, labor relations,
and the fight against corruption as reflected in interna-
tional declarations and conventions:
• UN Universal Declaration on Human Rights;
• UN Declaration on the Environment and Development;
Main areas of monitoring in relation to human
rights aspects:
• Compliance with the requirements of law;
• Internal audit in terms of compliance with corporate
procedures and standards according to business lines;
• Conducting procedures for assessing the impact of
production activities on environment and the effectiveness
of health and safety measures;
• Guiding Principles on Business and Human Rights en-
dorsed by the resolution of the UN Human Rights Council;
• Interaction with a trade union organization and monitoring
the implementation of a Collective Bargaining Agreement;
• OECD Guidelines for Multinational Enterprises;
• Analysis of feedback, including that within the Hotline
• Declarations and Conventions of the International Labor
Organization concerning multinational corporations and
social policy, labor, freedom of association, and protection
of the right to organize and to bargain collectively, as well
as the Social Charter of Russian Business.
The Company recognizes and respects the rights of each
employee to collective representation, freedom of associa-
tion, the right to organize employees into trade unions, and
the right t collective bargaining.
The Company assesses its activities in the field of human
rights in the course of regular assessment of corporate prac-
tices, including in the form of management self-assessment.
The Company’s services and divisions that are directly
related to the personnel management, security, and an-
ti-corruption activities are regularly trained in human right
aspects. Employees of the Company, including the services
related to the personnel and security management activities,
are continuously involved in procedures regarding human
rights aspects and regularly take appropriate training. The
Company plans to develop a human rights topic within the
Corporate University with the involvement of employees of
contractors and suppliers.
The Company’s human-right-related activities are assessed
in the course of analyzing aspects and drawing up a report on
sustainable development.
program.
When implementing business projects in the countries
with different political systems and cultural traditions, the
Company believes that everyone should enjoy all the rights
and freedoms proclaimed, including the right to work, the
right to a favorable environment, the rights of indigenous
minorities and special groups of the population, without
any distinction, regardless of race, skin color, gender, age,
language, religion, political or other beliefs, national or social
origin, disability, property, class, or any other status as well
as equal opportunities for women and men, excluding any
forms of harassment or discrimination in the field of work and
employment.
The Company uses its best endeavors to
prevent any adverse human rights impacts
that is directly related to its business
activities, products or services, business
relations, as well as to preserve the national
cultural identity of ethnic groups inhabiting
the regions of the Company’s operations,
and takes all available measures to eliminate
the consequences of such an impact, should
it happen.
The Company strives for a consensus with suppliers, contractors, and business partners in
the field of fundamental human rights principles and makes certain efforts to prevent human
rights violations in the practices related to the Company’s activities.
Compensation for damage
The Company has clear mechanisms for addressing claims of
and resolving disputes with consumers as well as measures
to prevent them.
All cases of receiving complaints from consumers are reg-
istered, the reasons are analyzed and, in case of objective
claims, appropriate measures are developed. 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 sys-
tems for the collection and protection of consumer data.
Information on 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 required
for the provision of products or rendering 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 the effective security measures.
In 2020, there were no complaints regarding violations of
consumer privacy and loss of consumer data.
Key principles of interaction with
stakeholders
Safety
Consumer health and safety protection includes the provi-
sion of products and services that are safe and do not pose
an unacceptable risk of harm when used or consumed. The
Company controls strictly the 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 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 2020.
Obtaining information
The Company provides consumers with the access to
complete, accurate, and comprehensible information that
enables them to make informed decisions according to
their individual expectations. Contracts concluded for the
supply of products are set out in a clear, precise, and plain
language, do not contain unfair contractual obligations, and
provide clear and sufficient information on the price, product
features, and terms and conditions of the contract.
No cases of noncompliance with the regulatory requirements
in respect of informing consumers on the features of prod-
ucts and services were registered in 2020.
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 promoting products
and services, advertising, and marketing comply with the
legislation of the Russian Federation.
In 2020, no cases of noncompliance of the Company’s activ-
ities with the legislation in the field of promoting 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 require-
ments concerning the provision and use of products.
212
213
Annual Report 2020 Health, safety, and environment in view of
climate change
Health and safety
Strategic priorities
The Company is one of the leaders of the fuel and energy
complex of the Russian Federation and is aware of the nature
and scale of the impact of its activities, correlates them with
the importance of rational use of natural resources, ensuring
safe working conditions, protecting the health of personnel
employed in all business segments and the population living
in the TATNEFT Group organizations’ operation areas as well
as preserving a favorable environment and reducing climate
risks.
Ensuring the safety, protection of human life and health, and
maintaining favorable environment are among the Company’s
key priorities. The Company applies a new version of the
Policy on Health, Safety, and Environment (HSE), taking into
account a climate change issue, formed on the grounds of
international best practices and a risk-based approach. The
Company’s principles in this area are recognition of the pri-
ority of life and health of people to industrial activities, a high
level of industrial safety, ensuring the level of potential for
self-restoration of ecosystems, reducing the negative impact
on the environment and the carbon footprint for a sustainable
energy future.
In 2020, the Board of Directors set long-term goals for
reducing the carbon footprint by 2030 and approved targets
for greenhouse gas emissions for the TATNEFT Group, and
reviewed the organizational structure for managing industrial
and environmental safety, taking into account climate-related
factors.
To achieve this goal, the Company undertakes the fol-
lowing obligations:
• Ensuring safe and healthy working conditions for employ-
ees to prevent injuries and deterioration of health.
• Improving the level of labor and health protection, industrial
and environmental safety, minimizing the risk of accidents
at hazardous production facilities.
• Continuous improvement of HSE performance indicators.
• Ensuring control over potentially adverse impacts on the
environment, occupational safety and health, industrial and
environmental safety in the supply chain and implementing
appropriate measures to minimize/eliminate such impacts.
• Implementation of effective measures for production
control and audit of the implementation of current HSE
standards and rules, emergency prevention — based
on the introduction of modern information technologies,
methods of technical diagnostics and remote monitoring.
The Company implements international
standards ISO 14001:2015 “Environmental
Management System” and ISO 45001:
2018 “Occupational Health and Safety
Management System.”
To improve management practices in
addressing the climate change challenges
it is planned to integrate the standards
of system ISO14064-1:2018; ISO 14064-
2:2019; ISO14064–3:2019
214
The Company aims to achieve leadership in
ensuring accident-free production activities,
safe working conditions for the Company’s
employees as well as rational use of natural
resources, minimizing the adverse impact
on environment, and preserving favorable
environment for the present and future
generations.
Sustainable Development
The Company’s key priority is to ensure life
and work safety.
The Company makes systematic efforts to improve working
conditions in the workplace. The main tool for assessing and
managing working conditions is the procedure regulated
for this purpose by the Russian legislation — the special
assessment of working conditions (SAWC). The 2018–2020
SAWC procedure covered all workplaces of TATNEFT Group
enterprises. Following the special assessment, measures
are being developed to improve working conditions in the
workplaces.
The Company has signed a general contract for scheduled
(once every 5 years) and unscheduled special assessment of
working conditions at workplaces in structural subdivisions in
2020–2021.
Key objectives in the field of industrial safety, labor, and
environmental protection are to improve the level of safety at
hazardous production facilities as well as to ensure the ratio-
nal use of natural resources and reduce the level of adverse
impact on the environment.
The amount of over RUB 1,370 billion has been allocated for
occupational safety efforts in 2020. Average costs per 1 em-
ployee amounted to circa RUB 26.6 thousand. The dynam-
ics of occupational safety expenses for TATNEFT Group, in
particular, per employee, shows a positive trend.
Occupational safety expenses for TATNEFT Group, including per
employee, thous. Rub
Funds spent on occupational safety efforts
Funds spent on occupational safety efforts per 1 employee
Year
2018
2019
2020
1 060 052,66
1 327 699,50
1 370 504,00
In 2020, 17 accidents were registered in the TATNEFT Group, with no fatalities.
Dynamics of occupational injuries in the TATNEFT Group
Year
2018
2019
2020
Number of accidents
(including fatal)
Lost time injury
frequency rate*
Total
6 (1)
22 (3)
17 (0)
Where men
Where women
4 (1)
18 (3)
14 (0)
2 (0)
4 (0)
3 (0)
0,14
0,44
0,34
* Lost time injury frequency rate is the number of injured per 1,000 employees.
23,9
26,8
26,6
LTIFR
0,08
0,26
0,2
215
Annual Report 2020 In 2020, the Lost Time Injury Frequency Rate (the number of
working time loss cases attributed to the total working time in
the organization for the reporting year and normalized per 1
million people/hour) for TATNEFT Group was 0.2.
In 2020, the TATNEFT Group experienced an increase in the
number of days of temporary disability as a result of work-re-
lated accidents. The reason for the increase was the group
cases of injuries that occurred at the end of 2019, for which
the days of disability were transferred to the early 2020.
Environment
Sustainable Development
Dynamics of the number of days of temporary disability due to
accidents
Total
499
431
1 765
2018
2019
2020
men (average per each injured)
women (average per each injured)
458 (114,5)
321 (17,8)
1 583 (113,1)
41 (20,5)
110 (27,5)
182 (67,7)
To organize joint actions of the administration and the trade
union committee to ensure the observance of occupational
safety requirements, to prevent occupational injuries and
occupational diseases, and to preserve the health of employ-
ees, the Company has established an Occupational Safety
Committee. It has 16 members elected on a parity basis — 8
representatives from each party of the partnership. Also, joint
occupational safety committees have been established in
each structural subdivision.
The committees develop a program of joint actions of the
management and the trade union committee to improve
working conditions, occupational safety, prevent occupation-
al injuries and diseases. Members of the committees partic-
ipate in the preparation of the “Occupational Safety” section,
the collective bargaining agreement and occupational safety
agreement, inform employees on the conditions and occu-
pational safety in the workplace, the existing risk of health
damage, and the protection equipment, compensation, and
benefits due to employees.
Production control over compliance with
the industrial safety and labor protection
requirements in TATNEFT Group
Production control in the TATNEFT Group is implement-
ed based on the Regulations “On Health and Safety
Management System in PJSC TATNEFT” and Regulations “On
Production Control of Compliance with Health and Safety
Requirements at Hazardous Production Facilities of PJSC
TATNEFT.”
In-process monitoring in TATNEFT Group provides the
involvement of chief specialists and specialists of opera-
tions and process services and departments in carrying out
preventive measures. The work of the permanent commis-
sion (PC) on occupational safety, the Process Monitoring
Committee, the Fire Safety Commission, and the internal
audit group of the integrated management system has been
organized.
Identification of significant issues of
personnel health and addressing them
In addition to the voluntary medical insurance programs for
outpatient services, inpatient services, rehabilitation treat-
ment, and comprehensive medical care operating under the
contract, a program of sanatorium rehabilitation of employ-
ees involved in harmful and/or dangerous occupational risk
operates in the Company. To preserve health and reduce the
days of temporary incapacity for work, employees engaged
in work with harmful and/or hazardous working conditions
are provided with 14-day sanatorium rehabilitation at least
once every 3 years. In 2020, RUB 5.5 million were refunded
to the sanatorium treatment of employees from the amounts
of insurance contributions for compulsory social insurance
against work-related accidents.
In connection with the novel coronavirus infection, the
Company has taken comprehensive measures to minimize
the risk of infection of its employees and to ensure the unin-
terrupted operation of its units and enterprises.
In its operations, the Company considers responsible policy, the creation of a safe and
favorable environment, the development of cities and localities, and the improvement of the
ecology of the region as its priorities. It aims to become an industry leader in the efficiency of
environmental protection measures.
The Company takes measures to prevent environmental
pollution, reduce and prevent adverse impacts thereon, in
particular, on natural objects with increased vulnerability and
objects the protection and preservation of which is of partic-
ular importance; to increase the energy efficiency of produc-
tion processes, to ensure resource saving, efficient use, and
minimal loss of natural resources.
Production and investment planning include the identification
of all significant impacts on the environment, including re-
duction of losses of oil, gas, and products of oil and gas and
the prevention of their entry into the environment; increasing
efficiency of associated petroleum gas; reducing green-
house gases; reducing significant impacts of the Company’s
activities, products, and services on biodiversity of protected
natural areas and areas of high biodiversity value outside of
protected natural areas; conducting additional risk assess-
ment in the ecologically valuable territories.
The Company implements integrated environmental im-
pact assessment (EIA) approaches for the project from the
construction stage to the liquidation stage within the project
implementation and its affiliated projects; strategic environ-
mental assessment (SEA) in the case of implementing major
infrastructure projects.
A necessary condition for effective performance in this area
and in reducing production risks is greater involvement of
employees and maintaining an open dialogue with stakehold-
ers on the HSE issues.
In 2020, TATNEFT Group enterprises continued their targeted
systematic work in the field of improving the environmental
safety of technological processes.
In 2020, the TATNEFT Group spent RUB 11.3 billion on
environmental protection efforts, which is 30.8% more than
in 2019. The increase in the amount of expenses is due to a
change in the methodology of the Federal State Statistics
Service for the current environmental protection costs ac-
counting: attribution of depreciation charges for the resto-
ration of fixed assets for environmental protection to current
environmental protection expenses.
Environmental protection expenses in TATNEFT Group, mln rub
2020
2019
2018
11 265
12 325
11 002
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
216
217
Annual Report 2020 Spending for environmental activities in accordance with the european classification of
environmental activities
23,1%
For wastewater collection
and treatment
36,1%
For atmospheric air protection
and climate change prevention
3,3%
For waste management
36,7%
For land protection and
rehabilitation (reclamation)
of surface and underground
water
0,001%
For environmental
protection from
noise, vibration,
and other physical
impacts
0,01%
For biodiversity
preservation and
natural areas
conservation
0,02%
For ensuring radi-
ation safety of the
environment
0,2%
For other busi-
ness lines in the
field of environ-
mental protection
0,6%
For research and de-
velopment activities
aimed at reducing ad-
verse human impacts
on the environment
Atmospheric air
Special attention is paid to reducing emissions of harmful
substances into the atmosphere, which is achieved through
the implementation of the following measures:
• To reduce hydrogen sulfide emissions, pilot tests of the
DECONTA air purification unit (Czech Republic) were
conducted at the treatment facilities of JSC TANECO. A
set of measures has been implemented to reduce the total
fuel gas consumption by reducing its supply to the flare
collector purge at the refinery;
• Modernization of production facilities (replacement of
equipment), dismantling of old equipment;
• Introduction of technology of light hydrocarbon vapor
recovery (LHVR) allowed for more than a 4-fold reduction
of carbon emissions as compared with emissions in 1991.
Number of active LHVR units is 42. The amount of carbon
recovered by the LHVR units in 2020 amounted to 28.9
thousand tonnes.
The Company has created a system for automatic monitoring
of atmospheric air quality in its area of operation. In 2020,
automatic air quality control stations as well as a monitor for
displaying information on the state of environment continue
operating in Almetyevsk.
In 2021, TATNEFT Group plans to continue implementing
measures aimed at minimizing the adverse impact on the en-
vironment. Next year, special attention of the TATNEFT Group
will be paid to reducing emissions of pollutants and increas-
ing the volume of compensatory reforestation.
42
Number of active LHVR units
28,9 thous. tonnes
Quantity of carbon recovered by LHVR units
Sustainable Development
APG flared volumes of TATNEFT Group,
mln m³
Efficient use of associated petroleum gas
The Company reduces emissions of pollutants and green-
house gases from APG flaring and dispersion. In 2020, the
reduction in APG flaring as compared to 2019 is mainly due to
a reduction in oil production.
A significant share of emissions of pollutants into the air is
accounted for by the “Exploration and production” business
line (68.1%), with the efficient use of associated petroleum
gas (APG) being one of the main air protection measures and
reducing its flared volume.
The Company’s activities in 2020, aimed at increasing and
maintaining the level of gas value-added use, have allowed
for the increase in the level of APG disposal as compared
to 2019. This allowed the Company to reduce emissions
of pollutants and greenhouse gases from APG flaring and
dispersion.
2020
2019
2018
Dynamics of the level of APG utilization in TATNEFT Group
96,24
1200
1000
800
600
400
200
0
95,98
95,93
2018
2019
2020
Production of APG, mln m³
APG use, mln m³
APG utilization rate, %
The implementation of technological solutions contributes to
the achievement of this indicator. The main ones are overhaul
and expansion of the gas collection system from the facilities
of PJSC TATNEFT, construction of facilities intended for APG
utilization as well as works on their updating, refurbishment,
and modernization.
In 2020, over 6.9 km of PJSC TATNEFT gas pipelines were
overhauled. The project to expand the gas collection system of
Yamashinsky and Tyugeyevsky fields is still being implement-
ed. Construction and installation works are planned for 2021.
44
45
42
96,3
96,2
96,1
95,9
95,8
95,8
95,7
218
219
Annual Report 2020 Greenhouse gas
The Company implements comprehensive measures to
reduce the impact on the climate, taking into account the
content of the UN Framework Convention on Climate Change
(Paris Agreement), which regulates measures to reduce the
content of carbon dioxide in the atmosphere from 2020.
Since 2015, the Company has been accounting for green-
house gas emissions and continues to expand the ac-
counting scope*. The company calculates greenhouse
gas emissions under Scope 1, 2, 3, in accordance with the
requirements of the guidelines of the Ministry of Natural
Resources and Environment of the Russian Federation and
the GHG Protocol.
* In 2020, calculations were made for the following enterprises:
PJSC TATNEFT, JSC TANECO, JSC Nizhnekamsktekhuglerod,
LLC Nizhnekamsk CHP, JSC Almetyevsk Heating Networks, LLC
Tolyattikauchuk, LLC TATNEFT Presskompozit, LLC P-D Alabuga
Steklovolokno, LLC Tatneft-AZS-Tsentr, LLC Tatneft-AZS-Zapad,
LLC Tatneft-AZS-Severo-Zapad, LLC Tatneft Samara, LLC PFTF
for RPM, PJSC Nizhnekamskshina, JSC Nizhnekamsk Mechanical
Plant, JSC Yarpolimermash-TATNEFT, LLC Nizhnekamsk Truck Tire
Factory.
Dynamics of greenhouse gas (GHG)
emissions under Scope 1, 2, 3, (mln tonnes
of CO₂-equivalent)
The company calculates greenhouse gas emissions un-
der Scope 1, 2, 3, in accordance with the requirements
of the guidelines of the Ministry of Natural Resources and
Environment of the Russian Federation and the GHG Protocol.
Dynamics of greenhouse gas (GHG)
emissions under Scope 1, 2, 3, (mln tonnes
of CO₂-equivalent)
2019
2020
Change
Scope 1
Scope 2
4,1
5,2
4,5
4,7
Scope 3
111,1
112,6
0,4
(0,5)
1,5
In 2016 (baseline year), greenhouse gas emissions under
Scope 1 amounted to 4.3 mln tonnes of CO2-equivalent.
2019
2020
111,1
112,6
4,1
4,5
5,2
4,7
Scope 1
Scope 2
Scope 3
120
100
80
60
40
20
0
Dynamics of greenhouse gas (GHG) emissions under Scope 1, 2, 3 by business
lines (mln tonnes of CO₂-equivalent)
Scope 1
Scope 2
Scope 3*
Sustainable Development
Exploration and production
Oil and gas refining
Tire business
Power generation
Retail business
Machine building
Composite materials
Petrochemicals
Other
Total
1,5
0,7
0,001
1,9
0,003
0,012
0,014
0,3
0,000
4,5
2,0
0,9
0,5
0,2
0,036
0,020
0,022
0,9
0,1
4,7
66,4
29,22
11,77
-
5,17
-
-
-
-
112,9
Scope 3* is calculated for category 11 Product Use (The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting
In 2020, the aggregate direct greenhouse gas emissions
of TATNEFT Group amounted to 4.5 mln tonnes of CO2-
equivalent, which is 8% higher than in 2019 (4.1 mln tonnes
of CO2-equivalent). Of the total amount of TATNEFT Group’s
greenhouse gas emissions, over 90% is carbon dioxide.
The growth of direct greenhouse gas emissions in the report-
ing year in the Exploration and Production business line was
expected due to an increase in the share of production of
super viscous oil (as an economically justified business line)
which is produced using thermal methods by injecting steam
generated by burning gas, which leads to carbon dioxide
emissions. Also, a factor in the growth of emissions in 2020 in
the Exploration and Production segment was the scheduled
overhaul work at associated petroleum gas processing facil-
ities, which led to a reduction in its value-added use during
such work.
At the same time, the Company plans to switch to an in-
crease in the meantime between repairs, which will eliminate
the adverse impact of this factor on the emissions in the
coming years. The increase in the Power Generation segment
is associated with the growth of production for the generation
of electric and thermal energy and an increase in the con-
sumption of natural gas (steam generation) for the production
of SVO. More than 90% of direct greenhouse gas emissions
are attributable to stationary fuel combustion sources. Due to
the high share of APG disposal in the TATNEFT Group, green-
house gas emissions from flaring account for less than 7% of
Scope 1 emissions.
The reduction of specific indicators of greenhouse gas emis-
sions in the “Oil and Gas Refining” and “Power Generation”
business lines was achieved with a simultaneous increase in
production indicators.
TATNEFT Group’s indirect greenhouse gas emissions under
Scope 2 in 2020 amounted to 4.7 million tonnes of CO2-
equivalent, which is less than in 2019 by 0.5 million tonnes of
CO2-equivalent. The main reason for the reduction in Scope
2 indirect emissions is the lower electricity consumption
associated with the OPEC+ restrictions on oil production and
the measures taken by the Company to improve energy effi-
ciency within the targeted corporate program. The increase in
greenhouse gas emissions under Scope 3 is associated with
an increase in the sales of petroleum products.
As part of the Company’s efforts to reduce its carbon foot-
print to neutralize greenhouse gas emissions, since 2000,
TATNEFT Group has been implementing a program to plant
and restore forests, taking into account the absorption
capacity of green areas. Measures are being implemented
to improve the efficiency of green planting management,
taking into account biodiversity and the development of
circular bioeconomics. In 2020, 1.97 million saplings were
planted, which, according to preliminary expert estimates,
will compensate for 660 thousand tonnes of CO2-equivalent
greenhouse gas emissions (after trees reach the age of ma-
turity). A total of 12 million trees have been planted since the
Program commencement. The Company plans to automate
the monitoring of the Reforestation Program with an assess-
ment of the forests’ absorption capacity and biodiversity.
In the future, the Company plans to pass the Reforestation
Program validation procedure and verify the results achieved
to compensate for greenhouse gas emissions from forest
plantations on a regular basis.
220
221
Annual Report 2020 Protection of water resources and rational water use
Land reclamation
Sustainable Development
Water discharge into surface water bodies,
mln m³
2020
2019
2018
14,4
16,2
16,6
To protect land, surface, and underground waters,
PJSC TATNEFT manufactured 723 km of pipes in an-
ti-corrosion design, used more than 3,716 thousand
tonnes of highly effective corrosion inhibitors, 10,109
wells were equipped with cathodic protection of casing
strings, 20,107 km of pipelines were equipped with
tread protection, 40 tanks (vertical storage tanks) and
horizontal settling tanks were equipped with electro-
chemical protection against corrosion of the inner and
outer surfaces.
Emergency prevention and elimination
The system of prevention and recovery of emergencies
caused by oil and petroleum spills, protection of the popula-
tion and the environment from their harmful effects is imple-
mented in two main business lines: a set of engineering and
organizational measures aimed at improving the reliability
of production equipment, timely detection of oil spills, and
minimizing losses as well as a set of measures aimed at
prompt response to this type of emergencies.
The Company’s subdivisions have developed and approved
with the EMERCOM of Russia the Plans for Prevention and
Elimination of Oil Spills. Emergency rescue teams have
been created and provided with trained personnel, equip-
ment, and special tools sufficient for the localization and
elimination of oil spills (skimmer installations for oil collec-
tion, booms, special equipment on the chassis of high-mo-
bility vehicles, pumping units, tankers, vacuum installations,
cranes, cargo vehicles, excavators, bulldozers, as well as
equipment and materials, according to the requirements of
regulatory documents).
Irreducible reserves of natural resources have been se-
cured, including for the elimination of oil and petroleum
product spills into water bodies; there are booms and
skimmers.
Water use in TATNEFT Group is in compliance with the Water
Code of the Russian Federation and the Federal Law on
Subsoil, on the grounds of contracts for the use of water bod-
ies, decisions on providing water bodies for use, licenses for
the right to use subsoil for groundwater extraction.
To ensure the standard level of wastewater treatment and
complete exclusion of discharge of polluted effluents into
the environment, JSC TANECO commissioned Water Unit
No. 3 in 2020, which allows reducing water consumption
through the use of recycled water supply; block 1 of the water
treatment plant system and desalination unit were commis-
sioned; automated control system programs on the biological
treatment units; the physical and chemical treatment unit, the
dewatering unit, the desalination unit of treatment facilities
were adjusted; technological standards for the content of
pollutants in wastewater were observed; territory of the sites
and the place of wastewater discharge are maintained in
proper sanitary and environmental condition.
During 2020, a significant scope of work was performed to
improve the reliability of pipelines for various purposes. Anti-
corrosion pipes are used to ensure reliable operation of oil
field pipelines..
Emergency failures at facilities
There were 2 emergency failures during 2018–2020. For each
emergency failure at a hazardous production facility, a tech-
nical investigation of its causes was conducted.
The results of the technical investigation of the emergency
failure causes are included in the report which specifies the
causes and circumstances of the emergency failure, the
scope of damage, violations of industrial safety requirements,
the persons who committed these violations as well as mea-
sures taken to localize and eliminate the consequences of
the emergency failure. The report also contains proposals for
the prevention of similar emergency failures.
The results and causes of each emergency failure were
communicated to the employees within the extraordinary
briefing. The description of the circumstances and causes
of the accident are additionally published in the In-Process
Control of Industrial Safety and Labor Protection corporate
information system.
To prevent the pollution of surface watercourses (rivers)
and water bodies (reservoirs) with oil, stationary oil recovery
structures (ORU), booms, and lagoons are maintained in
working condition.
TATNEFT Group’s emergency failure
statistics
2
2019
0
2020
0
2018
222
In TATNEFT Group, a comprehensive approach is applied to
the reclamation of lands affected during the construction and
operation of facilities, taking into account the categories of land
use, soil types, types of violations, and pollution.
the reclamation of lands affected during the construction and
operation of oil field facilities, loss of piping integrity, the use of
biotechnologies, and the preparation of reclamation projects
have been updated.
To support the reclamation process, PJSC TATNEFT developed
and implemented standards for the permissible residual content
of oil and petroleum products (PRCOPP) for 9 soil types of
industrial significance in 2020. The Company’s standards for
The reduction in the area of affected land is associated with a
reduction in the production program in terms of capital con-
struction and repairs as well as the ongoing maintenance work.
Land reclamation for 2018–2020, ha
2020
2019
2018
865
1139
1336
1588
1593
1956
Area of land affected during the year
Reclaimed during the year
Biodiversity conservation
The largest specially protected natural area of federal impor-
tance located in the region of TATNEFT Group operations is
FSBI National Park Nizhnyaya Kama.
TATNEFT Group does not cause an irreversible impact on bio-
diversity. The main impacts on biodiversity are associated with
the exploration, production, preparation, transportation, and
retailing of petroleum products.
The Biodiversity Conservation Program is being implemented
by JSC TATNEFT. It sets goals for the conservation of biodiver-
sity in the territories of operation at a level that ensures their
sustainable existence and inexhaustible use.
An additional Action Plan is being developed to achieve spe-
cific characteristics of biodiversity in a certain time period and
area. It depends on the results achieved, the socioeconomic
changes within the country.
In 2020, the following measures aimed at preserving biodiver-
sity were implemented: comprehensive monitoring in the area
of operation of PJSC TATNEFT on the territory of the protect-
ed areas of the FSBI SPNR National Park Nizhnyaya Kama;
replacement of uninsulated wires on power lines with steel
insulated wires; maintenance of power lines in a treeless state;
compensation for damage to aquatic bioresources.
223
Annual Report 2020 Personnel
TATNEFT Group provides circa 62 thousand
jobs at 110 enterprises in the Russian
Federation and abroad.
Currently, to ensure effective implementation of the person-
nel policy, the HR strategy of TATNEFT Group until 2030 is
being formed. With the development of operational activi-
ties and the assessment of the need in HR specialists and
operating personnel, the tasks of forming personnel reserve,
training and development, the system of financial and non-
financial incentives, corporate culture, and youth policy, etc.
have been focused on. The HR Management Policy is aimed
at engaging and retaining responsible and professional
employees. Career development, incentives, and employee
Remuneration plan
The Company considers remuneration as a part of an inte-
grated system of financial and nonfinancial encouragement
of personnel, which allows the Company to maintain high
competitiveness by attracting and retaining qualified and
incentivized employees.
The Company’s remuneration and incentive policy is based
on the following approaches: competitiveness, efficiency,
fairness, targeting, and unification.
Any decision to increase the wages of a Company’s employ-
ees is based on the following indicators: the consumer price
performance assessment are among the key areas of the
corporate personnel development system.
A large-scale HR project in 2020 was the opening of new
professions (positions) in the Company and the develop-
ment of an in-house own talent pool to address new tasks of
the Company with more than 300 employees professionally
retrained in the expert group of the IT block at the Company’s
Corporate University. A Project Office was opened in the
Geological Exploration block to retrain and develop its own
personnel.
Plans for 2021 include: implementation of a project for the
development of experts in the field of construction projects,
standardization (unification) of the process of mandatory per-
sonnel training in business blocks and business lines in the
Alfa information system, participation in the development of
instructions for the “Personnel Reserve” and “IDR” modules in
the Mirapolis software.
index (the level of inflation), the minimum consumer budget
in the region, the level of wages in other companies in the
industry, and the increase in labor productivity across the
Company.
The personnel basic income is formed from wages and em-
ployment benefits. Wages include a tariff-based (fixed) part,
according to the Unified Rate Schedule, and bonus-based
(variable) part. The employment benefits provide employees
with a relevant scope of medical and other social guarantees.
Average monthly wage, RUB
Payroll fund, mln RUB
72 201
75000
66000
19 924
63 795
66 439
57000
16 646
17 820
48000
39000
30000
20000
18000
16000
14000
12000
10000
2018
2019
2020
2018
2019
2020
Based on the results of 2020, the ratio of wage to the mini-
mum consumer budget in the Republic of Tatarstan was 4.18.
The ratio of the tariff rate (wage) of the first category with
standard working conditions and the minimum wage for the
Republic of Tatarstan (Minimum Wage Rate of the Republic
of Tatarstan) was 1.29.
Sustainable Development
Level of competence
Career development and employee performance assess-
ment are one of the key areas of the corporate personnel
development system. The Company has built a system for
assessing the professional knowledge and skills of its em-
ployees as well as a comprehensive system for evaluating the
competencies of managers and specialists.
The assessment of the performance and career develop-
ment of managers and specialists is integrated into a unified
system which comprises a comprehensive assessment of
personnel and a 360-degree assessment, the implementa-
tion of individual development plans, and the formation of the
Company Personnel Reserve.
Taking into account the requirements, candidates for
senior positions are assessed in several stages:
1. Assessment of employees’ qualifications;
2. Candidates’ performance (KPI) and activity (participation
in projects) assessment;
3. Professional knowledge and skill assessment;
4. Reliability assessment;
business assets in the context of structural transformations,
730 applications were processed in 2020, namely: for the
TOP 1,000 positions — 204 applications, for the TOP 300
positions — 459 applications, and for the TOP 100 positions
— 62 applications.
Personnel training and development
In 2020, professional development of the Company’s special-
ists was carried out in accordance with the approved plan,
within the framework of the recommendations of the World
Health Organization as well as to comply with the National
Plan for Preventing the Ingress and Spread of the Novel
Coronavirus Infection in the Russian Federation, approved by
the Chairman of the Government of the Russian Federation.
Corporate training programs were organized.
Headcount of trained employees, broken
down by categories and gender, people
5. Professional and psychological assessment.
Employee category
In 2020, 645 individual development plans were approved,
and efforts were made to structure the “life cycle” of the
Company’s individual employee development plan.
Personnel certification
In accordance with the Company’s Personnel Certification
Standard, the executive personnel certification process
under the Executive Office of the General Director of PJSC
TATNEFT has been organized to determine whether the
employees’ competence meets the job and qualification
requirements as well as to assess the opportunities for their
further career growth.
In 2020, 46 employees representing 3 departments and ser-
vices of the Executive Office of PJSC TATNEFT were certified.
The Certification Commission issued 86 recommendations
aimed at improving skills, developing professional and corpo-
rate competencies, applying financial incentives, developing
career, organizing rotation as well as updating organizational
and administrative documents.
Personnel Reserve formation
In 2020, work on the formation of the Company’s personnel
reserve was finished within the framework of an open compe-
tition for the Personnel Reserve of TATNEFT Group.
The Company has a clear hierarchy of management positions
and the following levels are allocated — TOP 100, TOP 300,
and TOP 1000.
In 2020, an additional competition was organized for posi-
tions at the TOP-100, TOP-300, and TOP-1,000 levels for the
most demanded line managers in individual structural and
subsidiary enterprises.
