Annual Report
2020
ROSNEFT ANNUAL REPORT 2020
“Rosneft” and the “Company” mean Rosneft Oil Company PJSC
either separately or together with its subsidiaries and affiliates,
as the context may require. This Annual Report contains for-
ward-looking statements that are subject to risks and uncer-
tainties. The actual Rosneft results may differ materially
from the information contained in the forward-looking state-
ments due to a number of factors. To convert tonnes to barrels,
a factor of 7.404 is used. To convert 1,000 cubic metres of gas
to barrels of oil equivalent, an average factor of 6.09 is used.
To convert Rospan’s gas condensate to barrels of oil equivalent,
a factor of 8.3 is used.
ANNUAL REPORT CONTAINING
INTEGRATED REPORTING ELEMENTS
Rosneft's 2020 Annual Report contains elements of integrated
reporting as defined in the International Integrated Reporting
Framework published by the International Integrated Reporting
Council (IIRC). It aims to present the Company’s financial
and non-financial results and sustainable development achieve-
ments, highlighting the existing links between the competitive
environment and Rosneft’s strategy, business model, risk man-
agement and a clearly defined corporate governance structure.
Since 2017, Rosneft has been involved in the activities of the IIRC
business network, which seeks to develop fundamental principles
of integrated reporting, while also contributing to and promoting
the International Integrated Reporting Framework.
The Annual Report was approved by the General Shareholders
Meeting on June 01, 2021 (unnumbered Minutes).
1
StrategyOperating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors CONTENTS
Message from the Chairman of Rosneft’s Board of Directors .............................4
Message from the Chief Executive Officer and Chairman
of the Management Board ......................................................................................................6
COVID-19 measures: caring for our people is our top priority ..............................8
Assets and regions of operation ........................................................................................10
Mission and values .....................................................................................................................12
Investment case ..........................................................................................................................13
Business model ........................................................................................................................... 14
Company structure ................................................................................................................... 16
1
STRATEGY
Rosneft–2022 Strategy .........................................................................................................20
Focus on sustainable development .................................................................................22
Committed to our consumers and environment ....................................................... 24
Carbon management plan for the period until 2035 .............................................. 25
Focus on digital transformation and technology ..................................................... 26
Progress against strategic objectives ............................................................................ 28
Long-term development programme and progress report ...................................31
KPI structure .................................................................................................................................32
Investment program in 2020 .............................................................................................. 34
OPERATING RESULTS
Key operating and financial results .................................................................................40
Rosneft’s exploration and reserve replacement ....................................................... 42
Production of liquid hydrocarbons ..................................................................................50
Overview of production in regions of operation .......................................................60
Greenfield development projects .......................................................................................71
In-house oilfield services ......................................................................................................80
Offshore projects ...................................................................................................................... 82
Gas business ...............................................................................................................................86
Development of international projects in promising oil and gas regions ....98
Downstream (refining and marketing) ......................................................................... 104
MARKET OVERVIEW AND COMPETITIVE ENVIRONMENT
Macroeconomic environment in 2020 ..........................................................................138
Oil and gas industry overview .......................................................................................... 146
Competitive analysis ............................................................................................................ 158
Overview of key taxation changes in the Russian Federation
with the largest impact on the Company’s financial and business
operations .................................................................................................................................. 169
2
3
2
4
5
6
SUSTAINABLE DEVELOPMENT
Health, safety, environment. Climate change ...........................................................176
Personnel and social programmes ................................................................................. 185
Social and economic development of regions and charity in 2020.............200
Company sponsorship activities .................................................................................... 202
Energy efficiency and energy saving ............................................................................ 204
Localisation and development of industrial clusters ...........................................207
Supplier and contractor relationships ...........................................................................212
Research, design, and innovations .................................................................................216
Digital transformation .......................................................................................................... 223
CORPORATE GOVERNANCE
Message from the Chairman of the Board of Directors ..................................... 230
Corporate governance .......................................................................................................... 232
General shareholders meeting .........................................................................................236
Members of the Board of Directors ...............................................................................238
Executive bodies .....................................................................................................................252
Remuneration of members of the Board of Directors ........................................ 264
Remuneration of the management ...............................................................................265
Civil liability insurance for the members of the Board of Directors
and the management .......................................................................................................... 266
Managing possible conflicts of interest ..................................................................... 266
Audit commission ................................................................................................................... 272
Risk management and internal control system ...................................................... 273
INFORMATION FOR SHAREHOLDERS AND INVESTORS
Share capital ............................................................................................................................ 286
Dividend policy ....................................................................................................................... 288
Shareholder relations, key events in 2020 ................................................................ 289
Institutional investor relations .........................................................................................292
Rosneft bonds and credit ratings .................................................................................. 298
Information disclosure ........................................................................................................300
Appendix 1. (Consolidated financial statements Rosneft Oil Company for the year
ended December 31, 2020 with independent auditor’s report Rosneft Oil Company) ............................301
Appendix 2. (Key risk factors) ................................................................................................................................................310
Appendix 3.(Report on compliance with the principles and recommendations of the Corporate
Governance Code) ....................................................................................................................................................................... 314
Appendix 4. (Information on compliance with instructions issued by the President of the Russian
Federation and the Government of the Russian Federation) .............................................................................. 335
Appendix 5. (Information on core internal regulations that serve as a basis for the preparation
of this annual report, including key internal documents regulating the internal audit function
and the functioning of the IC&RMS) .................................................................................................................................359
Appendix 6. (Financial statements and auditor’s report) ....................................................................................... 361
3
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MESSAGE FROM THE CHAIRMAN
OF ROSNEFT’S BOARD OF DIRECTORS
Gerhard SCHROEDER
Chairman of the Board of Directors
DEAR SHAREHOLDERS
AND INVESTORS,
In 2020, Rosneft worked con-
sistently to achieve its sustaina-
ble development goals. I am very
pleased that despite the global
economic turmoil the Company
fully achieved its plans in this area.
Therefore the Company's perfor-
mance has been praised by major
international agencies. Rosneft
has been named Russia’s best
oil and gas company in promi-
nent ESG ratings from Refinitiv,
Bloomberg, as well as the CHRB.
In 2020, we significantly improved
our position on FTSE Russell’s
ESG Index, which includes per-
formance in human rights, indig-
enous support, workplace
conditions, and industrial safety
and health. FTSE Russel, a division
of the London Stock Exchange,
confirmed that Rosneft remains
a member of the FTSE4Good
Index Series group of international
stock indices. It is encouraging
to see and a great achievement
by Rosneft and its employees that
we are ahead of 84% of partici-
pants in the ICB's international oil
and gas supersector.
In 2020, Rosneft released
an updated public statement
regarding the Company’s con-
tribution towards the UN
Sustainable Development Goals,
its stance on human rights,
and the Declaration on Respecting
Human Rights to be used
when interacting with suppliers
of goods, works and services.
Rosneft was first in Russia to pre-
pare a comprehensive Carbon
Management Plan for the period
until 2035 with clear tar-
gets to reduce greenhouse gas
(GHG) emissions. Rosneft Board
Summing up the 2020 results,
I would like to emphasise
Rosneft’s unique potential
and ability to stay the course
in today’s turbulent market envi-
ronment. In these challenging
conditions, the Company effec-
tively reinforced its financial posi-
tion and laid a strong foundation
for future projects.
of Directors approved the docu-
ment in December 2020. Its key
goals include preventing GHG
emissions of up to 20 mmt of CO2
equivalent, reducing upstream
emissions intensity by 30%, cut-
ting methane emissions inten-
sity to below 0.25%, and achieving
zero routine flaring of associated
petroleum gas.
Rosneft is continuing its energy
saving and associated petroleum
gas (APG) utilization programme
seeking to achieve zero routine
flaring of APG. Simultaneously,
the Company is planning
to increase to 25% the share of gas
in its production portfolio.
We are working to optimize
emissions from power genera-
tion and further exploring ways
to replace electricity produced
by traditional combined heat
and power units with power gener-
ated from low-carbon and renew-
able energy sources.
With capacity to use underground
storage facilities and Rosneft
own depleted fields for Carbon
Capture, Utilisation and Storage
(CCUS) the Company is well posi-
tioned to leverage its existing
infrastructure for gas capture
and other CCUS purposes, includ-
ing chemical neutralisation, trans-
portation and storage of carbon.
Natural carbon capture has also
been an important element
of the Company's effort to reduce
its carbon footprint. The Company
has set an ambitious goal
to unlock the carbon capture
potential of Russia’s forests
by 2035 with a massive refores-
tation and ecosystem preservation
programme to fight emissions.
Rosneft is implementing a com-
prehensive programme to improve
production processes and reduce
methane emissions, which
are significantly even more harm-
ful for the environment than CO2.
The expansion of this programme
along with the use of innovative
technologies, including drones,
laser and thermal imaging devices,
and ultrasonic detectors, will help
reduce the intensity of methane
emissions to below 0.25%.
Rosneft accomplishments
in reducing GHG emissions have
been recognized by interna-
tional partners. We have signed
a cooperation agreement in car-
bon management and sustainable
development with our long-
term partner and shareholder,
BP. While signed in early 2021,
the agreement was largely based
on the decisions and initiatives
that the Company was consist-
ently implementing in 2020.
As Rosneft Board Chairman
I believe it is very important that
the Company looks beyond 2035
to explore ways of achieving car-
bon neutrality by 2050.
A company’s ESG performance
has become a key factor con-
sidered by investors. Rosneft’s
strong results across key ESG
metrics allowed the Company
to continue developing interna-
tional partnerships and cooperat-
ing on promising projects. In 2020,
the Company scored a major suc-
cess by attracting the world’s
leading oil and gas companies
Equinor and Trafigura to joint
projects.
Rosneft and Equinor closed
a deal in December, by which
the Norwegian company acquired
49% of the Krasnoyarsk Geological
Research and Analytical Centre
(KrasGeoNats). The latter owns 12
licenses for exploration and pro-
duction of conventional reserves
in onshore areas of Eastern
Siberia.
Trafigura purchased
a 10% stake in LLC Vostok-Oil,
a promising project in the north
of the Krasnoyarsk Region.
4
5
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MESSAGE FROM THE CHIEF
EXECUTIVE OFFICER AND CHAIRMAN
OF THE MANAGEMENT BOARD
Igor SECHIN
Chief Executive Officer and Chairman of the Management Board
DEAR SHAREHOLDERS
AND INVESTORS,
In 2020, Rosneft significantly
strengthened its financial posi-
tion despite the pandemic-related
restrictions and temporary cuts
in oil production under the OPEC+
agreement we have committed
to in compliance with the govern-
ment directives.
the spread of COVID-19 that meet
the world's best practices. We
monitor the situation on a daily
basis at all Rosneft facilities,
with as many of our person-
nel as possible working remotely.
Strict observance by all employ-
ees of anti-pandemic rules
and requirements helped pre-
vent the spread of COVID-19
at our production facilities.
The health and well-being
of Rosneft employees is and has
always been our top priority.
We acted promptly to develop
and roll out measures to prevent
We have developed a Carbon
Management Plan for the period
until 2035 that outlines a frame-
work for the Company's tran-
sition to a low-carbon
economy. Successful implemen-
tation of the plan will cement
our position as a leading player
in the global energy market
in the context of energy transition
and help maximise monetisation
of the Company's proved reserves.
Rosneft is actively introducing
its own innovative technologies.
One example of this is the pro-
gress in Associated Petroleum
Gas (APG) utilization enabling
us to not only inject it into the res-
ervoir, thus maintaining forma-
tion pressure, but also to generate
electricity. In recent years, we have
invested more than RUB 164 bln
in APG utilisation at our produc-
tion assets.
In the reporting year, Rosneft
continued working consist-
ently towards our 2022 strate-
gic goals approved by the Board
of Directors. Launching the Vostok
Oil project marked a major mile-
stone both for the Company
and the country’s economy, pav-
ing the way for the develop-
ment of the world's largest oil
and gas province in Russia’s north.
Vostok Oil’s potential is confirmed
by thorough feasibility studies
and analysis of geological data
and development technologies
conducted by Rosneft special-
ists. Our findings are corroborated
by leading international experts.
Going forward, we plan to create
a new world-class cluster, the only
one of its kind today.
The project’s key advantage is its
close proximity to the unique
Northern Sea Route, enabling
feedstock supplies to both Europe
and Asia. Additionally, Vostok
Oil will help increase cargo flow
along the route as prescribed
by the Russian President.
In 2020, Rosneft transformed
and improved the quality
of its production assets portfo-
lio. In particular, we sold some
of the depleted and high water-
cut tail assets that were expen-
sive to operate and had a low rate
of return on invested capital. We
also focused on large high-mar-
gin projects with quality reserves
and low carbon footprint. In late
2020, Trafigura Group Pte. Ltd,
one of the world’s leading trad-
ing companies, joined the ranks
of Vostok Oil’s shareholders –
an important step towards the for-
mation of the project shareholder
structure.
In 2020, Rosneft launched
two new major projects –
the Erginsky licence area
and the Severo-Danilovskoye field,
boasting the production potential
of over 45 mmb of liquid hydrocar-
bons per year.
in the production segment were
introduced for the ongoing pro-
jects most affected by the OPEC+
production cuts.
During 2020, Rosneft contin-
ued with its large-scale explo-
ration programme discovering
three of the world’s largest oil
and gas fields: Zapadno-Irkinskoye
on the Taimyr Peninsula
and Marshal Zhukov and Marshal
Rokossovsky in the Kara Sea.
The fields’ average resource poten-
tial is over 4 bboe.
Despite all the challenges,
Rosneft delivered solid net profit
in 2020, which reached record
RUB 324 bln in the fourth quar-
ter and RUB 147 bln for the year
as a whole. The Company's free
cash flow remained positive
in 2020 at RUB 425 bln, allowing
for consistent shareholder pay-
ments and servicing of debt.
In the forth quarter of 2020,
the Company increased daily
production of liquid hydrocar-
bons and gas by 1.9% and 7.5%
quarter-on-quarter respectively,
responding to positive changes
in the market. With its state-of-
the-art technologies, Rosneft
can effectively manage the pro-
duction process. We can rapidly
boost hydrocarbon production
as the demand for oil recovers.
In the reporting year’s complex
market environment, Rosneft was
able to promptly react to and suc-
cessfully tackle the external chal-
lenges. This helped maintain
and reinforce our leading positions
in the energy market. I am confi-
dent that the decisions and strat-
egies implemented in 2020 will
enable the Company to deliver
strong results across its business
sectors both in Russia and abroad.
Unit OPEX in hydrocarbon pro-
duction went down by 7.1% year-
on-year in the fourth quarter
of 2020 to USD 2.6 per boe, while
the annual rate was at USD 2.8 per
boe, down by 9.7% year-on-year
(USD 3.1 per boe in 2019).
In 2020, Rosneft continued devel-
oping its gas assets, with gas
exceeding 20% in the Company’s
total hydrocarbon production.
This is in line with the strat-
egy to increase the share of gas
in our production portfolio.
In 2020, Rosneft spent
RUB 785 bln in capital expendi-
tures, meeting the optimisation
target for its CAPEX programme
originally approved at RUB1 trln.
When deciding to opti-
mise the CAPEX programme,
the Company's management
remained conscious of the need
to continue investing in new pro-
duction projects. It is worth not-
ing that the CAPEX reductions
6
7
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COVID-19 MEASURES: CARING
FOR OUR PEOPLE IS OUR TOP
PRIORITY
Health, life
and workplace safety
of our employees
have always been
our highest priority
Bashneft Group and units
with a large number of people.
The Company has hired a dedi-
cated medical organisation that
provides logistics and vaccination
in accordance with the Ministry
of Health’s requirements, includ-
ing preliminary medical check-ups
and follow-up observation.
Given that the infection rate
across the Company is on a down-
ward trend, the epidemiologi-
cal situation stabilised and mass
vaccination began, in March 2021
Rosneft started a phased return
of staff to offices.
Well aware of the life and health
risks posed by COVID-19
and the production risks that
come with anti-epidemic
measures and restrictions,
we took active steps to pro-
tect our staff and contractors
and ensured continuous operation
of our production facilities. Our
work organisation and planning
efforts included, but were not lim-
ited to, shift arrangements, strict
health and sanitary compliance,
quarantine and control meas-
ures, work zoning and oversight.
We introduced compulsory med-
ical examinations and provided
our staff with necessary personal
protective equipment. The control
measures were in line with statu-
tory and corporate requirements
and standards.
In early March 2021, Rosneft
launched COVID-19 vac-
cination for its employees.
The Company received the first
batch (50,000 doses) of Russian-
made vaccine approved
by the Russian Ministry of Health.
To minimise the risk of infec-
tion, we will first vaccinate staff
at our major remote facilities such
as Yuganskneftegaz, Vankorneft,
We care for our people
We care for our business
We care for our customers
Remote working introduced
for staff not involved
in ensuring continuous
production
39 mln units
of personal protective
equipment (PPE) and over
680,000 litres
of hand sanitisers
Regular testing: over
780,000 tests
Strict compliance with sanitary
and hygienic requirements
6.8 mln litres
of disinfectants for offices
and workplaces
COVID-19 vaccination
for employees
All Group Subsidiaries
developed Plans
of Priority Response
Measures to Ensure
Business Continuity
and implemented
a set of initiatives
to ensure production
stability
and to prevent
the spread of COVID-19
Length of breaks
between shifts
increased to
60 and 90 days
We rolled out more than
250 observation
units
with over 21,500 beds
and more than
322 isolation
units
with 2,800 beds
Production of two sanitiser and disinfectant
components: ethanol and acetone
41.8 kt
of acetone and
3.2 kt
of ethanol were sold domestically
Contactless payment solutions at filling
stations
Support for medical institutions: funding
and PPE supply
8
9
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ASSETS AND REGIONS
OF OPERATION
Canada
Norway
Russia
Germany
Belarus
Ukraine
Italy
Georgia
Armenia
Kyrgyzstan
Kazakhstan
Mongolia
Egypt
Iraq
Qatar
China
Cuba
India
Myanmar
Brazil
Mozambique
Vietnam
Indonesia
23
countries of
operation
78
regions of operation
in Russia
6%
share in global oil
production
13
refineries in Russia
Average hydrocarbon production growth in 2010–
2020, %
7.5
2.8
1.1
0.9
0.2
0.1
Hydrocarbon production in 2020, mmboe per day
Hydrocarbon production costs in 2020, USD per boe Hydrocarbon reserves, bboe as at 1 January 20211
5.2
1.0
4.1
4.4
1.9
3.8
1.4
2.5
2.3
3.5
1.4
2.1
3.4
1.6
1.8
3.0
1.1
1.9
2.8
0.5
2.3
2.1
0.5
1.7
11.1
11.6
10.1
8.5
6.4
6.8
3.7
2.8
152
53
99
59
23
36
54
26
28
54
27
27
45
26
19
45
24
21
32
8
24
27
3
23
-0.7
-1.0
-1.7
Hydrocarbon liquids
Gas
Sources: company reports; Wood Mackenzie (Gazprom).
Source: company reports for 2020.
Source: company reports for 2020.
10
Hydrocarbon liquids
Gas
1 Data on Rosneft is provided according to the Russian resource
classification system (АВ1С1+В2С2) as at 1 January 2021, data
on other companies is based on Wood Mackenzie’s appraisal
and includes commercial and sub-commercial reserves.
11
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MISSION AND VALUES
INVESTMENT CASE
Rosneft is a national oil industry leader and the largest publicly-traded company in the world.1
Our mission is to unlock energy potential through the development of projects in Russia
and abroad, ensure energy security, and promote the sustainable use of natural resources
BUSINESS PRINCIPLES
• Focus on the ESG agenda2
• Commitment to the UN Sustainable
Development Goals
• Strong project management
• Maintaining operational leadership
• Ensuring high shareholder returns
• Commitment to strong business ethics
• Growing a talent pipeline
and organisational capabilities
• Digitalising the entire business
and creating a sustainable
technological advantage
• Fostering in-house research
and development
Efficient capital
management
USD 9.7 bln
decrease in net debt
>35%
reduction in general and administrative
expenses
24%
interest expense savings
Sustainable
shareholder returns
and strong potential
50%
of net income: dividend payout ratio
70%
of investments banks have a Buy
recommendation for Rosneft shares3
Vostok Oil
large-scale project, strong upside
potential for the Company
Positive
financial result
in 2020 despite the decline in oil prices
and production restrictions
RUB 425 bln
free cash flow
RUB 147 bln
net income
Total shareholder return
(TSR)
MOEX
Oil and Gas
Index
Brent
Сompetitors
0.8
Rosneft
-9.6
-11.8
-25.3
1 In terms of production volumes among publicly-traded companies listed on western stock exchanges.
2 ESG (environmental, social, and corporate governance).
3 Share of investment banks that recommended to buy or hold Rosneft shares/GDRs as at the end of 2020
12
13
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors CAPITAL1
resources
FINANCIAL
RUB 785 bln
investments
SOCIAL
AND REPUTATIONAL
23
countries of operation
HUMAN
356,000
qualified employees2
INTELLECTUAL
31
R&D and design institutes
NATURAL
RUB 42 bln
green investments
PRODUCTIVE
#1
public company worldwide
by production volume3
Stakes in
6 refineries
13
refineries
in Russia
Abroad
BUSINESS MODEL
ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
OIL AND GAS
PRODUCTION
Major resource base
and modern production
assets
OIL REFINING
AND PETROCHEMICALS
Modern and environmentally
friendly refineries
COMMERCE
AND LOGISTICS
Effective trading
and wide retail
network
FINANCIAL
PERFORMANCE
Strong performance
and stable profits
Crude oil, mmt
Oil refining, mmt
Oil sales, mmt
Revenue, RUB bln
CAPITAL
results
FINANCIAL
EBITDA
RUB 1,209 bln
21%
EBITDA margin
226
104
121
Hydrocarbon liquids
production⁴
Crude oil purchases in Russia
Crude oil purchases abroad
193
14
19
In Russia
Abroad
93
11
In Russia
Abroad
5
115
Petroleum products, mmt
Petroleum products sales, mmt
Exploration
105
104
l
i
o
e
d
u
r
C
s
a
G
Production in Russia
Production abroad
Purchase
90
11
3
In Russia
Abroad
Petrochemicals
38
64
2
Gas, bcm
Gas sales, bcm
68
Gas production⁴
Gas purchases
58
10
4 Production by subsidiaries
and proportionately consolidated
companies
1 Definition and list of capitals
as per the International Integrated
Reporting Framework published
by the International Integrated
Reporting Council (IRCC)
2 Headcount as at 31 December 2020
3 Listed on Western stock exchanges
14
68
In Russia
Abroad
Internal consumption, etc.
52
4
12
2,249
oil
3,066
petroleum
products
73
petrochemicals
240
gas
129
other
RUB 147 bln
net income
SOCIAL
AND REPUTATIONAL
fiscal payments
RUB 2.4 trln.
RUB 5.6 bln
charity
HUMAN
#1
employer in Russia’s oil
industry
RUB 28 bln
allocated for social projects
INTELLECTUAL
64
patents
issued
72 technologies
implemented
and rolled out
NATURAL
767 kt of СО2 eq.
reduction of GHG emissions5
1.3 mmt
Euro-6 gasoline production
PRODUCTIVE
138%
reserve
replacement
ratio (SEC)
38 mmt
motor fuels
output
5 Effect from the Energy Saving
Programme
15
COMPANY STRUCTURE
Upstream
Downstream
EXPLORATION
Russia
Norway
Myanmar
REFINING
Russia
RN Nordic Oil AS
Bashneft International B.V.
Iraq
Mozambique
RN Angoche Pte. Ltd.
RN Zambezi North Pte. Ltd.
RN Zambezi South Pte. Ltd.
Bashneft International B.V.
Iraqi Kurdistan
LLC RN-BVK
RN-Batil Pte. Ltd.
RN-Zawita Pte. Ltd.
RN-Qasrok Pte. Ltd.
RN-Harir-Bejil Pte. Ltd.
RN-Darato Pte. Ltd.
LLC RN-Exploration
LLC RN-Shelf Arktika
LLC NK Priazovneft
LLC Bashneft-Petrotest
LLC Vostok Oil
USA
Neftegaz Holding America Limited
Brazil
Rosneft Brasil E&P LTDA
Russia
LLC RN-Service
LLC RN-Bureniye
LLC RN-GRP
LLC Intellectualnye Sistemy
SERVICES
PRODUCTION
Timan-Pechora
Eastern Siberia
Vietnam
Rosneft Vietnam B.V.
Canada
RN Cardium Oil Inc.
Egypt
Upstream Projeсts Pte. Ltd.
LLC Bashneft-Polyus
Far East
Sakhalin-1
JSC RN-Shelf-Far East
Western Siberia
LLC RN-Yuganskneftegaz
LLC RN-Purneftegaz
JSC Tomskneft VNK
LLC RN-Uvatneftegaz
JSC Samotlorneftegaz
JSC Rospan International
JSC RN-Nyaganneftegaz
JSC Sibneftegaz
LLC Kynsko-Chaselskoye
Neftegaz
JSC Tyumenneftegaz
JSC Messoyakhaneftegaz
PJSC NGK Slavneft
LLC Sorovskneft
JSC Yugraneft Corporation
LLC Kharampurneftegaz
JSC Kondaneft
LLC SKN
JSC Verkhnechonskneftegaz
JSC Vankorneft
JSC Vostsibneftegaz
LLC RN-Vankor
LLC Taas-Yuryakh
Neftegazodobycha
JSC Suzun
LLC Tagulskoye
JSC Bratskekogaz
Volga-Urals
JSC Samaraneftegaz
OJSC Udmurtneft
JSC Orenburgneft
LLC Bashneft-Dobycha
Southern Russia
LLC RN-Krasnodarneftegaz
OJSC Grozneftegaz
LLC RN-Stavropolneftegaz
JSC Rosneft-Dagneft
JSC Dagneftegaz
JSC Angarsk Petrochemical
Company
JSC Achinsk Refinery VNK
LLC RN-Komsomolsk Refinery
JSC Novokuibyshevsk Refinery
JSC Kuibyshev Refinery
JSC Syzran Refinery
LLC RN-Tuapse Refinery
PJSC Saratov Refinery
JSC Ryazan Oil Refining
Company
LLC Nizhnevartovsk Oil Refining
Association
PJSC Slavneft-YANOS
Integrated Ufa Refinery
(Bashneft-Ufaneftekhim,
Bashneft-Novoil
and Bashneft-UNPZ)
SALES
Russia
LLC RN-Morskoi Terminal Nakhodka
LLC RN-Vostoknefteprodukt
LLC RN-Morskoi Terminal Arkhangelsk
LLC RN-Morskoi Terminal Tuapse
LLC RN-Krasnoyarsknefteprodukt
LLC RN-Novosibirsknefteprodukt
LLC RN-Chechennefteprodukt
PJSC Rosneft-Altainefteprodukt
JSC Rosneft-Kubannefteprodukt
PJSC Rosneft-Kurgannefteprodukt
PJSC Rosneft-Smolensknefteprodukt
PJSC Rosneft-Kabardino-Balkaria
Fuel Company
OJSC Rosneft-Artag
LLC Bashneft-Roznitsa
JSC Rosneft-Murmansknefteprodukt
JSC RN-Moscow
JSC Bryansknefteprodukt
JSC Voronezhnefteprodukt
JSC Lipetsknefteprodukt
JSC Ulyanovsknefteprodukt
JSC Samaranefteprodukt
JSC Buryatnefteprodukt
JSC Tambovnefteprodukt
JSC Khakasnefteprodukt VNK
JSC RN-Tver
JSC Rosneft-Stavropolye
Oil plants
LLC Novokuibyshevsk Oils
and Additives Plant
PJSC
Rosneft – MP Nefteprodukt
Petrochemicals
and catalysts
JSC Angarsk Polymer Plant
JSC Angarsk Plant of Catalysts
and Organic Synthesis
JSC Novokuibyshevsk
Petrochemical Company
LLC Novokuibyshevsk Catalyst
Plant
PJSC Ufaorgsintez
Gas processing
JSC Otradnensky Gas
Processing Plant
JSC Neftegorsky Gas
Processing Plant
LLC Tuimazinskoye Gas
Processing Plant
LLC Shkapovskoe Gas
Processing Plant
LLC RN-Buzulukskoye Gas
Processing Plant
Germany
Rosneft Deutschland GmbH
PCK Raffinerie GmbH
Belarus
OJSC Mozyr Refinery
Ukraine
PRJSC LINIK
Kyrgyzstan
CJSC RN-Kyrgyznefteprodukt
Armenia
LLC Petrol Market
CJSC Rosneft-Armenia
Georgia
Petrocas Energy
International
Limited
PJSC Rosneft-Karachaevo-
Cherkessknefteprodukt
LLC RN-Ingushnefteprodukt
PJSC
Rosneft-Yamalnefteprodukt
LLC RN-Severo-Zapad
JSC Belgorodnefteprodukt
JSC Irkutsknefteprodukt
JSC Orelnefteprodukt
JSC Penzanefteprodukt
JSC Tomsknefteprodukt VNK
LLC RN-Volgograd
LLC RN-Aero
PJSC Tulanefteprodukt
JSC RN-Rostovnefteprodukt
LLC RN-Bunker
JSC Kaluganefteprodukt
JSC Ryazannefteprodukt
JSC Karelianefteprodukt
PJSC Saratovnefteprodukt
JSC RN-Yaroslavl
LLC RN-Chernozemye
JSC Uralsevergaz
Belarus
FLLC RN-Zapad
Mongolia
LLC Rosneft-Mongolia
LLC Mergevan
16
17
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 1
STRATEGY
ROSNEFT–2022
STRATEGY
CORE STRATEGIC PRIORITIES
ACHIEVEMENTS IN 2020
ENHANCING YIELD
and efficiency of existing Rosneft
assets
USD 2.8 per boe
leadership in upstream unit OPEX
RUB 22.6 bln
effect from operational efficiency
programmes in oil refining
and petrochemicals
ENSURING DELIVERY
high quality project management
2
greenfields came on stream1
23.7 mmt
production at key projects
innovations impact2
>RUB 40 bln
72
new technologies
implemented and rolled out
TRANSFORMING CULTURE
AND TECHNOLOGICAL
CAPABILITIES
to further sharpen
the competitive edge
Igor SECHIN,
Chief Executive Officer and Chairman of the Management Board
at Rosneft:
In spite of the challenges of 2020, we kept our principles unchanged
and achieved success across the key metrics of the Rosneft–2022
Strategy. The Company reaffirms its commitment to the reasonable use
of resources by combining robust production efficiency and adherence
to the sustainability principles.
A NUMBER OF STRATEGIC GOALS DELIVERED AHEAD
OF THE SCHEDULE
Share of horizontal wells
Lower well costs3
68%
2020 actual
40%
2022 target
15%
2020 actual
10%
2022 target
Faster horizontal drilling4
Longer well operation times between
repairs5
16%
2020 actual
5%
2022 target
13%
2020 actual
10%
2022 target
1 The Erginsky licence area and the Severo-Danilovskoye field.
2 The 2020 combined proven economic effect from the Target Innovative Projects implemented over the last three years.
3 Оn a comparable basis since the strategy launch.
4 Faster horizontal drilling using the in-house service in comparable conditions.
5 Since the strategy launch.
20
21
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
FOCUS ON SUSTAINABLE
DEVELOPMENT
Target
2020 result
Ensuring global leadership in accident-free operations, safe workplace
conditions, protecting health of local residents in the regions where
the Company operates, and minimising the environmental footprint.
RUB 42 bln
green investments
767 kt of СО2 eq
reduction in GHG emissions
14%
reduction in gross air pollutant
emissions
Strengthening environmental and social responsibility positions
1.5 mln trees
planted as part of forest
conservation
>70 mln
fingerlings
released into Russian rivers
to support reproduction
of aquatic biological
resources
Integrated approach
to sustainable development
Gas investment programme Energy saving programme
21
new APG utilisation facilities
0.4 mmtoe
energy savings within
the programme
Environmental efficiency
improvement programme
Marine biodiversity
conservation programme
94%
share of recycled and reused
water
RUB 119 mln
investments within
the programme
THE ROSNEFT–2022 STRATEGY FOCUSES ON ENSURING THE COMPANY'S LEADERSHIP
IN MINIMISING THE ENVIRONMENTAL FOOTPRINT AND PROMOTING ECO-FRIENDLY
PRODUCTION
PRESERVING THE ENVIRONMENT FOR FUTURE GENERATIONS IS AN INTEGRAL PART
OF OUR CORPORATE CULTURE
22
23
COMMITTED TO OUR CONSUMERS
AND ENVIRONMENT
Our eco-friendly solutions
Compressed natural gas
eco-friendly fuel with minimum exhaust gases
PULSAR branded gasoline
ensures clean fuel system
4 regions
sales
19%
sales growth
33 regions
sales
>1,100 filling
stations
Greener motor oils
RMLS (low-sulphur marine fuel)
complies with the latest MARPOL standards
reduce fuel consumption and make exhaust
gases less toxic
0.6 mmt
production
Efficiency and eco-friendliness
Use of renewable energy sources
EVs
Charging points
at filling stations in 6 regions
Euro-6 – greener fuel
1.3 mmt produced
Sold at 750 filling stations
CNG advantages
Euro-6 fuel advantages
S
NOx
CO
S
no sulphur
no benzene
-52%
-53%
less sulphur
less benzene
-24%
hydrocarbon
emissions
less engine
and catalytic
converter wear
less engine
deposits
less impurities
CARBON MANAGEMENT PLAN
FOR THE PERIOD UNTIL 2035
In pursuing its climate agenda, Rosneft focuses on protecting the environment in line with Russia’s
Energy Strategy to 2035 and the Paris Agreement goals.
In 2020, we approved the Carbon Management Plan for the period until 2035 underlying
our environmental agenda to contribute to low-carbon economy. It covers climate risk management
and seeks to unlock opportunities associated with future demand for energy.
The Carbon Management Plan also seeks to find potential ways of achieving carbon neutrality
by 2050.
2035 targets
Planned emission reduction initiatives
Reducing emissions
-20 mmt
of СО2 eq.
• Analysis, development and piloting of technology solutions
for carbon sequestration, production and use of blue hydrogen
at our refineries
• Further progress of our Energy Saving Programme ('continuous
improvement’)
Cutting the methane
emissions intensity
<0.25%
• Cutting-edge technologies for APG injection and utilisation
• Potential offered by underground storage facilities, depleted fields
and their infrastructure
• Rosneft is considering the use of renewable energy sources
in greenfield projects
СО2 upstream unit
emissions
-30%
• We intend to cut the methane emissions intensity by implementing
innovative technologies, including:
– drones
– laser and thermal imaging devices
– scanning technologies
– ultrasonic detectors
Routine flaring
of associated petroleum gas
0
Zero routine flaring of associated petroleum gas will be achieved
through further implementation and augmentation of the gas
investment programme
Natural absorption additionally lowering emissions
Biosequestration
Unlocking the biosequestration potential of Russia’s forests
and a massive reforestation and ecosystem preservation pro-
gramme will open up additional opportunities to offset green-
house gas emissions.
24
25
ROSNEFT / ANNUAL REPORT 2020 ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
FOCUS ON DIGITAL TRANSFORMATION
AND TECHNOLOGY
>RUB 40
bln
of effect from target innovative
projects implemented
over the last three years
127
technologies
tested in 2020
72
technologies
implemented and rolled out
in 2020
Target
2020 result
Upstream
Oil Refining and Petrochemicals
Downstream
Digital Plant
6 refineries
rolled out advanced
process management
systems
Rolling out
the standard solution
for optimised blending
of heavy petroleum
products at
5 refineries
24 digital twins
of process units designed and upgraded
at refineries
• Production process engineering models
are being introduced, a system for optimised
mixing of heavy petroleum products put into
operation
Global asset performance management system
to extend functional operation times between
repairs
The Meridium-based system to improve the effi-
ciency of process equipment performance man-
agement for comprehensive monitoring of critical
equipment began pilot operation
Digital Filling Station and Digital Supply Chain
programmes
~1,500 filling stations
connected to the remote fuel payment service
Automation and robotisation
+38 oil depots
automated measurements
• ~100% of material flows at filling stations
and ca. 90% oil depots covered with measuring
instruments
• We implemented a dedicated automation sys-
tem for retail filling stations
• We tested software robots designed to manage
inventories and procurement procedures
Digital Field, remote drilling and production
control centres, IIoT, Big Data
• Digital field management1
>17,000
surface infrastructure facilities digitalised
as part of digital field management
15%
reduction in in-shift oil
losses
36%
Reduction in logistics
costs
40%
reduction in costs
related to on-site
response interventions
into reservoir pressure
maintenance system
Enhancement of in-house technology capabilities
55 t per day
in a flow mode (or 6.8 t per day per
hydraulic fracturing stage) of the average
initial flow rate for MSHF horizontal wells
in the RN-Yuganskneftegaz's Bazhenov suite
>21,000
hydraulic fracturing operations
carried out using the RN-GRID hydraulic
fracturing simulator during strategy
implementation
• A low-permeability reservoir development tech-
nology involving the use of horizontal production
and injection wells and multi-stage hydraulic
fracturing was deployed
• A new software module, Decision Support
in Development of New Areas of Low-Permeable
Reservoirs, was added to the RN-KIN corporate
software package.
1 Based on the results of implementation at a pilot
Bashneft site
26
Advanced technology powering
sustainability initiatives
• We developed a technology for producing eco-
friendly drilling fluids from vegetable oils using
biodegradable components
• We successfully pilot tested a set of innovative
technologies and tools to identify and quantify
methane leaks
• The trials of a unique microbial agent based
on indigenous psychrophilic microorgan-
isms for eliminating hydrocarbon pollution
in the marine environment and cold climate
began
• To enhance industrial safety, we are imple-
menting a pilot computer vision platform,
which automatically detects people in haz-
ardous areas, checks whether they use per-
sonal protective equipment, and notifies of any
emergencies
• Pilot testing of an APG desulphurisation plant
using a microporous membrane technology
began
• The Company developed a commercial tech-
nology to manufacture dispersant compo-
sitions to be used in emergency oil clean-up
operations at sea
27
PROGRESS AGAINST STRATEGIC
OBJECTIVES
EXPLORATION AND PRODUCTION
Target
2020 result
100% liquid hydrocarbon reserve replacement ratio and organic growth
Increase the success rate
of onshore exploration drilling
in Russia
Optimise Russian onshore field
development (increase the share
of new horizontal wells)
Commission large-scale
projects on time and on budget
Exploration leadership
19
new fields1
208
new deposits
2 btoe
hydrocarbon reserves
discovered in 2020
15.2 mmt
production increase due to new
well start-ups
68%
share of horizontal wells
1.1 thousand
new horizontal wells drilled using
multi-stage hydraulic fracturing
techniques
Fast-track the development of new reserves based on viability
23.7 mmt
production at key projects
5%
an increase in production
at key projects
2
greenfields came on stream –
the Erginsky licence area
and the Severo-Danilovskoye
field
A stronger impact of base
production recovery measures
10.8 mmt
recovered base production
volume
6.5%
increase in base production
per well
More efficient service
Decrease non-productive time
Reduce well drilling time by 5%
on a comparable basis
Ensure a high share of in-house
services
<5%
maintaining a low proportion
of the non-productive drilling
time
Hydraulic fracturing fleets
expanded to 19 units
21
hydraulic fracturing fleets
13%
reduction of directional drilling
time
15.6%
reduction of horizontal drilling
time
59%
share of in-house services
in the Company’s total drilling
metreage
Due to production restrictions set by the OPEC+ deal and the sale of production assets, some quantitative strategic production targets
became outdated.
1 Including 17 onshore and 2 offshore fields
28
Improved performance
Optimise capex (by 10% for similar well design, by 10% for linear
objects)
Optimise opex (by -2–3% per
year on a comparable basis)
14.8%
reduction of production well construction costs on a comparable basis
since the strategy launch
2.8 USD/barrel
Maintaining leadership
in upstream unit OPEX
Engage in partnerships for capital intensive and high risk projects
• Equinor: a deal to jointly develop East Siberian fields
GAS
Commissioning projects on time and on budget
Implement major gas production projects, including Rospan
and Kharampur
• Rospan: construction of the first
start-up complex completed
(launch in Q1 2021)
• Kharampur:
– Construction
and installation over 40%
complete
– Fist stage of connecting
to Gazprom pipelines
completed
In the future
Monetise gas reserves within
Eastern Siberia and the Far
East
Efforts are ongoing
to provide access to local gas
transportation infrastructure
and find sales markets
Increasing technological edge
Increase APG utilisation, including through the development
of captive power generation and petrochemicals
>98%
APG utilisation
at Samotlorneftegaz
and Vankorneftegaz
21
new APG utilisation facilities
Develop Turonian deposits
Design and survey commenced to ensure the full-scale development
of the Turonian deposit
Develop liquid petroleum gas
(LPG) and natural gas liquids
(NGL) production
A positive opinion of the Main
Department of State Expert
Evaluation for all construction
stages of the Maisky gas
processing complex obtained
Procurement documents
drafted
29
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors OIL REFINING AND PETROCHEMICALS
Substantial profitability growth
Complete ongoing refinery
development projects in Russia
to substantially increase
profitability
Refinery development projects
in Russia continued
Most projects are in the active
stage: the bulk of equipment has
been purchased, construction
and installation are in progress
Increase efficiency and optimise opex (by 2–3% per year
on a comparable basis)
RUB 22.6 bln
effect from operational efficiency
programmes in oil refining
and petrochemicals
2.2%
decrease in opex
COMMERCE, LOGISTICS AND RETAIL
Commerce and logistics
Improve the cost efficiency
of sales and access to end
consumers (domestic/export
sales)
14%
increase in the sales of motor
oils for passenger cars thanks
to stronger retail sales
Retail
Expand and diversify distribution
channels (jet fuel, marine fuels,
and lubricants)
Adjust the product mix
to market trends by marketing
new products (bitumen, marine
fuels)
• Aircraft fuelling with jet fuel
started at 5 airports of Russia,
Europe and Asia
• Marine fuel sales started
at the St Petersburg
International Mercantile
Exchange
• 110% – Polymer modified
bitumen sales growth1
• 0.6 mmt of the new residual
marine low sulphur (RMLS 40)
fuel used in bunkering
Promote strong brands and service
excellence at filling stations
Expand non-fuel business
(introduce new categories of goods)
600+
filling stations fitted with equipment
for making hot dogs, sandwiches,
and hot beverages
• Expansion of non-fuel
services at filling stations
through the installation
of post lockers and carwash
robotics
Develop customer proposition at filling stations
(programme and use of fuel cards)
15.5 mln people
engaged through loyalty programme
1.7 mln holders
of virtual loyalty cards
1 mln
people hold fuel cards. Virtual fuel card
service up and running
9%
growth in sales of petroleum
products through the retail channel
since 2017
Rosneft is the No. 1
most recognised brand2
Improve performance
and optimise costs
2.5%
optimisation of expenses
on a comparable basis
1 Polymer modified PMB and PG.
2 Based on 2020 marketing research.
30
LONG-TERM DEVELOPMENT
PROGRAMME AND PROGRESS REPORT
The Programme envisages
a reserve replacement ratio
of at least 100%, efficient brown-
field operation and production
ramp-up driven by new projects
in Eastern Russia, development
of hard-to-recover reserves, gas
output growth secured by a long-
term high-performing sales port-
folio, and stronger margins across
the entire value chain.
In implementing the Programme,
we focus on cost effective-
ness and KPI targets for all key
initiatives.
Performance indicators include
an integrated KPI for innovations.
Rosneft’s Investment Programme
aims to help the Company
achieve its strategic objec-
tives stipulated in the Strategy
and the Programme (Investment
Programme in 2020 section) in key
business areas.
We completed the Programme's
key initiatives planned for core
businesses and functional units
for 2020. For the Programme out-
comes in 2020, see the Operating
results section.
Ernst & Young LLC, an independ-
ent auditor, has completed its
engagement and provided assur-
ance about Rosneft's Long-
Term Development Programme
Progress Report and achievement
of the key performance indicators
in 2020. The opinion was received
on April 20, 2021.
Originally developed in 20143,
the Long-Term Development
Programme (the Programme)
is subject to annual updates4.
In 2020, we revised
the Programme, taking into
account the Company’s perfor-
mance results and action plans
to achieve certain long-term
goals and updated initiatives
drafted pursuant to the Russian
Government directives5.
The updated Programme was
approved by the Company’s Board
of Directors (Minutes No. 14 dated
21 December 2020).
The Programme details
the Company’s strategic focus
areas, targets and goals for all
business areas and corporate
functions. It also includes
a list of key initiatives to achieve
the strategic goals and implement
the strategy in the medium term.
The main priorities, key per-
formance indicators (KPIs)
and actions plans under the cur-
rent Innovation Development
Programme, Import Substitution
and Equipment Localisation
Programme, and Energy Saving
Programme take into account
the Programme provisions
and are integrated into the cur-
rent version of the document.
3 In accordance with Instruction of the President of the Russian Federation Vladimir Putin No. Pr-3086 dated 27 December 2013; approved
by Rosneft's Board of Directors on 9 December 2014 (Minutes No. 12).
4 In accordance with the Russian Government Directive No. 4955p-P13 dated 17 July 2014 and the Long-Term Development Programme.
5 No. 4955p-P13 dated 17 July 2014, No. 7558p-P13 dated 12 November 2014, No. 1346p-P13 dated 5 March 2015, No. 2303p-P13 dated 16 April
2015, No. 7389p-P13 dated 31 October 2014, No. 1472p-P13 dated 3 April 2016, No. 4531p-P13 dated 28 June 2016, No. 4750p-P13 dated
4 July 2016, No. 830p-P13 dated 6 February 2017, No. 276p-P13 dated 17 January 2019, No. 6739p-P13 dated 30 July 2020.
31
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors KPI STRUCTURE
The Company’s KPI system seeks to decompose the Company’ Development Strategy and its
Long-Term Development Programme into specific KPIs, cascade them to all management levels,
evaluate progress against targets, and create incentives for efficient management decision-
making. A strong motivation tool for employees, KPIs ensure a step-by-step achievement
of the Company’s strategic goals.
Development Strategy
Long-Term Development Programme
Business plans
of Group Subsidiaries
• Collective KPIs of the Group
•
Subsidiaries
Individual KPIs of Group
Subsidiaries’ senior management
Business plans
of business units
• Collective KPIs of businesses
•
Individual KPIs of the Company's
top managers responsible
for the performance of businesses
Consolidated business
plan
• Corporate KPIs
•
Individual KPIs of the Chief
Executive Officer
Assessment of progress against KPIs
• corporate KPIs based
on the key financial, economic,
and industry-specific indicators
from the Company’s consoli-
dated business plan and busi-
ness plans of its business units;
• individual KPIs based on individ-
ual strategic goals for each top
executive.
• hydrocarbon production rate;
• accident rate;
• workforce productivity;
• TSR equal to or above
the Russian industry's average;
• cost reduction vs the previous
reporting period on a compara-
ble basis;
• financial leverage (net debt /
EBITDA);
KPIs and targets for the senior
management are set by Rosneft’s
Board of Directors on an annual
basis subject to preliminary dis-
cussion by the relevant committee.
• integrated KPI for innovations;
• compliance ratio
as regards instructions
from the Board of Directors
and the Management Board.
Based on the current business
plan, the 2020 KPIs for Rosneft’s
top managers were adopted
by the Board of Directors
on 16 March 2020 (Minutes No. 16).
Corporate KPIs and the individual
KPIs of the CEO for 2020 include:
• return on average capital
employed (ROACE);
The KPI system ensures:
• focus on implementing the strat-
egy and meeting the targets set
in the Long-Term Development
Programme;
• focus on consistently improv-
ing the Company’s financial
and operating (industry-specific)
results;
• compliance with directives
and instructions of federal exec-
utive bodies, including annual
cost-cutting targets;
• well-balanced integrated indi-
cators motivating employees
to achieve the Company’s main
goals;
• transparency, measurability, min-
imum sufficiency, and consist-
ency of KPIs;
• a top-down approach to cascad-
ing and breaking down KPIs.
With both financial and indus-
try-specific KPIs in place, the sys-
tem includes:
32
KPI PROGRESS
To calculate annual bonuses
for managers and employees,
the Company analyses progress
against KPIs following the review
of the annual performance based
on the management accounts
and audited public financial
statements.
The Company’s Internal Audit
Service annually assesses
the performance against cor-
porate and individual KPI
set for calculating annual
bonuses for the management
of the Company and Group
Subsidiaries. The audit results
for top managers are subject
to review by the Board of Directors’
HR and Remuneration Committee.
Top manager assessment
results are discussed by the HR
and Remuneration Committee
of the Board of Directors.
The Board of Directors makes
resolutions regarding annual
bonus payments and their size
depending on the management's
progress against KPIs.
Target KPIs are normalised
to reflect the factors beyond
the management’s control,
such as FX volatility and global
market prices in accordance
with the Regulations on the KPI
Normalisation Procedure Related
to Management Performance
Review and Assessment
in the Reporting Period
to Calculate Annual
Bonuses1 and the Guidelines
for KPI Normalisation Related
to Performance Review against
Business Plan2.
Actual KPI progress for the Company and Chief Executive Officer
in 2019–2020
KPI
2020
(actual)
Progress in 2020
Progress in 2019
Return on average capital
employed (ROACE), %
Financial leverage (net debt /
EBITDA)3
6.9
Above target
Above target
2.4
Above target
Above target
Injury rate, %
93
Above target
Above target
Integrated KPI for innovations4
ХХ
On target
On target
1 Approved by the Board of Directors (Minutes No. 27 dated 6 April 2015).
2 Approved by Order No. 730 dated 12 December 2019.
3 In RUB.
4 Based on the management accounts.
33
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INVESTMENT PROGRAM IN 2020
Rosneft 2020 investment program was approved as part of the 2020–2021 Business Plan
by the Board of Directors meeting held on the 19th of December, 2019 (Minutes No. 11 dated
December 23, 2019). The Board of Directors approved the updated 2020 investment program
June 29, 2019 (Minutes No. 2 dated June 29, 2020).
Actual CAPEX 2020 totalled
RUB 785 bln.
Given the current macroeconomic
environment, the Company took
a number of steps over the year
to optimise its investment port-
folio, maintain financial stability
and lay a strong foundation for its
strategic initiatives.
This resulted in a more than 20%
reduction of investments vs
the initial plan (ca. 8% year-on-
year), with investment efficiency
targets achieved.
We ranked our invest-
ment projects by return given
the Company strategic objectives.
The portfolio optimisation allowed
Capex, RUB trln
0.9
0.9
0.8
2018
2019
2020
>20 %
investment
optimisation in 2020
Investment programme split
~ RUB 0.8
trln
Upstream
Downstream
(Refining and marketing)
Other
90 %
7 %
3 %
us to postpone the least profitable
and long-term projects while car-
rying on with the pre-investment
study. With portfolio manage-
ment tools at our disposal, we can
promptly respond to market
changes and restore our invest-
ment activities in case the macro-
economic environment improves.
Our investment program seeks
to achieve key strategic goals,
including increase in profitability,
enhancing operational and invest-
ment efficiency, launching pro-
jects on time and on budget,
and minimising the environmental
footprint.
Over 96% of our investments
are concentrated in Russia,
with ca. 20% attributable
to projects in Eastern Siberia
and the Far East. In 2020,
Upstream accounted for ca. 90%
of our investments, including 4%
spent on gas projects, and 7%
for Downstream.
UPSTREAM
In 2020, Upstream capex totalled
RUB 706 bln. These investments
help us maintain and develop
mature and new oil and gas
assets to meet the strategic goals
related to production and reserve
replacement. In 2020, capital
investments in mature onshore
and offshore fields amounted
to ca. RUB 390 bln, or 50%
of the Company capex.
We use the industry best man-
agement practices to implement
our projects.
Capital investments in major
and new projects exceeded
RUB 275 bln, or 35% of the capex.
Launch of major and new E&P projects in 2009–2022
>22
~6
>23
~7
~5
Vankorskoye
Vostochno-
Messoyakhskoye
>5
>5
Zohr
(Egypt)
>5
Russkoye
Erginskoye
Rospan
~5
>2
Sakhalin-1
(Arkutun-Dagi)
Chupalsky
Lisence Area
Yurubcheno-
Tokhomskoye
Taas-Yuryakh
(Phase 2)
Severo-
Danilovskoye
Kharampur
>3
Sakhalin-1
(Odoptu)
>2
Severnoye
Chaivo
>4
~3
>4
Suzunskoye
Kondinskoye
Tagulskoye
>3
Kuyumbinskoye
>3
Vostochno-Salymsky
License Area
Severo-
Komsomolskoye
Lodochnoye
~35%
percentage
of investments in new
and major oil and gas
projects in Russia
in 2020
~16%
production
at new and major
fields in 2020
2
projects
Erginsky license
area and Severo-
Danilovskoye field
launched in 2020
2009–2015
2016–2019
2020
2021–2022
Area of circle corresponds to plateau production, the figures inside circle are shown: for oil projects – in million tonnes per annum; for gas projects –
in million tonnes of oil equivalent per annum. 100% of production
We retain leadership in terms
of exploration and produc-
tion unit capex, which amounted
to USD 5.5 per boe in 2020, while
also delivering on our hydrocarbon
production targets.
CAPEX in exploration and production per unit, USD/boe1
5.5
6.3
7.3
7.4
7.6
9.3
9.6
9.9
16.8
11.9
34
35
1 Compared to oil majors listed on Western stock exchanges.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors DOWNSTREAM
In 2020 Downstream capex
totalled RUB 53 bln.
Investments focused on complet-
ing highly cost-efficient projects
to construct and upgrade produc-
tion units and facilities at refineries,
construction and reconstruction
of oil depots and airport refueling
complexes, continued development
of catalysts and additives busi-
ness, and further implementation
of existing capacities maintenance
program.
We expect these projects to give
a boost to our refining margins,
light product yield and the out-
put of high-quality petroleum
products.
INVESTMENT PROCESS
Our investment process hinges on the following key principles:
Availability of all
required investment
decisions
1
6
2
7
3
4
5
Performance above
the minimum
threshold for each
project
Financing only in case
of an investment
decision
and funds allocated
in the business plan
Standardising
approaches
to project assessment
and documentation
Authority delegation
8
9
10
Comprehensive due
diligence
Project responsibility
Monitoring
and control
at all project stages,
including follow-up
monitoring
Compatibility
with project stages
Alignment
with related
processes
Our investment activities help
us ensure commitment to the fol-
lowing strategic priorities:
• sustainable business growth
driven by investments in com-
petitive and high value-added
projects and portfolio
optimisation;
• increasing efficiency across
all business streams through
an in-depth analysis of invest-
ment needs, efficient deci-
sion-making and project
implementation, monitoring
and control throughout the pro-
ject life cycle;
• strengthening investment dis-
cipline by ensuring better
project identification, classifi-
cation, thorough project analy-
sis and efficient decision-making
process reliant on delegation
of authority;
• honouring social responsibil-
ity principles regarding occupa-
tional safety and environmental
protection;
• focus on the UN Sustainable
Development Goals (SDGs)
to help achieve progress
in addressing global eco-
nomic, social and environmen-
tal challenges, including those
related to carbon management
(see carbon management plan
on page 25).
Rosneft investment govern-
ance process is integrated with all
related processes, including strate-
gic and business planning, budget-
ing, reporting and financial control,
project management and corporate
governance. It covers the following
areas:
Discipline and responsibility: busi-
ness projects are approved through
decision-making delegation
within the permitted limits as per
the investment mandate following
a regulated comprehensive project
analysis process.
Delegating: Investment Bodies and Limits of Authority
Limits of authority
Investment Bodies
>USD 1,500 mln
Board of Directors
USD 500–1,500 mln
Management Board
USD 200–500 mln
Investment Committee
USD 0–200 mln
Segment Subcommittees
Upstream
Downstream
Functional
Investment decision-mak-
ing: sound investment deci-
sions, shorter periods of approval
and review of investment memo-
randa, responsibility of investment
project owners and supervisors
for compliance with timelines,
budget, efficiency and perfor-
mance criteria;
Monitoring and control: regular
and thorough project monitoring
at all levels, change manage-
ment process; IT-based control
of investment decision availability
when assuming financial obli-
gations (the two-key principle)
at all stages of project planning
and implementation.
Portfolio analysis: com-
posing a balanced portfolio
of the Company's projects and flex-
ible management, relying on prin-
ciples of comprehensive project
ranking and optimisation based
on a list of criteria depending
on the Company’s development
strategy and priorities, use of tools
for portfolio scenario analysis.
IT tools: automating investment
project management, including
the support of investment deci-
sion making, economic analysis
and portfolio management.
Portfolio optimisation
criteria:
• economic efficiency;
• materiality;
• readiness for implementation;
• compliance with the strategy.
Portfolio Management
Strategic objectives and priorities
Ongoing projects
Investment initiatives
Individual project results
Overall portfolio results
Improvement recommendations
n
Proje c t
selectio
M
o
n
i
t
o
r
i
n
g
a
a
s
s
e
n
d
PROJECT
PORTFOLIO
s
s
p
m
e
erformance
nt
Inv e s t m e
O
p
ti
a
n
m
i
s
d r
a
n
a
t
i
k
o
i
n
n
g
g
n
i
k
a
m
n
n t d ecision-
a n d i m p le m entatio
Macroeconomics
and external environment
Resource and financing
constraints
Target efficiency
and profitability
Investment distribution
Project approval, cancellation,
completion
Value creation (NPV)
36
37
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors
2
OPERATING
RESULTS
2
I
G
N
T
A
R
E
P
O
40
s
t
l
u
s
e
r
ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
KEY OPERATING
AND FINANCIAL RESULTS
Proved Reserves of Liquid
Hydrocarbons, mmb
Proved Reserves of Natural Gas,
bcm
32,304
32,354
28,853
29,114
28,726
25,816
2,420
2,452
2,065
2,119
2,423
2,106
Hydrocarbon Reserve Replacement
Ratio, SEC, %
173%
129%
138%3
Key Operating Results
Metric
2020
2019
Δ
2018
Proved SEC reserves of liquid hydrocarbons,
mmt
Proved PRMS reserves of liquid hydrocarbons,
mmt
3,489
3,935
–11%
3,899
3,891
4,383
–11%
4,377
Proved SEC reserves of marketable gas, bcm
2,106
2,119
Proved PRMS reserves of marketable gas, bcm
2,423
2,452
PRMS hydrocarbon reserves-to-production ratio,
years
23
23
–1%
–1%
0%
2,065
2,420
23
Production of liquid hydrocarbons, mmt
204.5
230.2
–11%
230.2
Natural gas production, bcm
Oil exports, mmt
Oil refining, mmt
Petroleum product and petrochemicals output,
mmt
Petroleum product and petrochemicals export,
mmt
62.8
115.4
104.0
67.0
149.4
110.2
–6%
–23%
–6%
67.3
123.7
115.0
101.4
107.5
–6%
111.7
64.2
71
–9.6%
73.7
Key Financial Results
Metric
2020
2019
Δ
2018
Revenues and equity share in profits of associ-
ates and joint ventures, RUB bln
5,757
8,676
–34%
8,238
EBITDA1, RUB bln
EBITDA margin2
Taxes and customs duties, RUB trln
Net income, RUB bln
Net income margin
ROACE
ROAE
1,209
2,105
–43%
2,081
20.4%
24.0%
–3.6 p.p.
24.8%
2.4
181
3.7
802
–34%
–77%
3.1%
9.2%
–6.1 p.p.
4.0
649
7.9%
6.9%
15.7% –8.8 p.p.
17.4%
3.0%
14.3% –11.3 p.p.
12.3%
Capex, RUB bln
785.0
854.0
–8%
936.0
Unit capex in exploration and production, USD/
boe
Unit opex in production, USD/boe
Free cash flow, RUB bln
Dividend per share, RUB
5.5
2.8
425
6.1
3.1
–10%
–10%
6.8
3.1
941
–55%
1,133
6.94
33.41
–79%
25.91
Total accrued dividends, RUB bln
73.6
354.1
–79%
274.6
2018
2019
2020
2018
2019
2020
2018
2019
2020
Proved SEC reserves
Proved PRMS reserves
Proved SEC reserves
Proved PRMS reserves
Production of Liquid
Hydrocarbons, mmt
Natural gas production, bcm
Unit OPEX in hydrocarbon
production, RUB/boe
230.2
230.2
204.5
67.3
67.0
62.8
194
199
200
2018
2019
2020
2018
2019
2020
2018
2019
2020
In 2020, the Company produced
4.14 mmb of liquid hydrocarbons per
day (204.5 mmt), down 11.4% year-on-
year due to the OPEC+ deal that took
effect on 1 May 2020.
In 2020, gas production amounted
to 62.83 bcm, down 6.2% year-on-year.
The decrease is primarily attributed
to lower associated petroleum gas
production as a result of oil produc-
tion cuts in line with the new OPEC+
deal and a drop in gas demand amid
the COVID-19 pandemic.
The indicator remained flat
year-on-year.
OPEX of Russian Refineries per
Tonne of Refined Oil4, RUB
EBITDA and Net Income, RUB bln
Revenue, RUB bln
1,364
1,459
1,596
2,081
2,105
649
1,209
802
3,979
4,097
4,493
3,997
3,139
2,489
181
162
186
129
2018
2019
2020
2018
2019
2020
2018
2019
2020
EBITDA
Net profit
Oil and gas
Petroleum products and petro-
chemicals
Other and affiliates
Opex at our Russian refineries
for 12M 2020 were up 1.9% year-on-
year. Alongside this marginal growth,
unit opex went up by 10.0% due
to the need to optimise processing
volumes to fit the current demand
for petroleum products.
Apart from lower revenue, a year-on-
year decrease in EBITDA was driven
by a negative effect of the damper
mechanism, which is used as part
of the reverse excise tax. The latter was
partly offset by a 9.3% decline in gen-
eral and administrative expenses.
In 2020, our revenue decreased
by 33.6% year-on-year
to RUB 5,575 bln on the back of a drop
in global oil prices, cuts in oil produc-
tion and sales under the OPEC+ deal
and COVID-19-related decline in global
oil demand.
A year-on-year drop in net income
is related to EBITDA dynamics
and exchange rate fluctuations
1 Adjusted to pandemic-related expenses.
2 Adjusted to the effect of offsetting overpayments.
3 Across the relevant assets (after divestments)
4 Including petrochemistry expenses.
41
ROSNEFT’S EXPLORATION
AND RESERVE REPLACEMENT
In 2020, the Company
confirmed its leading
positions in resource base
and exploration efficiency.
13.3 bt
total oil and gas
condensate reserves
in Russia
24.9 bln
tonnes
offshore oil and gas
condensate resources
4.3 bln tonnes
onshore oil and gas
condensate resources
8.7 tcm
total gas reserves
in Russia
19.6 tcm
offshore gas
resources
152 bboe
(20.5 btoe) AB1C1+В2C2
hydrocarbon reserves
556 mmtoe1
replacement of AB1C1
hydrocarbon reserves
19 fields
and 208 new deposits
with total reserves over 2 btoe
discovered through successful
exploration
1,133 licences
in Russia (including
55 offshore licences)
Eastern Arctic shelf
Oil assets, crude oil, gas con-
densate and liquid hydrocarbons
production
Gas assets, gas production
Exploration assets
Shelf
Oil and gas provinces
AB1C1+B2C2 oil and gas con-
densate reserves by region ,
bln tonnes
AB1C1+B2C2 gas reserves
by region, tcm
0.0
0.0
1.8 tcm
onshore gas
resources
Western Arctic shelf
Russia’s shelf
0.4 / 2.0
Timan-Pechora
0.2 / 0.0
Kara Sea
Licence areas around
the Vankor field
Licence areas
in Taimyr
2141
%
hydrocarbon reserve replacement
ratio according to the Russian
resource classification system
Bashneft-Polyus
Payakh cluster
Suzunskoye
Messoyakha
Vankor
Tagulskoye
Russkoye
Rospan
Sibneftegaz
Kynsko-Chaselskaya group
Kharampur
Sorovskneft
Nyaganneftegaz
Purneftegaz
Yuganskneftegaz
Uvat
Megionneftegaz
Samotlor
Obneftegazgeologia
Tomskneft
Volga-Urals Region
1.6 / 0.2
Southern Russia
0.1 / 0.1
Priazovneft
Krasnodarneftegaz
Udmurtneft
Samaraneftegaz
Bashneft-Dobycha
Orenburgneft
Stavropolneftegaz
Dagneftegaz
Grozneftegaz
Caspian OC
Dagneft
Eastern Siberia and Far East
3.9 / 2.1
Far Eastern shelf
Licence areas in the
Irkutsk Region
Licence areas
in Yakutia
Srednebotuobinskoye
Verkhnechonskoye
Licence areas in the
Krasnoyarsk Territory
Kuyumba
Yurubcheno-Tokhomskoye
Bratskekogaz
Sakhalin-1
Sakhalin shelf
RN-Shelf Dalny Vostok
42
43
Western Siberia
7.2 / 4.2
1 Within the Company (excluding acquisitions/divestments).
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ONSHORE EXPLORATION IN RUSSIA
simulations are used to identify
optimum parameters for seismic
surveys during the design stage.
The Company completed projects
to model surveillance systems
in Eastern and Western Siberia,
the Republic of Bashkortostan
and the North Caucasus. The
Company has deployed advanced
seismic data processing and
interpretation technologies and
detailed velocity-depth modelling
in order to improve the exploration
drilling success rate. It also contin-
ued R&D in the integration of seis-
mic and non-seismic methods.
The Company’s top priorities are
unlocking the resource potential
and sustainable use of mineral
resources, exercising strict com-
pliance with environmental safety
standards, and an extensive appli-
cation of advanced technologies.
The Rosneft–2022 Strategy,
approved by the Company’s
Board of Directors, sets out the
key exploration targets: to ensure
100% reserve replacement of liq-
uid hydrocarbons and to increase
the exploration drilling success
rate to 95% by 2022 through the
use of advanced technologies and
innovative solutions.
The Company has developed and
is implementing a set of R&D pro-
jects. Finite difference wave field
Unique wireless seismic technology
In 2019–2020, we completed the development of the innovative seismic
acquisition system "Cheetah" and confirmed through test its geologic accu-
racy and productivity as well as the capability of working in hard-to-reach
areas. We assessed and ranked the Company’s assets for priority implemen-
tation of new technologies. The work is also underway to optimise seismic
surveying to address geological issues and reduce environmental impact.
KEY ONSHORE
ACHIEVEMENTS
IN RUSSIA:
477 mmtoe1
increase in АВ1С1
reserves through
exploration
194%
ratio of oil and gas
condensate reserve
replacement through
exploration
110
exploration wells
completed and tested
84.5%
success rate
of exploration drilling
17
new fields
and 208 new
deposits
with AB1C1+B2C2
reserves of
906 mmtoe
44
Oil and Gas Condensate Reserve
Replacement Ratio, SEC
200
150
173%
129%
138%4
2018
2019
2020
Breakdown of Proved Liquid
Hydrocarbon Reserves, mmt
INDEPENDENT
INTERNATIONAL AUDIT OF RESERVES
3,891
Under the SEC (U.S. Securities and
Exchange Commission) classifica-
tion, Rosneft’s proved hydrocarbon
reserves totalled 38,644 mmboe
(5,678 mmtoe) as at 31 December
2020. (5,221 mmtoe)2. The audit
to assess life-of-field reserves
was performed by DeGolyer &
MacNaughton.
In 2020, Rosneft’s SEC-proved
reserve life amounted to more
than 20 years. The SEC-proved
organic reserve replacement ratio
stood at 151%, while the replace-
ment ratio for existing assets was
138%3.
As at 31 December 2020,
the Company’s reserves
under the PRMS (Petroleum
Resources Management
System) standards, according to
DeGolyer & MacNaughton, totalled
43,484 mmboe (5,884 mmtoe) in
the 1P category, 83,761 mmboe
(11,308 mmtoe) in the 2P cat-
egory, and 126,216 mmboe
(17,028 mmtoe) in the 3P category.
2020 saw an increase of over
700 mmtoe in Rosneft’s PRMS 3P
reserves at existing assets (before
acquisitions/divestments) as a
result of successful exploration
and production drilling and the use
of advanced recovery enhance-
ment techniques to extract
hard-to-recover reserves, among
others. The highest increase in
reserves was registered at the
fields of RN-Yuganskneftegaz,
RN-Nyaganneftegaz,
Rospan International,
Verkhnechonskneftegaz, and
RN-Purneftegaz. The reserves
at Vostok Oil assets, includ-
ing Tagulskoye and Zapadno-
Erginskoye fields, also went up
significantly.
1 Within the Company (excluding acquisitions/divestments).
2 With acquisitions/divestments, including fuel gas.
3 Calculated in metric units across the relevant assets (including divestments).
4 Including divestments across the relevant assets.
Western Siberia
Volga-Urals
Eastern Siberia
Timan-Pechora
Southern Russia
Offshore
Foreign countries
2,828
606
381
29
23
18
6
Breakdown of Proved Reserves
of Marketable Gas, bcm
2,423
Western Siberia
Eastern Siberia
Foreign countries
Volga-Urals
Offshore
Southern Russia
Timan-Pechora
2,112
170
54
33
30
22
2
45
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RESERVE REPLACEMENT BY REGION
WESTERN SIBERIA
growth rate target for recov-
erable reserves. In the report-
ing period, significantly more oil
reserves were discovered than
extracted. In 2020, the increase in
RN-Uvatneftegaz’s АВ1С1 reserves
(12.5 mmt) exceeded produc-
tion (9.2 mmt) by 136%. The drill-
ing of Linveskaya well No. 324P
revealed three new deposits of the
Pikhtovoye field with 9,5 mmt of
potentially recoverable reserves.