To create and maintain the human resource potential of
Managers
Specialists
Officers
Workers
Total
Total
including
men
including
women
2 669
2 200
7 274
2 909
76
6
13 306
9 479
23 325
14 594
469
4 365
70
3 827
8 731
Total number of hours of external training,
broken down by employee category and by
gender, hours
Employee category
Managers
Specialists
Officers
Workers
Total
Total
including
men
including
women
1495 382
175 392
19 990
302 158
187 796
114 362
504
6
504
590 470
530 481
59 989
1 088 514
893 669
194 845
rub 115,3 bln
In 2020, were allocated for training.
224
225
Annual Report 2020 Corporate University
In 2020, 1,992 persons were trained (offline and online) in 28
courses at the Corporate University. In addition, training was
organized for 694 persons by external providers.
1 992
Trained
32 580
Remote training
The Company has developed and is implementing the follow-
ing targeted programs for professional retraining to develop
managers’ business administration competencies, business
analysis skills, and the use of lean technologies: “Personnel
Reserve. Leaders-1000,” “Business Intelligence School.
0+ Level,” and “Business Intelligence School. Advanced
Level,” “Lean Manufacturing Coach,” “Lean Manufacturing
Specialist.”
The Company is actively developing a distance learning sys-
tem: 32,580 employees were remotely trained in 42 courses
in 2020.
In 2020, the specialists of the Corporate University developed
and implemented 10 corporate professional standards. 2
state professional standards assigned to PJSC TATNEFT were
updated and approved. 2 more state professional standards
assigned to PJSC TATNEFT are currently being developed.
It is planned to develop 10 corporate professional standards
in 2021.
In 2020, 717 employees were assessed using the 360-Degree
method. Following the comprehensive personnel assess-
ment, 635 employees of the TATNEFT Group were provided
with feedback/advice on the IDP formation.
Large-scale work is underway to introduce culture of
self-learning organization. More than 54,000 users were
registered, 39 courses were launched, and 243 webinars
were held in the virtual environment of Mirapolis, the Unified
Platform for Employee Training and Development of TATNEFT
Group. The My book electronic corporate library currently has
over 3,600 registered users.
Youth policy
In 2020, the Youth Organization of PJSC TATNEFT has more
than 22.1 thousand young employees, of which 6,983 are
employees of structural subdivisions of PJSC TATNEFT, 7,174
are employees of TATNEFT Group subsidiaries, 7,937 are em-
ployees of oil industry service companies and organizations,
etc. The share of young employees is 31% — in structural
subdivisions, 30% — in subsidiaries, and 31% — in oil indus-
try service companies and organizations.
The Company organized TATNEFT Volunteers resource cen-
ters in 11 cities and towns of the Southeast of the Republic
226
of Tatarstan, where young employees of the Company were
among the first to take care of elderly and persons at risk
during the pandemic.
Thanks to the young employees, the delivery of 22.5 thou-
sand Kits of Goodness intended for vulnerable social groups
of the population was organized, which were purchased from
funds donated by the Company’s top management to charity
in the amount of quarterly remuneration; employees of the
TATNEFT Group also joined the campaign.
In 2020, the Company took part in an environmental cam-
paign to clean up the areas of water bodies in Almetyevsk,
Leninogorsk, and Nizhnekamsk. The Company’s Youth
Council continued its patronage work with orphaned children.
Efforts were made to promote blood donation among young
people.
During the year, online brainstorming sessions were held at
ZOOM sites, where young employees could demonstrate
their ideas, competencies, knowledge, and accumulated
experience to solve the Company’s business challenges. 50
enterprises of the TATNEFT Group and organizations of the
oil service sector took part in the traditional competition of
professional skills among young employees of the TATNEFT
Group.
In 2020, the Company organized a Sustainable Development
online forum in honor of the anniversary of the TATNEFT
Group’s accession to the UN Global Compact. The Forum
has become an online educational platform for young em-
ployees to improve their knowledge, share experience, ideas,
and competencies in the implementation of the Sustainable
Development Goals.
The Company pays great attention to addressing social and
everyday issues of young people.
Work with veterans
One of the most important activities of a trade union organi-
zation is to work with non-working pensioners — members of
the Trade Union. Today, the number of non-working pension-
ers is 47,172 persons.
Each enterprise has a Council of Veterans, and each prima-
ry trade union organization has a commission for work with
non-working pensioners. Council of Veterans members strive
to provide moral support to each pensioner.
A well-arranged system of cooperation between trade unions,
together with the administration, the Council of Veterans, the
youth organization enables targeted work with non-working
pensioners — members of the Trade Union in many areas
and their social protection. In accordance with the work
plans of the Trade Union and its commissions, approved at a
meeting of the Trade Union and agreed with the administra-
tion, veterans, retirees, an extensive work on the organization
of social protection and carrying out mass cultural, sports,
and recreational activities is performed, and special atten-
tion is paid to employment, moral, and patriotic education
of youth in employees. TATNEFT Group does a lot in terms
of social protection and improving the standard of living for
pensioners.
The work is performed jointly with the Trade Union Committee
and the Council of Veterans. In 2020, a survey of the living
conditions of veterans, identification of veterans whose
apartments and houses needed repair was organized.
Following the results of the conducted surveys, social and
living conditions were improved, and financial assistance was
provided to 41 veterans of PJSC TATNEFT for a total amount
of RUB 2.1 million. Besides, RUB 25.35 million were allocat-
ed for the organization of sanatorium rehabilitation of pen-
sioners in the sanatoriums of PJSC TATNEFT, the Republic
of Tatarstan and the Russian Federation in 2020. On the eve
of the Victory Day, the Company’s management, activists of
the Trade Union and youth committees congratulated each
veteran. The veteran organization of the TATNEFT Group
numbers: 119 war veterans, 741 GPW veterans’ widows, 1,402
homefront workers. They were presented gifts and materi-
al payments totaling RUB 113.3 million (each GPW veteran
received RUB 75 thousand, each GPW veteran’s widow
received RUB 75 thousand, and each homefront worker was
presented RUB 50 thousand).
Creative and meaningful leisure time is of great importance
for the elderly. Any form of leisure time extends the creative
activity of pensioners, preserves internal energy, and opti-
mism, changes the attitude to life, is an environment for new
acquaintances, provides an opportunity to communicate with
people of interest.
According to the Collective Bargaining Agreement and the
Regulations on financing cultural and sports events, funds
from enterprises and trade unions have been allocated and
used efficiently for these events.
Green Fitness classes and other types of physically active
leisure time occupies a significant place in health-improving
work with veterans. At the initiative of General Director of
PJSC TATNEFT, Nail U. Maganov, “Active Longevity Centers”
equipped with hi-tech exercise equipment have been
opened.
TATNEFT and its Trade Union organization, together with the
Council of Veterans, makes every effort to make our veterans
feel confident in the future.
All events held with pensioners are covered in the media.
During the pandemic, TATNEFT Volunteers — young employ-
ees — were among the first in the country to help elder-
ly, take care of pensioners and citizens at risk during the
pandemic, and deliver them food, medicines, and essential
commodities.
In total, during the pandemic period from 19.03.2020 to
07.06.2020, the volunteer centers received 8,094 phone
calls, made 15,617 calls, processed 8,248 requests of which
2,638 were for food delivery and 1,497 for medicine delivery.
Collective bargaining agreement
The Company cares about the welfare and social security
of its employees and their families. It provides its employ-
ees with social benefits and guarantees. The obligations to
ensure the same are stipulated in the Collective Bargaining
Agreement concluded annually between PJSC TATNEFT and
the personnel and covering all employees and non-working
pensioners of the Company.
Sustainable Development
The collective bargaining agreement provides for:
• Benefits and guarantees for employees;
• Social protection of young workers;
• Support for veterans and pensioners.
Структуру социальных льгот и гарантий определяет
Стандарт Коллективного договора Группы «Татнефть»,
который носит рекомендательный характер для всех
предприятий Группы. На предприятиях, входящих
в Группу «Татнефть» заключены свои Коллективные
договоры, которые в содержании и размерах льгот
и гарантий стремятся соответствовать Коллективному
договору ПАО «Татнефть».
The structure of social benefits and guarantees is determined
by the TATNEFT Group’s Collective Bargaining Agreement
Standard, recommended for all Group enterprises. The en-
terprises belonging to TATNEFT Group have concluded their
own collective bargaining agreements which are intended
to comply with the Collective Bargaining Agreement of PJSC
TATNEFT in terms of the content and scope of benefits and
guarantees.
The Collective Bargaining Agreement sets out mutual obliga-
tions of the employer and the Trade Union Committee in 12
sections. They reflect the tasks of effective production man-
agement, organization of safe labor, decent remuneration,
social benefits for employees, and support for non-working
pensioners; a section on guarantees of the trade union orga-
nization is also included. A separate section is dedicated to
social benefits for young employees.
To monitor the implementation of collective bargaining
agreements, the Chairman of the Trade Union Committee of
TATNEFT, deputies, and chief specialists of the Trade Union
Committee, chairmen of the trade union committees of
enterprises visited workplaces regularly, got acquainted with
living and working conditions, and met with the employees
of workshops and teams. Following the personal meetings,
shop meetings of employees and conferences at the enter-
prises of TATNEFT, a set of proposals from employees on im-
proving the Collective Bargaining Agreement, improving the
organization of labor, and problematic areas in the course of
structural changes in the Company was formed. This list was
sent for consideration and search for solutions to the relevant
services and the Conciliation Commission of PJSC TATNEFT
on the development of the Collective Bargaining Agreement.
The Trade Union Committee of TATNEFT took a proactive part
in this work.
The amounts of financial assistance payments for the birth/
adoption of a child, for the burial of close relatives of an em-
ployee/non-working pensioner, for funeral expenses to the
family of an employee/non-working pensioner, to employees
with dependent children with disabilities, the estimated rates
of one-time financial assistance to employees who leave
due to retirement, to employees and pensioners who have
reached the jubilee age were changed upwards in 2020.
227
Annual Report 2020 Nonstate pension scheme
One of the most important aspects of the Company’s social poli-
cy is a nonstate pension scheme for employees.
The pension program of PJSC TATNEFT is based on the
principle of social partnership, in accordance with which the
Company and its employees form a future corporate pension by
joint efforts on a parity basis.
The number of employees of PJSC TATNEFT participating in
the corporate nonstate pension scheme is 8,008 persons. The
actual expenses of PJSC TATNEFT under the nonstate pension
scheme in 2020 amounted to RUB 89,949 thousand.
The number of pensioners of PJSC TATNEFT receiving nonstate
pensions is 9,479 persons. 17,816 persons in TATNEFT Group.
Payments of nonstate pension to pensioners of PJSC TATNEFT
through JSC National NPF for 2020 amounted to RUB 364,800
thousand.
In accordance with the Collective Bargaining Agreement of
PJSC TATNEFT, non-working pensioners who retired before
the establishment of JSC NNPF receive quarterly financial
assistance. The total amount of financial assistance provided to
non-working pensioners of PJSC TATNEFT who retired before
the establishment of NNPF in 2020 amounted to RUB 17,728
thousand. The number of non-working pensioners of PJSC
TATNEFT receiving this financial assistance is 2.8 thousand
persons.
The total amount of social payments to
employees under the collective bargaining
agreement of PJSC TATNEFT (excluding
lump-sum leave payments and interest-free
loans to young employees), mln rub
223,6
231,4
190,7
240
224
208
192
176
160
2018
2019
2020
The increase in the amount of payments in 2020 was due to the
amount of financial assistance provided to the management
of PJSC TATNEFT under the following articles of the Collective
Bargaining Agreement: “Financial assistance to employees due
to their retirement” and “Financial assistance in connection with
any jubilee date,” “Lump-Sum Annual Paid Leave Payment.”
The total amount of social payments to non-
working pensioners under the collective
bargaining agreement of PJSC TATNEFT, mln
rub
56,9
57,8
98,4
100
84
68
52
36
20
2018
2019
2020
The increase in the amount of social payments to non-work-
ing pensioners is due to increased payments to veterans,
widows, and homefront workers to celebrate the 75th anni-
versary of Victory in the Great Patriotic War.
228
Voluntary health insurance
In accordance with Voluntary Health Insurance Agreements,
the total number of insured employees was 23,153 persons.
The total amount under VHI agreements is RUB 328.7 mil-
lion. The Company provides organization and payment of
medical and other services under 4 programs: “Outpatient
Services,” “Inpatient Services,” “Rehabilitation Treatment,” and
“Comprehensive Medical Care.”
rub 328,7 mln
Total amount under voluntary health insurance
agreements
23,153
Total number of insured employees
To reduce infectious diseases, annual seasonal preventive
immunization was conducted at the expense of the VHI funds.
In 2020, 871 employees were vaccinated against seasonal
influenza and 3,438 employees were vaccinated against tick-
borne encephalitis. A medical examination of 18,230 em-
ployees of PJSC TATNEFT under the “Women’s Health” and
“Men’s Health” programs for a total of RUB 33.4 million was
also conducted to detect cancer at an early stage. Within the
framework of the VHI agreement, PCR tests were taken for
the novel COVID-19 coronavirus infection. The total of 8,769
PCR tests were taken.
The Company has 11 sanatorium healthcare centers on
its balance sheet. In 2020, 1,061 employees of structural
subdivisions of PJSC TATNEFT engaged in work with harmful
and/or hazardous production factors rested and improved
their health in sanatorium healthcare centers. 519 employees
enjoyed sanatorium rehabilitation in the “Yuzhny Obyekt.”
A preferential category of citizens of the Russian Federation,
children and citizens who, if medically required, need rehabil-
itation are treated in the Company’s sanatoriums.
In 2020, two sanatorium healthcare centers received a
license for medical rehabilitation: “Ivolga” (Bavly) — for the
rehabilitation of patients with diseases of the central nervous
system (strokes, conditions after brain injuries); “Kosmos”
(Elabuga) — for the rehabilitation of patients with somatic
diseases (diseases of the cardiovascular system, including
heart attacks; diseases of the endocrine system (diabetes,
thyroid diseases (goiter); lung diseases (pneumonia, bron-
chial asthma).
Sustainable Development
High-tech medical carev
Thanks to the significant organizational contribution of TATNEFT,
the Program of Construction and Commissioning of the
Regional Medical Diagnostic Center of TATNEFT Medical Unit
(Almetyevsk) in the Southeast of Tatarstan, providing high-tech
medical care in cardiovascular surgery, traumatology, orthope-
dics, ophthalmology, and urology, has been implemented in a
short period of time. Today, this is a large and modern multi-
purpose medical and preventive treatment facility, which has a
pool of highly qualified personnel and is equipped with the latest
medical equipment.
The clinic uses a complex of high-tech methods of diagnostics
and treatment: hybrid cardiac surgery; radiofrequency ablation
of heart rhythm disorders using CARTO 3 nonfluoroscopic nav-
igation system; neurosurgical operations using neuronavigation
equipment.
Every year, state quotas are allocated for the Medical Unit to
perform high-tech operations for residents of 10 districts of the
Southeast of the Republic of Tatarstan in the fields of cardiovas-
cular surgery, traumatology, orthopedics, and neurosurgery,
which are successfully implemented.
Within the implementation of the state order on provision of high-
tech medical care for residents of the Southeast of the Republic
of Tatarstan, funds in the amount of RUB 291.7 million were allo-
cated. The Medical Unit specialists have fulfilled the state order.
For 2018, funds for the implementation of the state task to
provide medical treatment to residents of the Southeast of the
Republic of Tatarstan were allocated in the amount of RUB 314
million. For 2019, funds for the implementation of the state task
to provide medical treatment to residents of the Southeast of
the Republic of Tatarstan were allocated in the amount of RUB
328.9 million. In 2020 funds to provide medical treatment to
residents of the Southeast of the Republic of Tatarstan were al-
located in the amount of RUB 327.30 million. For 2020, a request
to provide medical treatment to residents of the Southeast of
the Republic of Tatarstan for the amount of RUB 500.27 million
was submitted. As of 01.02.2021, funding in the amount of RUB
260.46 million was approved (CHI HTMC — RUB 237.66 million
and HTMC paid from the budget of the Republic of Tatarstan —
RUB 22.8 million).
Since the opening of the Regional Medical Diagnostic Center in
2008, 2,466 open heart surgeries, 23,264 coronary angiogra-
phies, 8,312 stenting of coronary arteries, 1,136 implantation of
electric cardio stimulators, 919 radiofrequency ablation surger-
ies, more than 729 endoprosthesis replacements of large joints
as well as more than 9,415 microinvasive surgeries on the ante-
rior and posterior eye segments have already been performed.
New effective and minimally invasive surgical treatment using
hybrid technologies is being developed and implemented, such
as transcatheter aortic valve replacement, installation of stent
grafts to eliminate aortic aneurysms, and other vascular and
heart surgeries. To date, 102 such operations have been per-
formed. In 2020, 15 cryoablation surgeries in tachysystolic forms
of cardiac arrhythmias were performed for the first time. These
surgeries have a number of advantages over radiofrequency
ablation, associated with the development of post-surgical com-
plications. These surgeries were carried out jointly with leading
Russian specialists from Moscow and Ufa. The specialists of the
medical unit have performed hybrid surgeries on the aorta and
aortic valve, which is also a major achievement.
229
Annual Report 2020 Housing policy
PJSC TATNEFT is an active participant in and major payer
under the social mortgage housing construction program in
the Republic of Tatarstan.
From 2005 to 2020, inclusive, 124 multiapartment residential
buildings (13,392 apartments) and 40 individual residential
buildings were commissioned for TATNEFT Group employ-
ees under this program. The total area of the commissioned
housing is 895.44 thousand m2.
In 2016, under the Rental Housing program, 2 residential
buildings were constructed (228 apartments with a total
area of 11.5 thousand m2) for temporary residence of the
Company’s employees under lease agreements.
In 2020, 870 apartments with a total area of 53.3 thousand
m2 were constructed and commissioned for the Company
employees.
870 employees
were provided with apartments in 2020
In 2021, it is planned to commission 9 multiapartment resi-
dential buildings (1,226 apartments) with a total area of 86.75
thousand m2, as well as 40 individual residential buildings
with a total area of 4.37 thousand m2 in two rural settlements
of the Republic of Tatarstan.
Organization of summer and winter
holidays for employees’ children in
recreation camps
The Company has 10 children’s recreation camps for 2,663
beds located on the territory of the Company’s activities,
which meet the latest requirements for comfortable living and
recreation.
In 2020, in accordance with the children’s health program,
recreation was organized for 11 thousand children at the
Company’s children’s recreation camps in four shifts.
Much attention is paid to children’s recreation programs aimed
at the comprehensive child development. During the holidays,
qualified teachers, trainers who conduct various informative and
educational activities take care of children.
The company allocated 360 vacation packages for children of
public-sector employees of the oil region municipal districts
and partially financed them in the amount of more than RUB 2
million.
The TATNEFT Group League of Children’s Camps program
allows for the organization of children’s summer recreation
at a qualitatively high level, and ensures the comprehensive
development of the younger generation. In the context of the
restrictions imposed to prevent the spread of COVID-19, a uni-
fied Internet platform for children’s online projects was launched
to organize recreation and leisure activities for children during
the holidays. It comprised the following: KVN School together
with the TATNEFT Team, School of Intelligence and Memory
Development, Summer After-School Club (knowledge that will
be useful in the new academic year) as well as School of Great
Parents for the senior generation. ECO Week special environ-
mental project, Oil Kitchen career guidance project and much
more. The total coverage of the project participants was 150,000
people, with 1,500 children and parents actively participating in
online projects. In July, the record of views of published materi-
als was 400,000.
150 000 people
Total coverage of project participants
1 500 children and parents
Active participants
Sustainable Development
Development of the Company’s core
operations region
The Company sets a high priority on the innovative growth of
the territories of its operation based on smart and environ-
mentally friendly technologies.
The main region of the Company’s operations is the
Southeast of the Republic of Tatarstan with the executive
corporate center located in Almetyevsk. Also, a significant
number of the Company’s production facilities is located in
the proximity to Almetyevsk, including the production assets.
Almetyevsk was assigned a role of the state-of-the-art
technological zone with advanced information technologies
integrated into all spheres of life, including social infrastruc-
ture, medicine, and education.
TATNEFT Charitable Foundation
The TATNEFT Charitable Foundation is an important tool for
implementing TATNEFT’s social policy.
Powered by the Foundation, a unified center of responsibility
for the implementation of charity programs of the TATNEFT
Group is being formed.
The scope of social investments of the TATNEFT Group via
corporate charitable foundations (until 2018, Miloserdie,
Ruhiyat, Tazalyk, and Gifted Children) for 1998–2020 ex-
ceeds RUB 8.3 billion. This includes targeted assistance to
citizens, including the improvement of the financial situation
of the poor, social rehabilitation of the unemployed, people
with disabilities, and other persons, support for education,
science, culture, art and publishing, physical culture and
mass sports, public health prevention and protection, and
environmental efforts.
In 2020, the social investments totaled more than RUB 2.8
billion. Additional contributions from third-party legal entities
and private patrons exceeded RUB 276 million.
Education Development Support
The Company pays great attention to the educational devel-
opment by investing material, organizational, and intellectual
resources at all levels of educational processes. The Company
has financed the refurbishment, repair, and improvement of
material and technical facilities of educational institutions in the
Southeast of Tatarstan — from kindergartens to universities.
It supports the development of the high-quality educational
environment by facilitating open professional interaction of
educators.
Since 2018, the Company has been involved in the implemen-
tation of the Development Strategy of the Almetyevsk State Oil
Institute (ASOI) as a higher oil school. The Strategy covers the
period to 2030 and is aimed at creating a modern smart educa-
tional environment in line with the advanced world trends at the
level of leading research and educational centers of the oil and
gas profile with the priority goals of better education, advanced
science, modern infrastructure and management system.
The Institute is located in the region of the Company’s core
business and is the basic educational institution for training
of professional personnel for the enterprises of the TATNEFT
Group. It has a high potential for being a scientific branch school
providing advanced training and supplementary education.
TATNEFT is an industrial partner of the ASOI and provides
comprehensive support for the development of the Institute’s
material and technical facilities, organizational structure, and the
improvement of professional competence of teaching staff. The
managers and specialists of the Company share their profes-
sional knowledge and experience with students and postgradu-
ate students, act as experts in their scientific works as part of the
educational process.
The scientific and educational activities of the ASOI, along with
traditional specialties, are connected with digital technologies
for reservoir management and innovative mineral resource
management.
Within the strategy implementation, the ASOI together with the
Company has developed the projects aimed at accelerating
the modernization and improvement of educational programs,
attracting and recruiting talented applicants, raising the level
and scope of research and development activities, attracting
and developing the key staff, developing the infrastructure and
laboratory facilities.
Within the framework of the “Innovative Oil and Gas Subsurface
Use” and “Hydraulic Fracturing Treatment” master’s programs
offered at ASOI, the Company employees are now trained in
additional professional training programs with the involvement of
leading Russian scientists in the field of geology, petrophysics,
geophysics, development, hydrodynamics, and subsurface
use.
A modular training program for lean-trainers has been organized
for the purpose of training specialists who are able to give advice
and conduct internal training for employees of the Company in
process and project management, apply lean manufacturing
methods and tools, and have the ability to coordinate the work
of improvement project teams.
The Company pays great attention to the development of
comprehensive command of foreign language in specialists and
managers, which would be used in their work and participation
in foreign projects.
230
231
Annual Report 2020 with Chulpan Khamatova’s Podari Zhizn foundation which
provides targeted assistance to children from Tatarstan
in the treatment of cancer. In addition, support has been
provided to the Science for Children Foundation’s project
“Search for Molecular Genetic Markers for Early Diagnosis of
Predisposition to Tumor Diseases.”
TATNEFT Public Council
In the Company, the practice of Public Councils to improve
the efficient interaction with the stakeholders, including
the awareness level of stakeholders on socially important
aspects of the TATNEFT Group’s activities and the feedback
efficiency.
A Public Council is a collegiate body with the participation of
the Company top management and representatives of the
public concerned — leaders of civil associations and trade
unions, industry experts, media representatives, and the
local population. Nail U. Maganov, General Director of PJSC
TATNEFT, is one of the members of the Public Council.
The Public Council brings together the stakeholders to
discuss topical issues and further develop the solutions
required. The Company lays special emphasis on building
inclusiveness of local people in the Company’s social policy.
Development projects of the TATNEFT Medical Treatment
Unit and a new campus of the higher education institution
of Almetyevsk State Petroleum Institute were submitted for
discussion.
In the course of discussion, the constructive proposals were
developed with due consideration of the proposals received
from public discussion participants.
Public Councils enable the Company to obtain more precise
information on the demand and expectations of the social
environment, distribute corporate resources more efficient-
ly in implementation of the social policy, and increase the
stakeholders’ awareness of the TATNEFT Group activities.
The Public Council activities in 2019–2020 have been devot-
ed to the Company’s socially important infrastructure projects
in healthcare and education.
Despite all the challenges for the Company’s econom-
ic and social activities, the Republic of Tatarstan, and
the country as a whole, the Foundation has not only
implemented the main activities of the program but
also adapted to the current challenges of the time. In a
short time, the foundation was reoriented to the imple-
mentation of current tasks:
1. Assistance to medical institutions, municipalities, and state
authorities. In total, the Company donated over RUB 210
million worth of personal protective equipment, consum-
ables, and other assistance through the foundation.
2. Implementation of the Kits of Goodness charity campaign,
during which 22.5 thousand food packages were formed
and distributed among low-income segments of the
population of the Republic of Tatarstan.
3. To create conditions for distance learning of schoolchil-
dren from large and low-income families, over 300 units of
equipment were collected and distributed. These included
computers, tablets, smartphones, etc.
4. Together with the Quantorium technopark, the production
of personal protective equipment on 3D printers was
launched. In total, more than 5,000 protective screens
and more than 1,000 respirators were manufactured. In
addition, the foundation supported initiative volunteers
from Kazan (3D makers), who printed out more than 2,500
protective screens on their 3D printers and handed them
over to medical institutions in the capital of the Republic of
Tatarstan.
Work continued on the main programs and significant social
projects.
Under the Miloserdie program, targeted assistance is pro-
vided to veterans and people with disabilities, low-income
families, foster children, orphan students, and citizens who
encountered difficult situation. The Company supports
nonprofit organizations. In total, more than 42,600 individuals
and 380 legal entities received targeted charitable assistance
exceeding RUB 2.5 billion in 2020.
Every year, the perimeter of the Foundation’s responsibility is
expanded, and the system of planning and accounting for the
use of funds allocated to charity is improved. The Company
has developed regulations for the consideration of incoming
requests from individuals and legal entities. A special com-
mittee vested with the required powers has been established
to make decisions.
Together with Rusfond, TATNEFT is implementing a project
to form the Volga Region Register of Potential Bone Marrow
Donors (a program of targeted assistance to children of
Tatarstan). A similar joint project is being implemented
232
233
Annual Report 2020 Appendices
to the Annual
Report 2020
234
235
Auditor's Report
Appendices to the Annual Report 2020
Annex 1.
IFRS Consolidated Financial
Statements and Independent
Auditor’s Report
31 December 2019
236
237
Annual Report 2020 Appendices to the Annual Report 2020
238
239
Annual Report 2020 Appendices to the Annual Report 2020
240
241
Annual Report 2020 Appendices to the Annual Report 2020
242
243
Annual Report 2020 Report on Review of
Consolidated Financial Statements
Report on Review of Consolidated
Financial Statements
(in millions of Russian rubles)
Assets
Cash and cash equivalents
Banking: Mandatory reserve deposits with the Bank of Russia
Short-term 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
Right-of-use assets
Deferred income tax assets
Other long-term assets
Total non-current assets
Total assets
Note
31 December 2020
31 December 2019
(restated)*
6
7
8
9
10
11
7
8
9
12
13
14
40 105
1 528
83 734
22 492
44 314
44 988
20 075
995
764
25 157
1 572
84 706
33 880
27 713
53 379
20 770
4 838
1 112
258 995
253 127
1 484
79 163
70 605
2 122
826 569
12 185
2 218
10 100
7 861
102 572
80 578
774
768 897
13 658
2 712
10 164
1 004 446
1 263 441
987 216
1 240 343
15
16
20
17
18
14
15
17
18
12
13
14
19
20
20
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 the Bank of Russia
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 the Bank of Russia
Banking: Customer accounts
Decommissioning provision, net of current portion
Lease liabilities, net of current portion
Deferred income tax liability
Other long-term liabilities
Total non-current liabilities
Total liabilities
Shareholders’ equity
Preferred shares (authorised and issued at 31 December 2020 and at 31 December
2019 – 147,508,500 shares; nominal value at 31 December 2020 and at 31 December
2019 – RR 1.00)
Ordinary shares (authorised and issued at 31 December 2020 and at 31 December
2019 – 2,178,690,700 shares; nominal value at 31 December 2020 and at 31 December
2019 – RR 1.00)
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Less: Ordinary shares held in treasury, at cost
(75,636,735 shares at 31 December 2020 and 2019)
Total Group shareholders’ equity
Non-controlling interest
Total shareholders’ equity
Total liabilities and equity
Appendices to the Annual Report 2020
10 961
83 893
823
1 764
13 659
146 753
30 401
2 905
352
291 511
23 652
1 551
1 872
55 372
10 679
33 343
13 871
140 340
431 851
19 592
60 289
55 865
4 451
20 293
158 671
37 465
598
869
358 093
21 657
2 522
1 381
50 347
11 578
35 123
7 512
130 120
488 213
746
746
11 021
11 021
84 437
2 186
739 641
(10 359)
827 672
3 918
831 590
84 437
1 073
658 614
(10 359)
745 532
6 598
752 130
1 263 441
1 240 343
* Certain amounts have been restated to reflect the finalized fair value measurement of the assets and liabilities of the acquired entities (Note 28).