The drilling of Vostochno-
Pikhtovaya well No. 324P revealed
a prospective field with two new
deposits and 3,5 mmt of poten-
tially recoverable reserves.
In 2020, RN-Purneftegaz
discovered ten new
deposits at the Yuzhno-
Tarasovskoye, Barsukovskoye,
Verkhnepurpeyskoye, and
Novopurpeyskoye fields with total
reserves of 5.7 mmtoe.
At RN-Vankor, a success-
ful exploration programme
aimed at growing Vostok Oil’s
resource base led to the dis-
covery of Novoognennoye field
containing more than 20 mmt
of oil and about 1 bcm of gas.
Oil was discovered in the Lower
Cretaceous deposits north of the
Messoyakhsky ridge, changing the
Company’s view of the possible
nature of the prospective targets’
saturation.
At its Western Siberian gas assets,
Rosneft’s reserve increases
in 2020 amounted to 7,2 mmt of
oil and condensate and 27.6 bcm
of gas.
The Company continued to study
the unconventional gas-saturated
reservoir of the Berezovskaya
suite in Western Siberia. In 2020,
Rosneft filed for a patent for its
Rosneft’s reserve growth in
Western Siberia amounted to
269.9 mmt of oil and gas conden-
sate and 65 bcm of gas. 33 explo-
ration wells were completed and
tested with a success rate of
88%. 3D seismic surveys totalled
2.1 thousand sq km. One field and
62 new deposits were discov-
ered with a total of 71 mmtoe in
АВ1С1+В2С2 reserves.
RN-Uvatneftegaz is consist-
ently implementing the strat-
egy to develop the Uvat project,
including by ensuring the annual
including five that have not been
previously recorded on the bal-
ance of Russia’s hydrocarbon
raw materials. The testing of well
No. 70 included the first use of
Jet Pump technology on a gas
field – previously it had been used
only for oil fields. The use of jet
pumps accelerates the develop-
ment of deposits with low per-
meability and porosity through
creating a stronger drawdown
within a shorter timeframe, clears
the bottom-hole zone from killing
fluid and drilling mud, as well as
closes the well at the bottom for a
faster transition to radial pressure
build-up unaffected by the well-
bore. The Company is looking into
ways to cascade the experience to
its other projects.
A new gas cluster will be created
based on the Minkhovskoye field.
method of localising hydrocarbon
reserves in siliceous upper cre-
taceous deposits. The invention
helps assess hydrocarbon reserves
in the sedimentary rocks’ siliceous
deposits through exploration.
The proposed method consists of
determining the zonation of silica
distribution in the Berezovskaya
suite and similar structures.
In 2020, Rosneft studied the per-
meability and porosity prop-
erties of reservoir rocks of the
Kharampurskoye field's Turonian
deposit using the new Digital
Core technology. The studies were
carried out by Schlumberger’s
Moscow-based laboratory and
involved experts from BP Plc.
Comparative analysis of the
results is underway.
As part of the Gydan Peninsula
study in 2020, the interpreta-
tion of 3D seismic surveys of the
Minkhovskiy licence area con-
firmed the field potential and ver-
ified the location of exploration
wells. In 2020, Rosneft drilled and
completed well No. 70, the first
exploration well of the Minkhovsky
licence area. Following extensive
Geological Information System
and MDT drilling, ten prospec-
tive fields are ready for testing,
Increase in reserves –
270 mmt
of oil and gas
condensate
and 65 bcm
of gas
33
exploration wells
completed and tested
with a success rate of
88%
1
new field
and 62
new deposits
with AB1C1+B2C2
reserves of
71 mmtoe
Performed
3D seismic surveys of
2.1 thousand
sq. km
46
47
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors EASTERN SIBERIA AND FAR EAST
VOLGA-URALS, TIMAN-PECHORA, AND SOUTHERN RUSSIA
The first well within the
Predpatomsk foredeep led to a
major discovery – the testing of
the Vendian terrigenous depos-
its in Nizhnedzherbinskaya well
No. 1 identified a new large gas
condensate field named after Ivan
Kulbertinov with reserves of more
than 75 bcm of gas and 1.4 mmt of
gas condensate.
Drilling of Danilovskaya well
No. 85 confirmed the industrial oil
and gas bearing potential of the
Ust-Kutsky horizon outside the
zone of the basement protrusions
for the first time, which will drive
further exploration in the Irkutsk
Region. The oil flow rate exceeded
500 cub m per day.
The drilling of Preobrazhenskaya
appraisal well No. 14 to the south-
east of the Lisovsky field within
the reefal buildups confirmed
the industrial oil and gas bearing
potential of the Early Cambrian
intersalt formation. The well once
again confirmed the extremely
high productivity of the Early
Cambrian reefal buildup of the
Osinsky horizon: the tests recorded
an oil flow of 362 cub m per day.
We continued to drill additional
sidetracks to increase the explo-
ration drilling success rate, further
study the target reservoirs, and
search for new prospects.
Increase in reserves –
56 mmt
of oil and gas
condensate
and 38 bcm
of gas
12
exploration wells
completed and tested
with a success rate of
92%
4
new fields
and 16
new deposits
with AB1C1+B2C2
reserves of
811 mmtoe
Performed
2D seismic surveys of
42 linear km
and 3D seismic
surveys of
634 sq. km
In 2020, total reserves growth
in Eastern Siberia and the Far
East was 56 mmt of oil and gas
condensate and 38 bcm of gas.
12 exploration wells were com-
pleted and tested with a success
rate of 92%. 2D seismic surveys of
42 linear km and 3D seismic sur-
veys of 634 thousand sq km. Four
fields and 16 new deposits discov-
ered with a total of 811 mmtoe of
АВ1С1+В2С2 reserves.
As part of the Vostok Oil pro-
ject, a unique Zapadno-Irkinskoye
field was discovered on the
Taimyr Peninsula, with more than
600 mmtoe of C1+C2 reserves.
The Srednebotuobinskoye field
had a successful exploration year:
a highly promising block identi-
fied with a new integrated seismic
and geological model was not only
confirmed by the drilling of explo-
ration well No. 117 but also turned
out to have a record oil-saturated
thickness of the Botuobinskoye
formation (16.6 m). Rosneft
plans to drill another explora-
tion well No. 118 and 38 produc-
tion wells at the new block. The
drilling of well No. 117Р helped to
identify new drilling prospects
at the field. Production drilling
has already confirmed oil depos-
its in other eastern blocks of the
Srednebotuobinskoye field. The
drilling revealed gas in the car-
bonate deposits of the Yuryakhsky
horizon, the prospects of which
were previously associated only
with deposits above the basement
protrusions.
48
In the Orenburg and Samara
regions, the Company continued
exploration of Domanic depos-
its for siliceous limestones. The
Company is now planning a pilot
development programme to
develop a conclusion on the com-
mercial potential of these deposits
in the licence areas in the Samara
Region. In 2020, Orenburgneft
began appraisal drilling in the
Kutuluk subsoil area in order to
assess the commercial pros-
pects of domanikoid strata within
the Orenburg Region. In 2020,
Samaraneftegaz's geologists per-
formed the search for missed
deposits and exploratory drilling,
discovering 29 new deposits and
two new fields with a 6.7 mmtoe
increase in recoverable AB1C1 +
B2C2 reserves.
In 2020, reserves in the Volga-
Urals Region, Timan-Pechora,
and Southern Russia increased
by a total of 61.9 mmt of oil and
gas condensate and 5 bcm of
gas. 65 wells were completed
and tested, with a success rate of
82%. 3D seismic surveys totalled
1.8 thousand sq. km, while 2D seis-
mic surveys totalled 0.9 thou-
sand linear km. Twelve fields and
130 new deposits were discov-
ered with a total of 24 mmtoe in
АВ1С1+В2С2 reserves.
Increase in reserves –
62 mmt
of oil and gas
condensate
and 5 bcm
of gas
65
exploration wells
completed and tested
with a success rate of
82%
12
new fields
and 130
new deposits
with AB1C1+B2C2
reserves of
24 mmtoe
Performed 2D seismic
surveys of
900 linear km
and 3D seismic
surveys of
1.8 sq km
49
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors continues comprehensive devel-
opment of the new oil and gas
province in the Krasnoyarsk
Territory’s north as part of the
Vostok Oil project. Investment
incentives for infrastructure facil-
itated the economic model’s effi-
ciency and allowed Rosneft to
begin project implementation.
INNOVATIVE TECHNOLOGIES FOR STABLE PRODUCTION
Key achievements in field development in 2020
The average flow rate per produc-
tion well increased to 12.0 t per day
(up 1.3% year-on-year), with a 1.7%
increase in the well stock.
The annual average flow rate
of new wells stood at 44.7 t per day
(flat year-on-year). Accordingly,
the Company retained its leader-
ship in the production drilling effi-
ciency among its Russian peers.
Horizontal wells accounted for 68%
of new wells commissioned in 2020
(up 11 p.p. year-on-year), while
the share of horizontal wells drilled
using multi-stage hydraulic fractur-
ing techniques (MSHF HW ) increased
from 34% to 44%.
The Company completed 1.4 thou-
sand sidetracking operations (up 13%
year-on-year), thus increasing crude
oil production by 4 mmt (up 19%
year-on-year).
The production per well attrib-
utable to base production recov-
ery was up 6.5% year-on-year,
from 1.16 kt to 1.23 kt per well.
In October 2020,
RN-Yuganskneftegaz set a new
record, performing 600 hydraulic
fracturing operations in one month.
The annual number of such opera-
tions is about five thousand.
PRODUCTION OF LIQUID
HYDROCARBONS
2020 PERFORMANCE HIGHLIGHTS
The key factor affecting the
Company's crude oil production
in 2020 was the government-or-
dered production cut as part of
the OPEC+ deal taking effect
in May 2020. As a result, the
2020 production of liquid hydro-
carbons amounted to 4.14 mmb
per day (204.5 mmt), down 11.4%
year-on-year. In August, the
restrictions eased, allowing the
Company to quickly increase pro-
duction and demonstrate a 1.9%
quarter-on-quarter growth, to
3.98 mmb per day (49.46 mmt).
Previous production cuts provided
Rosneft with invaluable techno-
logical expertise that allows it to
manage production quickly and
efficiently. The Company relies on
the following instruments: limiting
flow rates without well suspen-
sion, intermittent well operation,
and optimisation of well inter-
ventions at the existing wells.
The strategy facilitates flexi-
ble production management and
prompt increase in production, if
necessary.
Production drilling in 2020
amounted to 10.9 mm m, up
9.1% year-on-year. In line with
our strategic priorities, we con-
tinue to focus on accelerating the
construction of the most effi-
cient high-tech wells. 68% of the
2.6 thousand wells commissioned
in 2020 were horizontal, compared
to 57% a year earlier. The share
of horizontal wells drilled using
multi-stage hydraulic fracturing
techniques increased to 44% (up
10 p.p. year-on-year). The pro-
duction per horizontal well was
2.6 times higher than per direc-
tional well.
Despite external constraints, the
Company continues to develop
brownfields and maintain leader-
ship in the Russian oil industry in
terms of launching new high-mar-
gin projects. In 2020, Rosneft
launched two new major pro-
jects – the Erginsky licence area
and the Severo-Danilovskoye field.
In 2020, the Company's share in
the total production of hydro-
carbon liquids as part of new
major projects1 totalled 19.9 mmt
(403 kbpd), up 4.8% year-on-year.
In compliance with the Russian
President's instruction to
increase the cargo flow along the
Northern Sea Route, the Company
1 Launched since 2016 (including the Erginsky licence area and Severo-Danilovskoye field).
50
51
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COMMISSIONING OF NEW
WELLS
Rosneft is focused on high-tech
wells: 68% out of the 2.6 thou-
sand wells commissioned in 2020
were horizontal vs 57% in 2019.
1.1 thousand new MSHF HWs
were commissioned, with their
share reaching 44%. Advanced
planning, drilling, and develop-
ment technologies facilitated
new wells’ average annual flow
rate of 44.7t per day, flat year-on-
year, and 15.2 mmt of incremental
production.
In 2020, RN-Yuganskneftegaz
commissioned 854 new wells pro-
ducing over 4.7 mmt and reached
the eight-years maximum aver-
age annual flow rate of new wells
(48.9 t per day, up 25% year-on-
year). These results were attrib-
utable to innovative technologies
and streamlined development sys-
tems. For example, the percentage
of horizontal wells in produc-
tion drilling increased from 38%
in 2019 to 48% in 2020. In 2020,
the Group Subsidiary continued
to pilot horizontal drilling and
completion technologies, commis-
sioned 59 wells with MSHF and a
horizontal section of over 1,200 m.
The Priobskoye field successfully
tested the Perf & Plug technology
using Russian-made equipment.
Rolling out this technology will
increase the number of hydrau-
lic fracturing stages in horizon-
tal wells, ensure the possibility of
refracturing, and reduce the well
development costs in case of mass
implementation.
In 2020, Samotlorneftegaz com-
missioned 406 new wells, the
highest number over the past five
years, (up 10% year on year), which
resulted in 1.2 mmt of incremen-
tal production (up 5.5% year-on-
year). The Group Subsidiary makes
consistent efforts to pinpoint hid-
den deposits at the Samotlor field,
including through the implemen-
tation of its appraisal sidetracking
and well deepening programme.
Due to these efforts, 16 wells in
YuV1 formation with an average
initial oil flow rate of 81.3 t per day
and eight wells in BV8(1–3) for-
mation with an average initial oil
flow rate of 145 t per day were
commissioned. The average ini-
tial oil flow rate for the field’s new
wells stood at 39 t per day.
In 2020, Verkhnechonskneftegaz,
operator of Severo-Danilovskoye
oil and gas condensate field,
started its drilling, which will con-
sist solely of horizontal wells. The
optimisation of well construction
cycle in 2020 allowed the Group
Subsidiary to commission 14 new
wells with an incremental oil pro-
duction of 191 kt.
RN-Uvatneftegaz continued
extensive drilling across the Uvat
group of fields. To streamline the
development of hard-to-recover
reserves, the Group Subsidiary
increased the percentage of mul-
ti-stage hydraulic fracturing hori-
zontal wells in the total number
of new horizontal wells from 51%
in 2019 to 73% in 2020. The use
of advanced technologies cou-
pled with the accelerated commis-
sioning of new wells on the back
of the migration of operations
to the structurally complicated
fields of the Uvat group Central
Development Centre, facilitated
In 2020, Rosneft
commissioned
2.6 thousand
new wells,
68%
of which were
horizontal
a 5% increase in incremental oil
production from wells commis-
sioned in 2019.
In 2020, Orenburgneft expanded
its horizontal drilling programme
and commissioned 15 horizon-
tal wells (up +36% year-on-year),
including six wells with mul-
ti-stage acid and proppant frac-
turing. The share of new horizontal
wells reached 19 %. These tech-
nologies make such wells highly
productive, with horizontal wells
having an initial flow rate of 69.8 t
per day, which is almost 1.5 times
higher than the average for the
Group Subsidiary’s new produc-
tion wells drilled in 2020 (47.7 t per
day).
Samaraneftegaz also increased
its horizontal drilling operations
in 2020. The Group Subsidiary
commissioned eleven horizon-
tal wells (up 83% year-on-year),
including six with multi-stage
acid fracturing and one with mul-
ti-stage proppant fracturing. The
share of horizontal wells more
than doubled year-on-year, reach-
ing 14%, while the initial flow rate
of horizontal wells in 2020 was a
quarter higher than the average
for all of the facility’s new produc-
tion wells (67 t and 49,5 t per day,
respectively; up 26%).
In 2020, Bashneft-Dobycha set
a new production drilling record
and commissioned 153 new wells
(up 34% year-on-year) with plans
underway to increase the annual
commissioning rate going for-
ward. Maintaining the focus on
high-tech, the Group Subsidiary
increased the share of horizontal
wells by 12% year-on-year, to 86%.
One of the key contributors to the
production drilling programme and
the share of horizontal wells in
particular is the implementation of
high-tech acid-proppant MSHF in
carbonate Kashira-Podolsk depos-
its. MSHF HWs account for more
than 70% of the new wells com-
missioning programme (up +22%
year-on-year). The MSHF burst
port system with cup packers
allowed for expanding the range
of initiatives aimed at minimising
the post-commissioning flow rate
decline.
52
53
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MULTILATERAL WELLS
Multilateral wells are applied to
improve the recovery and reservoir
penetration quality for projects
with high geological complexity.
This method of pay zone penetra-
tion was successfully piloted and
implemented at the Company’s
fields with 116 multilateral wells
commissioned in 2020.
At the Vankor cluster’s
Tagulskoye field, 27 fishbone mul-
tilateral wells were commissioned
in 2020, marking a new high for
the field and a 12-well increase
from the previous record set in
2018–2019.
Tyumenneftegaz continued suc-
cessful use of multilateral wells
at the Russkoye field to increase
well productivity and scope of
reserves. The Group Subsidiary
commissioned 14 wells with one
and two sidetracks. The aver-
age increase in the initial flow rate
was +56% compared to horizontal
wells drilled in similar conditions.
At the Srednebotuobinskoye field,
Taas-Yuryakh Neftegazodobycha
commissioned the longest mul-
tilateral well having 15 horizon-
tal sidetracks with a total drilling
length exceeding 10,000 m across
a pay zone. The well’s initial flow
rate stood at 402 t per day, 220%
above the average rate of the
Subsidiary's multilateral and hori-
zontal wells in 2020. Incremental
oil production amounted to
122.7 kt, accounting for 15% of the
total for all of the facility’s new
wells in 2020. The technology is
being successfully rolled out, with
36 multilateral wells commis-
sioned at the field in 2020, which
is a record high and nine wells
above the level of 2019.
Orenburgneft drilled and com-
missioned its first-ever horizon-
tal multilateral fishbone well (in
the carbonate formation of the
Pronkinskoye field), with a main
wellbore of 811 m and the total
length of four sidetracks reaching
1,198 m. The initial flow rate of the
new high-tech well stood at 66 t
per day, several times higher than
the rate of the Group Subsidiary’s
traditional directional wells.
To increase exposure to depos-
its within the pay zone and
enhance the oil recovery rate, East
Siberian Oil and Gas Company
(Vostsibneftegaz) commissioned
another high-tech multilateral
fishbone well, with an initial flow
rate of 281.5 t per day or more
than double the target average
rate of new wells commissioned
in 2020 (126.5 t per day). The well
consisting of main wellbore and
three sidetracks is 2,200 m long.
SevKomNeftegaz, a joint pro-
ject with Norway's Equinor,
launched pilot drilling of multi-
lateral wells. The first fishbone
multilateral well (main bore and
three additional sidetracks) was
successfully drilled and commis-
sioned in the PK1 formation at the
Severo-Komsomolskoye field. The
Company plans to use such wells
to improve the efficiency of devel-
oping thin under-gas-cap zones.
INFILL DRILLING
Along with drilling in new areas,
the Company conducts infill drill-
ing to augment production by
transforming and expanding the
development system.
In 2020, RN-Yuganskneftegaz
expanded its infill drill-
ing programme at the
Priobskoye, Prirazlomnoye and
Malobalykskoye fields. The pro-
gramme included commissioning
of 137 new wells (up 78% year-
on-year), including 48 MSHF HWs
(five ports per well on average).
Going forward, the company
intends to roll out the programme
to its other fields, with the infill
drilling growing at 27% above the
approved targets over five years.
To maintain production and
improve the quality of reserves
recovery at the Samotlor field,
Samotlorneftegaz continues its
infill drilling programme. 261 infill
wells were commissioned in 2020
(64% of all wells commissioned at
the field). In addition, horizontal
wells with MSHF are constructed.
The Vankor field has been suc-
cessfully implementing its infill
drilling programme. As at the end
of 2020, the incremental pro-
duction attributable to the com-
missioning of 52 new infill wells
totalled 798 kt. In harsh geological
conditions, advanced drilling and
horizontal well completion tech-
nologies ensured an average flow
rate of 99 t per day, which is almost
three times higher than the average
well flow rate across the Company.
SIDETRACKING
In order to increase production and
achieve target recovery factor the
Company carries out sidetrack-
ing operations in existing wells.
In 2020, such operations covered
1.4 thousand wells, up 13% year-
on-year, resulting in an incremen-
tal production of around 4 mmt of
crude oil (up 19% year-on-year).
Modern approaches and side-
tracking technologies allow not
only recommissioning of wells
that used to be in critical condi-
tion but also improved production
at mature fields, including those
with a long development his-
tory. Horizontal sidetracks enable
extraction from formation inter-
vals that have not been reached
by previously drilled directional
wells.
Improving the design of sidetracks
by increasing the share of horizon-
tal drilling to 74% vs 71% in 2019
helped to bring the average well
flow rate after well workover by
sidetracking up from 18.4 t per day
in 2019 to 19.5 t per day in 2020.
At RN-Yuganskneftegaz’s fields
398 sidetracking operations
were carried out in 2020, includ-
ing 337 sidetracks with horizontal
completion (up +13% year-on-
year). The active application of
horizontal sidetracks at mature
fields, for example in Cretaceous
54
55
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors formations of the Mamontovskoye
and Ust-Balykskoye fields, results
in high initial oil flow rates of up to
450 t per day, though these fields
have a more than fifty-year his-
tory of development. Due to the
use of new technologies, the aver-
age annual well flow rate totalled
22.8 t per day, compared to the
Company’s average of 19.5 t per
day. The appraisal sidetracking
programme included the drill-
ing of 33 wells reaching new, cur-
rently undeveloped Achimov and
Jurassic deposits. The highest ini-
tial oil flow rates (up to 244 t per
day) were recorded in the Achimov
formation of the Kudrinskoye field.
In 2020, Samotlorneftegaz com-
missioned 513 wells following a
workover by sidetracking, a record
number for the whole Company.
It is also a five-year high for the
subsidiary, up 21% year-on-year.
The drilling was focused on tight
AV4–5 and BV8(1–3) formations
with a short construction time and
high initial flow rates (44.9 t per
day, compared to the Subsidiary’s
average of 34.4 t per day). These
measures resulted in an additional
crude oil production of 844.9 kt,
up 9.4% year-on-year.
In 2020, RN-Vankor reached
an all-time high of incremental
production from sidetracking –
0.55 mmt of oil (up 71% to the
previous record set in 2018). The
result was solely due to the use of
combination string drilling tech-
nology, which widens the range
of permissible bottom-hole pres-
sure, providing greater flexibility
in managing the well operations
and extending its life. In 2020, the
technology was used to complete
the construction of eight wells
(out of 50 wells in operation),
which accounted for 28% of all
incremental production from the
annual sidetracking programme.
The company also continues well
reconstruction by multilateral
sidetracking. Six wells of the kind
were commissioned in 2020 (up
56
from three in 2019), with the aver-
age initial flow rate reaching 129 t
per day (up 14% year-on-year).
In 2020, Taas-Yuryakh
Neftegazodobycha launched its
sidetracking programme partially
aimed at resuming operations
at previously drilled and aban-
doned horizontal wells by turn-
ing them into multilateral. At the
Srednebotuobinskoye field, the
first two wells were commissioned
following the drilling of several
sidetracks.
To increase well productiv-
ity and better develop pre-
viously undrained reserves,
Samaraneftegaz has been
actively engaging small-scale
downhole pumping equipment in
sidetracking since 2016. In 2020,
such equipment was used in more
than 75% of cases, ensuring the
maximum average increase over
the past five years at 28.1 t per
day.
In 2020, Bashneft-Dobycha
performed a record number of
sidetracking operations, com-
missioning 126 wells and achiev-
ing an incremental oil production
of 223.5 kt, more than double
the 2019 level (53 operations,
112.5 kt).
In order to increase production
and achieve the target oil recov-
ery factor, RN-Uvatneftegaz
more than doubled the number of
sidetracking operations, resulting
in 131.5 kt of incremental oil pro-
duction, three times higher than
in 2019.
WELL INTERVENTIONS FOR
INCREMENTAL AND RECOVERED
PRODUCTION
In line with its approved Strategy,
the Company keeps improving the
efficiency of its well interventions.
In 2020, the Company performed
4,473 well interventions for incre-
mental oil production (excluding
production drilling and sidetrack-
ing). The well interventions trans-
lated into 5.1 mmt of incremental
oil and gas condensate production.
well interventions increased pri-
marily due to higher efficiency of
bottom-hole zone treatment and
well optimisation. In 2020, Rosneft
performed 3,743 bottom-hole zone
treatment operations with a total
production recovery of 3.3 mmt
(up 3% year-on-year), and 3,212 well
optimisations with a total produc-
tion recovery of 5.5 mmt.
MONITORING AND MANAGING
WELL OPERATIONS IN HARSH
GEOLOGICAL CONDITIONS
In 2019, Taas-Yuryakh
Neftegazodobycha successfully
piloted inflow control devices in
horizontal and multilateral wells
at the Srednebotuobinskoye field.
2020 saw gas-oil ratio stabilisation
without restricting well operations,
and higher crude oil production. For
horizontal wells, GOR decreased
four times and the flow rate dou-
bled, while for multilateral wells,
GOR reduced six times. Following
the pilot operations, the company
intends to roll out the technology
to 41 wells of the field.
Over 8.8 thousand well interven-
tions were performed in 2020,
resulting in a recovered production
of 10.8 mmt. The production per
well attributable to base produc-
tion recovery was up 6.5% year-on-
year, from 1.16 kt to 1.23 kt per well.
Production per well following
To minimise the risks of early
gas blowout from the gas cap or
underlying water and to be able to
restrict and control the flow of gas
with a coupling, the Company uses
inflow control devices to restrict
fluid inflow into certain horizontal
well sections.
In 2020, the Group Subsidiary
continued to use autonomous
inflow control devices and com-
pletion systems with shifta-
ble sleeves in horizontal wells
of SevKomNeftegaz as part of
pilot development of
57
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PK1 formation at the Severo-
Komsomolskoye field. The pilot
development also involved the
commissioning of 50 wells, includ-
ing 42 with inflow control devices.
In 2020, Tyumenneftegaz also
piloted the technology at five wells.
According to preliminary modelling,
levelling inflow profile will increase
cumulative oil production by up to
25%. The company plans to start
full-scale implementation of this
technology in 2022–2024.
In 2020, the Group Subsidiary
introduced marker diagnostics to
monitor inflow profiles at three
wells of the Vankor field. This
technology allows monitoring of
the flow profiles in horizontal and
multilateral wells without sus-
pending production and downhole
operations. If successful, the tests
will provide information on the
underground well operations for
a timely and targeted response to
any complications.
At Vostsibneftegaz’s
Yurubcheno-Tokhomskoye field,
seismic and geological analy-
sis and detailed interpretation of
geotechnical survey at the design
stages, geological support of drill-
ing and well completion helped to
identify potential gas and bottom
water inflow intervals. Following
the tests, the company piloted
the use of segmented liners to
preventively seal the intervals of
potential inflow of unwanted fluids
with swellable packers. Rosneft
intends to apply this experience at
Slavneft-Krasnoyarskneftegaz's
Kuyumbinskoye field.
DRILLING GEOLOGICAL SUP-
PORT CENTRE
In 2020, Rosneft's drilling geolog-
ical support centre supervised the
drilling of 3,018 horizontal wells
and sidetracks, the highest
number since the centre was
launched in 2008. Over the past
five years, the centre’s operations
have tripled. The high perfor-
mance was achieved due to new
technologies and improved meth-
odology, better corporate IT solu-
tions, and training initiatives for
the centre’s employees (corporate
geo-steering school, annual work-
shop on geological support and
geomechanics).
The centre’s staff demonstrated
their qualifications at the Russian
and international geosteering
championships, requiring the par-
ticipants to simulate a drill of hori-
zontal wells with different difficulty
levels and penetrate an oil res-
ervoir as far as possible. Rosneft
won the team classification of the
Russian championship, beating the
teams of four other major compa-
nies. At the World Championship,
a Rosneft employee took the first
place from among more than
250 participants from 60 compa-
nies and 20 countries.
In 2020, the Company contin-
ued to develop geological support
activities. Geosteering, log data
interpretation, and geomechanical
modelling are now combined with
seismic and geological support for
drilling complex wells.
DEVELOPMENT OF IN-HOUSE
WELL LOGGING SERVICE
In 2020, Bashneft-Petrotest
engaged its specialists in high-
tech well logging at Bashneft-
Dobycha sites, continued to
perform downhole logging and
blasting and perforating opera-
tions in Bashkortostan and the
Krasnodar Territory, and supported
the piloting of new logging tech-
nologies at Varyeganneftegaz,
Samotlorneftegaz, Orenburgneft,
Bashneft-Dobycha, etc. It also ini-
tiated a new line of business
for Bashneft-Petrotest – petro-
physical support of drilling
at RN-Yuganskneftegaz and
Rospan International sites.
In 2020, Rosneft and Rosatom
signed an agreement to cooper-
ate in improving the processing
and interpretation of data from
AINK-PL equipment. The agree-
ment will perfect the method-
ology for open and closed wells
and to test the AINK-PL equip-
ment to check its performance in
various geological and technical
conditions.
ENHANCING CORPORATE
SOFTWARE
The Company is expanding the
range of its proprietary application
software related to geology
out across the Group. In 2020,
over 400 efficiency improvement
projects were approved, with more
than 650 projects green-lighted
since the OEIS launch in 2018. The
economic effect from the imple-
mentation and roll-out of these
projects stood at about RUB 20
bln in 2020 and approximates
RUB 35 bln since launching the
system.
and field development. In 2020,
Rosneft finalised and success-
fully tested the first version of its
RN-Geosim simulator designed for
geological modelling and analy-
sis of hydrocarbon deposits using
three-dimensional geological
models. The Company continues
the development of RN-PetroLog
well logging interpretation soft-
ware suite with modules which
can be used to upload, store and
visualise logging data in the pro-
ject tree, harmonise petrophysical
project data for further multi-well
processing, edit data interactively
in graphical mode, and see statis-
tics of a petrophysical project.
RN-KIM hydrodynamic simula-
tor and RN-KIN information sys-
tem for mining data analysis and
development monitoring were
further upgraded. At the end of
2020, 85% of models were created
using the corporate hydrodynamic
simulator.
OPERATIONAL EFFICIENCY
IMPROVEMENT SYSTEM
The Company has put in place
a comprehensive Operational
Efficiency Improvement System
(OEIS) intended to identify and
implement the most promising
efficiency initiatives at Rosneft
subsidiaries with potential to sig-
nificantly improve production pro-
cesses across the Group while also
cutting the budgeted costs. Each
efficiency improvement project
goes through a rigorous selection
process that includes technical
and economic studies. If success-
fully implemented, it is then rolled
58
59
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RUB 460 bln starting 1 January
2021 will serve as a source of addi-
tional investments in developing
oil production in the area and will
ensure incremental production of
more than 70 mmt in 2021–2030.
RN-Yuganskneftegaz
69 mmtoe
of hydrocarbons
produced in 2020
In 2021–2030,
the tax deduction
for the Priobsky
license area
is expected to help
achieve an incremental
production of
70+ mmt
SAMOTLORNEFTEGAZ
Over 98% of Samotlorneftegaz’s
proved reserves are concen-
trated within the Samotlor field,
one of the largest in the world.
Commercial production at the
Samotlor field began in 1969 and
peaked at over 150 mmtpa in the
1980s.
In 2020, the company produced
23 mmtoe of hydrocarbons,
including over 18 mmt of liquid
hydrocarbons.
(excluding drilling) increased to
0.67 kt per well (up 7.1% year-on-
year), mainly due to more efficient
transitions and reaching other
formations.
Samotlorneftegaz
23 mmtoe
of hydrocarbons
produced in 2020
The Samotlor field relies on gov-
ernment support to continue drill-
ing new wells and performing well
interventions. Incremental pro-
duction of oil and gas condensate
at Samotlorneftegaz achieved
through the drilling of new wells
grew to 1.2 mmt (up 5.5% year-on-
year), while the number of com-
missioned wells reached 406.
Production from well interventions
RN-UVATNEFTEGAZ
The bulk of proved reserves
(ca. 70%) at RN-Uvatneftegaz
are concentrated in the Ust-
Tegusskoye, Zapadno-Epasskoye,
Urnenskoye, Severo-Tyamkinskoye,
Severo-Tamarginskoye and
Protozanovskoye fields, which are
being developed as part of the
Eastern Development Centre.
OVERVIEW OF PRODUCTION
IN REGIONS OF OPERATION
WESTERN SIBERIA
RN-YUGANSKNEFTEGAZ
RN-Yuganskneftegaz is the
Company’s largest asset. The
bulk of proved reserves (80%) are
concentrated in the Priobskoye,
Prirazlomnoye, Mamontovskoye
and Malobalykskoye fields.
Taking into consideration the
production restrictions set by
the new OPEC+ agreement,
RN-Yuganskneftegaz pro-
duced 69 mmtoe, including
65 mmt of liquid hydrocarbons.
RN-Yuganskneftegaz ensures sta-
ble production both by drilling new
wells and performing well inter-
ventions for incremental oil pro-
duction and by maintaining and
recovering its basic production.
Western Siberia is Rosneft’s key
hydrocarbon-producing region
accounting for 161 mmtoe of
hydrocarbons or 63% of the
Company's production. In 2020,
the liquid hydrocarbon pro-
duction exceeded 125 mmt.
The Company’s key producing
assets in Western Siberia include
RN-Yuganskneftegaz (27% of
Rosneft's total hydrocarbon pro-
duction), Samotlorneftegaz (9%),
and RN-Uvatneftegaz (4%).
To enhance oil recovery at its
fields in Western Siberia, the
Company monitors and stream-
lines its existing development
systems by switching from con-
ventional directional wells to
MSHF HWs. This technology sig-
nificantly boosts the well pro-
ductivity rate and the scope of
reserves under development, while
also reducing the well stock and
enhancing the project economics.
The Company massively leverages
MSHF HWs at its mature assets in
Western Siberia.
New projects are also underway,
with the Erginsky cluster and the
Russkoye field standing out as the
largest plays.
In August 2020,
RN-Yuganskneftegaz set a new
record in commercial drilling of
two-string horizontal wells –
15,700 m per rig, up by 47% com-
pared to 2015.
In October 2020, the company
set a new industry record in daily
drilling – 27,542 m, which is 414 m
per day higher than the previ-
ous record dated July 2017. The
new milestone was achieved with
fewer rigs and a 6% increase in
efficiency. The company is com-
mitted to minimising downtime –
24/7 monitoring and control of the
construction of each well reduce
downtime to zero and ensure a
high level of safety.
Western Siberia is the larg-
est gas-producing region, with
44 bcm extracted in 2020.
The initial flow rate of newly com-
missioned wells reached 89.6 t per
day (up 18.8% year-on-year), while
the average flow rate increased
by 25.5% year-on-year, reaching
48.9 t per day.
In October 2020,
RN-Yuganskneftegaz performed
a record 600 hydraulic fractur-
ing operations. The annual num-
ber of such operations is about
five thousand. To expand the pay
zone coverage, the company uses
up to 20 stages of MSHF, includ-
ing in the horizontal sections of
wells. Hydraulic fracturing allows
the company to reach and effec-
tively produce the reserves from
ultralow-permeability reservoirs.
The operations are fully designed
in RN-GRID, the first Russian
hydraulic fracturing simulator.
The use of proprietary simulator
put an end to Rosneft’s reliance
on foreign software for for hydrau-
lic fracturing modelling.
The efficiency of well interven-
tions for recovered production
increased by 20%, from 1.23 kt
to 1.48 kt per well, mainly due to
optimised production and clearing
of the bottom-hole zone.
In accordance with Federal
Law No. 340-FZ on Introducing
Incentives for the Priobsky licence
area dated 15 October 2020, on
28 January 2021 the Company
entered into an investment agree-
ment with the Ministry of Finance
of the Russian Federation and
the Ministry of Natural Resources
and Environment of the Russian
Federation to stimulate oil produc-
tion in the Priobsky licence area.
MET tax deduction for the Priobsky
licence area in the amount of
60
61
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 42 new production wells were
drilled (up 66% vs 2019), with
incremental production expand-
ing to 165 kt (up 60% vs 2019). The
share of horizontal wells drilled
using multi-stage hydraulic frac-
turing techniques (MSHF HWs)
rose from 53% in 2019 to 69%.
The efficiency of well interventions
(excluding drilling) was up 60%
at 1.4 kt per well, mainly thanks to
recompletions, commingling and
recommissioning.
The average daily flow rate of
existing wells increased by 3.2%
vs 2019 to 7.9 t per well as void-
age replacement grew by 3–4%
year-on-year.
RN-Purneftegaz
6+ mmtoe
of hydrocarbons
produced in 2020
In 2020, RN-Uvatneftegaz pro-
duced 9.4 mmtoe of hydrocarbons,
including 9.2 mmt of liquid hydro-
carbons. It commissioned 83 new
wells (up 5% year-on-year), result-
ing in 1.04 mmt of incremental pro-
duction (up 48 kt vs 2019). It also
launched 2.6 times as many wells
after sidetracking operations, with
incremental production rising to
4,240 t per well, or 3.5x vs 2019.
RN-Uvatneftegaz is introducing
new technology aimed at boost-
ing production, gaining access to
commercially recoverable reserves
and cutting unit costs. In terms
of reducing operating costs, the
company successfully completed
hydraulic fracturing tests in injec-
tion wells using the silica sand-en-
abled Salik service based on the
HiWAY technique, which pro-
vides cost savings of 5–10%, or
RUB 0.5 mln (net of VAT) per injec-
tion well on average, by reducing
proppant, logistics and chemicals
expenses. It also reduces the time
needed to complete the job by
accelerating the water and prop-
pant filling. Such treatment does
not impair well injectivity com-
pared to the conventional hydrau-
lic fracturing.
RN-Uvatneftegaz
9+ mmtoe
of hydrocarbons
produced in 2020
RN-NYAGANNEFTEGAZ
The bulk of proved reserves (over
99%) at RN-Nyaganneftegaz
are concentrated in the
Krasnoleninskoye field, includ-
ing the Kamenny (western part),
Em-Egovsky and Palyanovsky
areas.
In 2020, RN-Nyaganneftegaz pro-
duced over 7 mmtoe of hydrocar-
bons, including 5.9 mmt of liquid
hydrocarbons. The average daily
flow rate of existing wells grew
by 6.7 t per well, or 13%, vs 2019.
A total of 207 well interventions
(in addition to drilling) were per-
formed at RN-Nyaganneftegaz's
fields, leading to a 2% increase in
incremental production to 0.7 kt
per well.
RN-Nyaganneftegaz
7+ mmtoe
of hydrocarbons
produced in 2020
RN-PURNEFTEGAZ
The bulk of proved reserves (over
90%) at RN-Purneftegaz are con-
centrated in the Tarasovskoye and
Komsomolskoye fields.
In 2020, RN-Purneftegaz pro-
duced over 6 mmtoe of hydrocar-
bons, including more than 3 mmt
of liquid hydrocarbons.
EASTERN SIBERIA AND THE FAR EAST (ONSHORE)
RN-Vankor leverages horizontal
wells to develop the Vankor field.
In 2020, it commissioned 54 new
wells there (up 32% year-on-year)
which produced 0.8 mmt of oil
and gas condensate. At this field,
RN-Vankor increasingly relies on
sidetracking, having drilled a total
of 61 sidetracks in 2020 (up 49%
vs 2019). This resulted in 552 kt of
incremental oil and gas conden-
sate production (up 2.7x).
RN-Vankor continues to drill pro-
duction wells and build top-prior-
ity facilities and infrastructure at
new fields of the Vankor cluster.
Vankor cluster
20+ mmtoe
of hydrocarbons
produced in 2020
VERKHNECHONSKNEFTEGAZ
Verkhnechonskneftegaz
explores and develops the
Verkhnechonskoye field in the
Irkutsk Region, which is one of the
largest fields in Eastern Siberia.
In 2020, the company produced
8.8 mmtoe of hydrocarbons,
including 7.7 mmt of liquid hydro-
carbons. The Verkhnechonskoye
field is being developed using
advanced technologies. There are
also ongoing initiatives to stream-
line well construction and comple-
tion practices, monitor pay zone
performance, and optimise opera-
tion of infrastructure facilities.
In order to develop under-gas-cap
zones at the Verkhnechonskoye
field, the company has been work-
ing to improve the drilling of mul-
tilateral wells that help maintain
the pressure drawdown at a mini-
mal level to prevent gas blowouts.
In 2020, Verkhnechonskneftegaz
commissioned seven wells with an
average initial flow rate of 76.7 t
per day, a slight improvement vs
the 72.6 t per day in the previous
year. Thanks to this method of pay
zone penetration and the acceler-
ated commissioning of new wells,
the incremental production tar-
get for new wells was exceeded
by 19%.
Verkhnechonskneftegaz
8.8 mmtoe
of hydrocarbons
produced in 2020
TAAS-YURYAKH
NEFTEGAZODOBYCHA
Taas-Yuryakh Neftegazodobycha is
developing the Central Block and
the Kurungsky licence area of the
Srednebotuobinskoye field, which
is one of Rosneft’s Top 3 assets in
the Eastern Siberian oil cluster.
In 2020, the company pro-
duced 5.5 mmtoe of hydrocar-
bons, including 4.8 mmt of liquid
hydrocarbons (a 21% year-on-year
increase).
The Company continues to
expand its operations in Eastern
Siberia and the Far East. In 2020,
these regions produced 38 mmtoe
of hydrocarbons, including 32 mmt
of liquid hydrocarbons.
The bulk of production comes
from the Vankor cluster fields (52%
of total production in the region)
and Verkhnechonskoye field (20%).
VANKOR CLUSTER
RN-Vankor operates the develop-
ment project for the Vankor clus-
ter fields, including the Vankor
(the largest discovery in the last
20 years), Suzunskoye, Tagulskoye
and Lodochnoye fields located in
the Turukhansky and Taimyrsky
municipal districts in the
Krasnoyarsk Territory’s north.
In 2020, the Vankor cluster pro-
duced over 20 mmtoe of hydrocar-
bons, including more than 15 mmt
of liquid hydrocarbons.
Since the commencement of
commercial production at the
Vankor field in August 2009,
cumulative oil and gas conden-
sate production has exceeded
194 mmt on the back of a well
intervention programme covering
the existing wells and the com-
mitment to drill new wells.
62
63
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Samaraneftegaz
12.8 mmtoe
of hydrocarbons
produced in 2020
67 new production wells were
drilled, resulting in an incremental
production of 423 kt. The average
daily flow rate per new well rose by
7% year-on-year to 47.6 t.
Also, a total of 42 sidetracks were
drilled (up 7.7% vs 2019), with the
incremental production at 84 kt.
The average daily flow rate of
existing production wells reached
16.2 t per well (up 5% vs 2019)
as voidage replacement added
3.5 p.p.and production recov-
ery increased from 1.32 to 1.45 kt
per well.
Orenburgneft
14 mmtoe
of hydrocarbons
produced in 2020
SAMARANEFTEGAZ
More than 50% of
Samaraneftegaz's proved reserves
are concentrated in eight major
fields, including the Barinovsko-
Lebyazhinskoye, Kuleshovskoye,
Mukhanovskoye and Mikhailovsko-
Kokhanskoye fields.
In 2020, the company pro-
duced 12.8 mmtoe of hydrocar-
bons, including 12.4 mmt of liquid
hydrocarbons.
The number of hydraulic frac-
turing works increased by 11% to
103, a record high since 2012, with
incremental production at 173 kt.
Besides drilling, 377 well interven-
tions were performed, up 6% vs
2019, resulting in 690 kt of incre-
mental hydrocarbon production.
Production recovery stood at
1.42 kt per well, a 5.3% increase vs
a year before.
55 new wells were drilled, all hori-
zontal. The average flow rate of
new wells increased by 39% year-
on-year to 105 t per day (from 76 t
per day in 2019).
Taas-Yuryakh
Neftegazodobycha
5 mmtoe
of hydrocarbons
produced in 2020
VOSTSIBNEFTEGAZ
Vostsibneftegaz is running a pro-
ject to develop an expanded
high-priority area at the
Yurubcheno-Tokhomskoye field,
located in the Evenki District of
the Krasnoyarsk Territory.
In 2020, Bashneft-Dobycha pro-
duced 3.3 mmtoe of hydrocar-
bons, including 3 mmt of liquid
hydrocarbons.
It performed 46 well interventions,
up 5% year-on-year, including
new well drilling and sidetracking,
which resulted in an incremental
production of 535 kt.
Vostsibneftegaz
3.3 mmtoe
of hydrocarbons
produced in 2020
VOLGA-URALS REGION
of new wells increased by 7% year-
on-year to 47.6 t per day as void-
age replacement added 6 p.p.
The biggest drilling growth was
seen at the Arlanskoye field, where
88 out of the region's 148 new
wells were built. Given its com-
plex geology, horizontal drilling
with multi-stage hydraulic frac-
turing techniques has been used
widely. Over 180 horizontal wells
were commissioned at the field
between 2016 and 2020. The use
of advanced technology con-
tributed to gains in productivity,
with the average oil flow rate per
well rising by 73% at Bashneft-
Dobycha between 2009 and 2019.
Oil production increased from 3.1
to 4.5 mmt at the Arlanskoye field
over the same period.
Bashneft-Dobycha
11.5 mmtoe
of hydrocarbons
produced in 2020
ORENBURGNEFT
More than 50% of Orenburgneft's
proved reserves are concen-
trated in 10 major fields, includ-
ing the Sorochinsko-Nikolskoye,
Pokrovskoye, Olkhovskoye and
Pronkinskoye fields.
In 2020, the company produced
14 mmtoe of hydrocarbons,
including over 13 mmt of liquid
hydrocarbons.
In 2020, this region produced
around 41 mmtoe of hydrocar-
bons (including 39 mmt of liquid
hydrocarbons), or 16% of Rosneft’s
total output. The Company’s key
producing assets there include
Bashneft-Dobycha, Orenburgneft,
Samaraneftegaz and Udmurtneft.
BASHNEFT-DOBYCHA
Bashneft-Dobycha operates
licence areas in the Republics of
Bashkortostan and Tatarstan,
the Orenburg Region, and the
Khanty-Mansi Autonomous Area –
Yugra. More than 50% of its
proved reserves are concentrated
in six major fields, including the
Arlanskoye, Yugomashevskoye and
Tuimazinskoye fields.
In 2020, Bashneft-Dobycha pro-
duced 11.5 mmtoe of hydrocar-
bons, including 11.2 mmt of liquid
hydrocarbons.
The company performs high-im-
pact well interventions and drills
new wells to maintain robust oil
production at its mature fields.
In 2020, it performed 968 well
interventions (in addition to drill-
ing), with incremental production
increasing by 4% vs 2019.
Bashneft-Dobycha stepped up
production drilling, commission-
ing 153 new wells in 2020 (vs 114 a
year before). The average flow rate
64
65
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SOUTHERN RUSSIA
TIMAN-PECHORA PROVINCE
RN-STAVROPOLNEFTEGAZ
The bulk of proved reserves
(70%) at RN-Stavropolneftegaz
are concentrated in the
Velichaevsko-Kolodeznoye, Zimne-
Stavkinsko-Pravoberezhnoye,
Achikulakskoye and
Urozhaynenskoye fields.
In 2020, the company pro-
duced 0.71 mmtoe of hydro-
carbons, including 0.68 mmt of
liquid hydrocarbons. Since 2012,
RN-Stavropolneftegaz has
been developing weakly drained
reserves in the Jurassic formations
by drilling new wells while also
proceeding with its prospecting
and appraisal efforts.
It commissioned 18 new wells vs
nine in the previous year, resulting
in 41 kt of incremental production,
up 38 kt vs 2019.
Thanks to well interventions, the
average flow rate of production
wells grew by 7% to 6.6 t per day.
RN-Stavropolneftegaz
0.7 mmtoe
of hydrocarbons
produced in 2020
RN-KRASNODARNEFTEGAZ
The bulk of proved reserves
(76%) at RN-Krasnodarneftegaz
are concentrated in the
Anastasievsko-Troitskoye and
Mechetsko-Chernoyerkovskoye
fields.
In 2020, RN-Krasnodarneftegaz
produced 1.8 mmtoe of hydrocar-
bons, including 0.5 mmt of liquid
hydrocarbons. To ensure stable
production, the company drilled
twice as many wells as in 2019,
with incremental production from
new wells more than quintupling.
The average flow rate of new wells
reached 8.4 t per day, up 12%.
RN-Krasnodarneftegaz has also
been performing hydraulic fractur-
ing, well recommissioning and pro-
duction recovery. The latter's effect
increased by 26% year-on-year to
0.4 kt per well.
RN-Krasnodarneftegaz
1.8 mmtoe
of hydrocarbons
produced in 2020
Bashneft-Polyus
1.1 mmtoe
of hydrocarbons
produced in 2020
The Trebs and Titov
fields:
10-millionth
tonne of oil extracted
BASHNEFT-POLYUS
Bashneft-Polyus operates a devel-
opment project covering the Trebs
and Titov fields located in the
Nenets Autonomous Area.
In 2020, it produced 1.1 mmtoe of
hydrocarbons, including 1 mmt of
liquid hydrocarbons. The 10-mil-
lionth tonne of oil was extracted
at the Trebs and Titov fields.
Bashneft-Polyus brought on
stream 24 new wells, up 9%, with
the average flow rate rising by 15%
from 147 to 170 t per day. The com-
pany drilled a horizontal well at
the Trebs field. The well is a nat-
urally flowing well delivering a
record flow rate of 438 t per day.
The efficiency of well interven-
tions to recover production grew
by 150% to 5.4 kt per well (2.2 kt
per well in 2019). The number of
operations boosting production
increased to 28 (up +6 % vs 2019).
66
67
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors DEVELOPMENT OF HARD-TO-RECOVER
RESERVES
The Company’s portfolio of
assets with hard-to-recover
reserves currently consists of
more than 120 fields with over
4 bt of oil in recoverable reserves.
Rosneft’s key assets of this
type are RN-Yuganskneftegaz
and Vostok Oil, with aggre-
gate hard-to-recover reserves
of over 2 bt of oil. They are fol-
lowed by RN-Nyaganneftegaz,
RN-Uvatneftegaz and
Samaraneftegaz currently
accounting for about 90% of the
Company’s resource base in terms
of hard-to-recover assets.
The Company consistently devel-
ops its hard-to-recover oil reserves.
Oil production from deposits
classified as hard-to-recover
reserves under the applicable laws
amounted to 19.7 mmt amid the
restrictions under the new OPEC+
deal. The share of hard-to-recover
reserves rose from 9.7% of the
Company’s output in 2019 to 10.2%
in 2020. In 2020, Rosneft increased
the number of production wells
at fields with hard-to-recover
reserves by 20% year-on-year to
over 4.8 thousand wells.
In improving its development
technologies, the Company
focuses on well stimulation at
low-permeability formations, in
particular using more sophisti-
cated and longer horizontal wells
with a higher number of hydraulic
19.7 mmt
of hydrocarbon
production from hard-
to-recover reserves
in 2020
4+ bt
of total
hard-to-recover
reserves
2+ bt of oil
in total
RN-Yuganskneftegaz
and
Vostok Oil reserves
fracturing stages. In recent years,
Rosneft has commissioned yearly
an average of ~100 wells with
horizontal sections of over 1 km,
using multi-stage hydraulic frac-
turing, to tap into formations
with hard-to-recover reserves.
The use of longer horizontal wells
and a higher number of hydrau-
lic fracturing stages enables the
Company to effectively develop
previously unprofitable depos-
its. On top of that, in 2020, the
following activities were carried
out as part of projects to develop
low-permeable reservoirs:
• more than 50 elements of
development systems with
horizontal injection wells were
drilled;
high-viscosity oil reserves of the
Pokurskaya suite formations in
Western Siberia.
In 2020, the Company completed
the following key initiatives as
part of the Bazhen pilot develop-
ment programme:
• drilled ten horizontal wells with
ball-n-drop completion systems
in the Salymsky and Priobsky
licence areas;
• minimised problems in the pro-
cess of drilling horizontal wells
under abnormally high pressure
and temperature conditions.
All wells were drilled and com-
pleted without any problems;
• the horizontal sections of the
drilled wells averaged 970 m
long, with a horizontal section
of about 1,400 m long drilled for
the first time in the Bazhenov
suite;
• carried out multi-stage hydrau-
lic fracturing and launched eight
wells. The proppant weight was
on average 72 tonnes per stage;
• the average initial oil flow rate
per stage for launched hori-
zontal wells was 6.8 t per day
against the planned rate of 6 t
per day.
Multi-stage hydraulic fracturing
and the exploration programme in
the Bazhenov suite will continue
in 2021.
• more than 100 wells were drilled
using infill drilling under the
standard development scheme;
• a development technique for
low-permeability reservoirs was
created with the use of hori-
zontal wells drilled along the
regional stress with cross frac-
tures from hydraulic fracturing
enabling to boost well pro-
ductivity rate compared to the
standard development scheme
and mitigate risks of breaking
waterflood-induced fractures;
• a technology of simultaneous
isolated production and injec-
tion into horizontal wells drilled
using multi-stage hydraulic frac-
turing techniques (MSHF HW)
was developed;
In the coming years, the bulk of
production from hard-to-recover
reserves will be concentrated in
the Western Siberian fields with
low-permeability formations of
the Tyumen suite and the Achimov
deposits. Beyond 2020, though,
oil production from hard-to-re-
cover reserves will largely depend
on elimination of geological and
engineering uncertainties related
to appraisal and the choice of
best development solutions. To
this end, the Company imple-
ments an exploration programme
coupled with pilot projects set to
develop low-permeability for-
mations, the Bazhenov suite and
high-viscosity oil deposits as part
of the Target Innovative Projects.
Target Innovative Projects seek
to develop technologies to tackle
silty sand deposits (structur-
ally complicated undersaturated
ultralow-permeability reservoirs),
to bring Bazhenov and Domanic
plays into production, to introduce
thermal recovery methods fit for
ultrahigh-viscosity oil fields in the
Samara Region, and to develop
68
69
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PROGRESS ON THE PROGRAMME TO INCREASE APG UTILISATION
RATES
GREENFIELD DEVELOPMENT
PROJECTS
In 2020, the APG utilisa-
tion rate for mature assets
reached 94.3%, excluding green-
field projects and fields under
development (Suzunskoye,
Srednebotuobinskoye, Tagulskoye,
Lodochnoye, Vostochno-
Messoyakhskoye, Yurubcheno-
Tokhomskoye, Kondinskoye,
Russkoye, Kuyumbinskoye, Severo-
Komsomolskoye, Trebs and Titov
fields) where gas infrastructure is
yet to be created. If fields under
development and greenfield pro-
jects at early stages of devel-
opment are included, the APG
utilisation rate amounts to 74.8%.
In 2020, the Company completed
the construction of 21 APG utili-
sation facilities. Some of the most
important ones include:
• A complex of facilities for inject-
ing APG into the reservoir at
Vostsibneftegaz’s Yurubcheno-
Tokhomskoye field (four gas
pumping units in phase I). The
gradual injection of gas into
the system of reservoir pressure
maintenance started in August
2020, with a total of about
190 mmcm of gas injected in
2020.
• The Troitskaya compressor sta-
tion at RN-Krasnodarneftegaz
with a capacity of 250 mmcm.
• A 50.5 MW gas tur-
bine power plant at the
Srednebotuobinskoye
field of Taas-Yuryakh
Neftegazodobycha.
• A compressor station with
a gas treatment unit at
Messoyakhaneftegaz’s
Vostochno-Messoyakhskoye
field1. The pumping of gas into
underground storage facilities
started in July 2020, with a total
of 500 mmcm of gas pumped
during the year.
APG production in 2020
Vankor
Cluster
3.7 bcm
Maintaining APG utilisa-
tion rate at the Vankor field
at 98.4%. Since 2014, 34.5
bcm of gas was supplied
to Gazprom.
Samotlorneftegaz
6.1 bcm
Production rose by 2.2%
year-on-year on the back
of higher APG supplies
to processing facilities.
Maintaining APG utilisation
rate at the Samotlor field
at 98.6%.
Purneftegaz
2.5 bcm
Maintaining APG utilisa-
tion rate at RN-Purneftegaz
at 99.2%.
Other facilities are part of the APG
gathering, treatment, and trans-
port systems.
ERGINSKY CLUSTER
3 mmt
+7% of hydrocarbon
liquids produced (YoY)
The Company continues making progress
on its strategic project in the Khanty-Mansi
Autonomous Area – Yugra in a bid to develop
the Erginsky cluster which consists of five licence
areas: Kondinsky, Zapadno-Erginsky, Erginsky,
Chaprovsky and Novoyendyrsky.
Since the start of the project,
the Kondinskoye field has seen
7.2 mmt of oil produced (includ-
ing 2.6 mmt in 2020), 478 wells
from across 23 well pads com-
missioned, and key infrastructure
facilities launched. Drilling started
at three new well pads in 2020 as
part of the project’s third phase.
Marketable oil is transported to
trunk pipelines via a 68 km long
feeder pipeline.
In 2020, the Company drilled
272 wells in the field and produced
3 mmt of liquid hydrocarbons (up
7% year-on-year).
As part of the project to develop
the Erginsky cluster, the Company
embarked on the full-scale devel-
opment of its key asset – the
Erginsky licence area. A high-pres-
sure pipeline was launched there
to transport oil to the Priobskoye
field, with marketable oil start-
ing to flow into Transneft’s pipe-
line system. The area also saw
continued production drilling at
nine well pads along with the con-
struction of infrastructure facili-
ties, oilfield pipelines, and power
transmission lines. Equipment
for the first start-up complex of
the oil treatment and transpor-
tation facility was delivered and
is being installed, with the facil-
ity scheduled to go on stream
in 2021. As part of its efforts
to develop the cluster, earlier
Rosneft had brought on stream
the Kondinskoye and Zapadno-
Erginskoye fields.
Yuganskneftegaz
4.8 bcm
APG supplies to process-
ing facilities grew due
to the prompt replace-
ment of the compres-
sor unit at the Priobskoye
field’s Compressor Station 2
and launch of pipeline
from the Moskovtsev field.
Verkhnechonsk-
neftegaz
1.3 bcm
Gas production rose
by 5.9% year-on-year due
to the increase in the amount
of gas pumped into under-
ground storage facilities.
1 The asset is jointly managed with Gazprom Neft.
70
71
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors VANKOR CLUSTER
LODOCHNOYE FIELD
The Company continues to establish the Vankor cluster (based on the Vankor field) where
Suzunskoye and Tagulskoye fields have come on stream and are being actively developed.
Rosneft is also getting ready to launch the Lodochnoye field, thus completing formation
of the cluster.
SUZUNSKOYE FIELD
In 2020, a total of 20 wells were
drilled at the field, including seven
multilateral ones. Production
of liquid hydrocarbons totalled
2.1 mmt.
0.8 mmt
of liquid hydrocarbons
produced in 2020
Pilot production continues at the
field in the run-up to commercial
development.
Production drilling is under-
way at the most prolific sec-
tions by reserves (reservoirs of
the Yakovlev suite). Construction
and installation work is ongoing
at infrastructure and oil and gas
treatment facilities to start up key
field facilities.
In 2020, the Company drilled
11 wells, including five multilateral
ones. Production of liquid hydro-
carbons totalled 0.8 mmt.
Phase 2 of the Suzunskoye field
development is underway envis-
aging the construction of gas
facilities (gas treatment unit with
a compressor station, the Suzun–
Vankor interfield gas pipeline, gas
well pads). The Company com-
pleted three underwater cross-
ings (2,200 m long in total) by
directional drilling and is building
the Suzun–Vankor interfield gas
pipeline.
Follow-up exploration is ongo-
ing on a new prospective target
(Nkh-3 formation). Drilling contin-
ues in the field’s southern part.
Rosneft continues to build field
facilities, well pads, and other
infrastructure.
A drilling programme is underway
aiming to bring additional reserves
into production.
In 2020, we drilled 61 wells,
including 33 multilateral ones.
Production of liquid hydrocarbons
totalled 1.4 mmt.
2.1 mmt
of liquid hydrocarbons
produced in 2020
TAGULSKOYE FIELD
1.4 mmt
of liquid hydrocarbons
produced in 2020
DANILOVSKY CLUSTER
The Company continues its project to develop the Severo-Danilovskoye
field. The dense arrangement of the licence areas and the proximity
of the Verkhnechonskoye field will bring meaningful synergies from shared use
of the ground infrastructure.
0.3 mmt
of hydrocarbon liquids
produced in 2020
The Company is actively building
well pads, infield roads, and engi-
neering facilities. The field con-
struction includes drilling over
90 wells on well pads, a reservoir
pressure maintenance system, and
other top-priority infrastructure
facilities.
In December 2020, Rosneft and
Equinor closed the transaction
whereby the Norwegian company
acquired 49% of the Krasnoyarsk
Geological Research and
Analytical Centre (KrasGeoNats)1
engaged in the development of
the Danilovsky cluster.
The Severo-Danilovskoye field was
launched in the fourth quarter of
2020. Upon completion of hydrau-
lic testing, oil transportation from
the field started via a 93 km-long
pipeline to the Verkhnechonskoye
field. A 4 MW mobile power unit
was commissioned at the field to
ensure efficient use of APG. It will
serve as the main power source
until a 31 MW gas turbine power
plant is completed. The Company
continues production drilling and
construction of well pads, infra-
structure facilities and roads.
Construction and installation
started at oil treatment and trans-
portations facilities.
In 2020, we drilled 18 wells at the
field, producing 0.3 mmt of liquid
hydrocarbons.
1 Renamed to LLC Angaraneft in March 2021.
72
73
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SREDNEBOTUOBINSKOYE FIELD
The Company is currently devel-
oping the Central Block and the
Kurungsky licence area of the
Srednebotuobinskoye oil and gas
condensate field, which is one of
Rosneft’s top-3 assets in Eastern
Siberia.
In 2020, production of hydrocar-
bon liquids totalled 4.8 mmt, up
21% year-on-year. Average daily
production at the year end was
13.7 kt per day, which corresponds
to the target level of 5 mmtpa.
The Company continues to roll
out its multilateral well solutions,
including the fishbone design. The
world's first 15-splitter multilateral
well was drilled with a total length
of 12,792 m, including 10,310 m
inside the reservoir. In 2020, a
total of 56 wells have been drilled,
including 38 multilateral ones.
Since the start of its commercial
operation, the field has produced
15 mmt.
Construction of an in-house gas
turbine power plant with a design
capacity of 50 MW, and a 400-
bed shift camp was completed at
the field, while construction of a
high-pressure gas compressor for
maintaining reservoir pressure and
increasing APG utilisation rate is
continuing; well pads are being
prepared for subsequent drilling.
4.8 mmt
+21% of liquid
hydrocarbon produced
(YoY)
(590 mmcm per year) was
launched. The gas compressor is
the key facility of the gas invest-
ment program, designed for APG
utilisation by injecting it into the
formation to maintain reservoir
pressure. The aggregate injec-
tion volume from the beginning of
development totalled 198 mmcm.
The gas compressor station will
reach its design capacity in 2021
upon completion of construction,
installation and commissioning
activities at the second and third
start-up complexes.
In 2020, the field produced 3 mmt
of hydrocarbon liquids.
YURUBCHENO-TOKHOMSKOYE FIELD
VOSTOCHNO-MESSOYAKHSKOYE FIELD
3 mmt
of hydrocarbon liquids
produced in 2020
Vostsibneftegaz is running a pro-
ject to develop an expanded
high-priority area at the
Yurubcheno-Tokhomskoye field,
located in the Evenki District of
the Krasnoyarsk Territory.
In 2020, the Company drilled
40 wells, including four multilat-
eral ones. The "controlled pressure
drilling" technology is successfully
used to reach the design depth of
horizontal production wells. The
Company relies on horizontal drill-
ing to effectively develop vuggy
fractured reservoirs with highly
heterogeneous porosity and per-
meability both along the vertical
axis and across the floor area.
Vendian and Riphean deposits,
which have a complex geologi-
cal structure. The Vendian depos-
its lie on top of the productive
Riphean deposits, the oldest on
the planet, which date back over
1 bln years. In August 2020, the
Vendian deposits were penetrated
by a production well with an ini-
tial flow rate of 149 t of oil per day.
Subsequently, a multilateral well
with four horizontal sidetracks was
built, a record-breaking design for
Riphean deposits. The total length
of the well is 5,280 m, while its
horizontal section is 2,220 m long.
The initial oil flow rate was 281.5 t
per day, which is several times
higher than the average rate of
new wells in Russia.
As part of the Yurubcheno-
Tokhomskoye field develop-
ment, the Company is developing
In August 2020, the first start-up
complex of the gas compressor
In 2020, the asset produced
2.8 mmt1 of hydrocarbon liquids,
up 2% year-on-year. The growth
was driven by active drilling oper-
ations, new wells going on stream,
well interventions on existing
wells, and the reservoir pres-
sure maintenance system being
deployed.
Vostochno-Messoyakhskoye field
development (a joint project of
Rosneft and Gazprom Neft) con-
tinues. A total of 122 new wells
were drilled and commissioned,
including 76 multilateral wells
(100% share). The gas programme
was implemented; starting from
July 2020, associated petro-
leum gas from the Vostochno-
Messoyakhsky licence area has
been injected into the temporary
underground gas storage at the
Zapadno-Messoyakhsky licence
area.
2.8 mmt
+2% of hydrocarbon
liquids produced (YoY)
74
75
1 The Company’s share.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RUSSKOYE FIELD
KUYUMBINSKOYE FIELD
The main hydrocarbon reserves
of the Russkoye field are concen-
trated in the Cenomanian deposits
with heavy, highly viscous, sweet oil
with good commercial properties.
A special feature of the field devel-
opment system is the large-scale
use of multilateral wells in order
to increase productivity and scope
of reserves. In 2020, the Company
drilled and completed 58 hori-
zontal wells, including 21 multilat-
eral and multihole wells. A total of
337 wells have been drilled here,
including 69 multilateral wells. The
key goal of rolling out multilateral
wells to full-scale development was
1.8 mmt
+ over 100%
of hydrocarbon liquids
produced (YoY)
achieved ahead of schedule. A total
of 144 multilateral wells are to be
drilled at the field.
According to well logging, the effi-
ciency of recovery for multilateral
wells can be 38% higher than for
single-bore wells. At the same time,
testing and research are imple-
mented using a new method of
boundary mapping while drilling,
based on mathematical models
generated by standard well logging
surveys. This technology increased
the efficiency of oil-saturated res-
ervoir penetration by 17%.
Together with the commission-
ing of the Russkoye field CGF –
Zapolyarnoye MS oil pipeline1 and
the Rospan International oil and
condensate pipeline, the second
phase of the Zapolyarnoye CGF
facility was put into operation and
the design scheme of oil delivery
to Transneft's trunk pipeline sys-
tem in the flow mode was imple-
mented. Two mobile oil treatment
units were put into operation,
including the Company's innova-
tive project – the unit developed
by Sapphire Applied Engineering
and Training Centre2.
Production drilling continues
along with the construction of oil
treatment facilities.
In 2020, the field produced
1.8 mmt of liquid hydrocarbons,
more than twice the level of 2019.
compressor station, the key facil-
ity of the gas programme, and
procurement procedures for gas
pumping units were initiated.
The Kuyumbinskoye field
is developed by Slavneft-
Krasnoyarskneftegaz, a joint ven-
ture of Rosneft and Gazprom Neft.
Production of liquid hydrocarbons
at the field increased by 50% in
2020 and reached 0.7 mmt3, with
42 production wells completed.
Rosneft continues to build field
facilities and supporting infra-
structure. As regards the gas pro-
gramme implementation, areas for
temporary underground gas stor-
age were confirmed; the design
phase was completed for the
0.7 mmt
+50% of hydrocarbon
liquids produced (YoY)
SEVERO-KOMSOMOLSKOYE FIELD
The Severo-Komsomolskoye field
proceeded with the pilot devel-
opment programme for the PK1
formation (joint venture with
Equinor). Development drilling is
underway, including the construc-
tion of a fishbone multilateral well.
The field successfully uses intel-
ligent well completion systems
with an autonomous oil flow mon-
itoring device. This helps mini-
mise potential geological risks.
Advanced technologies also allow
drilling wells with a horizontal dis-
placement of up to 2 km. In 2020,
a record length of the horizontal
section (2,404 m) was achieved
in onshore single-bore horizontal
wells drilled by the Company.
As part of preparation for the
launch of the first stage of full-
scale field development, design
and estimate documentation was
developed and expert reviews
were obtained for major construc-
tion facilities, extensive contrac-
tor selection and material and
equipment procurement activities
were fulfilled to start construction
and installation, and site prepara-
tion was completed for nine major
standalone infrastructure facilities.
In 2020, 25 wells were drilled,
including one multilateral well. The
asset produced 0.5 mmt of hydro-
carbon liquids in 2020, up 23%
year-on-year.
0.5 mmt
+23% of hydrocarbon
liquids produced (YoY)
1 CGF – central oil gathering facility; MS – metering station
2 Sapphire Applied Engineering and Training Centre.
76
3 The Company’s share.
77
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
VOSTOK OIL –
A LARGE-SCALE
WORLD-CLASS
PROJECT
IN COMPLIANCE
WITH THE RUSSIAN
PRESIDENT'S INSTRUCTION
TO INCREASE
THE CARGO FLOW ALONG
THE NORTHERN SEA ROUTE,
THE COMPANY CONTINUES
COMPREHENSIVE
DEVELOPMENT OF THE NEW
OIL AND GAS PROVINCE
IN THE KRASNOYARSK
TERRITORY’S NORTH
AS PART OF THE VOSTOK
OIL PROJECT.
The project is implemented at the
existing fields of the Vankor clus-
ter, the Payakhskoye field and
licence areas prepared for devel-
opment, the newly discovered
Zapadno-Irkinskoye field, and the
Company's exploration licences on
the Taimyr Peninsula. Investment
incentives for infrastructure facil-
itated the economic model’s effi-
ciency and allowed Rosneft to
begin project implementation.
500+ mmt of oil
and 138 bcm
of С1 + С2 gas – recoverable
reserves of the Zapadno-
Irkinskoye field discovered
in 2020
Project highlights
Infrastructure development
• Proven world-class resource base
of 6 bt of liquid hydrocarbons.
• 50 licence areas within the project
perimeter.
• The light (40°API) and low-sulphur
(<0.05%) oil has a better quality
than Brent and ESPO crude
grades.
• Expected cargo traffic along
the Northern Sea Route: up
to 30 mmt in 2024, up to 50 mmt
in 2027, and up to 100 mmt
in 2030
• An international partner (Trafigura)
joined the project.
• Low carbon footprint (12 kg/
boe) – 25% of large oil projects’
standard indicators.
• 15 shift camps, several heliports
and airfields, oil loading terminal
with an annual capacity of 100
mmt.
• 770 km of trunk pipelines
and 7,000 km of infield pipelines.
• Power units with a total
capacity of 2.5 GW, including
wind power generation, more
than 3.5 thousand km of power
transmission lines.
• 50 vessels of various classes,
including 10 advanced ice-
class tankers with a deadweight
of 120 kt.
Project's competitive edge
Investment incentives
• The synergy effect due
• Infrastructure financing through
to the proximity of extensive
infrastructure and expertise
gained during the development
of the Vankor cluster fields will
significantly reduce the time
to complete and enhance efficiency
of the project.
• The proximity of the project
fields to the unique Northern
Sea Route will help procure top
quality feedstock (light sweet
crude) and a price with a premium
to the Brent grade.
• Vostok Oil's synergy
with the Zvezda hi-tech shipyard
project in the Far East, where
Rosneft is one of the shareholders
and anchor customer (the project
will require up to 50 Arc7 ice-
class tankers), will also enhance
the efficiency metrics.
reduced MET rate imposed
on the existing producing fields
of the Vankor cluster included
in Vostok Oil.
• Zero MET rate for oil until
the expiration of 16 years
from the year when 1% depletion
is achieved for new fields
of the project.
• Regional tax incentives: reduced
income and property tax rates
for existing and new project
assets.
• Gradual increase in the tax burden
after the return on investment
is achieved.
As a result of 2020 explora-
tion activities, the Company
discovered a large Zapadno-
Irkinskoye field with recovera-
ble C1 + C2 reserves comprising
over 500 mmt of oil and 138 bcm
of dissolved gas. The Zapadno-
Irkinskoye field and the
Payakhskoye field are similar in
geological structure and form
a single oil accumulation zone
with unique reserves, which will
be developed by implementing a
unified approach to exploration
planning and selection of devel-
opment technologies.
The project has entered an active
phase of design, engineering
and survey and land manage-
ment works. Sites for priority
well pads for production drill-
ing, as well as areas for oil gath-
ering, treatment and pumping
facilities, for auxiliary infrastruc-
ture (facilities for unloading and
material and equipment storage,
shift camps, aviation infrastruc-
ture, etc.) were selected. The
design of the first phase is near-
ing completion and the design
of the second phase of the trunk
oil pipeline from Payakha MPS 1
to the Sever Bay MS, oil load-
ing terminal and Sever Bay port,
has started. Some projects have
been submitted to state expert
review, and land use documents
are being prepared. The first
phase facilities will allow trans-
portation and transhipment of
up to 30 mmt of oil per year from
2024. The second phase will
expand capacity to 100 mmt of
oil per year.
78
79
IN-HOUSE OILFIELD
SERVICES
The Company continues its drive for expansion
and improvement of its oilfield services to deliver high quality
and gain a competitive edge. Using the in-house services
as the Company's procurement pricing benchmark minimises
the risk of overpricing by third-party contractors.
Horizontal drilling growth, %
71
62
48
35
2017
2018
2019
2020
DRILLING
In 2020, the Company’s drilling
service completed 6,533 thou-
sand m of drilling (1,767 wells,
including 28 exploration wells).
The share of horizontal drilling
reached 71% (+9 p.p. year-on-year).
The operating fleet of the
Company’s drilling service as at
the end of 2020 stood at 344 drill-
ing rigs with an average age
of 10 years. The Company has
296 drilling crews.
Key Achievements
• We expanded our mobile drilling business by acquiring 81 drilling rigs
(new and used).
• Rosneft successfully progressed with its programme to scale up
the technology for drilling two-string horizontal wells with oil based mud.
• RN-Bureniye participated in drilling the world's first horizontal
well having 15 downhole splitters and a total length of 12,792 m
at the Srednebotuobinskoye field of Taas-Yuryakh Neftegazodobycha
using the fishbone technology.
• A drilling crew of the RN-Bureniye’s branch in Nefteyugansk
broke the industry record for the commercial monthly rate of well
construction – 15,360 m per rig.
WELL WORKOVER
AND SERVICING
Today, RN-Service is the larg-
est company for well workover
and servicing, with branches in 13
Russian regions. In 2020, it pro-
vided well servicing to 21 Rosneft’s
upstream companies, covering
48% of Rosneft’s needs for well
workover and servicing.
Actual orders processed per work-
over and servicing crew amounted
to 57.5 per year (up 4.7% against
the business plan target). Average
service time reduced by 6.4 %
against the target.
PROJECTS
IMPLEMENTED
IN 2020
Since May 2020,
RN-Yuganskneftegaz rendered
services for comprehensive well
preparation for hydraulic fractur-
ing at RN-Yuganskneftegaz fields:
seven units for hydraulic fracturing
preparation and one unit for coil
tubing preparation (141 pieces).
Construction and maintenance of
winter roads for RN-Vankor (pilot
area of the East-Tarkosalinskoye
field in Purpe) in the season
2020/21 (21 pieces).
HYDRAULIC FRACTURING
In 2020, 21 of the Company's
hydraulic fracturing fleets were
engaged in hydraulic fracturing
operations at customer sites. All
the contracted hydraulic frac-
turing fleets executed work at
Rosneft's fields in 2020.
In the reporting period,
6,323 hydraulic fracturing oper-
ations were performed at the
customer sites, 6.7% higher than
the business plan target, which
was 5,922. In 2020, the average
monthly number of operations per
fleet was 33. The Nizhnevartovsk
branch achieved an average out-
put of 40.4 hydraulic fracturing
operations per fleet, and in August
2020 a record for this region was
set at 56.9 operations per fleet.
TRANSPORTATION SERVICES
In 2020, RN-Transport main-
tained leadership in terms of
the Company's demand share
among Group Subsidiaries in the
Upstream segment. 550 inefficient
or unused machines were with-
drawn from operation.
KEY ACHIEVEMENTS IN 2020:
the average machine
count –
7,835.3
vehicles;
services provided –
21,377.7
thousand
machine hours;
technical availability
of the rolling stock –
90%;
share of the operating fleet
upgraded –
10.1%;
794
general and specialised use
vehicles supplied;
fleet utilisation rate –
70%.
80
81
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors OFFSHORE PROJECTS
19 licence areas
are located
in the Western Arctic
(the Pechora, Barents
and Kara seas)
55 licence areas
on the Russian continental shelf,
with an aggregate resource potential of
41 btoe
9 licence areas
in the Eastern Arctic
(the Laptev, Chukchi
and East Siberian seas)
20 licence
areas
off the Russian far
eastern coast (the seas
of Okhotsk and Japan)
7 licence areas
in Russia's southern
seas (Black, Caspian
and Azov)
Development of hydrocarbon resources on the continental shelf is one
of Russia's economic priorities and a key strategic area for Rosneft.
The largest holder of continental shelf licences, Rosneft carries
out a full range of exploration operations in the Russian Arctic, Far
East and southern seas in accordance with its commitments, while
also developing offshore fields abroad as an operator or a member
of consortia and participating in joint international projects as part
of such consortia. In implementing continental shelf projects, we focus
on environmental monitoring of the areas of operations, mitigating
our impact and preserving biodiversity.
82
SEISMIC SURVEYS
In the 2020 field season, Rosneft
completed 3D seismic surveys on
the shelf of the Pechora and Kara
seas, covering 1,235 sq km at the
Yuzhno-Russky licence area and a
total of 1,562 sq km in Vostochno-
Prinovozemelsky-1 and Severo-
Karsky licence areas. The seismic
data collected in 2020 are under-
going analysis (processing and
interpretation), with optimal
decisions on the future explora-
tion strategy to be made upon
completion.
OFFSHORE EXPLORATION
IN RUSSIA
In 2020, in line with its licence
commitments, Rosneft continued
exploration and prospecting for
oil and gas in offshore areas in the
Russian Arctic, Far East, and in the
seas of the south Russia.
EXPLORATION DRILLING
In 2020, the Company finished
constructing three wells in off-
shore licence areas – Novaya-2 in
the Azov Sea and Vikulovskaya-1
and Ragozinskaya-1 on the Kara
Sea shelf.
Drilling of the Novaya-2 explora-
tion well in the Azov Sea started
on 21 October 2019. The drilling
confirmed the oil and gas bear-
ing potential of the Novoye field to
the west. In August 2020, the well
was classified as a production one.
The Company drilled
Vikulovskaya-1 appraisal well in
Vostochno-Prinovozemelsky-1
licence area on the Kara Sea shelf,
with a commercial gas bearing
potential identified following the
interpretation of geographic infor-
mation system (GIS) data and
open-hole testing of prospec-
tive intervals. This was how we
discovered the field named after
Marshal Georgy Zhukov. The State
Commission for Mineral Reserves
approved the field's recoverable
gas reserves at 800 bcm.
Rosneft also drilled
Ragozinskaya-1 appraisal well
(Western Dome) in Vostochno-
Prinovozemelsky-2 licence area in
the Kara Sea, with a commercial
gas bearing potential identified
in the Upper and Lower Jurassic
deposits following the interpre-
tation of GIS data and open-hole
testing of prospective intervals.
The discovered gas condensate
field was named after Marshal
Konstantin Rokossovsky. The State
Commission for Mineral Reserves
approved the field’s recoverable
reserves at 514 bcm of gas and
53 mmt of gas condensate.
Our comprehensive drilling pro-
gramme in the Kara Sea helped us
to create a new local oil and gas
cluster with estimated reserves
in excess of 1.7 tcm of gas and
ca. 200 mmt of oil and
83
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors condensate. The cluster comprises
three fields, including the offshore
Pobeda field discovered in the
Kara Sea in 2014.
Going forward, Rosneft will con-
tinue to tap into the oil and gas
potential of the Kara Sea.
In 2020, we started the onshore
drilling of Madachagskaya No. 2PO
appraisal well in the Medynsko-
Varandeysky licence area (Pechora
Sea shelf). The drilling completion
is expected in 2021.
REGIONAL GEOLOGICAL
SURVEY
The Company continues to
develop and update regional geo-
logical models of Russian and for-
eign offshore fields located in the
areas of its presence and interest
(Russian Arctic, Far East, southern
seas and foreign waters). The rock
material collected earlier during
onshore field geology expeditions
in Sakhalin, the Severnaya Zemlya
Archipelago, New Siberian Islands,
Black Sea and the Caucasus
region, underwent laboratory and
analytical testing to mitigate the
sub-surface risks related to all
elements of petroleum systems
(source rocks for oil and gas, res-
ervoir rocks, and cap rocks) within
the Company’s offshore licence
areas in the Far East and the
Arctic. The results will serve to
update the geological model of
the region and licence areas.
updating the geological structure
and oil and gas potential of the
North Kara basin.
Innopraktika and Lomonosov
Moscow State University's
Department of Geology will con-
duct comprehensive laboratory and
analytical studies of the samples
to make oil and gas potential esti-
mates for various age sedimentary
basins in the Arctic more reliable
and substantiate a new geological
model of the North Kara region.
SOIL SURVEYS
In 2020, soil surveys were per-
formed for infrastructure facilities
at the Kaigansko-Vasyukanskoye
Sea field located offshore Sakhalin
in the Sea of Okhotsk.
In the fall of 2020, Rosneft, for
the first time in the history of the
Arctic research, drilled ten shal-
low stratigraphic wells in the north
of the Kara Sea during a large-
scale expedition. The project's key
objective was to collect core, a
valuable rock material used as a
source of geological information
to determine the age (stratifica-
tion), composition, and forma-
tion conditions of the Arctic shelf
rocks. In total, we sampled 300 m
of core, which is essential for
The results of comprehensive off-
shore surveys provided full sets of
data for well design and construc-
tion, subsea facility construction
and transportation of produced
hydrocarbons, including engineer-
ing and environmental protection.
Detailed data on soil composition
in the area will enable experts to
predict geological and geological
engineering processes and address
risks that might arise during the
drilling of production wells and
field facility construction.
ENVIRONMENTAL MONITORING
The following environmental pro-
tection activities were carried out
under licence obligations:
• The mouths of previously drilled
wells were inspected in the Kara
Sea, the Sea of Okhotsk, and
the Black Sea. All work was car-
ried out in line with the require-
ments of the Russian HSE laws.
The technical condition of the
inspected wellheads was sat-
isfactory, with no hydrocarbon
leakages detected.
• Artificial reproduction of aquatic
biological resources was con-
ducted to compensate for any
potential damage to water life
and its habitats.
While implementing the biodiver-
sity preservation programme for
the Company’s licence areas, we
prepared a reasonable list of indi-
cator species to assess the sus-
tainability of Arctic ecosystems
and analysed the occurrence rates
for various species existing in
these areas.
OFFSHORE OIL AND GAS PRODUCTION IN RUSSIA
SAKHALIN-1 PROJECT
In 2020, we continued to success-
fully implement Sakhalin-1.
Rosneft is a member of the pro-
ject within the consortium that
includes ExxonMobil (United
States), SODECO (Japan), and
ONGC Videsh Ltd. (India). The
Company’s share is 20%, and the
project operator is Exxon Neftegas
Limited.
The Sakhalin-1 project involves
the development of four off-
shore fields: Chaivo, Odoptu-Sea,
Lebedinskoye (within the Odoptu
licence), and Arkutun-Dagi,
located in the Sea of Okhotsk on
Sakhalin Island’s north-eastern
continental shelf.
State-of-the-art technologies and
project management methods
are used to develop the project
fields. At the Odoptu-Sea field, oil
is produced from an onshore site
using super-extended reach hori-
zontal wells; at the Chaivo field,
oil is extracted from an onshore
site and the Orlan platform using
wells with record-length bore-
holes; while Arkutun-Dagi is devel-
oped using Berkut, a fixed offshore
drilling and production platform
that features the world’s heaviest
topside.
In 2020, the Sakhalin-1 project
produced a total of 12.4 mmt of
oil and gas condensate (Rosneft’s
share was 2.5 mmt), with over
2.4 bcm of gas (0.5 bcm attrib-
utable to Rosneft) supplied to
consumers.
Oil from the Sakhalin-1 fields is
delivered to the Chaivo onshore
oil treatment facility on Sakhalin
Island and then transported
by pipeline to the De-Kastri oil
export terminal in the Khabarovsk
Territory.
NORTHERN TIP OF THE CHAIVO
FIELD
Oil production at the northern
tip of the Chaivo field involves
five wells drilled from the shore.
The wells have a unique, com-
plex design and extended hori-
zontal displacement and leverage
smart completion systems with
flow control devices to limit gas
breakthroughs and maximise pro-
duction. The offshore project's
operator is RN-Shelf-Far East, the
Company's subsidiary.
The actual oil and condensate
output in 2020 was 0.5 mmt, while
the total amount of gas supplied
to consumers was 0.05 bcm.
12.4 mmt
(including Rosneft’s
share of 2.5 mmt)
of liquid hydrocarbons
produced in 2020
2.4+ bcm
of gas (including
Rosneft’s share
of 0.5 bcm) supplied
to consumers
0.5 mmt
of liquid hydrocarbons
produced in 2020
0.05 bcm
of gas supplied
to consumers
84
85
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors GAS BUSINESS
ROSPAN AND KHARAMPUR ARE MAJOR
GAS ASSETS VIEWED AS THE TOP DRIVERS
OF THE COMPANY'S NEAR-TERM HYDROCARBON
PRODUCTION GROWTH.
Rosneft’s strategic goal for gas
business development is to con-
sistently grow its shareholder
value through increased gas out-
put supported by a high-perfor-
mance long-term sales portfolio.
The Company is developing
vast gas reserves in Western
and Eastern Siberia and holds
a unique licence portfolio for
hydrocarbon development on
the Russian continental shelf. As
at 1 January 2020, АВ1С1+В2С2
recoverable gas reserves were
estimated at 8.7 tcm.
Rosneft produces gas through
more than 35 subsidiaries and joint
ventures in Western and Eastern
Siberia, Central Russia, the south
of European Russia, the Russian
Far East, as well as in Egypt, and
Vietnam.
20%
share of gas
in the Company’s
total hydrocarbon
production in 2020
62.83
bcm
total gas production
in 20201
8.7 tcm
of recoverable gas
reserves
1 Recovered gas volume excluding flared gas and gas used in liquid hydrocarbon production.
Achievements in gas business development
• Despite the overall decrease in gas production
in Russia over the year, the Company managed
to curb the decline pace.
• In 2020, we completed the construction
of the first start-up complex for the full-scale Rospan
development to ensure its launch in Q1 2021 (see
more on pages 90–91).
• Construction of key facilities at Kharampurneftegaz
is in the active phase. In 2020:
– works associated
with the development of the Cenomanian deposit
and the pilot operation of the Turonian deposit
at the Kharampurskoye field were on schedule;
– the construction and installation at the gas
treatment unit, which is key for the project, were
more than 40% complete;
– the construction and installation
of the gas shipment pipeline were well on track,
the pipeline crossing over the road and railway
and the crossings over the Vasseyakha,
Shonyauyakha and Ayvasedapur rivers were
constructed, and the tie-in to Gazprom's trunk
gas pipeline network was built;
– following the feasibility study, the company
started design and survey activities to ensure
the full-scale development of the Turonian
deposit and the construction of associated field
facilities.
• To expand gas production in the Yamal-Nenets
Autonomous Area, we acquired the Zapadno-
Minkhovsky subsurface site on the Gydan Peninsula
(area of federal importance), including an area in the Taz
Estuary of the Kara Sea, at an auction held in December
2020.
• In 2020, the Far Eastern LNG project saw a FEED
contractor selected following the tender and the onshore
facilities of the offshore loading system dismantled
as part of site preparations.
• Sibneftegaz constructed the first multilateral horizontal
gas well at the Beregovoye oil and gas condensate
field, with two cased horizontal boreholes 1.1 km long
in total. The use of multilateral wells in complex
geological conditions will help us achieve much higher
flow rates as compared with single-bore horizontal wells
and reduce geological risks.
• Rospan International drilled a horizontal well
and simultaneously penetrated two lower Achimov
formations (total length is 5,800 m, with a horizontal
section 1,241 m long). The company conducted six
hydraulic fracturing stages and injected 1,200 tonnes
of proppant, which allowed to more than double the well
productivity.
86
87
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors GAS PRODUCTION
PERFORMANCE
IN THE REPORTING YEAR
In 2020, Rosneft’s gas production
both in Russia and abroad totalled
62.831 bcm, including 30.262 bcm
of natural gas and 32.563 bcm
of APG. The Company’s interna-
tional projects, mostly in Egypt
and Vietnam, accounted for
4.5 bcm of the total gas out-
put, including 4.49 bcm of natu-
ral gas, while its domestic output
stood at 58.32 bcm. Some of the
Russian gas was processed into
liquid hydrocarbons. In 2020, the
Company’s gas output in Russia,
including gas processed into liquid
hydrocarbons, totalled 58.68 bcm.
Gas production decreased by
6.2%, or 4.13 bcm vs 2019. The
decrease is primarily due to APG
production going down as a result
of oil production cuts under the
new OPEC+ deal, a drop in gas
demand amid the COVID-19 pan-
demic, and warm weather.
8.4%
Company's share
in Russia’s
total gas production
GAS PRODUCTION BY REGION
Rosneft’s largest gas-producing
region is Western Siberia, which
contributed 70%, or 43.73 bcm,
of the total gas output in 2020,
including 21.86 bcm of natural gas
produced mainly by Sibneftegaz,
Rospan International,
RN-Purneftegaz and Purgaz
and 21.87 bcm of APG produced
mainly by Samotlorneftegaz,
RN-Yuganskneftegaz and
RN-Purneftegaz.
In Eastern Siberia, gas was pro-
duced at the Vankor group of
fields, the region's largest. In
2020, the output at these fields
totalled 7.29 bcm, including
5.32 bcm of APG, and 1.97 bcm of
natural gas.
In the Russian Far East, Rosneft
mainly produced associated
petroleum and natural gas from
onshore fields and on the shelf
off Sakhalin, with the bulk of the
3.22 bcm gas production in 2020
coming from the northern tip
of the Chaivo field operated by
RN-Shelf-Far East.
In the Volga-Urals region, gas
was primarily produced from the
fields owned by Orenburgneft,
Samaraneftegaz, and Bashneft-
Dobycha. Output there amounted
to 2.06 bcm.
Gas production in key regions
of operation in Russia
and abroad, bcm
62.83
Western Siberia
Eastern Siberia
Foreign Projects
Far East
Volga-Urals
Southern Russia
Other, including
Timan-Pechora
43.73
7.29
4.50
3.22
2.06
1.82
0.21
In Southern Russia, the
Company's key gas asset is
RN-Krasnodarneftegaz, which
produces both natural and asso-
ciated petroleum gas. The region
brought in 1.82 bcm in 2020.
International projects, mainly the
Zohr offshore field in Egypt, pro-
duced 4.5 bcm. Our operations in
Vietnam also contributed.
KEY ASSETS AND HIGH-POTENTIAL
PROJECTS OF THE COMPANY'S GAS
BUSINESS
Map of key gas assets and potential projects
Gas supply regions
Gas production
High-potential projects
LNG production projects
Gas processing plants (GPPs)
14
15
2
9
5
3
4
1
6
10
26
7
8
11
23
22
13
25
12
24
16
17
19
18
21
20
20
1. Rospan
2. Sibneftegaz
3. Kharampurneftegaz
4. Kynsko-Chaselskoye Neftegaz
5. Vankor group
6. RN-Purneftegaz
7. RN-Yuganskneftegaz
8. Samotlorneftegaz
9. Varyeganneftegaz
10. RN-Nyaganneftegaz
11. RN-Krasnodarneftegaz
12. Orenburgneft
13. Bashneft-Dobycha
14. Bashneft-Polyus
15. Minkhovsky cluster
16. Yurubcheno-Tokhomskaya
group
17. Agaleevsky licenсe area
18. Verkhnechonskneftegaz
19. Taas-Yuryakh
Neftegazodobycha
20. RN-Shelf-Far East, Sakhalin-1
21. Bratskekogaz
22. Otradnensky and Neftegorsky
GPPs in the Samara Region
23. Buzulukskoye GPP in the
Orenburg Region
24. Shkapovskoye and
Tuimazinskoye GPPs
25. RN-YuganskGazPererabotka
1 Recovered gas volume excluding flared gas and gas used in liquid hydrocarbon production.
88
89
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ROSPAN
THIS IS THE COMPANY'S LARGEST GAS ASSET
AND THE TOP CONTRIBUTOR TO THE COMPANY'S
NEAR-TERM PRODUCTION GROWTH.
>21 bcm
of gas produced per year
>5 mmt
of gas condensate and oil produced
per year
up to 1.3 mmt
of industrial propane/butane mixture
produced per year
Total recoverable АВ1С1+В2С2
reserves
ca. 0.9 tcm
of natural gas
ca. 0.2 bt
of oil and gas condensate
2020 RESULTS AND PROGRESS
IN 2021:
IN FEBRUARY 2021:
• the main construction and installation activi-
ties were completed, individual and comprehen-
sive testing of process equipment was started
to ensure the launch of key facilities of the
first start-up complex at the comprehensive
gas treatment unit (CGTU) of the Vostochno-
Urengoysky licence area, and the railway termi-
nal for the transshipment of industrial propane/
butane produced per year;
• all auxiliary infrastructure and linear facilities,
including well pads necessary to ensure the utili-
sation of the CGTU first start-up complex facili-
ties are ready to commence operation;
• all seven units of the gas turbine power plant
at the Vostochno-Urengoysky licence area
were launched; permanent power supply to the
phase I facilities was set up.
• dry gas was transported from the Vostochno-
Urengoysky CGTU to the gas shipment pipeline
for further transportation through Gazprom’s gas
transportation system;
• SGC transportation commenced from the
Vostochno-Urengoysky CGTU to Vostochno-
Urengoysky oil treatment unit for further ship-
ment to Zapolyarnoye metering station;
PLANS
• gradual ramp-up to design capacity at key pro-
duction facilities;
• continued construction of the second start-up
complex facilities;
• commissioning the SGC loading site at the
Vostochno-Urengoysky licence area’s CGTU.
HISTORICAL BACKGROUND
Rospan traces its history to 1994.
In 2013 it joined Rosneft, which
proved to be a major turning
point contributingsignificantly
to the project’s growth. Rospan
owns exploration and develop-
ment rights for the Urengoyskoye,
Vostochno-Urengoyskoye, and
Severo-Esetinskoye fields in the-
Novo-Urengoysky, Vostochno-
Urengoysky, and Resursny licence
areas. The key development asset
is the Achimov deposits. The pro-
ject’s complexity has to do with
the low natural permeability of
the deposits and abnormally high
reservoir pressure. With success-
ful long-term follow-up explora-
tion programme, jointly prepared
by the Company and the corpo-
rate R&D institute, the project
will help develop up to 97% of the
asset's reserves as opposed to
the previously planned 83%.
ACHIMOV DEPOSITS DEVELOPMENT TECHNOLOGIES
KEY FACILITIES
The Achimov production complex
lies at the depth of four kilometres
and is characterised by abnor-
mally high reservoir pressure of
600 atm or more, which ensures
high gas condensate content and
contributes to successful commer-
cial application of technologies
for separating a propane/butane
fraction. The abnormally high res-
ervoir pressure helps extend the
primary recovery stage and delay
the use of booster compressor
stations. The asset is being devel-
oped with a widespread utilisa-
tion of hydraulic fracturing and
cutting-edge HIWAY technique,
including multi-stage hydrau-
lic fracturing at horizontal wells.
These technologies provide for the
most comprehensive development
of the low-permeability and hydro-
dynamically isolated reservoir, while
also increasing well productivity.
In 2020, the resource base of the
deposits under the PRMS stand-
ards grew significantly (by up to
30%), as verified by DeGolyer &
MacNaughton auditors. The year
also saw the first assessment of
the Jurassic formations’ resource
potential. It was conducted using
multivariate analysis of uncertain-
ties and risks using the probabilistic
approach. According to the assess-
ment, the Jurassic formations’
resource potential may reach up to
84 mmtoe. The Company continues
rolling out and improving the sys-
tem to monitor well performance
using multiphase stationary flow
meter.
• A gas treatment unit at the
Novo-Urengoysky licence area;
• a comprehensive gas and con-
densate treatment unit at the
Vostochno-Urengoysky licence
area consisting offourproduc-
tion lines;
• an oil treatment unit with a facil-
ity to store and transship gas
condensate and oil;
• a railway terminal for loading
industrial propane/butane mix-
ture at the Korotchayevo station;
• trunk and oilfield pipelines;
• compressor stations and power
supply facilities.
90
91
KHARAMPURNEFTEGAZ
Also vital to Rosneft’s gas busi-
ness is Kharampur Gas, a pro-
ject we run together with BP to
build field facilities and develop
natural gas deposits at the
Kharampurskoye field. Its objec-
tives include conventional gas
production from the Cenomanian
deposit and the pilot and then
full-scale development of the
Turonian deposit. The Company
has the expertise and experience
to deliver such complex projects
efficiently.
In 2020, construction of key
gas-related facilities remained in
an active phase:
• the work progressed as planned;
• the construction and installa-
tion at the gas treatment unit,
which is key for the project, were
over 40% complete: foundation
concrete was cast, pile caps and
metalwork of racks, buildings
and structures were manufac-
tured and installed, equipment,
process pipelines, etc. were
installed;
• the construction and installa-
tion of the gas shipment pipe-
line were well on track, the
pipeline crossing over the road
and railway was constructed by
horizontal auger boring, cross-
ings over the Vasseyakha,
Shonyauyakha and Ayvasedapur
rivers were completed using
directional drilling, and the tie-in
to Gazprom's trunk gas pipeline
network was built;
• construction of gas gathering
networks and fit-up of well pads
and power facilities continued.
11+ bcm
natural gas production
at design capacity
up to 25
bcm
potential production
growth with low-
permeability Turonian
deposits on stream
• key facilities (the gas treatment
unit, gas shipment pipeline, and
field facilities);
• design and survey activities to
enable the full-scale develop-
ment of the Turonian deposit
and field facilities construction,
and expert reviews of the design
documentation.
Gas production at the
Cenomanian deposit is scheduled
to start in 2022.
Also in 2020, as part of the project
for the Turonian deposit full-scale
development and field facilities
construction:
• to enable pilot production in
order to confirm reserves, study
core samples, and update the
geological model, the construc-
tion and installation were com-
pleted at two gas well clusters,
downhole gauges were put into
operation, and linear segments of
gas gathering lines were tested;
• based on a 2019 feasibility study
and the pilot production results,
design and survey activities were
initiated under the project.
Total recoverable AB1C1+B2C2
reserves as at 1 January 2021,
including the Turonian deposit:
were ca. 1 tcm of natural gas;
100 mmt of crude oil.
Research was also in progress
at the Kharampurskoye field to
study the geological structure
and production potential of the
Berezovskaya suite's low-perme-
ability gas reservoirs. In 2020, we
worked with other major subsoil
users and the State Commission
for Mineral Reserves to com-
plete guidelines for studying and
calculating free gas reserves in
Coniacian–Campanian depos-
its (the Berezovskaya suite,
etc.), pending approval at a
2021 meeting of the commission's
Technology Expert Council.
Plans
To be completed in the near
future:
• gas production infrastructure for
the Cenomanian deposit;
92
93
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SIBNEFTEGAZ
This is our biggest gas-producing
asset for the moment.
In 2020:
• production drilling continued;
• essential production facilities
under construction included:
– a gas and condensate
treatment unit and related
infrastructure for the devel-
opment of the Beregovoye
field’s lower horizons;
– a booster compressor station
at the Beregovoye field.
The first multilateral gas well was
drilled at the Beregovoye oil and
gas condensate field, with two
cased horizontal boreholes 1.1 km
long in total. The use of multi-
lateral wells in complex geologi-
cal conditions will help us achieve
much higher flow rates as com-
pared with single-bore horizontal
wells and reduce geological risks.
Plans
In 2021, we plan:
• to launch a gas and conden-
sate treatment unit and related
infrastructure;
• to launch a booster compressor
station at the Beregovoye field;
• to continue building other gas
and condensate treatment and
transportation facilities.
In addition, we will continue to drill
multilateral wells. Based on this
experience, we will decide whether
the practice should be adopted
elsewhere.
Thanks to production maintenance
projects at the existing fields and
the non-capital-intensive devel-
opment of the Beregovoye field’s
lower horizons, annual gas out-
put in the period until 2022 is
expected to reach 13 bcm.
In 2020, we produced
9.8 bcm
of natural gas
with the cumulative
gas output reaching
135 bcm
As at 1 January 2021,
total recoverable
АВ1С1+В2С2 natural
gas reserves totalled
522 bcm
and oil and gas
condensate reserves
amounted to
31 mmt
OTHER PROJECTS
In 2020, Rosneft continued to
develop prospective gas produc-
tion centres at its existing fields in
Eastern Siberia and the Republic
of Sakha (Yakutia).
Indian Oil Corporation Limited
and Bharat PetroResources
Limited continued to develop the
Srednebotuobinskoye oil and gas
condensate field, which is set to
become the place of a major gas
production project.
design documentation for the pro-
ject’s first phase, which targets an
annual output of up to 8.7 bcm.
In 2021, Rosneft plans to receive
survey reports and complete the
design documentation.
To expand gas production in the
Yamal-Nenets Autonomous Area,
we also acquired the Zapadno-
Minkhovsky subsurface site on
the Gydan Peninsula (area of fed-
eral importance), including an area
in the Taz Estuary of the Kara Sea,
at an auction held in December
2020.
Verkhnechonskneftegaz
Rosneft and Beijing Enterprises
Group Company Limited1
were jointly exploring the
Verkhnechonskoye oil and gas
condensate field in the Irkutsk
Region.
Our strategic partnership with
Beijing Enterprises Group
Company Limited is expected to
open up new opportunities for
monetising gas reserves in Eastern
Russia.
Kynsko-Chaselskoye Neftegaz
In the long term, we plan to use
the infrastructure of the Kynsko-
Chaselsky licence area to cre-
ate a new gas production centre
in the south-east of the Yamal-
Nenets Autonomous Area. We also
expect to develop seven previ-
ously acquired licence areas and,
in the longer run, the adjacent
areas in the eastern part of what
is open acreage today. The pro-
ject’s expected annual output is
15.7 bcm, with a potential to grow
to 19 bcm later.
Taas-Yuryakh Neftegazodobycha
In the Republic of Sakha, Rosneft,
BP and an Indian consortium
consisting of Oil India Limited,
In 2020, we completed the key
field works related to engineering
surveys, and started to develop
1 Beijing Enterprises Group Company Limited holds a 20% stake in Verkhnechonskneftegaz.
94
95
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors GAS PROCESSING AND BETTER APG UTILISATION
INTERNATIONAL GAS BUSINESS DEVELOPMENT
Our APG utilisation programme helps reduce the envi-
ronmental footprint and address ecological issues
in the producing regions by utilising associated petro-
leum gas.
One of the Company's key objectives is zero routine
flaring of APG.
documentation was developed,
and state expert review conclu-
sions were obtained. A decision
was made to initiate a procure-
ment procedure for the facility
construction services.
The Company has
vast gas resources
in the north
of the Krasnoyarsk
Territory and Yamal-
Nenets Autonomous
Area (including those
of the Vostok Oil
project) and is run-
ning an extensive
exploration pro-
gramme. In the long
run, this will enable
us to establish large-
scale LNG produc-
tion in the region.
LNG will be exported
to Asia-Pacific
and European mar-
kets via the Northern
Sea Route.
In 2020, the Company's APG utili-
sation rate, including fields under
development and greenfield pro-
jects at early stages of develop-
ment, stood at 74.8% – or 3 p.p.
lower than a year ago. If fields at
early stages of development are
excluded, the rate was 94.3%.
The Company continued its full-
scale efforts to improve utilisation
and completed 21 APG facilities in
the reporting period.
To further develop our gas pro-
cessing capabilities, we worked on
a project to build the Maisky gas
processing complex. The design
LNG PROJECTS1
To monetise gas reserves off
the coast of Sakhalin as part of
the Sakhalin-1 consortium, the
Company participates in the Far
Eastern LNG project set to build
an LNG plant with a capacity of
6.2 mmtpa near the De-Kastri
port in the Khabarovsk Territory.
In 2020, the project saw a FEED
contractor selected following the
tender, the FEED contract signed,
LNG marketing campaign devel-
oped, and the onshore facilities
of the offshore loading sys-
tem dismantled as part of site
preparations.
In 2021, we plan to complete
FEED, start preparation of a ten-
der to select an EPC contractor,
and launch the LNG marketing
campaign.
1 LNG – liquefied natural gas.
96
Tapping into gas markets abroad
and becoming a global player
in the world's LNG market are
among Rosneft's priorities. The
Company’s involvement in inter-
national gas projects will ensure a
cost-effective increase in natural
gas reserves and a balanced risk
profile of its asset portfolio.
International gas assets
Egypt: a 30% stake in the unique project to develop the Zohr field
together with Eni S.p.A., BP Plc, Mubadala, and EGAS, Egypt’s state oil
and gas company.
Vietnam: a 35% stake in the gas and condensate production project
at Block 06.1 (as the operator); a 100% ownership of Block 05.3/11 explora-
tion project; and a 32.67% stake in the Nam Con Son gas pipeline.
Brazil: a 100% stake in Solimões Basin exploration project as the operator.
Mozambique: a 20% stake in three offshore exploration blocks (А5-В,
Z5-C and Z5-D) with a potential for major gas discoveries.
Latvia: a 10.56% stake in AS Latvijas Gaze, a major natural gas supplier
in the Baltic markets, and AS Gaso, the operator of Latvia's gas distribu-
tion networks.
97
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors DEVELOPMENT OF INTERNATIONAL
PROJECTS IN PROMISING OIL AND GAS
REGIONS
Rosneft is a global energy com-
pany with a diversified portfo-
lio of international assets. The
Company’s mid-term strategic
objectives in international expan-
sion include managing its current
asset portfolio effectively. Over
the longer term, the Company
seeks to expand its international
presence in the world’s most
promising oil and gas regions,
grow its resource base, and
improve overall performance.
Our main goal of building a sus-
tainable and profitable interna-
tional presence is the creation of
additional value for our sharehold-
ers while acquiring new knowledge
and expertise for more effective
project development both in
Russia and abroad. Operating in
regions such as South America,
North and East Africa, the Middle
East, and the Asia-Pacific Region,
the Company actively develops
local partnerships that are aimed
at mutually beneficial implemen-
tation of development projects.
THE ZOHR PROJECT IN EGYPT
Actual production in 2020 (100%
of the project) totalled 21.7 bcm of
gas and 0.2 mmt of gas conden-
sate (Rosneft’s share: 3.89 bcm
of gas and 0.04 mmt of gas
condensate).
The entire volume of gas pro-
duction goes to Egypt’s national
gas system. The due amount of
gas is monetised under a long-
term state-guaranteed gas sup-
ply agreement with EGAS, an
Egyptian state-owned company.
Exploration on the Shorouk Block
(including the drilling of a pros-
pecting well) are planned to go on
until the end of July 2022.
In October 2017, Rosneft signed
on as a full partner with a 30%
stake in the project.
The Zohr field was discovered
by Eni in 2015. It covers an area
of 231 sq km, with sea depths
ranging from 1.2 to 1.7 km and a
gas deposit located at a depth
of 3.4 to 4 km. Zohr is one the
biggest offshore fields in the
Mediterranean Sea. Gas pro-
duction at the field started in
December 2017.
In 2020, two new production wells
were commissioned, bringing the
total number of wells to 15. The
entire range of Zohr’s produc-
tion wells, production capacities
and infrastructure facilities allow
it to produce, process and supply
up to 90 mmcm of gas per day to
the gas transportation system of
Egypt.
Actual production
in 2020 (100%
of the project)
totalled
21.7 bcm
of gas
0.2 mmt
of gas condensate
In 2020, the project
switched to a self-fi-
nancing scheme
98
99
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors OFFSHORE PROJECTS
IN VIETNAM
Actual production
in 2020 (100%
of the project)
totalled
3.2 bcm
of gas
and 0.03 mmt
of gas condensate
18 years
of safe offshore
operations with no
lost-time injuries
area is located in the region with
confirmed oil and gas bearing
potential and extensive infrastruc-
ture, and borders on the currently
developed fields of Block 06.1.
As part of the second exploration
phase at Block 05.3/11 in 2020,
the Company finished drilling
three exploration wells.
Rosneft also participates in the
offshore Nam Con Son pipeline
project, which involves the trans-
portation of gas and gas con-
densate produced at offshore
blocks in the Nam Con Son Basin
to the onshore processing facil-
ity and then to gas turbine power
plants for electricity genera-
tion. Shares of the project partici-
pants: Rosneft Vietnam Pipelines
B.V. – 32.7%, Perenco – 16.3%,
PVN – 51%.
The pipeline has a capac-
ity of 7.7 bcm per year, carry-
ing ca. 5.6 bcm of gas in 2020,
including the gas produced from
Block 06.1 and other operators in
the Nam Con Son Basin. Its opera-
tional efficiency is 100%.
Rosneft participates in exploration
and a joint international gas and
condensate production project at
Block 06.1 in the Socialist Republic
of Vietnam (Rosneft Vietnam
B.V. as the project operator holds
35%, ONGC – 45%, PVN – 20%).
The project is implemented in
line with the Production Sharing
Agreement (PSA). Block 06.1 con-
tains three gas condensate fields,
which are located 370 km offshore
in the Nam Con Son Basin at a
water depth of up to 190 m.
Actual Block 06.1 produc-
tion in 2020 (100% of the pro-
ject) totalled 3.2 bcm of gas and
0.03 mmt of gas condensate
(Rosneft’s share: 0.6 bcm of gas
and 0.01 mmt of gas condensate).
On 22 June 2020, Rosneft
Vietnam B.V. marked 18 years
of safe offshore operations with
no lost-time injuries, an impor-
tant milestone in its activity at
Block 06.1.
During the exploration at
Block 06.1 in 2019, the Company
drilled a prospecting well on
PLD’s Clastic Centre area, which
showed that it contains a profita-
ble hydrocarbon deposit. Rosneft
Vietnam B.V. is now negotiat-
ing the timeline for drilling an
exploration well with Vietnamese
regulators.
In 2013, the Company signed a
production sharing agreement for
the development of Block 05.3/11.
The project is currently at the
exploration stage. The licence
OFFSHORE PROJECTS
IN MOZAMBIQUE
In 2020, the consortium finished
processing and interpreting seis-
mic data for the blocks.
Rosneft participates in a consor-
tium implementing an exploration
project at three offshore blocks
(А5-В, Z5-C, Z5-D) in Mozambique
which were obtained following
the fifth licensing round. The con-
sortium includes Rosneft – 20%,
ExxonMobil (operator) – 40%,
Mozambique’s state-owned ENH –
20%, Qatar Petroleum – 10%,
Eni – 10%.
100
101
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors BRAZIL
IRAQ
Through its subsidiary, Rosneft
Brasil E&P Ltda, Rosneft engages
in a prospecting and explora-
tion project at licence areas in the
Solimões River Basin (State of
Amazonas), holding a 100% stake
and operatorship in these licences.
Exploration in the past years led
to a number of gas discoveries.
In 2020, the Company continued
studying the geological structure
and the oil and gas bearing poten-
tial of the basin.
IRAQ (KURDISTAN)
MYANMAR
The Company also continued seis-
mic surveying and preparing for
exploration drilling as part of the
first subphase under the PSA.
Since 2017, Rosneft has been run-
ning a hydrocarbon exploration
and production project in Iraqi
Kurdistan. The Company is the
project operator, holding an 80%
stake in five PSAs.
In 2020, it successfully finished the
production piloting and started
drilling the first exploration well at
the Bejil field.
Bashneft International B.V. is the
project operator and holds a 100%
stake in the hydrocarbon explora-
tion and production agreement for
Block 12.
In December 2019, the second
exploration well, Salman-2, was
completed and tested by the
Company at Block 12 in Iraq’s
south. In late 2019, following the
testing, the Company submitted
to the Iraqi side an application
for potential commercial discov-
ery and a further exploration pro-
gramme for the next two years.
As part of the further exploration
programme, the Company com-
menced 3D and 2D seismic sur-
veys in 2020. It plans to continue
exploration drilling in 2021.
The Company participates in a
project at Block EP-4 in Central
Myanmar through its subsidiary
Bashneft. A respective PSA was
signed in 2014 between Bashneft
International B.V. (90%, opera-
tor), Sun Apex Holdings Limited
(10%) and national regulator
Myanmar Oil and Gas Enterprise.
The first phase of exploration is
now underway. In 2021, as part of
the first phase, the Company plans
to drill a prospecting well on one
of the most promising areas of
Block EP-4.
102
103
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors DOWNSTREAM (REFINING
AND MARKETING)
The Company ranks No. 1 in Russia in terms of refining
capacity and throughput. It operates 13 large refineries,
which processed 93 mmt of oil in 2020.
Kaliningrad
Primorsk
Baltiysk
Ust-Luga
Saint-Petersburg
Murmansk
Arkhangelsk
Moscow
Ryazan
Yanos
Vankorneft
Rospan
Sibneftegaz
Uganskzneftegaz
Taas-Yuryakh Neftedobycha
Samotlorneftegaz
Nizhnevartovsk
oil refining assocoation
Samaraneftegaz
Syzran
refinery
Samara group refineries
NPCC
Ufa Group of refineries
Taganrog Volga
and Don
basin
Yeysk
Caucasus
Taman
Gelendzhik
Tuapse
Azov
Novorossiysk
Tuapse
refinery
Sochi
Ufaorgsintez
Rivers in Western SIberia
Otradnensky
and Neftegorsky
GPSS
Buzuluksky GPP
Orenburgneft
Verkhnechonskneftegaz
Tomsk
Achinsk refinery
Angarsk refinery
Angarsk polymer plant
KEY RESULTS AND FOCUS AREAS IN 2020
(OIL REFINING)
In the reporting year, Rosneft’s
Russian refineries processed
93.0 mmt of crude oil (104.0 mmt
with foreign assets included). The
refining depth and light product
yield in 2020 were 74.5% and 57.1%,
respectively.
In 2020, the Company’s oil refining activities were
aimed at satisfying the demand for quality petroleum
products.
Rosneft continues to implement
existing facility maintenance ini-
tiatives and refinery upgrade
programmes. The total spend-
ing on Oil Refining maintenance
and upgrade projects under IFRS
amounted to RUB 34.4 bln in
the reporting year. The Company
remains focused on highly effi-
cient projects to debottleneck the
refinery configuration by over-
coming production and technical
constraints, and developing
bitumen production, as well as
increasing operational efficiency
and reducing operating costs.
Retail coverage
Producing assets
Company’s refineries
Petrochemical plants
Ports of presence
Company’s GPPs
De-Kastri
Komsomolsk refinery
Prigorodnoe
Komsomolsk-on-Amur
Vanino
Kholmsk
Korsakov
Vladivostok
Kozmino
Slavyanka
Nakodka
Vostochny
74.5%
refining depth in 2020
57.1%
light product yield
KEY FOCUS AREAS IN 2020
REFINERY UPGRADE
PROGRAMME IN RUSSIA
The Company continued to imple-
ment the refinery upgrade pro-
gramme in the Russian Federation,
which involves the construction
and renovation of process units
and facilities in order to increase
the depth of processing, light
product yield, and the output of
high-quality motor fuels and pro-
vide the Company's sales chan-
nels with petroleum products
that meet the requirements of
the Technical Regulations of the
Customs Union.
Most upgrade projects are in the
active stage of implementation,
with the bulk of equipment pur-
chased, engineering design final-
ised, construction and installation
in progress. Top priorities are
hydrocracking units at the Tuapse,
Achinsk, Novokuibyshevsk and
Komsomolsk refineries.
When completed, the programme
will improve the product portfo-
lio and boost the competitiveness
and profitability of the Russian
refineries.
Achievements in 2020
• The Kuibyshev Refinery com-
pleted construction of a central
laboratory for the MTBE unit and
obtained a certificate confirming
its compliance with the design
documentation.
Refinery maintenance programme
in Russia
Rosneft continues to implement
existing facility maintenance ini-
tiatives and refinery upgrade
programmes. The total spend-
ing on Oil Refining maintenance
and upgrade projects under IFRS
amounted to RUB 34.4 bln in
the reporting year. The Company
remains focused on highly effi-
cient projects to debottleneck the
refinery configuration by overcom-
ing production and technical con-
straints, and developing bitumen
production, as well as increasing
operational efficiency and reducing
operating costs.
Rosneft continued working to
ensure compliance with the
instructions issued by regulatory
authorities, minimise environmen-
tal risks, align rules and proce-
dures with relevant requirements,
replace worn-out equipment, and
implement target programmes at
the Company’s refineries in Russia.
In 2020, Rosneft continued to
implement:
• a large-scale programme to
comply with instructions issued
by the Federal Service for
Environmental, Technological
and Nuclear Oversight
(Rostekhnadzor) following
the inspections of production
facilities;
• a programme for measuring
in-house material flows;
• The Yaroslavl Refinery developed
• projects for emergency recov-
a baseline design for the die-
sel fuel hydrotreating process as
part of the deep conversion unit
construction project.
ery of gas fractionation section
of the Achinsk Refinery's LK-6Us
unit and a hydrocracking unit at
Bashneft-Ufaneftekhim;
104
105
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors • measures aimed at reducing
• The Angarsk Petrochemical
• elementary sulphur complex at
unscheduled production stop-
pages: replacement of worn-out
equipment, implementation of
industrial and fire safety pro-
jects, as well as targeted pipe-
line replacement and reliability
improvement programmes.
NEW PRODUCTS
In 2020, the product range of
Russian refineries was expanded
to meet market demand:
• The Syzran Refinery and Achinsk
Refinery started producing RMLS,
a low-sulphur marine fuel compli-
ant with IMO requirements. The
fuel contributes to minimising the
bunker’s environmental footprint.
Company began manufactur-
ing an advanced mineral base for
drilling fluids.
the Ryazan Refinery;
• construction of two additional
elemental sulphur production
lines at Bashneft-UNPZ.
ENVIRONMENT
In 2020, the Company continued
to implement a number of large-
scale projects to minimise the
environmental impact of Rosneft’s
operations, including:
• renovation/upgrade of waste-
water treatment facilities at
the Ryazan, Kuibyshev and
Novokuibyshevsk refineries, and
an oil sludge disposal unit at
Bashneft-Ufaneftekhim;
• construction of a new two-unit
desulphurisation system and an
IMPORT SUBSTITUTION,
DEVELOPMENT AND LAUNCH
OF NEW PRODUCTS,
AND PRODUCT APPROVAL
PROCESSES
In 2020, the Ryazan Refinery
switched another catalytic
reforming unit over to a catalyst
produced in house. It is the fourth
out of five reforming units at the
Ryazan Refinery to have success-
fully replaced costly foreign cata-
lysts with Russian-made
products. The catalyst produced
by the Angarsk Plant of Catalysts
and Organic Synthesis deliv-
ers outstanding performance in
terms of its stability and product
yield from hydrocarbon feedstock.
In October 2020, the first com-
mercial batch of the in-house pro-
duced hydrotreating catalyst was
loaded into the diesel fuel hydro-
treater 24/7-2bl at the Ryazan
Refinery. Before that, the catalyst
produced by RN-Kat, Rosneft’s
specialist subsidiary, had suc-
cessfully passed production tests
at the Company’s Ufa Group of
Refineries. This is the first diesel
fraction hydrotreating catalyst
for the Russian refining industry
capable of fully replacing
its foreign peers to produce the
Euro-5 ultra-low-sulphur (below
10 ppm) diesel.
IDZ-028RN, an isodewaxing cat-
alyst developed by RN-TsIR, suc-
cessfully passed pilot tests at
the Angarsk Plant of Catalysts
and Organic Synthesis. The
Novokuibyshevsk Catalysers
Plant has produced a commer-
cial batch of the catalyst for the
Kuibyshev Refinery. Meanwhile,
Bashneft-UNPZ has been using a
diesel fraction hydrotreating cat-
alyst developed by RN-TsIR and
produced by the Angarsk Plant of
Catalysts and Organic Synthesis.
The catalyst, Ht-100RN, has so far
proved more reliable
than foreign-made alternatives.
Another product, RN-Kat's cat-
alyst for hydrodesulphurisation
of vacuum gasoil, is being pro-
duction-tested at unit 24/8 of
the Syzran Refinery. Preliminary
results show it to be on par with
the previously-used imported
alternatives. Finally, the Ryazan
and Strezhevskoy refineries are
testing the guard beds of gasoline
fraction hydrotreating catalysts
developed by VNII NP.
The Saratov Refinery started
producing diesel fuel with a
new Russian-made additive
RN-DDP-2401. The new additive
demonstrates excellent perfor-
mance, with some of its properties
106
107
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors being even better than those of
foreign-made alternatives. It sub-
stantially increases the cold filter
plugging point in cold-weather
and winter diesel fuels and main-
tains their performance properties
during low-temperature storage.
REFINERIES’ OPERATIONAL
EFFICIENCY IMPROVEMENT
IN 2020
In 2020, the operational effi-
ciency improvement programme
had an actual economic effect of
RUB 22 bln (including quick diag-
noses and additional measures
with an EBITDA impact).
Measures to cut energy consump-
tion produced an economic effect
of over RUB 1.4 bln, positively
affecting the energy efficiency by
2.8 p.p.
In 2020, the Oil Refining seg-
ment met the approved energy
saving target. The actual sav-
ings amounted to over 200 ktce
against the plan of 120 ktce.
COMPREHENSIVE
ACCELERATED DIGITAL
TRANSFORMATION PLAN
In 2020, the Company continued
working on initiatives under the
consolidated strategy implemen-
tation plan in Oil Refining. They
included:
• approving the funding to roll out
a standardised solution for opti-
mised blending of dark petro-
leum products at five refineries;
• signing contracts for the imple-
mentation of an optimised pro-
cess control system at 47 units
of the Ryazan and Saratov refin-
eries, and Bashneft. The work to
• adopt the process control sys-
tem started at six units as pro-
vided for in the roadmap;
• approving functional and engi-
neering specifications for the
development and deployment
of the Digital Plant information
system at Bashneft;
• developing and updating
24 process unit models;
• approving functional and engi-
neering specifications to build a
single information space at the
production control centre of the
Syzran Refinery;
• a project launched to develop
and deploy a manufacturing
execution system in Oil Refining.
Main areas of operational
efficiency improvement
programme
Key initiatives of 2020
• Reducing the output of fuel oil and implementing new solutions to optimise dark petroleum product
output
Capacity and product yield
optimisation
petroleum products
• Replacing and upgrading fractionation trays of fractional columns at atmospheric and vacuum distillation
• Upgrading intra-plant communications to streamline process flows and increase the output of high-margin
units
• Increasing the output through optimisation/alignment of overhauls and refinery operations without reduc-
tion in scope
Reducing energy
consumption
• Renovating heat and steam condensate systems at production facilities
• Improving efficiency of waste heat boilers and in-house energy generation
• Comprehensive inspections and maintenance of process furnaces to enhance their efficiency rate
• Improving efficiency of heat exchangers
OIL REFINING
RUSSIA
FOREIGN ASSETS
Rosneft operates the largest
oil refining capacities in Russia
and controls refineries in the key
regions of the country. In 2020,
the Company's domestic capac-
ities processed 93.0 mmt of oil,
while their average Nelson Index
stood at around 8.1.
8.1
average Nelson Index
of Rosneft’s Russian
refineries
In Germany, the Company’s
subsidiary Rosneft
Deutschland GmbH holds inter-
est (24% to 54%) in three refin-
eries, controls more than 12% of
the country's oil refining capaci-
ties, and ranks third by capacity
(12.8 mmtpa). Its facilities have an
average Nelson Index of 9.0.
In Belarus, Rosneft indirectly
holds a 21% stake in the Mozyr
Refinery.
The Company also holds a 49%
stake in India’s second-largest
high-tech refinery in Vadinar with
a total throughput capacity of
20 mmtpa and a Nelson Index of
11.8.
The Company joined efforts with
its partners in Asia Pacific to
design a refinery and a petro-
chemical complex in Indonesia and
finalise a refinery project in China.
Rosneft’s refining capacities
17.1
13.1
12.0
9.0
10.2
9.3
7.5
7.1
8.5
5.9
23.5
15.5
7.0
6.3
7.5
7.3
8.3
6.7
7.0
8.5
6.5
4.5
Tuapse Refinery Achinsk
Refinery
Angarsk
Petrochemical
Company
Komsomolsk
Refinery
Ryazan
Refinery
Saratov
Refinery
Slavneft-
YANOS
(50%)
Novo-
kuibyshevsk
Refinery
Kuibyshev
Refinery
Syzran
Refinery
Ufa Group of
Refineries
Planned capacity for 01.01.2021, mmt
Crude input in 2020
1.9
1.9
Small
refining
facilities1
Light products in %
50.6
51.1
64.1
50.7
58.6
50.5
55.6
55.1
58.4
55.7
65.7
Not calculated
108
109
1 Small refining facilities include Nizhnevartovsk Refinery, Krasnoleninsky Refinery, Purneftepererabotka and Strezhevskoy Refinery (50%);
excluding processable waste.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors REFINING CAPACITIES IN RUSSIA
In 2020, investments were aimed
at maintaining the existing facili-
ties, building a hydrocracking and
hydrotreating complex with off-
site facilities, implementing oper-
ational efficiency projects, and
developing designs for other facil-
ity upgrade projects.
In 2020, the Novokuibyshevsk
Refinery carried out comprehen-
sive repairs of 18 units; a new
explosion-proof control room was
installed at AVT-11 distillation unit.
Processed in 2020:
6.7 mmt
The refining depth was
74.1%
In 2020, investments were focused
on further construction of a vac-
uum gasoil hydrotreating unit,
hydrogen and sulphur production
units, and off-site facilities, as well
as maintenance and operational
efficiency initiatives.
Throughput in 2020:
4.5 mmt
The refining depth was
66.2%
NOVOKUIBYSHEVSK REFINERY
Oil refining product mix, mmt
6.1
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
KUIBYSHEV REFINERY
Oil refining product mix, mmt
4.1
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
1 Including marine fuel.
110
—
1.2
0.2
2.2
1.6
0.8
0.5
0.6
–
1.4
1.4
0.1
SYZRAN REFINERY
Oil refining product mix, mmt
6.2
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
In 2020, investments were focused
on further construction of a vac-
uum gasoil hydrotreating unit,
hydrogen and sulphur production
units, off-site facilities, an FCC
unit, a diesel fuel hydrotreatment
unit, as well as maintenance and
operational efficiency initiatives.
Debottlenecking projects in 2020
included a contract to purchase a
vacuuming system for the ELOU-
AVT-6 unit with a supporting fluid
discharge system to reduce cor-
rosiveness, sulphide content and
water as part of the project to
increase the vacuum gasoil extrac-
tion at the ELOU-AVT-6 unit).
0.2
1.1
–
2.2
1.3
1.4
The Company launched produc-
tion of RMLS 40, a low-sulphur
residual marine fuel compliant
with the IMO requirements intro-
duced early in 2020.
RYAZAN REFINERY
Oil refining product mix, mmt
12.6
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
1 Including marine fuel.
In 2020, investments were aimed
at maintaining the existing facili-
ties, implementing operational effi-
ciency projects, and developing
designs for other facility upgrade
projects.
The Company launched pro-
duction of RMLS 40 (type EII), a
low-sulphur marine fuel with sul-
phur content below 0.5%, which
makes it fully compliant with the
International Convention for the
Prevention of Pollution from Ships
(MARPOL).Process pipelines in
workshop No. 1 were upgraded,
with the tar and oil fuel block of
the AT-6 unit connected.
0.3
2.7
0.8
3.7
3.3
1.8
Throughput in 2020:
6.5 mmt
The refining depth was
79.0%
Processed in 2020:
13.1 mmt
The refining depth was
74.3%
111
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors In 2020, the refinery focused
on the maintenance of existing
facilities, improving operational
efficiency, and highly efficient
debottlenecking projects related
to facility configuration.
Turnkey upgrade of the process
furnaces P-1 and P-2 was com-
pleted at the diesel fuel hydro-
treater L-24-6, facility No. 2. A
compressor with regulated air sup-
ply was installed at the bitumen
production unit.
Processed in 2020:
6.3 mmt
The refining depth was
80.1%
In 2020, investments were focused
on large-scale renovation pro-
jects, including the construction of
a hydrocracking and hydrotreat-
ing complex with off-site facili-
ties. Other projects were related
to maintenance of the existing
facilities.
The Company completed the con-
struction to launch fuel oil qual-
ity control procedures using
an inline viscosity meter at the
ELOU-AVT-12 unit.
Processed in 2020:
9.0 mmt
The refining depth was
65.4%
SARATOV REFINERY
Oil refining product mix, mmt
6.1
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
TUAPSE REFINERY
Oil refining product mix, mmt
9.0
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
1 Including marine fuel.
112
0.2
1.1
–
2.0
1.2
1.7
1.6
–
–
2.8
3.1
1.4
Throughput in 2020:
7.1 mmt
The refining depth was
65.6%
In the reporting year, investments
were focused on the comprehen-
sive upgrade programme, including
the construction of a hydrocrack-
ing complex with off-site facilities
and a petroleum coke production
unit, as well as on operational effi-
ciency improvement and main-
tenance of the existing facilities,
including the restoration of a gas
fractionation section of LK-6Us
unit.
Work started to assess the feasi-
bility of gasification of the Achinsk
Refinery.
The refinery started produc-
ing RMLS, a low-sulphur marine
fuel compliant with IMO 2020
requirements.
In 2020, investments were focused
on the comprehensive upgrade
programme, including the con-
struction of sulphuric acid alky-
lation units and a diesel fuel
hydrotreater with off-site facilities,
as well as on operational efficiency
improvement and maintenance of
the existing facilities.
Processed in 2020:
9.3 mmt
The refining depth was
82.2%
ACHINSK REFINERY
Oil refining product mix, mmt
6.9
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
ANGARSK PETROCHEMICAL
COMPANY
Oil refining product mix, mmt
8.2
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
1 Including marine fuel.
0.1
1.0
0.1
2.3
2.3
1.0
0.3
1.1
0.5
3.3
1.4
1.5
113
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors KOMSOMOLSK REFINERY
Oil refining product mix, mmt
5.7
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
In 2020, investments were focused
on the comprehensive upgrade
programme, including the con-
struction of a hydrocracking and
hydrotreating complex with off-
site facilities, as well as on oper-
ational efficiency improvement
and maintenance of the existing
facilities.
The ELOU AVT-2 crude oil distilla-
tion unit was upgraded, with inter-
nals replaced in two of its columns.
Repairs and recovery activities
were completed at the delayed
coking unit.
A boiler house was upgraded.
0.6
0.4
–
2.0
2.1
0.6
Throughput in 2020:
5.9 mmt
The refining depth was
63.1%
SMALL REFINING FACILITIES
Oil refining product mix, mmt
1.8
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
0.9
—
0.1
0.6
—
0.1
The Company holds inter-
ests in several small refin-
ing facilities in Russia, including
the Nizhnevartovsk Refinery,
Krasnoleninsky Refinery,
Purneftepererabotka and
Strezhevskoy Refinery (50%). In
2020, these facilities processed
a total of 1.9 mmt of crude oil,
including 1.5 mmt processed by the
Nizhnevartovsk Refinery, the larg-
est of them.
BASHNEFT REFINING COMPLEX:
Oil refining product mix, mmt
13.5
Naphtha
Motor gasoline
Kerosene
Diesel fuel1
Fuel oil
Other
0.4
2.9
0.1
6.1
1.9
2.2
1 Including marine fuel.
114
Bashneft-Novoil,
Bashneft-Ufaneftekhim,
and Bashneft-UNPZ
In 2020, investments were largely
focused on maintenance of the
existing facilities, aligning rules
and procedures with relevant
requirements, implementation of
a comprehensive upgrade pro-
gramme and operational efficiency
improvements.
Throughput in 2020:
15.5 mmt
The refining depth was
86.0 %
NOVOKUIBYSHEVSK OILS AND ADDITIVES PLANT
In 2020, the plant continued to
implement its oil quality improve-
ment programme as part of the
hydrogenation facility construc-
tion projects (Phase 1 and 2) and
proceeded with operational effi-
ciency, environmental, infrastruc-
tural and capacity maintenance
initiatives.
Processed in 2020:
936 kt
of feedstock and made
390 kt
of marketable
products
1 Including marine fuel.
115
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PETROLEUM PRODUCT QUALITY CONTROL
The motor fuels produced by
Rosneft’s refineries have high per-
formance and environmental char-
acteristics and meet the K5 fuel
class requirements outlined in
the Technical Regulations of the
Customs Union CU TR 013/2011
On Requirements for Motor
and Aviation Gasoline, Diesel
and Marine Fuels, Fuels for Jet
Engines, and Fuel Oil. The qual-
ity of Rosneft’s motor fuels has
been confirmed by qualification
and bench tests run by specialised
R&D centres, and various awards
and accolades.
Quality management systems at
the Company’s refineries comply
with the ISO 9000 international
standards and ensure high-quality
production and a minimum num-
ber of customer claims.
The Company’s refineries have a
multi-stage Quality Control sys-
tem for feedstock and marketable
products, including incoming con-
trol of feedstock, chemicals, and
additives supplied to the plants,
as well as multi-stage monitoring
and quality control of components
and marketable products through-
out the entire production cycle, i.e.
from feedstock delivery to a facil-
ity to product sales.
Since 2019, the Company has
been conducting enhanced qual-
ity monitoring of oil delivered for
refining.
The testing laboratories at the
refineries are equipped with state-
of-the-art equipment and analyt-
ical instruments to ensure highly
accurate and reliable test results.
Product compliance is confirmed
through certification performed
with the assistance of accredited
testing laboratories and leading
research institutes.
116
The Company’s refineries regu-
larly hold Quality Days attended
by the employees of relevant units
to study the best practices for
improving production efficiency
and quality control, and share
experience in ensuring quality and
safety of petroleum products.
In 2020, the Company continued
expanding the range of additives
that improve performance char-
acteristics of motor fuel. These
activities helped reduce addi-
tives purchase costs by consid-
erably increasing the number of
available alternatives. As part
of the import substitution pro-
gramme, the Company’s refineries
use only anti-wear additives pro-
duced by the Group Subsidiaries
in Russia. In addition, Rosneft –
MP Nefteprodukt launched the
production of dispersant and
depressor additives for diesel fuels
in 2020.
Consistent measures to improve
and control the quality of petro-
leum products resulted in more
stringent requirements for
AI-95-K5 Euro-6 motor gaso-
line with improved environmen-
tal and performance properties.
This gasoline contains less sul-
phur, benzene, aromatic and ole-
finic hydrocarbons and resins, and
has a longer shelf life. Its produc-
tion was launched at Bashneft
(Bashneft-Novoil), Saratov
Refinery, Ryazan Refinery and
Syzran Refinery. The product will
be marketed in the Republic of
Bashkortostan, Krasnodar Territory,
Ryazan, Kaluga, Tula and Moscow
Regions, and the city of Moscow.
OVERVIEW OF INTERNATIONAL OIL REFINING ASSETS
AND PROJECTS
ROSNEFT DEUTSCHLAND
GMBH (RDG)
The Company entered the German
petroleum product market in 2011
when it acquired a 50% stake in
Ruhr Oel GmbH (ROG). Following
ROG reorganisation in 2016,
Rosneft gained direct control
over more than 12% of Germany’s
oil refining capacities, with a
total throughput capacity of
about 12.5 mmtpa. The Company
became a shareholder in three
major refineries: Bayernoil (12.5%),
MiRO (12%), and PCK Schwedt
(35.42%). It then doubled its
shares in the refineries to 25%,
24% and 54.17%, respectively. At
the same time, BP accumulated a
100% share in the Gelsenkirchen
Refinery.
In December 2019, Rosneft
Deutschland GmbH closed the
deal to acquire 3.57% of shares in
Bayernoil Raffineriegesellschaft
mbH from BP Europa SE, increas-
ing its stake to 28.57%. As a
result, the Company saw its
share in the refining capaci-
ties of Bayernoil grow to almost
3 mmtpa, with its total through-
put capacity at German refiner-
ies reaching 12.8 mmtpa, which
strengthened its positions both in
Bavaria, one of the largest indus-
trial regions of Germany, and in
Austria.
Rosneft is the third largest player
in the German oil refining mar-
ket. Operating activities are car-
ried out by its subsidiary, Rosneft
Deutschland GmbH, established
in 2017. Rosneft supplies almost
a quarter (about 23 mmtpa) of
crude oil imports to Germany.
Following the joint venture
restructuring agreement, Rosneft
and BP decided on the gradual
adaptation of the petroleum prod-
uct sales chain to ensure full
117
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors and timely performance under the
contracts with refinery customers
during the transition phase, which
was completed as scheduled.
On 1 January 2019, Rosneft
Deutschland GmbH initiated
direct sales of petroleum prod-
ucts manufactured at the three
German refineries partially owned
by Rosneft. The product mix
includes gasoline, diesel, heating
oil, jet fuel, LPG, bitumen, fuel oil,
and petrochemical products. The
Company is a leader in the German
petroleum wholesale market.
Apart from direct supplies from its
refineries, the Company uses over
30 export terminals in Germany
to deliver petroleum products by
road, rail, and river. The compa-
ny’s customer base includes more
than 600 enterprises in Germany,
Poland, the Czech Republic,
Switzerland, Austria, and France,
as well as Turkey, Singapore and
Thailand.
The company owes the success of
its large-scale sales to the sim-
ilar experience it had with bitu-
men supplies in 2018. That year,
Rosneft Deutschland GmbH was
supplying its products to over
130 customers across Germany.
Apart from that, Rosneft
Deutschland GmbH signed con-
tracts on into-plane fuelling with
airports in Munich, Berlin and
Stuttgart to expand its jet fuel
market presence in Germany. In
the reporting year, customers of
Rosneft Deutschland GmbH were
successfully transferred to the
new Berlin Brandenburg Airport.