244
245
Annual Report 2020 Consolidated statement of profit or loss and other
comprehensive income
(in millions of Russian rubles)
Sales and other operating revenues on non-banking activities, net
Costs and other deductions on non-banking activities
Operating expenses
Purchased crude oil and refined products
Exploration
Transportation
Selling, general and administrative
Depreciation, depletion and amortization
12,13,24
Impairment losses on financial assets net of reversal
Impairment losses on property, plant and equipment and other non-financial
assets net of reversal
Taxes other than income taxes
Maintenance of social infrastructure and transfer of social assets
Total costs and other deductions on non-banking activities
Loss on disposals of interests in subsidiaries and associates, net
Fair value losses from financial assets at fair value through profit or loss
Other operating income, net
7,9
12
14
12
9
Note
24
Year ended
31 December 2020
Year ended
31 December 2019
720 677
932 296
(146 088)
(140 040)
(89 340)
(2 515)
(35 453)
(60 066)
(40 865)
(756)
(6 677)
(185 539)
(10 890)
(58 112)
(1 006)
(37 356)
(52 637)
(35 165)
(6 737)
(30 875)
(307 654)
(9 340)
(578 189)
(678 922)
(54)
(5 180)
836
(41)
(210)
1 203
Operating profit on non-banking activities
138 090
254 326
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
Net expense on creating provision for credit losses associated with debt financial
assets
Operating expenses
Gain arising from dealing in foreign currencies, net
Other operating income, net
Total net interest, fee and commission and other operating (expenses)/
income and (losses)/gains on banking activities
Other income/(expenses)
Foreign exchange gain/(loss), net
Interest income on non-banking activities
23,24
23
8
29
22
18 086
(9 611)
(3 629)
(8 438)
96
68
(3 428)
5 597
4 428
22 584
(12 118)
(462)
(9 871)
70
2 099
2 302
(207)
1 201
246
Interest expense on non-banking activities, net of amounts capitalised
Share of results of associates and joint ventures, net
Total other income/(expense), net
Profit before income tax
Income tax
Current income tax expense
Deferred income tax benefit/(expense)
Total income tax expense
Profit for the period
Other comprehensive income/(loss) net of income tax:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments
(Loss)/gain on debt financial assets at fair value through other comprehensive
income, net
Items that will not be reclassified to profit or loss:
(Loss)/gain on equity financial assets at fair value through other
comprehensive income, net
Actuarial loss on employee benefit plans
Other comprehensive income
Note
22
14
Appendices to the Annual Report 2020
Year ended
31 December 2020
Year ended
31 December 2019
(7 384)
(258)
2 383
137 045
(35 820)
1 348
(34 472)
102 573
2 099
(224)
(247)
(597)
1 031
(5 407)
127
(4 286)
252 342
(57 626)
(1 898)
(59 524)
192 818
(509)
170
1 225
(377)
509
Total comprehensive income for the period
103 604
193 327
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)
Ordinary
Preferred
Weighted average shares outstanding (millions of shares)
Ordinary
Preferred
103 490
(917)
102 573
104 603
(999)
103 604
45,92
46,92
2 103
148
20
20
192 260
558
192 818
192 343
984
193 327
85,43
85,43
2 103
148
247
Annual Report 2020 Consolidated statement of changes in equity
(in millions of Russian rubles)
Appendices to the Annual Report 2020
Attributable to Group shareholders
Non-con-trolling
interest
Total
equity
Balance at 1 January 2019
2 250 716
11 767
84 437
(10 251)
(1 537)
1 601
1 740
683 508
771 265
5 516
776 781
Number
of shares
(thousands)
Share
Additional
Treasury
capital
paid-in capital
shares
Actuarial loss
Foreign currency
Gain/(loss) on financial
Retained
Total shareholders’
on employee
benefit plans
translation
assets at fair value
earnings
equity
adjustments
through other compre-
hensive income, net
Profit for the year
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Treasury shares
- Additions
- Disposals
Disposal of non-controlling interest in subsidiaries
Acquisition of non-controlling interest in subsidiaries
Dividends declared (Note 20)
Disposal of equity financial assets at fair value through other comprehensive
income
-
-
-
(154)
(156)
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(108)
(109)
1
-
-
-
-
Balance at 31 December 2019
2 250 562
11 767
84 437
(10 359)
Balance at 1 January 2020
2 250 562
11 767
84 437
(10 359)
Profit/(loss) for the year
Other comprehensive (loss)/income for the year
Total comprehensive income/(loss) for the year
Disposal of non-controlling interests in subsidiaries
Dividends declared (Note 20)
Subsidiary’s shares requested for the
redemption (Note 16)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(377)
(377)
-
(509)
(509)
-
192 260
192 260
969
-
83
969
192 260
192 343
-
-
-
-
-
-
-
-
(108)
(109)
1
-
-
(217 968)
(217 968)
(814)
814
-
558
426
984
-
-
113
(14)
(1)
-
192 818
509
193 327
(108)
(109)
1
113
(14)
(217 969)
-
1 895
658 614
745 532
6 598
752 130
1 895
658 614
745 532
6 598
752 130
-
103 490
103 490
(389)
-
1 113
(917)
(82)
102 573
1 031
(389)
103 490
104 603
(999)
103 604
-
-
-
-
-
(22 518)
(22 518)
(56)
(1)
(56)
(22 519)
55
55
(1 624)
(1 569)
-
-
-
-
-
-
(1 914)
(1 914)
-
(597)
(597)
-
-
-
-
-
-
-
-
-
1 092
1 092
-
2 099
2 099
-
-
-
Balance at 31 December 2020
2 250 562
11 767
84 437
(10 359)
(2 511)
3 191
1 506
739 641
827 672
3 918
831 590
248
249
Annual Report 2020
Consolidated cash flow statement
(in millions of Russian rubles)
Note
Year ended
31 December
2020
Year ended
31 December 2019
Operating activities
Profit for the year
Adjustments:
Net interest, fee and commission and other operating expenses/(income) and losses/
(gains) on banking activities
Depreciation, depletion and amortization
12,13,24
Income tax expense
Impairment losses on financial assets net of reversal
Impairment losses on property, plant and equipment and other non-financial assets net
of reversal
Loss on disposals of interests in subsidiaries and associates, net
Expenses from changes in the fair value of financial assets measured at fair value
through profit or loss
Effects of foreign exchange
Share of results of associates and joint ventures, net
Interest income on non-banking activities
Interest expense on non-banking activities, net of amounts capitalised
Other
Changes in operational working capital related to operating activities, excluding cash:
14
7,9
12
9
22
22
Accounts receivable
Inventories
Prepaid expenses and other current assets
Securities at fair value through profit or loss
Accounts payable and accrued liabilities
Taxes payable
102 573
192 818
3 428
(2 302)
40 865
34 472
756
6 677
54
5 180
989
258
(4 428)
7 384
3 139
(26)
8 302
695
2
22 462
(7 064)
35 165
59 524
6 737
30 875
41
210
23
(127)
(1 201)
5 407
(1 168)
(7 252)
(1 462)
1 901
-
10 648
(1 603)
Net cash provided by non-banking operating activities before income tax and
interest
225 718
328 234
Appendices to the Annual Report 2020
Net interest, fee and commission and other operating (expenses)/income and (losses)/
gains on banking activities
Adjustments:
Note
Year ended
31 December
2020
Year ended
31 December
2019
(3 428)
2 302
Net expense on creating provision for credit losses associated with debt financial
assets
8
Provision/(reversal of provision) for losses on credit related commitments
Change in fair value of debt financial assets through profit or loss
Other
Changes in operational working capital on banking activities, excluding cash:
Mandatory reserve deposits with the Bank of Russia
Due from banks
Banking loans to customers
Due to banks and the Bank of Russia
Banking customers accounts
Debt securities issued
Securities at fair value through profit or loss
Other financial liabilities at fair value through profit and loss
Net cash provided/(used) by banking operating activities before income tax
3 629
100
201
4 664
44
5 180
21 713
(9 866)
(17 038)
(333)
1 178
(2 687)
3 357
462
(84)
(1 148)
(1 737)
303
(6 393)
5 542
5 094
(17 408)
(186)
(3 948)
3 261
(13 940)
Continuation of the table on page 252
250
251
Annual Report 2020 Начало таблицы на стр. 251
Income taxes paid
Interest paid on non-banking activities
Interest received on non-banking activities
Net cash provided by operating activities
Investing activities
Note
Year ended
31 December
2020
Year ended
31 December
2019
(29 670)
(64 268)
(3 348)
4 309
(2 222)
1 002
200 366
248 806
Additions to property, plant and equipment
(104 668)
(95 994)
Proceeds from disposal of property, plant and equipment
Acquisition and increase of interest in associate
Net cash flow from acquisitions of subsidiaries
Disposals of subsidiaries and associates, less cash disposed of in them
Purchase of securities at fair value through other comprehensive income
Purchase of securities at amortised cost
Proceeds from disposal of securities at fair value through other comprehensive income
Proceeds from redemption of securities at amortised cost
Proceeds from sale of non-current assets held for sale
Proceeds from 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
Purchase from sale of other non-current assets
Net cash used in investing activities
Financing activities
Proceeds from issuance of debt from non-banking activities
Repayment of debt from non-banking activities
Repayment of principal portion of lease liabilities
Issuance of bonds
Redemption of bonds
Repayment of subordinated debt
Dividends paid to shareholders
Dividends paid to non-controlling shareholders
Proceeds from government grants
Net cash used in financing activities
Net change in cash and cash equivalents
Effect of foreign exchange on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the period
252
767
(1 940)
-
-
(39 938)
(14 752)
39 072
5 819
242
1
674
(10 016)
21 211
(1 270)
(489)
1 678
-
(20 438)
(10)
(48 186)
(1 263)
48 724
9 087
1 118
-
27 198
(27 936)
3 981
(642)
(1 209)
(105 287)
(103 892)
218 758
(225 083)
(1 419)
3 198
(3 029)
(1 545)
115 346
(107 212)
(1 352)
21 790
(1 053)
(2 140)
(77 560)
(212 814)
(1)
5 090
(81 591)
13 488
1 460
25 157
40 105
(1)
3 231
(184 205)
(39 291)
(1 041)
65 489
25 157
28
9
9
29
29
29
29
20
20
19
6
6
Appendices to the Annual Report 2020
Notes to the consolidated
financial statements
(in millions of Russian rubles)
Note 1:
Оrganisation
Note 2:
Basis of preparation
PJSC TATNEFT (the “Company”) and its controlled
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 of crude oil and associated
petroleum gas processing, marketing of crude oil and
refined products as well as production and marketing of
petrochemicals and banking activities (Note 27).
The Company was incorporated as an open joint stock
company (now referred to as a public joint stock company)
effective 1 January 1994 (the “privatization date”) pursu-
ant to the approval of the State Property Management
Committee of the Republic of Tatarstan. 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 of the President of the Russian Federation 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 Company does not have an ultimate controlling party.
As at 31 December 2020 and 2019 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 reorga-
nization 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.
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 accompa-
nying 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)
accounting for oil and gas properties and fixed assets related to
oil refining; (7) recognition and disclosure of guarantees, contin-
gencies and commitments; (8) accounting for decommissioning
provision; (9) pensions and other post-retirement benefits; (10)
business combinations and goodwill and (11) lease liabilities and
right-of-use assets recognition.
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.
Note 3:
Summary of significant
accounting policiesи
The key accounting policies used in preparing these con-
solidated financial statements are presented below. These
principles have been applied consistently to all periods pre-
sented in the statements.
253
Annual Report 2020 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 func-
tional currency, adjustments resulting from translating foreign
functional currency assets and liabilities into Russian Rubles
are recorded in other comprehensive income. Revenues,
expenses and cash flows are translated at average exchange
rates of the relevant period (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 rates of exchange, as published by the Central
Bank of the Russian Federation (“the Bank of Russia”), of
the Russian Ruble (“RR”) to the US Dollar (“US $”) at 31
December 2020 and 31 December 2019 were RR 73.88 and
RR 61.91 to US $, respectively. Average rates of exchange for
the years ended 31 December 2020 and 31 December 2019
were RR 72.15 and RR 64.74 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 acquired assets
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis
at the non-controlling interest’s proportionate share of the
acquiree’s net assets 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
254
acquired is recorded within other non-current assets as
goodwill. If the total of consideration transferred, non-con-
trolling 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
or 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 rec-
ognised 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 recognise further losses, unless it has
incurred obligations or made payments on behalf of the
associate or joint venture.
Unrealised gains on transactions between the Group and
its associates and joint ventures are eliminated to the extent
of the Group’s interest in the associates and joint ventures;
unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
The Group reviews equity method investments for impair-
ment 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 29.
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 dis-
counts, 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
Appendices to the Annual Report 2020
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 trans-
actions 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 contrac-
tual provisions of the instrument.
Financial assets – classification and subsequent
measurement – measurement categories.
The Group classifies financial assets in the following mea-
surement categories: FVTPL, FVOCI and AC. The classifica-
tion 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 ac-
tivities 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 con-
tractual cash flows or to hold contractual cash flows and sell,
255
Annual Report 2020 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 – 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 ac-
tivities 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 con-
tractual 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 Group 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 guar-
antee 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 pre-
sented in the consolidated statement of financial position net
of the allowance for ECL. For loan commitments and financial
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 29 for a description of how the Group deter-
mines when a SICR has occurred. If the Group determines
that a financial asset is credit-impaired, the asset is trans-
ferred 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 29. For financial assets that are
purchased or originated credit-impaired (“POCI Assets”), the
ECL is always measured as a Lifetime ECL. Note 29 provides
information about inputs, assumptions and estimation
techniques used in measuring ECL.
The Group applies the IFRS 9 simplified approach for
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
256
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 transfer-
ring 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 sub-
stantially 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
Appendices to the Annual Report 2020
by the original effective interest rate (or credit-adjusted effec-
tive 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 clas-
sification 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 extin-
guished (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 extin-
guishment 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 consid-
ered. 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 ac-
counted 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 present-
ed 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.
Offsetting financial instruments.
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position only when
257
Annual Report 2020 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 simultane-
ously. 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
the Bank of Russia, other than mandatory reserves deposits
with the Bank of Russia, 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 Bank of Russia.
Mandatory cash balances with the Bank of Russia 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 consoli-
dated 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 character-
istics, 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. 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.
258
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.
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 invest-
ments 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 catego-
ries: (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 29 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 irre-
vocable 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 un-
drawn 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 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.
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 counterpar-
ty, 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 the Bank of Russia” or “Customer
accounts”.
Securities purchased under agreements to resell (“reverse
repo agreements”), which effectively provide a lender’s re-
turn to the Group, are recorded as “Due from other banks” or
“Banking loans 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 agree-
ments 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 contrac-
tual 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.
Appendices to the Annual Report 2020
Due to other banks and the Bank of Russia.
Amounts due to other banks and the Bank of Russia 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 individu-
als, state or corporate customers and are carried at AC.
Subordinated debt.
Subordinated debt can only be paid in the event of a liqui-
dation after the claims of other higher priority creditors have
been met. Subordinated debt is carried at AC.
Debt securities and bonds issued.
Debt securities issued include promissory notes and cer-
tificates 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 trans-
action 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 rea-
sonable 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/ex-
pense. 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.
259
Annual Report 2020 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 the Bank of Russia 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 condi-
tion and location.
Prepaid expenses.
Prepaid expenses include advances for purchases of prod-
ucts 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.
The base rate of mineral extraction tax (MET) relating to oil
production, established for 2020 at RR 919 per tonne (2019:
RR 919 per tonne), adjusted depending on the average world
market prices of the Urals blend and the RR/US $ average
exchange rate.
From 1 January 2017 an additional coefficient was introduced
into the calculating the MET, which increases the amount
of tax in 2020 equal to RR 428 per tonne (2019: RR 428 per
tonne).
Since 2019, additional coefficients have been added to
the MET calculation in connection with the introduction
of a "reverse excise" on crude oil and with a reduction in
export customs duties as part of the completion of the tax
maneuvere.
In 2019-2020 for some fields and reserves, the Group applies
coefficients that reduce the generally established MET tax
rate on the basis of the Tax Code of the Russian Federation:
• for superviscous oil with viscosity in the range from 200 to
10,000 Megapascal second (in reservoir conditions);
• for superviscous crude oil (with viscosity of 10,000
Megapascal second in reservoir conditions);
• for oil produced from domanic productive sediments.
In October 2020, amendments were made to the Tax Code
of the Russian Federation and the Law "On the Customs
Tariff", as a result of which, starting from 1 January 2021,
the tax incentives for MET for the extraction of superviscous
oil are canceled and the possibility of establishing special
formulas for calculating the rates of export duties in relation
to superviscous oil is excluded. At the same time, for the
production of superviscous oil in subsoil areas located fully
or partially within the borders of the Republic of Tatarstan,
subject to certain conditions, a tax deduction for MET is
established, which is applied from 1 January 2021 until the
tax period in which the deduction amount for the first time will
be more than RR 36 billion. In addition, incentive coefficients
in the mineral extraction tax calculation formula have been
canceled for oil production from depleted subsoil areas,
while the right to switch to the calculation of tax on additional
income has been granted.
MET is recorded within taxes other than income tax in the
consolidated statements of profit or loss and other compre-
hensive income.
Reverse excise on crude oil refined and negative excise
on gasoline and diesel fuel sold on domestic market.
In the consolidated statement of profit or loss and other
comprehensive income reverse (“negative”) excise on crude
oil refined and negative excise on gasoline and diesel fuel
is recognised as a reduction (additional expense, if reverse
excise payable) in excise tax expense deducted from sales
and other operating revenues on non-banking activities and
is presented in prepaid expenses and other current assets
line in the statement of consolidated financial position.
Value added tax.
Value added tax (VAT) at a standard rate of 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 submis-
sion 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 within Prepaid expenses and
other current assets and Taxes payable.
• for fields whose depletion rate exceeds more than 80%;
Oil and gas exploration and development cost.
• for fields with initial recoverable reserves less than 5 million
tons;
260
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 assets 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 discov-
ery. 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 ex-
ploration 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.
Appendices to the Annual Report 2020
assets, 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.
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
Years
30-50
10-35
Property, plant and equipment.
Machinery 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 ex-
pensed 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 construction of property, plant and
equipment are accounted for within Construction in progress.
Non-current 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
non-current assets with recorded values that are not expect-
ed 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 impair-
ment 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.
Non-current assets committed by management for disposal
within one year, and meet the other criteria for held for sale
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
impairment losses and losses on disposal on property, plant
and equipment and other non-financial assets net of reversal
in the consolidated statement of profit or loss and other
comprehensive income.
Leases.
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consid-
eration. An asset is identified by being explicitly specified in
a contract, or implicitly specified at the time that the asset is
made available for use by the customer. The Group does not
have the right to use an identified asset if the supplier has the
substantive right to substitute the asset throughout the period
of use.
To assess whether a contract conveys the right to control
the use of an identified asset for a period of time, the Group
assessed whether both of the following met:
• The Group has the right to obtain substantially all of the
economic benefits from use of the identified asset, and
• The Group has the right to direct the use of the identified
asset.
The Group leases service equipment used in oil extraction,
land plots, railway tanks and other assets. Some of service
agreements include lease component for a heavy and spe-
cial vehicles used in oil production, drilling rigs, pipeline. The
lease payments on heavy and special vehicles, drilling rigs,
pipelines, land plots and railway tanks comprise of variable
payments that are not based on an index or rate and there-
fore are recognised in profit or loss in the period in which
those payments occur. Service equipment lease contracts
are typically made for fixed periods from 1 to 3 years, but
have extension options as described below.
261
Annual Report 2020 Leases are recognised as a right-of-use asset and a cor-
responding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is
allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset
is depreciated over the shorter of the asset’s useful life and
the lease term on a straight-line basis. The estimated useful
lives of right-of-use assets are determined on the same basis
as those of property, plant and equipment.
Assets and liabilities arising from a lease are initially mea-
sured on a present value basis. Lease liabilities include the
net present value of the lease payments that are not paid at
the commencement date, discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used. Generally, the
Group determines its incremental borrowing rate as possible
borrowing rate offered by banks for the funds, necessary to
obtain an asset of similar value in a similar economic environ-
ment with similar terms and conditions.
The right-of-use asset is initially measured at cost, which
comprises the amount of the initial measurement of lease
liability adjusted for any lease payments made at or before
the commencement date less any lease incentives received,
plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located. The
right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of
the lease liability.
The term used to measure a liability and an asset in the form
of a right of use is defined as the period during which the
Group has sufficient confidence that it will lease the asset.
Any option for renewal or termination is taken into account
when estimating the term. Extension options are included
in a number of equipment leases across the Group. The
majority of extension options held are exercisable only by the
Group and not by the respective lessor. The Group considers
monetary and non-monetary aspects to determine the lease
term of the contract, such as business plans, past practices
and economic incentives to extend or terminate the contract
(the presence of inseparable improvements, integration
to the production process, potentially high consequential
termination costs, etc.) and other factors that may affect
management’s judgment on the lease term. Extension
options and termination options are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated).
Potential future cash outflows that have not been included in
the lease liability because it is not reasonably certain that the
leases will be extended (or not terminated) are not significant.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less.
The Group presents right-of-use assets and lease liabilities in
the separate lines in the Consolidated Statement of Financial
Position.
262
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 re-
ceived 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 cred-
it-impaired, the effective interest rate is the rate that dis-
counts 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 vari-
ous 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 arising
as the actuarial gains or losses from changes in assumptions
and from experience adjustments with regard to post em-
ployment 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 for the year
immediately.
Plan assets are measured at fair value and are subject to cer-
tain 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, includ-
ing 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.
Share-based payments.
The Group operates a cash-settled share-based compen-
sation plan, under which the entity receives services from
employees as consideration for equity instruments (options
or shares) of the Cоmpany.
Services, including employee services received in exchange
for cash-settled share-based payments, are recognised at
the fair value of the liability incurred and are expensed when
consumed. Until the liability is settled, the Group remeasures
the fair value of the liability at the end of each reporting
period and at the date of settlement, with any changes in fair
value recognised in profit or loss for the period. Market con-
ditions, such as increase of share prices upon which vesting
(or exercisability) is conditioned, as well as non-vesting
conditions, are taken into account when estimating the fair
value of the cash-settled share-based payment granted and
when remeasuring the fair value at the end of each reporting
period and at the date of settlement. Vesting conditions,
other than market conditions, are not taken into account
when estimating the fair value of the cash-settled share-
based payment at the measurement date, however are taken
into account by adjusting the number of awards included in
the measurement of the liability arising from the transaction.
The amount recognised for the services received during
the vesting period is based on the best available estimate of
the number of awards that are expected to vest. The Group
revises that estimate, if necessary, if subsequent information
indicates that the number of awards that are expected to vest
differs from previous estimates.
On the vesting date, the Group revises the estimate to equal
the number of awards that ultimately vested. The cumulative
amount ultimately recognised for services received as
consideration for the cash-settled share-based payment
is equal to the cash that is paid. The terms of share-based
compensation plan, initial data, assumptions and models
used in measurement of cash-settled share-based compen-
sation plan are presented in Note 19.
Decommissioning provisions.
The Group recognises a liability for the present value of
legally required or constructive decommissioning provisions
associated with non-current 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 pipe-
lines. 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
Appendices to the Annual Report 2020
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 decommis-
sioning 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 capitalises the associated decommissioning costs
as part of the carrying amount of the non-current 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 recov-
ered 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 report-
ing 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 trans-
action, when initially recorded, affects neither accounting
nor taxable profit. 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 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
263
Annual Report 2020 future and there is sufficient future taxable profit available
against which the deductions can be utilised.
parties. Revenue is recognised net of discounts, value added
taxes, export duties and excise tax.
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 tempo-
rary 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 compa-
nies of the Group outside the Consolidated Taxpayer 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 compre-
hensive income and taxes payable in the consolidated state-
ment 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 compre-
hensive income and other accounts payable and accrued
expenses in the consolidated statement of financial position,
respectively.
Share capital.
Ordinary shares and non-redeemable preference shares with
discretionary dividends are both classified as equity.
Dividends paid to shareholders are determined by the Board
of Directors and approved at the annual 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 ordinary
and preferred shares to the extent that each class may share
in earnings if all the earnings for the period had been distrib-
uted. Treasury shares are excluded from calculations. The
total earnings allocated to each class of shares are deter-
mined by adding together the amount allocated for dividends
and the amount allocated for a participation feature.
Revenue from Contracts with Customers.
Revenue is income arising in the course of the Group’s
ordinary activities. Revenue is recognised in the amount of
transaction price. Transaction price is the amount of consid-
eration to which the Group expects to be entitled in exchange
for transferring control over promised goods or services to a
customer, excluding the amounts collected on behalf of third
264
The Group’s business activities include sales of crude oil
and refined products, sales of tires and petrochemical raw
materials. Revenues are recognised 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 substan-
tially 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 recognised. Management uses judgement to determine
whether factors collectively indicate that the customer has
obtained control.
If the contract includes variable consideration, revenue is
recognised only to the extent that it is highly probable that
there will be no significant reversal of such revenue.
The Group operates a chain of own petrol (gas) stations
selling refined products. Revenue from the sale of products
is recognised when a group entity sells a product to the
customer. Payment of the transaction price is due immedi-
ately when the customer purchases the fuel. Since no right of
return, no refund liability is recognised.
Revenues from providing services are recognised in the
period in which the services are rendered.
A receivable is recognised when the goods are delivered
as this is the point in time that the consideration is uncondi-
tional 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 liabil-
ity, for example fees for evaluating creditworthiness, eval-
uating and recording guarantees or collateral, negotiating
Appendices to the Annual Report 2020
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 cred-
it-impaired, the effective interest rate is the rate that dis-
counts 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 risk 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.
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 rep-
resents 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 be-
half 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.
Government grants.
Grants from the government are recognised at their fair
value where there is reasonable assurance that the grant
will be received and the Group will comply with all attached
conditions. Government grants relating to the purchase of
property, plant and equipment are included in non-current
liabilities as deferred income and are credited to profit or loss
on a straight line basis over the expected lives of the related
assets.
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 con-
solidated 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 Fund”;
• Presentation of Revenue net of excise tax, including
reverse excise;
• Sale and purchase of oil under contracts for counter oil
deliveries;
• Financial assets impairment;
• Financial assets classification;
• Financial instruments fair value estimation.
Estimation of oil and gas reserves.
Oil and gas development and production assets are depre-
ciated on a unit-of-production (UOP) basis for each field or
group of fields with similar characteristics at a rate calculated
by reference of 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.
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
265
Annual Report 2020 revision, either upward or downward, based on new informa-
tion such as from the drilling of additional wells, observation
of long-term reservoir performance under producing con-
ditions 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 ap-
praisal activity may result in the related capitalised exploration
drilling costs being written off in the profit and loss for the year.
Useful life of property, plant and equipment.
Based on the terms included in the licenses and past ex-
perience, 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 consider-
ing the expected usage, estimated technical obsolescence,
residual value, physical wear and tear and the operating
environment in which the asset is located. Differences be-
tween 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 condi-
tion 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 decom-
missioning 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.
266
Sensitivity analysis for changes in discount rate:
Discount rate
Impact on decommissioning
provision
Change in At 31 December
2020
At 31 December
2019
100 bp
increase
100 bp
decrease
(11 931)
(11 243)
15 745
14 954
Information about decommissioning provision is presented in
Note 12.
Impairment of property, plant and equipment.
At 31 March 2020 management assessed whether there is
any indication of impairment of non-current assets. Based on
the result of analysis, a decision was made to test the assets
for impairment. As at 31 December 2020, due to changes in
the legislation on mineral extraction tax, as well as the law
"On customs tariff" in terms of the cancellation of a number
of benefits, including incentives aimed at stimulating the
production of superviscous oil, additional testing was carried
out for impairment of assets related to exploration and
production of superviscous oil. (Note 12).
Accounting of investments in JSC “National Non-State
Pension Fund”
As at 31 December 2020 and 2019 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 legisla-
tion. These investments are presented within financial assets
carried at FVOCI as at 31 December 2020 and 2019 (refer to
Note 9).
Presentation of Revenue net of excise tax, including
reverse (negative) excise
For the years ended 31 December 2020 and 2019 the Group's
revenue is presented net of excise taxes, including reverse
(negative) excise on crude oil refined, gasoline and diesel
fuel. For the years ended 31 December 2020 and 2019 excise
on refinery products amounted to RR 42,878 million and
RR 38,900 million respectively, reverse (negative) excise on
crude oil refined, gasoline and diesel fuel amounted to RR
7,285 million payable in 2020 and RR 23,307 million recover-
able in 2019 respectively.
Operations for the sale and purchase of oil under
contracts for counter oil deliveries.
During the year ended 31 December 2020 sales of crude oil
under counter-delivery contracts in the amount of RR 90,296
million are presented net in the consolidated statement of
profit or loss and other comprehensive income of the Group
in accordance with the IFRS 15 requirements for exchange of
products of similar quality. In 2019 no similar operations were
carried out.
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 29.
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 29.
Financial assets classification.
Business model assessment. The business model drives
classification of financial assets. Management applied
judgement in determining the level of aggregation and port-
folios 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.
Appendices to the Annual Report 2020
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 instrument.
The assessment was done for all reasonably possible scenar-
ios, 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 princi-
ple, 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 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 and 9.
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 observ-
able 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
267
Annual Report 2020 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 con-
solidated 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 esti-
mate is based on assumptions that do not utilize observable
market prices is presented in Note 29.
Note 5:
Adoption of new or
revised standards and
interpretations.
The following amended standards became effective for the
Group from 1 January 2020, but did not have any material
impact on the Group:
• 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).
• 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).
• Interest rate benchmark reform - Amendments to IFRS
9, IAS 39 and IFRS 7 (issued on 26 September 2019 and
effective for annual periods beginning on or after 1 January
2020).
The following other new standards and interpretations are not
expected to have any material impact on the Group’s consoli-
dated financial statements when adopted:
• COVID-19-Related Rent Concessions Amendment to IFRS
16 issued on 28 May 2020 and effective for annual periods
beginning on or after 1 June 2020.
• 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 deter-
mined by the IASB).
• IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and
effective for annual periods beginning on or after 1 January
2023). IFRS 17 replaces IFRS 4, which has given compa-
nies dispensation to carry on accounting for insurance con-
tracts 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.
• Amendments to IFRS 17 and an amendment to IFRS 4
(issued on 25 June 2020 and effective for annual periods
beginning on or after 1 January 2023). The amendments
include a number of clarifications intended to ease
implementation of IFRS 17, simplify some requirements
of the standard and transition. The amendments relate to
eight areas of IFRS 17, and they are not intended to change
the fundamental principles of the standard.
• Classification of liabilities as current or non-current –
Amendments to IAS 1 (issued on 23 January 2020 and
effective for annual periods beginning on or after 1 January
2022).
• Classification of liabilities as current or non-current,
deferral of effective date – Amendments to IAS 1 (issued on
15 July 2020 and effective for annual periods beginning on
or after 1 January 2023).
• Proceeds before intended use, Onerous contracts – cost
of fulfilling a contract, Reference to the Conceptual
Framework – narrow scope amendments to IAS 16, IAS
37 and IFRS 3, and Annual Improvements to IFRSs 2018-
2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
(issued on 14 May 2020 and effective for annual periods
beginning on or after 1 January 2022).
• Interest rate benchmark (IBOR) reform – phase 2 amend-
ments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(issued on 27 August 2020 and effective for annual periods
beginning on or after 1 January 2021).
• Amendments to IAS 1 and IFRS Practice Statement 2:
Disclosure of Accounting policies (issued on 12 February
2021 and effective for annual periods beginning on or after
1 January 2023).
• Amendments to IAS 8: Definition of Accounting Estimates
(issued on 12 February 2021 and effective for annual
periods beginning on or after 1 January 2023).
Note 6:
Cash and cash
equivalents
Cash and cash equivalents comprise the following:
At 31
December
2020
At 31
December
2019
Cash on hand and in banks
30 735
24 730
Term deposits with original maturity
of less than three months
Due from banks
7 242
2 128
350
77
Total cash and cash equivalents
40 105
25 157
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 29.
Appendices to the Annual Report 2020
Note 7: Accounts receivable
Short-term and long-term accounts receivable comprise the
following:
At 31
December
2020
At 31
December
2019
Short-term accounts receivable:
Trade receivables
84 254
81 950
Other financial receivables
Other non-financial receivables
9 241
163
9 516
161
Less credit loss allowance
(9 924)
(6 921)
Total short-term accounts
receivable
Long-term accounts receivable:
Trade receivables
Other financial receivables
Less credit loss allowance
83 734
84 706
1 080
861
(457)
333
10 301
(2 773)
Total long-term accounts
receivable
Total trade and other
receivables
1 484
7 861
85 218
92 567
The estimated fair value of short-term and long-term accounts
receivable approximates their carrying value (Note 29).
The Group applies the IFRS 9 simplified approach to mea-
suring 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 on the number of
days that an asset is past due, with a distribution to portfolios
of receivables, homogeneous in terms of credit risk. In ad-
dition 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.
Analysis by credit quality of trade and other receivables is as follows:
At 31 December 2020
At 31 December 2019
Loss rate
Gross
carrying
amount
Lifetime ECL
Loss rate
Gross
carrying
amount
Lifetime
ECL
Trade receivables
current
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
0,046%
78 800
1,33%
4,44%
905
135
(36)
(12)
(6)
0,065%
0,92%
3,51%
98,43%
5 494
(5 408)
88,93%
Total trade receivables (gross carrying
amount)
Credit loss allowance
Total trade receivables (carrying amount)
85 334
(5 462)
79 872
(49)
(27)
(34)
(2 449)
75 614
2 946
969
2 754
82 283
(2 559)
79 724
Other receivables
current
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
0,158%
5 060
100%
100%
17
4
(8)
(17)
(4)
0,254%
12 617
100%
100%
12
1
(32)
(12)
(1)
97,39%
5 021
(4 890)
98,65%
7 187
(7 090)
Total other receivables (gross carrying
amount)
Credit loss allowance
Total other receivables (carrying amount)
10 102
(4 919)
5 183
19 817
(7 135)
12 682
268
269
Annual Report 2020 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, ended 31 December 2020 and 2019:
Note 8: Banking: Loans to customers
Trade receivables Other receivables
Trade receivables Other receivables
2020
2019
Loans to legal entities
Loans to individuals
Expected credit loss allowance at 1 January
(New originated or purchased)/reversed
Other movements
Total credit loss allowance charge in profit or loss for
the period
Write-offs
(2 559)
(2 899)
(4)
(2 903)
-
(7 135)
(2 240)
1 449
149
1 598
618
(319)
-
(319)
-
Expected credit loss allowance at 31 December
(5 462)
(4 919)
(2 559)
(6 082)
(1 095)
53
(1 042)
(11)
(7 135)
Analysis by credit quality of trade and other receivables is as follows:
At 31 December 2020
At 31 December 2019
Trade receivables Other receivables
Trade receivables Other receivables
Not past due
International traders of crude oil, oil products and
petrochemicals
Russian crude oil and oil products traders
Russian oil and petrochemicals refineries
Central and Eastern Europe refineries
Russian tire dealers and automotive manufacturers
Natural monopoly entity
Russian construction companies
unrated
including related parties
Not past due
Past due but not individually assessed for credit loss allowance
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total past due but not individually assessed for credit
loss allowance
Individually assessed for credit loss allowance (gross)
less than 90 days overdue
91 to 180 days overdue
over 180 days overdue
Total individually assessed for credit loss allowance
Less credit loss allowance
Total
17 676
13 591
20 855
12 308
5 048
-
8
9 314
1 373
78 800
905
135
-
-
-
-
-
-
-
-
5 060
192
5 060
17
4
82
23 349
1 501
22 603
15 249
3 430
1 634
327
7 521
1 003
75 614
2 946
969
305
1 040
103
4 220
-
-
5 494
5 494
(5 462)
79 872
-
-
4 939
4 939
(4 919)
5 183
-
-
2 449
2 449
(2 559)
79 724
-
-
-
-
-
-
-
12 617
435
12 617
-
-
65
65
12
1
7 122
7 135
(7 135)
12 682
Appendices to the Annual Report 2020
At 31 December 2020 At 31 December 2019
27 488
1 755
29 243
(8 580)
20 663
1 829
22 492
37 986
45 607
83 593
(4 645)
78 948
215
79 163
38 201
1 617
39 818
(6 145)
33 673
207
33 880
53 946
40 219
94 165
(4 333)
89 832
12 740
102 572
Short term loans to customers measured at amortised cost before credit loss allowance
Credit loss allowance
Total short term loans to customers measured at amortised cost
Short term loans to legal entities measured at fair value through profit or loss
Total short term loans to customers
Loans to legal entities
Loans to individuals
Long term loans to customers measured at amortised cost before credit loss allowance
Credit loss allowance
Total long term loans to customers measured at amortised cost
Long term loans to legal entities measured at fair value through profit or loss
Total long term loans to customers
As at 31 December 2020 and 2019 the Bank ZENIT granted
loans to 13 and 19 customers totalling RR 37,808 million and
RR 57,435 million respectively, which individually exceeded
5% of the Bank ZENIT equity.