As a shareholder of PCK Refinery
in Brandenburg, Rosneft
Deutschland GmbH supplies
about a half of the total kerosene
MiRO GmbH & Co. Refinery KG is located in Karlsruhe,
Baden-Württemberg. This is the largest oil refinery
in Germany and one of the biggest and most innova-
tive plants in Europe. Capacity – 14.9 mmtpa (Rosneft's
share – 3.6 mmtpa), the Nelson Index – 9.4.
PCK Raffinerie GmbH is located in Schwedt,
Brandenburg. Thanks to its location, it can be supplied
with Urals through the Druzhba pipeline. Capacity –
11.6 mmtpa (Rosneft's share – 6.3 mmtpa), the Nelson
Index – 9.8.
Bayernoil Raffineriegesellschaft mbH supplies
fuel to Bavaria and northern Austria. Capacity –
10.3 mmtpa (Rosneft's share – 2.9 mmtpa), the Nelson
Index – 6.8.
NAYARA ENERGY LIMITED
In August 2017, Rosneft closed the
deal to acquire 49.13% of shares in
Essar Oil Limited (renamed Nayara
Energy Limited in May 2018), an
Indian company that owns a major
refinery in Vadinar and a retail chain
of filling stations across India.
The Vadinar refinery has a capac-
ity of 20 mmtpa and ranks second
in the Indian market by throughput.
It is among the world’s Top 10 most
complex refineries, with a Nelson
Index of 11.8. It is highly flexible as it
can process heavy and extra-heavy
crudes, which account for over 90%
of its annual throughput, and has
achieved high operational efficiency
for its assets.
The refinery owns a deep-water
port that can accommodate VLCC
supertankers, while its power sta-
tion independently provides ample
power supply.
Nayara Energy Limited runs a large
network of filling stations under the
Essar and Nayara brands in India.
As at the end of December 2020,
the network included 5,975 operat-
ing stations and had three in-house
and 13 rented oil depots.
Nayara Energy Limited operates in
30 out of 36 regions of India and
accounts for around 5.8% of the
Indian market in terms of sales. The
company is planning to increase
the number of filling stations to
7.6 thousand by 2024, selecting
the most promising territories for
development.
Nayara Energy Limited is imple-
menting a phased development
programme for its Vadinar refinery.
In October 2020, the Board of
Directors of Nayara Energy Limited
made a final investment decision to
green-light the first phase of this
programme.
During this phase, the company
will reconstruct the catalytic crack-
ing facility and build new polypro-
pylene production units with an
annual capacity of up to 450 kt.
consumed at Berlin airports. Due
to COVID-19 restrictions, jet fuel
output decreased in 2020.
As part of the initiative to cre-
ate a marketing function, Rosneft
Deutschland GmbH deployed
an advanced enterprise resource
planning system SAP S/4HANA.
The deployment project turned to
be the largest in the European oil
and gas industry and one of the
biggest worldwide in terms of data
volume transferred. S/4HANA is
a top-notch resource planning
solution.
MOZYR REFINERY
The Company indirectly holds a
21% stake in the Mozyr Refinery
(Belarus) through Slavneft. In
2020, Rosneft’s share in the
throughput of the Mozyr Refinery
amounted to 1.9 mmt. The
Company is completing its invest-
ment project to construct a heavy
residue hydrocracking unit sched-
uled to be launched in 2021.
118
119
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PROMISING FOREIGN PROJECTS
PETROCHEMICALS
In order to expand its presence in the growing high-margin markets, Rosneft
is carrying out a number of promising oil refining and petrochemicals projects
in Indonesia and China.
The Board of Directors of
PetroChina-Rosneft Orient
Petrochemical has approved pro-
cess configurations of the refinery
and the aromatic hydrocarbons
complex. Following a change
in the Chinese petroleum prod-
uct market, the parties agreed to
update the project’s feasibility
study.
REFINERY
AND PETROCHEMICAL
COMPLEX CONSTRUCTION
IN TUBAN
The project is implemented in
cooperation with Pertamina,
an Indonesian oil and gas com-
pany, through the establish-
ment of a joint venture named
РТ Pertamina Rosneft Pengolahan
dan Petrokimia (45% owned by
Rosneft and 55% by Pertamina)
on 28 November 2017.
Its design capacity will be up to
15 mmtpa for primary oil refining,
over 1 mmtpa for ethylene produc-
tion and 1.3 mmtpa for aromatic
hydrocarbons production.
In October 2019, РТ Pertamina
Rosneft Pengolahan
dan Petrokimia signed a contract
with Spanish Tecnicas Reunidas
SA on the basic (BED) and front-
end engineering design (FEED)
for an oil refining and petro-
chemical complex in Tuban (Java,
Indonesia). The complex is sched-
uled to be commissioned in 2026.
PETROCHINA-ROSNEFT
ORIENT PETROCHEMICAL
COMPANY, TIANJIN (JOINT
VENTURE)
The ownership structure of the
Tianjin Refinery includes:
• Rosneft (49%);
• China National Petroleum
Corporation (51%).
The refinery’s design capacity is
16 mmtpa.
UFAORGSINTEZ
Ufaorgsintez is one of the larg-
est petrochemical enterprises in
Russia. It focuses on the produc-
tion of phenol, acetone, high-den-
sity polyethylene, polypropylene
and its copolymers, synthetic rub-
ber, and other organic synthesis
products. The plant accounts for
over 30% of phenol produced in
Russia and is a leading producer
of acetone. Ufaorgsintez has a
capacity of more than 850 ktpa.
The company’s products are
widely used to manufacture plexi-
glass, phenol formaldehyde resins,
alkylphenols, plastic films, indus-
trial rubbers, and other products
for industrial, agricultural, mechan-
ical engineering, consumer goods,
healthcare, electronics and electri-
cal engineering applications.
Some of its organic synthesis
products are unrivalled in Russia.
The company’s ethylene propyl-
ene diene monomer (EPDM) rubber
is a component of various indus-
trial rubber products, including
those used in the defence industry
and cable insulation in electrical
appliances.
In 2020, the company processed
643.9 kt of hydrocarbon feedstock
and manufactured 576.2 kt of mar-
ketable products.
Petrochemical assets form a cru-
cial part of Rosneft’s production
complex. High product quality
and continuous improvement of
production processes provide the
Company with a competitive edge
over other Russian and foreign
players in the domestic market.
In 2020, the Angarsk Polymer
Plant processed 735.3 kt of hydro-
carbon feedstock, while its output
of high value-added marketable
products amounted to 576.8 kt.
NOVOKUIBYSHEVSK
PETROCHEMICAL COMPANY
Rosneft’s petrochemical complex
comprises:
• Angarsk Polymer Plant;
• Novokuibyshevsk Petrochemical
Company;
• Ufaorgsintez.
The Novokuibyshevsk
Petrochemical Company is one of
the largest gas processing, pet-
rochemical, and organic synthesis
companies in Russia and Eastern
Europe.
Rosneft also has petrochemi-
cal production lines at Bashneft-
Ufaneftekhim (an aromatic
hydrocarbon production complex)
and the Angarsk Petrochemical
Company (methanol, butyl alcohol,
and amine production units).
Its product mix comprises over
30 articles, including tert-amyl
methyl ether (TAME), synthetic
phenol, synthetic ethanol and ace-
tone for industrial application,
LPG, and para-tertiary butylphe-
nol (PTBP).
ANGARSK POLYMER PLANT
The plant’s main products include
ethylene, high-density polyeth-
ylene, propylene, benzene, buty-
lene-divinyl fraction, ethylbenzene,
styrene, polystyrene, etc.
The company produces 300 ktpa
of TAME, a high-octane addi-
tive for motor fuels, and has PTBP
production facilities unrivalled in
Russia and the CIS. It is also the
only synthetic ethanol manufac-
turer in the country.
As of now, the Angarsk Polymer
Plant is the only polystyrene and
high-density polyethylene man-
ufacturer in Eastern Siberia. The
plant’s annual output includes
over 200 kt of ethylene, over
100 kt of propylene, and 60 kt
of benzene. Ethylene is partially
supplied to Sayanskkhimplast as
feedstock, while the remainder is
used to produce high-density pol-
yethylene and other petrochem-
icals. The plant uses straight-run
gasoline and hydrocarbon gases
mainly produced by the Angarsk
Petrochemical Company as
feedstock.
In 2020, the company processed
877.4 kt of feedstock and manu-
factured 839.9 kt of marketable
products.
The company is carrying out a pro-
ject to build a pilot plant for the
production of synthetic polyal-
phaolefin base oils (PAO) charac-
terised by high viscosity and a low
freezing point. At present, polyal-
phaolefin base oils are not pro-
duced in Russia.
120
121
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors unit and the Zaykinskoye GPP,
processed 1.12 bcm of associated
petroleum gas and unstable gas
condensate derived from the oil
and gas fields of Orenburgneft.
Its main products are combus-
tible natural dry stripped gas, liq-
uefied gases such as industrial
propane-butane, autogas, indus-
trial propane, motor propane and
industrial butane, as well as sta-
ble natural gasoline and industrial
sulphur.
Currently, an investment project
is under way to build a 1.2 mmcm
gas desulphurisation unit at the
Zaykinskoye GPP, which will ena-
ble BGPP to process additional
volumes of sulfur-associated
petroleum gas from the prospec-
tive license areas of Orenburgneft.
PRODUCTION OF CATALYSTS
NOVOKUIBYSHEVSK
CATALYSERS PLANT
In 2019, the Novokuibyshevsk
Catalysers Plant launched Russia’s
first-ever advanced pilot test-
ing facility for hydrotreating cat-
alysts. The new facility is aimed
at testing technologies to man-
ufacture new catalysts designed
by Rosneft’s and Russian R&D
providers with a view to ramping
up large-scale production. Using
the pilot facility’s equipment, the
plant can test both specific pro-
duction stages and the complete
production cycle of alumina-based
catalysts. In 2020, the facility pro-
duced its first commercial batch of
diesel fuel isodewaxing catalysts
developed by RN-TsIR. The cat-
alysts are designed to manufac-
ture winter and Arctic diesel fuels
at the Kuibyshev Refinery with-
out using depressor additives. If
industrial tests of these catalysts
at the Kuibyshev Refinery (sched-
uled for 2021) are successful, the
production of isodewaxing cat-
alysts will be expanded, gener-
ating additional profits both for
Rosneft's refineries and the cata-
lyst manufacturer.
In 2020, the catalytic regenera-
tion unit of the Novokuibyshevsk
Catalysers Plant recovered
319 tonnes of hydrotreat-
ing catalysts to be reused
at the Company’s refineries
and 256 tonnes of catalysts to be
used at other Russian refineries.
ANGARSK PLANT
OF CATALYSTS AND ORGANIC
SYNTHESIS
The Angarsk Plant of Catalysts
and Organic Synthesis contin-
ues building a production unit
GAS PROCESSING
The Company’s gas processing
assets process associated petro-
leum gas from Rosneft’s oil and
gas production facilities, and their
output is mainly utilised as feed-
stock for Rosneft’s petrochemical
subsidiaries.
The plant continues a compre-
hensive programme involving the
upgrade and replacement of worn-
out and obsolete equipment with
advanced modular units poised to
improve operational efficiency and
increase automation.
Rosneft’s gas processing assets
include:
• Otradnensky Gas Processing
Plant (OGPP);
• Neftegorsky Gas Processing
Plant (NGPP);
• Tuymazinskoye Gas Processing
Plant (TGPP);
• Shkapovskoye Gas Processing
Plant (ShGPP);
• RN-Buzulukskoye Gas
Processing Plant (BGPP).
OTRADNENSKY GAS
PROCESSING PLANT
In 2020, OGPP processed
224.3 mmcm of associated petro-
leum gas derived from the oil and
gas fields of Samaraneftegaz and
Orenburgneft. Its main products
are dry stripped gas, natural gas
liquids, ethane fraction, and indus-
trial sulphur.
The plant continues a compre-
hensive programme involving the
upgrade and replacement of worn-
out and obsolete equipment with
advanced modular units poised to
improve operational efficiency and
increase automation.
NEFTEGORSKY GAS
PROCESSING PLANT
In 2020, NGPP processed
411.3 mmcm of associated petro-
leum gas derived from the oil and
gas fields of Samaraneftegaz and
Orenburgneft. Its main products
are dry stripped gas, natural gas
liquids, ethane fraction, and indus-
trial sulphur.
TUYMAZINSKOYE GAS
PROCESSING PLANT
In 2020, TGPP, part of Bashneft,
processed 22.7 mmcm of associ-
ated petroleum gas derived from
the oil and gas fields of Bashneft-
Dobycha (Oil and Gas Production
Board (OGPB) Tuymazaneft) and
96.4 kt of NGLs using its own or
third-party feedstock. Its main
products are liquefied gases such
as industrial propane/butane mix-
ture, autogas, industrial butane,
isobutane fraction, and normal
butane fraction, as well as sta-
ble natural gasoline and industrial
sulphur.
SHKAPOVSKOYE GAS
PROCESSING PLANT
In 2020, ShGPP, part of Bashneft,
processed 31.5 mmcm of associ-
ated petroleum gas derived from
the oil and gas fields of Bashneft-
Dobycha (OGPB Ishimbayneft and
OGPB Ufaneft) and 124.5 kt of
NGL using its own or third-party
feedstock. Its main products are
liquefied gases such as industrial
propane/butane mixture, autogas,
motor propane, industrial butane,
isobutane fraction, and normal
butane fraction, as well as sta-
ble natural gasoline and industrial
sulphur.
BUZULUKSKOYE GAS
PROCESSING PLANT
In 2020, BGPP, which includes two
standalone production facilities,
the Pokrovskaya gas treatment
122
for platinum-containing reform-
ing catalysts and gasoline isom-
erisation catalysts. The unit with
a capacity of 600 tpa is to be
launched in 2021. It is designed to
improve the quality of reforming
and gasoline isomerisation cata-
lysts, as well as reduce platinum
losses, increase production reli-
ability and safety, and ultimately
meet the needs of all Russian
refineries for this type of advanced
catalysts.
In 2020, the plant produced and
sold 416 tonnes of catalysts, up by
103 tonnes year-on-year.
IDZ-028RN, an isodewaxing cat-
alyst developed by RN-TsIR, suc-
cessfully passed pilot tests at the
Angarsk Plant of Catalysts and
Organic Synthesis.
Meanwhile, Bashneft-UNPZ has
been using a diesel fraction hydro-
treating catalyst developed by
RN-TsIR and produced by the
Angarsk Plant of Catalysts and
Organic Synthesis. The cata-
lyst, Ht-100RN, has so far proved
more reliable than foreign-made
alternatives.
On 13 November 2009, the
Russian Government issued
Resolution No. 1715-r On Russia's
Energy Strategy, which seeks to
bring about a transition to domes-
tically-made catalysts. In 2019,
Rosneft contributed to this effort
by establishing RN-Kat, a special-
ist subsidiary able to make 4 ktpa
of hydrotreating catalysts as a
replacement for imported alter-
natives. This addition is expected
to strengthen the technologi-
cal self-sufficiency, independence
and economic performance of our
refineries. In 2020, the plant pro-
duced 685 t of hydrotreating cat-
alysts, with 201 t loaded into the
Company's hydrotreaters.
123
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COMMERCE AND LOGISTICS
OIL SALES
Rosneft pursues a policy aimed
at ensuring a balanced mix of oil
monetisation channels, includ-
ing sales under long-term con-
tracts, through tender-based spot
transactions, and domestic market
sales, as well as refining at its own
facilities in Russia, Germany, and
India.
The Company continuously mon-
itors the cost efficiency of its oil
monetisation channels to maxim-
ise the share of high-margin chan-
nels in its overall sales structure.
In the reporting year, the Company
supplied about 93 mmt of oil to
Russian refineries. In addition to
shipments to its Russian refiner-
ies in 2020, the Company supplied
4.6 mmt of oil to its partly owned
refineries in Germany.
Export channels, %
115.4
China (pipeline)
Central and Eastern Europe
(pipeline)
International trading
Primorsk (sea)
Kozmino (sea)
Ust-Luga (sea)
Republic of Belarus
(pipeline)
Novorossiysk (sea)
De-Kastri (sea)
Rail
Varandey (sea)
35 %
15 %
12 %
9 %
9 %
7 %
5 %
4 %
2 %
2 %
1 %
The total sales to third parties in
2020 amounted to 120.6 mmt,
including 5.2 mmt of oil sold
domestically.
OIL EXPORTS TO FSU
AND NON-FSU COUNTRIES
In the reporting year, Rosneft’s
FSU and non-FSU oil exports
totalled 115.4 mmt. Eastbound
exports, particularly pipeline sup-
plies to China and sales via the
Kozmino and De-Kastri ports,
are the most profitable for the
Company.
In 2020, eastbound supplies,
including international trading,
amounted to 61.9 mmt, their share
in the total external sales reaching
54%. Out of this amount, Rosneft
supplied 54.8 mmt, while interna-
tional traders shipped 7.1 mmt.
In addition, the Company exported
47.2 mmt of oil to Northwestern,
Central, and Eastern Europe,
Mediterranean and other non-
FSU countries, while also shipping
6.3 mmt to the CIS.
The bulk of crude oil is exported
via Transneft's system, includ-
ing its trunk pipeline network and
ports. In the reporting year, we pri-
marily exported crude oil via the
following channels:
• Pipeline: approximately 96 mmt
(83.2% of total FSU and
non-FSU exports), including
32.7 mmt shipped via ports and
around 63.2 mmt transported
by pipelines to China, Belarus,
Central and Eastern Europe;
• Rail and mixed transport:
OIL SUPPLIES UNDER LONG-
TERM CONTRACTS
The Company continued sup-
plying oil to China National
Petroleum Corporation (CNPC)
under the China–Russia govern-
ment agreement. The supplies,
which total 40.0 mmtpa, includ-
ing 10.0 mmt transported via
Kazakhstan, enable Rosneft to
retain its presence in this strategic
export market.
EXPANDING COOPERATION
WITH OIL AND PETROLEUM
PRODUCT CONSUMERS
1.9 mmt, or 1.6% of total exports;
• Other channels, including ship-
ments through the De-Kastri
export terminal: 3.6 mmt.
In 2020, the Company continued
to focus on end consumers. Total
oil exports to them were around
67 mmt.
We continue to foster collab-
oration with end consumers of
petroleum products. In 2020, we
shipped approximately 0.7 mmt of
stable natural gasoline to ENEOS
(JXTG Nippon).
The share of oil and petro-
leum products supplied under
long-term contracts (1+ year)
exceeded 90% of total exports
from Russia to non-FSU countries
in 2020.
Key achievements
In 2020, eastbound oil supplies, including international trading, accounted
for 54% of total FSU and non-FSU oil exports.
Supplies to China under long-term contracts remained robust
at 40.0 mmtpa.
The share of oil and petroleum products supplied under long-term con-
tracts (1+ year) exceeded 90% of exports from Russia to non-FSU
countries.
To maintain and expand relation-
ships with end consumers, Rosneft
signed a long-term contract with
Total Oil Trading in 2020 to sup-
ply oil to Leuna Refinery (Total
Group) in Germany via the Druzhba
pipeline for the period from April
2020 to March 2022. Also in 2020,
the Company began oil supplies
to Germany under the previously
signed annual contracts with Shell
and Eni. Additionally, Rosneft and
Indian Oil Corporation Limited
signed a contract to supply oil to
India via the port of Novorossiysk till
the end of 2020. In 2020, Rosneft
continued working with SOCAR
Trading S.A. to supply oil to its STAR
Refinery (Turkey) from the port of
Novorossiysk, and with ENEOS
(JXTG Nippon) to supply ESPO and
Sokol crudes to Asia Pacific.
124
125
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors
PETROLEUM PRODUCTS SALES
GAS SALES
EXPORT SALES OF PETROLEUM
PRODUCTS
In 2020, petroleum product
exports amounted to 63.4 mmt1.
Rosneft supplies bulk quantities
of oil products to Mongolia on a
regular basis. In 2020, exports of
light and dark petroleum products
to this country reached 1.2 mmt.
The Company continues to
focus on expanding its interna-
tional footprint and diversify-
ing its supply routes. During the
2020 summer shipping season,
the Company exported diesel fuel
using its fleet directly from the
Syzran Refinery and the Saratov
Refinery to a foreign port on CFR
terms. This logistic option enabled
Rosneft to maximise the use of its
tanker fleet and avoid the cost of
additional transshipment at sea
ports.
DOMESTIC SALES
OF PETROLEUM PRODUCTS
In 2020, domestic sales of petro-
leum products totalled 37.9 mmt2,
down 10% year-on-year.
Rosneft is Russia’s largest motor
fuel exchange trader. In 2020, we
traded extensively in petroleum
products. The share of Rosneft
(including the Ufa group of refiner-
ies) in total sales during the main
trading session stood at:
• 44% for motor gasoline;
• 40% for diesel fuel;
• 42% for fuel oil.
The Company exceeded on-ex-
change sales targets set by the
joint order of the Russian Federal
Antimonopoly Service and the
Russian Ministry of Energy dated
12 January 2015. The reporting
year saw 27.3% of total motor gas-
oline, 17.1% of diesel fuel, 25.2% of
kerosene, and 2.8% of fuel oil from
Rosneft refineries (including the
Ufa group) sold on the exchange
vs the required 10%, 6%, 10%, and
2%, respectively.
As requested by our counterpar-
ties, we supplied motor fuel in full
and on time under the Northern
Supply Haul programme. Some of
the shipments were made via the
port of Arkhangelsk – this helped
us launch a new supply route
and increase sales as part of the
Northern Supply Haul programme
development.
SALES OF PETROLEUM
PRODUCTS TO FSU COUNTRIES
In 2020, Rosneft maintained sta-
ble and uninterrupted tanker sup-
plies of petroleum products to
Armenia, having shipped 194.0 kt
of high-quality gasoline and die-
sel fuel to the country from its
Russian refineries.
We also maintained supplies
of gasoline and diesel fuel to
RN-Kyrgyznefteprodukt, our sales
subsidiary in the Kyrgyz Republic,
for resale via its own retail chain
and wholesale channels. In 2020,
petroleum product shipments
totalled 53.7 kt.
We continued to supply petro-
leum products to the retail
chain in Georgia, with volumes
reaching 191.0 kt, up by 10.5 kt
year-on-year.
MEETING FEDERAL
CUSTOMERS' DEMAND
Meeting federal customers’
demand for petroleum products is
our key priority under the corpo-
rate policy. In 2020, Rosneft and
its subsidiaries fully delivered on
their obligations to supply petro-
leum products to federal custom-
ers. Next year, we will continue
working in this area.
Gas sales, bcm
Gas revenue, RUB bln
56.43
239.80
In Russia
Abroad
51.98
4.45
In Russia
Abroad
184.50
55.30
Under our Long-
term Development
Strategy we aim
to become a lead-
ing independent
gas supplier
on the domestic
market.
Rosneft supplies natural gas,
dry stripped gas, and associated
petroleum gas produced at the
Company's assets in Russia to
consumers in Russia and abroad
(via its international assets).
Associated petroleum gas is pro-
cessed both at the Company’s
own gas treatment facilities and
by external parties, such as SIBUR
Holding and Surgutneftegas.
The bulk of natural and dry
stripped gas is transported to
Russian consumers via Gazprom’s
gas transportation system under
a gas transportation contract.
The products are supplied both
to Russian end consumers and
regional sales companies in over
40 regions. The bulk of gas sold
abroad is supplied by production
facilities in Egypt and Vietnam.
In 2020, gas consumption was
affected by warm weather
early in the year and a reduc-
tion in gas demand brought
about by COVID-19 restrictions.
Consequently, Rosneft’s natural
gas sales in the domestic mar-
ket decreased to 51.98 bcm, or
RUB 184.5 bln.
International gas sales amounted
to 4.45 bcm, with the bulk of the
product coming from the Zohr
field.
The Sverdlovsk Region remains our
key region in terms of gas sales.
Our supplies cover approximately
80% of local gas demand from both
industrial facilities and households.
To maximise gas monetisation,
Rosneft has developed a com-
modity transport flow optimisa-
tion system used for calculating the
operational gas balance.
We continued trading in natural gas
at the St Petersburg International
Mercantile Exchange (the exchange
launched gas trading in 2014). In
2020, we sold 1.4 bcm, which rep-
resents 9% of the total trading
volume.
1 Including export bunkering services.
2 Including domestic bunkering services.
126
127
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RETAIL BUSINESS
• available at over 1,100 filling
• tested demand for bundled
stations in 33 Russian regions,
Euro-6 at over 750 filling sta-
tions in eleven regions, and
Active at over 130 stations in
eight regions;
• assured high quality at all stages
of the product journey from
refinery to vehicle. The fuel qual-
ity was assessed at oil depots
and filling stations in all regions
where Rosneft operated its retail
network, with over 5,000 tests
carried out daily in 74 fixed and
17 mobile laboratories;
• in 2020, the Federal Agency
for Technical Regulation and
Metrology (Rosstandart) con-
ducted 24 independent inspec-
tions at eight oil depots and
85 filling stations across Russia.
The inspections confirmed the
high quality of our motor fuel;
• refurbished 41 filling sta-
tions in St Petersburg and the
Leningrad, Kursk and Belgorod
regions as part of the project to
rebrand TNK and PTK stations as
Rosneft and BP;
• continued to expand the food
offering at filling stations by
installing equipment for making
hot dogs, sandwiches, and hot
beverages at 602 locations;
• promoted healthy eating by run-
ning a Breakfasts and Lunches
project at Rosneft filling stations
and launching a pilot project to
offer made-to-order sandwiches;
• continued to develop the kiosk
café formats for filling stations
and complexes, respectively,
opening Zerno-branded kiosks /
shops with cafés as part of a
new pilot project in Moscow and
the Moscow Region;
• to expand the range of services,
piloted parcel lockers together
with a leading e-commerce
company and, at a number of
BP multi-purpose filling sta-
tions, touchless (automated) car
washing;
insurance and service products
in categories like cars; health-
care, legal, and advisory ser-
vices; and travel and property
insurance;
• operated a network of 13 CNG
units at existing filling sta-
tions and a separate NGV sta-
tion in Stavropol, servicing up
to 3,600 vehicles daily. In 2020,
the network sold 22 mmcm
of natural gas as motor fuel,
up 19 % year-on-year. The
Company will continue this pro-
ject. Developing an NGV fill-
ing station network in Russia
is one of Rosneft’s priorities in
the retail business and one of
the most important focus areas,
since it enables the Company to
expand its competitive advan-
tages in the domestic market;
• developed EV charging infra-
structure at its filling stations
based on demand forecasts and
EV market trends to expand
its innovative and environ-
mentally-oriented services. We
have installed and now operate
14 charging points for electric
vehicles at our filling stations,
including five fast-charg-
ing (50 kW) points in the
Moscow and Leningrad regions,
Vladivostok and Khabarovsk,
and nine slow-charging
(22 kW) ones in the Tver Region
and the Krasnodar Territory.
Rosneft has joined forces with
some of Russia’s largest elec-
tric power companies to con-
tinue expanding its EV charging
infrastructure;
• since 2017, all Marketing and
Distribution Group Subsidiaries
have been implementing plans
to reduce internal fuel con-
sumption, resulting in both sav-
ings and lower greenhouse gas
emissions.
3,057 filling
stations
in the Company’s retail
network
Rosneft’s retail chain ensures unin-
terrupted supply of high-qual-
ity motor fuels to customers in
66 Russian regions, Abkhazia,
the Republic of Belarus, and
Kyrgyzstan. Rosneft is a leading
Russian fuel brand in terms of rec-
ognition and quality perception.
2,092 shops. As at 31 December
2020, the Company had 129 oil
depots (including two NGV filling
stations) with a combined capacity
of 2.3 mmcm and approximately
a thousand gasoline tanker trucks
in operation.
Amid the COVID-19 pandemic,
the Company maintained a lead-
ing position in the Russian retail
market for petroleum products.
In 2020, Rosneft’s petroleum
product retail sales amounted
to 13.3 mmt, while average daily
sales per filling station came in at
11.7 t.
also maintaining high customer
service standards. Rosneft took
all the necessary measures to
protect the health of its staff
and customers at the filling sta-
tions. The shops were systemat-
ically inspected to ensure there
were enough sanitisers and
health products to supply the
increased demand. All shops and
cafés at Rosneft filling stations
operated in strict compliance
with the guidance on preven-
tive and protective measures
issued by the Federal Service
for Surveillance on Consumer
Rights Protection and Human
Wellbeing (Rospotrebnadzor);
As at 31 December 2020, the
Company’s retail network com-
prised 3,057 filling stations, includ-
ing 61 in Belarus, Abkhazia, and
Kyrgyzstan. Our own and leased
filling stations operated
In accordance with its retail busi-
ness strategy, the Company took
the following steps in 2020:
• ensured uninterrupted opera-
tion of its filling stations during
the COVID-19 pandemic, while
• constantly worked on solu-
tions for minimising contact and
maintaining social distance to
support and improve sales. In
particular, Rosneft kept develop-
ing services allowing customers
• to pay for fuel and complemen-
tary goods from inside the car
via mobile apps (Yandex.Fuel,
Yandex.Navigator, Yandex.Maps).
By the end of 2020, about
1,500 filling stations had been
connected to the fuel payment
service in Moscow, St Petersburg,
Ufa and Novosibirsk, as well
as in Krasnoyarsk, Samara,
Voronezh, Rostov, Krasnodar and
Volgograd together with their
respective regions and territo-
ries, with 50 multi-purpose fill-
ing stations offering contactless
payment solutions for food;
• started selling the Pulsar 95
gasoline in the Khabarovsk
Territory and the Bryansk Region
as part of a project to expand
retail sales of its own fuels. As at
the end of 2020, the Pulsar 92,
Pulsar 95, and Pulsar 100 gaso-
lines were
128
129
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Germany, Georgia, the United
Arab Emirates, Mongolia, and
China.
In 2020, Rosneft expanded its
refuelling network both in Russia
and abroad by launching:
• operations at the Ulan-Ude
airport;
• refuelling services at airports of
Barcelona, Stuttgart, Dubai and
Beijing.
BUNKERING BUSINESS
Rosneft's bunkering business
extends to five Russian sea basins
and 20 ports, with trading sub-
sidiaries in London and Beijing in
addition to ten regional represent-
ative offices.
Bunker fuel sales in 2020
amounted to 1.9 mmt, including
34% sold in the domestic market
and 66% to non-resident shipping
companies.
In 2020, the Company took action
to increase the output of marine
fuels compliant with the IMO
sulphur content requirements
(max. 0.5%):
• the Achinsk and Syzran refiner-
SALES OF BITUMEN PRODUCTS
Sales of bitumen materials
in 2020 reached 2.9 mmt. Sales
of road bitumen compliant with
the new GOST 33133-2014 stand-
ard amounted to 1.1 mmt, up 10%
year-on-year.
The bulk of bitumen products
(96%) were sold domestically.
Rosneft continues to expand pro-
duction of an innovative poly-
mer-modified bitumen (PMB)
which substantially improves the
road surface quality. Sales of PMB
in 2020 grew by 110% to 0.22 mmt.
SALES OF LUBRICANTS
In 2020, sales of the Company’s
lubricants and related products
totalled 1.05 mmt, with 67% sold
domestically and 33% exported.
Sales of premium lubricants grew
by 23% to 0.1 mmt.
Angarsk Petrochemical Company
launched production of Rosneft
Drilltec B2, a state-of-the-art min-
eral oil base for drilling fluids.
ies started producing RMLS 40,
a low-sulphur marine fuel tar-
geting the Far Eastern mar-
ket and those in the Black Sea
and Northwestern regions,
respectively;
Rosneft supplied premium motor,
transmission, and hydraulic oils to
BELAZ and to Minsk Automobile
Plant (MAZ) for the first fill lubri-
cation of mining trucks and special
purpose vehicles.
• the Nizhnevartovsk Refinery
began manufacturing DMF-
III, a marine fuel to be sold at
river ports in the Volga and Don
basins and in Western Siberia.
Over one third of all inland bun-
kering services in Russia are pro-
vided by RN-Bunker.
DIGITAL TRANSFORMATION
IN RETAIL
The Company continues to
develop digital communica-
tion channels for customers and
suppliers.
As at 31 December 2020, we auto-
mated measurements at 119 oil
depots and more than 2,900 fill-
ing stations and provided meas-
uring instruments for nearly 100%
of material flows at filling stations
and 90% at oil depots.
In 2020, the Company developed
a prototype of a monitoring sys-
tem to enhance end-to-end sup-
ply chain control from oil depot to
fuel nozzle.
Rosneft also piloted a three-tier
ERP system to manage retail sales
of petroleum products and com-
plementary goods and services
at all stages from filling station to
head office. The Company intends
to roll out the new system across
its retail operations.
The Company tested a block-
chain-based electronic workflow
solution for ordering complemen-
tary goods and supplying them to
filling stations.
Rosneft is now piloting an inno-
vative technology that makes
it possible to pay for petroleum
products and complementary
goods and services at filling sta-
tions by scanning QR codes via
mobile apps of partner banks.
The Company took the following
steps to improve digital corporate
training resources for filling station
personnel:
• developed and introduced at
Marketing and Distribution
Group Subsidiaries a distance
learning course in standards and
rules for filling station personnel;
• developed a VR-based simula-
tor to practice unloading tank
trucks and piloted training ses-
sions at RN-Moscow's training
centre.
AIRCRAFT REFUELLING
BUSINESS
In 2020, sales of jet fuel from
Rosneft refineries reached
2.7 mmt, including 2.6 mmt sold
domestically and 0.1 mmt abroad.
The sales structure in 2020 was as
follows:
• 1.4 mmt sold to airlines and joint
ventures;
• 1.3 mmt sold in bulk, including
commodity exchange sales.
In Russia, jet fuel is sold through a
chain of Rosneft's own and part-
ner refuelling facilities at 44 air-
ports. The Company also sells jet
fuel at ten airports in Spain,
130
131
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PRODUCTION PLANNING AND LOGISTICS
2020 PERFORMANCE
HIGHLIGHTS
PERFORMANCE PRIORITIES
FOR 2021
• The Company’s needs for hydro-
carbons and petroleum products
transportation are 100% covered.
• Refineries’ production pro-
grammes and petroleum prod-
uct sales destinations were
developed to maximise consol-
idated netback while factoring
in rapid changes in production
and sales volumes amid a slump
in demand due to the Covid-19
pandemic.
• Average petroleum product
stocks at refineries were reduced
from 589 to 474 kt.
• The improvement of production
programmes at refineries as part
of monthly production planning
is an absolute priority for the
Company. In 2021, the Company
will continue working to achieve
the above goals through:
• optimisation of production pro-
grammes for the refineries and
distribution of hydrocarbons;
• carrying on to reduce surplus
stock of petroleum products at
the refineries by improving coor-
dination of production and ship-
ments cycles;
• delivering IT solutions to better
synchronise production, distri-
bution, and shipment processes.
The Company is developing
the Digital Core for Commerce
and Logistics initiative, which
is expected to reduce the resi-
due to 5.5 % of the technological
limits in 2021 and 8.3 % of the
technological limits in 2022 and
onwards.
MARINE AND RIVER TRANSPORTATION BY ROSNEFTEFLOT
2020 PERFORMANCE
HIGHLIGHTS
PLANS FOR 2021
• Rosnefteflot received and
launched the first new-gener-
ation Aframax tanker, Vladimir
Monomakh.
• Rosnefteflot started operating
a new tanker, RN Primorye, to
deliver light petroleum products
in the Far East.
• Construction of a shuttle tanker
with a deadweight of 69 kt,
commissioned by Rosnefteflot,
was commenced.
• Completion and launch of the
second Aframax tanker
• Implementation of the
Company’s river navigation
programme
• Concept development for ves-
sels to cover the Company’s
ongoing and future projects
(tankers and support fleet for the
Vostok Oil project, LNG bunker
tanks, offshore transshipment,
port infrastructure)
132
133
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MARINE TERMINALS OWNED BY THE COMPANY
RN-MORSKOI TERMINAL TUAPSE PETROLEUM TRANSSHIPMENT TERMINAL
Rosneft’s subsidiary was recog-
nised as the best socially respon-
sible company in the Russian
oil and gas industry: in 2020,
RN-Morskoi Terminal Tuapse won
the Best Socially Responsible
Oil and Gas Company award in
the category “Promoting healthy
living in a company with up to
4,000 employees”.
The terminal transships mostly
export petroleum products from
the Tuapse Refinery, Saratov
Refinery, Samara group of refin-
eries, Nizhnevartovsk Refinery,
and Bashneft refineries, as well as
third-party products. The termi-
nal is also used to transship petro-
leum products for the domestic
market (filling stations of Rosneft-
Kubannefteprodukt) and provides
bunker fuel transshipment ser-
vices. In 2020, the total transship-
ment volume (including export and
domestic bunkering services) at
the terminal in Tuapse amounted
to 16.1 mmt (against 15.2 mmt
in 2019). The Company’s deep-wa-
ter berth accounted for 10.1 mmt
of the total transshipment vol-
ume (against 9.3 mmt in 2019).
RN-Morskoi Terminal Tuapse also
transshipped 0.14 mmt of crude oil
for the Tuapse Refinery (0.95 mmt
in 2019). The volume of petroleum
products received from sea-going
ships increased to 644 kt (against
90 kt in 2019). The terminal is
upgrading its production assets to
make them compliant with the lat-
est industrial, environmental and
fire safety requirements and car-
rying out a production expansion
programme to increase freight
turnover at the Tuapse Refinery.
In 2020, the terminal completed
installation of safety equipment
to prevent falls of workers from
height. The terminal piloted sev-
eral components of the target
programme for measurement
automation and quality control,
installing scales on tracks 1, 2, 3
(first phase) and introducing a
monitoring system for material
flows in tanks and pipelines. The
terminal also continued design-
ing the left bank water treatment
plants
RN-MORSKOI TERMINAL NAKHODKA PETROLEUM TRANSSHIPMENT TERMINAL
the weight of petroleum prod-
ucts loaded onto the tanker). On
30 December 2020, the petro-
leum product measurement sys-
tem was piloted.
• The rail weighing scales were
commissioned as the main
measurement system for petro-
leum products in tank cars.
The terminal transships mostly
export petroleum products from
the Komsomolsk Refinery, Angarsk
Petrochemical Company, and
Achinsk Refinery. It is also used
to ship petroleum products to
the domestic market (Magadan,
Chukotka, Kamchatka regions and
Sakhalin Island). In 2020, the total
transshipment volume (includ-
ing bunkering) at the terminal in
Nakhodka amounted to 5.2 mmt,
including 0.07 mmt of third-party
products.
The terminal is upgrading its pro-
duction assets to make them
compliant with the latest indus-
trial, environmental and fire safety
requirements. In 2020, the work
continued to upgrade the water
treatment facilities to meet
the requirements of applicable
regulations. The terminal com-
pleted the renovation of start-up
complex No. 3 of the facility to
treat industrial and storm water
discharged into the Novitsky Bay.
The terminal also implemented the
Company’s target programmes,
such as
• the target programme on
metrology, measurement auto-
mation, and quality control at
RN-Morskoi Terminal Nakhodka.
In the fourth quarter of 2020,
the terminal completed con-
struction and installation for
the second phase (petroleum
products at the oil tanker pier)
of the petroleum products
accounting system (installa-
tion of the petroleum product
measurement system at the
loading pipelines to measure
RN-MORSKOI TERMINAL ARKHANGELSK PETROLEUM TRANSSHIPMENT TERMINAL
The terminal transships mostly
export petroleum products from
the Samara group of refineries and
Angarsk Petrochemical Company
and third-party products, as well
as provides bunker fuel transship-
ment services for RN-Bunker. It is
also used to deliver fuel to the Far
North and supply wholesale buy-
ers in the Arkhangelsk Region.
In 2020, the total transship-
ment volume (including export
and domestic bunkering ser-
vices) at the terminal amounted
to 1.15 mmt, including 0.23 mmt of
third-party products.
In 2020, the terminal completed
installation of safety equipment
to prevent falls of workers from
height; continued works at APCS
getting ready to install hydrostatic
pressure sensors at the tanks (the
sensors are to be installed in 2021);
and performed design and sur-
vey activities for renovation of the
engineered security systems to
comply with provisions of Russian
laws on counter-terrorism security.
which will contribute to safety of
future operations at this facility
under the existing industrial safety
standards for hazardous produc-
tion facilities.
To reduce loaded cars down-
time, the terminal implemented
the technology for simultane-
ous loading (into sea-going ships)
and unloading (from tank cars) of
catalytic cracking gasoline. Also
technical measures were taken to
enable catalytic cracking gaso-
line separation, which will allow
for loading and unloading of an
additional petroleum product, if
necessary.
As part of the overhauls, the
accident prevention system was
upgraded at the pumping sta-
tion for light petroleum products,
134
135
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 3
MARKET
OVERVIEW
3
I
W
E
V
R
E
V
O
T
E
K
R
A
M
138
e
v
i
t
i
t
e
p
m
o
c
d
n
a
t
n
e
m
n
o
r
i
v
n
e
ROSNEFT / ANNUAL REPORT 2020
Strategy
Performance
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
MACROECONOMIC
ENVIRONMENT IN 2020
GDP
In 2020, the COVID-19 pandemic
swept the world, causing a global
slump in economic activity, bor-
der closures, lockdowns, business
shutdowns, market disruptions,
falling stock prices and bond
yields, lower incomes and demand,
and rising unemployment.
According to January 2021 esti-
mates from the International
Monetary Fund (IMF), global econ-
omy in 2020 (PPP1 GDP in con-
stant 2011 prices) declined by 3.5%
year-on-year. Developed econo-
mies shrank by 4.9% year-on-year,
while emerging markets lost 2.4%
of their GDP year-on-year.
The service sector was hit
the hardest by the pandemic-re-
lated lockdowns, which explains
the deeper contraction of devel-
oped economies compared
to developing countries.
According to the IMF, the US GDP
decreased by 3.4% year-on-year
in 2020 prompting the US Federal
Reserve to resort to exceptional fis-
cal stimulus measures. The Fed cut
its interest rate three times during
the year down to 0–0.25% in March
2020 in an effort to shore up busi-
ness and household demand
for loans, support living standards
and economic activity. If COVID-
19 is successfully tackled, the US
economy is expected to grow
by 5.1 year-on-year in 2021.
The IMF estimates that Eurozone’s
GDP declined by 7.2% year-on-
year in 2020 as a result of lengthy
lockdowns, border closures
and other restrictions.
To prop up the economy,
the European Central Bank kept
its interest rate at 0% through-
out the year, while the deposit
and short-term loan rates were
at -0.4% and 0.25%, respec-
tively. The regulator also launched
the Pandemic Emergency
Purchase Programme (PEPP)
of private and public sector secu-
rities worth up to EUR 1.85 trln.
Under the programme,
the European Central Bank is able
to buy, in particular, Greek debt
obligations, which were left out
of the previous asset purchase
programme. The programme
is expected to last until the end
of March 2022. Provided the pan-
demic is successfully controlled,
the Eurozone is projected to grow
by 4.2% year-on-year in 2021.
UK registered the most significant
GDP decline among developed
nations – 10.0% year-on-year,
according to the IMF. Investment
fell by 11.3% year-on-year, while
household expenditures dropped
by 12.1% year-on-year on the back
of the global pandemic and Brexit.
In some emerging economies,
the COVID-19 impact was exac-
erbated by a slump in commodity
prices and geopolitical tensions.
China was the only major econ-
omy to avoid an absolute decline
in GDP caused by COVID-19.
Contracting by 6.8% in the first
GDP Growth Rates in Developed Economies, % year-on-year
5.5
4.2
2.8
4.3
3.1
1.6
5.1
2.2
2.5
1.9
4.1
3.6
4.2
3.6
3.5
3.1
5.5
4.1
5.0
4.5
1.3
0.6
1.5
1.5
3.1
2.4
0.3
-3.5
-3.4
-4.9
-5.5
-5.4
-7.2
-5.1
-9.0
-10.0
World
Emerging Markets
USA
Canada
Eurozone
Germany
France
United Kingdom
Japan
2019
2020
2021 (F)
2022 (F)
Source: IMF
GDP Growth Rates in Emerging Markets, % year-on-year
6.3
5.0
4.2
3.6
-2.4
11.5
6.8
6.1
8.1
5.6
2.3
1.4
3.6
2.6
2.0
3.9
3.0
2.8
1.4
0.2
0.3
4.0
2.6
-4.5
-3.1
-3.9
-8.0
-7.5
Emerging Markets
India
China
Brazil
Russia
South Africa
Saudi Arabia
2019
2020
2021 (F)
2022 (F)
Source: IMF
quarter of 2020 during the pan-
demic’s first wave, China’s econ-
omy subsequently gained traction
recording a 2.3% year-on-year
growth at year’s end – the low-
est rate since 1976. China’s growth
recovery in 2020 was mostly
driven by investments2. Chinese
exports grew at the year’s end,
as pandemic-related disruptions
around the world fuelled demand
for Chinese goods3. If this trend
continues, the IMF projects China's
economy to grow at 8.1% year-on-
year in 2021.
COVID-19 drove India's GDP down
by 8.0% year-on-year in 2020.
However, the lifting of the corona-
virus restrictions following wide-
spread vaccination in 2021 coupled
with an increase in business activity
could help the country’s economy
rebound by 11.5% year-on-year.
Countries across Latin America
also suffered from economic
downturn of various intensity,
with Brazil's GDP falling by 4.5%
year-on-year in 2020.
The Middle East and Central Asia
recorded a significant contrac-
tion of their economies in 2020.
Saudi Arabia’s year- GDP dropped
by 3.9% year-on-year.
1 Purchasing power parity.
2 According to the January 2021 estimates from the International Monetary Fund (IMF).
3 https://www.reuters.com/article/idUSL1N2JT039, http://www.stats.gov.cn/english/Statisticaldata/nsdp/201508/t20150819_1232260.html
139
Under the IMF's upside sce-
nario, global economy is projected
to grow by 5.5% year-on-year
in 2021, moderating to 4.2%
in 2022. In 2021, GDP growth rates
in advanced economies will rise
to 4.3% year-on-year while emerg-
ing markets will enjoy growth
of up to 6.3%.
The COVID-19 pandemic contin-
ues to present the greatest chal-
lenge to the global economy.
The latter also suffers from con-
tinued trade and political tensions
between the world’s three main
economic powers, particularly,
the US and China.
GLOBAL TRADE
In 2020, widespread restrictions
and business closures resulted
in global trade contracting by 9.6%
year-on-year, according to the IMF.
This decline followed a sluggish
1.0% year-on-year growth in 2019
caused by global trade tensions.
The greater decline in trade com-
pared to that of GDP, both glob-
ally and in groups of advanced
and developing economies, points
to the prevalence of regional
rather than global integration
trends.
Trade in goods and services
in developed economies dropped
by 10.1% year-on-year in 2020,
while also sinking by 8.9% year-
on-year in emerging markets.
Under a favourable COVID-19 sce-
nario, the IMF forecasts a global
trade growth at 9.2% year-on-year
in 2021 and 6.7% year-on-year
in 2022. These rates are in excess
of projected world GDP growth,
suggesting a return to the global
cooperation mode.
RUSSIAN ECONOMY
As estimated by the IMF,
the Russian economy shrank
by 3.6% year-on-year in 2020,
while according to the Russian
Ministry of Economic Development
it declined by 3.8% year-on-year.
According to an initial assessment
from the Federal State Statistics
Service (Rosstat), Russia's GDP
in 2020 dropped by 3.1% year-
on-year, less than the agency’s
original forecast. In 2019, the coun-
try’s economy grew by 2.0%
year-on-year.
The downturn was mainly caused
by widespread COVID-19 restric-
tion measures in Russia and across
the world and their negative impact
on foreign trade, including decline
in global demand and lower prices
for Russian exports.
According to the Federal Customs
Service of Russia, during the global
recession, Russian exports1
1 According to the customs statistics.
140
dropped in value terms by 21.3%
year-on-year in 2020 (a decrease
of USD 89.9 bln) to USD 332.87 bln
vs USD 422.8 bln in 2019.
In 2020, exports contracted
almost across the board,
with crude oil, petroleum products,
and gas (including liquefied nat-
ural gas – LNG) hit the hardest.
The reduction in oil exports was
largely due to the OPEC+ agree-
ment to cut production.
In value terms, crude oil exports
shrank by 40.4% year-on-year
in 2020 to USD 72.4 bln, petro-
leum products dropped by 32.2%
year-on-year to USD 45.3 bln, gas,
including LNG, slipped by 35.4%
year-on-year to USD 32.0 bln.
In 2020, crude hydrocar-
bons and petroleum prod-
ucts accounted for 44.3%
of total exports, down 11.8 p.p.
year-on-year.
Russia’s budget deficit in 2020
was at 4.5% of GDP, public debt
went up from 12.3% of GDP in 2019
to 19.1% of GDP as at 1 January
2021.
According to the Bank
of Russia, the country’s for-
eign debt as at 1 January 2021
stood at USD 470.1 bln, down
by USD 21.3 bln compared
with the beginning of the year.
Debt obligations to non-resi-
dents decreased in all sectors
of the economy, with the great-
est decline in other sector foreign
loans2.
As at 1 January 2021, Russia’s
foreign reserves were up
by USD 41.4 bln to USD 595.77 bln,
mainly due the increased share
of monetary gold (69% contribu-
tion). Therefore, Russia’s net debt
is negative.
Major international rating agencies
confirmed the resilience of Russia’s
economy and financial system.
S&P Global Ratings, Moody’s
and Fitch affirmed Russia’s sov-
ereign investment-grade rat-
ing at “BBB–,” “Baa3,” and “BBB”,
respectively, with a stable outlook.
In 2020, the number of those
employed decreased even further
building on the descending trajec-
tory of recent years. In December
2020, employment went down
by 1.7 mln people or 2.3% year-on-
year. The decline in employment
was due to both a natural reduc-
tion in the labour force by almost
0.7 mln people (down 0.9%
year-on- year) and an increase
in the number of unemployed
by 1 mln people (up 27.6% year-
on-year). The unemployment
rate in December 2020 was up
by 1.3 p.p. year-on-year at 5,9%,
the highest in five years.
In 2020, the recession resulted
in lower consumer purchasing
power, with the real disposable
income falling by 3.5% year-
on-year, according to Rosstat.
However, real accrued wages
increased in 2020 by 2.2%
year-on-year.
According to the September 2020
forecast from the Russian Ministry
of Economic Development,
economic recovery in 2021
will be influenced by a number
of competing factors. On the one
hand, as vaccines are rolled-
out and lockdowns and busi-
ness restrictions are lifted, growth
will be increasingly driven
by the government stim-
ulus initiatives supporting
the national development goals.
On the other hand, fiscal consol-
idation and a gradual reduction
of the pandemic-related fis-
cal support in 2021 are expected
to constrain economic growth.
Russian Exports, USD bln
343.5
127.4
12.7
46.4
67.5
89.6
2015
285.8
119.6
12.2
34.2
46.1
73.7
2016
449.6
162.6
25.2
54.4
78.2
129.2
424.6
162.1
24.6
49.6
66.9
121.4
357.3
145.3
18.5
41.9
58.2
93.4
2017
2018
2019
338.2
171.2
17.2
32
45.3
72.4
2020
Crude oil
Petroleum products
Gas (including LNG)
Other fuel and energy resources
Others
Source: Federal Customs Service
of Russia
Changes in Real Disposable Income and Wages in Russia,
% year-on-year
6.7
2.9
11.6
8.5
9.5
4.8
0.1
1.0
5.5
2.2
2017
2018
2019
2020
7.9
0.8
2016
-3.5
Source: Rosstat
Unemployment in Russia (at Year-
End), % of Economically Active
Population
5.9
5.5
5.2
4.8
4.6
-0.5
-4.5
Real disposable income
Real wages
Nominal wages
Taking into account these fac-
tors, the Ministry of Economic
Development projects a 3.3%
year-on-year GDP growth in 2021
and at least 3.0% year-on-year
in 2022–2023 driven mainly
by expanding domestic demand,
both consumer and investment.
According to the January 2021
forecast from the IMF, the Russian
economy will grow by 3.0% year-
on-year in 2021, accelerating to up
to 3.9% year-on-year in 2022.
2 https://cbr.ru/statistics/macro_itm/svs/ext-debt/
2016
2017
2018
2019
2020
141
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ENERGY PRICES. FOREIGN EXCHANGE RATES, MONETARY POLICY
AND INFLATION IN RUSSIA
In 2020, oil prices plummeted
reflecting a crisis in the global
oil market caused by an unprec-
edented decline in demand
as a result of COVID-19 related
restrictions. The annual average
Brent price fell by 35.2% year-
on-year to USD 41.67 per bar-
rel.1 The annual average Urals
price dropped to USD 41.74 per
barrel, down by 34.2% year-on-
year and was slightly higher than
the price of Brent crude oil.
Throughout 2020, global oil prices
were driven by mixed trends.
In January–April 2020, Brent crude
went down from USD 63.5 per
barrel in January to USD 18.6 per
barrel in April, while Urals crude
dropped from USD 61.3 per bar-
rel to USD 20.2 per barrel, respec-
tively. The tumbling of oil prices
in March–April 2020 was caused
by the collapse of the OPEC+ deal
due to the failure of the coun-
tries involved to reach agree-
ment on limiting production amid
falling demand for oil and high
crude oil inventories. From May
2020 to the year’s end, there was
an upward trend in oil prices
supported by a new OPEC+ deal
to cut production and gradual
lifting of lockdown restrictions,
with the monthly average Brent
price reaching USD 49.9 per bar-
rel in December. Some decline
of prices in autumn was due
to the second wave of COVID-19
and political tensions in the US
related to the presidential election
campaign.
Amid continued geopoliti-
cal tensions, lower oil prices,
broader sanctions and the risk
of new sanctions against Russia,
the country’s national cur-
rency was weakening in 2020.
According to the Bank of Russia,
the annual average nominal USD/
RUB exchange rate went up
by 10.0% year-on-year in 2020
to RUB 71.94 per USD.
Annual Average Brent and Urals Prices, USD/barrel
69.8
71.1
63.4
64.3
51.4
52.4
53.1
54.3
43.7
42.1
41.7
41.7
2015
2016
2017
2018
2019
2020
Urals
Brent
Sources: Platts, Expert and Analytical Group estimates.
Monthly Average Brent ad Urals Prices in 2020, USD/barrel
65
55
45
35
25
15
January
February
March
April
May
June
July
August
September
October
November
December
Urals
Brent
Source: Platts
As at 31 December 2019, the nom-
inal USD/RUB exchange rate was
RUB 73.88 per USD, having grown
by 17.4% over the year.
However, compared
with the currencies of other devel-
oping and oil-producing countries,
RUB’s depreciation in 2020 was
not the most significant.
Unlike in the previous years,
the Bank of Russia pursued
a rather soft monetary policy, act-
ing resolutely to cut the interest
rate. Between 7 February
and 24 July 2020, the Bank
of Russia reduced its inter-
est rate four times from 6.25%
per annum at the beginning
of the year to 4.25% per annum,
which remained unchanged
through the year’s end.
According to Rosstat, inflation
accelerated in 2020 reaching 4.9%
in December (vs 3.0% in December
2019), not significantly deviating
from the 2019 target of around
4.0% set in the Monetary Policy
Annual Average Nominal USD/
RUB
66.8
58.3
62.9
64.7
71.9
2016
2017
2018
2019
2020
Changes2 in Annual Average Nominal Exchange Rates of the Largest Emerging Markets’ and Oil-Producing
Countries’ National Currencies to USD in 2020, % year-on-year
0.1
Saudi
Arabia
China
-0.1
Iraq
Australia
Canada
Indonesia
India
Norway
Kazakhstan
Russia
Mexico
Columbia
South
Africa
Turkey
Brazil
-0.7
-1.0
-1.1
-3.0
-5.0
-6.5
-7.4
-10.0
-10.4
-11.2
-12.1
1 Sources: Platts, Expert and Analytical Group estimates.
2 “+” means currency appreciation while “–” means currency depreciation.
142
Source: Bank for International Settlements
-19.1
-23.5
143
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Changes1 in Nominal Exchange Rates of the Largest Emerging Markets’ and Oil-Producing Countries’
National Currencies to USD at the End of December 2019 , % year-on-year
9.0
6.1
2.8
2.0
Australia
China
Norway
Канада
Saudi
Arabia
0.0
Indonesia
India
South
Africa
Columbia
Mexico
Russia
Turkey
Brazil
-1.2
-2.4
-4.6
-4.7
-5.3
-19.7
-24.8
-29.2
Source: Bank for International Settlements
Guidelines for 2021–2022 pub-
lished by the Bank of Russia.
The rising inflation was pri-
marily driven by the weaken-
ing of rouble’s nominal exchange
rate against major currencies,
with increased prices of imported
goods causing prices of domestic
products to grow. The higher
inflation was also a result
of monetary easing to help
tackle the fallout of COVID-19
and, finally, it reflected changes
in the international environment
and poor yields of certain agricul-
tural products.
By contrast, the annual average
consumer price index fell to 3.4%
in 2020 (vs 4.5% in 2019).
As at December 2020,
the annual average producer
price index was 103.6% (vs 95.7%
in December 2019). In 2020,
The Bank of Russia’s Interest Rate in 2020, % per annum
6.25
6.0
6.0
5.5
5.5
4.5
4.25
4.25
4.25
4.25
4.25
4.25
January February March
April
May
June
July
August September October November December
Source: Bank of Russia
Индексы цен и тарифов
Metric
Consumer price index
Industrial producer price index
Oil and natural gas production
Petroleum product output
Machinery manufacturing
Production, transmission and distribution of power
Freight rate index
Source: Rosstat
2019
Dec/Dec
y/y
2020
Dec/Dec
103.0
95.7
89.2
84.7
102.5
100.0
101.5
104.5
102.9
102.3
97.0
103.0
104.4
102.8
104.9
103.6
90.7
96.8
104.9
104.5
105.2
y/y
103.4
97.1
78.9
89.8
104.6
102.9
101.7
Changes
in Transneft’s tariffs
• As at 1 January 2020,
Transneft’s rates
for oil transportation via trunk
pipelines increased by 3.42%.
• From 1 February 2020,
the oil transit rates through
the Republic of Belarus
for OJSC Gomeltransneft
Druzhba were increased
by 6.6% (the forecast average
annual inflation rate in Russia
plus 3 p.p.).
the annual average industrial pro-
ducer price index in Russia was
97.1% (vs 102.9% in 2019).
Inflation in Russia, % year-on-
year as at December
5.4
The Bank of Russia expects
measures to curb infla-
tion in 2021 to bring it back
to the Bank’s target of no more
than 4.0%. The Ministry
of Economic Development
expects a 3.7% year-on-year
increase in prices as at December
2021 with an annual average rise
of 3.6% year-on-year.
The Ministry forecasts that annual
average industrial producer prices
in Russia will go up by 5.0% year-
on-year in 2021.
The Russian oil companies’ oper-
ating costs are very sensitive
to changes in natural monopolies’
transportation tariffs.
4.9
4.3
3.0
2.5
2016
2017
2018
2019
2020
Sources: Bank of Russia, Rosstat
Changes in Russian
Railways’ tariffs
• As at 1 January 2020, railway
transportation tariffs increased
by 3.5%.
1 “+” means currency appreciation while “–” means currency depreciation.
144
145
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors OIL AND GAS INDUSTRY OVERVIEW
GLOBAL OIL MARKET
2020 saw the greatest drop
in oil demand in modern his-
tory brought about by the pan-
demic-related restrictions across
the world. In April 2020, global
consumption of liquid hydrocar-
bons1 fell by 23.9% year-on-year
to 76.3 mmb per day prompting
the OPEC+ countries to cut oil
production by a record 9.7 mmb
per day from an agreed baseline
level2. The agreement was signed
on 12 April 2020 for the period
between 1 May and 30 June
and was later extended until
31 July 2020. Between 1 August
and 31 December 2020, OPEC+
countries reduced produc-
tion by 7.7 mmb per day day
from the baseline level.
In the first quarter of 2020,
the global oversupply of liquid
hydrocarbons reached 6.5 mmb
per day, increasing to 9.3 mmb
per day day in the second quar-
ter. In the third quarter of 2020,
the oversupply was replaced
by a deficit of 1.6 mmb per day as
a result of the OPEC+ (including
Russia) production cuts, reduced
production in other countries
(including the US), and grad-
ual demand recovery following
the lifting of some restrictions.
The deficit increased to 2.2 mmb
Global Demand for Liquid
Hydrocarbons by Region, mmb
per day
Global Output of Liquid
Hydrocarbons by Region, mmb
per day
99.3
11.7
8.3
35
4.7
14.3
25.4
99.7
11.6
8.3
35.4
4.8
14.3
25.3
91.0
10.5
7.6
33.7
4.6
12.4
22.2
100.5
100.5
14.8
15.2
36.9
7.7
14.6
3.6
23
34.9
7.7
14.6
3.5
24.6
94.0
14.6
30.9
7.5
13.5
3.6
23.8
2018
2019
2020
2018
2019
2020
North America
OECD
FSU countries 3
Asia
Middle East
Others
Source: IEA
North America
Europe
FSU countries3
Asia
OPEC 4
Others5
per day in the fourth quarter.
As at the end of 2020, the global
oversupply of liquid hydrocarbons
totalled 3.0 mmb per day, accord-
ing to the International Energy
Agency (IEA).
In 2020, global demand
for liquid hydrocarbons decreased
by 8.7% year-on-year (accord-
ing to the IEA) to 91.0 mmb per
day. In 2020, consumption of liq-
uid hydrocarbons declined across
the world, most notably in North
America (35% of the global drop),
European countries of the OECD
(21%) and in the Asia-Pacific
region (20%). These regions
accounted for 24%, 14% and 37%
of global oil demand in 2020,
respectively.
The IEA estimates that the global
production of liquid hydrocar-
bons6 fell by 6.5% year-on-year
to 94.0 mmb per day in 2020.
1 Demand for liquid hydrocarbons hereinafter refers to consumption of petroleum products from oil and gas condensate; consumption of oil
as fuel; and consumption of hydrocarbon components from unconventional sources (biofuel, GTL, CTL, etc.).
2 Production volume in October 2018 was set as the baseline level of oil production for all OPEC+ countries, with the exception of Russia
and Saudi Arabia, whose baseline level was set at 11 mmb per day.
3 Excluding Estonia, Latvia and Lithuania.
4 13 member countries as at 31 December 2020.
5 Includes production in other countries, global biofuel output, and volume growth during refining.
The greatest reduction was in OPEC
countries7 where liquid hydrocar-
bon production dropped by 11.5%
year-on-year to 30.9 mmb per day,
and FSU countries, where produc-
tion was down by 7.8% year-on-
year to 13.5 mmb per day. Crude
oil production in OPEC countries
decreased by 12.9% year-on-year
to 25.7 mmb per day, with the larg-
est decline recorded in Libya (by
0.7 mmb per day to 0.4 mmb per
day), Iraq (by 0.7 mmb per day
to 4.0 mmb per day), and Saudi
Arabia (by 0.6 mmb per day
to 9.2 mmb per day).
In the USA, production of liq-
uid hydrocarbons went down
by 3.4% year-on-year to 16.6 mmb
per day, with crude oil and gas
condensate production fall-
ing by 7.7% year-on-year to 11.3
mmb per day. Since April 2020,
production stopped at some
of US wells, including in the shale
regions, due to a significant over-
supply in the domestic market.
Crude oil and gas conden-
sate production in the US fell
from 12.7 mmb per day in March
to 10 mmb per day in May.
Some of the suspended wells
were gradually put back into
production, with output vol-
umes rising to 11.1 mmb per day
in December 2020.
Commercial Crude Inventories in OECD Countries, bb
EIA’s Forecast of Global
Liquid Hydrocarbons Demand
and Output, mmb per day
97.3
97.7
101.2
100.8
-0.4
–0.4
2021 (F)
2022 (F)
Demand
Production
Oversupply
Source: forecast by U.S. Energy Information
Administration as at January 2021
1300
1250
1200
1150
1100
1050
1000
950
900
January
February
March
April
May
June
July
August
September
October
November
December
2016
2017
2018
2019
2020
2010–2015
Source: IEA
In Canada, production of liq-
uid hydrocarbons in 2020 went
down by 4.3% year-on-year
to 5.3 mmb per day, with crude
oil and gas condensate produc-
tion falling by 7.1% year-on-year
to 3.1 mmb per day.
In 2020, production of liquid hydro-
carbons increased in Norway
(by 15.2% to 2.0 mmb per day
with the Johan Sverdrup field
brought on stream in October 2019)
and Brazil (by 5.2% to 3.0 mmb
per day on the back of the rise
in output from offshore pre-salt
deposits).
Commercial crude inventories
in OECD countries reached approx-
imately 1.18 bb in 2020, up 8.5%
from December 2019.
The IEA estimates from February
2021 show that global demand
for liquid hydrocarbons
in 2021 is set to grow by 6.0%
to 96.4 mmb per day.
According to the forecast by the U.S.
Energy Information Administration
(EIA), global demand for liq-
uid hydrocarbons in 2021 will rise
by 5.8% year-on-year to 97.7 mmb
per day, while global production
will increase by 3.3% year-on-year
to 97.3 mmb per day, with global
supply shortages continuing
in 2021–2022.
6 Output of liquid hydrocarbons hereinafter refers to production of crude oil, gas condensate, gas condensate liquids, and production
of hydrocarbon components from unconventional sources (biofuel, GTL, CTL, etc.). Global production of liquid hydrocarbons includes
volume growth during refining.
7 13 member countries as at 31 December 2020.
146
147
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors GLOBAL GAS MARKET
The global demand for gas
in 2020 dropped by 4.6% year-
on-year to 3.73 tcm1, driven
by reduced business activity due
to the pandemic-related restric-
tions. Another factor contribut-
ing to decreased gas consumption
was the growing role of renewa-
bles in the electric power indus-
try. The demand, however, was
supported by lower gas prices
in regional markets, transition
from from coal to gas in power
generation, and the development
of gas infrastructure in Asia.
In 2020, gas consumption
was down across the world
with the exception of the Asia-
Pacific region, where demand
for gas rose by 1.8% year-on-
year (an increase of 15.2 bcm)
to 868 bcm, mainly driven
by China.
Gas Consumption by Region, bcm Gas Production by Region, bcm
3,813
222
153
518
819
533
161
445
961
+2.4%
3,906
219
157
527
853
541
166
453
-4.6%
3,726
200
144
493
868
462
157
434
+4.1%
4,000
170
268
221
684
670
193
687
-5.5%
3,782
152
227
206
676
587
190
654
3,843
174
247
231
645
660
189
675
990
968
1,023
1,108
1,088
2018
2019
2020
2018
2019
2020
North America
Russia
Other FSU countries4
Middle East
Asia Pacific
Europe
Africa
Latin America
North America
Russia
Other FSU countries4
Middle East
Asia Pacific
Europe
Africa
Latin America
In Europe, gas consumption fell
by 6.3% year-on-year (a decrease
of 33.4 bcm) to 493.1 bcm
(13.2% of global gas consump-
tion) as a result of lengthy lock-
downs and strong competition
with renewable energy sources
in the power industry. Demand
for gas in North America,
the world’s largest gas consumer
(26.0% of global consumption),
went down by 2.2% year-on-
year (a decrease of 22.2 bcm)
in 2020 to 967.8 bcm, which
is equal to the 2018 consumption
level. The greatest reduction was
in the Middle East, where gas con-
sumption dropped by 14.6% year-
on-year (a decrease of 79.2 bcm)
to 462.3 bcm (12.4% of global gas
consumption). In Latin America,
demand for gas fell by 8.4% year-
on-year (a decrease of 18.5 bcm)
to 200 bcm (5.4% of global gas
consumption). Africa saw a reduc-
tion in consumption by 8.7% year-
on-year ( a decrease of 13.7 bcm)
to 144 bcm (3.9% of global gas
consumption).
The decline in demand led
to a considerable reduc-
tion in global gas production2,
which fell by 5.5% year-on-
year to 3.78 tcm. Production
dropped in all regions, most sig-
nificantly in the Middle East
(by 82.8 bcm or 12.4% year-on-
year to 587.2 bcm), accounting
for 15.5% of global gas production,
and Africa (by 40.8 bcm or 15.2%
year-on-year, to 227.3 bcm),
accounting for 6.0% of global gas
production. In North America (the
world’s largest gas producer –
28.8% of global production),
gas production in 2020 went
down by 19.4 bcm (a decrease
of 1.7% year-on-year) to 1.09 tcm.
In the CIS, gas production
fell by 35.4 bcm (a decrease
of 4% year-on-year) to 844.4 bcm
and in Europe, it was down
by 14.3 bcm (a decrease of 6.5%
year-on-year) to 206.2 bcm.
The Asia-Pacific region recorded
the smallest reduction in gas pro-
duction (by 7.9 bcm or 1.1% year-
on-year to 676.1 bcm). The region’s
share in global gas produc-
tion increased from 17.1% in 2019
to 17.9% in 2020.
Every year approximately one
third of natural gas produced
globally is exported. An esti-
mated3 0.97 tcm of gas were
exported in 2020, of which
about 50% was supplied through
1 IHS Markit preliminary estimates.
2 IHS Markit preliminary estimates.
3 Based on data by IHS Markit and BP.
4 Excluding Estonia, Latvia and Lithuania.
148
gas pipelines and 50% as LNG.
Russia, the world’s largest gas
exporter, accounted for approx-
imately 25% of gas exports
globally in 2020 – 240.9 bcm
according to the Federal Customs
Service of Russia and CDU TEK;
a decrease of 7.5% year-on-year.