The Group holds a portfolio of loans to customers that does
not meet the SPPI requirement for measured at amortised
cost 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
repay of loans within the period specified in loan contract; the
time value of money is not compensated to the Group, inter-
est 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 were measured at fair value through
profit or loss from the date of initial recognition.
Loans to customers measured at fair value through profit or
loss 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 to customers.
The fair value of loans to customers, including a break-
down by fair value hierarchy level, is disclosed in Note 29.
Information on related party balances is disclosed in Note 25.
Movements in the credit loss allowance during the year
ended at 31 December 2020 are as follows:
Loans to legal entities
Loans to individuals
Total
Credit loss allowance as at 1 January 2020
Net provision for credit loss allowance during the period
Reclassification to the credit loss allowance for other long-term loans
Other changes
(7 791)
(2 507)
645
226
(2 687)
(10 478)
(1 122)
(3 629)
-
11
645
237
Credit loss allowance as at 31 December 2020
(9 427)
(3 798)
(13 225)
Movements in the credit loss allowance during the year ended at 31 December 2019 are as follows:
Loans to legal entities
Loans to individuals
Total
Credit loss allowance as at 1 January 2019
(11 533)
(1 536)
(13 069)
Net reversal of provision/(provision) for credit loss allowance during
the period
Reclassification to the credit loss allowance for other long-term loans
Other changes
698
2 780
264
(1 160)
-
9
(462)
2 780
273
Credit loss allowance as at 31 December 2019
(7 791)
(2 687)
(10 478)
270
271
Annual Report 2020 Risk concentrations by customer industry within the customer loan portfolio are as follows:
At 31 December 2020
At 31 December 2019
Appendices to the Annual Report 2020
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 2020
At 31 December 2019
Share in
customer loan
Gross book value
portfolio, % Gross book value
Share in
customer loan
portfolio, %
9 092
24 287
4 984
11 361
508
3 638
1 008
5 415
47 362
23 939
13 207
9 667
504
45
7 225
7,91%
21,14%
4,34%
9,89%
0,44%
3,17%
0,88%
4,71%
41,23%
20,84%
11,50%
8,41%
0,44%
0,04%
6,29%
19 485
29 191
15 908
17 895
633
10 173
1 041
5 013
41 836
22 843
14 202
4 178
572
41
5 755
13,26%
19,87%
10,83%
12,18%
0,43%
6,92%
0,71%
3,41%
28,47%
15,55%
9,67%
2,84%
0,39%
0,02%
3,92%
Total loans to customers before credit loss
allowance
114 880
100%
146 930
100%
Note 9: Other financial assets
Other short-term financial assets comprise the following:
Financial assets measured at amortised cost
Notes receivable (net of credit loss allowance of RR 240 million as at 31 December
2019 respectively)
Other loans (net of credit loss allowance of RR 3,667 million and of RR 3,615
million as at 31 December 2020 and 31 December 2019 respectively)
Bank deposits (net of credit loss allowance of RR 5,547 million as at 31 December
2020 and 31 December 2019 respectively)
Due from banks
REPO with banks
Securities held by the Group (net of credit loss allowance of RR 27 million and of
RR 9 million as at 31 December and 31 December 2019 respectively):
Russian government and municipal debt securities
Corporate debt securities
At 31 December 2020
At 31 December 2019
-
5 946
10 000
2 391
1 551
9 577
12
9 565
112
227
659
1 222
4 081
1 562
30
1 532
272
Securities pledged under sale and repurchase agreements (net of credit loss
allowance of RR 9 million and of RR 22 million as at 31 December 2020 and 31
December 2019 respectively):
Russian government and municipal debt securities
Corporate debt securities
Financial assets measured at fair value through profit or loss
Due from banks
Securities held by the Group:
Russian government and municipal debt securities
Corporate debt securities
Corporate shares
Derivatives
Securities pledged under sale and repurchase agreements:
Russian government and municipal debt securities
Financial assets measured at fair value through other comprehensive
income
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
Total short-term financial assets
Other long-term financial assets comprise the following:
Financial assets measured at amortised cost
Notes receivable (net of credit loss allowance of RR 318 million as at 31 December
2020 and 31 December 2019 respectively)
Loans to employees (net of credit loss allowance of RR 1,717 million and of RR
1,804 million as at 31 December 2020 and 31 December 2019 respectively)
Other loans (net of credit loss allowance of RR 20,896 million and of RR 22,392
million as at 31 December 2020 and 31 December 2019 respectively)
Due from banks
Securities held by the Group (net of credit loss allowance of RR 92 million and of
RR 31 million as at 31 December 2020 and 31 December 2019):
Russian government and municipal debt securities
Corporate debt securities
4 517
-
4 517
-
5 744
1 518
3 995
-
231
17
17
1 441
227
1 012
202
3 130
959
2 171
9 044
2 609
6 435
1 238
7 658
460
6 865
165
168
-
-
1 910
695
1 000
215
-
-
-
44 314
27 713
At 31 December 2020
At 31 December 2019
-
981
2 618
-
19 814
1 272
18 542
-
928
21 281
2 027
13 132
1 272
11 860
273
Annual Report 2020
Financial assets measured at fair value through profit or loss
Other loans
Securities held by the Group:
Corporate debt securities
Corporate share
Financial assets measured at fair value through other comprehensive
income
Securities held by the Group:
Russian government and municipal debt securities
Corporate shares
Corporate debt securities
Investment fund units
Total long-term financial assets
5 079
342
245
97
41 771
11 627
12 400
4 764
12 980
70 605
-
293
293
-
42 917
15 236
12 440
2 176
13 065
80 578
The fair value of financial assets and valuation techniques used are disclosed in Note 29.
The Group holds a portfolio of other loans that does not meet the SPPI requirement for measured at amortised cost classifica-
tion 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 repay of loans within the period specified in loan contract; the time value of money
is not compensated to the Group, 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 other loans were measured at fair value through profit or loss from the date
of initial recognition.
Other loans measured at fair value through profit or loss 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 other loans.
For the years ended 31 December 2020 and 2019 the Group recognised fair value losses from loans at fair value through profit
or loss in the amount of RR 5,180 million and RR 210 million respectively.
Corporate bonds consist of Russian Ruble and US Dollar 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”, Russian Federation Eurobonds and Bank of Russia bonds.
Municipal bonds consist of Russian Ruble denominated bonds issued by regional and municipal authorities of the Russian
Federation.
Corporate shares measured at fair value through profit or loss include quoted and unquoted shares of Russian companies and
banks. As at 31 December 2020 and 31 December 2019 unquoted securities measured at fair value through other comprehen-
sive income include investment in AK BARS Bank ordinary shares (17.24%) in the amount of RR 7,300 million.
Investment fund units are solely presented with investment in closed mutual investment rental fund AK BARS – Gorizont
(45.45% of the total amount a shares). 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 asset measured at fair
value through other comprehensive income.
In 2020 the Group recognised an impairment losses on financial assets net of reversal in the amount of RR 756 million (in 2019
amount of RR 6,737 million). These losses consist of expected credit loss allowance for accounts receivable in the amount of
RR 1,305 million (in 2019 amount of RR 1,361 million), other financial assets in the amount of RR 310 million (in 2019 amount of
RR 156 million) income from reversal of impairment on loans issued in the amount of RR 859 million (in 2019 impairment loss in
the amount of RR 5,220 million).
The following tables disclose the changes in the credit loss allowance and gross carrying amount for other loans measured at
amortised cost.
Appendices to the Annual Report 2020
Credit loss allowance
Gross carrying amount
Stage 1
(12-months
ECL)
Stage 2
lifetime ECL
for SICR)
Stage 3
(lifetime
ECL for
credit im-
paired)
Total
Stage 1
(12-months
ECL)
Total
Stage 2
Stage 2
(lifetime
ECL for
SICR)
Stage 3
(lifetime
ECL for
credit im-
paired)
Other loans
At 31 December 2019
-
(241)
(25 766)
(26 007)
73
1 531
45 911
47 515
Movements with impact on credit loss allowance charge for 2020:
Transfers:
to credit-impaired (from Stage 1 and
Stage 2 to Stage 3)
Net remeasurement of credit loss
allowance within the same stage
Loans repaid or derecognised
(excluding write-offs)
New originated or purchased
Total movements with impact on
credit loss allowance charge for
2020
-
-
-
-
-
149
(149)
-
-
-
-
(106)
(106)
1 046
1 046
(81)
(81)
149
710
859
Movements without impact on credit loss allowance charge for 2020:
Write-off
Reclassification from other financial
assets
Other changes
At 31 December 2020
At 31 December 2018
-
-
-
-
-
-
-
-
1 171
1 171
(645)
(645)
59
59
(92)
(24 471)
(24 563)
(543)
(17 464)
(18 007)
Movements with impact on credit loss allowance charge for 2019:
Transfers:
to credit-impaired (from Stage 1 and
Stage 2 to Stage 3)
Net remeasurement of credit loss
allowance within the same stage
Loans repaid or derecognised
(excluding write-offs)
New originated or purchased
-
-
-
-
302
(302)
-
(6 608)
(6 608)
-
-
-
-
-
-
-
-
-
-
-
73
83
-
-
(208)
208
-
-
-
-
(46)
(20 713)
(20 759)
38
873
911
(216)
(19 632)
(19 848)
-
-
-
(1 224)
(1 224)
6 655
6 655
29
29
1 315
31 739
33 127
26 217
20 377
46 677
(23 021)
23 021
-
-
-
-
1 388
1 388
(10)
(1 849)
(1 756)
(3 615)
-
-
-
184
439
623
274
275
Annual Report 2020 Total movements with impact on
credit loss allowance charge for
2019
-
302
(5 522)
(5 220)
(10)
(24 686)
21 704
(2 992)
Movements without impact on credit loss allowance charge for 2019:
Reclassification from other financial
assets
At 31 December 2019
-
-
-
(2 780)
(2 780)
(241)
(25 766)
(26 007)
-
73
-
3 830
3 830
1 531
45 911
47 515
In December 2018 the Group entered into a transaction to acquire from a number of Russian government-controlled banks
their rights of claim under the credit facilities with NEFIS Group, a leading Russian household chemicals, oil and fats manufac-
turer. Total rights in the amount of RR 5,355 million and RR 19,861 million were accounted as other loans in other short-term
financial assets carried at amortised cost at 31 December 2020 and other long-term financial assets carried at amortised cost
at 31 December 2019 respectively.
Note 10:
Inventories
Materials and supplies
Crude oil
Refined oil products
Petrochemical supplies and finished products
Other finished products and goods
Total inventories
Note 11:
Prepaid expenses and other current assets.
Prepaid export duties
VAT recoverable
Advances
Prepaid transportation expenses
Excise
Other
At 31 December 2020
At 31 December 2019
15 361
5 597
14 370
7 226
2 434
44 988
14 743
9 905
13 197
10 798
4 736
53 379
At 31 December 2020
At 31 December 2019
1 807
4 117
5 977
2 367
697
5 110
2 233
6 006
6 176
1 465
1 942
2 948
Appendices to the Annual Report 2020
Note 12: Property, plant and equipment.
Oil and gas
properties
Buildings
and con-
structions
Machinery
and equip-
ment
Con-
struc-tion
in progress
Total
Cost
As at 31 December 2018
397 390
220 862
157 529
219 916
995 697
Additions
Disposals
415
-
-
99 735
100 150
(6 266)
(1 506)
(3 369)
(1 353)
(12 494)
Changes in Group structure (Note 28)
-
9 298
9 235
1 206
19 739
Transfers
Changes in decommissioning provision
46 157
13 072
39 944
43 137
(129 238)
-
-
-
-
13 072
As at 31 December 2019
450 768
268 598
206 532
190 266
1 116 164
Depreciation, depletion and amortisation, impairment
As at 31 December 2018
Depreciation charge
Impairment
Disposals
Changes in Group structure
Transfers
As at 31 December 2019
Net book value
As at 31 December 2018
As at 31 December 2019
Cost
Additions
Disposals
Changes in Group structure
Transfers
179 359
43 576
70 840
17 296
759
(5 764)
-
(2 090)
6 441
4 090
(683)
2
280
9 394
-
-
293 775
33 131
-
24 391
29 240
(2 386)
(48)
1 810
-
-
-
(8 833)
(46)
-
189 560
53 706
79 610
24 391
347 267
218 031
177 286
86 689
219 916
701 922
261 208
214 892
126 922
165 875
768 897
-
-
-
105 087
105 087
(453)
(649)
(1 664)
(1 678)
(4 444)
-
213
-
-
22 824
26 194
15 241
(64 259)
213
-
973
As at 31 December 2019
450 768
268 598
206 532
190 266
1 116 164
Changes in decommissioning provision
973
-
-
-
Prepaid expenses and other current assets
20 075
20 770
As at 31 December 2020
474 112
294 356
220 109
229 416
1 217 993
Depreciation, depletion and amortisation, impairment
As at 31 December 2019
Depreciation charge
Impairment
Disposals
Transfers
As at 31 December 2020
Net book value
As at 31 December 2019
As at 31 December 2020
189 560
53 706
79 610
24 391
347 267
19 647
1 364
(361)
38
7 919
1 572
(428)
1 193
11 645
1 325
(1 136)
(1 231)
-
2 610
-
-
39 211
6 871
(1 925)
-
210 248
63 962
90 213
27 001
391 424
261 208
214 892
126 922
165 875
768 897
263 864
230 394
129 896
202 415
826 569
276
277
Annual Report 2020 Additions for years 2020 and 2019 years include construction
of TANECO refinery complex and superviscous oil fields
facilities.
Within construction in progress there are advances for
construction of RR 25,531 million and RR 14,862 million at 31
December 2020 and 2019, 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 2024 and 2105. The economic lives of
several of the Group’s licensed fields extend beyond the
dates of licenses expiration. Under Russian law, the Group is
entitled to renew the licenses to the end of the economic lives
of the fields, provided certain conditions are met.
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.
Changes in the net book value of exploration and evaluation
assets are presented below:
At 1 January 2019
Additions
Re-classification to different categories
Charged to expense
На 31 декабря 2019
At 31 December 2019
Re-classification to different categories
Charged to expense
At 31 December 2020
16 718
3 194
-
(17 818)
2 094
2 671
-
(978)
3 787
Due to indications of possible impairment as at 31 March
2020 the Group conducted impairment testing for the main
groups of assets. As at 31 December 2020 impairment testing
for superviscous oil production assets were updated due to
changes in the legislation on mineral extraction tax, as well as
the law "On customs tariff". According to the accounting poli-
cy, individual assets are grouped for impairment purposes to
the cash generating units (CGU) at the lowest level for which
there are identifiable cash flows that are largely independent
of the cash flows of other groups of assets:
• field-by-field basis for exploration and production assets;
• entire complex level for refining assets;
• individual petrol station level;
• entire factory level for tire production assets;
The macroeconomic factors, including but not limited to the
reduction in oil production, crude oil and oil products prices
fall, the volatility of the Russian Ruble to the US dollar and
a decrease in the level of business activity were taken into
account when preparing models, which are the main source
of information for measuring the value in use of non-current
assets, including forecasts of oil production and refining
volumes, oil and oil products price dynamics, petrochem-
ical production forecast, as well as when determining the
discount rate.
In assessing impairment, the recorded value of assets was
compared with the estimated value in use of the CGUs. The
value in use is determined as the discounted net cash flows
based on the forecasts of Revenue, production costs and
changes in working capital based on confirmed long-term
strategic plans of the Group, taking into account the impact
of the pandemic and accepted restrictions on the uncertainty
in the period of recovery in demand and profitability The fore-
casting period for determining the value in use is in line with
the management assumptions used for long-term strategy
and does not exceed the useful life of assets included in the
CGUs.
For the year ended 31 December 2020 the Group recognised
impairment of the following assets:
• assets used in the production of tire products of the
Petrochemicals segment in the amount of RR 3,976 million;
• exploration assets related to the superviscous oil fields, in
the amounts of RR 1,364 million;
• exploration and evaluation assets related to the oilfields
located outside the Republic of Tatarstan in the amount of
RR 978 million, due to adverse conditions in the oil market
affecting the current assessment of respective projects;
• other assets, including social assets, in the total amount of
RR 553 million, which are not providing future economic
benefits.
For the year ended 31 December 2019 the Group recognised
impairment of the following assets:
• exploration and evaluation assets related to the oilfields
located outside the Republic of Tatarstan in the amount
of RR 17,818 million, due to adverse conditions in the oil
market affecting the current assessment of respective
projects;
• other assets, including social assets, in the total amount of
RR 11,422 million, which are not providing future economic
benefits.
An impairment loss is included in the corresponding line
of the consolidated statement of profit or loss and other
comprehensive income.
Key assumptions applied to the calculation of value in use are
follows:
• oil prices, refined product spreads and US dollar / Russian
ruble exchange rates are based on available forecasts from
globally recognized research institutions;
impairment loss on costs of construction and acquisition of
social assets not providing future economic benefits, in the
amount of RR 7,208 million.
Appendices to the Annual Report 2020
In 2020 the Group recognised an impairment losses and
losses on disposal on property, plant and equipment and
other non-financial assets net of reversal in the amount of
RR 6,677 million (in 2019 in the amount of RR 30,875 million).
These losses consist of impairment losses on property, plant
and equipment in the amount of RR 6,871 milllion (in 2019
in the amount of RR 29,240 milllion) income from reversal
of impairment on other long-term assets in the amount of
RR 1,058 (in 2019 in the amount of RR 365 million), losses
on creation of provision for impairment of inventories in the
amount of RR 88 million (in 2019 in the amount of RR 320 mil-
lion) and losses on disposal of property, plant and equipment
in the amount of RR 776 million (in 2019 in the amount of RR
950 million).
Decommissioning provisions
The following table summarizes changes in the Group’s
decommissioning provision for the year:
2020
2019
Balance at the beginning of period
50 474
34 457
Unwinding of discount
New obligations
3 377
3 015
2 077
1 349
Expenses on current obligations
(30)
(70)
Changes in estimates
(525)
11 723
Balance at the end of period
55 373
50 474
Less: current portion of decommissioning
provisions (Note 16)
(1)
(127)
Long-term balance at the end of period
55 372
50 347
In 2020 and 2019 the Group recorded the change in esti-
mate for oil and gas properties decommissioning due to
the changes in discount rate and estimated future costs of
decommissioning.
Key assumptions used for evaluation of decommissioning
provision were as follows:
Discount rate
Discount rate for superviscous oil
Inflation rate
At 31
December
2020
At 31
December
2019
6,46%
5,92%
4,00%
6,69%
6,69%
4,00%
• estimated production and refining volumes were based
on detailed information for the production and refining
plans approved by management as part of the long-term
strategy, considering the decrease in business activity
as a result of the COVID-19 pandemic and the OPEC +
agreement terms.
The discount rate calculated based on the Company’s
weighted average cost of capital adjusted for asset specific
risks. The Group applied the following nominal pre-tax
discount rates for impairment testing purposes:
• from 15.91 to 16.2% for oil fields;
• from 13.42 to 14.45% for refining complexes:
• from 13.6 to 14.0% for petrol stations;
• from 15.5 to 15.6% for tire production factories.
The recoverable amounts of oil field in the amount of RR
76,282 million which were tested and impaired on RR 1,364
million were determined as value in use equal to the present
value of the expected cash flows.
The following Brent price assumptions have been used:
$46.8 per barrel in 2021, $55.9 per barrel in 2022, $57.6 per
barrel in 2023, $59.4 per barrel in 2024 and $62.7 per barrel
in 2025 with further growth in subsequent years according to
forecasts.
In addition, for the purposes of calculating the recoverable
amount of assets related to the production of superviscous
oil, the assumption on the receiving of the full amount of tax
deduction was made. Tax deduction will be provided for the
production of superviscous oil in subsoil areas located fully
or partially within the borders of the Republic of Tatarstan
subject to certain conditions stipulated by the Tax Code. In
the absence of these tax deductions, the impairment loss for
the superviscous oil fields would be RR 23,171 million, taking
into discounted cash flows.
A reasonably justified change in key assumptions, taken
into account by management for the purpose of preparing
models as at the reporting date, does not necessitate the
recognition of an additional impairment other than the above.
Social assets.
During the years ended 31 December 2020 and 2019 the
Group transferred social assets with a net book value of RR
34 million and RR 345 million, respectively, to local author-
ities. At 31 December 2020 and 2019 the Group held social
assets with a net book value net of impairment provision of
RR 5,148 million and RR 6,378 million, respectively.
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. For the year ended 31
December 2020 and 2019 the Group incurred social infra-
structure expenses of RR 10,856 (including an impairment
loss on costs of construction and acquisition of social assets
not providing future economic benefits, in the amount of RR
2,298 million) and RR 8,995 million respectively. For the
year ended 31 December 2019 the Group recognised an
278
279
Annual Report 2020 Note 13: Right-of-use assets
and lease liabilities
Starting from January 1, 2019, a lease is recognised as a
right-of-use assets and a lease liabilities on the date the
asset becomes available for use by the Group.
Note 14: Taxes
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
Year ended
31 December 2020
31 December 2019
Right-of-use assets comprise the following:
Profit before income tax
137 045
252 342
Service
equipment
Other
assets
Total
Theoretical income tax expense
at statutory rate
(Increase)/decrease due to:
(27 409)
(50 468)
As at 1 January 2019
13 654
2 414
16 068
Additions
Disposals
Depreciation
Non-deductible expenses, net
(6 160)
(8 408)
78
1 648
1 726
(293)
(632)
(925)
Income tax withheld at source
on dividends for treasury shares
(1 784)
(316)
(2 100)
Other
(907)
4
(733)
85
Revaluation and modification
(896)
(215)
(1 111)
Income tax expense
(34 472)
(59 524)
As at 31 December 2019
10 759
2 899
13 658
Additions
Disposals
Depreciation
526
(2)
613
1 139
(365)
(367)
(1 516)
(619)
(2 135)
Revaluation and modification
(53)
(57)
(110)
As at 31 December 2020
9 714
2 471
12 185
The reconciliation between undiscounted lease liabilities and
their present value presented in the table below:
At 31
December
2020
At 31
December
2019
2 891
8 482
9 738
3 024
9 443
11 078
21 111
23 545
13 219
14 191
Lease liabilities
Less than one year
Between one and five years
More than five years
Total undiscounted lease
liabilities
Lease liabilities
Of which are:
Current lease liabilities, presented
in Accounts payable and accrued
liabilities (Note 16)
Non-current lease liabilities
2 540
10 679
2 613
11 578
At 31 December 2020 no deferred tax liabilities have been
recognised for taxable temporary differences of RR 45,781
million (2019: RR 68,729 million) on 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 1,404 million (2019: RR 1,203 million) if they
were remitted as dividends.
Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities rec-
ognised for financial reporting purposes and such amounts
recognised for statutory tax purposes. Deferred tax assets
(liabilities) are comprised of the following:
At 31 December
At 31 December
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
Deferred income tax
liabilities
2020
3 202
7 808
195
-
1 343
457
234
13 239
(43 131)
(1 070)
(163)
2019
3 057
7 318
189
425
1 773
366
94
13 222
(43 612)
(2 021)
-
(44 364)
(45 633)
Net deferred tax liability
(31 125)
(32 411)
Total taxes payable
30 401
37 465
Deferred income taxes are reflected in the consolidated
statement of financial position as follows:
Taxes payable were as follows:
At 31 December
At 31 December
Appendices to the Annual Report 2020
Deferred income tax asset
At 31 December
At 31 December
2020
2 218
2019
2 712
Mineral extraction tax
Value Added Tax
Deferred income tax liability
(33 343)
(35 123)
Net deferred tax liability
(31 125)
(32 411)
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 2020, the Group had recognised deferred
income tax assets of RR 3,202 million (RR 3,057 million at 31
December 2019) in respect of unused tax loss carry forwards
of RR 16,010 million (RR 15,285 million at 31 December 2019).
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 ap-
plies. The amendments also set limitation on utilisation of tax
loss carry forwards that will apply during the period from 2017
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 does not 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
Year ended 31
December 2020
December 2019
Mineral extraction tax
175 636
298 592
Property tax
Other
Total taxes other than income
taxes
7 742
2 161
7 320
1 742
For the year ended 31 December 2020 actual expenses on
MET per tonne of oil produced amounted to RR 6,585 per
tonne (in 2019: RR 10,003 per tonne), which is RR 2,135 per
tonne (in 2019: RR 3,035 per tonne) below the average rate
established by law. This deviation is due to the application
of the coefficients stipulated by the tax legislation to the
generally established MET rate for oil.
Taxes other than income taxes exclude the export duties paid
on the sale of crude oil and refined products as the Group
sales and other operating revenues are presented net of such
export duties.
Excise
Export duties
Property tax
Other
Note 15: 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
Russian Rubles credit facility
Other debt
Total short-term debt
Сurrent portion of long-term debt
Total short-term debt,
including current portion of
long-term debt
Long-term debt
Bonds issued
Subordinated debt
Debt securities issued
US $144.5 million 2011 credit
facility
EUR 55 million 2013 credit facility
EUR 39.2 million 2020 credit
tranche
Other debt
185 539
307 654
US $75 million 2011 credit facility
2020
17 500
4 983
3 198
245
1 826
2 649
2019
21 172
8 369
2 863
425
1 975
2 661
At 31 December
At 31 December
2020
2019
3 881
21
500
-
-
-
1 300
2 286
7 988
2 973
1 850
21
884
816
2 090
1 652
10 142
938
18 393
1 199
10 961
19 592
18 198
-
112
495
1 871
1 441
2 848
1 660
20 007
1 266
39
-
-
-
-
1 544
Total long-term debt
26 625
22 856
Less: current portion
(2 973)
(1 199)
Total long-term debt, net of
current portion
23 652
21 657
280
281
Annual Report 2020 During 2019, the Group received short-term loans under the
credit facilities with the Russian banks in total amount of RR
113,200 million at rates ranging from 6.33% to 8.54%, most
of which were repaid earlier. The debt at 31 December 2019
amounted to RR 10,142 million and was repaid in January
2020.
Bonds issued.
In December 2019 the Company issued Russian Ruble
denominated bonds in the amount of RR 15,000 million with
the maturity in 3 years at a rate of 6.45% per annum.
At 31 December 2020 and at 31 December 2019 bonds
issued include bonds denominated in Russian Rubles issued
by Bank ZENIT amounted RR 7,079 million and RR 6,857
million respectively, that mature between 2022 and 2025.
At 31 December 2020 and at 31 December 2019 the annual
coupon rates on these securities range from 6.65% to 7.65%
and 7% to 8.85% respectively (excluding bonds issued on
emission BO-13 at amount RR 1 million and coupon rate
0.1%). The majority of bonds, issued by Bank ZENIT, allow
early repurchase at the request of the bond holder as set in
the respective offering documents.
Subordinated debt.
At 31 December 2019 subordinated debt is presented by one
subordinated loan raised by Bank ZENIT (excluding subor-
dinated debt under the direct repurchase agreement with
Deposit Insurance Agency (DIA) at the rate 8.9% and matures
in 2024. The loan was repaid earlier in fourth quarter 2020.
Information on subordinated loans received Bank ZENIT
from the DIA within the Russian Federation Government
programme for additional capitalisation of Russian banks
presented in Note 29.
Debt securities issued.
At 31 December 2020 debt securities are promissory notes
issued by Bank ZENIT at a discount to nominal value and
interest bearing promissory notes denominated in Russian
Rubles (at 31 December 2019: in Russian Rubles and US
Dollars). Maturity dates of these promissory notes vary from
2021 to 2028 (at 31 December 2019: from 2020 to 2028).
At 31 December 2020 and at 31 December 2019 non-inter-
est-bearing promissory notes of the aggregate nominal value
of RR 101 million and of RR 641 million respectively were
issued by Bank ZENIT for settlement purposes and mature
primarily on demand.
Fair value of debt is presented in Note 29. Maturity and cur-
rency analysis of debt is presented in Note 29. 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 lev-
els 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 March 2020, the Group obtained the waiver from re-
quirement of early repayment according to which the credit
facilities of TANECO were recorded as long-term debt as at
31 December 2020.
In November 2020, OOO "NZGSh" entered into a two-
tranche syndicated loan: RR 5,400 million and EUR 49
million (RR 4,320 million and EUR 39.2 million excluding
intercompany amount) with quarterly repayments during ten
years with the first repayment date on 28 March 2022. The
loan was arranged by Bank ZENIT, Bank VBRR and Credit
Bank of Moscow. Contract interest rate is preferential and
for the tranche in rubles is key interest rate minus 4.5% per
annum, for the tranche in Euro is EURIBOR per annum. The
government subsidises the rate of 4.5% per annum if the
borrower meets the conditions for the subsidy granting. 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.
During 2020 the Group received short-term loans under the
credit facilities with the Russian banks in total amount of RR
210,150 million at rates ranging from 4.39% to 6.74%, most
of which were repaid earlier. The debt at 31 December 2020
amounted to RR 1,300 million and was repaid in January
2021.
Note 16: Accounts payable and
accrued liabilities
Note 17: Banking: Due to banks and
the Bank of Russia
Appendices to the Annual Report 2020
Trade payables
55 028
36 150
Term deposits from other banks
At 31
At 31
December
December
2020
2019
Current portion of lease liabilities (Note
13)
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
2 540
2 613
Term deposits from the Bank of Russia
REPO
2 623
1 809
60 191
40 572
Correspondent accounts and other
banks’ overnight deposits
Total due to banks and the Bank of
Russia
Less: long term due to banks and the
Bank of Russia
8 414
11 175
1
8 267
7 828
127
4 112
3 495
At 31
At 31
December
December
2020
3 110
2 121
2019
5 364
2 630
9 704
13 259
275
1 562
15 210
22 815
(1 551)
(2 522)
Total short term of due to banks and
the Bank of Russia
13 659
20 293
Within due to banks and the Bank of Russia at 31 December
2020 and 2019 there are RR 13,526 million and RR 18,778
million respectively of correspondent accounts and term
deposits, borrowed from the Bank of Russia and from three
Russian banks, which individually exceeded 5% of the Bank
ZENIT equity.
As at 31 December 2020 and 31 December 2019 financial
liabilities which are subject to offsetting include RR 9,704
million and RR 13,260 million of due to banks collateralised
by securities, fair value of which is RR 10,657 million and RR
14,446 million respectively.
Total non-financial liabilities
23 702
19 717
Accounts payable and accrued
liabilities
83 893
60 289
For the current reporting period revenue of RR 7,828 million
was recognised in respect of contract obligations as of 1
January 2020 related to advances received.
For the previous reporting period revenue of RR 6,197 million
was recognised in respect of contract obligations as of 1
January 2019 related to advances received.
The increase in contract obligations as at 31 December
2020 is due to the sales under contracts with customers with
agreed prepayment terms.
The fair value of each class of financial liabilities included in
short-term trade and other payables is presented in Note 29.
As at 31 December 2020 other financial payables include
an obligation to repurchase of 2,179,347,288 shares of
Bank ZENIT at a price of RR 0.75 per share, requested for
the redemption by minority shareholders and not paid by
the Bank. The discounted amount of the liability is RR 1,618
million (as at 31 December 2019: not applicable). Disposal
of the carrying value of the non-controlling interest (in the
amount of RR 1,624 million) and the difference between the
accrued liability and the disposed non-controlling interest
(in the amount of RR 55 million) recognised as a result of
the transaction are reflected in the line “Subsidiary's shares
requested for the redemption” of the consolidated statement
of changes in equity.
282
283
Annual Report 2020 Note 18: Banking: Customer accounts
Pension liabilities.
Note 20: Shareholders’ equity
Appendices to the Annual Report 2020
State and public organizations
Current / settlement accounts
Term deposits
Other legal entities
Current / settlement accounts
Term deposits
Individuals
Current / settlement accounts
Term deposits
Total customer accounts
Less: long-term customer accounts
Total short-term customer accounts
At 31 December 2020
At 31 December 2019
1 276
95
24 674
19 240
22 891
80 449
148 625
(1 872)
146 753
1 014
90
16 986
22 653
14 265
105 044
160 052
(1 381)
158 671
Within customer accounts at 31 December 2020 and 2019 there are RR 58,607 million and RR 38,557 million of current/settle-
ment accounts and term deposits from 23 and 12 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 2020
At 31 December 2019
Carrying value
Share in customer
loan portfolio, %
Carrying value
Share in customer
loan portfolio, %
103 340
69,53%
119 309
74,54%
11 812
3 261
6 142
14 922
2 067
3 422
3 659
7,95%
2,19%
4,13%
10,04%
1,39%
2,30%
2,47%
100%
9 292
2 195
4 798
12 331
4 306
3 620
4 201
160 052
5,81%
1,37%
3,00%
7,70%
2,69%
2,26%
2,63%
100%
At 31 December 2020
At 31 December 2019
4 335
8 327
976
233
13 871
4 062
3 231
-
219
7 512
Individuals
Finance
Oil and gas
Trade
Services
Manufacturing
Construction
Other
Total customer accounts
148 625
Note 19: Other long-term liabilities
Other long-term liabilities are as follows:
Pension liability
Government grants
Share based compensation
Other long-term liabilities
Total other long-term liabilities
284
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 JSC TATNEFTEmployees” and the contracts
concluded between the Company or its subsidiaries,
management, and the JSC “National Non-Governmental
Pension Fund”. In accordance with these contracts the Group
is committed to make certain contributions on behalf of all
employees and guarantees a minimum benefit upon retire-
ment. 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 ap-
pointment 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.