With the recovery of the world
economy in 2021 and 2022,
IHS Markit projects the global
gas demand to grow by 1.5%
and 1.3% year-on-year, respec-
tively, while gas consumption
is expected to increase to 3.78 tcm
in 2021 and 3.83 tcm in 2022.
LNG MARKET
Despite the COVID-19 pandemic
and decline in the world demand
for gas, global LNG exports
increased by 1.5% year-on-year
in 2020 (the lowest growth rate
since 2015), reaching 362.1 mmt
or 499.5 bcm5. The growth
in LNG trade was driven by lower
prices compared to pipeline gas
in the period between the first
and third quarters of 2020. LNG
accounted for 13.4% of global gas
consumption in 2020 (vs 12.6%
in 2019)6.
Asia contributed the most
to the growing LNG trade in 2020,
with supplies to the region ris-
ing by 4.3% year-on-year to reach
256.7 mmt. LNG exports to China
increased by 12.2% year-on-
year to 69.2 mmt, while supplies
to India were up by 14.6% year-on-
year to 26.4 mmt. Japan, the larg-
est LNG consumer, once again
reduced its imports by 2.6% year-
on-year to 75.2 mmt.
In 2020, LNG imports to Europe
went down by 3.2% year-on-
year to 84.6 mmt, including
to France – by 14.9% year-on-
year to 13.8 mmt, Italy – by 9.2%
year-on-year to 9.1 mmt, Spain –
by 4.9% year-on-year to 15.4 mmt,
and the Netherlands – by 7.0% year-
on-year to 5.6 mmt. At the same
time, LNG imports have significantly
increased in Turkey (by 17.9% year-
on-year to 11.2 mmt) and the UK (by
5.1% year-on-year to 14.0 mmt).
Pass LNG plant (Sabine Pass,
Cameron Parish, Louisiana)
was expanded by 1.2 mmtpa
and 3 mmtpa, respectively.
Following the 2019 reduction,
the Middle East and North Africa7
reported a slight rise in their LNG
imports – by 0.6% year-on-year
to 7.1 mmt. Egypt, on the other
hand, stopped importing LNG
and resumed gas exports after
putting the Zohr field on stream.
The field is being developed
by an international consortium,
where Rosneft has a share of 30%.
A major component of the export
growth in 2020 were new LNG
trains coming on stream in the US:
• second and third trains
of the Cameron LNG project
(Cameron Parish, Louisiana)
with a capacity of 4.5 mmtpa
each;
• second and third trains
of the Freeport LNG facility (Gulf
Coast, Texas) with a capacity
of 5.1 mmtpa each;
• second and fifth to tenth
trains of the Elba Island LNG
plant (Chatham County,
Georgia) with a total capacity
of 1.75 mmtpa.
In addition, the capacity of the first
and second trains at the Corpus
Christi LNG plant (Gulf Coast, Texas)
and first to fifth trains at the Sabine
In total, 20.95 mmpta of new LNG
facilities came on stream in the US,
while the capacity of existing
trains was expanded by 4.2 mmtpa
in 2020.
In 2020, the largest decline in LNG
exports was recorded in Trinidad
and Tobago (a decrease of 2.3 mmt
to 10.7 mmt), Malaysia (down
by 2.2 mmt to 24.0 mmt), and Egypt
(down by 2.1 mmt to 1.3 mmt).
The reporting year saw only one
final investment decision (the few-
est number in 23 years)8 on LNG
plant projects: the 3 mmtpa
Energia Costa Azul LNG facil-
ity in Mexico is expected to come
on stream in late 2024–early
2025 with shareholders including
Total (16.6%) and Sempra (83.4%).
The capacity of regasification ter-
minals grew in 2020 by 19.7 mmt9,
with new facilities commissioned
in India (the 5 mmtpa Mundra
regasification terminal) and Brazil
(the Port of Sergipe 5.6 mmtpa
floating regasification unit)
and two new importers – Myanmar
(a 1.1 mmtpa terminal) and Croatia
(a 1.9 mmtpa terminal).
5 IHS Markit conversion rate – 1,379.
6 Estimate, based on IHS Markit data.
7 Egypt, Israel, Jordan, Kuwait, United Arab Emirates.
8 Final investment decision (FID) is the decision to proceed with a project. As a rule, FID is taken after the design stage is completed,
necessary permits obtained, an EPC (Engineering, Procurement, and Construction) contract signed, and financing sources and target
markets for the project products identified.
9 Including the floating storage regasification unit in Croatia, which arrived at the operation site on 1 December 2020, but the first fuel was
shipped on 1 January 2021.
149
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Increase in LNG Exports and Imports in 2020 by Country, mmt
+1.2
+2.2
+11.3
+1.1
-10.5
-2.0
+1.7
+3.4
-4.5
356.8
362.1
-0.7
+7.5
356.8
Export
Import
2019
USA
Australia
Qatar
Russia
Others
2020
Others
Europe
Japan
Turkey
India
China
2019
Source: IHS Markit
LONG-TERM FORECAST
FOR HYDROCARBON DEMAND
Technological progress has been
opening up new opportunities
for the energy sector and energy
needs of humankind at large.
Energy transition and climate
change are reshaping the way
we think about the global energy
sector going forward. All sources
of energy, including renewa-
ble energy, have inherent limi-
tations. The potential to replace
fossil fuels with renewable energy
sources is limited by consider-
able technological weaknesses
of the latter, i.e. low energy flux
density and intermittency.
The significant reduction in global
oil and gas consumption in 2020
is due to the temporary restric-
tions on business activity related
to the COVID-19 pandemic.
Global Energy Consumption
by Fuel Type in 2019, %
Global Energy Consumption
by Fuel Type in 2040, %
14,406
mmtoe
17,104
mmtoe
Oil
Gas
Coal
Nuclear energy
Hydropower
Other renewable
energy sources
Source: IEA
31.4%
23.2%
26.2%
5.0%
2.6%
11.6%
Oil
Gas
Coal
Nuclear energy
Hydropower
Other renewable
energy sources
28.9%
25.3%
19.4%
5.3%
2.9%
18.2%
Sources: forecasts by the IEA, OPEC, U.S.
Department of Energy, IHS Markit, BP Plc,
and Rosneft
The demand for hydrocarbons is set
to rebound as global economy
recovers. At the same time, the cur-
rent low prices for traditional energy
resources discourage energy saving,
while also making hydrocarbons
more price competitive against
the renewable energy sources.
According to top global energy
agencies, oil and gas producers,
consulting companies1, and fore-
casts by Rosneft, until 2040, hydro-
carbons will remain the pillar
of the global energy industry,
with their share in the world’s energy
mix staying largely unchanged.
Global demand for gas will be add-
ing an average of 1.4 % a year,
reaching almost 5.2 tcm by 2040
and accounting for more than
a quarter of the global energy mix.
Strong growth in demand for gas
will be supported by its supe-
rior environmental performance
as compared to other fossil fuels.
Gas consumption is expected
to increase in all regions
except Europe. In the fore-
cast period, the Asia-Pacific
Region will be the largest region
by gas consumption, with its
demand going up by 616 bcm vs
2019 to almost 1.5 tcm, exceed-
ing the level of consumption
in North America (1.3 tcm in 2040,
an increase of 276 bcm against
2019).
North America will remain
the leader in natural gas produc-
tion (1.4 tcm of gas in 2040, 28%
of global production).
The most considerable rise in gas
output (around 29% of the global
increase) in the forecast period
will be seen in the Middle East,
reaching over 970 bcm in 2040.
While oil2 will continue dominat-
ing other resources in the energy
mix worldwide, its share, along
with that of coal, will be declining
in favour of natural gas, nuclear
energy, and renewable energy
sources.
By 2040, global oil demand will
increase by 420 mmt compared
to 2019, amounting to more than
4.9 bt. This growth in demand
will be mostly driven by the Asia-
Pacific Region, which will account
for 39.4% of global oil demand
in 2040 or over 1.9 bt. In North
America and Europe, oil demand
will decline in 2040 to 856 mmt
(17.3% of global oil demand)
and 469 mmt (9.5% of global oil
demand), respectively.
Until 2030, natural gas will be out-
performing all other energy sources
in terms of increase in global
demand in absolute terms.
Oil Demand by Region, mmt
Gas Demand by Region, bcm
4,844
4,945
476
204
237
293
531
346
935
527
205
270
313
469
356
856
1,822
1,950
4,127
339
203
175
229
524
306
889
1,461
5,183
698
262
242
511
735
1,266
4,637
677
217
201
518
636
1,200
1,187
1,469
3,726
591
144
200
493
462
968
868
2020
2030
2040
2020
2030
2040
Asia Pacific
North America
Middle East
Europe
Central and South America
Africa
CIS
International aviation and
bunkering
Asia Pacific
North America
Middle East
Europe
Central and South America
Africa
CIS
Sources: forecasts by the IEA, OPEC, U.S. Department of Energy, IHS Markit, BP Plc,
and Rosneft
150
151
1 IEA, OPEC, U.S. Department of Energy, IHS Markit, BP Plc.
2 Includes the consumption of petroleum products from oil and gas condensate and consumption of oil as fuel.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RUSSIAN OIL INDUSTRY
(down by 10.7% year-on-year
to 210.8 mmt; 41.1% of Russia’s
total production) and the Tyumen
Region (down by 10.3% year-on-
year to 11.2 mmt; 2.2% of Russia’s
total production). Crude oil pro-
duction increased in the Yamal-
Nenets Autonomous Area (up
by 2.9% year-on-year to 63.3 mmt;
12.3% of Russia’s total production).
In the Volga Federal District,
oil and gas condensate pro-
duction declined the greatest
in the Republic of Bashkortostan
(down by 31.2% year-on-year
to 11.1 mmt; 2.2% of Russia’s total
production) and the Republic
of Tatarstan (down by 10.8%
year-on-year to 32.7 mmt; 6.4%
of Russia’s total production).
In 2020, oil and gas conden-
sate production also decreased
in the Orenburg Region (down
by 4.7% year-on-year to 20.7 mmt;
4.0% of Russia’s total produc-
tion), Samara Region (down
by 3.6% year-on-year to 15.5 mmt;
3.0% of Russia’s total produc-
tion), the Perm Territory (down
by 6.0% year-on-year to 15.1 mmt;
2.9% of Russia’s total produc-
tion) and Udmurtia (down by 9.7%
year-on-year to 9.5 mmt; 1.8%
of Russia’s total production).
Oil and Gas Condensate
Production in Russia, mmt
+0.8%
-8.5%
555.9
560.3
512.8
2018
2019
2020
Source: CDU TEK
In the Southern Federal District,
oil and gas condensate production
went down by 6.8% year-on-year
to 13.6 mmt; 2.7% of Russia’s total
production) most significantly
in the Volgograd Region (down
by 23.0% year-on-year to 1.8 mmt;
0.4% of Russia’s total produc-
tion), Astrakhan Region (down
by 2.5% year-on-year to 11.0 mmt;
2.1% of Russia’s total production),
and the Krasnodar Territory (down
by 16.2% year-on-year to 0.6 mmt;
0.1% of Russia’s total production).
Evolution of Oil and Gas Condensate Production by Federal District, mmt
560.3
-24.8
-12.7
-6.6
-3.6
-1.0
-0.1
+1.3
512.8
2019
Ural
Federal
District
Volga
Federal
District
Siberian
Federal
District
Northwestern
Federal
District
Southern
Federal
District
North
Caucasian
Federal
District
Far
Eastern
Federal
District
2020
Source: CDU TEK
Russia is a top three oil pro-
ducer globally (alongside the USA
and Saudi Arabia). In 2020, oil
and gas condensate produc-
tion in Russia stood at 512.8 mmt,
down by 8.5% year-on-year.
The reduction in oil produc-
tion in Russia was in compli-
ance with the OPEC+ decision
in April 2020 to significantly
decrease production against
the baseline level to balance
global demand. Russia’s baseline
level for oil production (exclud-
ing gas condensate) was set
at 11 mmb per day, with the tar-
get output level for the period
between 1 May and 31 July 2020
set at 8,492 kbpd and between
1 August and 31 December 2020 –
at 8,993 kbpd.
Oil and gas condensate produc-
tion was cut in all of Russia’s
oil-producing federal districts
with the exception of the Far
Eastern Federal District, where
oil production increased by 3.8%
year-on-year in 2020, to 34.5 mmt
(6.7% of Russia’s total produc-
tion) owing to the output ramp-up
in the Republic of Sakha (a rise
of 19.9% year-on-year to 16.2 mmt,
3.2% of Russia’s production), which
compensated for the production
decline in the Sakhalin Region
(a decrease of 7.2% year-on-year
to 18.3 mmt, 3.6% of Russia’s
production).
The greatest reduction in oil
and gas condensate produc-
tion was recorded in the Ural
Federal District (down by 8.0%
year-on-year to 285.3 mmt;
55.6% of Russia’s total produc-
tion) and Volga Federal District
(down by 10.7% year-on-year
to 106.2 mmt; 20.7% of Russia’s
total production). In the Ural
Federal District, crude oil pro-
duction decreased in the Khanty-
Mansi Autonomous Area – Yugra
152
In 2020, oil and gas condensate
production continued decreas-
ing in the Siberian, Northwestern
and North Caucasian Federal
Districts. In the Siberian
Federal District production
dropped by 12.9% year-on-year
to 44.6 mmt (8.7% of Russia’s
total production) mostly due
to lower output in the Krasnoyarsk
Territory (down by 15.4% year-on-
year to 20.2 mmt; 3.9% of Russia’s
total production), Tomsk Region
(down by 24.5% year-on-year
to 6.9 mmt; 1.3% of Russia’s total
production), and Irkutsk Region
(down by 3.5% year-on-year
to 17.3 mmt; 3.4% of Russia’s total
production).
In the Northwestern Federal
District production declined
by 11.6% year-on-year to 27.6 mmt
(5.4% of Russia’s total produc-
tion), including in the Nenets
Autonomous Area by 12.0%
year-on-year to 14.1 mmt (2.8%
of Russia’s total production)
and in the Republic of Komi
by 11.2% year-on-year to 13.0 mmt
(2.5% of Russia’s total production).
In the North Caucasian Federal
District, oil production con-
tracted to 0.9 mmt (down by 12.9%
year-on-year; 0.2% of Russia’s
total production), includ-
ing in the Stavropol Territory
to 0.7 mmt (down by 8.8%
Russian Oil and Gas Condensate Exports and Refining, mmt
280.0
287.0
285.3
257.0
257.7
266.2
270.0
232.5
2017
2018
2019
2020
Oil export
Oil refining
Source: CDU TEK
year-on-year; 0.1% of Russia’s
total production), in the Republic
of Dagestan – to 0.12 mmt
(down by 25.8% year-on-year;
0.02% of Russia’s total produc-
tion), in the Chechen Republic –
to 0.05 mmt (down 29.1%
year-on-year, 0.01% Russia’s
total production), in the Republic
of Ingushetia – to 0.05 mmt
(down by 7.5% year-on-year, 0.01%
of Russia’s total production).
In 2020, Russian oil and gas
condensate refining volumes
decreased by 5.4% year-on-year
to 270.0 mmt, while oil exports
declined by 12.6% year-on-year
to 232.5 mmt. The export share
in total oil and gas condensate
production totalled 45.3% in 2020
(down by 2.2 p.p. year-on-year).
Oil and gas condensate exports
to countries outside the CIS
went down by 11.8% year-on-
year to 219.2 mmt. Almost 58%
of export volumes to countries
outside the CIS were transported
by sea (around 126.5 mmt), includ-
ing 15.1% via Primorsk and 15.0%
via the Kozmino oil port.
Oil and gas condensate exports
to CIS countries declined in 2020
by 24.1% year-on-year to 13.3 mmt,
all of which was transported via
Belarus.
153
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors year-on-year), while supplies
to CIS countries totalled 35.2 bcm
(down by 7.9% year-on-year).
Exports of LNG4 grew by 1.2 bcm
in 2020 (up by 3.0% year-on-year)
and reached 41.7 bcm.
Wholesale prices of gas produced
by Gazprom and its affiliates
and sold to domestic consum-
ers are used as a benchmark.
The prices are determined by orders
of the Federal Antimonopoly
Service of the Russian Federation
(regulated gas price).
RUSSIAN GAS INDUSTRY
In 2020, Russia was the world’s
No. 2 gas producer (surpassed
only by the USA) and the world’s
largest gas exporter.
Natural and associated gas
production in Russia in 2020
decreased by 6.1% year-on-year
to 692. bcm1. Rosneft accounted
for around 8.4% of the nation’s
total production, or 58.3 bcm2.
Gas produced in Russia is sold
domestically and exported.
According to the Federal Customs
Service of Russia and CDU TEK,
Russia’s natural gas exports
totalled 240.9 bcm in 2020, going
down by 7.5% year-on-year. Export
volumes via Gazprom’s pipelines3
stood at 199.2 bcm (down by 9.4%
year-on-year), including 164.0 bcm
exported to countries outside
the CIS (down by 9.8%
Major gas consumers in Russia
include power generation com-
panies, households, utilities,
and companies in the oil, met-
als, and agrochemical industries,
which taken together account
for around 80% of Russia’s total
gas consumption.
Rosneft supplies gas to indus-
trial consumers, households,
and municipal utilities.
Rosneft’s selling prices for end
consumers are not regulated
by the Government and are based
on agreements with customers.
Natural and Associated Gas Production in Russia, bcm
635.5
640.2
691.1
725.4
737.7
692.9
2015
2016
2017
2018
2019
2020
Source: CDU TEK
Current wholesale prices of gas
for all categories of Russian
consumers were set by Order
of the Federal Antimonopoly
Service No. 638/20 dated 10 July
2020 (for consumers other than
households) and No. 636/20
dated 10 July 2020 (for
households). In accordance
with the Orders, gas prices for all
categories of consumers were
subject to indexation of 3.0 %.
Regulated gas prices in Russia dif-
fer by region, generally depending
on the distance from the gas pro-
duction hub in the Yamal-Nenets
Autonomous Area.
The indexation bench-
mark for regulated gas prices
is the Forecast of Social
and Economic Development
of the Russian Federation pub-
lished by the Ministry of Economic
Development of the Russian
Federation.
As the owner of the Unified Gas
Supply System, Gazprom provides
independent companies with ser-
vices of gas transportation via
trunk gas pipelines. The transpor-
tation charges are set by the FAS
(previously by the FTS)5. Gas
transportation service prices
are based on a tariff consisting
of two fees, one for the use of gas
pipelines and the other for gas
pumping. The pipeline usage fee
is set for the distance between
the pipe inlet and outlet points,
while the pumping fee depends
on Gazprom’s handling and trans-
portation costs.
Current tariffs were approved
by Order of the FTS No. 216-
e/1 dated 8 June 2015 and were
not indexed in 2016–2020.
Natural Gas Exports from Russia, bcm
200.3
14.9
40.7
213.5
14.7
34.0
144.7
164.7
228.5
15.7
34.3
247.5
26.9
36.6
260.4
40.5
38.2
178.5
184.0
181.8
240.9
41.7
35.2
164.0
2015
2016
2017
2018
2019
2020
Countries outside the CIS
CIS
LNG
Sources: Federal Customs Service of Russia,
CDU TEK
1 Data by CDU TEK is based on temperature of 20°C, and pressure of 101,325 Pa. Data by international agencies: temperature of 15°C,
and pressure of 101,325 Pa.
2 Excluding gas used in hydrocarbon liquids production.
3 Pursuant to Federal Law of the Russian Federation No. 117-FZ on Gas Export dated 18 July 2006, the exclusive right to gas export shall be
granted to the owner of the Unified Gas Supply System or to its wholly-owned subsidiary.
4 Large-scale production of LNG in Russia concentrates at the Sakhalin-based LNG plant built as part of Sakhalin-2, a project operated
by Sakhalin Energy Investment Company Ltd., and the Yamal LNG plant (Yamal-Nenets Autonomous Area) controlled by Novatek.
5 The Federal Tariff Service was abolished by Presidential Executive Order No. 373 dated 21 July 2015, and was succeeded by the Federal
Antimonopoly Service (FAS).
154
155
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Gazprom also provides independ-
ent gas producers with under-
ground gas storage services.
The main gas consumption regions
currently have 23 underground
gas storage facilities. Their usage
fees are non-regulated and are set
by Gazprom on a case-by-case
basis for each facility for the dura-
tion of the storage season (from
1 April to 31 March of the next
year). Rosneft relies on under-
ground gas storage facilities
to offset fluctuations in gas con-
sumption by end consumers.
In recent years, the domestic
gas market has seen increased
competition for consumers
and a gradually expanding share
of independent gas producers
in the total volume of domestic
gas sales.
The St Petersburg International
Mercantile Exchange (SPIMEX)
was launched on 24 October
2014 pursuant to an instruction
of the Presidential Commission
for Strategic Development
of the Fuel and Energy Sector
and Environmental Safety.
In 2020, the Exchange contin-
ued to develop organised trade
in natural gas. Trading is based
on three balancing points (Nadym,
622.5 Km (Lokosovo), and Parabel)
with next month deliveries of nat-
ural gas.
In 12M 2020, natural gas sales
under exchange-traded contracts
stood at 16.05 bcm, with total
sales since the launch of SPIMEX
now exceeding 89 bcm.
Actual Growth in Regulated Gas Prices in Russia
Indexation of Regulated Prices (Tariffs) for Infrastructure Sector Products (Services) for 2021–2023,
forecast
2016
2017
2018
2019
2020
Price increase for consumers
other than households, %
Price increase for house-
holds, %
0.0
July:
2.0
July:
3.9
July:
3.9
August:
3.4
July:
3.4
July:
1.4
July:
1.4
August:
3.0
August:
3.0
Metric
2021
2022
2023
Wholesale price indexation for all categories of consumers other
than households
July: 3%
July: 3%
July: 3%
Wholesale price indexation for households
July: 3%
July: 3%
July: 3%
Source: Forecast of Social and Economic Development of the Russian Federation for 2021 and for the 2022 and 2023 Planning Periods (dated
26 September 2020)
156
157
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COMPETITIVE ANALYSIS
HYDROCARBON EXPLORATION
AND PRODUCTION
Rosneft is the largest oil and gas
company in Russia and a leader
in terms of reserves and hydro-
carbon liquid production among
global peers whose shares
or depositary receipts trade
on international stock exchanges.
Efficient reserves management
and resource sustainability, includ-
ing the reserves-to-production
ratio, organic reserves growth,
and cost of organic reserves
growth are among the key invest-
ment highlights of an oil and gas
company.
Under the SEC (U.S. Securities
and Exchange Commission)
classification, Rosneft’s proved
hydrocarbon reserves totalled
Reserve replacement and F&D costs
38,644 mmboe (5,221 mmtoe)
as at 31 December 20201, while
its proved reserve life amounted
to more than 20 years and proved
organic reserve replacement ratio
(RRR) to more than 150%. The life-
of-field audit of the reserves
was performed by DeGolyer &
MacNaughton.
38,644
mmboe
Proved hydrocarbon
reserves (SEC)
Global oil production, kbpd
71.945
kbpd
USA
Saudi Arabia
Russia (excl. Rosneft)
Rosneft
Iraq
Canada
China
Brazil
Iran
Norway
Venezuela
Others
Other OPEC nations
Source: Wood Mackenzie.
16 %
13 %
7 %
6 %
6 %
5 %
5 %
4 %
3 %
2 %
1 %
17 %
15 %
250 %
200 %
150 %
100 %
50 %
0 %
)
r
a
e
y
-
3
(
2
0
2
0
2
–
8
1
0
2
n
i
)
R
R
R
(
o
i
t
a
r
l
t
n
e
m
e
c
a
p
e
r
e
v
r
e
s
e
r
c
n
a
g
r
O
i
0
5
10
15
20
25
30
35
40
45
50
Chevron
Shell
Rosneft
Equinor
BP
Petrobras
LUKOIL
PetroChina
As at 31 December 2020,
the Company’s reserves
under the PRMS (Petroleum
Resources Management
System) standards, accord-
ing to DeGolyer &
MacNaughton, totalled
43,484 mmboe (5,884 mmtoe)
in the 1P category, 83,761 mmboe
(11,308 mmtoe) in the 2P cat-
egory, and 126,216 mmboe
(17,028 mmtoe) in the 3P cate-
gory. In 2020, Rosneft’s PRMS 3P
reserves at existing assets
(before acquisitions/divestments)
increased by over 700 mmtoe
as a result of successful explo-
ration and production drill-
ing and the use of advanced
recovery enhancement tech-
niques to extract hard-to-
recover reserves, among
others. The key contribu-
tors to the reserves base were
the fields of RN-Yuganskneftegaz,
RN-Nyaganneftegaz,
Rospan International,
Verkhnechonskneftegaz,
and RN-Purneftegaz. The reserves
at Vostok Oil assets also grew
significantly.
Reserves-to-production ratio (SEC) in 2020, years3
19.9
21.0
9.6
9.9
10.7
11.0
13.9
7.1
7.4
Source: company reports.
Organic reserves growth (SEC),bboe3
9.0
3.3
2.4
2.3
1.9
1.8
1.6
1.4
-1.4
2018
2019
2020
Source: company reports.
Organic finding and development (F&D)2 costs in 2018–20202. USD/boe
Circle size shows organic reserve growth in 2018–2020.
Source: company reports.
1 After acquisitions/divestments, including fuel gas.
2 Including associates and joint ventures. PetroChina data does not include associates or joint ventures.
3 Including associates and joint ventures. PetroChina data does not include associates or joint ventures.
158
159
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors
fields, to increase the output
through organic growth. In compli-
ance with the Russian President's
instruction to increase the cargo
flow along the Northern Sea Route,
we have embarked on a large-
scale hydrocarbon production
project, which will set the stage
for a comprehensive develop-
ment of the new oil and gas prov-
ince in the Krasnoyarsk Territory’s
north (Vostok Oil project).
Together with our partners, we will
build a unique world-class oil
and gas cluster in this location.
In line with its plans, the Company
continues to run production pro-
jects outside Russia.
For years, Rosneft has invariably
maintained a high reserve replace-
ment ratio (reserve replace-
ment cost in 2018–2020 was
USD 0.3 per boe). In 2021–2022,
we intend to replace no less than
100% of our hydrocarbon pro-
duction. The Company also
plans to fast-track the develop-
ment of new reserves by reducing
preparation timelines, acceler-
ate viability-based resources
to reserves conversion, and make
exploration drilling in Russia more
successful.
The Company accounts for around
40% of the total oil production
of Russia and approximately 6%
of the global oil output. On top
of that, we boast the highest
10-year average production
growth among peers.
Hydrocarbon production in 2020, mmboe per day
5.2
1.0
4.1
4.4
1.9
2.5
3.8
1.4
3.5
1.4
2.3
2.1
3.4
1.6
1.8
3.0
1.1
1.9
2.8
0.5
2.3
2.1
0.5
1.7
Liquids
Gas
Source: company reports for 2020.
To ensure production growth
in the long run, we create an opti-
mal portfolio of major green-
field projects, while also using
advanced production technologies
at our existing fields. Technology
advance is a key focus area
of the Rosneft–2022 Strategy
and a powerful driving force
behind our competitiveness.
Average hydrocarbon production growth over 10 years, %
Rosneft
PetroChina
Chevron
Petrobras
Shell
Gazprom
LUKOIL
BP
ExxonMobil
Sources: company reports; Wood Mackenzie (Gazprom, PetroChina).
7.5%
2.8%
1.1%
0.9%
0.2%
0.1%
–0.7%
–1.0%
–1.7%
161
Exploration activities
in 2020 helped discover
208 deposits and 19 fields
with a total of over 2 btoe
in AB1C1+B2C2 reserves. Appraisal
drilling in the Kara Sea resulted
in the discovery of two unique
Arctic fields – the Zhukov gas field
and the Rokossovsky gas conden-
sate field, with reserves of 1.3 tcm
and 55 mmt, respectively. As part
of the Vostok Oil project, a unique
Zapadno-Irkinskoye field was dis-
covered on the Taimyr Peninsula,
with more than 600 mmtoe
in C1+C2 hydrocarbon reserves.
Rosneft is Russia’s leading
petroleum company in terms
of launching new projects.
In recent years, we have put
on stream a number of large
fields, including Suzunskoye,
Yurubcheno-Tokhomskoye,
Kondinskoye, Tagulskoye,
Russkoye, Srednebotuobinskoye
(Phase 2), Zapadno-Erginskoye,
Vostochno-Messoyakhskoye
and Kuyumbinskoye. The third
quarter of 2020 saw the launch
of a high-pressure oil pipeline
to the Priobskoye field, mark-
ing the start of the Erginsky
license area’s full-scale develop-
ment (a key asset of the Erginsky
cluster). In the fourth quar-
ter of 2020, a pipeline
to the Verkhnechonskoye field
was put on stream to transport
oil from the Severo-Danilovskoye
field. In the medium term, we plan
to enhance the productivity
of mature fields and develop
new high-potential oil and gas
projects, including the Vankor,
Erginsky and Danilovsky clus-
ters, Rospan, Kharampurskoye
and Severo-Komsomolskoye
Oil and gas condensate
production in Russia,
mmb per day
11.27
11.37
2.00
1.22
1.65
0.58
2.08
1.22
1.65
0.58
4.58
4.61
1.23
2018
1.23
2019
Gazprom Neft
Rosneft
Tatneft
LUKOIL
Surgutneftegaz
Other
Source: CDU TEK
10.37
2.03
1.10
1.48
0.51
4.11
1.15
2020
160
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors REFINING AND MARKETING
Rosneft is the largest refiner
in Russia. Its refining business
includes 13 large refineries, as well
as petrochemical and gas pro-
cessing plants in five federal dis-
tricts – Central, Volga, Southern,
Siberian, and Far Eastern.
The Company’s oil refining oper-
ations are focused on the strate-
gic task of supplying high-quality
petroleum products to the Russian
domestic market, including
remote regions. The Achinsk,
Komsomolsk, and Angarsk refiner-
ies are the key suppliers of motor
fuels for the Eastern Siberian
and the Far Eastern regions,
ensuring uninterrupted supply
and curbing price growth that
would inevitably be the case if
petroleum products were delivered
from Central Russian refineries.
In general, unlike those
of most of the Russian produc-
ers, the Company’s oil refiner-
ies are located far from export
markets, which limits the eco-
nomic efficiency of oil refining.
However, the Company continues
its efforts to connect the refiner-
ies to Transneft’s oil trunk pipeline
system.
The oil refineries continue upgrade
and maintenance projects related
to their existing capacities.
In Oil Refining and Petrochemicals,
we have been successfully imple-
menting an operational effi-
ciency programme. As part
of the Rosneft–2022 Strategy,
we work systematically to reduce
operating costs at our production
facilities, among other things
by introducing advanced technol-
ogies to cut energy consumption
in line with ISO 50001 (Energy
Management Systems).
Rosneft’s Innovation Development
Programme is aimed at substi-
tuting imported technologies
for the production of high-qual-
ity petroleum products. One of its
key objectives is for the Company’s
refineries to start using cata-
lysts produced in-house in order
to mitigate the exposure to for-
eign-made products, cut refining
costs and boost the competitive-
ness of Rosneft’s refining segment.
Under the Rosneft–2022 Strategy,
the Company's refineries con-
tinue rolling out the Digital Plant
system to streamline production
management.
As an environmentally responsi-
ble company, Rosneft is consist-
ent in improving and expanding
the development and output
of high-tech petroleum products
with enhanced environmental per-
formance. The Company is also
expanding the sales geography
of Euro-6 and AI-100 gasolines
and boosting production of RLMS,
a low-sulphur marine fuel.
Rosneft is an active player
in the domestic and foreign oil
and petroleum product mar-
kets and Russia’s largest oil
exporter. Its crude oil is exported
to European, Asia-Pacific, and CIS
countries, sold on international
markets, and supplied
to refineries in Russia and abroad.
In general, the Company con-
tinues successfully diversi-
fying its oil supply channels.
Amid growing competition
in the oil market, the Company
is focused on boosting export
volumes under long-term con-
tracts, including oil supplies
to China National Petroleum
Corporation (CNPC) and supplies
to Europe under direct contracts.
Rosneft also captures opportu-
nities of expanding partnerships
through short-term contracts.
The Company is consolidat-
ing its competitive position
in the European market through
the operation of its German
refineries, whose total through-
put in 2020 stood at 10.97 mmt.
Rosneft is currently the third larg-
est player in the German refin-
ing market. Its capacities provide,
on average, an oil refining depth
of 93% and a refinery complex-
ity of 9.0, according to the Nelson
Index. The local operator
is Rosneft Deutschland GmbH.
This subsidiary manages the sup-
ply of crude to Rosneft-owned
refineries (PCK Raffinerie GmbH,
MiRO, Bayernoil) and the sales
of petroleum products.
Rosneft is consistent in its expan-
sion efforts in the Asia-Pacific
Region. Rosneft associate
Nayara Energy owns and oper-
ates the Vadinar refinery, which
accounts for approximately 8%
of Indian refining. With a Nelson
Index of 11.8, it is one of the coun-
try's most advanced facilities
of its kind. In 2020, Nayara Energy
had a rapidly growing retail net-
work in India, with more than
5,975 operating filling stations (over
8% of all filling stations in India)
and 2,200 filling stations in various
stages of commissioning.
Rosneft’s main competitors
in Russian oil exports are verti-
cally integrated companies such
as LUKOIL, Surgutneftegas,
and Gazprom Neft. All Russian oil
producers have their own export
schedule for oil transportation
outside the Russian customs zone
based on equal access to the oil
trunk pipeline system and sea-
port terminals. Key competitors
supplying other crude oil grades
to export markets are international
and national oil companies such
as Shell, ВР, ExxonMobil, Chevron,
Total, Equinor, Saudi Aramco,
NIOC, etc.
The Company consistently supplies
petroleum products to the domes-
tic market in required
quantities. Rosneft is a major
player in the Russian wholesale
motor gasoline and diesel fuel
market. We operate the largest
retail network in Russia, offering
petroleum products in all fed-
eral districts. The Company relies
on extensive infrastructure, both
own and leased, to market and dis-
tribute petroleum products (oil
depots, filling stations), which
takes into account the capacity
of regional markets and consumer
demand. The Rosneft trademark
is one of the most recognisa-
ble for petroleum products across
the regions where the Company
operates and is associated
with quality fuel on sale at filling
stations.
As a result of successful efforts
made in 2018 to create its own
marketing function, Rosneft
Deutschland began market-
ing and selling petroleum prod-
ucts in Germany in January 2019
and now acts both as a major
refiner and a leading whole-
sale supplier of petroleum prod-
ucts to this market. It supplies
petroleum products directly
from three German refineries par-
tially owned by Rosneft, as well
as from over 30 German terminals
by road, rail, and river. The compa-
ny’s customer base includes more
than 500 enterprises in Germany,
Poland, the Czech Republic,
Switzerland, Austria, and France.
The Company exports its petro-
leum products, just like crude oil,
to European, Asia-Pacific, and CIS
countries. Its competitive advantage
lies in its ability to maintain sta-
ble relations with foreign partners,
and, specifically, expand and renew
petroleum product supply contracts.
Alongside Rosneft, Russian oil
majors LUKOIL, Surgutneftegas,
Gazprom Neft, Tatneft and other
oil companies offer petroleum
products on the domestic market.
Key competitors in export markets
include transnational oil compa-
nies (Shell, ВР, Total, ExxonMobil,
Chevron, etc.) and local refiners.
Russia’s oil refining dynamics, mmt
103.3
100.1
93.0
43.3
44.1
40.1
39.4
38.3
37.1
39.6
38.5
36.0
18.2
18.6
18.1
13.0
13.5
13.3
10.3
11.6
8.8
6.9
6.9
7.0
4.9
4.7
4.7
9.6 10.3 9.1
Rosneft
LUKOIL
Gazprom Neft
Surgutneftegas
Gazprom
Tatneft
Novatek
NNK
Independent
refineries
Mini-refineries
2018
2019
2020
Sources: CDU TEK, Rosneft’s reports.
162
163
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors As the oil and gas industry's
environmental performance
comes under closer scrutiny,
the Company is developing its gas
business with a focus on produc-
tion technologies and efficient gas
monetisation. The latter includes
building a portfolio of long-term
supply contracts, participat-
ing in LNG production projects
as well as in Russia’s gas motor
fuel development programme,
and the work to create equal con-
ditions for access to infrastructure
facilities and consumers.
Developing an NGV filling sta-
tion network in Russia is one
of Rosneft’s priorities in the retail
business and one of the most
important focus areas, since
it enables the Company to expand
its competitive advantages
in the domestic market.
Rosneft is also building up its
trading potential and trading com-
petencies in the international LNG
market.
In addition, the Company is suc-
cessfully expanding in new envi-
ronmentally-oriented business
segments. Zvezda Shipbuilding
Complex, created by a consor-
tium led by Rosneft, is building
“green” tankers to high environ-
mental standards, with their main
and additional power supply units
able to run on eco-friendly LNG.
Russia’s first "green" Aframax
tanker Vladimir Monomakh
was launched at the shipyard
in May 2020. In July 2020, Zvezda
became the only Russian shipyard
to obtain an international licence
to build LNG carriers
with a membrane storage sys-
tem. In December 2020, it was
licensed to build nuclear-pow-
ered vessels under the applica-
ble Russian regulations. Zvezda
had successfully passed inspec-
tions of the Interregional Territorial
Department for Siberia and the Far
East of the Federal Environmental,
Industrial and Nuclear
Supervision Service, which made
it the only Russian shipyard
allowed to build Project 10510
“Leader” ice-breakers.
In an effort to expand its innova-
tive and environmentally-oriented
services, Rosneft is developing
EV charging infrastructure at its
filling stations based on demand
forecasts and EV market trends.
We have installed and now oper-
ate 14 charging points for electric
Russia’s motor fuel production, mmt
Russia’s oil refining breakdown,
mmt
270
mmt
Rosneft
LUKOIL
Gazprom Neft
Surgutneftegas
Gazprom
Tatneft
Novatek
NNK
Independent refineries
Mini-refineries
93.0
40.1
37.1
18.1
13.3
11.6
7.0
4.7
36.0
9.1
Sources: CDU TEK, Rosneft’s reports.
77.5
13.0
7.0
10.8
16.5
30.3
78.4
78.0
14.5
7.1
10.4
16.8
16.0
7.2
10.9
16.1
29.6
27.8
39.5
40.2
5.5
2.5
8.3
8.0
15.1
7.2
2.5
7.6
7.9
15.1
38.4
7.6
2.5
8.0
7.1
13.3
2018
2019
2020
2018
2019
2020
Motor gasoline
Diesel fuel
Rosneft1
LUKOIL
Gazprom Neft
Surgutneftegas
Other
vehicles at our filling stations,
including five fast-charging
(50 kW) points in the Moscow
and Leningrad regions, Vladivostok
and Khabarovsk, and nine
slow-charging (22 kW) ones
in the Tver Region and the Krasnodar
Territory. Rosneft has joined forces
with some of Russia’s largest
electric power companies, to con-
tinue expanding its EV charging
infrastructure.
To meet the tougher CO2 reg-
ulations in the EU, at Bayernoil
and MiRO refineries in Germany
we have successfully implemented
projects to import and blend
with diesel fuel a new bio-com-
ponent – hydrotreated vegetable
oil (HVO). Rosneft seeks to fur-
ther improve emissions manage-
ment by working in a number
of directions, in particular focusing
on "green" hydrogen production.
OPERATIONAL AND FINANCIAL EFFICIENCY
The reporting year was marked
by a number of developments that
had a material impact on the whole
oil and gas industry. The most sig-
nificant change that negatively
affected the balance of hydro-
carbon supply and demand
was a decrease in consump-
tion caused by the COVID-19–
related restrictions. The OPEC+ cut
accord resulted in supply con-
straints, which together with par-
tially improving demand brought
about a recovery in prices
by late 2020. However, plummet-
ing oil prices in 2020 led to a sig-
nificant fall in oil and gas operating
profits, prompting companies
to review their mid- and long-
term price forecasts, increasing
write-offs, and pushing net income
into a negative territory.
Amid the uncertainty and vol-
atility in the global oil market,
Rosneft demonstrated high explo-
ration and production efficiency,
while maintaining traditionally
low finding and development
costs and staying committed
to the long-term organic growth
of its hydrocarbon production.
Our F&D costs over the last five
years averaged USD 4.75 per
barrel, with the RRR of 1P reserves
(under SEC classification) in 2016–
2020 rising from 151% to 156%.
Low unit production costs
are yet another indicator
of Rosneft’s operational effi-
ciency. In the reporting period,
we retained an undisputed leader-
ship in production costs in Russia
thanks to optimal technolo-
gies and stringent cost control.
Rosneft's current operating costs
per barrel are significantly lower
than those of international majors,
and 15–30% lower than the lifting
costs of Russian peers.
Unit capex in exploration and production2, USD/boe
13.5
13.1
11.3
8.4
6.3
6.8
6.1
5.5
7.3
7,0
6.7
7.4
7.3
8.5
7.6
21.2
19.6
16.8
12.8
13.3
13.3
11.7
9.3
9.6
16.1
14.8
14.2
13.5
9.9
11.9
2018
2019
2020
1 Reporting data. Rosneft’s diesel fuel volumes do not include marine fuel.
2 Petrobras unit capex in exploration and capex in Brasil
164
165
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Unit production costs1, USD/boe
Free cash flow 2016–2020, comparative analysis (majors)3, USD/boe
10.9
9.6
9.7
9.0
8.5
10.8
10.6
10.1
12.3
12.1
11.1
13.3 13.4
11.6
7.1
6.8
6.4
6.8
5.7
5.8
5.1
3.1
3.1
2.8
3.9
3.6
3.3
4.1
3.8
3.7
2018
2019
2020
Net income in 2018–2020 (majors), USD/boe2
14.4
11.4
10.4
10.6
5.0
5.9
1.4
2.6
2.7
7.8
0.3
7.1
3.0
15.3
10.2
17.9
12.3
-5.1
-7.0
-7.7
-16.2
-16.3
-16.9
-17.4
2018
2019
2020
Net debt / EBTIDA in 2019–2020
1.7
1.5
2.3
0.8
2.7
2.8
3.0
1.4
1.0
0.6
3.5
3.5
4.2
1.2
1.5
1.3
2019
2020
22.5
14.4
14.1
11.1
-1.1
8.5
6.9
3.3
2.0
3.3
11.1
4.9
4.0
1.7
16.3
12.3
7.2
7.5
4.6
1.5
1.8
11.8
10.1
4.0
3.7
-5.5
-5.7
-5.0
-0.1
-1.9
2016
2017
2018
2019
2020
Over many years, Rosneft has
demonstrated a positive free
cash flow, which makes us stand
out among most competitors,
whose free cashflow perfor-
mance tends to be highly volatile
and sometimes negative during
periods that follow asset acquisi-
tion or at the start of investment
projects.
During the turbulent 2020, the Company delivered
positive net income and the lowest net debt / EBTIDA
growth compared to the largest international peers,
thanks to its financial resilience and quality asset
portfolio.
Source: BP, Shell, Equinor, Total, ENI, Chevron, and ExxonMobil reports
CLIMATE AGENDA AND CARBON MANAGEMENT
With climate change climb-
ing higher on the global agenda,
environmental, social and gover-
nance (ESG) criteria are becom-
ing a key factor in determining
the Company's investment appeal.
Investors have come to rely
on ESG ratings from international
agencies when making allocation
decisions, and companies' climate
change initiatives are starting
to represent a major competitive
advantage.
Rosneft fully recognises
the importance of the climate
agenda and makes sure to assess
the systemic, environmental, infra-
structural and economic risks
associated with climate change.
We keep working to reduce
our GHG emissions. In 2006,
we launched and have since been
expanding our Gas Investment
Programme aimed at increas-
ing the level of APG utilisation.
During 2006–2012, Rosneft com-
bined forces with the World Bank
and a number of European state
funds to carry out three joint pro-
jects under the Kyoto Protocol.
Aimed to reduce APG flaring,
the projects resulted in a 2 mmt
decrease in annual CO2 emis-
sions. Rosneft’s Energy Efficiency
Programme was approved
in 2009 and is regularly updated
with direct input from the Board
of Directors. In 2013, Rosneft
started a systemic assessment
and monitoring of its GHG emis-
sions. In 2017, we launched
a programme to regularly monitor
and optimise production losses,
and to ensure sustainable use
of energy by our facilities.
This ongoing initiative will enable
us to achieve lower GHG inten-
sity compared to peers. Following
the comparison of CO2 equivalent
intensity in 2019, Rosneft ranked
in the first quartile of interna-
tional oil and gas majors in terms
of direct emission intensity
in upstream (alongside CNOOC
and Equinor) and downstream.
We are introducing and expanding
the principles of low-carbon devel-
opment as part of our corporate
governance framework. In 2019,
Rosneft set up the Carbon
1 Petrobras data, unit capex in Brazil
2 Per boe of hydrocarbon liquids production, including associates and joint ventures.
166
3 Per boe of hydrocarbon liquids production, including subsidiaries.
167
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Management Subcommittee
to assess the results of its GHG
initiatives. The subcommittee
comprises heads of operations,
energy, economic and environmen-
tal functions.
As carbon management
increases in importance,
in 2020 the Company decided
to transform the subcommit-
tee into the Carbon Management
Committee that directly reports
to the Rosneft’s Chief Executive
Officer. The Committee started its
work in 2021.
In April 2020, the Board
of Directors voted to assign more
responsibilities to the Strategic
Planning Committee, renaming
it the Strategy and Sustainable
Development Committee.
The committee assists the Board
of Directors in defining strategic
goals and growth targets, includ-
ing ESG goals and Rosneft’s
contribution towards the UN
Sustainable Development Goals.
In June 2019, we joined
the Methane Guiding Principles
initiative.
and promoting eco-friendly pro-
duction. In July 2020, we released
a public statement regarding
the Company’s stance on human
rights and the Declaration
on Respecting Human Rights
to be used when interacting
with suppliers of goods, works
and services.
On 20 December 2018,
the Board of Directors approved
the Company's ESG initiatives
and announced Rosneft's com-
mitment to the 17 UN Sustainable
Development Goals. In June
2020, we released an updated
public statement regard-
ing the Company's contribu-
tion towards the UN Sustainable
Development Goals. The state-
ment confirms our commitment
to becoming the leader in minimis-
ing the environmental footprint
In December 2020, the Board
of Directors discussed the long-
term Carbon Management Plan
for the period until 2035, which
takes into account the views
of the Company’s key share-
holders and lays the founda-
tion for Rosneft’s environmental
agenda on developing a low-car-
bon economy, including climate
risk management and defining
opportunities and competitive
advantages associated with future
demand for clean energy.
OVERVIEW OF KEY TAXATION
CHANGES IN THE RUSSIAN FEDERATION
WITH THE LARGEST IMPACT
ON THE COMPANY’S FINANCIAL
AND BUSINESS OPERATIONS
TAXATION IN THE OIL INDUSTRY
СOMPLETION
OF THE TAX MANOEUVRE
AND INTRODUCTION
OF THE TAX ON ADDITIONAL
INCOME FROM HYDROCARBON
EXTRACTION (AIT)
The reporting year saw the gov-
ernment continue to take steps
towards completing the tax
manoeuvre, namely a phased
reduction in export duties on oil,
gas condensate and petroleum
products until they are reduced
to zero in 2024, with an equivalent
increase in MET for oil and gas
condensate, and the introduction
of the reverse excise tax on petro-
leum feedstock.
Additionally, some fields con-
tinued to be subject to the AIT
regime providing for a lower MET
as compared to the general tax
regime and a 50% AIT rate appli-
cable to the tax base calculated
as free cash flow from a subsur-
face development project after
return on investment (as pre-
scribed in the Russian Tax Code).
As at 31 December 2020, the total
number of subsurface sites trans-
ferred to AIT was 36 (exclud-
ing non-producing sites in 2020).
In 2020, these subsurface sites
produced 29 mmt of oil.
INCENTIVES FOR PROJECTS
IN NORTHERN RUSSIA
On 1 April 2020, the government
introduced tax benefits for pro-
jects to develop hydrocarbon
resources in the North of Russia:
• there is now a new fifth group
of subsurface sites transferable
to AIT, comprising areas located
north of 70 degrees of north-
ern latitude within the borders
of the Krasnoyarsk Territory,
the Republic of Sakha (Yakutia)
or the Chukotka Autonomous
Area, with oil reserve depletion
less than 0.1% as at 1 January
2019;
• until the expiration of 12 years
after the start of the commer-
cial production, Group 5 subsur-
face sites are subject to a zero
MET rate and reduction coeffi-
cients (CGR) in the subsequent
four years (0.2, 0.4, 0.6, and 0.8).
On 1 January 2021, the period
of the zero MET rate was
extended from 12 to 16 years;
• a MET deduction was granted
until 31 March 2030 for projects
located north of 67 degrees
of northern latitude and south
of 69 degrees of northern
latitude within the borders
of the Krasnoyarsk Territory,
which provide for the construc-
tion of road, transport, engineer-
ing and energy infrastructure
necessary for the develop-
ment of AIT Group 5 sites
(deduction on infrastruc-
ture). The deduction cap is set
based on the positive difference
between the actual Urals price
and the baseline price (Pbas)
equal to USD 42.45 per bar-
rel for 2020, subject to fur-
ther indexation. On 1 January
2021, the baseline price for cal-
culating the MET deduction
on infrastructure was reduced
to USD 25 per barrel;
• a zero MET rate is introduced
for the production of natural gas
and gas condensate together
with natural gas at subsurface
sites located in certain regions
of the Russian Arctic and used
exclusively for the manufacture
of liquefied natural gas (LNG)
and/or petrochemicals at new
facilities, until the accumulated
extraction volume (250 bcm
of gas or 20 mmt of gas con-
densate at the subsurface site)
is reached or until the expira-
tion of 12 years from the first day
of the month in which the sale
of the first LNG or petrochemical
batch took place;
168
169
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Excise rates for petroleum products in 2019–2020, RUB per tonne
Excisable goods
Motor gasoline
• Non-compliant with EURO-5
• Non-compliant with EURO-5
Straight-run gasoline
Diesel fuel
Jet fuel
Motor oils
Benzene, paraxylene, orthoxylene
Middle distillates
Heavy marine fuel2
from 1 January
to 31 December 2019
from 1 January to 31 March
2020
from 1 January to 31
December 2020
13,100
12,314
13,912
8,541
2,800
5,400
2,929
9,241
2,100
13,100
12,752
14,720
8,835
2,800
5,616
3,058
9,535
2,100
13,100
12,752
14,720
8,835
2,800
5,616
3,058
16,1911
-
OTHER TAXATION CHANGES
IN THE OIL INDUSTRY
To compensate for additional
budget expenses arising out
of changes in the damper mech-
anism (part of the reverse
excise tax on petroleum feed-
stock), from 1 January 2020
the CMGDF coefficient used
to increase the MET rate for oil
was supplemented with a new
increment (NBUG) in the amount
commensurate with the damper
(the changes were introduced
in 2019 to allow for increased
excise deductions as compared
to the previous formula).
From 1 April 2020, new offshore
hydrocarbon deposits located
in White, Pechora and Okhotsk
seas and the southern part
of the Barents Sea, for which
the date of the start of com-
mercial hydrocarbon produc-
tion falls after 1 January 2020,
are reclassified to Group 4 in terms
of oil extraction complexity (the
most attractive tax benefits)
for the purposes of MET.
EXCISE TAX ON PETROLEUM FEEDSTOCK AND PETROLEUM
PRODUCTS
In 2020, the Company con-
tinued to apply the so-called
reverse excise tax introduced
from 1 January 2019 as part
of completing the tax manoeu-
vre. The scheme envisages levying
excise tax on petroleum feedstock
supplied for refining in Russia
and granting the relevant tax
deduction.
The petroleum feedstock
excise rate is calculated based
on current global oil prices,
USD/RUB exchange rate,
the quantity and types of refin-
ing products. Certain constitu-
ent entities of Russia (including
the Krasnoyarsk Territory
and Irkutsk Region) apply higher
regional coefficients.
The deduction also includes
a damping component cal-
culated as the difference
between global and notional
domestic prices for gaso-
line and diesel fuel and can be
both positive (reimbursable
from the budget) and negative
(payable to the budget) depend-
ing on the said price difference.
Given the macroeconomic condi-
tions, starting from February 2020
the damper was negative.
From 1 January 2020 the gov-
ernment increased the excise
tax for petroleum products,
with the exception of jet fuel
and heavy marine fuel, by 3.2–
5.8% as planned.
From 1 April 2020, the middle dis-
tillate category used for excise
tax purposes was significantly
expanded to comprise nearly
all heavy petroleum products,
with certain exceptions listed
in Article 181 of the Russian Tax
Code and heavy marine fuel
excluded from the list of excisable
goods as a standalone item.
Other changes include a tax
deduction for middle distillates
used as fuel for electricity and/or
heat generation, and an increased
tax deduction for the sale of mid-
dle distillates as bunker fuel
exported from Russia as supplies.
170
171
1 An average rate for the period. The monthly rate is calculated using the following formula: 9,585 – (PDSexp – 48,300) x 0.65 if PDSexp
is ≤ RUB 48,300 per tonne and 9,585 if PDSexp is > RUB 48,300 RUB per tonne (PDSexp is the average price of the export alternative
for class 5 diesel fuel for the tax period).
2 For fuel produced at refining facilities located in the Khabarovsk Territory; in other cases the excise is equal to zero.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors FURTHER CHANGES IN TAX LEGISLATION
The reporting period saw
the adoption of several federal
laws significantly changing the fis-
cal regime for the oil industry start-
ing from 2021. Some of the new tax
measures with the greatest impact
on the Company include:
duties on incremental produc-
tion resulting from such deduction
(the difference between the actual
and baseline production (without
the deduction) set out by the oil
production agreement).
TAX DEDUCTION
FOR THE PRIOBSKY
SUBSURFACE SITE
A monthly tax deduction
of RUB 3,830 mln is applied to oil
production at subsurface sites
meeting the statutory criteria
(including the Priobsky site) until
the accrued deduction reaches
RUB 460 bln.
The tax deduction is appli-
cable to a certain month pro-
vided an oil production
agreement has been signed
with the Russian Ministry of Finance
and the Ministry of Natural
Resources and Environment
(Rosneft signed the agree-
ment with the said federal
executive bodies in January
2021) and the Urals price has
exceeded the baseline set out
by Article 96.6 of the Russian
Budget Code.
On top of that, the deduction can-
not exceed the federal budget’s
additional notional revenue
from the applied deduction deter-
mined as a sum of MET and export
ADJUSTMENT TO FISCAL
BENEFITS FOR PROJECTS
IN NORTHERN RUSSIA
As mentioned above,
from 1 January 2021 the period
of the zero MET rate for AIT
Group 5 subsurface sites was
extended until the expiration
of 16 years from the start of com-
mercial production. Moreover,
the government increased the cap
for MET deduction on infrastruc-
ture on the back of a lower base-
line price (Pbas) of USD 25 per
barrel for the whole period,
and granted a statutory exemp-
tion from oil export duties
for the period of the MET relief.
CHANGES IN FISCAL TERMS
FOR DEPLETED SITES
AND SITES CONTAINING HIGH-
VISCOSITY OIL
Starting 1 January 2021, reductions
in the MET rate for high-viscosity
oil and oil extracted on depleted
sites (the Cd coefficient) are can-
celled, while the Cdp reduction
coefficient for the MET rate
for depleted deposits of hard-to-
recover oil remains in effect.
In addition, depleted sites may
now be transferred to AIT (Group 3
for the purposes of AIT). Starting
1 January 2024, these sites
are eligible for tax deductions
of 20% from the MET amount,
which become applicable once
the depletion level reaches 80%
(for the purposes of deduction,
depletion calculations account
for increments and write-offs
in the oil reserves after 2006,
unlike the similar calculation used
to determine the Cd coefficient).
For the depleted sites in the Sea
of Okhotsk, the specified deduc-
tion comes into force starting
1 January 2021.
The Russkoye field, which is being
developed by the Company
and has high-viscosity oil reserves,
is also eligible to the AIT regime.
CHANGES IN FISCAL TERMS
FOR FIELDS THAT APPLIED
REDUCED EXPORT DUTIES
ON OIL
Starting 1 January 2021, no
longer effective are special for-
mulas for calculating export
duty rates for certain subsur-
face sites specified by the Federal
Law of the Russian Federation
On the Customs Tariff, as well
as reduced MET on oil produced
in such areas. Until the end
of 2021, these sites may be trans-
ferred to the AIT regime.
CHANGES IN AIT TERMS
In addition to the subsurface
site categories above, start-
ing 1 January 2021 the right
to switch to AIT has been granted
for the sites that are:
• located entirely or partially
within the North Caucasian
Federal District or the Sakhalin
Region (except for offshore
fields);
• located north of 65 degrees
of northern latitude and entirely
within the Komi Republic
(and meeting the criteria set
by the Russian Tax Code for AIT
Group 4), as well as six sub-
surface sites in the Orenburg
and Samara regions (the geo-
graphical coordinates can be
found in the Russian Tax Code).
Starting 1 January 2021, there
have also been certain changes
in calculating AIT and MET on oil
for subsurface sites transferred
to AIT.
There is now a temporary limita-
tion on the carry-forwards of his-
torical losses: they may not reduce
the tax base for 2021–2023
by more than 50% (this limitation
does not apply to subsurface sites
falling under AIT Group 5).
Also, there have been changes
in the loss indexation coefficient:
instead of a universal carry-for-
ward loss indexation coefficient
(1.163), there are now different
coefficients depending on the tax
period and subsurface site group.
The old 1.163 coefficient remains
in effect for Group 5.
There are new details on defining
the unit cost value for calculating
the minimum AIT tax base: the unit
cost value is taken to be RUB 7,140
per tonne until 31 December 2023
and RUB 8,600 per tonne start-
ing 1 January 2024, multiplied
by the deflator.
The MET rates for subsur-
face sites transferred to AIT
increased for certain Group 2
sites due to the cancella-
tion of lower rates for sites that
as at 1 January 2021 had no
grounds for applying the MET tax
holidays under the general tax
regime and due to higher rates
for individual sites for 2021–2023.
deductions for owners of the petro-
leum feedstock supplied for pro-
cessing. Eligible for the mark-up
are the companies that before
1 October 2021 sign investment
agreements with the Russian
Ministry of Energy.
The definition of middle distillates
has been updated as follows:
• the density threshold for a mix-
ture of hydrocarbons to be
recognised as a middle distil-
late has been lowered, mean-
ing a number of heavy
petroleum products (e.g. tar
and fuel oil) are now excluded
from the category;
• the criteria for defining high-vis-
cosity products not belonging
to middle distillates have been
refined, which also means that
a number of products are no
longer subject to excise tax.
The resolutions on revised fiscal
terms passed in 2020 are compre-
hensive and balanced in nature.
Overall, the new taxation param-
eters bear no adverse impact
on the Company’s plans as regards
its oil production projects.
In addition, starting 1 January 2022
the reverse excise tax will be intro-
duced for ethane and lique-
fied petroleum gas (LPG) if such
ethane and/or LPG are supplied
for processing into goods that
constitute petrochemical products.
EXCISE TAX ADJUSTMENTS
There have been adjustments
to certain aspects of the reverse
excise tax on petroleum feed-
stock effective from 1 January
2021. In particular, an investment
mark-up (Cinv) has been intro-
duced, which increases excise
172
173
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 4
SUSTAINABLE
DEVELOPMENT
4
E
L
B
A
N
A
T
S
U
S
I
176
t
n
e
m
p
o
l
e
v
e
D
ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
HEALTH, SAFETY,
ENVIRONMENT.
CLIMATE CHANGE.
STRATEGIC GUIDELINES
Rosneft understands its respon-
sibility for the health, safety
and well-being of its employees,
contractors and local commu-
nities from its operating activi-
ties, as well as for the protection
of the environment in the regions
of its operations.
The global economy faced huge
challenges in 2020 with the coro-
navirus pandemic causing many
disruptive changes across all
industries. In these current chal-
lenging conditions the Company
has continued to focus on main-
taining high occupational safety
standards; together with enhanced
controls and efficient risk man-
agement processes to ensure
accident-free operations; ensur-
ing safe labor conditions
for employees and implement-
ing programs to minimize envi-
ronmental impacts. The Company
has also continued to strengthen
its carbon management agenda
to manage physical risks associ-
ated with the impacts of climate
change and the energy transition.
HSE MANAGEMENT PRINCIPLES
In December 2018, the Rosneft
Board of Directors approved
the Company’s strate-
gic development guidelines
related to the implementa-
tion of the United Nations (UN)
Sustainable Development
Goals. Thus, the mission, values,
goals and strategic guidelines
of the Company are consist-
ent with the 17 United Nations
Sustainable Development Goals.
The company also focused on five
priority SDGs to help guide
the work of its operations: “Good
Health and Well-being”, “Clean
and Affordable Energy”, “Decent
Work and Economic Growth”,
“Climate Action” and “Partnerships
for the Goals”. In support of these
priority goals, Rosneft strength-
ened its HSE risk management
system, improved the HSE gov-
erance processes and proce-
dures, strengthened its carbon
management goverance pro-
cesses and increased its focus
on competency development
planning. The company also
improved its monitoring of HSE
programs to improve implemen-
tation and embedding across all
operations.
In 2020, Rosneft adopted
the international stand-
ard for occupational health
and safety management systems -
ISO 45001:2018 while maintaining
its conformance with the require-
ments of the Environmental man-
agement system - ISO 14001:2015.
Rosneft Headquarters
and 66 Group Subsidiaries
received certificates of conform-
ance with these international man-
agement system standards after
the completion of independent
audits in 2020.
HSE GOALS OF THE COMPANY
Rosneft strives to continuously
conduct accident-free operations,
maintain safe working conditions
for employees and contractors,
support the health of communi-
ties in the areas of the Company’s
operations and minimize envi-
ronmental impacts from its
operations. HSE performance
is benchmarked against interna-
tional peers.
The Company has also invested
in a number of environmental
improvement projects and envi-
ronmental programs to achieve
its strategic environmental goals
defined in the Rosneft-2022
Strategy.
Rosneft’s ‘2030 Environmental
Vision’ was reviewed
by the Committee for Strategy
and Sustainable Development
FROM COMMITMENTS TO ACTIONS
Five meetings of the compa-
ny’s HSE Committee were held
in 2020 to review HSE perfor-
mance, review progress of key HSE
programs and agree the HSE pri-
orities of the Company. Progress
against the Company’s HSE tar-
gets is reviewed on a quarterly
basis, first by the HSE Committee,
which includes representatives
of the Company's management,
and then by Rosneft’s Board
of Directors.
Meetings of the Carbon
Management Sub-committee
were also held on a quarterly
basis to review progress against
actions in Rosneft’s 2020 Carbon
Management Plan. In August
2020, a team was established
by the Carbon Management Sub-
Committee to develop a long
term Carbon Management Plan
to 2035. This plan was reviewed
and approved by the CEO
and the Board of Directors
of the Board of Directors in 2020.
This vision outlines Rosneft’s
2030 environmental operating
principles, the technical envi-
ronmental programs and goals
to 2030 and the areas for align-
ment with the UN Sustainable
Development Goals and 2030
national environmental goals
of the Russian Federation.
in December 2020 and then com-
municated externally. At the end
of 2020, the status of the Carbon
Management Sub-committee
was upgraded to the Carbon
Management Committee report-
ing directly to the Chief Executive
Officer.
177
ENSURING THE SAFETY AND HEALTH OF OUR PEOPLE
IS THE HIGHEST AND UNCONDITIONAL VALUE OF ROSNEFT
The highest priority of the com-
pany is the safety of all employ-
ees, contractors, operations
and the communities in which
the Company operates. Rosneft
strongly believes that 'all acci-
dents are preventable'.
The HSE priorities for 2020
included the development, intro-
duction and implementation of key
industrial safety and occupational
safety programs that focused
on leadership and safety culture,
compliance with the Golden Rules
of Safety, contractor safety man-
agement and road safety. In 2020,
the Company delivered all nec-
essary health and safety activ-
ities, with the overall spending
of ca. RUB 48 bn due to employee
remote working and additional
epidemic-related measures help-
ing to protect employee health.
LEADERSHIP AND SAFETY
CULTURE
HSE Leadership commitments
are in place for top managers
of the Company, as well as both
General Directors and other top
managers in Group Subsidiaries.
Leaders demonstrate this commit-
ment by personal example as they
discuss health, safety and envi-
ronmental risks with employ-
ees and contractors while they
are planning or conducting oper-
ational activities, and also work
with them to identify opportu-
nities for improved HSE perfor-
mance. In addition, managers at all
levels define clear HSE guide-
lines in accordance with the uni-
fied “Leadership Principles”
of the Company which ensure safe
working conditions for all employ-
ees and contractor organizations.
and take measures to stop work
if the safety or health of any per-
son is at risk. There are also trade
union representatives across who
have the authority to provide
additional support to ensure com-
pliance with occupational safety
procedures.
The Company is commit-
ted to continuously developing
the capability and competence
of employees especially in areas
of the highest occupational safety
risks. This contributes to strength-
ening the processes to preserve
worker health; reduces the expo-
sure to personal or process safety
risks and increases the focus
on environmental protection
from operational activities. These
capability development programs
include specific internal corporate
HSE training, external safety train-
ing, direct coaching and through
information shared in HSE
interventions and Corporate
and Subsidiary HSE campaigns
based on specific identified risks.
In 2020, over 25,000 subsidiary
employees were trained internally
on the following HSE courses:
“Procedure for the Internal
Investigation of Incidents”, “HSE
Risk Management” and “HSE
Leadership”.
As part of cooperative arrange-
ment with the National University
of Oil and Gas “Gubkin University”,
the Company’s internal trainers
together with staff of the Gubkin
University prepared a num-
ber of distance training courses
for Group Subsidiaries' managers
and their deputies, with 355 Group
Subsidiary managers successfully
trained in 2020.
Employees and contractors, wher-
ever they work, must adhere
to the “Golden Rules of Safety”
In November and December 2020,
a number of employees from both
the Corporate
The HSE priorities
for 2020 were:
• Developing leadership
and safety culture;
• Embedding the Golden Rules
of Safety;
• Improving contractor safety;
• Reducing road traffic accidents;
• Implementing Process Safety
improvements;
• Improving the Risk-based
approach to operational
activities;
• Developing a 2035 Carbon
Management Plan;
• Development
of an Environmental Vision
to 2030.
Offices and Group Subsidiaries
were trained on Requirements
of international standards ISO
45001:2018 and ISO 14001:2015.
Internal audit of HSE IMS for ISO
45001:2018 and ISO 14001:2015.
to be able to build the capability
and understanding of the require-
ments of these HSE management
systems.
In the fourth quarter of 2020,
the HSE Department organ-
ized a survey of Group Subsidiary
employees on the topic of occu-
pational safety culture, including
questions on motivation; HSE risk
assessment; Golden Safety Rules;
personal protective equipment;
attitudes towards occupational
safety; incident reporting; HSE
communications and compliance
with Covid-19 Company protocols
and hygiene practices. The results
from the survey provided many
important HSE insights and also
demonstrated an improving safety
culture among our employees.
In 2020, the Company commenced
its carbon management training
for Executives and senior repre-
sentatives of Central corporate
functions with over 15 sessions
178
delivered. Training will continue
across all the Company Group
Subsidiaries in 2021. Company
specialists were also trained
on the ISO 14064 standard related
to the system of accounting, moni-
toring and reporting of greenhouse
gas emissions, which was con-
ducted by external certified train-
ers. Information sessions were also
held for managers and employ-
ees of various departments
of the Company's central office
and the Group Subsidiaries, includ-
ing those involved in development
of the methane leak detection
pilot projects. In 2021, a corpo-
rate training programme on car-
bon management will be delivered
across all Company Subsidiaries.
One of the most impor-
tant priorities of the Company
is the preservation of the envi-
ronment for the benefit of pres-
ent and future generations.
The Company's expectation
is that each employee incorpo-
rates individual actions to protect
the environment in work plan-
ning and execution while com-
plying with all environmental
requirements, thereby contribut-
ing to Rosneft's growing environ-
mental culture. Last year, at all
levels of the Company, meetings
were held were held on the topic
“Environmental Culture
and Environmental Protection
Leadership”. Managers at all lev-
els, from top managers to line
managers of operational units
of the Group Subsidiaries, held
video and audio conference meet-
ings (due to Covid 19 restrictions)
to clarify environmental issues,
increase employee involvement
and awareness of environmen-
tal compliance and encour-
age employees to participate
in actions to protect the environ-
ment, both at work or at home.
The 7th Rosneft General
Corporate Congress of Ecologists
was attended by top managers
of the Company, heads
and specialists of the Company's
structural units and more than
200 Group Subsidiaries as well
as representatives of Rosneft's
international partners – Equinor
and BP. One of the focus
areas of the Congress was
the discussion of the progress
towards Strategy-2022 goals
and the Company's long-term
environmental management
and carbon management goals.
In addition, measures were also
discussed to align these Company
goals with the UN Sustainable
Development Goals, Russian
Federation's National Goals
and 2035 Energy Strategy. Also
included in the Congress agenda
were specific topics on indus-
trial ecology, conservation
of biological diversity and the use
of new environmental technolo-
gies for environmental monitor-
ing and improving operational
performance. A separate item
on the agenda of the Congress
was the topic of socially responsi-
ble investing (ESG)
130,000+
employees
completed the “Golden
Rules of Safety”
training conducted
by internal trainers
and the importance
of environmental indicators
to the Company's investment case.
GOLDEN RULES OF SAFETY
Despite the limitations caused
by the coronavirus infection, addi-
tional measures were implemented
in 2020 to embed the Golden
Rules of Safety in all Rosneft
Group Subsidiaries with access
to the Training and Development
Portal and Distance Learning cor-
porate training systems. A distance
learning “Golden Rules of Safety”
interactive training program
was launched
179
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors in 2020 and this program will
be widely shared with the Group
Subsidiaries to maximize avail-
ability to Company employees.
In 2020, 130 thousand employ-
ees completed the “Golden Rules
of Safety” training conducted
by internal trainers.
SAFETY OF EMPLOYEES
OF THE COMPANY
AND CONTRACTORS
In 2020, in addition to the man-
agement of HSE risks from oper-
ational activities, the Company
also managed the significant
risk of the spread of the corona-
virus infection across the oper-
ations. In response, Rosneft
took responsible steps to pre-
vent the spread of the virus,
protect the Company’s employ-
ees and contractors and ensure
the continuous operation
of production facilities. This
was achieved through the plan-
ning and organization work,
including shift rotations, main-
taining strict sanitizing precau-
tions, introducing tight control
and quarantine measures, work
zoning and work monitor-
ing. Employees were required
to undergo compulsory medical
examinations and were provided
with personal protective equip-
ment at the required level. All
controls were carried out in com-
pliance with legal and corporate
standards and requirements.
New regulations and procurement
procedures for the qualification
and admission of contractors
to the Company's facilities were
also implemented in 2020. A new
risk assessment procedure to rank
contractors of potential HSE risk
from the nature of their operational
activities was also introduced. HSE
expectations and requirements
for contractors are included within
their contractual obligations. These
improvements in the contractor
management procedures allowed
the Company to effectively man-
age risks and minimize injuries
and accidents during operational
activities.
ROAD-TRAFFIC SAFETY
The Company's 'Vehicle Safety
Management System' sets require-
ments for Company, contractor
and sub-contractor drivers, vehi-
cles and equipment.
In 2020, the Company approved
the Rosneft Concept for Road
Safety 2020–2022 as part
of the transport safety manage-
ment system to prevent road traf-
fic accidents. This concept takes
into account the main goals
and objectives of the Decree
of the President of the Russian
Federation dated May 07, 2018
No. 204 and the Road Safety
Strategy of the Russian Federation
for 2018–2024, including:
• Reduction of injury rates
and incident severity from road
traffic accidents;
• Compliance with HSE legal
requirements for driving;
• Continuous improvement
of road traffic safety perfor-
mance indicators ;
• Eliminating accidents due
to vehicle malfunctioning or due
to health risks of drivers;
• The use of a risk-oriented ‘bar-
rier’ approach in the road traffic
safety management process .
In addition, the following priority
activities were implemented as part
of this 2020-2022 Road Safety
plan to reduce driving safety risks:
• Defensive driving training pro-
grams for drivers;
• Installation of in-vehicle monitor-
ing systems (IVMS – GLONASS),
video recorders, the use of port-
able vehicle speed measurement
devices;
• Creation of the unified cor-
porate telematics platform
for GLONASS satellite monitoring
of the Company's vehicles;
• Publication of articles on road
safety in regional/corporate
media; and
• Implementation
of a Communication support
plan.
During the year, Group Group
Subsidiaries and contractors
also organized accident preven-
tion campaigns “We are for road
safety – 2020”, “Safe road – 2020”
and “Beware, Children!” to contrib-
ute further to the reduction in road
traffic accidents.
PROCESS SAFETY
The Company uses a risk assess-
ment approach using preven-
tion and response barriers
to plan and implement programs
and activities. This is both
from 2019–2020 where subsid-
iaries carrying higher risk activi-
ties were prioritized, in addition
to those which were certified
against the ISO 45001 and ISO
14001 management system
standards.
An important result of the imple-
mentation of the HSE risk man-
agement process in all Group
Subsidiaries is the identifica-
tion of weaknesses in existing
safety barriers. These findings
will help to prioritize strength-
ening of the most critical safety
barriers linked to the highest risk
activities and operations. This will
contribute significantly to reduc-
ing serious accidents and occupa-
tional safety risks for employees
and contractors in the oper-
ations, as well as reduce inci-
dents that can negatively impact
the environment.
In 2020, there was significant
focus to analyze the strength
and condition of safety risk
barriers at facilities located
in the Arctic zone of the Russian
Federation and permafrost
regions, as well as in tank farms.
23
oil and gas
subsidiaries
participate
in the 2020–2025
Pipeline Reliability
Improvement
Programme
In 2020, to support the imple-
mentation of the risk barrier
approach, guidelines were devel-
oped to assess and analyze
the risks associated with fires
and well control safety. In addition,
several typical risk bow-tie dia-
grams were developed to create
a standardized approach to con-
ducting these risk assessments
and to improve the level of under-
standing of the overall strength of
operational safety barriers across
various activities.
to reduce the number of major
accidents resulting from leaks
and integrity incidents as well
as to minimize any consequence
resulting from their occurence.
In 2020, the Company launched
the start of a new 5-year pipeline
integrity program (2020 - 2025)
for risk assessing and improv-
ing the reliability of pipelines.
with twenty-three (23) oil and gas
production subsidiaries being part
of the Program. The main goals
of the Program are to:
• Reduce field pipeline failure rate
by 20 % vs 2019;
• Increase the scope of in-line
inspections to pro-actively mon-
itor the condition of pipelines;
• Select, test and implement new
technologies that ensure corro-
sion and scale protection;
• Develop and implement tools
for operational control and anal-
ysis of the operation and condi-
tion of the field pipeline fleet.
The scope of this program
includes the reconstruc-
tion of 7,000 km of pipelines
and completing maintenance
repairs to 6,000 km of pipelines
on the transportation network
RISK-ORIENTED APPROACH
The HSE risk management pro-
cess was updated to include
uniform assessment criteria
and decision-making levels as well
as the introduction to the risk pre-
vention safety barrier approach.
These changes were introduced
across 135 Oil and Gas subsidiaries
180
181
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ENVIRONMENTAL RESPONSIBILITY
GREEN INVESTMENTS
In 2020, the Company imple-
mented a number of activities
and investment projects to mini-
mize its environmental footprint.
During the period 2018–2020
"Green investments" for reduction
of flaring of associated petroleum
gas (APG), investment in pipeline
reliability; improvement in waste-
water treatment, improvement
in waste management practices
and remediation of contaminated
land, was around 120 bln RUB.
~RUB 120 bln
spent by Rosneft
on green investments
in 2018–2020
CARBON MANAGEMENT - RISK AND OPPORTUNITY
MANAGEMENT
In December 2020, the Company's
Board of Directors reviewed
and approved the Rosneft 2035
Carbon Management Plan. This
plan was approved by the CEO
and outlines a long-term approach
to reducing the Company’s car-
bon footprint in alignment
with the global energy transi-
tion to a low-carbon economy.
The main goals of the Plan are:
• the prevention of 20 million
tons of CO2-equivalent (Scope
1 and 2) absolute greenhouse
gas emissions from forecasted
growth;
• the reduction of Upstream GHG
intensity (Scope 1 and 2) by 30 %
against a 2019 baseline;
• the reduction of methane inten-
sity to below 0.25 %
in the context of the energy
transition process and to allow
maximum monetization
of the Company's proven reserves.
NON-GREENHOUSE GAS
EMISSIONS
In 2020, the Company reduced
the volume of non-GHG air pol-
lutants by 14 %, with some of this
reduction resulting from the imple-
mentation of the APG utilization
program. One of the key meas-
ures for the implementation of this
program in 2020 was the com-
missioning of priority APG
utilization facilities at Yurubcheno-
Tokhomskoye field of the East
Siberian Oil and Gas Company.
• the achievement of ‘zero routine
WATER PROTECTION
flaring’ of associated gas by 2035.
Implementation of the plan will
help to strengthen Rosneft's
position as one of the lead-
ers in the global energy market
One of the Company’s strategic pri-
orities is to minimize the demand
for fresh water in align-
ment with the United Nations
Sustainable Development Goals.
14%
reduction in air
pollutant emissions
in 2020
This is achieved through the imple-
mentation of infrastructure mod-
ernization projects and the use
of the best available technologies.
In 2020, the company continued
to reduce the volume of con-
taminated wastewater disposal
by the construction and upgrade
of water treatment facilities as part
of the refinery modernization pro-
gram. The upgraded waste-water
treatment facilities of Bashneft-
Ufaneftekhim also reached its
operating design capacity, while
efficiency of other water treatment
facilities were improved. Local
treatment facilities and a recycling
water supply unit were commis-
sioned at NZMP LLC in February
4.7+ mmt
drilling waste
processed by Rosneft
in 2020
LAND REMEDIATION
The Company continued to imple-
ment measures for land protection
and rehabilitation with more than
500 hectares of contaminated
land reclaimed in 2020.
2020 while facilities for the treat-
ment and disposal of wastewa-
ter were commissioned at Rospan
International JSC in October 2020.
DRILLING WASTE AND OILY
WASTE HANDLING
In 2020, the Company reduced
the previously accumulated vol-
ume of drilling waste by around
1.3 mln tons and processed
around 850,000 tons of oily
waste. Rosneft is working contin-
uously to improve the contracting
processes for waste manage-
ment and the execution of mod-
ern waste management practices
to maintain the improved rates
of waste management.
182
183
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors IMPROVEMENT
OF THE EFFICIENCY OF OIL
SPILL MANAGEMENT
Rosneft is continuing to improve
its spill prevention, management
planning and response prepar-
edness for emergency response
teams building on the improve-
ments that have already
been made by the Company.
The Company has now centralized
the spill prevention and response
organizational function to drive
the implementation of measures
to prevent environmental dam-
age from both on-shore pipeline
ruptures and from environmen-
tal accidents in the shelf area
of the Russian Federation .
Given the importance of the Arctic
natural ecosystems, Rosneft has
also developed a wildlife response
action plan as part its offshore
project work. This plan focuses
on the rescue and rehabilita-
tion of wildlife in the event of oil
and chemical spills. This action
plan is a part of each Oil Spill
Response (OSR) plan and it pro-
vides guidance to the RN Group
Subsidiaries and project teams
for the planning and management
of response efforts for vulnerable
species in their areas.
BIODIVERSITY CONSERVATION
The Company pays special atten-
tion to activities aimed at biodi-
versity conservation. In December
2019 Rosneft and the Ministry
of Natural Resources and Ecology
of the Russian Federation signed
the Cooperation Agreement
for a national project ‘Ecology’
which focuses on cooperation
on biodiversity conservation.
The goal of the project is to assess
the current natural state and pop-
ulation dynamics of key species
in the marine and terrestrial eco-
systems of the Arctic. These spe-
cies include the wild reindeer, ivory
gull, Atlantic walrus and polar
bear which are listed in the Red
Book of the Russian Federation.
In 2020, as part of this work,
expeditionary field work was car-
ried out to study the polar bear
habitats on the Novaya Zemlya
archipelago (Cape Zhelaniya)
and the walrus populations
on the islands of the Franz
Josef Land archipelago as well
as the Oran Islands and Victoria
island. In addition, during the field
work in July-August 2020, work
was organized on Vize Island
to study the ivory gulls. The actual
cost of these activities in 2020
was more than 119 mln rubles.
The Company has continued
the work started in 2016 to publish
scientific data obtained from both
field research work conducted
in collaboration with the lead-
ing research institutes of Russia,
and those collected by Rosneft
itself from its field operations.
As a result of this work, Rosneft
published both the "Environmental
Atlas for the Barents Sea"
and the "Species as biological
indicators of the state of Arctic
marine ecosystems" in 2020.
In the autumn-winter period
of 2020, field research was con-
ducted on the wild reindeer spe-
cies on the Taimyr Peninsula
and in Evenkiya. Scientists
from the Siberian Federal
University and the Arctic Research
Center used aerial surveys as well
as satellite transmitters placed
on tagged collars for remote
tracking of migration routes.
The research was conducted using
daily observations at fixed loca-
tions as well as by using motor-
ized monitoring along the banks
of the Kheta and Khatanga rivers.
Over 50 samples were also taken
for further laboratory research
to improve scientific knowledge
of the health, diets and habitats
of these species.
The Group Subsidiaries carried
out large-scale work to enhance
the population of aquatic species
according to preliminary results,
more than 70 mln juvenile fish
species were released into the river
systems of Russia. The largest
production subsidiary of Rosneft,
RN-Yuganskneftegaz made
the greatest contribution to this
release with more than 55 mil-
lion juveniles of Siberian stur-
geon, muksun and peled raised
in fish hatcheries as part of river
ecosystem preservation meas-
ures. All juveniles were released
into the rivers of the Ob-Irtysh
basin.
PERSONNEL AND SOCIAL
PROGRAMMES
No Company goal can be achieved without our core asset – highly qualified personnel
motivated to work effectively, whatever the market environment.
Average headcount
in 2020 (as per the business
plan)
Average headcount
as at 31 December 2020
(as per the business plan)
342.7
thousand
employees
355.9
thousand
employees
Exploration and Produc-
tion, including gas
Commerce and Logistics
Corporate Services
In-House SerZvices
(Oilfield Services)
Oil Refining and Petro-
chemicals
Other
Research
Head Office (Rosneft)
25.3%
17.5%
16.3%
16.0%
15.6%
4.1%
3.9%
1.3%
Exploration and Produc-
tion, including gas
Commerce and Logistics
Corporate Services
In-House Services
(Oilfield Services)
Oil Refining and Petro-
chemicals
Other
Research
Head Office (Rosneft)
24.7%
17.9%
16.2%
16.0%
15.7%
4.1%
4.1%
1.2%
In 2020, the average headcount
of Rosneft Group Subsidiaries
was 342.7 thousand employees1,
which is up 27.3 thousand com-
pared to 2019 (315.4 thousand
employees).
The increase was primarily
due to a higher average head-
count in Group Subsidiaries
driven by business expan-
sion2 and the acquisition
or inclusion of several new assets
in the Company's business plan3.
The average employee
age increased by 0.3 years
to 40.6 years vs 40.3 years
as at the end of 2019. 43.9 thou-
sand employees held manage-
rial positions vs 40.8 thousand
as at the end of 2019. The number
of employees categorised as man-
agers remained virtually flat
year-on-year and made up 12.3%
of the total average headcount
in 2020 (vs 12.2% as at the end
of 2019).
WORKFORCE PRODUCTIVITY AND ORGANISATIONAL
EFFECTIVENESS
Improvement of workforce pro-
ductivity has been, and remains,
a key priority for the Company.
As at the end of 2020,
the Company achieved its overall
productivity target on a compa-
rable basis. We developed a list
of relevant improvement initi-
atives, which we update annu-
ally as part of our Long-Term
Development Programme.
Workforce productivity met-
rics are used as an individual KPI
to assess the performance of some
of the Company’s top executives,
1 As per the Company’s business plan.
2 RN-Yuganskneftegaz (+0.6 thousand employees), Kharampurneftegaz (+0.7 thousand employees), RN-Okhrana Group
(+1.2 thousand employees), etc.
3 Sibintek Group subsidiaries (+19.3 thousand employees), Petersburg Fuel Company (+1.3 thousand employees) and Samaraneftegeofizika
(+1.0 thousand employees).
184
185
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors in Rosneft’s annual conference
for best mentors and gave a talk
on BP’s experience with develop-
ing a mentoring system at produc-
tion facilities.
Together with Rosneft
International Centre for Research
and Development (RICRD, Qatar)
and leading international experts,
we ran the Moving into the Digital
Era through Digital Transformation
course for our IT team.
• professional retraining for target
personnel groups in oil and gas
practical engineering and tech-
nology, oil and gas engineer-
ing economics, organisational
development and effective HR
management in the oil and gas
industry (87 people trained);
• retraining in geology and explo-
ration (as part of an educational
project run in collaboration
with Lomonosov Moscow State
University);
• training for in-house coaches
and line personnel at oil depots
and filling stations of R&D
and manufacturing facilities;
• professional retraining for target
personnel groups in HSE;
• retraining in compliance, busi-
ness ethics compliance,
anti-corruption and anti-
fraud (over 30.7 thousand
man-courses);
• special training for employ-
ees engaged in providing air-
craft to support the Company’s
operations.
The Company’s initiative
to continue the educational pro-
grammes in the unfavourable sit-
uation received support not only
from traditional training provid-
ers in Russia and abroad but also
from Rosneft’s international
partners.
As part of educational cooper-
ation with BP, we held a video
conference on personnel assess-
ment, a round table on digital
communication between employ-
ees and their employer, a joint
seminar on developing HR com-
petencies and a webinar on cre-
ating corporate training centres.
BP representatives took part
including the CEO and senior man-
agement of the Group Subsidiaries
within Rosneft's major businesses.
them to the Group Subsidiaries.
Their phased implementation
is planned until the end of 2022.
In 2020, we designed five standard
organisational structures for func-
tional areas and communicated
To capitalise on the automa-
tion of methodologically stream-
lined HR business processes,
we continued to roll out uni-
form corporate HR, compensation
and social development standards
based on SAP and 1C. In 2020,
they were implemented at another
seven Group Subsidiaries.
TALENT POOL MANAGEMENT
As part of the talent pool
management plan for 2020,
the Company strengthened
the talent pool for target first-
and second-level management
positions in the Company’s Head
Office and first-level manage-
ment positions in the Group
Subsidiaries.
The talent pool commit-
tee for Regional Sales chaired
by the relevant top manager
of the Company held a meeting
to review the candidates to be
included in the business' talent
pool.
We gathered informa-
tion on additional candi-
dates selected to be included
in the talent pool for first-
level management positions
in the Group Subsidiaries.
To ensure HR security within
the Company and Group
Subsidiaries, we continuously
develop our management tal-
ent pool, which includes a mul-
ti-tier competency assessment
to select candidates, iden-
tify their priority growth areas
and design related individual
plans.
As part of talent pool selec-
tion and individual development
planning in 2020, we assessed
managerial and professional
skills of 2,382 employees.
We provided the talent pool
with 1,004 man-courses in man-
agement training.
We also reviewed the Company’s
internal regulations on talent
pool management, with all nec-
essary amendments now pend-
ing approval.
PERSONNEL TRAINING AND DEVELOPMENT
Amid the 2020 pandemic,
the Company managed to main-
tain the stable development of its
corporate training system.
Together with partner educational
institutions in Russia and abroad,
we reviewed and updated edu-
cational programmes and imple-
mented distance learning formats
employing IT platforms, as well
as solutions for group and individ-
ual online learning and knowledge
testing.
In 2020, we provided 761.9 thou-
sand man-courses as part
of the mandatory vocational
and management training, overa-
chieving the 2020 target by 38%.
Our training programmes cover all
of the Company’s business areas.
As part of talent pool develop-
ment under the Rosneft–2022
Strategy, we organised the follow-
ing management training courses:
• MBA programmes for manag-
ers, talent pool and high-po-
tential employees of the Head
Office and Group Subsidiaries
(95 employees);
• Leader of the Future (Strategic
Level, Operational Level, Young
Talents) (93 employees).
These programmes are run
in partnership with the Graduate
School of Management
of St Petersburg University,
Moscow State Institute
of International Relations
(MGIMO), Gubkin Russian
State University of Oil and Gas
and foreign universities, including
the Polytechnic University of Turin
(Italy), NOVA University Lisbon
(Portugal), and Qatar branch
of HEC Paris (France, Qatar).
The following educational pro-
grammes were successfully
completed:
• training for young engi-
neers from upstream facilities
in the following jobs: techno-
logical monitoring and con-
trol in well construction (drilling
supervisor), well construc-
tion supervisor, oilfield chemist,
and project manager (108 people
trained);
• training of shop managers
from the upstream facilities
under the professional retraining
programme to improve perfor-
mance and production methods
(79 people trained);
186
187
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Vostok Oil project staffing
A priority of the Vostok Oil project
staffing is timely and proper train-
ing of workforce and professionals
qualified for the project.
With that view, in 2020,
the Company and the Krasnoyarsk
Territory ministry of education
developed and implemented
a comprehensive programme
of the regional subsidiaries inter-
action with the local second-
ary vocational education entities
and the Institute of Petroleum
and Natural Gas Engineering
of the Siberian Federal University.
The programme covers the fol-
lowing update and development
of the oil and gas curricula in line
with the business needs; pro-
vision of up-to-date software
and equipment to the educational
institutions for efficient adminis-
tration of training; a programme
of student and teacher internship
at the Group Subsidiaries’ facilities
in the Krasnoyarsk Territory.
To ensure sufficient train-
ing of the Subsidiaries’ person-
nel for Vostok Oil project purposes,
as well as boost the efficiency
of the hands-on training provided
to vocational and higher educa-
tion students of the industry-spe-
cific fields, in 2020, the Company
developed and approved the con-
cept of a corporate training cen-
tre at RN-Vankor, Eastern Siberia.
The concept involves equipment
of the corporate training centre
with advanced facilities for theoretical
and applied training (computer-based
simulation, distance learning sys-
tems, VR rooms, theme-based labs).
The programme is to cover 51 class-
rooms seating over 1,500 students.
The Company plans to create a train-
ing facility with 16 training sites/work-
shops for hands-on training in key
production and service operations
(drilling, oil and gas production, oilfield
services, energy, transport) as well
as health and safety training (first
aid for those injured at production
sites, industrial safety, fire safety,
electrical safety, transport safety,
environmental safety, including
oil and petroleum products spill
response, etc.).
In addition, the corporate training
centre now includes social amen-
ities (residential hotel, canteen,
sports and health centre).
On average, some 68 thousand
man-courses, including hands-on
training, are expected to be com-
pleted at the corporate training
centre every year.
DEVELOPMENT OF IN-HOUSE TRAINING
We leverage our in-house train-
ing centres, coaches, experts
and workplace mentors to provide
63% of training (479.6 thousand
man-courses).
All in all, there are 64 train-
ing centres operating as part
of the Group Subsidiaries or local
educational institutions across
our footprint. They have testing
sites and offer hands-on voca-
tional training, including manda-
tory courses, to help blue-collar
employees and specialists develop
professionally.
In 2020, the Company cre-
ated a corporate training cen-
tre at Bashneft-PROFI to train
employees of Group Subsidiaries
operating in Bashkortostan.
Additionally, we are working
to create the following facilities:
• a corporate training centre
at RN-Vankor in Krasnoyarsk,
Eastern Siberia (part
of the Vostok Oil strategic
investment project);
• an electrical engineer-
ing and testing site
at the Samaraneftegaz training
centre;
• a training centre at Zvezda
Shipbuilding Complex;
• a regional training centre
at RN-Komsomolsk Refinery;
• a training centre
at Orenburgneft.
We are also developing an inter-
nal training system to preserve
and transfer knowledge within
the Company.
In 2020, in-house coaches con-
ducted 207 corporate training ses-
sions (5,113 man-courses).
We ran a training programme
for in-house coaches covering
68 groups and 850 man-courses
(99 at the Company’s Head Office
and 751 at Group Subsidiaries).
On top of that, over 422 thou-
sand man-courses were available
in the distance learning format.
As a result of the company-wide
mentoring programme, we compiled
an integral rating to assess the effi-
ciency of relevant initiatives imple-
mented by the Group Subsidiaries
in 2020. The assessment covered
89 Group Subsidiaries in Upstream,
Downstream, Gas Processing
and Petrochemicals, In-house
Services, Corporate Services (R&D
and manufacturing), Shipbuilding
and Ship Repair, with winners
named for each business.
We also staged
the Best Mentor 2020 competi-
tion in the Group Subsidiaries (the
first round) and across Upstream,
Downstream, Gas Processing
and Petrochemicals, In-House
Services, Corporate Services
and Shipbuilding and Ship Repair
units (the second round).
The first round welcomed
5,634 mentors of blue-collar
employees and 1,564 mentors
of young specialists from 89 Group
Subsidiaries,
with 191 and 215 mentors
from the above groups making
it to the second round.
We also held an online confer-
ence for winners and runners-up
of the Best Mentor 2019 com-
petition, with 30 best men-
tors from 26 Group Subsidiaries
attending as participants.
COOPERATION WITH FOREIGN PARTNERS
As a global company, Rosneft
is fostering partnerships
with foreign oil and gas producers
and the world’s best educational
institutions to provide compre-
hensive training to its employees
and enable them to perform well
in any international project.
In 2020, Rosneft helped arrange
training for Venezuelan, Cuban
and Mongolian specialists at part-
ner universities:
• complete a programme
for 27 Venezuelan students
in July 2020;
PROFESSIONAL STANDARDS
In 2020, the Company contin-
ued to implement professional
standards.
In pursuance of Directive
of the Russian Government
No. 5119p-P13 dated 14 July 2016,
Rosneft’s Board of Directors
held two meetings in the report-
ing year to discuss the roll-
out of professional standards
across Rosneft and the Group
Subsidiaries. According to the lat-
est monitoring, more than a quar-
ter of 1,360 approved professional
standards can be implemented
in the Company, with 68 of them
classified as mandatory quali-
fication requirements (depend-
ing on the subsidiary's type
of operations). The qualification
standards apply to over 49 thou-
sand employees, of whom
over 96% have an educa-
tional background meeting
the requirements.
In 2015, Rosneft
and other oil and gas produc-
ers joined the National Council
• continue a programme
for the second group
of 20 Cuban students;
• organise training
for 41 Mongolian students.
for Professional Qualifications
in the Oil and Gas Industry.
Pursuant to the Council’s
Action Plan, the Nefteyugansk
Corporate Institute, Rosneft's
Professional Expertise Centre,
drafted two industry standards
and submitted them for approval
by the Ministry of Labour
and Social Protection. In 2020,
the Ministry approved three indus-
try standards developed earlier
by Rosneft.
188
189
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PERSONNEL SKILL ASSESSMENT
PRE-UNIVERSITY TRAINING
Our comprehensive personnel
assessment framework estab-
lishes uniform knowledge and skill
requirements for employees across
all business segments, includ-
ing the Head Office and Group
Subsidiaries.
We assess employees when plan-
ning competency training, cre-
ating a talent pool and expert
communities, recruiting, or chang-
ing job descriptions. The assess-
ment helps check managerial,
corporate, professional and tech-
nical skills across all personnel
categories: managers, specialists
and blue-collar employees.
Its aim is to identify knowledge
gaps, determine priority devel-
opment areas, optimise training
costs, and improve qualifications
and performance.
of managerial competencies.
In 2020, the Company used
the model to evaluate
11.19 thousand employees.
The assessment of professional
skills uses materials drafted
in the course of the target inno-
vative project (TIP) to introduce
a skills-based approach to person-
nel development across all busi-
ness segments.
The project involves special-
ised universities, such as Gubkin
Russian State University of Oil
and Gas (oil refining and procure-
ment projects), Tomsk Polytechnic
University (oil and gas produc-
tion and offshore projects) and Ufa
State Oil Technical University (pet-
rochemicals and oil refining pro-
jects), as well as leading Russian
and foreign consulting firms.
We launched a corporate training
and development portal to col-
lect personnel assessment results
and integrate them into the shared
HR database of Rosneft Group
Subsidiaries, Head Office,
and training resources.
The corporate and managerial skills
assessment relies on the dedi-
cated model approved by the Chief
Executive Officer. The model takes
into account the Company’s cul-
ture, values and the description
As part of the initiative,
we developed and introduced
professional competencies along
with employee assessment
and development tools in the fol-
lowing areas: offshore projects, oil
refining, oil and gas production,
marketing and distribution, logis-
tics and transport, capital con-
struction, economics and finance,
procurement, energy efficiency,
gas, design and survey at research
institutes, oil refining, gas process-
ing, petrochemicals and energy
at corporate research and design
institutes. In 2020, we continued
to implement relevant projects
across the following functions:
internal audit, HR management
and social programmes, petro-
chemicals, and HSE.
In 2020, we assessed
over 16.18 thousand people based
on the TIP materials as well
as those used to evaluate the pro-
fessional competencies of the key
blue-collar staff in Oil Refining
and Petrochemicals, Exploration
and Production, and In-House
Services.
To ensure reliable power sup-
ply and safe operation
of the Company’s power gener-
ation facilities Rosneft started
developing company-wide pro-
fessional requirements (includ-
ing a set of assessment tools
and educational programmes)
for employees of the Energy func-
tion. In 2020, we developed pro-
fessional standards for five most
common jobs: electrical mainte-
nance technician, electrical, relay-
ing and automation equipment
maintenance technician, boiler
operator, boiler equipment repair-
man and internal combustion
engine operator. Six more internal
regulations are to be developed
in 2021.
YOUTH POLICY
Rosneft’s Youth Policy aims
to ensure a steady influx
of young, qualified special-
ists from among the top gradu-
ates of educational institutions,
and their fast and effective
onboarding at the Company's facil-
ities. To this end, Rosneft is work-
ing hard to build an external
talent pool comprised of students
of local educational institutions.
The Company’s Youth Policy covers
190
pre-university training of school-
children (Rosneft classes), coopera-
tion with universities and students,
and work with young specialists.
In 2020, the Company’s top pri-
ority in terms of the Youth Policy
was to maintain efficient coop-
eration with educational insti-
tutions and continue productive
work with young specialists amid
the pandemic, as well as ensure
full implementation of projects
under the Rosneft–2022 Strategy,
including Rosneft classes and pro-
grammes for young talent. The lat-
ter reflects the Company’s support
of the Russian Government's
educational policy and com-
pliance with the main goals
of the Education national project,
including Continuing Education,
Looking for Talents, Smart School,
and Teacher of the Future.
In accordance with its Youth
Policy, Rosneft consistently imple-
ments a school-to-workplace
approach to training. The initial
project run in close partnership
with the state educational system
is pre-university training.
We organise Rosneft classes
at top-ranking schools, colleges,
and gymnasiums in regions where
we operate. The initiative is sup-
ported by the Group Subsidiaries
that have a strong need for quali-
fied labour to implement contem-
plated growth plans and capacity
ramp-ups.
Rosneft classes offer school stu-
dents a high-quality second-
ary education with a strong focus
on technology and natural sciences
to enable them to continue engi-
neering studies at universities.
After graduation, young talents
are employed by the Company.
Rosneft classes help digital-
ise education at partner schools,
upgrade facilities and equipment,
boost the efficiency of training
and career guidance activities,
and support gifted students
and teachers committed to ongo-
ing professional development.
In 2020, the Company sup-
ported 122 classes in partner-
ship with 64 secondary schools
in 57 towns and settle-
ments located in 27 Russian
regions. The classes saw
some 2,776 attendees.
This helped the schools main-
tain education during the pan-
demic and continue implementing
the project run by Rosneft
and Lomonosov Moscow State
University to provide dis-
tance learning for teachers
in 2020. In the reporting period,
Educational Processes in Digital
Format, a virtual summer school
for teachers, was held in cooper-
ation with Lomonosov Moscow
State University and the Russian
Academy of Education. 186 teach-
ers from 33 schools of 17 Russian
regions took part in the training.
In order to expand the contin-
uing education opportunities
for schoolchildren and teach-
ers and support digitalisa-
tion in educational institutions
where Rosneft classes are held,
the Company provided 55 part-
ner schools with distance learning
equipment.
Rosneft provides career guid-
ance for students of all partner
secondary educational institu-
tions. The key corporate initia-
tive of the 2020 Rosneft classes
programme was the Stairway
to Success, a series of work-
shops that took place in 57 towns
and settlements
191
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors across eight federal districts.
Some 2,761 schoolchildren
(122 Rosneft classes) participated
in the workshops.
of Group Subsidiaries involved
in the pre-university training
project.
To improve the effectiveness
of Rosneft classes, schools
introduce early career guidance
and preliminary training for fifth
to ninth grade kids. This helps
them decide on their future career
and make an informed choice
of the major at high school, thus
improving the selection of stu-
dents for Rosneft classes.
For a unified approach
to the programme implementa-
tion, Rosneft’s HR Department
has developed a concept of early
career guidance and preliminary
training to provide methodology
support to teachers, school stu-
dents and employees
Among other things, the Rosneft
classes project seeks to identify,
support and provide education
to the gifted youth. The attendees
of Rosneft classes take an active
part in various academic con-
tests. In the school year 2019–
2020, 985 students became
winners and runners-up in a wide
range of olympiads, competitions
and conferences, with 517 winning
the top awards and other prizes
at various stages of the National
Olympiad of Schoolchildren.
The Company continued its coop-
eration with the Sirius Educational
Centre to reach out to more young
talents in the country’s regions.
In 2020, we held the third
partner educational programme
in an online format involv-
ing 986 students from Rosneft
classes across 25 regions.
The programme included
three modules developed jointly
by Sirius and Rosneft’s Corporate
Research and Design Complex.
During the competition, Sirius
expert council ranked the par-
ticipants and selected 108 win-
ners from 30 Russian towns
and settlements.
The project proved to be a suc-
cess as evidenced by the num-
ber of Rosneft-class graduates
who received relevant higher edu-
cation and signed employment
contracts with the Company.
In 2020, 106 graduates started
work at 34 Group Subsidiaries,
with a total of 896 employed
by 63 Group Subsidiaries.
WORK WITH YOUNG TALENT
In 2020, 101 Group Subsidiaries
employed 3,621 young profession-
als, with 1,009 university gradu-
ates hired during the year.
The programmes
for young specialists are based
on the Company's Regulations
on Organising Work with Young
Specialists, which covers the fol-
lowing areas:
• onboarding;
• training and development;
• identifying and development
of potential leaders;
• progress assessment;
• financial support and social pro-
tection of young specialists.
To fast-track the onboard-
ing of the young talent, we have
put in place dedicated courses,
set up 71 young specialist coun-
cils and introduced mentorship
programmes across the Group
Subsidiaries. As part of the Three
Steps programme, Rosneft offers
the young talent training and pro-
fessional growth opportunities
aligned with their individual devel-
opment plans.
In 2020, the Company con-
tinued carrying out youth
training and development activ-
ities. To that end, we pro-
vided 1,146 man-courses aimed
at developing professional, cor-
porate and managerial com-
petencies. We also organised
in-person (regional conferences
that took place in the first quar-
ter of 2020) and online R&D con-
ferences for young specialists
using corporate digital resources.
3,634 employees of the Company,
including 2,716 young employees
from 97 Group Subsidiaries, took
part in regional and cluster R&D
conferences.
For the first time an interre-
gional R&D conference was held
on three information and commu-
nication portals, including the HR
Department’s corporate por-
tal. 97 out of 395 participating
young specialists from 77 Group
Subsidiaries became winners, run-
ners-up or nominees. The con-
ference also saw 89 projects
recommended for implemen-
tation. As part of the confer-
ence, we developed and held
15 training sessions for young
talent, organised exchange
of experience among HR divi-
sions of the Group Subsidiaries,
created the conference’s website
and digital magazine. The event
opening and wrap-up were
streamed. The new format helped
greatly expand the conference’s
target audience. Some 1.5 thou-
sand employees participated
in the training sessions.
In an effort to build up a stra-
tegic talent pool, we staged
assessment business games
for prospective young lead-
ers in their third year of employ-
ment. The games took place
from September to October 2020
and brought together 382 employ-
ees from 88 Group Subsidiaries.
Based on the results, we selected
157 participants from 61 Group
Subsidiaries who had demon-
strated strong corporate and man-
agerial skills, and recommended
that they be included in the stra-
tegic pipeline of young talent.
As game winners, these employ-
ees will receive further training
under the Three Steps programme.
In 2020, we trained 148 young
specialists who had topped
in the 2019 assessment games.
In December 2020, we held
an annual conference for chairs
of young professionals’ coun-
cils to help boost the efficiency
of their work. The event saw some
84 participants.
192
193
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COOPERATION WITH UNIVERSITIES
SUPPORT FOR EDUCATIONAL INSTITUTIONS
In 2020, Rosneft worked together
with 70 Russian and foreign
universities from the major-
ity of regions where it operates.
Of these, 26 universities are part-
ners of Rosneft. Cooperation
agreements with higher education
institutions allow the Company
to actively engage in joint efforts
focused on employee train-
ing and retraining, and research
and innovation, as well as help
develop the research and edu-
cation capabilities of universities
so that their graduates are qual-
ified enough to meet our current
business needs. Below are some
of the 2020 highlights:
• 25 university departments con-
tinued to operate and one new
specialised department was
established, with 68 employ-
ees of the Company involved
in their activities in 2020;
• Rosneft Scientific
and Educational Centre focusing
on digital technology in the oil
and gas industry was created
jointly with Lomonosov Moscow
State University;
• a new Master’s programme
on Digitalisation in Fossil
Fuel Geology was launched
by the Department of Geology
and Geochemistry of Fossil
Fuels of the university’s Geology
Faculty;
• a new Master’s programme
on Genomics and Human
Health (led by Prof. Evgeny
Rogaev, corresponding mem-
ber of the Russian Academy
of Sciences and head
of the Genetics Department
of the Biology Faculty) signi-
fied the launch of a novel field
of research at Lomonosov
Moscow State University;
• work continued on projects aimed
at enhancing curriculum via more
sophisticated university infra-
structure (the Marine Engineering
Scientific and Educational
Centre at St Petersburg State
Marine Technical University,
a Rosneft drilling laboratory
at Tyumen Industrial University,
the Rosneft – Ufa State Oil
Technical University research
and education centre, etc.);
• works completed on the cre-
ation of a vocational training
centre to be run by the Faculty
of Vocational Education
of Millionshchikov Grozny State
Oil Technical University. The cen-
tre’s opening ceremony timed
with the university’s 100th anni-
versary took place on 20 August
2020. The centre has become
a high-tech educational platform
for students of Grozny State Oil
Technical University, employees
of the Company and residents
of the Chechen Republic;
• Rosneft Days were
held offline and online
to provide career guidance
to, and improve the Company’s
image among more than
14.5 thousand students;
• 2,475 students completed
internship with the Company;
• In 2020, the Head Office
arranged a long-term intern-
ship for 129 Master's students
of Rosneft's partner universities.
Rosneft and the Group Subsidiaries
provide charitable assistance
to educational institutions of var-
ious levels offering courses rel-
evant to the Company's needs
and taking part in projects and pro-
grammes of the corporate School–
University–Company framework
for continuing education.
Some of this aid is devoted
to class programmes supported
by Rosneft Group Subsidiaries.
The funding targets include:
• additional education in rele-
vant subjects involving lecturers
from partner universities;
• training for teachers;
• career-guidance and team-build-
ing events for schoolchildren.
In 2020, RUB 225.2 mln was given
to partner schools.
Master’s students doing intern-
ships at Rosneft's business
units, as well as promising edu-
cators. 849 corporate scholar-
ships and 130 corporate grants
were provided in 2020.
Vocational and higher educa-
tion institutions received financial
support:
• to improve and develop
their hard and soft capabilities;
• to maintain
their specialised departments
and Master’s courses as required
by the Company’s strategic
projects;
In 2020, Rosneft continued issu-
ing grants for relevant exploratory
research by academics at its part-
ner universities (68 grants were
issued). As a result, 16 exploratory
studies were carried out at 11 part-
ner universities.
The aid provided to vocational
and higher education institutions
for the said purposes totalled
RUB 889.9 mln.
• class programmes sup-
• to help finance large-scale infra-
ported by Rosneft Group
Subsidiaries, including mate-
rials and equipment for dedi-
cated classrooms and distance
learning equipment for teachers
and schoolchildren;
structure projects;
• to provide corporate scholar-
ships and grants to talented
students looking for profes-
sional development within
the Company's perimeter,
194
195
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SOCIAL PARTNERSHIP AND SOCIAL BENEFITS
CORPORATE PENSIONS AND SOCIAL SUPPORT FOR VETERANS
The corporate pension pro-
gramme is an integral part
of the Company’s HR and social
policy, as it is aimed at improv-
ing the social protection of retired
employees. Pension contribu-
tions made by Rosneft and Group
Subsidiaries under private pen-
sion schemes totalled RUB 13.9 bln
in 2020.
The corporate pension programme
includes the following elements:
PRIVATE PENSION SCHEMES
FOR EMPLOYEES
• the programme covers more
than 280 thousand employ-
ees of Rosneft and Group
Subsidiaries who entered into
a pension agreement with Non-
State Pension Fund (NPF)
Evolution1;
SOCIAL SUPPORT
FOR VETERANS
• the Company has been running
a veteran support programme
for over 17 years;
• in 2020, the number of people
benefiting from monthly pension
payments under the programme
totalled 23 thousand;
• in 2020, pensions rose by 5%
as a result of indexation;
ACTIVE LONGEVITY
PROGRAMME
• as part of the Rosneft–2022
Strategy, in 2020 we carried
on with the Active Longevity
Programme designed to improve
the social security of retir-
ees. In 2020, the investment
income of NPF Evolution
was used to finance a 6.18%
increase in some 40.2 thousand
pensions.
Under collective bargaining
agreements, Group Subsidiaries
allocated RUB 700 mln to pro-
vide financial aid to pension-
ers on national holidays, one-off
financial aid for family reasons,
aid to relatives upon a pensioner’s
death, funding of tours for health
resort treatment, etc.
3.4
thousand
of the Company’s
veterans received
additional financial aid
in 2020
To mark the 75th anniversary
of the victory in the Great Patriotic
War of 1941–1945, the Company
launched a programme to com-
pensate annual housing and util-
ity bills for veterans of the Great
Patriotic War and persons
of equivalent categories.
The above programmes help
enhance social security not only
for the employees of Rosneft
and Group Subsidiaries but also
for pensioners who retired earlier.
• the Russian Government
approved the Temporary
Rules of Rotation-based Work
amid the COVID-19 Pandemic
and later extended them
to 2021;
• the Russian Trilateral
Commission approved,
and the State Duma adopted
in the first reading, a draft
amendment to the Russian
Tax Code on recognising costs
for health resort treatment
tours for employees as payroll
expenses.
Rosneft pays special attention
to its social partnership pro-
gramme with two focus areas:
• corporate social part-
nership – strengthening
our meaningful cooperation
with the Interregional Trade
Union Organisation of Rosneft
(ITUO Rosneft), which rep-
resents most of the trade
unions of Group Subsidiaries.
In 2020, the Company carried
on with its traditional activities
in this domain:
– decision-making
on the improvement
of the Standard Collective
Agreement of Rosneft
Group Subsidiaries.
In 2020, three amend-
ments and additions were
made to the Agreement
to enhance social security
for employees;
– a meeting between
the Company’s HR
and social service manage-
ment and leaders of trade
union organisations affiliated
with ITUO Rosneft;
• industrial social partner-
ship – liaising with the Russian
Association of Oil and Gas
Employers. In 2020, more than
50 Rosneft Group Subsidiaries
joined the Industry
Agreement on the Companies
of the Oil and Gas Industry
and the Construction of the Oil
and Gas Industry Facilities, effec-
tively gaining certain advantages
in implementing the Russian
Labour Code.
Cooperation with the Russian
Association of Oil and Gas Employers
led to the following results:
SOCIAL PROGRAMMES
For many years, Rosneft has been
one of the most socially responsi-
ble employers in Russia. In 2020,
the Company continued to imple-
ment the Rosneft–2022 Strategy
to ensure better motivation
and social security for its employ-
ees and retirees.
In 2020, the Company allocated
RUB 27.6 bln to create opti-
mal working conditions, promote
healthy lifestyles, and provide
healthcare and social guaran-
tees for its employees. Rosneft’s
management has always been
committed to maintaining
high social security standards
for our employees.
Key Social Policy Costs in 2020,
RUB bln, %
RUB
27.6
bln
Private pension schemes
Healthcare, healthy lifestyle
promotion, and other social
contributions
Healthcare facility and
social infrastructure
maintenance
Housing
50%
42%
5%
3%
196
197
1 Formerly known as NPF Neftegarant.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors coverage as an additional source
of support for employees
with lost-time injuries (causing
temporary or permanent inabil-
ity to work) or their families in case
of a materialised insured event.
Corporate healthcare and personal
insurance programmes help sup-
port and build on the Healthcare
national project.
In 2020, resort treatment pro-
grammes for employees
and their families in Russia
and Cuba were partly suspended
due to the COVID-19 pandemic.
A total of 30.8 thousand employees,
members of their families and retir-
ees received treatment services
in Russia, primarily at the Company’s
own health resorts and regional
wellness centres.
Rosneft plans to resume the Cuba
wellness and recreation pro-
gramme in the second half of 2021
if the global epidemiological situ-
ation improves.
In the reporting year, personal
insurance programmes (voluntary
health and accident insurance)
covered more than 340 thousand
employees of the Company.
Quality medi-
cal assistance provided
by high-tech multidisciplinary
clinics accessible for employ-
ees at their place of residence
or workplace is the key to improve
the health of our employees
and extend their careers.
Amid the COVID-19 pandemic,
the voluntary health insur-
ance gave us an opportunity
to take prompt measures to curb
the spread of the disease, includ-
ing organised mass testing
of our employees for COVID-19 (a
total of over 780 thousand tests)
and providing medical treatment
to employees working at remote
production facilities.
Group Subsidiaries continued
to provide voluntary accident
insurance policies with a 24/7
COMPREHENSIVE HOUSING PROGRAMME
For over 15 years, the Company
has been successfully running
a comprehensive housing pro-
gramme, a crucial incentive
included in the corporate social
policy. The initiative enables
the Company to attract and retain
highly qualified, and ensure
long-term engagement of val-
uable professionals by provid-
ing housing through the following
arrangements:
• mortgage lending;
• provision of corporate housing.
Starting August 2020,
partner banks (Russian
Regional Development Bank
and Dalnevostochny Bank) give
subsidised mortgage loans
at an interest rate of 5.25%
(Bank of Russia’s key rate +1%)
to Rosneft employees who take
part in the corporate mortgage
programme.
In addition, relocated profes-
sionals are provided with cor-
porate housing, with the total
number of apartments available
in the Company’s regions of opera-
tion exceeding 1.5 thousand.
With its comprehensive hous-
ing programme, Rosneft also
contributes to the implemen-
tation of the national Housing
programme.
HEALTHCARE AND PERSONAL INSURANCE
1,158
employees
of the Company
improved
their living conditions
under the subsidised
mortgage programme
in 2020
In order to protect and strengthen
the health of its employees, pre-
vent diseases and promote
a healthy lifestyle, Rosneft contin-
uously implements the following
healthcare and personal insurance
initiatives:
• provision of emergency
and routine medical services
for employees, including those
stationed at remote and hard-
to-access production facilities
of the Company;
• voluntary health insurance
for the Company's employees
providing access to the required
healthcare services at the fin-
est Russian medical institutions
as an add-on to the mandatory
government healthcare scheme;
• provision of resort and rehabil-
itation treatment opportunities
for employees;
• implementation of programmes
aimed at disease prevention
and mitigation, and promotion
of a healthy lifestyle.
As part of the Rosneft–2022
Strategy approved by the Board
of Directors, the Company contin-
ued to run a number of designated
programmes aiming to:
• supply industrial healthcare
facilities with modern train-
ing equipment. In the reporting
period, 52 Group Subsidiaries
that have such facilities received
a total of 670 units of equip-
ment to develop emergency
medical care skills;
• create and develop a corporate
telemedicine network. In 2020,
the network covered 33 healthcare
facilities at remote production
sites, which allowed them to con-
duct some two thousand online
medical consultations with large
regional consultation centres;
• perform preventive medical
examination of the Company's
employees focusing on early
detection of cardiovascu-
lar and oncological diseases.
In 2020, given the COVID-19
pandemic and related restric-
tions, around 12 thousand
Rosneft employees underwent
medical examination.
The Company keeps running its
Live Longer! programme to pro-
mote a healthy lifestyle. In 2020,
given the epidemiological situation
in Russia, the majority of the pro-
gramme’s initiatives aimed at iden-
tifying and eliminating health
risks, promoting a healthy lifestyle
and improving physical and mental
health of the Company’s employ-
ees were held online and in the for-
mat of information campaigns.
Resort treatment and reha-
bilitation opportunities aimed
at preserving employees' health,
extending their careers and pre-
venting diseases are an inte-
gral part of the social security net
offered to the Company’s employ-
ees, their families and retirees
(veterans of labour).
198
199
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SOCIAL AND ECONOMIC DEVELOPMENT
OF REGIONS AND CHARITY IN 2020
Allocation of Funds in 2020, %
RUB
5,614
mln
Physical education and
sports, including children’s,
promotion of healthy
lifestyles
Infrastructure development
in regions, districts, and
municipalities
Kindergartens
Education and science
Culture and revival
of cultural heritage
Other (including pensioners,
low-income families, youth
organisations, municipal
events, social and
agricultural institutions,
environmental projects)
Healthcare
Charities, NGOs,
humanitarian aid
Support for veterans, the
disabled, and people in need
Support for indigenous
peoples of the North
Orphanages
43.0%
23.8%
9.3%
7.6%
5.3%
4.9%
3.3%
1.0%
0.8%
0.6%
0.3%
The Company’s systematic
approach to making a social
impact helps reduce social risks
and achieve our key charita-
ble goals as we remain com-
mitted to fully implementing
both the social and economic
programmes under our agree-
ments with regional authorities
and individual charitable initia-
tives. In our charitable activities,
we mainly seek to:
• promote social and economic
development in our regions
of operation;
• foster partner relation with local
governments;
• help advance the federal educa-
tion policy;
• support federal programmes
for healthcare, physical training
and sports, science and tech-
nology, environmental protec-
tion, etc.
Our social policy
is about delivering high liv-
ing standards across the foot-
print (including for employees
of Group Subsidiaries), maintain-
ing a strong focus on the socie-
ty's needs, and getting the most
out of our projects. We pay special
attention to improving the infra-
structure of municipal districts
and settlements and provide
funds to upgrade municipal terri-
tories, repair or replace engineer-
ing and transportation system
equipment and power and heat
supply facilities, protect communi-
ties and territories from emergen-
cies, and ensure fire safety.
In 2020, Rosneft and the Group
Subsidiaries continued their char-
itable tradition of financing
projects to build, repair, equip
or support kindergartens, orphan-
ages and schools. Promoting
mass sports, physical training,
healthy lifestyles, culture, science,
and higher education, reviving
cultural heritage and protecting
the environment also remained
high on our agenda.
The Company’s social policy seeks
to preserve the traditions, cul-
ture and heritage of indigenous
peoples in its regions of opera-
tion, with the well-being and com-
fort of the northerners as a clear
priority. We use the local natu-
ral resources with utmost care
and make a point of restoring
them. Rosneft maintains an active
dialogue with, and provides full
support to indigenous minorities
of the North, enabling them to live
their lives as they always have.
We work to ensure that domestic
reindeer herding and other indig-
enous trades remain an impor-
tant part of their lifestyle,
which we look to preserve along
with their national languages
and folklore. At the same time,
Rosneft promotes higher educa-
tion and healthcare in the region,
and seeks to make the latest digi-
tal technology available in remote
locations so the people can access
e-government services and dis-
tance learning. The Company
also continues to help protect
public health in Russia. In 2020,
we introduced a wide range
of administrative and sanitary
measures and restrictions to pre-
vent COVID-19 from penetrating
into, and spreading across our pro-
duction facilities.
Rosneft also put much effort
into assisting the country’s
regional authorities across its
footprint with their fight against
the virus. We supported them
in rolling out a full set of meas-
ures to protect the local com-
munities and vital infrastructure.
Among other things, we pro-
vided mobile CT units and other
medical and personal protective
equipment (PPE) to healthcare
institutions and aid to med-
ical workers at the forefront
of the pandemic response.
With our support, ambulance
crews and infectious diseases
wards in hospitals received
the latest PPE (protective suits
and goggles, waterproof over-
alls, heavy-duty aprons, valved
respirators, multi-layered face
masks, particle filtering half
masks, helmets, shoe covers,
coats, etc.), as well as spray-
ers, blood pressure gauges,
and antiseptics. This helped
reduce COVID-19 rates among
healthcare workers and contrib-
uted to successful anti-epidemic
measures.
200
201
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors COMPANY SPONSORSHIP
ACTIVITIES
As part of its sponsorship activities, Rosneft is supporting large-scale projects aimed
at protecting the environment and developing science, culture, education, and sports. In 2020,
Rosneft spent RUB 1,220.6 mln on sponsorship activities. Sponsorship projects of the Company
and Group Subsidiaries confirm Rosneft’s reputation as a socially responsible business, adding
up to a stronger public image overall.
Reviving and building up the tra-
dition of partnership between
business and culture is an impor-
tant element of the Company’s
operations. In 2020, with the sup-
port of Rosneft, the Pushkin
State Museum of Fine Arts
in Moscow arranged a unique
exhibition of the British art-
ist Thomas Gainsborough.
The State Hermitage Museum
continued to host the perma-
nent historical display Ancient
Colonisation of the Northern
Black Sea Region after unveiling
it in 2019 with our financial help.
The Company was also the gen-
eral sponsor of the After Raphael
exhibition. In December 2020,
the museum opened
it to mark the 500th anniversary
of the artist's death and show
both his and his followers’ out-
standing works.
For many years, Rosneft
has been the general spon-
sor of the D. D. Shostakovich
St Petersburg Academic
Philharmonia and, together
with BP, has provided support
to the Russian-British Britten-
Shostakovich Festival Orchestra.
To celebrate the 70th Anniversary
of Victory in the Great Patriotic
War, Rosneft, together
with the TASS agency, imple-
mented the Fuel of Victory
special project to inform peo-
ple about the contribution of oil
industry workers in the defeat
In 2020, Rosneft spent
RUB 1,220.6
mln
on sponsorship
activities
of the Nazis by the Soviet Army
and navy. The project won
a special prize of the All-Russian
MediaTEK 2020 Award.
Rosneft acted as the general
sponsor of the Wings of Victory
Foundation seeking to preserve
Russia's military and historical
heritage by building a collection
of historical aircraft. The Company
provided money to restore
an Il-2 ground-attack aircraft that
Soviet flyer Valentin Skopintsev
piloted during WWII. In 2020,
it flew over St Petersburg as part
of the Navy Day celebrations.
In addition, the Company spon-
sored the Immortal Air Regiment
open air exhibition on Tversky
Boulevard in Moscow display-
ing aircraft found by search
teams and recovered by spe-
cialists of the Wings of Victory
Foundation.
Rosneft is a patron of profes-
sional and amateur sports.
It finances the CSKA Moscow
Hockey Club and is a sponsor
of the Arsenal Tula Football Club
and the Avers Basketball Club,
among others. Rosneft sup-
ports the domestic automakers
and contributes to the develop-
ment of motor sports in Russia
by funding the LADA Sport
ROSNEFT racing team.
The Company is also the gen-
eral sponsor of the International
SAMBO Federation.
Another integral part
of our corporate culture
and socially responsible approach
is environmental protection. We
do not hesitate to go the extra
mile to ensure environmen-
tal safety, preserve or restore
natural resources and pro-
tect rare animals – in addi-
tion to our extensive efforts
to study marine mammals.
In 2020, the Company continued
its comprehensive programme
to protect polar bears living
in Russian zoos, which has been
running since 2013. By late 2020,
Rosneft provided sustenance
for 34 polar bears in 16 zoos
across the country.
With the support of Rosneft,
the P. P. Shirshov Institute
of Oceanology of the Russian
Academy of Sciences was
able to look further into
the life of Black Sea dolphins.
The research is the first
of its kind since the early 1980s
and is essential for acquiring data
on the overall state of the Black
Sea. In addition, the Company
By late 2020, Rosneft
provided sustenance
for
34 polar bears
in 16 zoos across
the country
supports a number of projects
on studying polar bears, reindeer,
sable, and Atlantic walrus.
Together with the Russian Arctic
National Reserve, the Company
runs a programme to study human
impact on the Arctic’s extraordi-
nary ecosystem. This is the first
time such a study is being carried
out in Russia. As part of the pro-
gramme, an expedition was organ-
ised to Heiss Island (Franz Josef
Land archipelago) to look into
the environmental condition
of Arctic territories with the help
of aerial systems and take sam-
ples of core for further analysis.
202
203
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ENERGY EFFICIENCY AND ENERGY
SAVING
FUEL AND ENERGY CONSUMPTION
Rosneft is a major fuel and energy
consumer in Russia. In 2020,
the Company’s1 fuel and energy
consumption totalled 18.9 mil-
lion tonnes of coal equivalent
(mmtce)2, or RUB 216,946 mln.
For energy consumption and costs
by business segment in 2020, see
the table below.
Energy consumption and costs by business segment in 2020
Segment
Fuel and energy consumption
In ktce / RUB mln
Share, %
electricity, th. kWh /
RUB mln
heat, th. Gcal /
RUB mln
fuel, kt /
RUB mln
Oil and gas production
37,750,767 / 133,233
2,752 / 7,125
1,547 / 3,453
7,093 / 143,811
Oil refining
6,001,792 / 19,863
19,460 / 19,806
4,093 / 15,529
9,786 / 55,198
Petrochemicals and gas
processing
Gas production
and distribution
2,308,307 / 6,335
6,799 / 5,604
405 / 1,170
1,843 / 13,109
340,630 / 1,746
113 / 264
61 / 102
142 / 2,112
Marketing and distribution
319,479 / 1,674
70 / 86
92,343 / 452
248 / 451
5 / 32
2 / 21
55 / 1,792
48 / 923
46,813,318 / 163,303
29,442 / 33,336
6,111 / 20,307
18,967 / 216,946
Services
Total
37.4
51.6
9.7
0.7
0.3
0.4
100
ENERGY SAVING PROGRAMME
In 2020, the Company embarked
on its 2020–2024 Energy
Saving Programme approved
by the Board of Directors in March
2020. The Programme promotes
a more efficient use of electric-
ity and heat, as well as boiler
and furnace fuel across key
business lines. For actual fuel
and energy savings in 2020, see
the table below.
Actual fuel and energy savings in 2020
Segment
Savings in 2020
In ktce
Share, %
Oil production
Oil refining
Petrochemicals
Gas distribution
Marketing and distribution
In-house services
Total
electricity,
th. kWh
1,356,788
33,649
3,458
26,931
4,612
1,554
heat,
th. Gcal
2
236
40
0
0
1
fuel,
tce
957
175,129
9,373
0
144
365
164.1
212.2
15.3
3.2
0.7
0.7
41.0
54.0
4.0
0.8
0.2
0.2
1,426,991
279
185,967
396.3
100.0
1 Information on the most energy-intensive assets operated directly by Rosneft, for 2020.
2 Natural units of electricity and heat are converted into tonnes of coal equivalent in accordance with GOST R 51750-2001, and those
of fuel – in accordance with Resolution of the Federal State Statistics Service (Rosstat) No. 46.
ENERGY EFFICIENCY AND ENERGY SAVING POLICY
In accordance
with its Energy Efficiency
and Energy Saving Policy
and the Energy Management
System: Requirements and Use
Guidance Standard, the Company
took the following steps in 2020:
• amended the list
of Group Subsidiaries cov-
ered by the 2021–2025
Energy Efficiency Programme,
adding the following
assets: RN-Buzulukskoye
Gas Processing Plant,
and Saratovnefteprodukt. Given
asset combinations and divest-
ments and with no new energy
saving initiatives planned
for 2021–2025, the Programme
covered 82 Group Subsidiaries;
• drafted regulations on how
to use the Electrically-driven
Centrifugal Pumps module
of the Mechanical Resources
information system at Group
Subsidiaries in Upstream, which
resulted in Rosneft becom-
ing one of the first companies
in Russia's oil and gas industry
to introduce a production well
operating procedure for mon-
itoring the energy efficiency
of electrically-driven centrifugal
pumps and implementing tar-
geted energy saving initiatives
before any equipment failures
or well interventions;
• arranged for corpo-
rate training in energy effi-
ciency (five courses). In 2020,
471 employees took training
in the dedicated corporate train-
ing centre;
• put into effect Order No. 71
On Drafting and Implementing
Targeted Programmes
to Introduce an Energy
Consumption Monitoring
System in Oil Refining, Gas
Processing and Petrochemicals
dated 3 February 2020 to cre-
ate an automated instrumen-
tal database for fuel and energy
resources and develop/deploy
in-house software for energy
use regulation, planning
and reporting;
• performed an internal assess-
ment of energy management
systems at 21 Group Subsidiaries
in Exploration and Production,
and Oil Refining, Gas
Processing and Petrochemicals,
with individual roadmaps
drafted to address the iden-
tified gaps in 2020–2022.
Another assessment is sched-
uled for 2021;
• had its own energy efficiency
and energy saving divisions per-
form an internal energy effi-
ciency audit of 386 production
facilities and units of equipment
at 35 Group Subsidiaries to iden-
tify their energy saving potential
and exploit it under the Energy
Saving Programme;
• had Taas-Yuryakh
Neftegazodobycha certified
for compliance with ISO 50001
(Energy Management
Systems). All in all, 42 Group
Subsidiaries accounting for 98%
of the Company's total energy
consumption in 2020 hold
ISO 50001 certificates.
204
205
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors POWER GENERATION DEVELOPMENT
The reporting year saw the fol-
lowing generating facilities built
or commissioned to help meet
the projected Group energy needs
in Exploration and Production:
• In-house power plants:
– 50 MW gas turbine power
plant commissioned
at the Srednebotuobinskoye
field of Taas-Yuryakh
Neftegazodobycha;
– main construction and instal-
lation operations completed
(96.6%) and pre-commission-
ing started at the 153 MW
gas turbine and thermal
power plant at the Tuapse
Refinery (Phase 2); APCS
pre-commissioning almost
completed at the 105 MW
gas turbine power plant
at the Vostochno-Urengoysky
license area of Rospan
International;
On top of that, the Company
renovated a 1.36 km CHP-Okha
heat line, an important facility
for the communities of the Sakhalin
Region’s northern part.
• 110 kV grid facilities:
– two 110 kV substa-
tions with a total trans-
former capacity of 100 MVA
and 64 km of 110 kV over-
head lines commis-
sioned at Orenburgneft
and RN-Yuganskneftegaz.
IMPROVED ENERGY SUPPLY RELIABILITY
Every year, the Company takes
a number of steps to ensure
uninterrupted energy sup-
ply of the existing and prospec-
tive production assets. In 2020,
as part of its efforts to improve
the supply efficiency and reliabil-
ity, the Company conducted eight
technical audits to check the qual-
ity of power facility management
and drafted a remedial action plan
to eliminate the gaps. The report-
ing year saw 106 remedial actions
completed, with deadlines
for another 166 not yet expired.
This helped achieve a 12.7% year-
on-year reduction in power fail-
ures across in-house electricity
networks.
As part of technical audits,
the Company also checks if its
sites operate equipment in com-
pliance with health and safety
requirements.
Rosneft's Energy and HR depart-
ments have defined the key per-
sonnel development and training
priorities for the Energy func-
tion, with the following steps
taken to improve employee
competencies:
• group and individual devel-
opment courses created
for the Energy function
(Upstream) to do in 2020–2021
after completing pilot tests
and undergoing an assessment
of professional skills;
• professional competency pro-
files created for Oil Refining, Gas
Processing and Petrochemicals,
subject to an ongoing revision,
together with the test questions,
following pilot tests involving
Energy Department experts;
• work started to draft profes-
sional qualification guidelines
for the eleven most common
blue-collar energy professions
in Exploration and Production,
and Oil Refining, Gas Processing
and Petrochemicals, with five
already covered;
• eleven dedicated courses
included in the corporate curric-
ulum for 2021;
• Exploration and Production,
and Oil Refining, Gas Processing
and Petrochemicals coaches
trained by their colleagues
from the Energy Department
to operate in-house power
and heating plants and emer-
gency shutdown systems, per-
form switching, and make
the preparations to maintain
or repair energy equipment.
206
LOCALISATION AND DEVELOPMENT
OF INDUSTRIAL CLUSTERS
IMPORT SUBSTITUTION AND EQUIPMENT LOCALISATION
FOR ROSNEFT’S NEEDS
In 2015, Rosneft launched
an Import Substitution
and Equipment Localisation
Programme.
Aligned with strategic goals
and objectives set forth
in the Rosneft–2022 Strategy
and the Company’s Long-Term
Development Programme,
the Programme seeks to:
• facilitate the development
of Rosneft as a high-tech oil
and gas company;
• secure the Company’s techno-
logically sustainable position
in the hydrocarbons mar-
ket by increasing the share
of Russian-made products
and implementing projects
to localise the manufacturing
of foreign oil and gas equip-
ment in Russia in cooperation
with leading global producers;
• facilitate the development
of infrastructure supporting
upstream and downstream pro-
jects as part of localisation
efforts.
As part of the programme,
Rosneft keeps investing in pro-
prietary solutions and products
with a view to sustaining its tech-
nological self-sufficiency.
As it works to develop crit-
ical prospecting, explo-
ration and development
technologies, Rosneft approved
a pilot testing programme
for RN-Yuganskneftegaz to test
the multi-parameter logging while
drilling equipment developed
as part of the Rosneft–Rosatom
R&D cooperation
by Dukhov Automatics Research
Institute (VNIIA). A five-well pilot
testing of this equipment is sched-
uled for 2021.
The pilot testing of an ice condi-
tions monitoring system that was
developed within the Company
has been completed, with the sys-
tem currently being put into oper-
ation. The Company has also
developed three components
of an iceberg towing system
(towing rope, buoys, and tow-
ing nets) and filed utility model
applications.
With an agreement on technolog-
ical partnership in the production
and maintenance of import-sub-
stituting solutions signed
between Rospan International
and Rosatom, the parties are now
working on a domestic multiphase
flow meter to measure flow rate
in gas condensate wells. In 2020,
the related R&D efforts were com-
pleted with the key deliverables
presented.
Other equipment that was pilot-
tested includes a corporate coiled
tubing simulator by RN-VECTOR
used to plan prevention actions,
estimate residual life and exer-
cise day-to-day operational con-
trol. The testing showed that
RN-VECTOR’s simulator performs
as claimed.
Russian-made catalysts are key
to sustaining the technological
self-sufficiency of the Company’s
refining segment ending its reli-
ance on foreign technologies.
In 2020, Rosneft launched com-
mercial operation of a proprietary
hydrotreating catalyst. A commer-
cial batch of these unique cat-
alysts was loaded into a diesel
fuel hydrotreater at the Ryazan
Refinery. This is the first diesel
fraction hydrotreating catalyst
for the Russian refining industry
capable of fully replacing its for-
eign peers to produce the Euro-5
ultra-low-sulphur (below 10 ppm)
diesel.
The Komsomolsk Refinery
(part of Rosneft’s refining seg-
ment) launched the final stage
of building a hydrocracking com-
plex with an integrated diesel
fuel hydrotreating unit. When
launched with a design capacity
of 3.65 mmtpa, this hydrocrack-
ing and hydrotreating complex
will increase the Komsomolsk
Refinery’s refining depth to 92%.
In 2020, Rosneft commissioned
Russia’s first pilot testing facility
for hydrotreating catalysts built
in 2019 at the Novokuibyshevsk
Catalysers Plant. Its operation
will have a significant economic
effect as the Company will spend
less buying third-party cata-
lysts and for logistics reasons.
For example, the Company’s refin-
eries need approximately 2 kt
of hydrotreating catalysts each
year putting the annual costs
at ca. RUB 2.5 bln. The new tech-
nological capabilities will consid-
erably reduce Russia's reliance
on imported catalysts for refining
purposes. The new pilot testing
facility features nine main produc-
tion lines and five auxiliary units
207
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors comprising production equipment
for oil refining catalysts and a vari-
ety of controls, measurement
and production process manage-
ment tools. It has a daily capacity
of nearly 200 kg of different cata-
lysts (6 t per month).
In 2020, the scientists of RN-TsIR
(Rosneft’s R&D institute) devel-
oped an innovative technology
to convert Rosneft-produced ace-
tone into higher-margin isopro-
panol, which is mainly imported
to Russia today. The technology
provides for the hydrogenation
of acetone using the Company’s
own heterogeneous metal-con-
taining catalyst produced
from raw materials available
in the country. The isopropanol
will be used as an anti-icing agent
in the production of the high-qual-
ity, odourless (as opposed
to propylene-based isopropanol),
frost-free car windscreen wiper
fluid for the Company’s retail net-
work. Isopropanol is also used
as a basis for highly effective
antiseptics designed to combat
the spread of infections,
which pre-determines a surge
in demand for isopropanol
in Russia and worldwide. An
industrial-grade acetone-to-iso-
propanol unit and in-house unit
for isopropanol-based windscreen
wiper fluid are to be constructed
at Rosneft’s Novokuibyshevsk
Petrochemical Company that has
the relevant petrochemical profile.
The development of proprie-
tary research-intensive special-
ist software is another strategic
focus area for the Company. It
has created RN-GEOSIM 1.0 soft-
ware suite for geological model-
ling and, starting from 2021, plans
to deploy it across the Group
Subsidiaries. The developed com-
plex can replace 50% of imported
geological modelling software.
The Company has also completed
the development of a new version
of RN-KIM hydrodynamic simula-
tor boasting new capabilities.
Other software – a hydraulic frac-
turing simulator – has been used
to design more than 21 thousand
full-scale hydraulic fracturing
operations. This simulator is com-
mercialised for external users,
with its licences available for pur-
chase to the Group Subsidiaries
and third parties. Rosneft has
now completed its R&D efforts
designed to identify further
development areas for RN-GRID
as required to add new capabilities
in line with the newest hydrau-
lic fracturing challenges, and has
launched R&D work to develop
RN-GRID 3.0.