Government grants.
During 2020 and 2019, the Group received grants from the
Republic of Tatarstan for the creation, modernization and
reconstruction of energy facilities and infrastructure.
Share based compensation.
The Company has approved the TATNEFTGroup long-term
employee incentives program. The program provides for
employees benefits based on the change in the share price
during a five-year cycle. In accordance with the terms of the
program, 11.7 million shares were “conditionally” assigned to
the management and directors of the Company, based on
which, at the end of the cycle, remuneration is paid on the
amount of the positive difference in the average annual price
of an ordinary share of PJSC TATNEFT for the fifth year of the
five-year cycle and the year adopted as a base. Payments are
made in cash.
The fair value of the Program was calculated at the reporting
date by applying the option pricing model, taking into
account the conditions for the increase in the value of
shares and the volume of services provided by employees
before the end of the reporting period. The fair value of the
Program estimated as RR 120 per share was determined in
accordance with the Black-Scholes option pricing model at
the reporting date and is subject to further review until it is
redeemed. The fair value was calculated using the spot price
of the Company's shares at the reporting date in the amount
of RR 514.4, the exercise price of the option in the amount of
RR 400.27, an expected dividend yield of 7.77% per annum,
the risk-free interest rate equal to 4.36 % per annum, the
term until the maturity of the program, and the volatility of the
return on the underlying asset equal to 34.7%. The expected
volatility was determined based on the historical volatility
of the Company's shares. Receiving payments depends on
the completion of the required period of service provision,
certain performance indicators and an increase in the value
of shares. The Group plans to recognize the costs of the
Program on a straight-line basis over the period of its validity.
Authorised share capital.
At 31 December 2020 and 2019 the authorised, issued
and paid share capital of PJSC TATNEFT 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 on capital contributions made
before 2003.
Golden share.
Tatarstan holds a “Golden Share” – a special governmental
right – in the PJSC TATNEFT 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, liq-
uidation 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 current rights of preferred shareholders; and
• the liquidation or reorganization of the Company.
Изменения по любому из перечисленных вопросов
могут быть приняты только в том случае, если за них
проголосовало 75% держателей привилегированных
акций.
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 div-
idends are either not declared, or declared but not paid. On
liquidation, the shareholders are entitled to receive a distribu-
tion of net assets. Under Russian Joint Stock Companies Law
and the Company’s charter in case of liquidation, preferred
shareholders have priority over shareholders holding
common shares to be paid declared but unpaid dividends
on preferred shares and the liquidation value of preferred
shares, if any.
Amounts available for distribution to shareholders.
The source of payment of dividends is the Company's net
profit for the reporting period, determined are based on the
Company’s non-consolidated statutory accounts prepared
285
Annual Report 2020 in accordance with RAS, which differ significantly from IFRS
(see Note 2). According to the Company's financial state-
ments prepared in accordance with RAS, for the years ended
31 December 2020 and 2019, the Company had a statutory
current year profit of RR 81,665 million and RR 156,474
million, respectively.
When determining the dividend amount (per share) rec-
ommended to the General Meeting of Shareholders, the
decision of PJSC TATNEFT’s Board of Directors is based on
the amount of net profit under RAS or IFRS, depending on the
availability of published financial statements for the relevant
period, and assuming that the target level the total funds
allocated for dividends payment accounts for least 50% of
the net profit amount determined by RAS or IFRS, whichever
is greater.
In September 2020, the shareholders of the Company
approved interim dividends for the six months ended 30 June
2020 in the amount of RR 9.94 per preference and ordinary
share. Dividends were paid in the fourth quarter of 2020.
In June 2020, the shareholders of the Company approved
dividends for the year ended 31 December 2019 in the
amount of RR 1 per each preferred share, excluding the
previously approved interim dividends for the six and nine
months of 2019 in the amount of RR 64.47 per one preferred
share. Dividends were paid in the third quarter of 2020.
In December 2019, the shareholders of the Company
approved the payment of interim dividends for the nine
months ended 30 September 2019, in the amount of RR
64.47 per preference and ordinary share (the “9 months
2019 Dividends”), including previously paid interim dividends
for the six months ended 30 June 2019, in the amount of
RR 40.11 per preference and ordinary share. The 9 months
2019 Dividends are reported as dividends payable as at 31
December 2019 and were paid in the beginning of 2020.
In September 2019, the shareholders of the Company
approved interim dividends for the six months ended 30 June
2019 in the amount of RR 40.11 per each preference and
ordinary share. The dividends were paid in the fourth quarter
of 2019.
In June 2019, the shareholders of the Company approved div-
idends for the year ended 31 December 2018 in the amount
of RR 84.91 per each preference and ordinary share with the
consideration of earlier paid interim dividends for the nine
months ended 30 September 2018 in the amount of RR 52.53
per each preference and ordinary share. The dividends were
paid in the third quarter of 2019.
In December 2018, the shareholders of the Company
approved the payment of interim dividends for the nine
months ended 30 September 2018 in the amount of RR 52.53
per each preference and ordinary share including previously
paid interim dividends for the six months ended 30 June 2018
in the amount of RR 30.27 per each preference and ordinary
share. Dividends were paid in the beginning of 2019.
million at 31 December 2020 and 2019.
Note 21: Employee benefit
expenses
Year ended
Year ended
31 December 2020
31 December 2019
Wages and salaries
45 239
41 045
Statutory insurance
contributions
Share based compensations
(Note 19)
Pension costs – defined benefit
plans
Other employee benefits
Total employee benefit
expense
12 657
11 474
976
263
1 545
-
736
1 801
60 680
55 056
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
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 av-
erage 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 ordinary and pre-
ferred shares to the extent that each class may have share in
earnings if all the earnings for the period had been distribut-
ed. 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.
Year ended
Year ended 31
31 December 2020
December 2019
Profit attributable to Group
shareholders
103 490
192 260
Ordinary share dividends
(20 904)
(203 682)
Preferred share dividends
(1 614)
(14 286)
Income available to ordinary and
preferred shareholders, net of
dividends
Basic and diluted:
Weighted average number of shares
outstanding (millions of shares):
Ordinary
Preferred
Combined weighted average number
of ordinary and preferred shares
outstanding
Basic and diluted earnings per
share (RR)
Ordinary
Preferred
80 972
(25 708)
2 103
148
2 103
148
2 251
2 251
45,92
46,92
85,43
85,43
Non-controlling interest.
Non-controlling interest is adjusted by dividends declared
and paid by the Group’s subsidiaries amounting to RR 1
Appendices to the Annual Report 2020
activities in the consolidated statement of profit or loss and
other comprehensive income.
Note 22: Interest income and
interest expense on non-banking
activities
Interest income on non-banking activities comprises the
following:
Year ended
Year ended
31 December 2020
31 December 2019
Interest income from financial
assets measured at amortised
cost
Unwinding of the present value
discount of long-term financial
assets
Total interest income on
non-banking activities
4 368
1 128
60
73
4 428
1 201
Interest expense on non-banking activities comprises the
following:
Bank loans
Bonds issued
Unwinding of the present value
discount of decommissioning
provision
Interest expense on lease
liabilities
Unwinding of the present value
discount of long-term financial
liabilities
Discount of long-term financial
liabilities
Total interest expenses on
non-banking activities
Year ended
Year ended
31 December 2020
31 December 2019
(1 033)
(970)
(736)
(19)
(3 377)
(3 015)
(1 374)
(1 571)
(17)
(613)
(66)
-
(7 384)
(5 407)
286
287
Annual Report 2020 Note 23: Interest and commission
income and expense on banking
activities
Year ended
Year ended
31 December: 2020
31 December: 2019
Interest income
Loans to customers
Other
Fee and commission income
Settlement transactions
Other
Total interest and
commission income on
banking activity
Interest expense
Term deposits
Other
Fee and commission expense
Settlement transactions
Other
Total interest and
commission expense on
banking activity
14 262
11 136
3 126
3 824
2 429
1 395
18 086
(7 964)
(5 988)
(1 976)
(1 647)
(1 558)
(89)
18 157
14 216
3 941
4 427
2 664
1 763
22 584
(10 491)
(8 159)
(2 332)
(1 627)
(1 352)
(275)
(9 611)
(12 118)
Note 24: Segment information
Operating segments are components that engage in busi-
ness 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 10% 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, devel-
opment, 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, technical carbon;
• Banking segment includes operations of Banking Group
ZENIT.
Other sales include revenues from ancillary services provid-
ed by the specialised subdivisions and subsidiaries of the
Group, such as sales of oilfield equipment, 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. Effective the current
reporting period, the Group uses an export netback calcu-
lated based on average Urals quotes less export duty, freight
and transportation costs to calculate the cost of its own oil
for refining. The calculation based on the export netback,
used by the Group to make operational decisions, meets the
criteria of relevant and reliable information, сhanges made
are disclosed retrospectively in the consolidated financial
statements. 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 2020, revenues of RR
96,663 million or 13% of the Group’s total sales and operating
revenues are derived from one external customer.
For the year ended 31 December 2019, revenues of RR
104,506 million or 11% of the Group’s total sales and operat-
ing revenues are derived from one external customer.
These revenues represent sales of crude oil and are attribut-
able to the exploration and production segment.
Management does not believe the Group is dependent on
any particular customer.
288
Segment sales and other operating revenues.
Reportable operating segment sales and other operating revenues are stated in the following table:
Year ended 31 December 2020
Year ended 31 December 2019
Appendices to the Annual Report 2020
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
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
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
119 095
16 264
153 574
4 224
150 367
443 524
206 618
206 618
14 604
14 604
6 049
101 454
107 503
9 114
2 489
340 328
34 953
11 087
4 364
3 660
491
54 555
14 262
3 824
18 086
856 493
35 617
(153 347)
738 763
(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.
175 402
26 818
255 602
3 151
219 021
679 994
225 137
225 137
14 866
14 866
8 900
138 496
147 396
11 426
1 461
400 286
29 336
11 466
4 124
3 647
1 028
49 601
18 157
4 427
22 584
1 152 465
23 925
(221 510)
954 880
289
Annual Report 2020
Segment earnings
Segment earnings
Year ended 31
Year ended 31
December 2020
December 2019
Segment depreciation, depletion and amortisation and
additions to property, plant and equipment
Year ended
Year ended
31 December 2020
31 December 2019
Exploration and production
161 879
252 026
Depreciation, depletion and amortization
Refining and marketing
Petrochemicals
Banking
16 796
1 830
(3 964)
49 272
1 345
1 279
Total segment earnings
176 541
303 922
Corporate and other
(41 879)
(47 294)
Other (expenses)/income
2 383
(4 286)
Exploration and production
Refining and marketing
Petrochemicals
Banking
Corporate and other
24 483
11 727
1 152
359
3 144
22 037
9 885
1 538
349
1 356
Total depreciation, depletion
and amortization
40 865
35 165
Profit before income tax
137 045
252 342
Additions to property, plant and equipment
"Corporate and other" line includes Head Office adminis-
trative expenses, impairment losses on financial assets net
of reversal, impairment losses and losses on disposal on
property, plant and equipment and other non-financial as-
sets, charity expenses, maintenance of social infrastructure
and transfer of social assets, fair value losses from financial
assets at fair value through profit or loss.
Exploration and production
Refining and marketing
Petrochemicals
Banking
Corporate and other
26 670
63 366
7 567
175
7 522
44 636
48 609
2 264
665
23 715
Segment assets
Assets
Exploration and production
Refining and marketing
Petrochemicals
Banking
Corporate and other
At 31 December
At 31 December
2020
2019
Total additions to property,
plant and equipment
105 300
119 889
Additions to property, plant and equipment of exploration
and production segment are presented net of changes in
estimated decommissioning provisions. For the year ended 31
December 2019 additions to property, plant and equipment
of refining and marketing segment and corporate and other
assets took into account changes in Group structure (Note
28).
364 843
507 860
35 230
209 273
146 235
384 022
451 167
34 324
232 101
138 729
Total assets
1 263 441
1 240 343
As at 31 December 2020 corporate and other includes RR
63,495 million of property, plant and equipment, RR 24,389
million of securities measured at fair value through other
comprehensive income, RR 3,091 million of securities mea-
sured at amortised cost, RR 12,453 million loans receivable,
RR 16,027 million of bank deposits measured at amortised
cost, RR 181 million of cash.
As at 31 December 2019 corporate and other includes RR
50,102 million of property, plant and equipment, RR 24,413
million of securities measured at fair value through other
comprehensive income, RR 20,626 million loans receivable,
RR 331 million of bank deposits measured at amortised cost,
RR 3,277 million of cash.
The Group’s assets and operations are primarily located and
conducted in the Russian Federation.
290
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 regulat-
ed 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:
Appendices to the Annual Report 2020
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
Securities measured at fair value through
profit or loss
Other loans receivable
Prepaid expenses and other current assets
Due from related parties short-term
Long-term accounts receivable
Banking: Loans to customers
At 31 De-
cember
2020
At 31 De-
cember
2019
132
73
29
357
204
795
71
-
231
293
42
51
268
885
198
50
Year ended
Year ended
31 December 2020
31 December 2019
Other financial assets
Revenues and income
Sales of refined products
Other sales
Interest income
Costs and expenses
Other services
Other purchases
28
84
26
852
400
21
122
57
844
501
Securities measured at fair value through
other comprehensive income
Other loans receivable
3 890
4 070
1 002
978
Due from related parties long-term
4 963
5 296
Liabilities
Accounts payable and accrued liabilities
(69)
(37)
Banking: Customer accounts
(779)
(910)
Due to related parties short-term
(848)
(947)
Government related companies
The amounts of transactions for each period with Government
related companies are as follows:
Year ended 31 De-
Year ended 31 De-
cember 2020
cember 2019
Sales of refined products
Other sales
Interest income
Interest expense
Purchases of refined products
Purchases of electricity
Purchases of transportation
and compounding services
Other services
Other purchases
18 060
4 764
2 804
656
24 661
16 014
21 934
4 994
686
30 662
5 302
2 852
764
20 715
18 479
26 987
5 830
2 366
291
Annual Report 2020
The outstanding balances with Government related companies were as follows
At 31 December
At 31 December
2020
2019
Assets
Cash and cash equivalents
Banking: Mandatory reserve deposits with the Bank of Russia
Accounts receivable
Banking: Loans to customers
Other financial assets
Notes receivable
Bank deposits
Securities measured at fair value through other comprehensive income
Securities measured at amortised cost
Securities measured at fair value through profit or loss
Other loans measured at amortised cost
Prepaid expenses and other current assets
Due from related parties short-term
Banking: Loans to customers
Other financial assets
Securities measured at fair value through other comprehensive income
Securities measured at amortised cost
Other loans measured at amortised cost
Advances for construction
Due from related parties long-term
Liabilities
Accounts payable and accrued liabilities
Banking: Due to banks and the Bank of Russia
Banking: Customer accounts
Debt
RR credit facilities
Debt securities issued
Other debt
Due to related parties short-term
Banking: Due to banks and the Bank of Russia
Other debt
Government grants (Note 19)
Due to related parties long-term
14 007
1 528
2 102
-
-
-
3 023
7 480
4 095
41
4 441
36 717
5 228
22 294
8 803
104
16
10 044
1 572
4 416
6 563
4
310
505
3 325
3 915
41
3 185
33 880
4 994
24 193
7 898
148
14
36 445
37 247
(1 744)
(570)
(161)
-
(46)
(1 835)
(4 356)
(1 551)
(102)
(8 327)
(9 980)
(1 519)
(2 445)
(2 959)
(10 142)
(404)
(477)
(17 946)
(2 763)
-
(3 231)
(5 994)
Appendices to the Annual Report 2020
Key management personnel
The key management personnel of the Group includes
members of the Board of Directors and the Management
Board of PJSC TATNEFT.
For the years ended 31 December 2020 and 2019 total
remuneration, including pension cost, for key manage-
ment personnel was RR 1,084 million and RR 988 million,
respectively.
At 31 December 2020 and 2019 key management personnel
customer accounts in Bank ZENIT amounted to RR 29,328
million and RR 31,738 million, respectively.
As at 31 December 2020 the liability for the services provided
was recognized in respect of the key management personnel
of the Group in accordance with the long-term incentive
program for executive employees in the amount of RR 387
million. Information about the program is presented in Note
19.
Note 26: Contingencies and
commitments
Operating Environment of the Group
The economy of the Russian Federation displays certain
characteristics of an emerging market. It is particularly sen-
sitive to oil and gas prices and subject to significant negative
impact of continuous decrease in crude oil prices.
In March 2020 the World Health Organization announced
a pandemic due to the rapid spread of COVID-19. The
measures taken around the world to combat the spread of
COVID-19 resulted in limitation of business activity, which
caused significant decrease in world demand for energy
resources. The expiration of prior arrangement of OPEC+
on April 1, 2020 raised the risks of substantial oversupply of
crude oil and refined products in the market. These events
led to significant drop in stock markets, fall in crude oil prices,
the Russian Ruble weakened against the US dollar and the
Euro. In April 2020, the OPEC + countries reached a new
agreement, under which the Russian Federation assumed
obligations to reduce oil production in the period from May 1,
2020 to April 30, 2022. In accordance with the agreements
reached, the Group began to fulfill its obligations to reduce oil
production. Despite the new production restrictions agreed
by OPEC+, the recovery in oil prices may take a long time
and may be accompanied by a significant reduction in oil
production. These events can have a significant impact on
the operations, financial position and financial results of the
Group in the future, the consequences of which are difficult
to predict. Management created provisions for impairment
considering the economic situation and prospects at the end
of the reporting period (Note 12).
Tax, currency and customs legislation are 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.
The future economic development of the Russian Federation
depends on external factors and internal measures taken by
the government and changes in the tax, legal and regulatory
framework.
Continued uncertainty regarding further economic growth,
volatility in the financial markets, lower global oil prices,
reduced oil production, as well as other risks, could have a
significant negative impact on the financial and corporate
sectors of the Russian economy in the future. 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. As with any
economic forecast, however, the projections and likelihoods
of their occurrence are subject to a high degree of inherent
uncertainty and therefore the actual outcomes may be
significantly different from those projected.
Capital commitments.
As at 31 December 2020 and at 31 December 2019 the Group
has approximate outstanding capital commitments of RR
71,829 million and RR 46,804 million, respectively, mainly
for the construction of the TANECO refinery complex, drilling
and construction of wells, superviscous oil fields facilities
construction and tire business development project. These
commitments are expected to be paid between 2021 and
2025.
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 15).
Management believes the Company has the ability to obtain
syndicated loans and other financings as needed to continue
funding the own projects, refinance any maturing debts as
well as finance business acquisitions and other transactions
that may arise in the future.
Credit related commitments.
The credit related commitments comprise loan commit-
ments, 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:
Undrawn credit lines that are irrevocable or are
revocable only in response to a material adverse
change
Guarantees issued
Import letters of credit
At 31 De-
cember
2020
At 31 De-
cember
2019
34 249
28 973
12 928
12 739
185
129
Less: allowance for credit related commitment
(406)
(324)
Less: commitments collateralised by cash
deposits under guarantees issued
Less: commitments collateralised by cash
deposits under import letters of credit
(6)
(19)
(182)
(130)
Total credit related commitments
46 768
41 368
292
293
Annual Report 2020 Taxation.
The Russian tax legislation is subject to varying inter-
pretations 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 inter-
pretation of the legislation, and it is possible that transactions
and activities that have not been challenged in the past may
be challenged.
In 2019 the tax authorities completed audits of the Company
and its subsidiaries for the years ended 31 December 2015,
2016 and 2017. The available results of audits, in particular,
of the income tax of the consolidated group of taxpayers
of PJSC TATNEFT, did not have a significant impact on the
financial results and cash flows of the Group.
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 mon-
itoring 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. In
addition, the Group is introducing and applying best health,
safety and environmental protection practices and standards
which might go beyond any existing and potential legal
requirements in the Russian Federation.
Legal contingencies.
The Group is subject to various lawsuits and claims arising in
the ordinary course of business. The outcomes of such con-
tingencies, lawsuits or other proceedings cannot be deter-
mined 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
294
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 PJSC 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.
Note 27: Principal subsidiaries
Set out below are the Group's principal subsidiaries at 31
December 2020. 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. 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.
Appendices to the Annual Report 2020
At 31 December 2020
At 31 December 2019
% of
% of
% of
% of
ownership
ownership
ownership
ownership
Name of entity
Principal activity
interest
interest
interest
interest
held by the
held by the
held by the
held by the
PJSC Bank ZENIT
Tatneft Europe AG
TANECO
Nizhnekamskshina
Banking operations
Export oil sales
Oil refinery
Tires production
Nizhnekamskiy zavod gruzovykh shin
Tires production
Trade House Kama
Tatneft-AZS Centr
Tatneft-AZS-Zapad
Tatneft-AZS-Severo-Zapad
Tires sales
Oil products sales
Oil products sales
Oil products sales
Group
72
100
100
82
100
100
100
100
100
NCI
28
-
-
18
-
-
-
-
-
Group
72
100
100
82
100
100
100
100
100
NCI
28
-
-
18
-
-
-
-
-
The summarised financial information relating to the subsidiaries with material non-controlling interest was as follows:
Current assets Non-current assets
Current
Non-current
liabilities
liabilities
Revenue
Profit
Year ended 31 December 2020
PJSC Bank ZENIT
Nizhnekamskshina PJSC
Total
Year ended 31 December 2019
PJSC Bank ZENIT
Nizhnekamskshina PJSC
Total
82 263
130 898
179 593
12 293
18 605
(3 992)
682
389
4 419
-
7 076
(2 993)
82 945
131 287
184 012
12 293
25 681
(6 985)
84 220
1 033
149 286
195 643
13 184
22 873
1 480
3 575
5 223
-
14 918
623
85 253
152 861
200 866
13 184
37 791
2 103
295
Annual Report 2020 The purchase price was RR 11,299 million (net of cash on the
targets’ balance sheets), and cash consideration was fully paid
in 2019. The consideration paid by the Group was based on the
results of the evaluation of the business value of the acquired
entities as a whole.
Details of assessment of the fair value of acquired assets and
liabilities performed by the Group are as follows:
Financial assets
Cash and cash equivalents
Cash on hand and in banks
Term deposits with original maturity of less than three months
Fair value
Due from banks
Note 28: Business combinations
LLC Neste Saint-Petersburg
In 4th quarter of 2019 the Group acquired 100% of the
charter capital of LLC Neste Saint-Petersburg (subsequently
renamed to LLC Tatneft-AZS-Severo-Zapad) from third party
Neste Oyj (Neste Corporation) and obtained control becom-
ing its sole participants. LLC Neste Saint-Petersburg owns a
chain of 75 premium retail petroleum stations, an oil products
tank farm and an office building in Saint-Petersburg, Russia.
The acquired subsidiary will increase the Group’s presence in
the fuel and retail market of the North-West Federal District of
the Russian Federation.
The purchase price was RR 9,169 million (net of cash on the
acquired entity’s balance sheet) and the cash consideration
was fully paid in 2019-2020. The consideration paid by the
Group was based on the results of the evaluation of the
business value of the acquired entity as a whole.
Details of assessment of the fair value of acquired assets and
liabilities performed by the Group are as follows:
Cash and cash equivalents
Property, plant and equipment
Inventories
Other assets
Accounts payable
Deferred income tax liabilities
Other liabilities
Fair value of identifiable net assets of
subsidiary
Goodwill
Total purchase consideration
Сash and cash equivalents of subsidiary acquired
Purchase price, net
1 693
8 144
915
620
(900)
(1 073)
(79)
9 320
1 542
10 862
(1 693)
9 169
The carrying amount of goodwill is RR 1,542 million as at
31 December 2020 and 2019. No impairment was identified
based on the results of the audit performed by the Group.
Petrochemical complex in Togliatti
In the 4th quarter of 2019 the Group acquired 100% of the
charter capital of LLC SIBUR Togliatti (subsequently renamed
to LLC Togliattikauchuk) and 100% of the share capital of JSC
Togliattisintez from the third party PJSC SIBUR Holding and
obtained control of these entities becoming the sole partic-
ipant of LLC SIBUR Togliatti and through its ability to cast a
majority of votes in the general meeting of shareholders of JSC
Togliattisintez. The acquired companies form a petrochemical
complex for the production of various types of synthetic rub-
bers, as well as the high-octane component MTBE for motor
fuel, butadiene, isoprene, and other intermediate products.
The acquired subsidiaries contribute to the further develop-
ment of the Group’s petrochemical and tires business.
296
Cash and cash equivalents
Property, plant and equipment
Inventories
Other assets
Accounts payable
Deferred income tax liabilities
Other liabilities
Fair value of identifiable net assets of
subsidiaries
Сash and cash equivalents of subsidiaries
acquired
Purchase price, net
Note 29: Financial risk
management
Fair value
Total purchase consideration
1 502
11 595
1 226
565
(790)
(1 232)
(65)
12 801
12 801
(1 502)
11 299
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), credit risk and liquidity risk. The Group‘s overall risk
management program focuses on the unpredictability of
financial markets and seeks to minimize potential adverse
effects on the Group‘s financial performance. The Group
has introduced a risk management system and developed a
number of procedures to measure, assess and monitor risks
and select the relevant risk management techniques.
Market risk
Market risk is the risk or uncertainty arising from possible
market price movements and their impact on the future
performance of a business.
The Group takes on exposure to market risks. Market risks
arise from open positions in (a) foreign currencies, (b)
interest rate risk and (c) financial instruments price risk.
a) Currency risk
The Group operates internationally and is exposed to cur-
rency 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.
The table below summarises the Group’s exposure to foreign
currency exchange rate risk as at 31 December 2020.
Appendices to the Annual Report 2020
Russian Ruble
US Dollar
Other
Total
21 553
7 242
29
1 528
47 736
4 798
73 712
10 000
1
608
981
8 346
5 079
4 915
40 659
19 023
6 401
2 781
30 735
-
-
-
-
2 099
7 242
2 128
-
1 528
32 017
385
119
-
79 872
5 183
20 401
7 542
101 655
-
2 390
943
-
218
-
425
-
-
-
-
-
-
763
1 460
4 223
14 885
-
10 000
2 391
1 551
981
8 564
5 079
6 103
46 342
33 908
246 210
79 525
17 527
343 262
52 828
823
2 540
10 679
2 583
1 690
22 079
-
612
1 300
3 006
6 494
1 486
714
55 028
-
-
-
40
-
-
21
-
-
-
-
-
74
-
-
-
3 807
2 848
427
513
6 862
1 854
823
2 540
10 679
2 623
1 764
22 079
21
612
7 955
3 946
15 210
110 330
29 291
9 004
148 625
214 964
41 934
15 007
271 905
31 246
37 591
2 520
71 357
297
Banking: Mandatory reserves with the Bank of Russia Banking: Mandatory
reserves with the Bank of Russia
Accounts receivable
Trade receivables
Other financial receivables
Banking: Loans to customers
Other financial assets
Bank deposits
Due from banks
REPO with banks
Loans to employees
Other loans at AC
Other loans at FVTPL
Securities at FVTPL
Securities at FVOCI
Securities at AC
Total financial assets
Financial liabilities
Trade and other financial payables
Trade payables
Dividends payable
Current portion of lease liabilities
Lease obligations, net of current portion
Other payables
Banking: Other financial liabilities at FVTPL
Debt
Bonds issued
Subordinated debt
Debt securities issued
Credit facilities
Other debt
Banking: Due to banks and the Bank of Russia
Banking: Customer accounts
Total financial liabilities
Net balance sheet position
Annual Report 2020 The table below summarises the Group’s exposure to foreign currency exchange rate risk as at 31 December 2019.
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
Banking: Mandatory reserves with the Bank of Russia
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 at AC
Securities at FVTPL
Securities at FVOCI
Securities at AC
Total financial assets
Financial liabilities
Trade and other financial payables
Trade payables
Dividends payable
Current portion of lease liabilities
Lease obligations, net of current portion
Other payables
Banking: Other financial liabilities at FVTPL
Debt
Bonds issued
Subordinated debt
Debt securities issued
Credit facilities
Other debt
Banking: Due to banks and the Bank of Russia
Banking: Customer accounts
Total financial liabilities
Net balance sheet position
298
Appendices to the Annual Report 2020
For the year ended 31 December 2020 the Group recognised RR 15,234 million and RR 9,637 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 2019: RR 12,892 million and RR 13,099 million, respectively).
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:
16 472
5 853
2 405
24 730
Year ended 31 December 2020
Year ended 31 December 2019
350
-
1 572
42 019
12 633
-
-
-
36 895
29
-
77
-
810
20
350
77
1 572
79 724
12 682
109 895
19 897
6 660
136 452
350
29
4 081
112
928
21 198
7 079
43 798
12 586
309
-
1 450
3 008
-
-
-
310
716
850
11 152
-
-
-
-
156
179
-
659
4 487
4 081
112
928
21 508
7 951
44 827
23 738
273 102
77 461
13 315
363 878
35 109
55 865
2 613
11 578
1 764
4 337
21 857
-
809
10 142
1 734
12 951
496
545
-
-
-
45
114
-
1 287
114
4 558
272
9 557
-
-
-
-
-
-
-
-
-
476
307
36 150
55 865
2 613
11 578
1 809
4 451
21 857
1 287
923
14 700
2 482
22 815
128 750
25 982
5 320
160 052
287 509
42 425
6 648
336 582
(14 407)
35 036
6 667
27 296
Impact on profit before tax
7 518
(7 518)
Impact on
equity
6 015
(6 015)
Impact on profit before tax
7 007
(7 007)
Impact on
equity
5 606
(5 606)
US Dollar strengthening by 20%
US Dollar weakening by 20%
b) Interest rate risk.
The Group takes on exposure to the effects of fluctuations in
the prevailing levels of market interest rates on its financial
position and cash flows. Interest margins may increase as a
result of such changes, but may reduce or create losses in
the event that unexpected movements arise. Management
monitors on a daily basis and sets limits on the level of
mismatch of interest rate repricing that may be undertaken.
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 signifi-
cant changes in the LIBOR rate, the Group’s treasury function
performs periodic analysis of the interest rate environment.
The Group does not have a formal policy of determining how
much of the Group’s exposure should be to 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 analy-
sis 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 Bank
ZENIT's assets and liabilities are relatively short-term and that
provides the Bank ZENIT 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 transac-
tions, 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 com-
plementary 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 consid-
ered 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:
299
Annual Report 2020 Demand and
less than 1
month
From 1 to 6
From 6 to 12
From 1 to 5
More than 5
Non-sensi-
months
months
years
years
tive
Total
31 December 2020
Total financial assets
Total financial liabilities
40 496
45 961
25 504
48 852
25 320
35 811
70 309
77 621
62 057
119 576
343 262
5 017
58 643
271 905
Net interest sensitivity gap
(5 465)
(23 348)
(10 491)
(7 312)
57 040
60 933
71 357
31 December 2019
Total financial assets
Total financial liabilities
22 101
58 220
19 095
65 700
16 043
46 762
96 644
39 911
76 635
133 360
363 878
9 668
116 321
336 582
Net interest sensitivity gap
(36 119)
(46 605)
(30 719)
56 733
66 967
17 039
27 296
The table below summarises the effective average year end interest rates, by major currencies (US Dollars, Russian Rubles),
for financial instruments. 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 2020
At 31 December 2019
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
REPO with banks
Notes receivable
Loans to employees
Other loans
Securities at FVTPL
Securities at FVOCI
Securities at AC
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 the Bank of Russia
Banking: Customer accounts
300
-
4,36%
-
-
-
-
-
1,00%
7,21%
4,41%
-
-
9,98%
2,84%
10,13%
4,60%
5,08%
4,40%
4,25%
0,10%
3,19%
7,05%
6,53%
6,04%
6,93%
6,90%
8,50%
5,48%
5,00%
4,10%
5,25%
4,15%
3,62%
-
13,00%
1,60%
0,02%
0,19%
-
-
-
4,74%
5,25%
4,95%
-
-
-
0,76%
0,01%
7,70%
0,36%
0,52%
4,41%
6,05%
0,10%
3,19%
9,22%
7,11%
8,67%
8,35%
6,89%
0,00%
5,00%
6,47%
4,57%
7,46%
6,41%
6,00%
-
-
-
-
-
3,66%
6,57%
6,57%
-
8,92%
1,20%
4,19%
0,01%
-
1,60%
2,30%
Appendices to the Annual Report 2020
The following table presents a sensitivity analysis of interest rate risk on banking and non-banking financial assets and
liabilities:
Increase by 100 basis points
Decrease by 100 basis points
Year ended 31 December 2020
Year ended 31 December 2019
Impact on profit before tax
(717)
717
Impact on
equity
(574)
574
Impact on profit before tax
(273)
273
Impact on
equity
(218)
218
c) Financial instruments price risk
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 instru-
ment and, as a result, the Group’s profitability.
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 maxi-
mum mismatch between respective assets and liabilities) as
well as stop-loss and call-level limits, in addition to these, the
Group sets limits on a maximum duration of debt financial
instruments. When necessary the Group establishes margin
and collateral requirements.
Financial instruments price risk is managed primarily through
daily mark-to-market procedures, sensitivity analysis and
control of limits established for various types of financial
instruments.
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
are as follows:
Year ended 31 December 2020
Year ended 31 December 2019
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
499
1
500
399
1
400
301
6
307
240
5
245
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.
ECL is a probability-weighted estimate of the present value
of future cash shortfalls (i.e., the weighted average of credit
losses, with the respective risks of default occurring in a
given time period used as weights). An ECL measurement is
unbiased and is determined by evaluating a range of possible
outcomes. ECL measurement is based on four components
used by the Group: Probability of Default (“PD”), Exposure
at Default (“EAD”), Loss Given Default (“LGD”) and Discount
Rate.
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 in-
terest, 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
301
Annual Report 2020
the probability of conversion of the committed amounts to an
on-balance sheet exposure within a defined period.
or a combination of the following factors:
• financial assets are over 30 days overdue;
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 dis-
counted 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 purpos-
es 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 iden-
tify 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 favour-
able 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
302
• 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 follow-
ing events occur:
• financial assets are over 90 days overdue (a rebuttable
presumption);
• 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 receiv-
able 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 manage-
ment 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 borrowers are as follows:
Name of committee
Maximum exposure
allowed to be
approved, RR million
Assets and liabilities management committee
Not limited*
Credit committee
Not limited*
Credit committee on small and medium-sized
business borrowers
Credit committee on retail lending
Personal banking projects committee
* Within the limits of standards N6 and N25
400
50
90
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 coun-
terparties), 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 ac-
tivity, 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 accep-
tance 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 addi-
tional 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 monitor-
ing procedures.
Appendices to the Annual Report 2020
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,
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 devel-
oped. 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 5 credit quality rating categories in order of credit
quality deterioration (credit risk increase) in accordance with
the approaches outlined below:
Rating
group
PD interval
Corresponding
ratings of S&P
Description
I
II
III
IV
V
<0,36%
«AAA»…«BB+»
Minimal credit risk
[0,36%; 1,51%)
«BB»…«BB-»
Low credit risk
[1,51%; 7,51%)
«B+»…«B-»
Medium credit risk
[7,51%; 100%)
«CCC+»…«C»
High credit risk
100,00%
«D»
Default assets
The Group does not enter into transactions with an initial
rating of III, IV and V.
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:
• structured and continuous monitoring of the implemen-
tation of financial and non-financial covenants using the
control register;
• carrying out, with an established frequency, regular inspec-
tions of the volume, type and conditions of maintenance of
the pledged items, its validity and insurance;
• conducting a quarterly analysis of the financial and eco-
nomic activities of the borrower and monitoring its financial
position;
• monitoring of proper loan maintenance and repayment
(tranches);
• analysis of actual exposures versus established limits;
• control over compliance with internal policies, procedures,
instructions and orders issued by respective management
bodies;
303
Annual Report 2020 • monitoring of macroeconomic parameters in order to
check the adequacy of risk assessment and forecast.
Credit risk analysis on banking and non-banking operations
of the Group
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/en/#investor_en
The Group uses the following rating categories for the anal-
ysis 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.
The following table contains an analysis of the credit risk exposure of cash and cash equivalents including mandatory reserve
deposits with the Bank of Russia. The carrying amount 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)
At 31 December 2020
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
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
29 237
226
1 272
30 735
-
30 735
911
6 073
258
7 242
-
7 242
2 128
-
-
2 128
-
2 128
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29 237
226
1 272
30 735
-
30 735
911
6 073
258
7 242
-
7 242
2 128
-
-
2 128
-
2 128
Appendices to the Annual Report 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
credit im-paired)
At 31 December 2019
POCI
Total
Banking: Mandatory reserve deposits with the Bank of Russia
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
Cash on hand and cash in banks
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
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
Banking: Mandatory reserve deposits with the Bank of Russia
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
1 528
-
-
1 528
-
1 528
22 999
10
1 721
24 730
-
24 730
128
222
-
350
-
350
77
-
-
77
-
77
1 572
-
-
1 572
-
1 572
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 528
-
-
1 528
-
1 528
22 999
10
1 721
24 730
-
24 730
128
222
-
350
-
350
77
-
-
77
-
77
1 572
-
-
1 572
-
1 572
The following table contains an analysis of the credit risk exposure of other financial assets measured at amortised cost and
measured at fair value through other comprehensive income for which ECL allowance is recognised other than cash and cash
equivalents including mandatory reserve deposits with the Bank of Russia, loans to customers and accounts receivable.
304
305
Annual Report 2020 The carrying amount 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)
At 31 December 2020
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
306
-
-
-
-
-
-
-
-
73
73
-
73
-
-
-
-
-
-
-
10 000
-
10 000
-
10 000
208
2 201
-
2 409
(18)
2 391
-
-
-
-
-
-
-
-
-
-
318
318
(318)
-
-
-
1 315
31 739
1 315
31 739
(92)
(24 471)
1 223
7 268
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 698
2 698
(1 717)
981
-
-
5 547
5 547
(5 547)
-
-
-
39
39
(39)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
318
318
(318)
-
-
-
33 127
33 127
(24 563)
8 564
-
-
2 698
2 698
(1 717)
981
-
10 000
5 547
15 547
(5 547)
10 000
208
2 201
39
2 448
(57)
2 391
Appendices to the Annual Report 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
credit im-paired)
At 31 December 2020
POCI
Total
REPO with banks
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
Debt securities measured at amortised cost
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
1 551
-
-
1 551
-
1 551
26 929
6 863
244
34 036
(128)
33 908
Debt securities measured at fair value through other comprehensive income
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
18 595
1 723
474
20 792
(32)
20 760
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 551
-
-
1 551
-
1 551
26 929
6 863
244
34 036
(128)
33 908
18 595
1 723
474
20 792
(32)
20 760
307
Annual Report 2020 Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
credit im-paired)
At 31 December 2019
POCI
Total
-
-
-
-
-
-
-
-
73
73
-
73
-
-
-
-
-
-
309
12
338
659
-
659
1 475
3 121
-
4 596
(109)
4 487
-
-
112
112
-
112
-
-
-
-
240
240
(240)
-
-
-
1 531
45 911
1 531
45 911
(241)
(25 766)
1 290
20 145
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 732
2 732
(1 804)
928
-
-
5 547
5 547
(5 547)
-
-
-
32
32
(32)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
352
352
(240)
112
-
-
47 515
47 515
(26 007)
21 508
-
-
2 732
2 732
(1 804)
928
309
12
5 885
6 206
(5 547)
659
1 475
3 121
32
4 628
(141)
4 487
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
308
Appendices to the Annual Report 2020
Stage 1
(12-months ECL)
Stage 2
(lifetime ECL for
SICR)
Stage 3
(lifetime ECL for
credit im-paired)
At 31 December 2019
POCI
Total
REPO with banks
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
Debt securities measured at amortised cost
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
4 081
-
-
4 081
-
4 081
16 354
5 087
2 359
23 800
(62)
23 738
Debt securities measured at fair value through other comprehensive income
Investment grade rating
Non-investment grade rating
Unrated
Gross carrying amount
Credit loss allowance
Carrying amount
16 476
797
1 848
19 121
(34)
19 087
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
20
-
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4 081
-
-
4 081
-
4 081
16 354
5 087
2 359
23 800
(62)
23 738
16 476
797
1 868
19 141
(34)
19 107
Within short term bank deposits there are RR 5,540 million of deposits placed with Tatfondbank. In March 2017, by the order
of the Bank of Russia the license to conduct banking operations was withdrawn from Tatfondbank. At 31 December 2020 and
2019 the Group created a provision for impairment of deposits placed with Tatfondbank in the amount of RR 5,540 million.
309
Annual Report 2020 • purchase and sale of certain financial assets in liquid
Other payables
portfolios;
• accelerating closure of trade positions;
Banking: Other financial liabilities at fair value through profit and
loss
Appendices to the Annual Report 2020
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:
Less than 1 year
Between 1 and 5
years
Over 5 years
Total
At 31 December 2020
Financial liabilities
Trade and other financial payables
Trade payables
Dividend payable
Current portion of lease liability
Lease obligations, net of current portion
Debt
Bonds issued
Subordinated debt
Debt securities issued
Credit facilities
Other debt
Banking: Due to banks and the Bank of Russia
Banking: Customer accounts
Credit related commitments (Note 26)
55 028
823
2 891
-
2 183
1 764
1 470
21
502
3 008
3 551
14 400
146 149
41 393
-
-
-
8 482
433
-
23 490
-
120
2 708
386
1 777
20 810
5 969
-
-
-
9 738
7
-
-
-
2
2 239
9
275
2 334
-
55 028
823
2 891
18 220
2 623
1 764
24 960
21
624
7 955
3 946
16 452
169 293
47 362
Total
273 183
64 175
14 604
351 962
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, quarter-
ly 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 perma-
nent nature, the Group will normally raise long-term debt in
available international and domestic markets.
• 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; and
• relevant external factors.
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 sup-
porting units on large transactions (both proprietary and
customer based);
Banking operations liquidity risk management
• estimation of minimum expected cash inflow during a
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 obliga-
tions 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 unac-
ceptable losses or damaging the Group’s reputation.
In respect to the banking segment 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 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:• current structure of assets and liabilities
including any known renewal arrangements as at the date of
the respective test;
• amounts, maturity and liquidity profiles of transactions
projected by business units;
business day; 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.
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.
310
311
Annual Report 2020 At 31 December 2019
Recurring fair value measurements
Appendices to the Annual Report 2020
Less than 1 year
Between 1 and 5
years
Over 5 years
Total
Financial liabilities
Trade and other financial payables
Trade payables
Dividend payable
Current portion of lease liability
Lease obligations, net of current portion
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 the Bank of Russia
Banking: Customer accounts
Credit related commitments (Note 26)
Total
Fair values
36 150
55 865
3 024
-
1 660
4 451
3 232
292
880
14 700
475
20 727
134 315
36 114
311 885
-
-
-
9 443
149
-
22 323
3 137
40
-
2 007
2 827
29 486
5 725
75 137
-
-
-
11 078
-
-
7
509
3
-
3
8
-
36 150
55 865
3 024
20 521
1 809
4 451
25 562
3 938
923
14 700
2 482
23 557
163 809
41 839
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 follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities that Group has the ability to assess at the measure-
ment date.
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 assump-
tions a market participant would use in pricing the asset or liability.
The levels in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows:
Banking: Loans to customers measured at fair value through profit or loss
Securities measured at fair value through profit or loss
Other loans measured at fair value through profit or loss
Securities measured through other comprehensive income
Investment property
Banking: Other financial liabilities measured at fair value through profit and
loss
Fair value
At 31 December 2020
Carrying value
Level 1
Level 2
Level 3
-
4 064
-
20 304
-
(1 691)
-
1 793
-
9 865
-
(73)
2 044
246
5 079
16 173
1 229
2 044
6 103
5 079
46 342
1 229
-
(1 764)
Total
22 677
11 585
24 771
59 033
Banking: Loans to customers measured at fair value through profit or loss
Securities measured at fair value through profit or loss
Banking: Due from banks
Securities measured at fair value through other comprehensive income
Banking: Other financial liabilities measured at fair value through profit and
loss
Fair value
Level 1
Level 2
Level 3
At 31 December 2019
Carrying value
-
7 015
-
18 325
-
(4 425)
-
643
1 238
10 407
-
(26)
12 947
293
-
16 095
1 323
12 947
7 951
1 238
44 827
1 323
-
(4 451)
Total
20 915
12 262
30 658
63 835
11 608
398 630
Investment property
312
313
Annual Report 2020 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 2020 и 2019:
Banking: Loans to customers at FVTPL
Level 3
Discounted cash flow models adjusted at credit risk
Fair value hierarchy
Valuation technique and key input data
Securities at FVOCI
Level 2, Level 3
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
Other loans measured at FVTPL
Level 3
Discounted cash flow models adjusted at credit risk
Securities at FVTPL
Level 2, Level 3
Banking: Due from banks
Investment property
Banking: Other financial liabilities at FVTPL
Level 2
Level 3
Level 2
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
adjusted at credit risk
Market data on comparable objects adjusted in case of
differences from similar objects
Discounted cash flow models adjusted at credit risk
There were no changes in valuation technique for Level 2 and Level 3 recurring fair value measurements during the years
ended 31 December 2020 and 2019.There have been no transfers between Level 1, Level 2 and Level 3 during 2020 and 2019
year.
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:
Assets
Cash and cash equivalents
Cash on hand and in banks
Term deposits
Due from banks
Banking: Mandatory reserve deposits with the Bank of
Russia
Fair value
Level 1
Level 2
Level 3
Carrying
value
Fair value
Level 1
Level 2
Level 3
Carrying
value
5 141
-
-
25
594
7 242
2 128
1 528
-
-
-
-
-
30
735
7 242
2 128
6 365
-
-
1 528
1 572
18
365
350
77
-
-
-
-
-
24
730
350
77
1 572
At 31 December 2020
At 31 December 2019
Current portion of lease liabilities
Appendices to the Annual Report 2020
At 31 December 2020
At 31 December 2019
Fair value
Level 1
Level 2
Level 3
Carrying
value
Fair value
Level 1
Level 2
Level 3
Carrying
value
Accounts receivable
Trade receivables
Other financial receivables
Banking: Loans to customers measured at amortised
cost
Other financial assets
Bank deposits
Due from banks
REPO with banks
Notes receivable
Loans to employees
Other loans measured at amortised cost
-
-
-
-
-
-
-
-
-
-
79 872
79 872
681
4 502
5 183
-
100 230
99 611
10 000
2 460
1 551
-
-
-
-
-
-
-
981
10 000
2 391
1 551
-
981
8 564
8 564
-
-
-
-
-
-
-
-
-
Securities measured at amortised cost
25 675
9 455
-
33 908
24 777
-
79 724
79 724
1 176
11 506
12 682
-
122 842
123 505
659
3 283
4 081
-
-
-
-
-
-
-
112
928
659
3 249
4 081
112
928
21 508
21 508
-
23 738
Total financial assets
32 344
59 111
194 149 283 694
32 714
27 991 236 620
296 915
Liabilities
Trade and other financial payables
Trade payables
Dividend payable
Other payables
Non-current lease liabilities
Debt
Bonds issued
Subordinated debt
Debt securities issued
Credit facilities
Other debt
-
-
-
-
-
-
-
-
-
-
55 028
55 028
823
823
2 540
2 540
2 623
2 623
10 679
10 679
-
-
-
-
-
350
35 800
36 150
-
-
55 865
55 865
2 613
2 613
332
1 477
1 809
-
11 578
11 578
22 079
20 032
1 825
15 000
7 189
-
-
-
-
21
610
-
-
-
-
-
21
612
7 955
7 955
3 946
3 946
-
-
-
-
1 287
923
-
-
-
-
-
21 857
1 287
923
14 700
14 700
2 482
2 482
Banking: Due to banks and the Bank of Russia
273
14 802
Banking: Customer accounts
-
148 307
-
-
15 210
1 527
21 288
148 625
-
156 578
-
-
22 815
160 052
Total financial liabilities
15 273
170 929
83 594
270 141
21 559 182 583
124 515
332 131
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.
314
315
Annual Report 2020 Reconciliation of liabilities arising from financing activities
Non-banking operations capital management
Banking operations capital management
Appendices to the Annual Report 2020
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:
Liabilities arising as a result of financing activities
Short-term and
Subordinated
long-term debt
Bonds issued
debt
Lease liabilities
At 31 December 2018
9 270
1 056
3 580
Cash flow movement, including:
Proceeds from issuance of debt
Repayment of debt
Issuance of bonds
Redemption of bonds, subordinated debts
Repayment of principal portion of lease
liabilities
Interest paid
Foreign exchange adjustments
Interest accrual
Other non-cash flows
115 346
(107 212)
-
-
-
(2 222)
713
755
532
-
-
21 790
(1 053)
-
(119)
-
182
1
-
-
-
(2 140)
-
(286)
(160)
310
(17)
At 31 December 2019
17 182
21 857
1 287
Cash flow movement, including:
Proceeds from issuance of debt
Repayment of debt
Issuance of bonds
Redemption of bonds, subordinated debts
Repayment of principal portion of lease
liabilities
218 758
(225 083)
-
-
-
-
-
3 198
(3 029)
-
Interest paid
(1 009)
(1 518)
Foreign exchange adjustments
Interest accrual
Other non-cash flows
1 017
1 033
3
-
1 594
(23)
At 31 December 2020
11 901
22 079
-
-
-
(1 545)
-
(240)
276
243
-
21
-
-
-
-
-
(1 352)
(1 571)
-
1 571
15 543
14 191
-
-
-
-
(1 419)
(1 374)
-
1 374
447
Total
13 906
115 346
(107 212)
21 790
(3 193)
(1 352)
(4 198)
553
2 818
16 059
54 517
218 758
(225 083)
3 198
(4 574)
(1 419)
(4 141)
1 293
4 244
427
13 219
47 220
The Group considers equity and debt to be the principal
elements of capital management. In order to maintain or ad-
just 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
assets.
The Group monitors capital on the basis of its gearing ratio.
Consolidated total borrowings excluding
borrowings of Bank ZENIT:
Bonds issued
Credit facilities
Other debt
Year ended
Year ended
31 December
31 December
2020
2019
26 901
32 182
15 000
15 000
7 955
14 700
3 946
2 482
Consolidated shareholders’ equity
827 672
745 532
Debt to capital employed ratio, %
(Consolidated total borrowings /
Consolidated shareholders’ equity)
3,3%
4,3%
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 suffi-
cient 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 cove-
nants, including capital adequacy level of 8% calculated in
accordance with Basel I and IFRS, and Tier 1 capital adequa-
cy ratio of 6%. Bank ZENIT has complied with all externally
imposed capital requirements throughout 2020 and 2019.
In September 2015 Bank ZENIT received five subordinated
loans totalling RR 9,933 million from DIA within the Russian
Federation Government programme for additional capitalisa-
tion 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 subor-
dinated 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. 646-P.
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 at 31 December 2020 was RR 827,672 million (2019: RR
745,532 million). The Group manages capital for banking and non-banking operations separately.
316
317
Annual Report 2020 Annex 2.
Report on compliance of
PJSC TATNEFT n.a. V.D. Shashin
with the corporate governance
code guidelines
of the Bank of Russia
based on the results of the reporting calendar year
2020 and the end of the corporate year (June 2020/
June 2021)
The present report has been prepared pursuant to 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 is compliant with the guidelines 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/finmar-
kets/files/ common/letters/2014/inf_apr_1014.pdf.
The Corporate Governance Code compliance is assessed
by PJSC TATNEFT according to the guidance of the Bank of
Russia provided in its Letter No IN-06-52/8 of 17 February
2016 "On Disclosure of the report on compliance with the
Corporate Governance Code guidelines in the annual report
of a public joint stock company".
318
This Corporate Governance Compliance Report was con-
sidered by the Board of Directors of PJSC TATNEFT n.a. V.D.
Shashin at the meeting in May 25, 2021. (Minutes No. 13
dated May 25, 2021) as part of the 2020 Annual report.
The Board of Directors acknowledges that the information
and data disclosed herein contain complete and accurate
information with regard to
the PJSC TATNEFT compliance with the guidance of the
Corporate Governance Code in 2020.
The Company’s corporate governance model and practice is
set out in the Corporate Governance Section of this Report.
Item
No.
1.1
1.1.1.
Appendices to the Annual Report 2020
Corporate Governance Principle
Criteria for assessing compliance
Status of compliance
Explanations
with the corporate governance principles
with the corporate
for deviations from the criteria for assessing compli-
governance principle
ance with the corporate governance principle
The Company shall ensure equal and fair treatment of all its shareholders in the course of exercise by them of their rights to par-
ticipate in the management of the company.
Full compliance
Partial compliance
Noncompliance
The Company creates most
favorable conditions for its
shareholders enabling them
to participate in the General
meeting and develop informed
positions on issues on its agen-
da, as well as provide them with
the opportunity to coordinate
their actions and express
their opinions on issues being
discussed.
1. The Company's internal document
approved by the General meeting
of shareholders and regulating the
procedures for holding the General
meeting is publicly available.
2. The Company provides an acces-
sible means of communication
with the Company, such as a
hotline, e-mail or Internet forum
to allow shareholders to express
their opinions and send their
questions regarding the agenda
during preparation for the General
meeting. These actions were taken
by the Company ahead of each
General meeting held during the
reporting period.
1.1.2. Procedures for notification of
the General meeting and pro-
vision of materials for it should
enable the shareholders to get
properly prepared for participa-
tion therein.
1.1.3. During the preparation for and
holding of the General meeting,
the shareholders could freely
and timely receive information
about the meeting and its
materials, pose questions to
members of the Company’s ex-
ecutive bodies and the Board
of Directors, and communicate
with each other.
1. The notification of the General
Full compliance
Partial compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
meeting of shareholders is posted
(published) on the website on the
Internet at least 30 days before the
date of the General meeting.
2. The notification indicates the venue
of the meeting and the documents
to be presented permitting access
to the premises.
3. Shareholders have been provided
with an access to the information
about who proposed agenda items
and who nominated candidates
to the Board of Directors and the
Audit Committee of the Company.
1. During the reporting period, the
shareholders were given the
opportunity to ask questions to
the members of the Company's
executive bodies and the Board
of Directors before and during the
annual General meeting.
2. The standpoint of the Board of
Directors (including dissenting
opinions recorded in the minutes)
on each item on the agenda of
General meetings held during the
reporting period was included in
the proceedings for the General
meeting of shareholders.
3. The Company provided the eligible
shareholders with an access to the
list of persons entitled to participate
in the General meeting, starting
from the date when it was received
by the Company, in all cases when
General meetings were held in the
reporting period.
319
Annual Report 2020 1.1.4.
There were no unjustified diffi-
culties preventing shareholders
from exercising their right to
demand that a General meet-
ing be convened, nominate
candidates to the Company’s
governing bodies, and to place
proposals on its agenda.
Full compliance
Partial compliance
Noncompliance
1. During the reporting period, share-
holders could submit their propos-
als to be included in the agenda of
the annual General meeting within
at least 60 days after the end of the
relevant calendar year.
2. In the reporting period, the Com-
pany did not reject any proposals
for the agenda or nominees to the
Company's governance bodies if
there were typos and other slight
insufficiencies in the shareholder's
proposal.
1.1.5. Each shareholder could freely
1. The internal document (internal
Full compliance
Partial compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
In pursuance of the requirements of the
current legislation of the Russian Federation
related to the COVID-19 spread prevention,
General meetings of shareholders in the
reporting period were held in the form of
absentee voting.
exercise their right to vote in
a straightforward and most
convenient way.
1.1.6. Procedures for holding a Gen-
eral meeting set by the Compa-
ny provide equal opportunity to
all persons present at the Gen-
eral meeting to express their
opinions and ask questions that
might be of interest to them.
policy) of the Company contains
provisions according to which
each participant of the General
meeting may request a copy of the
completed ballot, certified by the
ballot-counting committee, before
the end of the relevant meeting.
1. When holding General meetings
of shareholders in the form of
a meeting (joint attendance of
shareholders) in the reporting
period, sufficient time was provided
to speakers for their presentations
and discussions with regard to the
agenda items.
2. Candidates for the governance
and control bodies of the Company
were available to answer questions
asked by the shareholders at the
meeting, at which their nominations
were put to the vote.
3. When making decisions regarding
preparation and holding of the
general meetings of shareholders,
the Board of Directors considered
the option of using telecommunica-
tions so that the shareholders could
remotely participate in the general
meetings in the reporting period.
1.2
Shareholders have equal and fair opportunities to participate in the profits of the company by means of receiving dividends.
1.2.1.
The Company has developed
and put in place a transparent
and clear mechanism for deter-
mining the amount of dividends
and their payment.
Full compliance
Partial compliance
Noncompliance
1. The Company has developed its
dividend policy that has been
approved by the Board of Directors
and disclosed.
2. If the dividend policy of the Compa-
ny uses the Company’s perfor-
mance indicators from its account-
ing reports to determine the size of
dividends, then relevant provisions
of the dividend policy take into
account consolidated figures of the
financial statements.
1.2.2.
The company does not make
a decision to pay dividends if
such decision, while formally
compliant with laws, is unjusti-
fied from the economic point of
view and may lead to misrep-
resentation of the company’s
performance.
1. The Company’s dividend policy
Full compliance
contains clear indications of finan-
cial and economic circumstances
when the Company should not pay
dividends.
Partial
compliance
Noncompliance
The Company's Dividend Policy contains the
provisions under which dividends are pay-
able, and the Company assumes that failure
to comply with these provisions is the basis
for non-payment of dividends. The Company
plans to make appropriate changes to the
Dividend Policy in 2021-2022, specifying the
financial/economic circumstances under
which the Company should not pay dividends.
Appendices to the Annual Report 2020
1.2.3.
The Company does not allow
deterioration of dividend rights
of its existing shareholders.
1.2.4.
The Company strives to rule
out any ways through which its
shareholders can obtain any
profit or gain at the Company’s
expense other than dividends
and distributions of its liquida-
tion value.
1. In the reporting period, the
Full compliance
Partial compliance
Noncompliance
Company did not take any actions
that would lead to deterioration
of dividend rights of its existing
shareholders.
2. The history record of dividend
payments reflects the Company’s
consistency in terms of ensuring
high level of dividend yield while
maintaining a balance between
short-term (earnings in the form of
dividend payouts) and long-term
(investment into the development
of the Company) interests of share-
holders.
1. In order to rule out any ways for its
Full compliance
Partial compliance
Noncompliance
shareholders to obtain any profit or
gain at the company’s expense oth-
er than dividends and distributions
of its liquidation value, the internal
documents of the Company set out
controls that ensure timely identifi-
cation and approval procedure for
transactions with persons affiliated
(associated) with substantial share-
holders (persons who have the
right to exercise their voting shares
rights), when the law formally does
not recognize such transactions as
non-arm's length transactions.
1.3.
1.3.1.
The system and practices of corporate governance ensure equal terms and conditions for all shareholders owning shares of
the same class (category) in the company, including minority and foreign shareholders as well as their equal treatment by the
Company.
The Company has created
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. In the reporting period, the pro-
cedures for managing potential
conflict of interest of substantial
shareholders have been effective,
and the conflicts among sharehold-
ers, if they took place, were given
sufficient attention by the Board of
Directors.
Full compliance
Partial compliance
Noncompliance
1.3.2.
The Company does not take
any actions, which will or might
result in artificial reallocation of
corporate control therein.
1. There were no quasi-treasury
Full compliance
shares, nor did they participate in
voting in the reporting period.
Partial
compliance
Noncompliance
The Company prevents all actions, which
will or might result in artificial reallocation
of corporate control therein. 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
3.47% of voting shares, and voting with this
stake cannot significantly affect the overall
voting result. Voting for candidates for the
governance and control bodies is carried out
in equal proportions between each candi-
date, which does not give an advantage to
any candidate. The voluntary nature of such
approach is equivalent of voluntary renunci-
ation 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 realloca-
tion of control.
320
321
Annual Report 2020 The shareholders are provided with reliable and efficient means of recording their rights in shares as well as with the opportunity
to freely dispose of such shares in a non-onerous manner.
The shareholders are provided
with reliable and efficient
means of recording their rights
in shares as well as with the
opportunity to freely dispose of
such shares in a non-onerous
manner.
1. The quality and reliability of the ac-
tivities carried out by the Registrar
of the Company to maintain the reg-
ister of holders of securities meet
the needs of the Company and its
shareholders
Full compliance
Partial compliance
Noncompliance
The Board of Directors is in charge of strategic management of the Company, determine major principles of and approaches to
creation of a risk management and internal control system within the Company, monitor the activity of the Company’s executive
bodies, and carry out other key functions.
The Board of Directors is re-
sponsible for making decisions
with regard to appointments
and dismissals of members
of executive bodies, including
those related to their failure to
properly perform their duties.
The Board of Directors also
procures that the Compa-
ny’s executive bodies act in
accordance with an approved
development strategy and
main business goals of the
Company.
The Board of Directors sets the
Company's main guidelines
and targets for its business
activities in the long term,
evaluates and approves the
Company's key performance
indicators and main business
goals, as well as evaluates
and approves the Company's
strategy and business plans for
its core business activities.
The Board of Directors defines
the principles and approaches
to setting up of the risk man-
agement and internal control
system in the Company.
The Board of Directors defines
the Company’s policy on
remuneration due to and/
or reimbursement of costs
(compensation) incurred by its
Board members, members of
its Executive bodies and other
key managers.
Full compliance
Partial compliance
Noncompliance
1. The Board of Directors is vested
with the powers embodied in the
Articles of Association to appoint,
dismiss and determine the terms of
contracts with respect to members
of Executive bodies.
2. The Board of Directors has con-
sidered the progress report of the
sole executive body and members
of the collegial executive body on
implementation of the Company’s
strategy.
1. In the reporting period, the Board of
Directors addressed the matters re-
lated to implementation and updat-
ing of the strategy, approval of the
Company's financial and economic
plan (budget), as well as reviewed
criteria and performance indicators
(including interim ones) for the
implementation of the Company's
strategy and business plans.
Full compliance
Partial compliance
Noncompliance
1. The Board of Directors defined
Full compliance
the principles and approaches to
setting up of the risk management
and internal control system in the
Company.
2. The Board of Directors assessed
the Company's risk management
and internal control system during
the reporting period.
Partial compliance
Noncompliance
1. The Company has developed and
Full compliance
Partial compliance
Noncompliance
put in place the policy (policies) on
remuneration due to and/or reim-
bursement of costs (compensation)
incurred by its Board members,
members of the Executive bodies of
the Company and other key man-
agers, which has been approved by
the Board of Directors.
2. During the reporting period,
matters related to this policy (s)
were considered at meetings of the
Board of Directors.
1.4.
1.4.1.
2.1.
2.1.1.
2.1.2.
2.1.3.
2.1.4.
322
Appendices to the Annual Report 2020
2.1.5.
2.1.6.
2.1.7.
The Board of Directors plays a
key role in preventing, detect-
ing and resolving internal con-
flicts between the Company's
governance bodies, sharehold-
ers and employees.
1. The Board of Directors plays a key
role in the prevention, detection
and resolution of internal conflicts.
2. The Company has established a
system for identifying transactions
related to conflicts of interest and a
set of measures aimed at resolving
such conflicts.
Full compliance
Partial compliance
Noncompliance
The Board of Directors plays
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 the Information Policy
Regulation.
2. There are designated persons in
the Company, who are responsible
for implementation of the informa-
tion policy.
Full compliance
Partial compliance
Noncompliance
The Board of Directors over-
sees corporate governance
practices in the Company and
plays a key role in significant
corporate events of the Com-
pany.
1. In the reporting period, the Board
Full compliance
of Directors considered the matter
of corporate governance practices
in the Company.
Partial compliance
Noncompliance
2.2.
The Board of Directors is accountable to the shareholders of the Company.
2.2.1.
Information with regard to the
work of the Board of Directors
is disclosed and provided to
the shareholders.
1. The Annual report of the Company
for the reporting period includes
information on attendance at meet-
ings of the Board of Directors and
committees by individual directors.
2. The Annual report contains infor-
mation on the main results of the
Board of Directors' performance
assessment conducted in the
reporting period.
Full compliance
Partial compliance
Noncompliance
2.2.2.
The Chairman of the Board of
Directors is available to com-
municate with the Company’s
shareholders.
1. There is a transparent procedure in
place in the Company that allows
the shareholders direct all their
queries to the Chairman of the
Board of Directors as well as their
own points of view thereupon.
Full compliance
Partial compliance
Noncompliance
2.3.
2.3.1.
The Board of Directors is an efficient and professional governing body of the Company, which is able to make objective and
independent judgements and pass resolutions in the best interests of the Company and its shareholders.
Only persons who have an
impeccable business and
personal reputation and
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 are elected
to the Board of Directors.
1. The Company's procedure for
Full compliance
Partial compliance
Noncompliance
assessment of the performance
of the Board of Directors includes,
inter alia, evaluating the profession-
al qualifications of the members of
the Board of Directors.
2. Over the reporting period, the
Board of Directors (or its Nom-
ination Committee) evaluated
candidates for the Board of Di-
rectors in terms of their necessary
experience, knowledge, business
reputation, lack of conflicts of
interest, etc.
323
Annual Report 2020 The Company provides shareholders with
information related to the background of
candidates for membership in the Board
of Directors, the results of the evaluation of
such candidates, the candidate's compliance
with the independence criteria by posting it
on the Company's website. The Company
confirms the existence of written consents
of candidates for election to the Board of
Directors. and published this information as
part of the materials for the general meetings
of shareholders.
The written consents of candidates for elec-
tion to the Board of Directors were posted on
the Company's website as part of the mate-
rials and information for the annual general
meeting of shareholders for 2020.
2.3.2. Members of the Company's
Board of Directors are elected
using a transparent procedure
enabling the shareholders to
obtain the sufficient information
with regard to respective can-
didates so that they could form
their opinion of the candidates’
personal and professional
qualities.
2.3.3.
2.3.4.
The composition of the Board
of Directors is well balanced,
including in terms of the qual-
ifications of its members, their
experience, knowledge and
business acumen, which enjoy
the confidence of sharehold-
ers.
The membership of the Board
of Directors of the Company
makes it possible to organize
the operation of the Board of
Directors in the most efficient
way, in particular, to create
committees of the Board of
Directors, as well as to enable
substantial minority sharehold-
ers of the Company to elect
a candidate to the Board of
Directors for whom they would
vote.
1. In all General meetings of share-
holders held in the reporting
period, where the meeting agenda
items called for the election of the
Board of Directors, the Company
furnished its shareholders with bi-
ographical details of all candidates
for the Board of Directors, results
of evaluation of the candidates per-
formed 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 writ-
ten consent of the candidates to be
elected for the Board of Directors.