As regards RN-Sigma, a corpo-
rate suite for geomechanical mod-
elling of borehole stability while
drilling, it was upgraded to ver-
sion 2.0. The new version fea-
tures extra functions for real-time
geomechanical drilling support
and building dynamic wellbore
stability models.
The suite was pilot-tested
by the Group Subsidiaries.
FOSTERING THE INDUSTRIAL CLUSTER
In 2020–2025, the industrial
cluster based on the Company’s
capacities, will be focusing on:
• establishing R&D and manu-
facturing infrastructure to sup-
port re-engineering, innovations,
and import substitution;
• running pilot projects and tests
in line with the Company’s Target
Innovative Projects;
• supplying capacities to support
localisation projects in cooper-
ation with foreign technology
partners as well as joint ven-
tures with Russian R&D centres
and enterprises.
Industrial cluster companies
together with the Company’s R&D
centre take an active part in imple-
menting the Target Innovative
Projects. In 2020, RN-Remont NPO
acting as the management com-
pany for the industrial cluster,
set up an Engineering, Design,
Technology and Development
Policy Office responsi-
ble for the Target Innovative
Projects and import substitution.
The Target Innovative Projects
are already producing great
results with an URPSV-10000
preliminary water discharge
and oil treatment unit (intel-
lectual property of Rosneft)
manufactured and deliv-
ered to RN-Nyaganneftegaz
and a strategy for the devel-
opment and pre-production
of mobile modular technologi-
cal solutions for water-oil emul-
sion preparation being drafted.
Cooperation with the R&D cen-
tre is not limited to manufacturing
new equipment only. For example,
the cluster’s pilot facilities deal
with the automation and roboti-
sation of daily operations involved
in repairing the tubing and elec-
tric submersible pumps and in well
servicing and workover.
The industrial cluster development
strategy provides for expand-
ing the geography and diver-
sifying the range of services
provided. To deliver the strategy,
the last year saw the development
of the Company’s offering
with a focus on the maintenance,
repair and rental of tubing, electric
submersible pumps for RN-Vankor
and Chekmagushevsky produc-
tion area of Bashneft-Dobycha.
The Company has also certified
and received licence to manu-
facture and repair tank contain-
ers required to ensure year-round
supply of fuels and lubri-
cants to the Vostok Oil project.
Repair and maintenance of oil-
field equipment is now availa-
ble to East Siberian Oil Company,
Slavneft-Krasnoyarskneftegaz,
Tyumenneftegaz
and Samotlorneftegaz.
The industrial cluster is committed
to not only unleashing the domes-
tic potential, but also attracting
and cooperating with technology
partners. To this end and to share
experience and best practices,
the Company has signed a cooper-
ation agreement with the indus-
trial cluster of the Republic
of Tatarstan.
208
209
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INDUSTRIAL AND SHIPBUILDING CLUSTER
IN THE RUSSIAN FAR EAST
Upon instruction from the Russian
President, Rosneft is ramping up
a shipbuilding cluster in the Far
East to foster the domestic ship-
building industry and energise
the development of the coun-
try’s continental shelf. Zvezda
Shipbuilding Complex in Bolshoy
Kamen will be the core shipyard
and Russia’s first-ever facility
for the construction of large-ca-
pacity vessels.
Importantly, the shipyard
will be manufacturing icebreakers
and reinforced ice-class vessels,
along with LNG-powered ves-
sels. The shipyard boasts a unique
set of competencies unparalleled
among both domestic and leading
global peers.
To cater to the needs of import
substitution and equipment
localisation, an industrial clus-
ter for shipboard equipment
and components is emerging
around the Zvezda Shipyard.
Despite the challenging COVID-
19 situation, restricted workforce
mobility and the need to comply
with the related health and safety
regulations, the Company man-
aged to arrange for a large
scope of construction works
at the shipyard:
• 625 th. cub m dredged
to deepen the waterways;
• in excess of 56,432 cub m of soil
replaced;
• over 3.5 kt of sheet piles
and 1,803 piles installed;
• over 144 th. cub m of concrete
poured;
• over 31 th. sq m of enclosing
structures and roofing installed;
• more than 4 kt of steelworks
assembled;
• over 6.1 th. sq m of fire protec-
tion added;
• 10,593 linear m of cable lines
laid for the power supply
and light current systems;
• four distribution transformer
substations assembled;
• over 12.1 th. linear m of heat
and gas supply networks laid;
• more than 8.7 th. linear m
of water supply networks
and sewerage system laid.
Pre-commissioning opera-
tions are nearing completion
at one of Zvezda’s key facilities –
a dry dock with an adjacent area
and outfitting quays. The dry
dock is a unique hydraulic struc-
ture measuring 485x114x14 metres
which can accommodate con-
struction of the majority of exist-
ing and future types of vessels
with virtually no restrictions
on tonnage and launching weight
of the hulls, including the world’s
most powerful nuclear ice-breaker
"Leader".
The shipyard’s order portfo-
lio already counts 56 vessels,
all of them being engineering-
and technology-intensive vessels,
mostly of high ice-class (sup-
ply vessels, research vessels, ice-
breakers, Arctic shuttle tankers,
"green" Aframax type tankers,
gas carriers). This is the first time
all the vessels in the shipyard’s
production programme are built
in Russia.
In November 2020, Zvezda
reached an important milestone
launching the production of gas
carriers (foreign-built until then).
The shipyard started cutting steel
for the flagship vessel of the Arctic
LNG 2 project. This was the result
of a great deal of produc-
tion and organisational efforts
taken such as employee train-
ing, receiving Russia’s first licence
to manufacture and assemble
cargo systems for LNG trans-
portation, making pre-produc-
tion arrangements and securing
technology partnership so that
the project is implemented
within an unprecedentedly short
time frame even to international
standards.
Another important milestone was
the launch of a unique icebreak-
ing supply vessel named Katerina
Velikaya in December 2020, which
will also operate in the Russian
Arctic.
In 2020, the shipyard also deliv-
ered to Rosnefteflot its first ves-
sel, a Russian Aframax type tanker
Vladimir Monomakh that has suc-
cessfully passed its sea trials.
This means that in just five years after
incorporation, Zvezda Shipbuilding
Complex has mastered the entire
shipbuilding cycle – from cutting
steel to trials and delivery of vessels
to the customer.
VRK SAPPHIRE PLANT
STEERABLE THRUSTERS
An industrial cluster for ship-
board equipment and compo-
nents is emerging around Zvezda
Shipbuilding Complex. The clus-
ter accommodates a workshop
to manufacture steerable thrust-
ers for ice-class vessels, including
gas carriers.
VRK Sapphire Plant, a joint ven-
ture of Rosneft and General
Electric, manages the project
to develop and localise the pro-
duction of steerable thrusters,
a key component of marine elec-
tric propulsion system.
The plant has been in operation
since 2019. The first two 7.5 MW
steerable thrusters were installed
on a higher ice-class multifunc-
tional support vessel put afloat
in December 2020.
In 2020, the plant contin-
ued to upgrade its capacity
with the goal of manufacturing
higher-power steerable thrust-
ers. Concurrently, VRK Sapphire
Plant secured a purchase order
for 15 MW steerable thrusters
intended to be installed on gas
carriers.
210
211
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors SUPPLIER AND CONTRACTOR
RELATIONSHIPS
In recent years, Rosneft has been a major consumer of goods, works and services in Russia.
The annual spend by the Company (Rosneft and Group Subsidiaries) on externally procured
goods, works and services amounted to RUB 2.76 trln.
trading platform. Preliminary
review of potential suppli-
ers or contractors for compli-
ance with the approved standard
requirements makes it easier
for them to prepare for and par-
ticipate in the Company’s pro-
curement procedures in relevant
categories.
To establish long-standing
relationships with suppliers,
the Company’s internal regula-
tions provide for long-term
(up to 18 months) accreditation
which helps considerably reduce
costs incurred by potential sup-
pliers participating in procure-
ment procedures. Suppliers may
obtain accreditation both prior
to and in the course of procure-
ment procedures.
As a vertically integrated hold-
ing company, Rosneft relies
on the consolidated procure-
ment of goods, works and services
for the Group Subsidiaries
The Company’s ongoing devel-
opment involves engaging
a wealth of products, advanced
technologies, new contractors
and suppliers.
Therefore, the Company’s pro-
curement activities are focused
on building long-term partner-
ships with suppliers and contrac-
tors. Signing long-term contracts
and placing long-term orders facil-
itate stable development of the oil
and gas industry, the machine
building industry and the mainte-
nance services market, while also
helping to create jobs in all indus-
tries and drive innovation. Thus,
in 2020, 75% of the 2021 central-
ised requirements were covered
by long-term contracts.
The Company keeps implementing
the category management in pro-
curement, including by leveraging
category/procurement strategy
as its key enabler. In 2019–2020,
Rosneft developed 26 strategies
in the most capital-intensive pro-
curement areas.
As part of its work to implement
the category management in pro-
curement and build a frame-
work for long-term counterparty
qualification1, the Company con-
tinues to develop standard sup-
plier and contractor requirements
for certain groups of materials,
equipment, works and services.
The information on the applicable
standard requirements is available
at TEK-Torg’s electronic
1 The validity period is 18 months.
212
with a view to enhancing its pro-
curement efficiency, all in line
with recommendations of the fed-
eral executive bodies. Rosneft’s
procurement is centralised
at 64%, including 50.5% han-
dled by the Head Office and 13.5%
sourced regionally.
When choosing suppliers and con-
tractors, the Company adheres
to the principles of openness,
competitiveness, reasonable-
ness, effectiveness, and non-dis-
crimination, as stipulated
in the applicable Russian laws
and the Procurement Policy
adopted by the Company in 2020.
The Policy sets out the key goals,
objectives and guiding princi-
ples of the Company’s supplier
relations, as well as procurement
management priorities for Rosneft
and the Group Subsidiaries.
These principles are imple-
mented under the Regulations
on Procurement of Goods,
Works and Services applied
in the Company and the Group
Subsidiaries.
To ensure procurement trans-
parency, increased competition
and equal access for market par-
ticipants, the Company manages
its procurement procedures elec-
tronically via TEK-Torg’s electronic
trading platform (Rosneft sec-
tion). The Company conducts vir-
tually all competitive procurement
procedures electronically.
In 2020, the Company
and the Group Subsidiaries initi-
ated over 137 thousand procure-
ment procedures on TEK-Torg’s
electronic trading platform
(Rosneft section).
Over 464 thousand suppli-
ers are registered on the trading
platform2.
To enhance transparency and effi-
ciency of minor procurement
(worth below RUB 500 thousand),
TEK-Torg’s electronic trading plat-
form is expanding its Corporate
Internet Shop (CIS).
For reference
The Corporate Internet Shop
helps boost, control and stream-
line the Company’s internal busi-
ness processes as well as those
of the Group Subsidiaries leading
to shorter times, lower operat-
ing costs and lower procurement
prices due to a better compet-
itive environment. As a result,
the Company managed to attract
new counterparties (mostly
SMEs).
2 Cumulative total since the launch of TEK-Torg’s electronic trading platform.
213
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors on Respecting Human Rights
to be used when interacting
with suppliers of goods, works
and services. The declaration
is available at the Company’s offi-
cial website, and the requirement
to comply with all its guiding prin-
ciples is part of the procurement
documentation.
The Company expects its suppli-
ers and contractors to pay particu-
lar attention to health protection,
maintaining the right to favour-
able environment, and creating
comfortable and safe labour con-
ditions in line with the applica-
ble labour safety requirements
of the Company, the Russian
Constitution, Labour Code, health
and disease control regulations
and standards and/or other legal
instruments of their jurisdic-
tion / regions of operation, as well
as the international law.
• contract management and ref-
erence data support for cen-
tralised list of items, reporting
on procurement processes.
As at 31 December 2020, the SSC
had a headcount of 175 employ-
ees and had service contracts
signed with Rosneft, regional pro-
curement operators and 19 Group
Subsidiaries.
To recruit and train young profes-
sionals, the Company maintains
its cooperation with the Samara
State Technical University,
Samara’s flagship in higher edu-
cation, with a plan to train, hire
and attract young talent in 2021
in place.
In July 2020, Gubkin Russian State
University of Oil and Gas awarded
first masters degrees in procure-
ment upon two-year training
at the Department of Procurement
Chain Management for the Oil
and Gas Industry (under the aus-
pices of Rosneft). There were
14 graduates, and 7 of them were
awarded honours degrees.
The educational programme
involved managers and employees
of Rosneft’s procurement func-
tion, leading industry and interna-
tional experts.
In autumn 2020, the second
intake of master’s degree stu-
dents (26 persons) was launched
with on-campus and remote
learning combined.
In cooperation with the operator
of TEK-Torg’s electronic trading
platform, the Company
implemented a new joint project –
Rosneft Procurement mobile
application to facilitate the han-
dling of the Company’s procure-
ment procedures.
Rosneft Procurement application
enables employees and owners
of potential and current suppliers
of Rosneft or Group Subsidiaries
to choose the relevant pro-
cedures swiftly, to be noti-
fied of new purchases and to be
updated on the news of the trad-
ing platform, relevant documents
and procedural changes.
The Company continues deploy-
ing cutting-edge robotic auto-
mation in procurement. Robotic
scripts are already applied
in delivery monitoring, reporting
and inventory reallocation. Optical
recognition is used in accred-
itation of potential suppliers
and contractors.
To ensure compliance with major
international human rights instru-
ments, the Company adopted
a Declaration
For reference
Rosneft relies on automa-
tion tools to unlock resources
previously engaged in routine
and algorithm-driven operations
so as to:
• refocus its employees on more
sophisticated tasks,
• mitigate risks of errors (human
factor) while managing big
data,
• exponentially accelerate
routine operations supporting
a 24/7 continuous workflow.
As at 31 December 2020,
over 41 thousand organisa-
tions were registered in the CIS,
including over 30 thousand small
and medium-sized enterprises
(SMEs). In 2020, the Company
published over 55 thou-
sand procurement procedures
with completed procurement
worth over RUB 3.6 bln, almost
doubling year-on-year.
The Company is commit-
ted to promoting cooperation
with SMEs. The annual value
of Rosneft Group’s contracts
with SMEs is at least RUB 100 bln.
It is worth noting that SMEs
account for over 50% of potential
suppliers accredited with Rosneft.
To better inform suppliers
and contractors, including SMEs,
on procurement opportunities,
Rosneft and SME Corporation
held 13 workshops/events
on the Company’s procurement
activities in 2020. The work-
shops were held in Ivanovo,
Sochi, Khabarovsk, Ulyanovsk,
Tuapse, Nizhnevartovsk,
the Republics of Bashkortostan
and Tatarstan, the Volgograd,
Sakhalin and Tomsk regions,
and the Krasnoyarsk Territory.
The Company continues
with the Import Substitution
and Equipment Localisation
Programme for Rosneft’s Needs
for 2019–2021 with an out-
look for 2028. The Regulations
on Procurement of Goods, Works
and Services provide
for the Company’s right to priori-
tise Russian-made goods, works
and services where and as required
by the applicable laws.
The Company also regularly carries
out purchases of Russian-made
equipment of its own accord.
The Company continues
the roll-out of a Shared Service
Centre (SSC) in Samara with a view
to centralising and pipelining pro-
curement operations and category
management functions. In 2020,
the following functions were suc-
cessfully transferred to the SSC:
• contractor accreditation, pub-
lishing procurement docu-
ments, monitoring due delivery
time, purchase and supply plans
approval;
1 In January–May 2020.
2 Including those held online/remotely due to the pandemic.
214
215
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors • formation of the Frolov petro-
leum region. Its integration tech-
nology for multi-scale studies
of the Jurassic high-carbon for-
mation in the Sredneobskaya
oil and gas bearing region
of Western Siberia was upgraded,
adapted and tested to conduct
petrophysical studies and ana-
lyse logging and seismic data.
RESEARCH-INTENSIVE
TECHNOLOGY SOFTWARE
• New algorithms were added
to RN-SMT, an integrity moni-
toring system for oilfield pipe-
lines. They allow us to calculate
the maximum possible pressure
subject to technical condition
of the facilities, carry out factor
analysis of changes in pump-
ing energy efficiency, and moni-
tor pipeline inhibition. The system
provides an opportunity to fully
digitalise all the processes
related to pipeline operations,
reduce operating risks and assist
in management decision-making.
Once completed, RN-SMT will
turn into a single corporate soft-
ware suite capable of fully sup-
porting pipeline operations.
• To support the national oil
and gas industry in its efforts
to substitute imports
• of critical specialist software
products, Rosneft commer-
cialised its RN-GRID simula-
tor to serve external consumers;
licenses to use the simulator
were made available for pur-
chase. The Company contin-
ues to issue RN-GRID licenses
to all Russian oil and gas com-
panies. In 2020, 115 commer-
cial licenses and over 40 test
licenses for RN-GRID were
granted to 23 oil and gas pro-
duction and service companies.
In addition, four leading partner
universities were granted more
than 50 academic licenses to use
RN-GRID in teaching. To improve
the field design accuracy
and select the most appropriate
hydrocarbon extraction technol-
ogies, Rosneft makes extensive
use of field models created by its
proprietary RN-KIM hydrody-
namic simulator.
• This advanced software
product has been widely
exploited by the Company
for over six years and adapted
to the geological and oper-
ating conditions of the fields
the Company is developing.
In 2020, we released a new ver-
sion of this software product
with composite modelling that
makes it possible to perform
• computations using graph-
ics processing units or com-
puter clusters and create models
for oil and gas condensate fields
that require computation-in-
tensive analysis. Rosneft also
developed a module that deter-
mines the optimal irregular well
placement by applying artifi-
cial intelligence technologies
(similar to Google DeepMind's
AlphaZero). As a result, more
than 80% of digital field model-
ling tasks were performed using
RN-KIM. Going forward, the pro-
prietary simulator will not only
cover 90–95% of the Company’s
needs for hydrodynamic model-
ling, but also allow us to actively
apply artificial intelligence tech-
nologies in field development.
• Rosneft developed RN-GEOSIM
0, a geological modelling soft-
ware system (similar to lead-
ing foreign geological modelling
software packages) that will
assist in building geological mod-
els of fields. The Company is also
developing modules for kine-
matic interpretation of seismic
information. The newly devel-
oped system features unique
capabilities of modelling process
management and can automat-
ically update geological models
with new field data
RESEARCH, DESIGN,
AND INNOVATIONS
RESEARCH AND INNOVATIONS
Rosneft carries out its inno-
vative activities in accordance
with the 2020–2024 Innovation
Development Programme
approved by its Board of Directors.
The Programme aims to achieve
the Company’s strategic goals
drawing on its strategic prior-
ities, such as efficiency, sus-
tainable growth, transparency,
social responsibility, and inno-
vations. The Programme pro-
vides for a range of activities
with a focus on:
• development and deployment
of new technologies;
• development, production,
and launch of new world-class
innovative products and services;
• support to the Company’s mod-
ernisation and technological
advancement through high-im-
pact improvements in key per-
formance indicators for business
processes;
• enhancement of the Company’s
shareholder value and competi-
tive edge in the global market.
In the reporting year, Rosneft
continued with a success-
ful implementation of R&D
KEY ACHIEVEMENTS IN 2020
Total R&D costs
in 2020 amounted to
RUB 26.8 bln
results and state registration
of intellectual property rights.
The R&D efforts in 2020 resulted
in 60 intellectual property appli-
cations submitted by, and 64 pat-
ents granted to, the Company.
The Company implements pro-
jects in various fields, including oil
and gas production, oil refining,
and petrochemicals.
UPSTREAM
• RN-Yuganskneftegaz contin-
ued to deploy a low-permeability
reservoir development technol-
ogy involving the use of horizon-
tal production and injection wells
and multi-stage hydraulic frac-
turing (MSHF). In 2020, the tech-
nology was deployed at more
than 120 wells. Unlike the stand-
ard development scheme (one
horizontal production well
and two directional injection
wells), the new scheme is based
on one horizontal injection well
instead of two directional injec-
tion wells. This results in both
cost savings and higher oil pro-
duction. Also in 2020, a new soft-
ware module, Decision Support
in Development of New Areas
of Low-Permeable Reservoirs,
was added to the RN-KIN
• corporate software package
• suite. The map will be used
as part of the Company’s R&D
activities. The module was used
by RN-Yuganskneftegaz to cal-
culate the optimal drilling score
for 2021–2025.
• RN-Yuganskneftegaz continued
to deploy the newly developed
MSHF technology in an ultra-
low-permeability source rock
reservoir at the Bazhenov suite
(YuS0 formation). Nine horizontal
MSHF wells were commissioned
in 2020. Their average initial flow
rate amounted to 55 t per day
in a flow mode (or 6.8 t per day
per hydraulic fracturing stage),
which is in line with the best
global practices. MSHF wells
demonstrated 1.5–3 times bet-
ter performance as compared
to the previous project devel-
opment phase. Also in 2020,
we finalised our technology
designed to locate potentially
productive areas of the Bazhenov
suite. With this technology,
we updated a map of potentially
productive areas of the Bazhenov
by RN-Yuganskneftegaz to drill
over 20 horizontal MSHF wells
in 2021–2023.
• Rosneft developed a con-
solidated methodology that
allows evaluating local perme-
ability and porosity properties
of the Berezovskaya suite depos-
its. With the new methodology,
the Company refined its technol-
ogy used to locate Berezovskaya
suite reserves in its license area
in Western Siberia. A new strati-
graphic plan of upper cretaceous
deposits in Western Siberia was
developed.
• Rosneft partnered
with the National Intellectual
Development Foundation
(Innopraktika) to conduct zoning
of the Frolov petroleum region
in terms of movable hydrocarbon
fluid resources, occluded hydro-
carbon compounds, and organic
matter in the Jurassic high-car-
bon formation. The Company
identified oil exploration targets
in the Jurassic high-carbon
216
217
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors • received. RN-GEOSIM is antic-
ipated to cover up to 80%
of the Company’s needs for geo-
logical modelling.
• Rosneft developed RN-Simtep 0,
a software product for modelling
oil and gas production processes.
Currently, the product is being
tested at corporate research
and design institutes. Going for-
ward, RN-Simtep will cover up
to 80% of the Company’s needs
for production process mod-
elling and eventually tap into
oil refining and petrochemicals
processes.
• New features were added
to the RN-PETROLOG corpo-
rate software suite for interpre-
tation of core samples and well
log data. These features allow
uploading large projects (more
than 10 thousand wells), con-
necting external modules,
processing metadata of a petro-
physical project, obtaining
statistics on data availability
in the project, filtering well data
in the project tree (making flexi-
ble data requests). The Company
intends to drastically reduce its
dependence on foreign vendors
by developing proprietary petro-
physical software and integrating
it into its digital universe.
• The Company organised a series
of competitions for Russian pro-
grammers. Hackathons1 help
Rosneft to draw attention
of the global IT community
• to solving industry-specific
applied problems. In 2020,
the number of hackathon top-
ics was increased to three, which
reflects to the Company’s grow-
ing interest in IT technologies
and their potential applications
to address current challenges
of the industry.
– The first IT marathon event,
Hackathon of Three Cities,
was held on 24–25 September
in Ufa, Kazan and Samara
simultaneously. Over 250 stu-
dents and postgraduates
comprising 52 teams were
solving a classic “postman
problem” (finding the shortest
route to deliver “letters” to all
addressees), but in the con-
text of oil and gas.
– The competitions continued
with a hackathon for robot-
ics programmers in Ufa State
Aviation Technical University
on 16–17 October. The pur-
pose of the hackathon was
to find new approaches
to solving operating prob-
lems with the use of robots
and robot-based mechanisms,
as well as to promote a career
in robotics among students
of Russian higher education
institutions. The teams were
writing a programming algo-
rithm for a four-axial robot
manipulator (to perform man-
ufacturing equipment
– disassembly tasks), designing
and 3D printing a robot-based
gripper tooling. The organis-
ers provided the contestants
with all the required technical
devices.
– The IT marathon ended
with Rosneft Proppant
Check Challenge (RPCC).
Its online finals took
place on 28 November.
Representatives of 35 univer-
sities from 28 countries par-
ticipated in the challenge. This
was an absolute record for IT
competitions held in Russia’s
oil and gas industry.
– During the 2.5-month online
Proppant Check Challenge,
942 contestants (822 teams)
were estimating the linear
size and quantity of prop-
pant grains by analysing
a series of images. Ten teams
that presented the best PC
and smartphone solutions
to the Company’s experts
qualified for RPCC finals.
• The Company is work-
ing to expand the function-
ality of RN-SIGMA, one of its
most rapidly developing soft-
ware products. RN-SIGMA was
designed to solve the problems
of geomechanical modelling
and stability analysis of direc-
tional and horizontal wellbores.
In 2020, RN-SIGMA capabili-
ties were expanded considerably,
with the following features added:
geomechanical drilling support
in real-time mode, wellbore sta-
bility dynamic modelling based
on time-dependent structural
changes of rock formations, assess-
ment of sand ingress risks and risks
of cement sheath failure during
well operation. The new features
cover a full range of tasks associ-
ated with data acquisition, analysis
and pre-processing, 1D geome-
chanical model building and trans-
fer, drilling failures prediction, well
path and well structure optimisa-
tion, and calculation of the mud
weight window for safe operation.
At present, RN-SIGMA has all the
required algorithms and interface
solutions to build a 1D geomechan-
ical model of wellbore stability
and includes a number of mod-
ern non-default capabilities, such
as elastic anisotropy tracking, tem-
perature tracking, etc.
• In 2020, the Company devel-
oped RN-VEKTOR, a proprietary
coil tubing simulator. This indus-
trial software product is capa-
ble of mathematical modelling
and analysis of production oper-
ations involving the use of coil
tubing. The simulator offers more
than 50 algorithms for stress,
hydraulic and fatigue wear cal-
culations to model various pro-
duction operations conducted
with the use of coil tubing, such
as wellbore cleanout, well stimu-
lation and development, milling
operations to restore the full bore
of the well, fishing operations,
cement and parker plug placing
and drilling, acid treatment, geo-
physical surveys, sand blast per-
foration, etc.
The coil tubing simulator is used
in the oil and gas industry to plan,
monitor and analyse coil tubing
technology operations. At present,
the simulator undergoes pilot test-
ing by more than 100 dedicated
experts at 24 Group Subsidiaries.
• In 2020, Rosneft created
RN-VISOR, a software product
for real-time visualisation of coil
tubing/hydraulic fracturing data.
RN-VISOR is a real-time data
acquisition, processing and visual-
isation tool installed on the coil
tubing/hydraulic fracturing control
station.
RN-VISOR collects integrated
data coming from control sta-
tion sensors, enables data storage
and visualisation of coil tub-
ing or hydraulic fracturing oper-
ations and data transmission
through a user-friendly interface,
and has over 50 flexible adjust-
ment parameters.
• While developing an informa-
tion modelling technology for oil
and gas production and refining
facilities, the Company created
over 20 standardised CAD work
stations, prototypes of IT sys-
tems for geotechnical monitor-
ing and feasibility assessment
of project design documents,
a centralised design documen-
tation archive and a 3D image
directory. This technology will
drastically increase the automa-
tion of design processes in oil
and gas production and refin-
ing and will provide for a single
database of information mod-
els used in design, construction
and operation.
ARCTIC SHELF
• Two research expeditions were
organised in the Kara and Laptev
Seas to conduct geophysical
and environmental studies, per-
form maintenance of the measur-
ing infrastructure
• deployed by the Company
in the Arсtic, and collect hydro-
logical, meteorological and ice
data. The Company will rely
on its results to design facilities
and perform operations across its
license areas on the Arctic shelf.
• Meteorological surveys were con-
ducted in the area of the Khastyr
temporary field base (the
Khatanga Bay, the Laptev Sea),
with meteorological and actino-
metric data collected. Provisional
local operating conditions
for the Khatanga license area
were developed.
• The Company developed
a commercial technology
to manufacture two dispersant
compositions to be used in emer-
gency oil clean-up operations
at sea. The dispersant agents
were tested on a large test facil-
ity in comparison with a foreign
commercial dispersant. The test
results confirmed that the newly
developed dispersants are highly
effective.
• Another expedition, Iceberg
Spring 2020 in the Barents Sea,
was organised as part of the cor-
porate ice monitoring system
development programme. During
the expedition, the crew tested
ice monitoring system compo-
nents and staged six experiments
on diverting potentially danger-
ous ice formations. Technical aids
were developed to ensure ice-
berg safety of marine oil and gas
field structures. The project won
the first prize in the international
contest for R&D, engineering
and innovative projects aimed
at development and exploration
of the Arctic and its continental
shelf.
• The Company launched a new
project called Development
of Regional Stratigraphic
Modelling Technology
for Underexplored Sedimentary
Basins in the Arctic with the Use
of Marine Shallow
1 A hackathon is a forum for software developers where experts from various software development career fields (programmers, designers,
managers) solve a certain problem collectively in a time-constrained environment.
218
219
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors • Wells Data. During the project's
first stage in 2020, Rosneft drilled
the northernmost stratigraphic
wells on the Russian Arctic
shelf. The results of the expedi-
tion were broadcast by Russia-1,
Russia-24 and Discovery chan-
nels and presented in a number
of federal print media. The initial
analysis of core samples shows
the unique nature of the acquired
geological material, which
will be used to make reliable pre-
dictions of oil and gas occur-
rence in the explored Arctic shelf
waters and determine prospec-
tive targets in the Company’s
Severo-Karsky license area.
ASSOCIATED PETROLEUM GAS
MONETISATION
• Rosneft continued with the GTL
technology project. The Company
developed a plan for its pilot
testing and commenced engi-
neering of a GTL-1.5 pilot unit.
• It partnered with the National
Intellectual Development
Foundation to design and man-
ufacture a pilot APG desulphuri-
sation unit based on microporous
membranes. The unit was added
to the preliminary water dis-
charge facility at Orenburgneft.
OIL REFINING
• The Company developed a tech-
nology for the reactivation of die-
sel fuel hydrotreatment catalysts.
It is capable of restoring catalysts
to more than 95% of the activ-
ity demonstrated by fresh cata-
lysts. The technology drastically
improves the catalyst efficiency
and reduces their purchase costs.
• The Company successfully com-
pleted the development of a die-
sel fraction isodewaxing catalyst
with a higher tolerance to sulphur
compounds, and its production
technology. The Novokuibyshevsk
Catalyst Plant released a catalyst
with a higher tolerance to sulphur
compounds for an integrated
hydrotreatment/isodewaxing
220
• process. The decision to com-
mercialise the new product
will be made after the cata-
lyst is tested at the Angarsk
Plant of Catalysts and Organic
Synthesis (tests scheduled
for 2021). If the decision is pos-
itive, the product will fully sub-
stitute imported catalysts
for the integrated hydrotreat-
ment/isodewaxing process
at the Angarsk Petrochemical
Company.
• In December 2020,
the Novokuibyshevsk Catalyst
Plant produced the first com-
mercial batches of an isode-
waxing catalyst IDZ-028RN
and a hydrofinishing cata-
lyst HG-017RN. The catalysts
were delivered to the Kuibyshev
Refinery in preparation
for production testing sched-
uled for March 2021. Following
the production tests, Rosneft
will decide on the commence-
ment of full-scale produc-
tion of the innovative catalyst
at the Company’s plants and its
further use at Rosneft’s oil refin-
eries. The new catalytic system
will be the first domestic catalyst
system for the production of win-
ter and Arctic grades of ultra-
low-sulphur diesel fuel.
• With the goal of reducing
the Company’s dependence
on foreign suppliers of cata-
lysts, Rosneft developed tech-
niques to obtain isodewaxing
and hydrofinishing catalysts
for the production of high-viscos-
ity index base oils.
• Rosneft successfully completed
an R&D phase to develop diesel
fuels with improved environmen-
tal properties and performance
for the Company’s oil refineries.
Based on the results of qualifica-
tion and laboratory engine tests,
the Company issued recom-
mendations for the commence-
ment of commercial production
of diesel fuel with improved envi-
ronmental properties and per-
formance at the Saratov Oil
Refinery.
• The Company successfully com-
pleted R&D activities to develop
uniform technical specifica-
tion for neutralisers intended
to ensure chemical protection
against corrosion of the conden-
sation and cooling equipment
of atmospheric and vacuum dis-
tillation units at the Company’s
oil refineries. As a result,
the specification for neutral-
isers will be amended accord-
ingly. These efforts will improve
operational performance of crude
oil distillation units (decelerate
corrosion and sedimentation,
cut operating costs associated
with chemical protection against
corrosion, and mitigate the risks
of unscheduled downtime due
to clogged heat exchangers
in the atmospheric and vacuum
distillation units).
POLYMERIC MATERIALS FOR OIL
PRODUCTION
• Rosneft designed
a dicyclopentadiene-based
binding substance for the pro-
duction of polymer compos-
ites and a technique to produce
polymer composite pipe seg-
ments. It also developed
a strength calculation meth-
odology for polymer composite
pipes. The Company produced
and tested representative sam-
ples of polymer composite pipes.
Following the tests, the bind-
ing substance composition was
altered. The representative sam-
ples of pipe segments made
of PDCPD-based polymer com-
posites were found to fully com-
ply with physical and mechanical
requirements. Results of ulti-
mate collapse pressure tests
were 40% better than those
expected. This indicates that
the pipe has a good margin
of strength.
• Rosneft created an industrial
technology to produce a ruthe-
nium catalyst for dicyclopen-
tadiene (DCPD) metathesis
polymerisation. It
of Quality Grade 3 crude oil
(according to GOST R 51858-
2002 Crude petroleum. General
Specifications) with resid-
ual water content of less than
1.0%. The treated bottom water
is up to the industry stand-
ards. The tests demonstrated
productivity of 400 t per day
with a potential to ramp up
capacity. Implementation
of the technology does
not affect the engineer-
ing and technical infrastruc-
ture, as it is not expected to be
connected to the existing oil
and gas collecting pipelines. It
means that all MPWDU equip-
ment is mobile and can be
transported between fields
and warehouses.
• Rosneft is developing
a 15 MW steerable thruster.
It completed the preliminary
design stage with “Released
for Implementation” status
and submitted applications
for the protection of intellec-
tual property created during
the project implementation.
The Company intends to final-
ise the design in 2021 following
the assembly of the first steera-
ble thruster.
• developed initial design data
for an industrial facility to pro-
duce the ruthenium catalyst
for the DCPD metathesis polym-
erisation process. The ruthenium
catalyst is intended for the pro-
duction of polymers and polymer
composites based on polydicy-
clopentadiene (PDCPD), such
as an ultra-lightweight poly-
meric proppant for hydraulic
fracturing, polymer composite
casing, dispersant and depressor
additives, etc.
HIGH-TECH EQUIPMENT
• In July 2020, Rosneft com-
pleted successful produc-
tion tests of a pilot mobile
preliminary water discharge
unit (MPWDU) at an Arctic
facility located in the Tazovsky
District of the Yamal-Nenets
Autonomous Area.
The technology is designed
to provide primary treatment
of the formation fluid directly
at the field, near the well pad,
to avoid transporting ballast
(formation water) to the central
preparation and gathering facil-
ity. The tool is based on a unique
patented technology of mass
transfer coalescers enabling
the production
ADAPTATION AND ADOPTION OF ADVANCED TECHNOLOGIES
As part of its efforts to adopt
promising efficient technologies
developed by Russian and for-
eign companies, the Company
arranged for testing, adapta-
tion, and adoption of innova-
tions while running pilot projects
in 2020. These tests helped
evaluate their key features
and conduct feasibility studies
as to their fitness for the geolog-
ical and operating environment
of the Company’s upstream sub-
sidiaries. In 2020, 127 technolo-
gies were put to test
by 19 Group Subsidiaries. A total
of 314 tests were conducted
as part of the pilot projects,
resulting in 69 kt of incremen-
tal oil production. The Company
and its relevant business units
review the results, assess
the economic viability of imple-
menting proposed solutions,
and prepare plans for their roll-
out and implementation. As part
of the implementation pro-
gramme, the Company introduced
and rolled out 72 new technolo-
gies which proved their viability
following prior tests. Rosneft
spent RUB 1.86 bln to deploy
and roll out 3.7 thousand
solutions.
As part of its efforts to imple-
ment the Target Innovative
Projects, the Company signed
over 30 licence and subli-
cence agreements for the trans-
fer of its software and solutions
(RN-KIN, RN-GRID and the man-
ufacturing process for oils worth
over RUB 30 mln, including to pro-
vide training to students
221
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors DIGITAL TRANSFORMATION
FOCUS ON DIGITAL TRANSFORMATION AND TECHNOLOGY
Digital transforma-
tion and innovations
are at the forefront of Rosneft’s
efforts to develop informa-
tion technology. To engage
with the domestic mar-
ket, embrace new technology
and explore innovation oppor-
tunities in IT, the Company held
Rosneft Pitch Day, an online exhi-
bition of domestic IT solutions
inviting Russian manufactures
to showcase their IT achievements
that can be of benefit to Rosneft’s
core operations. Following
the event, the Company selected
a number of technologies to be
piloted at Rosneft such as those
powered by IoT, big data, AI, wire-
less connectivity and blockchain.
Rosneft places a strong focus
on enhancing cooperation
in the digital industry and build-
ing its own digital ecosystem.
The Company works with lead-
ing national universities, including
Gubkin Russian State University
of Oil and Gas, Lomonosov
Moscow State University, MIPT,
National Research University
Higher School of Economics
and others, specialised agencies,
vendors and developers
of IT solutions in Russia. To sup-
port import substitution initia-
tives in relation to IT hardware
and software, the Company
partners with Sberbank
and Rostelecom.
Rosneft’s endeavours to meet its
business development targets
and create an industry standard
in IT are guided by the Company’s
IT strategy that defines informa-
tion technology as a tool for opti-
mising and transforming business
processes. Some examples
of the relevant projects are listed
below:
at the industry-related depart-
ments of the leading Russian
universities. In 2020, the com-
bined proven economic effect
from the Target Innovative Projects
implemented over the last three
years exceeded RUB 40 bln.
ROSNEFT'S RESEARCH
AND DESIGN CLUSTER
IS THE LARGEST TECHNOLOGY
CLUSTER IN EUROPE
Research fostered by Rosneft
helped create Europe’s largest
(and unprecedented in the world)
corporate system set to solve
applied and fundamental problems
of the Company and the whole oil
and gas sector. To date, over 800
proprietary technologies have been
developed and patented.
Rosneft currently operates 34
research and technology cen-
tres employing over 20 thou-
sand highly qualified professionals
and scientists. The Company's
technology cluster is home
to 44 competence centres for ded-
icated and research-intensive
activities.
The scope of work and the range
of competencies of corporate R&D
facilities is growing every year.
Currently, we are focused on R&D
in bleeding-edge smart production
technologies, robotic systems, new
materials and design
Pilot projects
methods, big data systems, tech-
nologies for transition to green
and resource-saving energy,
and technical regulations.
Rosneft has taken the lead among
Russian companies in this area
with its proprietary geosteer-
ing service, which was created
from scratch based on the old-
est corporate Institute for Geology
and Development of Fossil
Fuels (IGiRGI). Savings resulting
from the abandonment of for-
eign services totalled more than
RUB 1.7 bln.
Over 300 internal regula-
tions of Rosneft stem from its
best technical solutions gov-
erning the operations of Group
Subsidiaries, as well as part-
ners, counterparties, equipment
and service providers.
We have established targeted
process to search for and roll out
effective design solutions. Each
year, Rosneft creates more than
100 design solutions to improve
the reliability and technical effi-
ciency of facilities subject
to approval by the Company's
Scientific and Technical Council.
software comprising more than
10 software products for all key oil
and gas production processes.
In 2020, the corporate R&D insti-
tutes completed more than
1,500 projects ranging from geol-
ogy and development to the design
of field infrastructure and oil
and gas processing and petro-
chemical facilities, reviewed
by authorised state bodies.
The technology cluster’s labs have
examined 26 km of core sam-
ples – about 2.8 million studies
of 100 thousand samples have
been conducted to provide evi-
dence of the Company's reserves
growth, including hard-to-recover
reserves, and to boost the effi-
ciency of hydrocarbon production.
19 new fields and 208 new depos-
its have been discovered based
on inputs from the institutes.
Our research centres for oil refin-
ing manufactured more than
10,000 tonnes of petrochemi-
cals to provide the Company's
own facilities with base oils,
import-substituting additives
for fuels and oils.
For the purposes of systemic
import substitution and cost opti-
misation, Rosneft's corporate insti-
tutes have developed a range
of research-intensive technological
Together with Innopraktika,
a non-governmental development
institute, Moscow State University,
and Rosgeologia, we made two
unique expeditions to develop
and explore the Arctic.
Metric
Total projects /
technologies
Projects tested /
deployed
Technology testing
Technology
deployment
127
72
314
3,704
Costs,
RUB thousand,
incl. VAT
392,063
1,866,049
Total incremental
oil production, kt
Economic effect,
RUB thousand
69
275
370,448
540,538
222
223
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ACHIEVEMENTS IN 2020 UNDER BUSINESS DIGITALISATION
PROGRAMMES
UPSTREAM. DIGITAL FIELD
that help accelerate and improve
management’s decision-making,
reduce the risk of, and the time
of response to, incidents
and emergencies.
• 100% of Russian Group
Subsidiaries involved
in production that
are part of the Exploration
and Production business
were given access to geologi-
cal drilling support that relies
on data visualisation powered
by advanced analytics.
• RN-GRID, a unique hydraulic
optimisation technology helped
the Company save up to 52
days per year within the pro-
duction well building and work-
over cycles. After pilot testing
had confirmed there was a sig-
nificant effect, the Company
started developing a single cor-
porate solution for all its drilling
facilities.
fracturing simulator, is in charge
of 100% engineering calculation
required to design and perform
hydraulic fracturing.
• Rosneft’s own mathemati-
cal modelling and schedule
• Digital twins were created
for the fields of six Group
Subsidiaries in Exploration
and Production. Digital
twins are 3D models based
on advanced data visualisation
OIL REFINING. DIGITAL PLANT
• Projects to introduce advanced
process control systems
are being rolled out at six Group
Subsidiaries.
• 24 engineering models have
been developed and updated
for process units at refineries
in Oil Refining.
• Piloting a solution template
to automate repair, mainte-
nance, and equipment control
was approved for two Group
Subsidiaries.
• Functional and engineering
requirements and the architec-
tural concept were approved
to create a standard
solution for optimised blend-
ing of heavy petroleum products
at five refineries.
• protected standby capaci-
ties in different geographies;
implementing a set of meas-
ures to enhance remote work-
ing at the Company, upgrading
the IT infrastructure, mobile
ecosystem security system, etc.;
• creating a corporate store
of basic digital apps to support
the implementation of digital
scenarios across the Company’s
processes;
• developing solutions to digital-
ise management and production
processes across the Company
using AI technology.
• integrated modelling of a pro-
duction asset that combines
models of the formation, well,
production infrastructure, accu-
mulation and storage system;
• integrated planning
and management in production
and drilling;
• prediction of equipment failures;
• computer vision.
technology that is being pur-
sued by a number of govern-
ments coupled with the COVID-19
pandemic, changes in the envi-
ronment and regulatory frame-
work, the emergence of new
digital technologies and the need
for higher returns from IT solutions
force the Company to adapt its IT
strategy.
In 2020, the Company analysed
26 digital scenarios and launched
14 digital projects.
There are 35 digital projects
currently underway as part
of the Comprehensive Plan
to Deliver the Rosneft–2022
Strategy. These cover areas such
as Digital Field, Digital Plant,
Digital Supply Chain and Digital
Filling Station.
The external challenges that come
from a consistent policy of sanc-
tions in relation to providing
To this end, the Company seeks
to leverage information tech-
nology to improve the effective-
ness of its business, focusing
on the following:
• deploying digital technologies
across its operations to build
a single digital environment
and migrating to big data-pow-
ered products; creating self-suf-
ficient IT solutions and using
proprietary developments;
improving the corporate data
processing centre and creating
a network of regional data pro-
cessing centres, including
224
225
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PETROCHEMICALS
• Software robots were developed
to manage inventories (seven
robots) and procurement pro-
cedures (two robots) as part
of a pilot project to automate
business processes relat-
ing to inventories and pro-
curement at Novokuibyshevsk
Petrochemical Company.
COMMERCE AND LOGISTICS
• The Company is developing
the Digital Core for Commerce
and Logistics initiative,
which is expected to reduce
the residue to 5.5% of the tech-
nological limits in 2021 and 8.3%
of the technological limits
in 2022 and onwards.
REGIONAL SALES. DIGITAL FILLING STATION
CYBER SECURITY
Information security is a key fac-
tor underlying the Company’s
sustainable operation amid dig-
italisation and improvement
of business management, con-
trol and industrial automation
systems.
Since 2018, the Company has
been implementing its information
security strategy aimed to ensure
secure digital development
of the Company.
In 2020, Rosneft's Board
of Directors approved the revised
Information Security Policy,
which addresses the new chal-
lenges. The policy is a core doc-
ument that sets the framework
for protecting business pro-
cesses and interests from risks
and threats to information secu-
rity and ensuring compliance
with laws and local regulations
in information security that apply
in Russia and the jurisdictions
of the Company’s operation.
To streamline the implementa-
tion of the information security
strategy, the Company has built
an extensive portfolio of pro-
jects aimed at planned upgrad-
ing and testing of innovative
information security solutions.
The Company places a strong
focus on promoting the corpo-
rate culture and digital hygiene
and improving the staff's aware-
ness of, and skills in, information
security.
Rosneft continues its efforts
to comply with provisions
of Russian laws on critical infor-
mation infrastructure protec-
tion. Group Subsidiaries conduct
regular compliance monitor-
ing. On top of that, a centralised
procedure has been established
to interact with the National
Computer Incident Response
and Coordination Centre.
Scheduled and ad hoc cyber drills
are arranged on a regular basis
to ensure the staff are prepared
to counter cyber attacks.
In 2020, amid the unfavourable
epidemiological situation expe-
rienced both in Russia and glob-
ally, the Company paid particular
attention to safe and sustaina-
ble operation of its IT infrastruc-
ture as employees were moved
to remote working.
• 1,500 of the Company’s fill-
ing stations allow payment
from inside the car.
• 23 self-service terminals have
been installed at 12 filling sta-
tions of the Company.
• 50 filling complexes saw the roll-
out of contactless payment
solutions for products bought
in the café and store and deliv-
ered to the customer’s car.
• Five suppliers of complemen-
tary goods for filling stations
took part in testing of block-
chain-based electronic workflow.
226
227
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 5
CORPORATE
GOVERNANCE
5
E
T
A
R
O
P
R
O
C
230
e
c
n
a
n
r
e
v
o
G
ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
MESSAGE
FROM THE CHAIRMAN
OF THE BOARD
OF DIRECTORS
DEAR SHAREHOLDERS
AND INVESTORS,
2020 saw the Company con-
tinue with the implementa-
tion of Rosneft–2022, one
of the industry’s most comprehen-
sive strategies. Consistent efforts
of our management and employ-
ees supported business continu-
ity and paved the way for further
growth.
In October, the Board resolved
to make some changes
to the Management Board
to help the team better address
the pandemic-related chal-
lenges and to strengthen the ties
with Rosneft’s major regional
divisions.
The Company places health
and safety among its top pri-
orities. To contain the spread
of the coronavirus, Rosneft pro-
cured personal protective equip-
ment for employees at all its
production facilities, filling sta-
tions and offices and introduced
strict sanitary and anti-epidemic
controls at its shift camps, estab-
lishing observation and isolation
units and staffing them with med-
ical personnel. Beyond the Arctic
Circle, Rosneft introduced tele-
medicine at its facilities.
In the reporting year, Rosneft’s
Board of Directors recommended
record high dividends for 2019 –
RUB 354.1 bln1 – and approved
Vostok Oil, a large-scale and very
promising project. The invest-
ment community highly appreci-
ated the Company’s performance
and, as a result, its shares have
hit fresh highs in this year of 2021,
outperforming the MOEX Russia
Index growth rate several fold.
In April 2020, the Board
of Directors voted to assign more
responsibilities to the Strategic
Planning Committee, renaming
it the Strategy and Sustainable
Development Committee.
The Committee assists the Board
of Directors in defining strategic
goals and growth targets, includ-
ing ESG goals.
In 2020, the Company contin-
ued to introduce innovations
and develop its R&D capabili-
ties as part of the Rosneft–2022
Strategy, came up with new meth-
ods to produce synthetic oil,
researched into minimising car-
bon footprint, and deployed digital
production management plat-
forms for oil refineries and stor-
age facilities. Commissioned
by the Company, Russia’s first
green tanker Vladimir Monomakh
completed its inaugural voyage
after successfully passing its sea
trials in 2020.
As a key item of its environmen-
tal agenda, the Board of Directors
reviewed our Carbon Management
Plan for the period until 2035. It
focuses on preventing GHG emis-
sions, reducing the upstream
emissions intensity by 30%,
1 Including dividend payment for the first six months of 2019.
Gerhard SCHROEDER
Chairman of the Board of Directors
The results of 2020
are a testament to the correctness
of the Company’s focus on busi-
ness development and imple-
mentation of new high-potential
projects in strict compliance
with the highest environmental
and carbon footprint standards.
cutting the methane emissions
intensity, and achieving zero rou-
tine flaring of associated petro-
leum gas (APG).
In December,
the Board of Directors assessed
the Company’s performance
over the reporting period
and approved a business plan giv-
ing the go-ahead for the man-
agement to continue investments
in promising projects.
231
CORPORATE GOVERNANCE
GUIDING PRINCIPLES FOR THE COMPANY’S GOVERNING BODIES
KEY CORPORATE GOVERNANCE PRINCIPLES AND IMPROVEMENTS
IN 2020
Our corporate governance framework and guidelines for its development take into account
the major role that Rosneft plays in its domestic and export markets. The Company
is committed to creating a favourable environment for effective cooperation with its
shareholders, employees and business partners.
Adhering to high corporate governance standards
is a strategic priority that powers the long-term sus-
tainable growth of Rosneft’s shareholder value.
Commitment to shareholders
Rosneft has adopted the world’s best corporate governance practices
and complies with the Bank of Russia’s Corporate Governance Code to ensure
the following:
• equal rights and opportunities for, and equitable treatment of all shareholders;
• professionalism and independence of the Board of Directors who act in the best
interests of all shareholders;
• efficiency of the the Risk Management and Internal Control System (RM&ICS);
• timely disclosure of complete, valid and up-to-date information on the Company’s
activities that is most relevant to shareholders and investors for them to rely
on in making informed decisions.
A substantial share of the Company’s net
income is distributed as dividends.
In 2020, our shareholders were
paid
RUB 191.5 bln
We continue enhancing Shareholder's
Personal Account, a powerful tool
for shareholders to stay in contact
with the Company.
Innovation and global leadership
Continuous improvement and global leadership are the prior-
ities that encourage us to develop and invest in cutting-edge
technologies.
In 2020, Rosneft demonstrated new developments in environ-
mental safety and seismic surveying.
Partnership with non-governmental
organisations and cooperation
with state institutions
The Company is a party to the UN Global Compact.
In 2020, we released an updated public statement regard-
ing the Company's contribution towards achieving the UN
Sustainable Development Goals.
Rosneft is the largest taxpayer in Russia.
Favourable environment
for sustainable growth
Protection of shareholders
and key stakeholders
The Company cares for its employees, their families,
and members of local communities across its footprint.
We at Rosneft keep a clear focus on employee health, hav-
ing adopted an integrated framework to respond to epidemic
threats. Amid the pandemic, we adopted a practice of test-
ing our employees for COVID-19 and provided all of them
with personal protective equipment.
The Company takes care of the environment by introducing
carbon management initiatives and implementing best waste
management practices. Commitment to environmental safety
is an integral part of our corporate culture.
The Company supports scientific research, culture, and sports.
Rosneft respects and honours human rights and freedoms
in accordance with the Universal Declaration of Human Rights,
Social Charter of the Russian Business, relevant generally
accepted standards, and the laws of the Russian Federation
and other countries where the Company operates.
The Company implements best internal control and risk man-
agement practices, develops technologies for industrial safety
and information security, and ensures product safety, protect-
ing its customers and contractors.
Rosneft maintains compli-
ance with the Bank of Russia’s
Corporate Governance Code
at a high level of 95.2%.
The minimum threshold as recom-
mended by the Federal Agency
for State Property Management
(Rosimushchestvo) is 65% (for eval-
uation of compliance with the Bank
of Russia’s Code see Appendix 3
to this Annual Report).
232
233
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors GOVERNANCE AND CONTROL STRUCTURE
The Company operates a two-tier management model where management functions are split
between the Board of Directors and executive bodies.
Executive Bodies
BOARD OF DIRECTORS
EXECUTIVE BODIES
The Board of Directors performs two key functions:
• strategic management of the joint-stock company,
which includes approving strategic documents
and material transactions;
• oversight of the executive bodies.
• The law requires companies to have a sole exec-
utive body. At Rosneft, it is the Chief Executive
Officer. In dealing with third parties, this person
is authorised to act on behalf of the Company
without a power of attorney.
• Rosneft has established a collective execu-
tive body (Management Board) which is chaired
by the Chief Executive Officer. Pursuant to the laws
of the Russian Federation, the Management
Board and its members (except for the CEO)
are not authorised to enter into transactions
or execute legal acts on behalf of the Company
without a power of attorney.
Reporting
n
o
i
t
c
e
l
E
g
n
i
t
r
o
p
e
R
General Shareholders Meeting
Rosneft’s supreme governing body responsible for decision-making
on key matters of the Company’s business.
Board of Directors
Board of Directors provides strategic management of the Company’s activities; it reports to the General
Shareholders Meeting and acts on behalf and for the benefit of all shareholders within its remit.
Reporting
Reporting, set-up,
assessment
Committees of the Board of Directors
Set-up
Audit Committee
HR and Remuneration Committee
Reviews and then issues rec-
ommendations for overseeing
the Company’s business; preparing
complete and accurate account-
ing (financial) statements and other
reports; and ensuring reliability
and effectiveness of risk manage-
ment and internal control systems,
compliance, internal audit, and cor-
porate governance.
Reviews and then issues recommendations
for assessing effectiveness of the Company’s HR
and succession policies and the appointment
and remuneration system; evaluating Board
and management candidates; reviewing inde-
pendence of independent directors; and con-
ducting performance assessments of the Board
of Directors, the executive bodies, and top man-
agers of the Company.
Strategy and Sustainable
Development Committee
Assists in defining the Company’s
strategic goals and growth tar-
gets, including ESG goals, and issues
strategic and business planning
recommendations.
Executive bodies manage the day-to-day operations for the benefit of the Company
and report to the Board of Directors and the General Shareholders Meeting.
Chief Executive Officer
Management Board
Sole executive body
Collective executive body
Coordinating and consultative bodies
Coordinating and consultative bod-
ies of the Chief Executive Officer carry
out in-depth reviews of matters that
are reserved to them. These bodies
include:
• Technological Council;
• Budget Committee;
• Council for Business Ethics;
• Carbon Management Committee
• Central Procurement Committee;
• Central Conflict Resolution
Commission;
• Investment Committee;
• Commission on Energy Efficiency;
•
Information Technology Expert
Council;
• Expert Council for Quality and Safety
of Oil Products;
• other coordinating and consultative
bodies of the Company.
Head of Internal Audit and Corporate Secretary
are appointed by the Board of Directors
Administrative subordination
Internal Audit Service
Corporate Secretary
Assesses the robustness and effectiveness
of the Company’s business processes, identifies internal
potential for improving its financial and business perfor-
mance, including that of the Group Subsidiaries.
Ensures the governing bodies’ compliance with the appli-
cable laws, the Company Charter and internal regulations,
which guarantee protection of shareholders’ rights and legit-
imate interests. Organises the work of the Board of Directors
and is responsible for efficient communication between
the Company’s shareholders, governing and supervisory bod-
ies, and management.
Functional
subordination
t
i
d
u
A
l
a
n
r
e
t
n
I
f
o
d
a
e
H
e
e
t
t
i
m
m
o
C
e
h
t
h
t
i
w
t
c
a
t
n
o
c
t
c
e
r
i
d
n
i
s
i
External auditor
Audit Commission
A commercial organisation selected through a procurement
process and approved by the General Shareholders Meeting
upon recommendation of the Board of Directors based
on the Audit Committee’s assessment.
Oversees the Company’s financial and business operations
and performance of its governing bodies, executives, business
units and functions, branches and representative offices.
Reporting
Election
234
235
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors
GENERAL SHAREHOLDERS MEETING
BOARD OF DIRECTORS
The procedure
for convening, preparing
for, holding and following
up on the General
Shareholders Meeting
is set forth
by Rosneft’s Regulations
on the General
Shareholders Meeting.
As at 31 December
2020, all resolutions
of the Company's
Annual General
Shareholders
Meeting 2019 were
implemented in full.
Annual General Shareholders Meeting, a supreme
governing body, on results of 2019 took place in 2020.
ANNUAL GENERAL SHAREHOLDERS
MEETING
Pursuant to Article 2 of Federal
Law No. 50-FZ dated 18 March
2020, the Board of Directors had
resolved to use absentee voting
as the format for the Company's
Annual General Shareholders
Meeting, which was held on 2 June
2020 (vote by means of ballots).
This resolution was made due
to the COVID-19 pandemic
and associated restrictions
on public events.
Rosneft's shareholders, their safety
and well-being are the top priori-
ties of our governing bodies.
For information on
Shareholder's
Personal Account,
see the section
Official Channels
of Communication
with Shareholders.
The existing tools for remote com-
munication and the Company’s
own corporate services, namely
Shareholder’s Personal Account,
enabled our shareholders to par-
ticipate in corporate proceedings
in full and without restrictions
and provided unconditional abil-
ity to exercise shareholder rights
without physical presence.
The holders of 90.8%
of the Company shares took part
in the meeting.
They approved the Annual
Report, annual accounting (finan-
cial) statements and net income
distribution for 2019 (includ-
ing for dividend payment),
elected the Board of Directors
and the Audit Commission,
determined the remuneration
of the Board and Audit Commission
members for the period,
and approved the Company’s
Auditor.
During the exercise, sharehold-
ers had an opportunity to ask
their questions on the agenda via
their personal accounts, the share-
holder hotline, or by mail.
Age
Composition
Under 45 years
46–55 years
56–65 years
66 or over
Independent
Non-executive
Executive
1
2
2
6
36%
55%
9%
Elected
by the General Shareholders
Meeting, the Board of Directors
provides strategic manage-
ment of the Company’s activities
on behalf and for the benefit of all
shareholders.
It is run by the Chairman
and Deputy Chairmen and has
a number of dedicated commit-
tees to carry out in-depth reviews
of matters that are reserved
to them.
Information on the mem-
bers and activities of the Board
of Directors and its committees
is published on the Company’s offi-
cial website.
Key competencies of directors
Director
Competencies
Strategy
Oil
and gas
Corporate
governance
and M&A
Law
Finance
and audit
Risk
management
Politics/
GR
HSE
HR
Gerhard Schroeder
Igor Sechin
Matthias Warnig
Faisal Alsuwaidi
Hamad Rashid
Al-Mohannadi
Oleg Viyugin
Robert Dudley
Bernard Looney
Alexander Novak
Maxim Oreshkin
Hans-Joerg Rudloff
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
Directors who left the Board of Directors on 2 June 2020
Andrey Belousov
Guillermo Quintero
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
х
236
237
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MEMBERS OF THE BOARD
OF DIRECTORS
(AS AT 31 DECEMBER 2020)
The directors elected
by the Annual General
Shareholders Meeting in 2020
perfectly fit the Company's
international profile and scale
of operations while also bringing
the strategic governance expertise
and professional competencies
needed to make informed, unbi-
ased economic, financial, risk man-
agement and other decisions that
will help deliver on Rosneft's goals.
The Board is made up of eleven
directors from different coun-
tries and backgrounds, includ-
ing experience in public
service and with major oil and gas
and financial companies. We want
to make sure that the Board’s
resolutions are unbiased. This
is why four out of eleven directors
are independent, as recommended
by the Corporate Governance
Code of the Bank of Russia.
Born in 1944.
Graduated from the University of
Goettingen (Germany), the Department
of Law, in 1976.
Foreign fellow of the Russian Academy
of Sciences.
1998–2005: Chancellor of Germany.
Elected to the Board in Septem-
ber 2017.
Involvement in other
companies
Chairman of the Shareholders’ Com-
mittee of Nord Stream AG (Switzer-
land), Chairman of the Board of Direc-
tors at Nord Stream 2 AG (Switzerland),
Deputy Chairman of the Supervisory
Board at Herrenknecht AG (Germany),
and member of the Executive Board at
BVUK (Betriebliche Vergutungs- und
Versorgungssysteme fur Unternehmen
und Kommunen, Germany).
Holds no shares of Rosneft.
Gerhard
SCHROEDER
Chairman, independent director
Igor SECHIN
Deputy Chairman, Chief Executive
Officer, Chairman of the Management
Board
Federation, member of the Boards of
Trustees of Lomonosov Moscow State
University, National Intellectual De-
velopment Foundation, St Petersburg
State University, Graduate School of
Management of St Petersburg State
University, St Petersburg Mining Uni-
versity, Russian Federal Public Acade-
my of Education, Moscow State Insti-
tute of International Relations, Russian
Geographical Society, Lomonosov
Moscow State University High School,
Primakov Gymnasium, and Church
Construction Support Fund in Moscow,
Chairman of the Supervisory Board of
Genetic Technologies, member of the
Supervisory Board of the Global Ener-
gy Association (international research
and energy projects), and member of
the Supreme Supervisory Board of the
Boxing Federation of Russia.
Holds 13,489,350 shares of Rosneft
(0.1273 % of the Company’s charter
capital).
Born in 1960.
Graduated from the Leningrad State
University in 1984, holds a PhD in
Economics.
2000–2004: Deputy Head of the Rus-
sian Presidential Administration.
2004–2008: Deputy Head of the Rus-
sian Presidential Administration, Aide
to the President.
2008–2012: Deputy Prime Minister of
the Russian Federation.
2012 – present: Chief Executive Officer
and Chairman of the Management
Board.
First elected to the Company's Board
of Directors in 2004. Chairman of
the Board of Directors in 2004–2011.
In November 2012, he was re-elected
to the Board of Directors, and from
June 2013 holds the position of the
Deputy Chairman.
Involvement in other
companies
Chairman of the Boards of Directors
of ROSNEFTEGAZ and Inter RAO, and
Chairman of the Supervisory Board of
CSKA Professional Hockey Club1.
Involvement in non-profit
organisations
Active in the areas of social, scientific,
sports and education development;
serves as Chairman of the Board of
Trustees of the Russian Research Cen-
tre for Radiology and Surgical Technol-
ogies, Deputy Chairman of the Super-
visory Board of the Russian Volleyball
238
239
1 For more information on the positions held in the governing bodies of other organisations, see the Management Board section
and the Company's official website.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Born in 1955.
Graduated from the Bruno Leuschner
Higher School of Economics (Berlin)
in 1981.
1990–2006: was engaged in the
financial activities of Dresdner Bank
Group AG in Frankfurt, St Petersburg,
and Moscow and held the positions
of President, Chairman of the Board
of Directors, and Chief Coordinator of
Dresdner Bank AG in Russia.
2006–2016: Managing Director of
Nord Stream AG (Switzerland).
2008 – present: Director of Interatis
AG (Switzerland)
2015 – present: Executive Director of
Nord Stream 2 AG (Switzerland).
Elected to the Board in June 2011.
Involvement in other
companies
Member of the Supervisory Boards
of VTB Bank, and FC Gelsenkirch-
en-Schalke 04 e.V. (Germany), mem-
ber of the Administrative Council of
GAZPROM Schweiz AG (Switzerland),
member of the Board of Directors of
Transneft, and Chairman of the Admin-
istrative Council of Gas Project Devel-
opment Central Asia AG (Switzerland)1.
Holds 92,633 shares of Rosneft
(0.0009% of the Company’s charter
capital).
Matthias WARNIG
Deputy Chairman, independent
director
Chairman of the HR and Remuneration
Committee, member of the Audit
Committee
Oleg Viyugin
Member of the Strategy
and Sustainable Development
Committee, and Audit Committee,
independent director
Born in 1954.
Graduated from Merton Technical Col-
lege (UK) in 1978.
2012–2018: President of Research and
Development at Qatar Foundation.
2018 – present: Member of the Board
of Trustees at
Qatar University.
2018 – present: Representative of
Qatar Investment Authority.
Elected to the Board in June 2017.
Holds no shares of Rosneft.
Faisal ALSUWAIDI
Member of the Strategy
and Sustainable Development
Committee, and HR and Remuneration
Committee
Robert Dudley
Chairman of the Strategy
and Sustainable Development
Committee
Involvement in non-profit
organisations
Active in the areas of strategic devel-
opment, entrepreneurship, corporate
governance and education; serves as
a member of the Board of the Centre
for Strategic Research, Agate Youth
Entrepreneurship Foundation, mem-
ber of the Boards of Trustees of EUSP
Endowment Fund, NES Endowment
Fund, and Forum Analytical Centre, and
member of the Praesidium of National
Corporate Governance Council.
Holds no shares of Rosneft.
Involvement in non-profit
organisations
Active in the area of energy sector de-
velopment; serves as Chairman of the
Accenture Global Energy Board.
Holds no shares of Rosneft.
Born in 1952.
Graduated from Lomonosov Moscow
State University in 1974, holds PhD in
Physics and Mathematics.
2004–2007: Head of the Federal Ser-
vice for Financial Markets.
2007 – present: Professor of National
Research University Higher School of
Economics.
2013–2015: Senior Advisor for Russia
and CIS at Morgan Stanley Bank (con-
tractor agreement).
Elected to the Board in June 2015.
Involvement in other
companies
Chairman of the Supervisory Board of
the Moscow Exchange, Chairman of
the Board of Directors of NAUFOR,
Advisor to CEO of SAFMAR Financial
Investments, member of the Board of
Directors of Unipro, member of the Su-
pervisory Board of National Settlement
Depository and SF Holdings Co PLC.
Born in 1955.
Graduated from the University of Illi-
nois in 1977.
Bachelor of Science in Chemical En-
gineering. Holds a Master of Science's
degree in International Management
from Thunderbird School of Manage-
ment (USA) and MBA from Southern
Methodist University (USA).
2003–2008: Chairman of the Supervi-
sory Board, President, CEO at TNK BP
Management.
2009–2020: Director and member of
the Board of Directors at BP p.l.c.
2010–2020: CEO of BP Group.
2016–2020: Chairman of the Oil and
Gas Community of the World Economic
Forum.
2016 – present: Chairman of the Oil
and Gas Climate Initiative.
2020 – present: BP RIL Consultant.
Elected to the Board in June 2013.
1 For more information on the positions held in the governing bodies of other organisations, see the Board of Directors section
and the Company's official website.
240
241
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Involvement in non-profit
organisations
Active in the areas of geography and
related sciences; member of the Board
of Trustees of the Russian Geographical
Society.
Holds no shares of Rosneft.
of Rosatom and the Global Energy
Association (international research
and energy projects), Chairman of the
Board of Trustees of Moscow Power
Engineering Institute, member of the
Boards of Trustees of Siberian Federal
University and Gubkin Russian State
University of Oil and Gas, and Chair-
man of WEC RNC, Russian Basketball
Federation, Solovki Archipelago Pres-
ervation and Development Foundation,
and International Sustainable Energy
Development Centre under UNESCO
auspices.
Holds no shares of Rosneft.
Born in 1970.
Graduated from University College
Dublin (Ireland) in 1991, Stanford Uni-
versity (USA) in 2005.
Bachelor of Science in Electrical Engi-
neering, Master of Science in Manage-
ment.
Fellow of the Royal Academy of
Engineering and the Energy Institute.
Mentor in the FTSE 100 Cross-Compa-
ny Mentoring Executive Programme.
2013–2016: Chief Operating Officer for
Production of BP p.l.c.
2016–2020: Chief Executive Officer for
Upstream of BP p.l.c.
2016–2020: member of the Board of
Directors of Aker BP.
2020 – present: Chief Executive Officer
and member of the Board of Directors
of BP p.l.c.
Elected to the Board in June 2020.
Born in 1971.
Graduated from Norilsk Industrial
Institute in 1993 and from Lomonosov
Moscow State University in 2009.
2008–2012: Deputy Minister of Fi-
nance of the Russian Federation.
2012–2020: Minister of Energy of the
Russian Federation.
2020 – present: Deputy Prime Minister.
First elected to the Board in June 2015
and served as a director until
June 2017. Re-elected to the Board in
September 2017.
Involvement in other
companies
Chairman of the Boards of Directors of
Rosseti and Transneft, member of the
Board of Directors of Gazprom.
Involvement in non-profit
organisations
Active in the areas of education and
sports development, and energy sec-
tor; member of the Supervisory Boards
Bernard Looney
Chief Executive Officer, BP p.l.c.
Alexander NOVAK
Deputy Chairman of the Strategy
and Sustainable Development
Committee
Involvement in non-profit
organisations
Active in the areas of social, scientific,
sports and education development;
serves as Co-Chairman of the Supervi-
sory Board of the National Association
of Technology Transfer, member of the
Supervisory Boards of the Analytical
Centre for the Government of the Rus-
sian Federation, and Agency for Strate-
gic Initiatives to Promote New Projects,
Chairman of the Board of Trustees of
the Novgorod Museum Reserve, and
member of the Boards of Trustees of
the Skolkovo Foundation, Russian Pres-
idential Academy of National Economy
and Public Administration, and Russian
Geographical Society.
Holds no shares of Rosneft.