1. In the course of assessment of the
Board of Directors' performance
carried out in the reporting period,
the Board analyzed its own needs
in terms of professional qualifica-
tions, experience and business
skills.
Full compliance
Partial
compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
1. As part of the Board of Directors'
Full compliance
assessment procedure conducted
in the reporting period, the Board
of Directors addressed the matter
of whether the number of members
of the Board of Directors meets the
Company's needs and interests of
shareholders.
Partial compliance
Noncompliance
2.4.
The Board of Directors includes a sufficient number of independent directors.
1. During the reporting period, all
independent members of the
Board of Directors met all the
independence criteria specified in
Recommendations 102-107 of the
Code, or were deemed indepen-
dent by the decision of the Board of
Directors.
Full compliance
Partial compliance
Noncompliance
2.4.1.
A person is qualified as an
independent director, if he/she
has required professional skills,
experience and independence
to form his/her own position,
is able to make objective and
bona fide judgments, free from
the influence of the executive
bodies of the Company, certain
groups of shareholders or
other stakeholders. However,
it should be noted that, under
normal circumstances, a candi-
date (an elected member of the
Board of Directors) may not be
deemed to be independent, if
he/she is associated with the
Company, any of its substantial
shareholders, material coun-
terparties or competitors to the
Company, or connected with
the government.
Appendices to the Annual Report 2020
2.4.2.
It is evaluated whether
candidates nominated to the
Board of Directors meet the
independence criteria as well
as it is reviewed, on a regular
basis, whether independent
members of the Board meet
the independence criteria.
When carrying out such evalua-
tion, the content should prevail
over form.
Full compliance
Partial compliance
Noncompliance
1. In the reporting period, the Board
of Directors (or the Committee
on nominations of the Board of
Directors) made an opinion on the
independence of each candidate
to the Board of Directors and pre-
sented the relevant opinion to the
shareholders.
2. During the reporting period, the
Board of Directors (or the commit-
tee on nominations of the Board of
Directors) at least once examined
the independence of the current
members of the Board of Direc-
tors, indicated by the Company as
independent directors in the annual
report.
3. The Company has developed
procedures that determine the
necessary actions of a member of
the Board of Directors in the event
that he ceases to be independent,
including the obligation to promptly
inform the Board of Directors there-
of.
2.4.3.
Independent directors account
for at least one third of all the
directors elected to the Board
of Directors.
1. Independent directors account for
Full compliance
at least one-third of all the directors
elected to the Board of Directors.
Partial
compliance
Noncompliance
The membership of the Board of Directors
has been composed to balance and align the
interests of minority and majority sharehold-
ers, 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 one third of the
Board membership.
2.4.4.
Independent directors play a
key role in prevention of inter-
nal conflicts in the Company
and performance by the latter
of material corporate actions.
1. Independent directors (who have
no conflict of interest) preliminari-
ly assess the material corporate
actions associated with a possible
conflict of interests, and the results
of such an assessment are submit-
ted to the Board of Directors.
Full compliance
Partial compliance
Noncompliance
2.5.
2.5.1.
The Chairman of the Board of Directors contributes to the most efficient implementation of the functions assigned to the Board
of Directors.
The Board of Directors is
chaired by an independent
director, or one of the indepen-
dent directors is appointed as
a senior independent director
who coordinates the work of
the independent directors and
liaises with the Chairman of the
Board of Directors.
1. The Board of Directors is chaired
Full compliance
by an independent director, or one
of the independent directors is
appointed as a senior independent
director.
2. The role, rights and duties of the
Chairman of the Board of Directors
(and the senior independent
director, if applicable) are duly de-
termined in the internal documents
of the Company.
Partial
compliance
Noncompliance
Explanation for Item 1: The Chairman 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 an impeccable business and
personal reputation, significant experience
in leadership positions, ensuring increased
efficiency of the Company's efficiency in the
interests of shareholders.
Currently, based on the position of the
independent directors themselves, a senior
independent director is not identified among
them. All the independent directors have equal
rights to interact with the Chairman of the
Board of Directors.
Next corporate year, after election of the new
membership of the Board of Directors by the
Annual General Meeting of Shareholders
following the results of 2020, the indepen-
dent directors will be offered to elect a senior
independent director. The Company proceeds
from the principle of voluntariness of the
approach.
Item 2: Full compliance.
324
325
Annual Report 2020 The Chairman of the Board
ensures that Board meetings
are held in a constructive at-
mosphere and that any issues
on the meeting agenda are
discussed freely. The Chairman
also monitors fulfilment of
decisions made by the Board
of Directors.
The Chairman of the Board
of Directors takes any and all
measures as may be required
to provide the Board mem-
bers in a timely manner with
the information required to
make decisions on the agenda
issues.
1. The performance of the Chairman
of the Board of Directors has been
evaluated as part of the perfor-
mance evaluation of the Board of
Directors carried out in the report-
ing period.
Full compliance
Partial compliance
Noncompliance
1. The internal documents of the
Full compliance
Company provide that it is the duty
of the Chairman of Board of Direc-
tors to take measures to provide
the Board members with materials
on Board meetings agendas.
Partial compliance
Noncompliance
The Board members act reasonably and in good faith in the best interests of the Company and its shareholders, being sufficiently
informed, with due care and diligence.
2.5.2.
2.5.3.
2.6.
2.6.1.
The Board members make de-
cisions considering all available
information, in the absence of
a conflict of interest, treating
shareholders of the Company
equally, and assuming normal
business risks.
2.6.2.
Rights and duties of the Board
members are clearly stated and
documented in the Company’s
internal documents.
2.6.3.
The Board members have
sufficient time to perform their
duties.
1. The internal documents of the
Full compliance
Partial compliance
Noncompliance
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 discus-
sion 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
the scope at the expense of the
Company.
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
Partial compliance
Noncompliance
1. Individual attendance at the
Full compliance
Partial compliance
Noncompliance
meetings of the Board of Direc-
tors 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 entities (besides the
Company’s controlled and subsid-
iary companies), as well as of such
appointments.
Appendices to the Annual Report 2020
2.6.4.
All the Board members have
equal opportunities to access
the Company’s documents
and information. Newly elected
Board members are provid-
ed with sufficient information
about the Company and work
of the Board of Directors as
soon as practicable.
1. The internal documents of the
Full compliance
Partial compliance
Noncompliance
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 com-
panies, and the executive bodies of
the Company shall provide request-
ed information and documents.
2. The Company has a formal on-
boarding program for newly elected
members of the Board of Directors.
2.7. Meetings of the Board of Directors, preparation for them, and participation of Board members therein ensure efficient work of
2.7.1.
2.7.2.
2.7.3.
2.7.4.
the Board.
The meetings of the Board of
Directors are held as required
with due account of the Com-
pany’s scope of activities and
objectives in a certain period.
The procedure for preparing
for and holding meetings of
the Board of Directors is set
out in the Company's internal
documents, which enable
the members of the Board of
Directors to properly prepare
for the meetings.
The form of a meeting of the
Board of Directors is deter-
mined with due account of
importance of issues on the
agenda of the meeting. The
most important issues are
decided at the meetings held
in person.
1. The Board of Directors held at least
six meetings during the reporting
year.
Full compliance
Partial compliance
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 the meeting notification should
be made, as a rule, at least 5 days
before the meeting date.
Noncompliance
Full compliance
Partial compliance
Noncompliance
1. The Articles of Association or in-
Full compliance
ternal documents of the Company
stipulate that the most important
issues (according to the list given in
Recommendation 168 of the Code)
should be decided at the Board
meetings held in person.
Partial
compliance
Noncompliance
Decisions on the most import-
ant issues of the Company are
taken at the meeting of the
Board of Directors by a quali-
fied majority or a majority of all
elected members of the Board
of Directors.
1. The Articles of Association of the
Full compliance
Company provide that decisions on
the most important issues set out in
Recommendation 170 of the Code
shall be taken at a meeting of the
Board of Directors by a qualified
majority vote of at least three quar-
ters of the votes or by a majority
vote of all elected Board members.
Partial
compliance
Noncompliance
The Company's Articles of Association
provides for a list of the most important
issues considered at in-person meetings of
the Board of Directors, per Article 168 of the
Code, except for preliminary consideration
of the Company's annual report. Based on
the position of full compliance with corporate
governance standards, the Company intends
to make appropriate changes to the Articles
of Association in 2021-2022.
The Company's Articles of Association pro-
vides for a list of the most important issues
considered at meetings of the Board of
Directors, which are adopted at a meeting of
the Board of Directors by a qualified majority,
i.e., at least three-quarters of the votes of all
members of the Board of Directors. Due to
the established corporate practice, this list
does not fully cover the recommendations of
Article 170 of the Code.
The Company intends to make appropriate
changes to the Articles of Association in
2021-2022.
326
327
Annual Report 2020 2.8.
The Board of Directors forms Committees for preliminary consideration of the 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 activ-
ities, the Audit Committee is
established and comprised of
independent directors.
Full compliance
Partial
compliance
Noncompliance
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 Recommen-
dation 172 of the Code.
3. At least one member of the Audit
Committee, who is an independent
director, has sufficient experience
and expertise in preparation,
analysis, evaluation and audit of
accounting (financial) statements.
4. The Audit Committee held meet-
ings at least once a quarter during
the reporting period.
2.8.2
For the purpose of preliminary
consideration of any matters
of development of efficient
and transparent remuneration
practices, the Remuneration
Committee is established,
comprised of independent
directors and chaired by an
independent director who is
not concurrently the Chairman
of the Board of Directors.
1. The Board of Directors has estab-
Full compliance
Partial
compliance
Noncompliance
lished a Remuneration Committee,
which consists solely of indepen-
dent directors.
2. The Remuneration Committee is
chaired by an independent director
who is not the Chairman of the
Board of Directors.
3. The internal documents of the
Company specify the objectives
of the Remuneration Committee,
including the objectives indicated in
Recommendation 186 of the Code.
Explanation for Item 1: The Audit Committee
consists of three independent directors, one
of whom has an experience and expertise in
preparation, analysis, evaluation and audit
of accounting (financial) statements (Yu.L.
Levin, Committee Chairman).
The Board of Directors decided to increase
the membership of the Committee by adding
a nonexecutive director who is also experi-
enced 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.
Compliance with recommendations of the
Bank of Russia Code on the committee mem-
bership exclusively of independent directors
will be possible after the increased share of
independent directors in the Board
of Directors planned by the Company. (Clari-
fications in Item 2.4.3 of this report).
Clarification for Item 1: The Human Resourc-
es & Remuneration Committee of the Board
of Directors is comprised of three indepen-
dent directors and chaired by the indepen-
dent director (R. Steiner).
The Board of Directors decided to increase
the Committee membership by adding a
non-executive director (R.K. Sabirov). The
expansion of the membership is related to the
fact that the Committee also functions as the
Nominations Committee (for appointments,
human resources).
The Company reviews the membership of
the Committee on an annual basis. Compli-
ance with recommendations of the Bank of
Russia Code on the committee membership
exclusively of independent directors will be
possible after the increased share of inde-
pendent directors in the Board of Directors
planned by the Company. (Clarification in
Item 2.4.3 herein).
2.8.4
2.8.5
Taking account of the scope of
activities and levels of related
risks, the Board of Directors
of the Company has ascer-
tained that its Committees’
membership is fully in line with
the corporate objectives of the
Company. Either additional
committees were formed,
or they were deemed not
necessary (Strategy Commit-
tee, Corporate Governance
Committee, Ethics Committee,
Risk Management Committee,
Budget Committee, Committee
on Health, Security & Environ-
ment, etc.)
The composition of the com-
mittees is determined in such
a way to provide a comprehen-
sive discussion of issues being
considered on a preliminary
basis with due account of
differing opinions.
Appendices to the Annual Report 2020
1. In the reporting period, the Board
of Directors of the Company has
considered alignment of the mem-
bership of the Board’s committees
and corporate objectives of the
Company. Additional committees
were either formed, or deemed not
necessary.
Full compliance
The Corporate Governance Committee is
formed in the Company.
Partial compliance
Noncompliance
1. The Committees of the Board of
Full compliance
Partial
compliance
Noncompliance
Directors are headed by indepen-
dent directors.
2. The internal documents (poli-
cies) of the Company include the
provisions according to which
persons not being members of the
Audit Committee, Nominations
Committee and the HR & Remu-
neration Committee may attend
the meetings of the Committees
upon the invitation of the respective
Chairman only.
Clarification for Item 1:
The Company adheres to the recommenda-
tions of the Bank of Russia Code that Audit,
Remuneration and Nominations Committees
are mandatory for public companies, the re-
quirements for these committees are clearly
stated in the Corporate Governance Code,
and the Company follows them.
Corporate Governance Committee is not a
mandatory body of the Board of Directors,
and the Code’s restriction on the number of
independent directors (at least three) creates
a conflict of participation whereby the same
directors may be members in different com-
mittees, which can undermine the quality of
their contribution to the work of committees.
Therefore, the Company is of the opinion that
the membership of the Corporate Gover-
nance Committee and its Chairman (N.U.
Maganov) do not contradict the recommen-
dations of the Bank of Russia Code on the
composition of the Committee, and taking
into account qualifications and evaluating the
effectiveness of members of the Committee,
the composition of the Committee is in line
with its goals and provides opportunities for
a comprehensive and balanced discussion
of the issues under consideration, taking into
account different opinions.
2.8.3
For the purpose of preliminary
consideration of any matters
relating to human resourc-
es planning (making plans
regarding successor directors),
professional composition and
efficiency of the Board of Di-
rectors, the Nominations Com-
mittee (appointments, human
resources) is established with
a majority of its members being
independent directors.
1. The Board of Directors has set up
the Nominations Committee (or
its functions indicated in Recom-
mendation 186 of the Code are
delegated to another Committee),
and most of its members are inde-
pendent directors.
2. The internal documents of the
Company specify the objectives
of the Nominations Committee (or
another Committee which performs
its functions), including the objec-
tives indicated in Recommendation
186 of the Code.
Full compliance
Partial compliance
The objectives of the Nominations Committee
are combined with functions of the HR and
Remuneration Committee.
Noncompliance
2.8.6
The chairmen of the Commit-
tees report on the work of their
Committees to the Board of
Directors and the Chairman on
a regular basis.
1. During the reporting period, Chair-
men of the Committees regularly
reported on the work of the Com-
mittees to the Board of Directors.
Full compliance
Partial compliance
Noncompliance
328
329
Annual Report 2020
The Board of Directors provides for performance evaluation of the Board of Directors, its Committees and members of the
Board.
Performance evaluation of the
Board of Directors is aimed at
determining how effectively the
Board of Directors, its Com-
mittees and Board members
work and whether their work
meets the Company devel-
opment requirements, as well
as at making their work more
intensive and identifying areas
of improvement.
1. Self-evaluation or external evalua-
tion of the Board of Directors per-
formance conducted in the report-
ing period included evaluation of
the work of Committees, individual
members of the Board of Directors
and the Board as a whole.
2. The results of self-evaluation or
external evaluation of the Board of
Directors conducted in the report-
ing period were considered at a
physical meeting of the Board.
Full compliance
Partial
compliance
Noncompliance
With regard to the evaluation criteria for indi-
vidual members of the Board of Directors set
out in paragraph 1, the Company is consider-
ing the possibility to carry out such evaluation
until 2025.
1. For the purposes of independent
performance evaluation of the
Board of Directors, during the last
three reporting periods the Com-
pany has at least once engaged the
third party entity (consultant).
Full compliance
Partial
compliance
Noncompliance
Performance evaluation of the
Board of Directors, the Com-
mittees and Board members,
is carried out regularly, at least
once a year. To carry out an
independent evaluation of the
Board of Directors’ perfor-
mance, the third party entity
(consultant) is engaged on a
regular basis, at least once
every three years.
Performance of the Board of Directors is
evaluated on a regular basis once a year, the
evaluation is based on formalized self-eval-
uation system and the results are further
considered by the Audit Committee and
Corporate Governance Committee with the
involvement of
independent directors.
The self-evaluation system is based on the
methods similar to the RAEX (Expert RA)
methodology adopted since 01.06.2014.
The results are disclosed in the annual report
and are available to the shareholders and all
stakeholders.
The Company has not engaged a third party
entity for performance evaluation of the
Board of Directors for the last three years on
the basis of reasonable grounds associated
with qualitative changes in the Company
(development, approval and implementation
of the corporate Long-term Strategy) and
positive financial results and production
performance.
The Company considers an independent
evaluation with the involvement of a third
party entity (consultant) during 2022.
The Company’s corporate secretary ensures effective interaction with its shareholders, coordination of the Company’s actions
to protect the rights and interests of the shareholders, and support of efficient work of its Board of Directors.
2.9.
2.9.1
2.9.2
3.1
3.1.1
The corporate secretary has
the knowledge, experience,
and qualifications sufficient to
fulfill the duties assigned, as
well as an impeccable reputa-
tion and enjoys the trust of the
shareholders.
3.1.2
The corporate secretary is
sufficiently independent of the
Company’s executive bodies
and is 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
information of the corporate secre-
tary, with the same degree of detail
as for the members of the Board of
Directors and the executive man-
agement of the Company.
1. The Board of Directors approves
the appointment, removal from
office and additional fee of the
Corporate Secretary.
Full compliance
Partial compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
4.1.
4.1.1
4.1.2
4.1.3
4.1.4
The level of remuneration paid by the Company is adequate to enable it to attract, motivate, and retain persons having required
skills and qualifications. The remuneration due to the members of the Board of Directors, the executive bodies, and other key
managers of the Company is paid in accordance with a remuneration policy approved by the Company.
Appendices to the Annual Report 2020
1. The Company has approved an
Full compliance
internal document (documents) -
policy (policies) on remuneration
for the members of the Board of
Directors, executive bodies and
other key managers, which clearly
describes (describe) the remunera-
tion framework
Partial compliance
Noncompliance
1. In the reporting period, the Remu-
neration Committee 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
Full compliance
Partial compliance
Noncompliance
policy (policies) provides (provide)
for transparent mechanisms to
be used to determine the amount
of remuneration due to members
of the Board of Directors, the
executive bodies, and other key
managers of the Company, as well
as regulates (regulate) any and all
types of payments, benefits, and
privileges provided to the above
persons.
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,
the executive bodies, and other key
managers of the Company.
Full compliance
Partial compliance
Noncompliance
The level of remuneration paid
by the Company to its Board
members, executive bodies,
and other key managers is
adequate to motivate them
to work efficiently and enable
the Company to attract and
retain knowledgeable, skilled,
and duly qualified persons.
The Company avoids setting
the level of remuneration any
higher than necessary, as well
as an excessively large gap be-
tween the level of remuneration
of any of the above persons
and that of the Company’s
employees.
The Company’s remunera-
tion policy is developed by
its Remuneration Committee
and approved by the Board of
Directors. With the help of the
Remuneration Committee, the
Board of Directors monitors
implementation of and com-
pliance with the remuneration
policy by the Company and,
if necessary, reviews and
amends it.
The Company’s remuneration
policy provides for transpar-
ent mechanisms to be used
to determine the amount of
remuneration due to members
of the Board of Directors, the
executive bodies, and other
key managers of the Company,
as well as regulates any and all
types of payments, benefits,
and privileges provided to the
above persons.
The Company develops a
policy on reimbursement of ex-
penses (compensation) which
contains a list of reimbursable
expenses and specifies service
level provided to members
of the Board of Directors, the
executive bodies, and other
key managers of the Compa-
ny. Such policy can form part
of the Company’s policy on
remuneration.
330
331
Annual Report 2020 The remuneration system of the Board members ensures harmonization of financial interests of the directors with long-term
financial interests of the shareholders.
The Company pays fixed
annual
remuneration to the members
of the Board of Directors.
The Company doesn’t pay re-
muneration for participation in
certain Board meetings or the
Board’s committees’ meetings.
The Company doesn’t engage
methods of short-term moti-
vation and additional financial
incentives towards members of
the Board of Directors.
Long-term ownership of the
Company’s shares contrib-
utes most to aligning financial
interests of the members of the
Board of Directors with long-
term interests of the sharehold-
ers. However, the Company
doesn’t make the right to
dispose of shares dependent
on the achievement by the
Company of certain perfor-
mance results; and members
of the Board of Directors don’t
take part in the option plans.
The Company doesn’t provide
for any additional allowance or
compensation in the event of
early resignation of the Board
members due to change of
control over the Company or
other circumstances.
1. The fixed annual remuneration was
the only monetary remuneration for
the members of the Board of Direc-
tors for their work on the Board of
Directors in the reporting period.
Full compliance
Partial compliance
Noncompliance
1. If the internal document (doc-
uments) - remuneration policy
(policies) of the Company stipulate
provision of shares of the Company
to the members of the Board of Di-
rectors, there should be provisions
and clear rules for share ownership
by members of the Board of Direc-
tors aimed at incentivizing long-
term ownership of such shares.
Full compliance
Partial compliance
Noncompliance
1. The Company doesn’t provide
for any additional allowance or
compensation in the event of early
resignation of the Board members
due to change of control over the
Company or other circumstances.
Full compliance
Partial compliance
Noncompliance
The system of remuneration due to members of the executive bodies and other key managers of the Company provides that their
remuneration is dependent on the Company’s performance results and their personal contributions to the achievement thereof.
Remuneration due to members
of the executive bodies and
other key managers of the
Company is determined in such
a way as to procure a reason-
able and justified ratio between
its fixed part and its variable
part that is dependent on the
Company’s performance re-
sults and employee’s personal
(individual) contribution to the
achievement thereof.
1. In the reporting period, annual
Full compliance
Partial compliance
Noncompliance
performance indicators approved
by the Board of Directors were
used to determine the variable
remuneration due to members of
the executive bodies and other key
managers of the Company.
2. In the course of the last evaluation
of the system of remuneration due
to members of the 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
parts of remuneration.
3. The Company provides for a pro-
cedure that ensures that bonuses
received by members of the execu-
tive bodies and other key managers
illegitimately are returned back to
the Company.
4.2.
4.2.1.
4.2.2.
4.2.3.
4.3.
4.3.1.
332
Appendices to the Annual Report 2020
4.3.2.
The Companies has put in
place a long-term incentive
programme for members of the
Company’s executive bodies
and other key managers
involving the Company's shares
(or options or other derivative
financial instruments the under-
lying assets for which are the
Company’s shares).
1. The Companies has put in place
Full compliance
Partial compliance
Noncompliance
a long-term incentive programme
for members of the Company’s
executive bodies and other key
managers involving the Company's
shares (financial instruments the
underlying assets for which are the
Company’s shares).
2. The long-term incentive pro-
gramme for members of the
Company’s executive bodies and
other key managers provides that
the right to sell the shares or other
financial instruments provided
under the programme arises no
earlier than in three years from the
date when they were provided.
At the same time, the right to sell
the same is conditioned by the
achievement of certain targets by
the Company.
4.3.3.
5.1.
5.1.1.
5.1.2.
5.1.3.
The amount of severance pay
(so-called "golden parachute")
payable by the Company in
the event of early dismissal
of a member of the executive
body or other key manager at
the initiative of the Company,
provided that there have been
no bad faith actions on the part
of such person, doesn’t exceed
two times the fixed part of their
annual remuneration.
1. The amount of severance pay (so-
Full compliance
called "golden parachute") payable
by the Company in the event of
early dismissal of a member of
the executive body or other key
manager at the initiative of the
Company, provided that there have
been no bad faith actions on the
part of such person, didn’t exceed
two times the fixed part of their
annual remuneration.
Partial compliance
Noncompliance
The Company has in place an efficient risk management and internal control system designed to provide reasonable confidence
that the Company’s goals will be achieved.
The Board of Directors has
determined
the principles and approaches
to creation of the risk man-
agement and internal controls
system in the Company.
The Company’s executive bod-
ies ensure the establishment
and continuing operation of the
efficient risk management and
internal control system in the
Company.
The Company’s risk manage-
ment and
internal control system enables
one to obtain an objective, fair
and clear view of the current
condition and prospects of the
Company, integrity and trans-
parency of its accounts and
reports, and reasonableness
and acceptability of risks being
assumed by the Company.
1. The functions of different gover-
Full compliance
nance bodies and divisions of the
Company in the risk management
and internal control system are
clearly defined in the internal
documents/relevant policies of the
Company, approved by the Board
of Directors.
Partial compliance
Noncompliance
1. The executive bodies of the
Full compliance
Company ensured distribution of
functions and powers in respect of
risk management and internal con-
trol among the managers (heads)
of divisions and departments
accountable to them.
1. The Company has an approved
policy on combating 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 Direc-
tors of any breaches of legislation,
internal procedures and the ethics
code of the Company.
Partial compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
333
Annual Report 2020 5.1.4.
5.2.
5.2.1.
5.2.2.
The Board of Directors
takes required and sufficient
measures to procure that the
existing risk management and
internal control system of the
Company is consistent with the
principles of and approaches
to its creation as set forth by
the Board of Directors and that
it operates efficiently.
1. In the reporting period, the Board of
Directors or the Audit Committee of
the Board of Directors conducted
the evaluation of the risk manage-
ment and internal control system
of the Company. The evaluation
results are included in the annual
report of the Company.
Full compliance
Partial compliance
Noncompliance
For the purposes of regular independent evaluation of reliability and efficiency of the risk management and internal control
system, as well as corporate governance practices, the Company arranges for internal audit.
6.2.
6.2.1.
The Company discloses
information in accordance with
the principles of regularity,
consistency and timeliness, as
well as accessibility, reliability,
completeness and comparabil-
ity of disclosed data.
The Company has a separate
structural division (internal audit
department) or an independent
third-party entity is engaged to
carry out internal audit of the
Company.
The internal audit department
has separate lines of functional
and administrative reporting.
Functionally, the internal audit
department is accountable to
the Board of Directors.
The internal audit department
evaluates efficiency of the
internal control system and the
risk management system, as
well as evaluate corporate gov-
ernance. The Company applies
generally accepted standards
of internal audit.
1. For the purposes of internal audit,
the Company created a separate
structural division (internal audit
department), which is functionally
accountable to the Board of Direc-
tors or the Audit Committee, or an
independent third-party entity is
engaged with the same account-
ability principle.
Full compliance
Partial compliance
Noncompliance
1. In the reporting period, the efficien-
cy of the internal control and risk
management system was evaluat-
ed, as part of the internal audit.
2. The Company applies commonly
accepted approaches to the inter-
nal control and risk management.
Full compliance
Partial compliance
Noncompliance
6.2.2.
The Company avoids a formal-
istic approach to information
disclosure and discloses
material information on its
activities, even if disclosure of
such information is not required
by law.
The Company discloses, on a timely basis, full, updated and reliable information about itself so as to enable its shareholders and
investors to make informed decisions.
Appendices to the Annual Report 2020
Full compliance
Partial compliance
Noncompliance
Item 1: The Company's information policy,
including, in particular, the Regulation on
the information policy, the Regulation on the
information provision to the shareholders,
the Regulation on the procedure of access to
the insider information, in aggregate contains
approaches and criteria for identifying infor-
mation that can have a significant impact on
the Company’s valuation and the value of its
securities and procedures that ensure timely
disclosure of such information.
Full compliance
Partial compliance
Noncompliance
1. The Company’s information policy
identifies the approaches and cri-
teria for identifying information that
can have a significant impact on the
Company’s valuation and the value
of its securities and procedures
that ensure timely disclosure of
such information.
2. In the event that the Company’s
securities are traded in foreign or-
ganized markets, the disclosure of
material information in the Russian
Federation and in such markets is
carried out synchronously and is
the same during the reporting year.
3. If foreign shareholders hold a
significant number of Company’s
shares, then information disclosed
during the reporting year was
not only in Russian, but also in
one of the most common foreign
languages.
1. In the reporting period, the Compa-
ny disclosed annual and semi-an-
nual financial statements prepared
under IFRS standards. The annual
report of the Company for the
reporting period includes annual fi-
nancial statements prepared under
IFRS and an auditor’s report.
2. The Company discloses full
information on the structure of the
Company’s capital in compliance
with the Recommendation 290 of
the Code in the annual report and
in the corporate website.
6.2.3.
The annual report, as one of
the most important tools of
information exchange with the
shareholders and other stake-
holders, contains the informa-
tion enabling one to evaluate
the Company’s performance
results for the year.
1. The annual report of the Company
contains information on key as-
pects of the Company’s operation
and its financial results.
2. The annual report of the Company
contains information on environ-
mental and social aspects of the
Company’s activities.
Full compliance
Partial compliance
Noncompliance
6.1.
The Company and its activities are transparent to shareholders, investors and other stakeholders.
6.1.1.
6.1.2.
The Company developed and
implemented an information
policy ensuring efficient ex-
change of information between
the Company, shareholders,
investors, and other stake-
holders.
The Company discloses infor-
mation on its corporate gover-
nance system and practices,
including detailed information
on compliance with the princi-
ples and recommendations of
the Code.
Full compliance
Partial compliance
Noncompliance
Full compliance
Partial compliance
Noncompliance
1. The Board of Directors of the Com-
pany has approved an information
policy aligned with the recommen-
dations of the Code.
2. The Board of Directors (or one of its
Committees) considered issues re-
lated to the Company’s compliance
with its information policy at least
once in the reporting period.
1. The Company discloses information
on the Company’s corporate gover-
nance system and the general prin-
ciples of the corporate governance
applied in the Company, including
the information disclosed on the
Company’s Internet 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 Com-
pany publishes a memorandum of
the controlling person regarding
the plans of such person in respect
of the corporate governance in the
Company.
334
335
Annual Report 2020 The Company's information policy, including,
in particular, the Regulation on the informa-
tion policy, the Regulation on the information
provision to the shareholders, the Regulation
on the procedure of access to the insider
information defines an unhindered procedure
for providing the shareholders with access to
information, including information on entities
controlled by the Company.
Item 2: The Company's information policy,
including, in particular, the Regulation on
the information policy, the Regulation on the
information provision to the shareholders, the
Regulation on the procedure of access to the
insider information contains procedure and
conditions for informing shareholders about
the confidential nature of information and
their obligations to keep it confidential.
The Company provides information and documents requested by its shareholders in accordance with the principle of equal and
unhindered accessibility.
6.3.
6.3.1.
The Company provides
information and documents
requested by its shareholders
in accordance with the princi-
ple of equal and unhindered
accessibility.
1. The information policy of the
Full compliance
Company defines an unhindered
procedure for providing the share-
holders with access to information,
including information on entities
controlled by the Company, at the
request of the shareholders.
Partial compliance
Noncompliance
6.3.2. When providing information to
its shareholders, the Company
maintains a reasonable bal-
ance between the interests of
individual shareholders and its
own interests related to the fact
that the Company is interested
in keeping confidential sensi-
tive business information that
might have a material impact
on its competitiveness.
1. In the reporting period, the Compa-
ny didn’t refuse to satisfy the share-
holders’ requests for information,
or such refusals were justified.
2. In the events specified in the
information policy of the Company,
shareholders are advised of the
confidential nature of the informa-
tion and assume the obligation to
maintain its confidentiality.
Full compliance
Partial compliance
Noncompliance
7.1.
Any actions, which affect or may materially affect the Company’s share capital structure and financial position of the Company
and, accordingly, the position of its shareholders (“material corporate actions”) are taken on fair terms and conditions ensuring
that the rights and interests of the shareholders as well as other stakeholders are observed.
Full compliance
Partial compliance
Noncompliance
7.1.1. Material corporate actions are
deemed to include reorganiza-
tion of the Company, acquisi-
tion of 30 or more percent of
its voting shares (takeover),
entering by the Company into
any material transactions,
increasing or decreasing its
share capital, listing and del-
isting of its shares, as well as
other actions which can result
in material changes in rights of
its shareholders or violation of
their interests. The Compa-
ny’s Articles of Association
provides for a list of (criteria
for identifying) transactions or
other actions falling within the
category of material corporate
actions and provide therein that
decisions on any such actions
fall within the jurisdiction of the
Company’s Board of Directors.
1. The Company’s Articles of Associ-
ation provides for a list of transac-
tions or other actions falling within
the category of material corpo-
rate actions and criteria for their
identifying. Decisions on material
corporate actions fall within the
jurisdiction of the Company’s Board
of Directors. In cases where the
implementation of these corporate
actions is directly attributed by law
to the competence of the General
Meeting of the Shareholders, the
Board of Directors provides ap-
propriate recommendations to the
shareholders.
2. Reorganization of the Company,
acquisition of 30 or more percent
of voting shares of the Company
(takeover), entering by the Com-
pany into any major transactions
or other material transactions,
increasing or decreasing its share
capital, as well as listing and del-
isting of its shares are recognized
in the Articles of Association of the
Company as material corporate
actions.
7.1.2.
The Board of Directors plays a
key role in passing resolutions
or making recommendations
relating to material corporate
actions, the Board of Directors
relies on opinions of the Com-
pany’s independent directors.
1. The Company has provided for a
procedure whereby the indepen-
dent directors declare their opinion
on any material corporate actions
prior to their approval.
Full compliance
Partial compliance
Noncompliance
Appendices to the Annual Report 2020
7.1.3. When taking any material
1. The Articles of Association of the
Full compliance
Company, taking into account the
specifics of its activities, sets lower,
than legislatively stipulated, criteria
for recognizing transactions as
material corporate actions.
2. In the reporting period, all material
corporate actions went through the
approval procedure prior to their
implementation.
Partial compliance
Noncompliance
corporate actions which affect
rights and legitimate interests
of the Company’s sharehold-
ers, equal terms and conditions
are ensured for all of the share-
holders; if statutory mecha-
nisms designed to protect the
shareholder rights prove to be
insufficient for that purpose,
additional measures are taken
with a view to protecting the
rights and legitimate interests
of the Company’s share-
holders. In such instances,
the Company seeks not only
to comply with the formal
requirements of law but also
is guided by the principles of
corporate governance set out
in the Code.
7.2.
7.2.1.
7.2.2.
The Company has in place such a procedure for taking any material corporate actions that enables its shareholders to receive
full information about such actions in due time and influence them, and that also guarantees that the shareholder rights are
observed and duly protected in the course of taking such actions.
Information on the perfor-
mance of material corporate
actions is disclosed with expla-
nations concerning reasons for,
conditions and consequences
of such actions.
1. In the reporting period, the Com-
pany disclosed information about
material corporate action in a timely
manner and in detail, including
grounds and timescale of such
actions.
Full compliance
Partial compliance
Noncompliance
Rules and procedures in
relation to material corporate
actions taken by the Compa-
ny are set out in its internal
documents.
1. The internal documents of the
Full compliance
Partial compliance
Noncompliance
Company provide for a procedure
for engaging an independent
appraiser to determine the value
of property disposed or acquired
pursuant to a major transaction or a
non-arm’s length transaction.
2. The internal documents of the
Company provide for a procedure
for engaging an independent
appraiser to evaluate the cost of
acquisition and buyback of the-
Company’s stock.
3. The internal documents of the
Company provide for an extensive
list of grounds for recognizing
members of the Board of Direc-
tors or other persons as stated in
respective laws as interested in the
Company’s transactions.
336
337
Annual Report 2020 Annex 3.
Principal risks
Appendices to the Annual Report 2020
Risk name
Risk description
Risk management
1. Macroeconomic
2. Strategic risk
Changes in macroeconomic conditions,
caused by the volatility of world energy pric-
es, exchange rates, inflationary processes,
changes in fiscal and monetary policy may
have an adverse effect on the Company’s
financial performance.
The Company uses a scenario approach to forecasting macroeconomic
indicators. One of the scenarios is defined as a baseline and characterizes
the macroeconomic situation development that is the most likely to occur
from the point of view of the Company management. Optimistic and stress
scenarios are developed as well. Using the stress scenario, the assets and
investment projects most sensitive to adverse changes in macroeconomic
parameters are identified. The results of this analysis serve as the grounds for
informed administrative decisions.
The implementation of the Company’s De-
velopment Strategy and the achievement of
operational and financial results depends on
multiple factors which include changes in the
energy markets, international and domestic
policies, macroeconomics, agreements
between OPEC and other oil producers,
legal and tax regulations, the development
of technologies and information resources,
the dynamics of the labor market as well as
various other factors.
The Company implements the Development Strategy for up to 2030, formed
based on a detailed analysis of the combination of all key factors which may
impact the Company development and the achievement of the planned
results. Decisions of the Company governance bodies, associated with the
strategic and current planning and operational activities are based on all
available information relevant 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 base,
which it is improving continuously in accordance with production goals, in-
cluding the development of import-substituting technologies and equipment.
The Company has a well-balanced management platform to implement the
Strategy and adjusts its plans as and when required.
The Company implements a policy of vertical integration and diversification,
which allows for a significant reduction (elimination) of strategic risks, includ-
ing critical risks, through redistribution of resources and commodity flows.
338
339
Annual Report 2020 3. Country and
geopolitical risks
4. Financial risks
5. Changes in legis-
lation and regulatory
environment
The Company is registered in the Russian
Federation, where a significant share 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.
At the same time, several international,
commercial, nongovernmental organiza-
tions publish their country ratings based on
the level of risks, including political ones. In
such ratings, the Russian Federation may
be classified as an increased-risk country,
which investors should take into account
when bringing their funds into the country’s
economy and securities of Russian issuers,
such as the Company.
USA and EU sanctions
Since 2014, the United States, the European
Union, and several other countries have con-
sistently imposed sanctions on the Russian
Federation, including sectoral sanctions af-
fecting the activities of individual companies
operating in the energy and other sectors of
the Russian economy.
Those sanctions and their unpredictability
increase the country risk for the Russian
Federation.
The Company’s activities are exposed to
various financial risks: market risks (including
currency, interest rate, and price risks), cred-
it risks, and liquidity risks.
The Company adheres to the opinion that the situation in the region of princi-
pal activities and location of key assets of the Group is generally stable.
Rating agencies assess the creditworthiness of a country with a view to the
relevant country risks based on their own methodologies. PJSC TATNEFT
is assigned the following credit ratings by the international rating agencies:
BBB- assigned by Fitch Ratings and Baa2 assigned by Moody’s as well as
ruAAA, on the national scale, assigned by Expert RA, a Russian rating agen-
cy. These credit ratings are used by investors to assess the risks considering
the location of the assets of PJSC TATNEFT in the Russian Federation.
In its activities, the Company takes into account and monitors the existing
sanctions to minimize the adverse effects and consequences (considering
the potential expansion of sanctions, i.e., various initiatives in the United
States and other countries to strengthen the sanction regime against the
Russian Federation) which might have a selective impact on the Company’s
highly prospective projects.
To reduce the risks related to the availability of technologies and equipment
subject to sanctions, the Company carries out the consistent implementation
of the program of import substitution and development of domestic technol-
ogies with the localization of equipment production in the Russian Federation
and the engagement of advanced industry research centers.
The Company’s financial risk management policy focuses on procedures for
risk measurement, assessment, and monitoring as well as on the selection of
the appropriate risk management methods.
For detailed information on financial risks, including those related to the TATNEFT Group banking segment, refer to the IFRS Consolidated Financial
The Company conducts continuous monitoring of changes in legislation,
evaluates and forecasts the extent of their impact on the Group entities’
activities. The Company is a regular participant in working groups to develop
draft laws in various fields of legislation that meet the Company’s interests,
evaluates consequences of such changes, and accounts for the same in its
plans. With regard to legislative initiatives in other countries, the Company
continuously monitors the most important ones and assesses their potential
impact on the Company’s operations.
Statements, Note 29: Financial Risk Management.
The Company’s performance may be
significantly influenced by changes in
the applicable legislation of the Russian
Federation and other countries, such as:
• Tax legislation (in terms of changes in
taxation procedure and tax rates both for
legal entities and for companies engaged
in production and sale of gas and liquid
hydrocarbons);
• Currency legislation (mainly, in terms of
regulation of export-import operations);
• Customs regulation (in terms of regulating
the export of liquid hydrocarbons and
processed products);
• Subsoil licensing.
6. Litigation risks
The company may be involved as a defen-
dant or plaintiff in multiple legal proceedings
that arise in the ordinary course of business.
In carrying out financial and economic activities, the Company adheres to
the principle of prudence. As of the date of approval of the Annual Report,
the Company was not involved in any litigation which when ruled upon might
adversely affect its financial standing.
Appendices to the Annual Report 2020
The Company is a party to legal proceedings arising in the ordinary course of
business. Currently, the outcome of these proceedings cannot be deter-
mined. Based on the available information, the management believes that
there is a low risk that future costs associated with known potential liabilities
will have a material adverse effect on the Company’s performance or finan-
cial standing.
Possible liability of the issuer for debts of third parties, including the Com-
pany’s subsidiaries
The Civil Code of the Russian Federation and the Federal Law on Joint Stock
Companies, in certain circumstances, provide for the possibility of imposing
liability on the Company for the obligations of a subsidiary that commenced
as a result of a transaction effected in compliance with the instructions or
with the consent of the Company as well as in case of insolvency (bankrupt-
cy) of the subsidiary as a result of the Company’s actions or omissions. The
risks associated with the occurrence of liability for the subsidiaries’ debts
are not considered by the Company as significant, but in case of such risk
realization, it will take measures to minimize the adverse consequences.
Given the absence of legal proceedings in which the Company acts as a
defendant (debtor) regarding the obligations of subsidiaries, affiliates, and
other companies, the risks associated with the occurrence of liability for the
debts of third parties were not identified in the reporting period.
The Company monitors changes in the listing rules and other requirements
of regulatory authorities and stock exchanges. The Company’s representa-
tives participate in working meetings and other issuers’ events held by stock
exchanges and other organizations that provide advisory and educational
services for issuers. The Company also strives to implement the best interna-
tional practices in the field of corporate governance.
7. Risks associated
with Company’s se-
curities circulation
The Company’s securities are traded on
the securities market in Russia and abroad.
Changes in the requirements for issuers from
regulatory authorities and stock exchang-
es may force the Company to modify its
corporate governance procedures and
assume additional obligations in the field
of information disclosure and interaction
with shareholders. If the Company fails to
comply with these requirements and fulfill the
required obligations in a timely manner, this
may lead to the Company’s securities being
moved to lower listing segments as well as
delisting, which may have an adverse effect
on the liquidity and value of such securities.
340
341
Annual Report 2020 8. Risks related to
climate change
The tightening of regulations due to climate
change and its physical consequences may
have an adverse impact on the activities of
PJSC TATNEFT as a major oil and gas pro-
ducer with its activities entailing greenhouse
gas emissions, in the course of both produc-
tion activities and products consumption,
which may lead to a reduction in revenue,
an increase in costs, a drop in business
profitability, a decrease in its efficiency and
funding restrictions.
The company shares the global concern about climate change and adheres
to the initiatives of the Caring for Climate Global Strategic Partnership, the
UN Global Compact, and the United Nations Framework Convention on
Climate Change (UNFCCC) enshrined in the Paris Climate Agreement. The
Company consistently and comprehensively adheres to initiatives related to
climate aspects and the reduction of greenhouse gas emissions and is an
active participant in the discussion and implementation of measures to regu-
late greenhouse gas emissions at both the national and international levels.
Within the efforts to reduce greenhouse gas emissions and the carbon
footprint, the Company ensures the adoption of administrative decisions on
the development of the corporate system of accounting and management of
greenhouse gas emissions, sets and develops target values for reducing the
overall greenhouse gas emissions and implements the relevant measures
to ensure that these target values are achieved. In the long-term strategic
planning, the Company takes into account, inter alia, the scenario of the
global energy system transition to decarbonization, the expansion of the use
of low-carbon fuels and, in general, to a low-carbon global infrastructure.
9. Industry risks
Oil price risk, oil and petroleum products
demand risk
The Company performs continuous monitoring and analysis on the dynamics
of prices and demand for oil and petroleum products.
Appendices to the Annual Report 2020
The Company’s model of strategic and current planning provides for the
relevant 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
case of a significant difference in price between domestic and international
markets, demand for crude oil and petroleum products, and the ability to
reduce or rebalance capital and operating costs to fulfill its obligations in
case of a slump in prices of oil, gas, and petroleum products. The Compa-
ny analyzes the risks of prices and demand for oil and petroleum products
based on modeling various scenarios.
In terms of demand for oil and petroleum products, the Company believes
that the alternative energy will be able to replace significantly oil and petro-
leum products in the medium-term perspective. Regardless of the develop-
ment of alternative sources of energy and a potential increase in the number
of electric vehicles, the demand for oil and petroleum products will remain
(largely due to the emerging markets). Therefore, the Company does not ex-
pect any significant adverse changes in the industry in terms of the demand
in the medium term.
Being one of the innovative leaders in Russia, the Company pays special
attention to the development and application of cutting-edge technologies
in all business areas and develops its own research and production base,
interacts with advanced industry research centers.
Target focus is the technologies required to implement the strategy, effective
investment in R&D, and pilot developments.
The Company is actively developing IT infrastructure powered by the
new-generation single information platform of production management,
which integrates information flows of all services at all stages of the value
chain. The Company implements IT projects aiming to increase the efficiency
of business processes.
Business efficiency and profitability largely
depend on oil and petroleum product prices
as well as on the demand for oil and petro-
leum products. Oil and petroleum product
prices have shown significant volatility
recently — due to multiple factors.
Technical and technological risks
Exploration, development, and equipping of
new fields, keeping the existing wells up and
running, drilling new wells as well as crude oil
treatment, transportation, oil and gas refining
are extremely complex and expensive pro-
cesses. Enhanced oil recovery requires extra
costs which is very critical for the Company.
As fields go depleted, the role of the ad hoc
approach for enhanced oil recovery will be
growing.
The Company has launched the develop-
ment of a new business area — petrochem-
istry.
Concurrently, the Company is developing the
banking segment.
As a whole, the economic efficiency of all
business lines of the Company will largely
depend on the Company’s ability to use the
most efficient and affordable technologies,
including information technologies.
342
343
Annual Report 2020 The region of the Company’s principal activities is not remote in terms of
transportation and other infrastructures.
The Company transports a significant part of the crude oil and part of
petroleum products — to be sold in foreign and domestic markets — via the
trunk pipeline system 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.
The Company carries out close monitoring of the development and main-
tenance of the transport infrastructure required to deliver oil and petroleum
products to buyers, monitors the tariff policy, and is an active participant in
the relevant industrial discussions and initiatives.
The Company has a large tank farm for storing commercial stocks of oil and
petroleum products, which can be also used during extraordinary disruptions
in the operation of the transport infrastructure.
Transportation
As the majority of oil production regions in
Russia are located far from the main oil and
petroleum product markets, so oil compa-
nies are dependent on the sophistication
of transport infrastructure, its continuous
functioning, and accessibility. Russian sea
terminals have certain limitations due to
geographic location, weather conditions,
and throughput capacity. Within Russia, oil
products are transported mainly by railroad.
The railway infrastructure in the Russian
Federation is owned and overseen by JSC
Russian Railways. Both Transneft and Rus-
sian Railways are joint
stock companies partially owned by the
state, and the above companies belong to
the natural monopolies sector, having their
tariff policy defined by the state authorities to
ensure a balance of interests of the state and
all parties involved in the transportation pro-
cess. The Federal Antimonopoly Service of
the Russian Federation (FAS of Russia) sets
the tariffs for natural monopolies. The tariff
rate depends on the route of transportation,
shipment volume, distance to destination,
and several other factors. FAS of Russia
reviews tariffs at least once a year.
Appendices to the Annual Report 2020
Industry risks of industrial and environ-
mental safety
The Company and TATNEFT Group enterpris-
es operate complex process systems and
facilities for production, treatment, transpor-
tation, and refining of oil and gas, some of
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 and
health, and potentially may cause pecuniary
sanctions, etc.
The Company has developed a comprehensive program aimed at mitigating
negative situations associated with industrial production and environmental
risks. The Company continuously implements new technical and
organizational activities to minimize the impact of such risks. The Company
also provides liability insurance for several facilities.
The Company is committed to becoming a leader in industrial, occupational,
and environmental safety of production, minimizing the impact on the
environment, including the impact on the climate. Comprehensive actions
in this area have yielded the reduction of environmental footprint to the level
where there is a potential for ecosystems to self-recover. To improve the
efficiency of industrial and environmental safety management, TATNEFT
Group is currently introducing the management system in compliance
with the latest-generation international standards ISO 14001-2015 and ISO
45001:2018. Key risk management activities include, inter alia: - Production
control over the operation of hazardous production facilities;
• Diagnostics (nondestructive testing) and monitoring of equipment
parameters;
• Repair and timely replacement of equipment;
• Ensuring the observance of requirements in the field of industrial and
occupational safety and environmental protection by contractors at all
stages of interaction;
• Promotion of leadership and safety culture;
• Ensuring the qualification of personnel at all levels;
• Special assessment of working conditions, improvement of working
conditions for employees;
• Development of action plans for the localization and elimination of the
consequences of accidents at hazardous production facilities, plans for
the elimination of oil and petroleum product spills, formation of a reserve
of resources and facilities for the elimination of failures and emergencies,
training personnel working at hazardous production facilities and
emergency rescue units in emergency prevention and elimination;
• Conducting briefings on compliance with safety measures when
performing work;
• Verification of the risk assessment in the course of works;
• Control over the equipment of vehicles of the Group enterprises and
contractors with on-board vehicle monitoring systems and two-way video
recorders.
344
345
Annual Report 2020 To minimize the risk of the spread of COVID-19 coronavirus infection, the
Company has taken the following measures:
• Updated procedures and regulations to ensure the continuity of production
activities during pandemics;
• Sanitary and epidemiological rules are observed, antiseptic agents and
protective medical masks are used — at all Group enterprises. Sanitary
treatment of transport is organized. Special protection measures extend to
both employees and customers of TATNEFT filling stations;
• Vaccination against the COVID-19 coronavirus infection is on the way both
among employees and the population of the principal regions where the
Company operates;
• The base of production of protective masks, suits, and antiseptics has been
formed.
10. Risk of damage
to business repu-
tation (reputational
risk) related to the
quality of products
and services
The Company product consumers’ percep-
tion regarding the quality of its products and
services impacts the sales and profitability of
the relevant business segment.
Epidemic and COVID-19 risks
In late 2019, the spread of a novel corona-
virus infection which may cause serious
consequences leading to death — called
COVID-19 — has started. As of the end of
2019, the World Health Organization reported
a limited number of cases of COVID-19
infection but on 31.01.2020 declared a public
health emergency, and on 13.03.2020
announced a pandemic due to the rapid
spread of COVID-19 in Europe and other
regions. Measures taken globally to combat
the spread of COVID-19 lead to the urgency
of limiting business activities which affects
the demand for energy resources and other
products of the TATNEFT Group as well as
to the need for preventive measures aimed
at suppressing the spread of infection. Amid
the spread of COVID-19, there has been a
severe plunge in stock markets, a decline in
commodity prices, in particular, a significant
drop in oil prices, and the Russian ruble
weakening against the US dollar and euro.
Despite a significant recovery in the oil mar-
ket, including due to the actions of OPEC+
and the prospects for global economic
growth, the situation is still developing and
the corresponding risks remain. Besides, the
COVID-19 pandemic has prompted height-
ening attention to the epidemiological risks
associated with the emergence and spread
of diseases that pose a threat to human life
and health around the world.
11. Geographical
and nature-related
aspects
Geographical and natural features of the
region of the Company’s principal activi-
ties are not characterized by factors that
may have a significant adverse impact on
the ordinary course of business and plans
implementation. At the same time, there is a
potential risk of the impact of these aspects
on the Company’s production and economic
activities.
12. Risk of a short-
age of qualified
personnel
Insufficient qualifications and expertise of
employees may have an adverse impact on
the Company’s financial performance.
Appendices to the Annual Report 2020
Improving the quality of interaction and establishing long-term relations with
consumers is one of the priorities in creating the Company’s competitive
advantage based on the quality control system and high-level services as
well as raising consumers’ awareness. While interacting with consumers of
Company products and services, the Company adheres to the UN guidelines
for the protection of consumer 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
regulating the quality of products and services.
Safety of products and services
At all life-cycle stages of the offered products and services, the Compa-
ny assesses their impact on health and safety to identify opportunities for
improvement and takes a set of measures to minimize any adverse impact
of the offered products and services on the environment. Protection of
consumer health and safety includes the provision of products and rendering
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 consistently updates its customers and counterparties on
its activities by 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 imple-
mented for responding promptly to complaints and claims received via the
hotline — 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
promoting its products and services, advertising, and marketing are compli-
ant with the legislation of the Russian Federation.
When planning its activities, the Company takes into account the geograph-
ical (including climatic) features of the operation region. To address adverse
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, at reducing
the impact of such on the life, health, and safety of employees and residents
of operation regions as well as on the Company’s production activities.
There are monitoring procedures, wherein the latest technical means are
used with the aim of preventing the possibility of adverse consequences of
natural phenomena and informing the population of the region where the
Company operates on the possibility of such consequences.
To reduce the adverse impact of this risk, the Company lays emphasis on the
comprehensive development of human resources. The HR strategy is based
on the Company’s development strategy and the needs of the business
segments in providing personnel, for which plans and budgets are formed to
ensure timely hiring of employees as well as their professional training and
development.
346
347
Annual Report 2020 Annex 4.
On the annual report and the
underlying regulatory documents
constituting the framework for this
annual report
The Annual Report of Public Joint-Stock Company TATNEFT
named after V.D. Shashin (TATNEFT PJSC, Company) is
prepared for the period from January 1 to December 31,
2020, and includes the operating results of the Company
and its subsidiaries, collectively referred to as TATNEFT
Group (Group). The designations of “PJSC TATNEFT n.a.
V.D. Shashin”, “PJSC TATNEFT”, “TATNEFT Group”, “Group”,
“TATNEFT”, “Company”, “we” and “our” used in the text of
this Annual Report, are considered equivalent and refer to
the Group TATNEFT as a whole, PJSC TATNEFT and/or its
subsidiaries, as the context requires.
PJSC TATNEFT is the parent company of the Group and for
this Report provides the consolidated information on oper-
ating and financial activities in key business segments and
activities.
This Annual Report is based on the Consolidated Financial
Statements of the Company for 2020, formed in accordance
with the International Financial Reporting Standards and
the audit report of the independent auditor, which together
are an integral part of this Annual Report, as well as on the
Company’s Management of the financial status and perfor-
mance results of 2020.
The Annual Report is prepared with the elements of inte-
grated reporting, which allows to reflect the priority areas of
activities, production, financial, economic, environmental
and social results in direct correlation. The Company adheres
to the principle that the effective and sustainable business
development is possible only based on maintaining the
balance between these aspects.
The preparation practice of the Annual Report includes the
establishment of an ad hoc Working Group (it includes senior
managers and specialists of the Company), the formation
of internal regulatory documents for the preparation and
analysis of information for the report, interaction with stake-
holders. In order to ensure the accuracy of the information,
the Annual Report is submitted for approval to the responsi-
ble departments.
The Annual Report of TATNEFT Company is compiled in
accordance with the basic documents:
1. Federal Laws
• Federal Law No. 39-FZ of April 22, 1996 “On the Securities
Market”;
• Federal Law No. 208-FZ of December 26, 1995 “On Joint
Stock Companies”.
2. Bank of Russia Regulations N660-P of November 16, 2018
«On General Meetings of Shareholders»;
3. Regulations “On Disclosure of Information by Issuers of the
Issued Securities”, approved by the Order of the Bank of
Russia No. 454-P dated December 30, 2014;
4. The Corporate Governance Code recommended for the
use by the Letter of the Bank of Russia No.06-52/2463
dated April 10, 2014;
5. The Letter of the Bank of Russia “On Reporting on
Compliance with the principles and recommendations of
the Corporate Governance Code by Public Joint-Stock
Companies in annual reporting” No. IN-06-52/8 dated
February 17, 2016;
Appendices to the Annual Report 2020
6. The Information Letter of the Bank of Russia “On
Recommendations on the Disclosure in Annual Reports
of a Public Joint-Stock Company of Information on
Remuneration to Members of the Board of Directors
(Supervisory Board), Members of Executive Bodies and
other Key Executives by Public Joint-Stock Companies”
No. IN-06–28/57dated December 11, 2017
In order to reflect the Company’s actions to ensure the prin-
ciples of the UN Global Compact, the G20/OECD Guidelines
for Corporate Governance, the implementation of the UN
Sustainable Development Goals, the corporate responsibility
policy in the ESG aspects, the content of the Annual Report
takes into account the following documents and Guidelines:
• UN Global Compact Principles;
• OECD Guidelines for Multinational Enterprises;
• SDG Compass;
• UN Guiding Principles on Business and Human Rights;
• ILO Tripartite Declaration of Principles Concerning
Multinational Enterprises and Social Policy
• ISO 26000 Guidance on Social Responsibility;
• GRI Sustainability Reporting Guide;
• AA1000 Series of Standards developed by the International
Institute for Social and Ethical Reporting (AccountAbility);
• Provisions of the Social Charter of Russian Business;
• Basic performance indicators. Recommendations on the
use in the management practice and in corporate non-
financial reporting of the Russian Union of Industrialists and
Entrepreneurs (RSPP).
In order to reflect the Company’s position in the corporate
policy and actions related to climate issues, the Annual
Report takes into account the following international initia-
tives and platforms:
• Paris Climate Agreement;
• Climate Initiative Platform of International Petroleum
Industry Environmental Conservation Association (IPIECA);
• Climate Oil and Gas industry Initiative (OGCI);
• Recommendations for companies to disclose the financial
risks associated with global climate change. (The FSB Task
Force on Climate-related Financial Disclosures — TCFD).
While preparing the Annual Report, the elements of the
Integrated Reporting Standard of the International Integrated
Reporting Council (IIRC) have been used; published studies
and recommendations in the corporate reporting.
The Company also plans to publish, in addition to the Annual
Report, a full version of the integrated report in an interactive
format, which will significantly expand the scope of providing
information on aspects of sustainable development (ESG).
The report takes into account the recommendations of the
Corporate Governance Code approved by the Government
of the Russian Federation and recommended by the Bank of
Russia by Letter No. 06-52/2463 of April 10, 2014.
348
349
Annual Report 2020 Significant statements
List of acronyms
In order to ensure the information reliability the Annual
Report was agreed with the responsible departments
and checked for compliance with the data of the consol-
idated financial statements by the independent auditor
PricewaterhouseCoopers Audit JSC.
The Annual Report of TATNEFT Public Joint Stock Company
for 2020 was preliminarily approved by the PJSC TATNEFT
Board of Directors, Minutes No. 13 dated May 25, 2021.
The reliability of the data presented in the Annual Report is
confirmed by the Revision Commission of PJSC TATNEFT.
The report contains links to web-site tatneft.ru, individual
documents and resources for the convenience of readers.
This report is available at tatneft.ru in the electronic form,
as well as in hard copies at the offices of the Company in
Almetyevsk, Moscow and Kazan.
The key communication objective of the Annual
Report is to create the most complete understanding
among the stakeholders of the Company’s activities
and strategic plans, as well as the potential for their
realization, results achieved, and the measures
taken to improve the effectiveness of the business
model, taking into account aspects of sustainable
development.
The information presented in this Annual Report contains
several forward-looking statements in relation to the future.
Such statements include, but are not limited to, the plans,
objectives, and forecasts for production, including those re-
lated to the volume of products and services, economic and
financial indicators, information about projected or expected
income, profit (loss), net profit (loss) in respect of stocks,
dividends, capital structure, other indicators and ratios, as
well as statements regarding the premises on which our
statements are based. All statements, other than statements
of historical facts, are or may be considered as forecast
statements. Forward-looking statements are statements of
future expectations that are based on the management’s
current expectations and assumptions and include known
and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those
expressed or implied in these statements. Forward-looking
statements include, among other things, statements regard-
ing the Company’s potential exposure to market risks and
statements expressing the expectations, beliefs, estimates,
forecasts, projections and assumptions. These statements
are accompanied by the words “expected”, “intends”,
“planned”, “will”, “seeks”, “predicted”, “predicted”, “ambition”
and other similar expressions.
Forward-looking statements in relation to the future are
subject to uncertainties, assumptions and inherent risks, both
of a general nature and specific to the business. There is a
risk that future actual results may differ materially from plans,
goals, expectations, estimates and intentions expressed in
such statements or may not be realized due to a number of
different factors of economic, financial, political, social, legal
aspects that are outside of the Company’s control, including
factors that may affect future operations of the Company.
(See “Risk Factors” further in the Annual Report.)
Forward- looking statements cannot be the basis for making
investment decisions. Each forward-looking statement cor-
responds only to the date of this report. Neither the Company
nor any of its subsidiaries undertakes any obligation to
publicly update or revise any forward-looking statements as a
result of new information, future events or other information.
With the exception of financial statements, errors may occur
in the text of the report when calculating shares, percent,
and amounts when rounding calculated indicators. The data
presented in this report may slightly differ from previously
published data due to the difference in rounded figures.
Appendices to the Annual Report 2020
MICEX
Moscow Interbank Currency Exchange
MPP
Metal-Plastic Pipes
BIA
Business Idea Auction
MTBR
Mean Time Between Repair
AGFS
ASPI
AB
FFS
JSC
Automobile Gas Fueling Station
Almetyevsk State Petroleum Institute
Anode Bed
Fuel Filling Station
Joint Stock Company
BWMB
Basin Water Management Board
BMZ
Bugulma Mechanical Plant (PJSC TATNEFT structural
EOR
MPP
Enhanced Oil Recovery
Multiphase Pump
EMERCOM
Emergency Control Ministry
NGDU
Oil & Gas Field Operating Division (PJSC TATNEFT
structural subdivision)
MRRT
Mineral Resource Recovery Tax
VAT
Value Added Tax
subdivision)
NSSCTF
Nizhnekamsk Solid Steel Cord Tire Factory
VOIR
All-Russian Society of Inventors and Innovators
R&D
Research and Development
GMPS
Group Metering Pump Station
GMS
Group Metering Station
Tubing
Oil Well Tubing
ITA
Intangible assets
GIBDD
State Traffic Safety Inspectorate
OR & PP
Oil Refining and Petrochemical Plants
SCNS
State Complex Nature Sanctuary
Refinery
Oil Refinery
HS
Horizontal Settler
OPU
Oil Processing Unit
GOST
National State Standard
NNPF
Non-State Pension Fund
Frac
F&L
GTM
HEI
CC
BPS
CHC
Hydraulic Fracturing
Fuel and Lubricants
Well Interventions
Hydraulic Engineering Structures
Cultural Center
Booster Pumping Station
Children Resting Camp
STC
PCC
UN
LLC
DCA
PO
DCP
Science & Technology Center
Petrochemical Complex
United Nations organization
Limited Liability Company
Designated Conservation Area
Pilot Operations
Dual Completion Production
CYSS
Children & Youth Sports School
DCP&I
Dual Completion Production & Injection
EU
European Union
UNECE
United Nations Economic Commission for Europe
DIO
DC
Dual Injection Operation
Dual Completion
RCT
CJSC
DPI
ORF
IS
ORF
CIS
PPS
KFU
CSR
HRS
KPI
Reinforced Concrete Tank
Closed Joint Stock Company
Discounted Profitability Index
Oil Recovery Factor
Information System
Oil Recovery Factor
Corporate Information System
Pad Pumping Station
Kazan (Volga Region) Federal University
OECD
Organization for Economic Cooperation and Development
SEZ
MPC
APG
RPM
PCP
PS
CD
VST
Special Economic Zone
Maximum Permissible Concentration
Associated Petroleum Gas
Reservoir Pressure Maintenance
Polymer Coated Pipes
Power Substation
Chain Drive
Vertical Steel Tank
Corporate Social Responsibility
RYSO
Regional Youth Social Organization
Horse-racing School
Key Performance Indicators
RT
RF
Republic of Tatarstan
Russian Federation
MGPP
Minnibayevo Gas Processing Plant
SVO
Super Viscous Oil
350
351
Annual Report 2020 CPS
CGS
Cathodic Protection Station
Corporate Governance Standard
OHSMS
Occupational Health & Safety Management System
EDMS
Electronic Document Management System
TH
TTH
TS
FEC
TPP
DCU
MC
Trading House
Technical Trading House
Technical Specification
Fuel & Energy Complex
Thermal Power Plant
Delayed Coker Unit
Management Company
LHVR
Light Hydrocarbon Vapor Recovery
HSOTF
High Sulfur Oil Treatment Facility
OTF
Oil Treatment Facility
FWNO
Free Water Knock Out
PFTF for RPM Process Fluid Treatment Facility for Reservoir Pressure
Maintenance (PJSC TATNEFT subsidiary)
SRU
Sulfur Recovery Unit
UTNGP
Tatneftegazpererabotka Division (PJSC TATNEFT structural
subdivision)
All-Steel Tires
Central District Hospital
Personnel Training Center
Sucker Rod Pump
Natural Gas Liquids
Electrical Insulating Connection
Electronic Corporate University
Electric Submersible Pump
Net Present Value
AST
CDH
PTC
SRP
NGL
EIC
ECU
ESP
NPV
352
353
Annual Report 2020 Contact details
Public Joint Stock Company TATNEFT named after
V.D. Shashin (hereinafter referred to as the Company, Joint
Stock Company, Company, PJSC TATNEFT) 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 na-
tional and communal properties in the Republic of Tatarstan
(denationalization and privatization)” dated 05.02.1992
#1403-XII.
The Company was established in January 1994 for an indef-
inite period and registered with the Republic of Tatarstan
Ministry of Finance (Registration No. 632 dated January 21,
1994).
The Company’s major activity is focused on a profit-making
goal.
Public Joint Stock Company
TATNEFT named after V.D. Shashin
Abbreviated name:
PJSC TATNEFT n.a. V.D. Shahin
Head office:
75, Lenin Street, Almetyevsk,
425450, Republic of Tatarstan,
Russian Federation
Phone: +7 (8553) 30-75-68
Company’s registrar:
LLC Euro-Asian Registrar 10, Mira Street, Almetyevsk,
423450 Republic of Tatarstan, Russian Federation,
Phone: +7 (8553) 22-10-88
Company web-site:
tatneft.ru
The report preparation working group
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
the 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
Alparova A.M.
Alchinov A.F.
Bikmursin A.Sh.
Gaifullina R.R.
Zvezdin E.Yu
Zabbarov R.G.
Karpov V.A
Kurochkin D.V.
Matveev O.M.
Mukhamadeev R.N.
Nugaibekov R.A.
Salahov R.A.
Syubayev N.Z.
Khalimov R.H.
Khisamov R.S.
Khabibrahmanov A.G.
Zemlyakova Yu.V
Sharagina O.A.
Design and printing
LLC EuroPublicity
354
Annual Report 2020