Involvement in other
companies
Member of the Foundation Board of
International Centre for Monetary
and Banking Studies (ICMB), advisor to
the Board of TB Holdings NV (Thys-
sen-Bornemisza Group) and director at
Decolef and Guardian Capital.
Holds no shares of Rosneft.
Born in 1982.
Graduated from the Higher School of
Economics with a Bachelor's degree in
Economics in 2004 and with a Master's
degree in Economics in 2006.
2002–2006: 1st Category Economist,
Lead Economist, Chief Economist, Sec-
tor Leader at the Balance of Payments
Department of the Bank of Russia.
2006–2013: held various positions at
commercial banks.
2013–2016: Head of the Long-term
Strategic Planning Department (2013
to 2015), Deputy Minister of Finance of
the Russian Federation (2015 to 2016).
2016 – January 2020: Minister of
Economic Development of the Russian
Federation.
January 2020 – present: Aide to the
President of the Russian Federation
Elected to the Board in June 2020.
Involvement in other
companies
Chairman of the Boards of Directors
of the Russian Post, Channel One,
and Professional Football Club CSKA,
member of the Bank of Russia’s Nation-
al Financial Board, and member of the
Supervisory Boards of Sberbank, VEB.
RF, and the Management Company of
the Russian Direct Investment Fund.
Born in 1940.
Graduated from the University of Bern
(Switzerland) in 1965.
1998–2014: Chairman of the Manage-
ment Board at Barclays Capital.
2002 – present: Chairman of Marcuard
Holding.
2003 – present: Executive Director of
ABD Capital S.A.
2015 – present: President of ABD Cap-
ital Eastern Europe S.A.
First elected to the Board in
June 2007. Member of the Board of Di-
rectors from June 2007 to June 2013.
Re-elected to the Board of Directors in
June 2018.
Maxim Oreshkin
Aide to the President
of the Russian Federation
Hans-Joerg Rudloff
Chairman of the Audit Committee,
member of the HR and Remuneration
Committee, independent director
242
243
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Energy and Sustainable Development.
2017–2020: Chairman of the Board of
Trustees at The Community College of
Qatar.
Representative of Qatar Investment
Authority.
Elected to Rosneft’s Board of Directors
in June 2019.
Holds no shares of Rosneft.
Born in 1958.
Graduated from Portland State Univer-
sity (USA) in 1981.
Between 1985 and 2018, he held the
following positions:
• Head of the downstream business of
Qatar Petroleum;
• Chief Executive Officer of Qatar Pet-
rochemical Company (QAPCO);
• Chairman of Qatar Shipping Com-
pany;
• Chief Executive Officer of RasGas
Company;
• Member of the Boards of Directors
of Qatar Petroleum and RasGas
Company;
• Member and Chairman of the Board
of Trustees of Qatar University.
2015 – present: member of the Board
of Trustees at the Abdullah Bin Hamad
Al-Attiyah International Foundation for
Hamad Rashid
AL-MOHANNADI
Member of the Strategy
and Sustainable Development
Committee
DIRECTORS WHO LEFT THE BOARD IN 2020
Andrey
BELOUSOV
Member of the Strategy
and Sustainable Development
Committee1
Born in 1959.
Graduated from Lomonosov Moscow
State University in 1981, Doctor of
Economics.
2006 – present: Chief Researcher
(part-time) at the Institute of Economic
Forecasting of the Russian Academy of
Sciences.
2008–2012: Director of the Depart-
ment of Economics and Finance of the
Russian Government.
2012–2013: Minister of Economic
Development of the Russian Federation.
2013–2020: Aide to the President of
Russia.
2020 – present: First Deputy Prime
Minister.
Elected to the Board in June 2015.
Chairman of the Board of Directors
from June 2015 to September 2017.
Holds no shares of Rosneft.
Guillermo
Quintero
Member of the HR
and Remuneration Committee
2014–2016: President of BP Explora-
cion de Venezuela S. A.
2016 – present: Director of GQO
Consultants LTD.
Elected to the Board in June 2015.
Holds no shares of Rosneft.
Born in 1957.
Graduated from the University of
Southern California in 1979.
2010–2015: Regional President Brazil,
Uruguay, Venezuela and Columbia,
BP Energy do Brasil Ltda and BP Brasil
Ltda, and President and Director of
BP Brasil Ltda.
2011–2015: President of BP Exploration
do Brasil Ltda.
2011–2016: Director at BP Petroleo y
Gas S. A.
Directors' Attendance at Board and Committee Meetings in 2020
Board of Directors
Member of the Board
of Directors
Status (executive/non-executive/
independent)
Attendance
Audit
Committee
HR
and Remuneration
Committee
Strategy
and Sustainable
Development
Committee
Gerhard Schroeder
Igor Sechin
Matthias Warnig
Hamad Rashid
Al-Mohannadi
Faisal Alsuwaidi
Oleg Viyugin
Robert Dudley
Bernard Looney
Alexander Novak
Maxim Oreshkin
Hans-Joerg Rudloff
Directors who left the Board in 2020
Andrey Belousov
Guillermo Quintero
Independent
Executive
Independent
Non-executive
Non-executive
Independent
Non-executive
Non-executive
Non-executive
Non-executive
Independent
Non-executive
Non-executive
31/32
32/32
31/32
32/32
32/32
32/32
29/32
16/16
31/32
16/16
32/32
15/16
15/16
17/17
14/14
7/7
17/17
17/17
14/14
7/7
15/15
15/15
15/15
15/15
15/15
5/5
Note: the first figure stands for the number of meetings attended by the director, the second figure stands for the total number of meetings
they were entitled to attend.
For reference: Gerhard Schroeder, Chairman of the Board, and Igor Sechin, Matthias Warnig, Robert Dudley, Guillermo Quintero, Bernard
Looney, and Hans-Joerg Rudloff, directors, did not vote on a number of agenda items that could involve a potential legal and/or commercial
conflict of interests.
INDUCTION
The Company ensures prompt
onboarding of new directors
in line with the established induc-
tion procedure. In 2020, Maxim
Oreshkin and Bernard Looney
nominated by JSC ROSNEFTEGAZ
and BP Russian Investments
Limited were elected to the Board
of Directors for the first time.
Rosneft’s management promptly
introduced the elected direc-
tors to the Company’s day-
to-day operations, strategy,
corporate and organisational
structure, and corporate govern-
ance practices. They have been
briefed on the Succession Plan
for Directors and Management
Board members2 and received
an explanation of the confiden-
tiality and insider information
requirements, and the procedure
for their participation in the meet-
ings of the Board of Directors
and its committees.
The induction
procedure for Board
members is described
in Rosneft Regulations
on the Induction
of Rosneft Board
Members.
1 Strategic Planning Committee until April 2020.
2 The Document was approved by resolution of Rosneft's Board of Directors on 29 May 2020.
244
245
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors To this end and to help maintain
strong performance in other areas,
the Board approved the Action
Plan to Improve the Performance
of Rosneft’s Board of Directors that
takes into account the 2019 exter-
nal assessment by Ernst & Young
as an independent consultant.
Update of the Succession Plan
for Directors and Members
of the Management Board
to reflect Bank of Russia’s recom-
mendations and the 2019 exter-
nal assessment of the Board
by Ernst & Young. The Plan
seeks to guarantee succession
in the Company’s management
bodies and preserve the Board
of Directors and Management
Board’s best practices ensuring
consistency with the Company’s
development strategy.
Rosneft Oil Company's
Regulation on Evaluation
of Rosneft Board
of Directors Performance.
Committee, with additional pow-
ers to review ESG-related matters,
the Board will be able to focus
more closely on the Company's
green projects.
The following internal documents
were approved/amended:
• Policy on Onshore Oil
Production;
• Policy on Gas Business;
• Information Security Policy;
• Working Capital Management
Policy;
• Energy Saving Programme
for 2020–2024 and report
on the programme implementa-
tion in 2019;
• report on the Company's HSE
activities in 2019 and preliminary
results of 2020;
• report on the Information Policy
implementation in 2020;
• report on the Innovative
Development Programme pro-
gress in 2019;
• reporting on the identifica-
tion of company-wide financial
and operational risks for 2021.
The following documents and cri-
teria related to remuneration
were approved:
• performance indicators
• Policy on Internal Audit;
• Regulations on Rosneft Board
of Rosneft's top managers
for 2020;
Committees.
In 2020, the Board of Directors
continued expanding its
ESG and sustainable growth
agenda. In particular, by vesting
the Strategic Planning Committee,
which was renamed the Strategy
and Sustainable Development
The following programmes
and reports were reviewed/
approved:
• Sustainability Report 2019;
• reports on the activities
of the Board's committees
in 2019–2020;
• normalised KPIs of top managers
for the 2019 annual bonus cal-
culation, and their performance
and bonus amount for 2019.
The Board of Directors con-
ducted corporate procedures
with respect to more than 60
interested party transactions.
ACTIVITIES OF THE BOARD OF DIRECTORS
Matters considered
HR and Remuneration
Directives of the Russian
Government
Transactions
Corporate governance
Report reviews
Finance, business projects
Audit, risks
Approving/amending
internal regulations
Strategy items
Other
11
13
35
27
18
14
5
6
7
3
(8%)
(9%)
(25%)
(20%)
(13%)
(10%)
(4%)
(4%)
(5%)
(2%)
The Board
of Directors is governed
by the Regulations
on the Board of Directors
of Rosneft Oil Company.
In 2020, the Board of Directors
held 32 meetings (3 in person
and 29 in the form of absentee
voting) and considered 139 items
(16 at in-person meeting and 123
at meetings held in the form
of absentee voting).
BOARD RESOLUTIONS IN KEY FOCUS AREAS
Review of the Rosneft–2022
Strategy execution. The Board
of Directors noted achievement
of most of the Strategy’s key goals
for 2020.
Renewal of Rosneft’s Long-
Term Development Programme
to account for external factors,
the independent auditor’s rec-
ommendations, the Company’s
updated strategic targets
and the Programme implementa-
tion results in 2019.
Approval of Innovation
Development Programme
for 2020–2024 with an outlook
for 2030 to support Rosneft’s
development as a high-tech energy
company, ensure its technological
leadership in oil and gas production
and oil refining, and meet the strin-
gent international environmental
and industrial safety standards.
Approval of Rosneft’s busi-
ness plan for 2020–2021.
The document aims to maintain
the Company’s production poten-
tial and ensure stable financial per-
formance and leadership in unit
production costs with due account
of the Russian Government’s
Directives No. 6883p-P13 dated
4 August 2020 on implementing
the OPEC and non-OPEC ministerial
meeting’s (ONOMM) decisions set-
ting Rosneft’s oil production level
in Russia for the period until May
2022. The Board of Directors took
notice of the preliminary results
of the business plan performance
and normalisation in 2020.
It approved the implementation
concept for Vostok Oil, a project
to create a new oil and gas prov-
ince in Russia’s north.
The Board approved
the business projects to develop
the Suzunskoye and Lodochnoye
fields, Erginsky and Chupalsky
licence areas, and Russkoye field.
It reviewed the Comprehensive
Plan for the Enhancement
of the RM&ICS in 2020–2022
and the report on the implementa-
tion of the Plan in 2019.
To ensure compliance
with the orders of the Russian
President and the Russian
Government the following items
were considered:
• addressing the impact
of COVID-19;
• reducing crude oil production
to provide for Russia’s compli-
ance with the OPEC and non-
OPEC ministerial meeting’s
decision to that effect;
• introducing tax monitoring;
• improving labour productivity;
• updating Rosneft’s Long-Term
Development Programme
to reflect the Company’s 2019
results.
Amendments to the terms
of Rosneft’s Open Market Share
Buyback Programme. To bring
it in line with the current market
environment, the programme was
amended to simplify the buyback
procedure.
Evaluation of the independ-
ent directors against independ-
ence criteria (Gerhard Schroeder,
Matthias Warnig, Oleg Viyugin
and Hans-Joerg Rudloff).
Self-assessment review
of the Board’s performance
in 2019 and 2020.
All surveyed Directors, senior
executives, and heads of busi-
ness units praised Rosneft’s Board
performance as generally highly
effective.
The self-assessment has revealed
areas for the Board’s perfor-
mance improvement and efficiency
increase.
246
247
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors PLANS FOR 2021
The Board of Directors approves
its work plans and meeting sched-
ule semi-annually.
• implementation/revi-
sion of Rosneft’s Long-Term
Development Programme;
The work plan takes into account
the proposals of members
of the Board, executive bodies
and top management, and always
includes the following matters:
• oversight of the Strategy
performance;
• reviewing the business plans
and results;
• approval of management’s col-
lective and individual KPIs;
• assessment of the Board
performance;
• preparations for the General
Shareholders Meetings.
The Company’s Corporate
Governance Code defines the list
of additional issues that the Board
of Directors seeks to consider
in person.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three
committees:
• Audit Committee;
• HR and Remuneration
Committee;
• Strategy and Sustainable
Development Committee
The committees are set up
and their chairs elected at the first
meeting of the Board of Directors
in its new composition (in 2020,
the meeting was held in absentia).
Committees of the Board of Directors
Members of the
Audit Committee
Members of the HR
and Remuneration Committee
Hans-Joerg Rudloff – Chairman
(independent director)
Matthias Warnig – Chairman
(independent director)
Matthias Warnig
(independent director)
Oleg Viyugin
(independent director)
Hans-Joerg Rudloff
(independent director)
Faisal Alsuwaidi1
The committees of the Board
of Directors plan their activities
taking into account the sched-
ule of the Board of Directors’
meetings.
The committees
are appointed
and perform their functions
in accordance
with Rosneft Regulations
Procedure for Formation
and Work of Rosneft
Board of Directors
Committees
Members of the Strategy
and Sustainable Development
Committee
Robert Dudley – Chairman
Alexander Novak –
Deputy Chairman
Faisal Alsuwaidi1
Oleg Viyugin
(independent director)
Hamad Rashid Al-Mohannadi
1 Faisal Alsuwaidi was elected to the Committees on 5 June 2020.
248
ACTIVITIES OF THE BOARD COMMITTEES
AUDIT COMMITTEE
Statement of Hans-Joerg Rudloff,
Chairman of the Audit Committee
2020 was a hard year for many companies all over the world. Due
to the pandemic, Rosneft had to reorganise internal processes
and organisational systems across all its units. Working from home
and lack of interaction between employees and businesses caused
a number of hard challenges, and it is the commitment and disci-
pline of our staff that helped us tackle them. In spite of all the dif-
ficulties, the Company conducted over 200 audits, 30 ad hoc
inspections that involved our new objectives, such as supporting
new projects, for example, those related to shipbuilding, and other
business expansion initiatives. In addition, we provided continu-
ous training in new systems and technologies. Although the Audit
Committee members were unable to meet in person, the audit
function exercised its duties and carried out its mission due
to the high quality of available written materials.
In general, we overcame the last year’s challenges and adapted
to a new way of doing business. Therefore, our shareholders can
be certain that the Company's internal control system is function-
ing to its full potential.
The auditor’s fees for 2020
recommended to the General
Shareholders Meeting:
• audit of Rosneft’s RAS
accounting (financial)
statements – RUB 7,200,000,
including VAT;
• audit of Rosneft’s IFRS
consolidated financial
statements – up
to RUB 79,906,950, including
VAT.
The external audi-
tor’s actual remuneration
for the audit of financial state-
ments and other services is dis-
closed on the Company’s website
in the Corporate governance –
Internal control and audit –
Company auditor section.
• report on the status
of the Comprehensive Plan
for the Enhancement
of the RM&ICS in 2019
and on approval of the Plan
for 2020–2022;
• reporting on the company-wide
financial and operational risks
materialised in 2019;
• reporting on the identifica-
tion of company-wide financial
and operational risks for 2021;
• report on internal investigations
conducted by Rosneft in 2019;
• results of the survey on strategic
risks in 2020.
The Working Capital Management
Policy was updated to set out
a risk-oriented approach to man-
aging working capital elements,
the Company’s adherence to infor-
mation transparency, and absence
of restrictions on competition
in managing accounts payable
and receivable.
249
In 2020, the Audit Committee
held 17 meetings (one in person
and 16 in the form of absentee
voting) and considered 40 items
(two at in-person meet-
ings and 38 at meetings held
in the form of absentee voting).
KEY RESOLUTIONS
The Committee recom-
mended that the Board
of Directors approve the pro-
posal to the General Shareholders
Meeting regarding the distribution
of the Company’s profit for 2019,
the amount of dividends for 2019,
and the payout procedure.
To ensure proper preparation
of accounting (financial) state-
ment and impartiality and inde-
pendence of the external audit,
the Committee:
• reviewed the consolidated finan-
cial results, financial statements
and the relevant audit reports
(on a quarterly basis);
• recommended Ernst & Young
as the Company’s auditor
and the amount of the auditor’s
fees.
To ensure efficiency of the risk
management and internal control
system, the Committee conducted
preliminary review of the following:
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors To ensure the impartiality
and independence of the internal
audit, the Committee reviewed:
• reports on the internal audit per-
formance in 2019 and first six
months of 2020, and information
on the independence and objec-
tivity of the internal audit;
• the assessment and results
of the quarterly monitoring
of potential conflicts of interest
related to the Head of Internal
Audit serving on the Management
Board in Q1–Q3 2020.
In the area of corporate govern-
ance, the Committee:
• updated Rosneft’s Policy
on Internal Audit to reflect
the amendments to Federal
Law No. 208-FZ On Joint-Stock
Companies dated 26 December
1995 with respect to the require-
ment to prepare and disclose
to shareholders an internal audit
report on the safety and effi-
ciency of the Company’s risk
management and internal con-
trol system.
The matters related to financial
statements and information pro-
vided by the auditor were first dis-
cussed during conference calls
between the Committee members,
management, and representatives
of internal and external auditors.
STRATEGY AND SUSTAINABLE DEVELOPMENT COMMITTEE
Statement of Robert Dudley,
Chairman of the Strategy and Sustainable Development
Committee:
The Committee name was changed in 2020 to emphasise
our focus on environmental and social responsibility, improving
the corporate governance system and enhancing its transparency,
as well as supervision over the Company's strategic investment
projects.
HR AND REMUNERATION COMMITTEE
Statement of Matthias Warnig,
Chairman of HR and Remuneration Committee
One of the most notable events for the Company in 2020 was
the change in our approach to the Management Board forma-
tion. Five CEOs of key Group Subsidiaries joined the Management
Board in 2020 to give a more important role to our regional busi-
nesses implementing major oil and gas projects. Alongside
that, the Committee focused on assessing the effecitveness
of the Company’s HR and succession policies. The Committee
ensured the independence of nominees and Board members.
Motivation was another focus of the Committee.
KEY RESOLUTIONS
To attract skilled talent
to the Company’s management
and create conditions for high
performance, the Committee:
• reviewed proposals regarding
the remuneration of the mem-
bers of the Board of Directors
and Audit Commission for 2019–
2020, as well as the compen-
sation of the expenses related
to their functions;
• provided recommenda-
tions for appointments
to the Management Board;
• verified the compliance of candi-
dates to the Board of Directors
with independence criteria;
• renewed the Succession Plan
for Directors and members
of the Management Board.
To assess the performance
of the Company’s manage-
ment and governing bodies,
the Committee reviewed:
• top management's collective
and individual KPIs for 2020,
their normalised KPI per-
formance criteria for 2019,
and the results considered
in the 2019 annual bonus
calculation;
• self-assessment of the Board’s
performance;
• reports
and action plans for introduc-
ing professional standards
In 2020, the HR
and Remuneration Committee
held 14 meetings in the form
of absentee voting and consid-
ered 29 items.
in the operations of Rosneft
and Group Subsidiaries in 2021.
Key matters related
to the Committee activities
were discussed in due course
with the Committee mem-
bers with the involvement
of the Company’s management.
In 2020, the Strategy
and Sustainable Development
Committee held 15 meetings
in the form of absentee voting
and considered 28 items.
KEY RESOLUTIONS
in 2019 and preliminary results
in 2020.
To run the Company's business
projects, the Committee recom-
mended that the Board of Directors
approve key metrics and budgets
for a number of business projects.
To promote innovation,
the Committee recommended that
the Board of Directors approve
Rosneft’s Innovation Development
Programme for 2020–2024
with an outlook for 2030.
When reviewing the key matters,
the Chairman and Committee mem-
bers consulted the Company’s man-
agement, requested additional
information and received written
and oral clarifications.
To determine the Company’s pri-
orities, the Committee reviewed:
• status of the Rosneft–2022
Strategy;
• Rosneft’s 2019 Sustainability
Report;
• Rosneft’s updated Long-Term
Development Programme
and the audit of its implementa-
tion results in 2019;
• adjustment of Rosneft’s busi-
ness plan for 2020;
• the Company’s business plan
for 2021–2022, its implementa-
tion results and normalisation
for 2019;
• renewal of the Company’s
Accounting Function
Development Strategy
to 2024, with its name changed
to Rosneft’s Programme
to Improve the Efficiency
of Rosneft's Accounting
Function to 2024.
With respect to HSE matters,
the Committee approved reports
on the Company's HSE activities
250
251
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Strategy
Performance
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
EXECUTIVE BODIES
Rosneft’s executive bodies are:
Chief Executive Officer
Management Board
As per Rosneft’s Charter, the per-
son performing the functions
of the sole executive body
and Chairman of the Management
Board is the Chief Executive
Officer.
Since 2012, the position
of the Chief Executive Officer
has been held by Igor Sechin. He
manages the Company’s day-
to-day operations, formulates
the Management Board’s agenda,
and chairs the Board’s meetings.
The procedure for Management
Board formation, the rights, duties
and liability of Management
Board members, and proceed-
ings of the Management Board
are governed by the Regulations
on the Collective Executive Body
(Management Board) of Rosneft.
CHANGES IN THE BOARD COMPOSITION
The activities of the Company’s executive
bodies are governed by Regulations
on the Sole Executive Body (Chief Executive
Officer) and Regulations on the Collective
Executive Body (Management Board)
of Rosneft Oil Company.
• Dina Malikova, President,
Chairman of the Board at RRDB
Bank (JSC).
and assisting the Management
Board in their respective areas
of expertise.
The size of Rosneft’s Management
Board did not change in 2020,
totalling 11 members. Nine mem-
bership positions have been filled,
while two remain vacant.
The Management Board is also
comprised of senior execu-
tives responsible for key areas
of the Company's activities:
upstream, downstream, finance
and strategic planning.
The membership of RRDB
Bank’s President and Chairman
of the Board in Rosneft’s
Management Board aims
to ensure continuous monitoring
of financing availability.
The Vice Presidents, who
had previously been mem-
bers of the Management
Board, continued to work
for the Company performing
their functional responsibilities
To better address the pandem-
ic-related challenges, improve
production and economic effi-
ciency, and strengthen the links
with Rosneft’s major regional divi-
sions in implementing promising
oil and gas production projects
that could become the Company's
growth drivers in the medium term,
the Board of Directors resolved
to change the composition
of the Management Board starting
on 30 September 2020.
The newly appointed members
of the Management Board are:
• Igor Tabachnikov,
General Director
of LLC RN-Yuganskneftegaz;
• Khasan Tatriev, General Director
of Bashneft;
• Vladimir Chernov, General
Director of LLC RN-Vankor;
• Ilgam Kuchukov, General
Director of JSC Suzun;
252
BOARD
COMPOSITION
AS AT 31 DECEMBER 2020
Igor SECHIN
Chairman
of the Management Board,
Chief Executive Officer
Born in 1960.
In 1984 graduated from Leningrad State
University. PhD in Economics.
Holder of government and ministerial awards.
2000–2004: Deputy Head of the Russian
Presidential Head Office.
2004–2008: Deputy Head of the Russian
Presidential Head Office, Aide to the President.
2004–2011: Chairman of Rosneft’s Board
of Directors.
2008–2012: Deputy Prime Minister
of the Russian Federation.
2012 – present: Chief Executive Officer
and Chairman of the Management Board.
From June 2013: Deputy Chairman of Rosneft’s
Board of Directors.
Holds positions in various non-profits and takes
part in social, scientific, sport and education
development (for the full list of positions in non-
profit organisations, see the Board of Directors
section).
Holds 13,489,350 shares of Rosneft (0.1273%
of the Company’s charter capital).
253
ROSNEFT / ANNUAL REPORT 2020 ROSNEFT / ANNUAL REPORT 2020
Strategy
Performance
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
Zeljko
RUNJE
Deputy Chairman of the Management Board, First
Vice President for Oil, Gas,
and Offshore Business Development
Didier
CASIMIRO
First Vice President
Ilgam KUCHUKOV
Dina MALIKOVA
Advisor to the Chief Executive Officer in the rank
of Vice President, General Director of JSC Suzun
Advisor to the Chief Executive Officer in the rank
of Vice President, President of RRDB Bank (JSC).
Born in 1954.
Graduated with honours from the University
of Alaska
Has Acknowledgement from the President
of the Russian Federation, Order of Friendship
holder.
1979–1993: held various management positions
in Arctic Alaska drilling and production projects.
1993–1997: worked on oil projects in Yemen,
Algeria, Australia, Thailand, Japan, Angola,
Azerbaijan and Turkmenistan.
1997–2012 : held various executive positions
in the Sakhalin-1 project in his capacity as Vice
President of ExxonMobil Russia Inc.
From October 2012: Vice President of Rosneft.
From March 2013: Vice President for In-House
Services at Rosneft.
In November 2012, appointed member
of Rosneft’s Management Board.
From December 2019: First Vice President
for Oil, Gas, and Offshore Business
Development of Rosneft, Deputy Chairman
of the Management Board.
Chairman of the Supervisory Board
at PJSC Rosneft-Sakhalin, Chairman
of the board of directors at JSC RN RN-Shelf-
Far East, JSC Verkhnechonskneftegaz,
LLC RN-GAZ, LLC RN-Upstream, member
of the Board of Directors at PJSOC Bashneft,
CJSC Rosshelf, JSC FESRC, LLC RN-Commerce,
LLC RN-Commerce, and PJSC NGK Slavneft.
Holds 377,318 shares of Rosneft (0.0036 %
of the Company’s charter capital).
Born in 1966.
Graduated with distinction from Ghent
University (Belgium) in 1991, and from Ghent
University (Belgium) / Lisbon University
(Portugal) in 1992.
1996–2005: held executive positions at BP.
2005–2012: held executive positions at TNK-BP.
From May 2012: Vice President of Rosneft.
From March 2013: Vice President for Commerce
and Logistics at Rosneft.
From January 2015: Vice President for Refining,
Petrochemical, Commerce and Logistics
at Rosneft.
From July 2020: First Vice President of Rosneft.
Member of Rosneft’s Management Board since
June 2012.
Chairman of the Board of Directors
at PJSC Saratov Refinery, Rosneft –
MP Nefteprodukt, LLC RN-Commerce,
LLC RN-Refining, PJSOC Bashneft,
LLC RN-Foreign Projects, Chairman
of the Supervisory Board at PRJSC LINIK,
member of the Board of Directors
at OJSC NGK Slavneft, PJSC Slavneft-YANOS,
JSC SPIMEX.
Holds 457,598 shares of Rosneft (0.0043 %
of the Company’s charter capital).
Born in 1977.
In 2008 graduated from Tyumen State Oil
and Gas University.
2000–2015: held various positions in the oil
and gas industry.
2015–2018: First Deputy General
Director for Production, Chief Engineer
at LLC RN-Yuganskneftegaz.
2018 – present: General Director of JSC Suzun
and LLC Tagulskoye (concurrently), Deputy
General Director for greenfield development
at LLC RN-Vankor (concurrently).
From September 2020: Advisor to the Chief
Executive Officer in the rank of Vice President,
member of the Management Board at Rosneft.
Holds no shares of Rosneft.
Born in 1975.
In 1996 graduated from Ulyanov-Lenin
Kazan State University, PhD in Physics
and Mathematics.
Holder of government and ministerial awards:
Acknowledgement of the Ministry of Energy
(2011), Labour Glory Medal, third degree,
from the Ministry of Energy (2018), Order
of Honour of the Russian Federation (2019).
1995–2003: held various positions in a number
of credit and finance organisations.
2003–2011: Head of Treasury, member
of the Board at RRDB Bank (JSC).
2011–2013: Senior Vice President, member
of the Board at RRDB Bank (JSC).
2013–2014: Acting President of RRDB
Bank (JSC).
2014 – present: – President, Chairman
of the Board at RRDB Bank (JSC).
From September 2020: Advisor to the Chief
Executive Officer in the rank of Vice President,
member of the Management Board at Rosneft.
Chairman of the Board
of Directors at PJSC PERESVET Bank, member
of the Supervisory Board at RRDB Bank (JSC).
Holds 4,360 shares of Rosneft (0.00004 %
of the Company’s charter capital).
254
255
ROSNEFT / ANNUAL REPORT 2020
Strategy
Performance
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
Andrey POLYAKOV
Igor TABACHNIKOV
Khasan ТATRIEV
Vladimir CHERNOV
Vice President – Chief Geologist
at Rosneft
Advisor to the Chief Executive Officer
in the rank of Vice President, General Director
of RN-Yuganskneftegaz
Advisor to the Chief Executive Officer in the rank of Vice
President, General Director of Bashneft
Advisor to the Chief Executive Officer in the rank
of Vice President, General Director of LLC RN-Vankor
Born in 1976.
Born in 1985.
Born in 1963.
Born in 1970.
In 2002 graduated from Lomonosov Moscow
State University.
2002–2004: Geologist, Chief Geologist,
Geological Group Leader at CJSC Modelling
and Monitoring of Geological Objects.
2004–2005: Senior Specialist, Geology
and Geophysics Section, EP Analysis
and Forecast Centre, CJSC YUKOS Exploration &
Production.
2005–2013: Deputy Director, Director
of the Corporate Research and Development
Centre, Division of Scientific and Technical
Development and Innovation, Department
of Exploration and Licensing, Department
of Resource Base and Reserves, Audit
Department, Rosneft.
2013–2017: Division Head, Deputy Director,
Director of the Exploration and Licensing
Department, Vice President for Subsurface
and Reservoir Management, JSC Independent
Oil and Gas Company.
2017–2019: Vice President
for Subsurface and Reservoir Management,
JSC Neftegazholding.
From December 2019: Vice President – Chief
Geologist and member of the Management
Board at Rosneft.
Chairman of the Board of Directors
at PJSC Samaraneftegeofizika, member
of the Board of Directors at LLC RN-Upstream,
LLC RN-GAZ, LLC RN-Assets, LLC RN-Foreign
Projects, JSC Vankorneft.
Holds 18,757 shares of Rosneft (0.0002 %
of the Company’s charter capital).
In 2007 graduated from Plekhanov
St Petersburg Mining University, in 2010 gradu-
ated with honours from the Academy of National
Economy under the Russian Government.
In 2010–2011 completed the post-graduate pro-
gramme at the Department of Economic Policy,
Lomonosov Moscow State University.
In 2018–2019 completed the SKOLKOVO
Moscow School of Management’s
Executive MBA programme.
Holder of Acknowledgement of the Russian
Ministry of Energy.
2007–2015: held various positions
in Russia’s oil and gas industry companies
(ОJSC Severneftegazprom, CJSC Vankorneft).
2015–2016: General Director
at OJSC Taimyrneftegazodobycha.
2016–2019: General Director at JSC NNK-
Pechoraneft, CJSC Kolvinskoe.
2019–15 March 2021 : General Director
at LLC RN-Yuganskneftegaz, Director
of Rosneft’s Office in the Khanty-Mansi
Autonomous Area – Yugra (Nefteyugansk)
(concurrently), General Director at Kondaneft
(concurrently).
From September 2020: Advisor to the Chief
Executive Officer in the rank of Vice President,
member of the Management Board at Rosneft.
Holds no shares of Rosneft.
In 2002 graduated from the Tyumen State
University.
Holder of government and industry awards:
Medal of the Order “For Merit to the Fatherland,”
second degree, (2018), Order “For Merit
to the Fatherland,” fourth degree, (2019).
2002–2012: held executive positions at various
oil and gas industry companies.
2012–2013: General Director
at OJSC RN-Ingushneft.
2013–2015: General Director
at OJSC Samotlorneftegaz.
2015–2019: General Director
at RN-Yuganskneftegaz, Director of Rosneft’s
Office in the Khanty-Mansi Autonomous Area –
Yugra (Nefteyugansk).
2019–2020: President, Chairman
of the Management Board at Bashneft.
From June 2020: General Director of Bashneft.
From September 2020: Advisor to the Chief
Executive Officer in the rank of Vice President,
member of the Management Board at Rosneft.
Chairman of the Board of Directors
at PJSC Ufaorgsintez, member of the Board
of Directors at Bashneft.
Holds no shares of Rosneft.
In 1999 graduated from the Novosibirsk State
Academy of Water Transport, in 2009 –
from Tomsk Polytechnic University.
Holder of government and ministerial awards:
Order of Honour of the Russian Federation
(2019), Certificate of Merit of the Russian Ministry
of Energy (2019).
2000–2010: held executive positions at various
oil and gas industry companies.
2010–2011: Deputy General Director
for Production at CJSC Vankorneft.
2011–2014: Deputy Chief Engineer, Acting Deputy
General Director for Production Development
at CJSC Vankorneft.
2014–2015: Director of the Capital Construction
Department at CJSC Independent Oil and Gas
Company.
2015–2017 – Vice President for Oil and Gas
Production at CJSC Independent Oil and Gas
Company.
2017 – present: General Director
of LLC RN-Vankor, JSC Vankorneft (concurrently)
2020 – present: General Director
(concurrently) of LLC NGKh-Nedra,
LLC Taimyrneftegaz-Port, LLC Taimyrneftegaz-
Estate, LLC PSMO-36
From September 2020: Advisor to the Chief
Executive Officer in the rank of Vice President,
member of the Management Board at Rosneft.
General Director of LLC Vostok-Oil
Holds no shares of Rosneft.
256
257
Due to changes in the Management Board’s composition, the powers of the following Board members have
been terminated: Gennady Bukaev, Eric Liron, Yury Kurilin, Peter Lazarev, Elena Zavaleeva, Andrey Shishkin
and Ural Latypov.
Gennady BUKAEV
Eric Maurice Liron
Yury Kurilin
Peter Lazarev
Elena Zavaleeva
Andrey Shishkin
Vice President, Head of Internal Audit
Vice President for Oil and Gas
Services of Rosneft
Vice President, Chief of Staff
of Rosneft
Financial Director
Advisor to the Chief Executive Officer,
Vice President
Vice President for Informatisation,
Innovation and Localisation
Born in 1947.
Born in 1954.
Born in 1972.
Born in 1967.
Born in 1981.
Born in 1959.
In 1971 graduated from Leningrad State
University. PhD in Economics.
Holder of government and ministerial
awards.
2000–2004: Minister of the Russian
Federation for Taxes and Levies.
2004–2012: Assistant to the Prime
Minister of the Russian Federation.
2012–2013 годы: Advisor
to the President of the Republic
of Bashkortostan.
From 2013: Advisor to the President
of Rosneft.
From March 2015: Head of Internal
Audit at Rosneft.
2016–2020: member of Rosneft’s
Management Board.
June 2016 – present: Vice President,
Head of Internal Audit Service
of Rosneft
Gennady Bukaev was not author-
ised to participate in voting on mat-
ters within the Management Board’s
competence related to the Company’s
operations, which could be objects
of audit / managerial decisions
with regard to audited entities (subject
to Board of Directors review).
In 1980 graduated from the School
of Radio Engineering, Electronics
and Computer Science (Paris, France).
1980–2000: held various executive
positions at Schlumberger managing
complex projects in the Middle East,
Africa, and the Asia-Pacific Region.
2000–2005: manager of Complex
Projects in Russia, managing
the oilfield services project for Sibneft
at Schlumberger Oilfield Services
(Russia).
2006–2013: held various executive
positions at TNK-BP Management, was
Vice President of the Wells Division.
From April 2013: Vice President
of Rosneft for Drilling, Development,
and Services.
2013–2019: First Vice President
of Rosneft overseeing the production
business.
2019–2020: Vice President
for In-House Services at Rosneft.
2013–2020: member of Rosneft’s
Management Board.
December 2020 – present: Vice
President of Rosneft for Oil and Gas
Services
Graduated from Lomonosov
Moscow State University in 1994
and from California State University
(Hayward) with an MBA degree in 1998.
2003–2008: Head of the Head
Office of the Office of the President
and Chief Executive Officer, Head
of the Office of the President
at TNK-BP Management.
2008–2011: Commercial Director at BP
Group companies.
2011–2014: worked in procurement
performance planning and manage-
ment at BP America (Houston, USA).
2014–2017: Director for Corporate
Affairs and Interaction with Business
Partners at BP Exploration Operating
Company Ltd. (UK), Moscow Branch.
2017–2020: member of Rosneft’s
Management Board.
March 2017 – present: Vice President,
Chief of Staff of Rosneft.
Graduated from Moscow State Social
University of the Ministry of Labour
and Social Development in 2003,
majoring in Law.
Holder of government awards.
Works at Rosneft since 2008.
2013–2017: held a number of posi-
tions, including Deputy Director –
Head of Federal Authorities Relations
of the Government and Management
Relations Department; First
Deputy Director of the Government
and Management Relations
Department, Acting Director
of the Department.
2017: Director of the Government
and Management Relations
Department.
September 2017–2020: State
Secretary, Vice President of Rosneft.
2018–2020: member of Rosneft’s
Management Board.
October 2020 – present: Advisor
to the Chief Executive Officer, Vice
President
Graduated from Plekhanov Moscow
Institute of National Economy in 1990.
1990–1993: held various positions
at the Soviet Ministry of Finance
and the Russian Ministry of Economy
and Finance.
1993–1995: held various posi-
tions in the Office of Securities
of the International Joint-Stock Bank
of Savings Banks.
1995–1996: member
of the Management Board,
Head of the Office of Securities
of the International Joint-Stock Bank
of Savings Banks.
1996–1999: held senior positions
in ACB Center, CJSC Finance Company
Finko Investment and Russian
Industrial Bank.
2000–2004: Head of the Promissory
Note and Investment Programmes
in the Finance Department of Rosneft,
Deputy Departmental Director,
Head of Securities in the Finance
Department.
2004–2012: Head of Treasury
at Rosneft.
2011–2020: member of Rosneft’s
Management Board.
February 2012 – present: Financial
Director of Rosneft.
Graduated from Gubkin Moscow
Institute of the Petrochemical and Gas
Industry in 1985, from Financial
Academy under the Government
of the Russian Federation in 1996,
and from Moscow International Higher
Business School MIRBIS in 2002.
Holder of government and ministerial
awards.
1992–2005: held executive posi-
tions in various credit and finance
organisations.
2005–2010: General Director
of OJSC Ural Energy Management
Company, OJSC TGK-10, OJSC Tyumen
Energy Selling Company.
2008–2009: First Vice President
of OJSC Integrated Energy Systems
(IES Holding).
2010–2012: Deputy Minister of Energy
of the Russian Federation.
From July 2012: Vice President
of Rosneft.
From March 2013: Vice President
of Rosneft for Energy, Health, Safety
and Environment.
From August 2014: Vice President
of Rosneft for Energy and Localisation.
From April 2016: Vice President
of Rosneft for Energy, Localisation
and Innovation.
2015–2020: member of Rosneft’s
Management Board.
November 2019 – present: Vice
President for Informatisation,
Innovation and Localisation of Rosneft.
258
259
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Ural
LATYPOV
Vice President, Head of Security
Service
Born in 1972.
Graduated from the Bashkir State
University in 1997.
1996–2016: officer of law enforcement
agencies.
2016–2019: Deputy Head of Security
Service of Rosneft, Acting Vice
President – Head of Security Service
of Rosneft.
2019–2020: member of Rosneft’s
Management Board.
June 2019 – present: Vice President,
Head of Security Service of Rosneft
Age Diversity on the Management
Board
Gender Diversity
on the Management Board
Under 45 years
46–55 years
56–65 years
66 or over
Men
Women
4
2
2
1
91%
9%
The members of the Management Board know Russian,
English, French, German, Spanish, Portuguese, Dutch
and Croatian.
Management Board Tenure
Management Board member
Igor Sechin
Zeljko Runje
Didier Casimiro
Ilgam Kuchukov
Dina Malikova
Andrey Polyakov
Igor Tabachnikov
Khasan Tatriev
Vladimir Chernov
Membership start
date
From 2012
From 2012
From 2012
Period
8 years
8 years
8 years
From 2020
Less than a year
From 2020
Less than a year
From 2019
1 year
From 2020
Less than a year
From 2020
Less than a year
From 2020
Less than a year
consultative bodies: Information
Technology Expert Council, Risk
Management Committee, Carbon
Management Committee, Expert
Council on Pricing in Capital
Construction, Commission
for Emergency Prevention,
Response and Fire Safety,
Conflict Resolution Commission,
and others, as well as docu-
ments on:
– management of receivables
and payables,
– remuneration and social
security of employees,
– supply of goods, works
and services,
– government relations,
– energy management, etc.
MANAGEMENT BOARD’S ACTIVITIES IN 2020
In 2020, the Management Board
held 86 meetings, reviewed
189 matters and adopted
a number of decisions, including
the following:
• the Vostok Oil project,
with the Management
Board recommending that
the Board of Directors approve
the acquisition of a 100% stake
in Taimyrneftegaz;
• approved the transactions that
would terminate the Company's
participation in projects
in Venezuela;
• approved four field develop-
ment and refinery construc-
tion projects for the Group
Subsidiaries;
• approved Rosneft’s organisa-
tional structure (as amended);
• approved entering into:
• approved amendments
to 36 transactions for the sup-
ply of oil and oil products, asso-
ciated petroleum gas and gas
condensate, well drilling, con-
struction and installation opera-
tions, loan agreements, etc.;
• approved winding up / reorgani-
sation of nine Group Subsidiaries
as part of the Company’s corpo-
rate structure optimisation;
• approved Rosneft's partici-
pation / termination of par-
ticipation (direct and indirect)
in 31 profit and one non-profit
organisations;
• approved KPIs for the heads
of Rosneft’s standalone busi-
ness units and the sole executive
bodies of key Group Subsidiaries
for 2020, reviewed their perfor-
mance in 2019;
– 195 transactions for oil
• approved the lists of nomi-
and oil products deliveries
to foreign and domestic mar-
kets, supply of gas and gas
condensate, loans, as well
as transactions with shares
and stakes in the Group
Subsidiaries, etc.;
– two charity transactions;
– four transactions for pro-
viding operator services
(performing works) related
to the production of crude oil,
natural and associated petro-
leum gas, transshipment,
storage, well drilling, etc.;
nees to the boards of directors
of the key Group Subsidiaries,
as well as for the posi-
tions in the executive bodies
of the key Group Subsidiaries;
• approved the amended
templates of charters
and regulations on governing
bodies for the Group Subsidiaries
as well as the updated charter
of a key Group Subsidiary;
• approved internal regulations /
modifications of internal reg-
ulations on the procedures
of the Company’s collective/
260
261
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors MANAGEMENT BOARD WORK PLANNING
CORPORATE SECRETARY
The Board prepares its work plan
quarterly taking into account pro-
posals of the Board members,
top managers and heads of func-
tional units, including the follow-
ing matters:
• implementation of business
projects, investment pro-
grammes, entering into trans-
actions / amending transaction
terms, including non-core assets
and real estate transactions;
• Rosneft's participation / termi-
nation of participation in profit
and non-profit organisations;
• winding up and reorganisation
of the Group Subsidiaries;
• termination and appoint-
ment of the governing bodies
of the Group Subsidiaries.
In 2021,
the Management
Board will con-
tinue implement-
ing the Company's
Development
Strategy in accord-
ance with the Board
of Directors’ resolu-
tions.
Starting February 202111, the posi-
tion of the Company’s Corporate
Secretary is held by Yury Kurilin2.
The Corporate Secretary is func-
tionally accountable to the Board
of Directors, appointed and dis-
missed by the CEO on the basis
of the Board of Directors’ resolu-
tion.
The Corporate Secretary’s key
functions are:
• improving the corporate govern-
ance system;
• arranging and holding general
shareholders’ meetings;
• supporting the activities
of the Board of Directors
and its committees, act-
ing as the Management Board
Secretary;
• preventing corporate conflicts;
• facilitating the exercise of share-
holders' rights;
• implementing the disclosure
policy;
• managing the compliance
with regulatory and inter-
nal requirements for counter-
ing the illegal use of insider
information;
• communicating with the reg-
istrar, the government bod-
ies and the corporate relations
and securities market regulatory
authorities;
The Corporate Secretary’s function
is supported by the Company’s
separate business unit – Corporate
Governance Department.
The Corporate
Secretary’s activities
are governed
by the Regulation
on the Corporate
Secretary.
Yury Kurilin
and Interaction with Business
Partners at BP Exploration
Operating Company Ltd. (UK),
Moscow Branch.
In March 2017: appointed
Vice President, Chief of Staff
of Rosneft.
From April 2017
to September 2020: member
of Rosneft’s Management Board.
Holds no shares of Rosneft.
Born in 1972.
Graduated from Lomonosov
Moscow State University
in 1994 and from California State
University (Hayward) with an MBA
degree in 1998.
From September 2003
to December 2008:
Head of the Head Office
of the Office of the President
and Chief Executive Officer, Head
of the Office of the President
at TNK-BP Management.
December 2008 – October 2011:
Commercial Director at BP Group
companies.
October 2011 – November 2014:
worked in procurement perfor-
mance planning and management
at BP America (Houston, USA).
November 2014 – March 2017:
Director for Corporate Affairs
262
263
1 As at 31 December 2020, the Corporate Secretary's position was held by Svetlana Gritskevich. Her powers were terminated by the resolution
of the Board of Directors. Information about Svetlana Gritskevich is available in Rosneft’s previous annual reports.
2 Minutes of the Board of Directors No. 17 dated 11 February 2021
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors REMUNERATION OF MEMBERS
OF THE BOARD OF DIRECTORS
REMUNERATION
OF THE MANAGEMENT
In 2015, the Board of Directors approved Rosneft’s Regulations on Remunerations
and Compensations Payable to Members of the Board of Directors drawing
on the recommendations of the Bank of Russia’s Corporate Governance Code which lists all
types and terms of payments to directors, thus ensuring a transparent remuneration process.
The existing complex incentive system for the top management is described in Rosneft’s
Standard for Rewards and Compensations to Top Managers and ensures their focus on results
and commitment to achieving the Company’s strategic goals.
Incentive system
Cash remuneration
Fringe
benefits
Non-financial
incentives
Top managers’ remuneration
depends on the Company’s per-
formance and implementation
of major projects, provided that
team-based and individual key
performance indicators are met.
The KPIs, actual performance
and annual bonuses are approved
by the Board of Directors
on an annual basis with input
from the HR and Remuneration
Committee.
The KPI framework and its integra-
tion with the Company’s Strategy
are detailed in Section Company
KPIs of this Report.
No loans or borrowings were
issued to members of the Board
of Directors and the Management
Board in the reporting year.
The total remuneration paid
to members of the Management
Board in 2020 amounted
to RUB 3.531 bln1, down by 1.1 %
year-on-year.
Since 2017, the total remu-
neration payable to members
of the Management Board went
down by 10.1 %, or RUB 396 mln.
Total remuneration payable
to members of the Management
Board, RUB mln
3,927
3,854
3,570
3,531
2017
2018
2019
2020
Since 2015, the Company has
been paying the following
amounts to members of its Board
of Directors as fixed remuneration
and additional compensation:
• fixed remuneration paya-
ble to each Board member
and amounting to USD 500,000;
• additional compensation paya-
ble for:
– chairing the Board
of Directors and amounting
to USD 100,000;
– membership in the Board
committees and amounting
to USD 30,000;
– chairing the Board com-
mittees and amounting
to USD 50,000.
Rosneft’s Regulations
on Remunerations
and Compensations
Payable to Members
of the Board
of Directors sets
out amounts
payable to directors
as fixed remuneration
and additional
compensation.
The remuneration is payable
to directors pro rata to the time
served and performance of addi-
tional duties.
On 2 June 2020, the Annual
General Shareholders Meeting
acting on the recommendation
of the Board of Directors,
pre-approved by the HR
and Remuneration Committee,
resolved to pay the following
amounts to members of its Board
of Directors pro rata to the time
served:
• Gerhard Schroeder –
USD 600,000 (including com-
pensation for chairing the Board
of Directors);
• Hamad Rashid Al-Mohannadi –
USD 530,000 (including com-
pensation for membership
in the Strategy and Sustainable
Development Committee
of Rosneft’s Board of Directors);
• Faisal Alsuwaidi – USD 530,000
(including compensation
for membership in the Strategy
and Sustainable Development
Committee of Rosneft’s Board
of Directors);
• Matthias Warnig –
USD 580,000 (including com-
pensation for chairing the HR
and Remuneration Committee
and membership in the Audit
Committee of Rosneft’s Board
of Directors);
• Oleg Viyugin – USD 560,000
(including compensation
for membership in the Strategy
and Sustainable Development
Committee and Audit
Committee of Rosneft’s Board
of Directors);
Total remuneration payable
to members of the Board
of Directors over time
3,385
3,380
3,380
11
11
11
565
565
565
2017–2018
2018–2019
2019–2020
Total remuneration, USD '000
Number of Board members
Average remuneration
of a Board members, USD '000
• Hans-Joerg Rudloff –
USD 580,000 (for chair-
ing the Audit Committee
and membership in the HR
and Remuneration Committee
of Rosneft’s Board of Directors);
• No remuneration for 2019–
2020 corporate year was paid
to Andrey Belousov, Robert
Dudley, Guillermo Quintero,
Alexander Novak, Igor Sechin.
The total remuneration paid
to members of the Board
of Directors for 2019–2020
corporate year amounted
to USD 3,380,000.
264
265
1 Information on remuneration and reimbursement of expenses paid to the collective executive body (the Management Board) in 2020 was
published on 12 February 2021 in accordance with the Russian regulatory requirements for information disclosure by issuers of issue-grade
securities as part of Rosneft’s Issuer Report (Quarterly Report) for Q4 2020.
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors CIVIL LIABILITY INSURANCE
FOR THE MEMBERS OF THE BOARD
OF DIRECTORS AND THE MANAGEMENT
In 2020, the Company and SOGAZ
extended the civil liability
insurance contract for mem-
bers of the Board of Directors,
executive bodies, employ-
ees of the Company and all
of the Group Subsidiaries.
The contract stipulates USD 150 mln third-party liability coverage.
It also provides for additional liability insurance for independent direc-
tors, as well as additional liability limits for environmental pollution
and environmental management.
MANAGING POSSIBLE CONFLICTS
OF INTEREST
Integrity is one of the Company’s
priorities and key values. It
allows Rosneft to balance inter-
ests of shareholders with inter-
ests of management and ensures
trust and high standards
of business culture and ethics
in their interaction.
Rosneft’s Regulations on Internal Control Rules for the Prevention,
Detection and Suppression of Illegal Use of Insider Information
in Rosneft and/or Market Manipulation.
The Company is committed
to managing possible conflicts
of interest at all corporate govern-
ance levels.
The Corporate Secretary (see the Corporate Secretary
section) is in charge of compliance with regulatory
and internal requirements for countering the illegal use
of insider information.
Rosneft's Charter contains a num-
ber of restrictions for related party
transactions that could benefit
certain members of the governing
bodies or shareholders.
The internal documents availa-
ble on the Company’s website set
forth the values and principles
underlying the Company's corpo-
rate culture, as well as key rules
aimed at preventing and manag-
ing conflicts of interest at all cor-
porate governance levels.
266
SHAREHOLDERS
Rosneft's Charter regulates
the basic rights and obliga-
tions of shareholders, as well
as the decision-making procedures
for the most significant issues.
The Corporate Secretary coordi-
nates the efforts to protect share-
holder rights and interests, ensures
effective day-to-day interaction
with shareholders, and contributes
to preventing corporate conflicts.
The Corporate Secretary
is required to promptly notify
the Board of Directors of any
potential violation of the appli-
cable laws or shareholder rights
and any potential conflicts
of interest.
To foster dialogue with the share-
holders, the Company's website
features contacts for shareholders,
including the shareholder hotline.
BOARD OF DIRECTORS
The Board of Directors is respon-
sible for managing any conflicts
of interest in the Company.
The Regulations on the Board
of Directors determine the duties
of Board members related to pre-
vention and management of any
conflicts of interest.
In particular, Board members shall
refrain from any actions which
result or may result in a conflict
between their interests and those
of the Company.
Board members must report any
actual/potential conflicts of inter-
est to the Chairman of the Board
of Directors or the Corporate
Secretary.
For Shareholders:
Shareholder Relations Division, Corporate Governance Department,
Rosneft
Phone: 8-800-500-11-00 (toll-free within Russia); +7 (495) 987-30-60;
Fax: +7 (499) 517-86-53
E-mail: shareholders@rosneft.ru
Dear shareholders, Outside working hours, you can text us at +7 (926) 685-44-86.
Please include your full name, and we will get back to you.
With respect to any issues that
may, in the opinion of a Board
member, result in a conflict
with the Company's interests,
the director shall not participate
in voting and, where necessary,
in the discussion of such issues.
For the avoidance of any poten-
tial conflicts among the Company’s
employees, the Board of Directors
introduced rules for conducting
transactions in financial instruments
by persons included in the insider
list and their related parties.
As part of its major role
in ensuring transparency
and timely and full disclosure,
the Board of Directors approved
the rules for disclosing insider
information.
The Company's Chief Executive
Officer exercises day-to-
day control over compliance
with regulatory and internal
requirements related to insider
information.
267
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors EXECUTIVE BODIES
The Regulations
on the Management Board
and on the Chief Executive
Officer contain special sections
with the following rules to pre-
vent a conflict of their interests
with the interests of the Company:
• these persons shall refrain
from any actions that may cause
a conflict of interest and, should
such a conflict arise, imme-
diately notify the Chairman
of the Management
Board / the Chairman
of the Board of Directors and/or
the Corporate Secretary;
• while in office, these persons
may not hold and/or control 20
or more percent of voting shares
(interests or stakes) in any entity
competing or having any busi-
ness interest in maintaining rela-
tions with the Company;
• these persons may not accept
any gifts from persons interested
in resolutions passed as part
of their duties or otherwise ben-
efit from such persons.
TOP MANAGERS
AND EMPLOYEES
Possible conflicts of interest
are also regulated by a number
of internal documents, including
the Corporate Governance Code,
Code of Business and Corporate
Ethics, and the Regulations
on Managing Conflicts of Interest
in Rosneft and Group Subsidiaries.
These documents establish
the rules for preventing the con-
flicts of interest, define the terms
“conflict of interest”
In the reporting period, Andrey Polyakov, member
of the Management Board, Vice President – Chief
Geologist, reported his potential conflict of interest,
partially related to the positions held in the governing
bodies of other organisations. The Corporate Secretary,
Chief Executive Officer and Chairman of the Board
of Directors were duly notified. In the reporting period,
all grounds for this conflict of interest were resolved
in accordance with corporate procedures.
as at compliance with the anti-cor-
ruption laws of the Russian
Federation. The Policy defines
the Company’s efforts in build-
ing anti-corruption elements
of the corporate culture and organ-
isational structure, as well as rules
and procedures intended to prevent
corporate fraud and corruption.
The list of special rules aiming
to prevent the securities market
manipulation and the illegal use
of insider information is laid down
in the Company's Regulations
on Internal Control Rules
for the Prevention, Detection
and Suppression of Illegal Use
of Insider Information in Rosneft.
The rules for the avoidance and prevention
of conflicts of interest are set forth
in the Corporate Governance Code
and the Code of Business and Corporate
Ethics.
and “corruption” and set out
the procedure for preventing cor-
porate fraud.
The Company’s Council
for Business Ethics also con-
tributes to managing conflicts
of interest.
The Company continuously works
to prevent corporate fraud. Special
rules for its prevention are gov-
erned by the Company’s Policy
on Combating Corporate Fraud
and Involvement in Corruption
Activities. The Policy establishes
a comprehensive set of principles,
procedures and initiatives aimed
at preventing and combating cor-
porate fraud and involvement
in corruption, as well
The document is publicly avail-
able on the Company's official
website and establishes the rules
for access to insider informa-
tion and its disclosure, the proce-
dure for conducting transactions
in financial instruments by per-
sons included in the insider list
and their related persons, as well
as the rules for protection of con-
fidentiality of the insider informa-
tion of Rosneft.
“The Board of Directors reviews, on a regular basis,
information on assessment and monitoring of poten-
tial conflicts of interest of the Head of Internal Audit
and considers the Company’s efforts to minimise
this risk as adequate.”
Special rules
for the prevention
of corporate fraud
are governed
by the Company’s
Policy on Combating
Corporate Fraud
and Involvement
in Corruption Activities.
ANTI-CORRUPTION EFFORTS
Rosneft works to maintain com-
pliance with the requirements
of the anti-corruption laws
of the Russian Federation, includ-
ing through a set of measures
aimed at building an organisa-
tional structure and elements
of corporate culture, and estab-
lishing rules and procedures
to prevent corporate fraud
and corruption.
The effort was also aligned
with the National Anti-Corruption
Plan for 2018–2020 approved
by Presidential Executive Order
No. 378 dated 29 June 2018
(Instruction of the Russian
Government No. DM-P17-4575
dated 23 July 2018).
The new anti-corruption pro-
cedures were developed
in accordance with the applica-
ble international anti-corrup-
tion laws, Federal Law No. 273-FZ
On Combating Corruption dated
25 December 2008, the guidelines
of the Russian Ministry of Labour
and the Federal Agency for State
Property Management, as well
as International Anti-Corruption
Standard ISO 37001:2016 “Anti-
bribery management systems —
Requirements with guidance
for use”, and the ICC Guidelines
on Conflicts of Interest
in Enterprises.
All of the Company’s governing
bodies contributed to these efforts
within their remit:
1. Rosneft's Board of Directors
1. and guiding principles, and reg-
ularly assesses the efficiency
of such efforts; considered
and approved2 the results
of a review of the anti-corrup-
tion risk management and inter-
nal control process.
2. Rosneft's Chief Executive
Officer ensures the implemen-
tation of the Company's Policy
on Combating Corporate Fraud
and Involvement in Corruption
Activities, and approves
the relevant internal regula-
tions. In 2020, Rosneft:
– approved and implemented
the Company’s Regulations
on Coordinating Anti-
Fraud and Anti-Corruption
Processes, including the fol-
lowing procedures: (i) assess-
ment of corporate fraud
and corruption risks; (ii) pro-
tection of whistleblowers;
(iii) reporting of suspected
corporate frauds or corrup-
tion and investigations; (iv)
training and communications
in combating corporate fraud
and corruption; (v) monitor-
ing and control of anti-fraud
and anti-corruption pro-
cesses (Order No. 61 dated
20 January 2020);
– updated the Company's
Procedure for Documenting
and Reporting Business
Expenses and Other
Transactions with Employees
(Order No. 366 dated 22 June
2020).
3. The Rosneft Council
(the Audit Committee
of the Board of Directors)
approved strategic documents1
for Business Ethics, which
includes senior executives
responsible for key areas
1. of the Company's activities,
(i) reviews reports on implemen-
tation, execution and operat-
ing efficiency of the anti-fraud
and anti-corruption risk man-
agement and internal control
system3, (ii) approves the results
of collecting and analysing
ethical declarations in order
to identify conflicts of inter-
est among the Company's
employees in accord-
ance with the Regulations
on Managing Conflicts
of Interest in Rosneft and Group
Subsidiaries.
Moreover, as part
of the Comprehensive Anti-Fraud
and Anti-Corruption Programme
for 2019–20204, the Company
in the reporting period:
• updated its employees on typ-
ical violations of anti-fraud
and anti-corruption rules
(including management of con-
flicts of interest) on a quarterly
basis;
• on an ongoing basis informed
the relevant units about new
regulations and government ini-
tiatives aimed at combating
corruption;
• assessed/reassessed the risk
of corporate fraud and corrup-
tion on a quarterly basis in line
with the approved methodology.
– Clause 2.6
of the Recommendations
for Public Joint-stock
Companies to Organise
Risk Management, Internal
Controls, Internal Auditing,
and the Work of Auditing
Committees under Boards
1 The Company’s Policy on Combating Corporate Fraud and Involvement in Corruption Activities was approved by resolution of Rosneft's
Board of Directors (Minutes No. 19 dated 21 May 2018).
2 The results for 2019 were reviewed and approved by Rosneft's Board of Directors (Minutes No. 19 dated 3 April 2020).
3 The Report for 2019 was approved on 8 June 2020 by the resolution of the Council for Business Ethics (Minutes No. 13).
4 Approved by the Council for Business Ethics on 10 December 2018 (Minutes No. 7).
268
269
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors – of Directors (Supervisory
Boards)1 establishes a quali-
tative indicator of risk appe-
tite for corporate fraud
and corruption risk in order
to reflect the Company’s zero
tolerance to this risk (Minutes
of the Risk Management
Committee of Rosneft
No. 4–2020 dated
2 November 2020);
• conducted ongoing anti-cor-
ruption audits of draft internal
regulations;
• published the quarterly All
about Compliance informa-
tion bulletin, and distrib-
uted the bulletin devoted
to the International Anti-
Corruption Day to all Rosneft
employees on 9 December 2020.
The Company manages conflicts
of interest at all levels.
The rules for the avoid-
ance and prevention of con-
flicts of interest are set forth
in the Corporate Governance
Code, the Code
of Business and Corporate
Ethics, the Company's Policy
on Combating Corporate Fraud
and Involvement in Corruption
Activities, and the Regulations
on Managing Conflicts of Interest
in Rosneft and Group Subsidiaries.
The Regulations set out a frame-
work to classify conflicts of inter-
est, including conflicts of interest
between shareholders and mem-
bers of the Company’s govern-
ing bodies (e.g. decisions made
by corporate governing bod-
ies that might adversely affect
the Company’s financial and oper-
ating performance; the Company
failing to make a statutory disclo-
sure or members of corporate gov-
erning bodies underreporting
on their positions in governing
bodies of other entities, on inter-
ests (stakes) held in other entities,
or other information required to be
disclosed by the applicable laws,
the Company’s Charter or internal
regulations).
The Board members’ obligations
to disclose a conflict of inter-
est are set out in the Regulation
on the Holding by Members
of Rosneft Board of Directors
of Rosneft Shares, Shares
of and Equity Stakes in Group
Subsidiaries.
In the reporting period,
Andrey Polyakov, member
of the Management Board, Vice
President – Chief Geologist,
declared his potential con-
flict of interest, partially related
to the positions held in the gov-
erning bodies of other organ-
isations. The Corporate
Secretary, Chief Executive Officer
and Chairman of the Board
of Directors were duly notified.
In the reporting period, this con-
flict of interest was resolved
in accordance with corporate
procedures.
• and property-related obligations
of their spouses and minor chil-
dren who are included in the list
of persons required to submit
such declarations;
• carried out an annual cam-
paign to collect ethical declara-
tions of the Company’s officers/
employees in order to monitor
their compliance with restric-
tions, prohibitions and require-
ments of anti-corruption laws,
with the results of the analy-
sis of such ethical declarations
being approved by the Business
Ethics Council2;
• informed employees of the mat-
ters related to the manage-
ment of the conflict of interest
(in October 2020, method-
ology support on frequently
asked questions related to con-
flicts of interest was circulated
to the Company's employees);
• required new hires
and employees appointed
to new positions to sign
an anti-corruption clause, which
forms part of their employ-
ment contracts and includes
the restrictions, prohibitions
and requirements aimed at pre-
venting the conflict of interest.
To abide by Clause 12
of the National Anti-Corruption
Plan for 2018–2020,
as well as ensure compliance
with the anti-corruption laws
for the prevention and settle-
ment of conflict of interest, during
the reporting period the Company:
• introduced a procedure that
requires participants of procure-
ment procedures to declare any
conflict of interest (Order No. 69
dated 27 July 2020);
• collected annual declara-
tions on property and prop-
erty-related obligations of its
officers/employees, as well
as on income, property
– All Group Subsidiaries have
set up conflict of interest
commissions.
Pursuant to Clauses 22 and 28
of the National Anti-Corruption
Plan for 2018–2020, the Company
runs ongoing corporate training
programmes in the field of coun-
tering corporate fraud and corrup-
tion for its employees, including
those whose job responsibilities
include participation in combating
corruption, and new hires.
Multimedia training courses
on Countering Corporate Fraud
and Business Ethics Compliance:
1 Letter of the Bank of Russia No. IN-06–28/143 dated 1 October 2020.
2 Minutes of the Council for Business Ethics No. 14 dated 12 August 2020.
270
Managing Conflicts of Interest
were updated (to reflect changes
in key internal documents).
Participated
in the 5th International
Corruption in Business conference
and workshop.
The Company operates a 24/7
Security Hotline to report on sus-
pected, proven and potential
cases of corporate fraud, corrup-
tion and conflict of interest.
Identified/prevented dam-
age amounted to RUB 38.7 mln.
The Company took disciplinary
actions against 96 employees,
terminated 32 employment con-
tracts, and submitted findings
of 18 audits to law enforcement
authorities.
Members of the Company’s
Board of Directors are updated
on the Security Hotline operation
on a quarterly basis.
In the reporting year, the Company
kept on updating the Executive
Office of the Russian Government
on its progress towards
Instruction of the Russian
Government No. DM-P17-4575
dated 23 July 2018 on the imple-
mentation of the National Anti-
Corruption Plan for 2018–2020.
37,000+
calls received
by the Security Hotline
in 2020
The Corruption Control section on the official corporate website has:
Corruption Control
section
• the Company’s statement on its zero
tolerance for corruption;
• key provisions of Russian
•
and applicable international anti-
corruption laws;
internal corruption control
regulations of the Company
(Rosneft’s Code of Business
and Corporate Ethics and Policy
on Combating Corporate Fraud
and Involvement in Corruption
Activities);
• Security Hotline contact details;
•
information on cooperation with law
enforcement authorities.
271
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors AUDIT COMMISSION
The Audit Commission comprises five members elected
on an annual basis and monitors the Company’s financial
and business activities.
The Audit Commission audits
the Company’s financial
and business operations, ver-
ifies the accuracy and reliabil-
ity of data included in Rosneft’s
annual reports and annual
accounting (financial) statements,
and prepares proposals and rec-
ommendations for improving
the asset management efficiency
and streamlining the risk manage-
ment and internal control system.
In 2020, the Audit Commission
held two meetings that, among
other things, adopted its action
plan and approved an audit
programme.
The findings of the Audit
Commission were communi-
cated as part of the materials
for the General Shareholders
Meeting in the form of an opin-
ion of the Audit Commission
on the accuracy and reliabil-
ity of data included in Rosneft’s
Annual Report and annual
accounting (financial) state-
ments as at 31 December 2020,
and in the report on interest-
ed-party transactions entered into
in the reporting period.
The annual compensation
awarded by the Annual General
Shareholders Meeting to the members
of the Audit Commission amounted
to RUB 440,000 in 2020.
No compensation was paid to pub-
lic officers serving on the Audit
Commission.
The Audit Commission
is governed
by the Regulations
on Rosneft’s Audit
Commission.
The procedure
for calculating
and paying
remunerations
and compensations
to the members
of the Audit
Commission is described
in Rosneft’s
Regulations
on Remunerations
and Compensations
Payable to Rosneft's
Audit Commission
Members.
On 2 June 2020, the Annual General Shareholders Meeting
resolved to elect the Audit Commission as follows:
Chairman
Zakhar Sabantsev
Born in 1974.
Members of the Audit Commission
Olga Andrianova
Born in 1958.
Graduated from the Moscow State
University of Economics, Statistics,
and Informatics.
Graduated from the All-Russian State
Distance-Learning Institute of Finance
and Economics (ARDLIFE).
Holder of ministerial awards – Letter
of recognition from the Minister
of Finance of the Russian Federation
(2007), For Excellent Work in Finance
badge of the Ministry of Finance
of the Russian Federation (2012).
Section Head, Bank Sector Monitoring,
Consolidated and Analytical Work
Section, Financial Policy Department,
Ministry of Finance of the Russian
Federation.
Holder of a ministerial award – Certificate
of Merit of the Russian Ministry of Energy.
Chief Accountant – Head of Finance
and Economics at JSC ROSNEFTEGAZ.
Tatyana Zobkova
Born in 1976.
Graduated from Moscow State
Pedagogical University and National
Research Nuclear University (MEPhI).
Lead advisor, deputy head of unit, head
of unit, Deputy Director of Corporate
Policy and Property Relations in the Fuel
Producing Industries, Pricing and Audit
in the Fuel & Energy Industry, Ministry
of Energy of the Russian Federation.
Sergey Poma
Born in 1959.
Graduated from Nakhimov Black Sea
Higher Naval School and St Petersburg
State University.
Vice President of the National
Association of Securities Market
Participants (NAUFOR).
Pavel Shumov
Born in 1978.
Graduated from the Moscow State
University of Economics, Statistics,
and Informatics.
Head of unit, Deputy Director,
Department of State Regulation
of Tariffs and Infrastructure Reforms.
RISK MANAGEMENT AND INTERNAL
CONTROL SYSTEM
In accordance with the Corporate Governance Code of the Bank of Russia1, Russian regulatory
requirements2 and the best practices, the Company has established and is continuously
improving its Risk Management and Internal Control System (RM&ICS).
In accordance with the Corporate
Governance Code of the Bank
of Russia, Russian regulatory
requirements and the best prac-
tices, the Company has estab-
lished and is continuously
improving its Risk Management
and Internal Control System
(RM&ICS).
The objectives of the RM&ICS
are set out in the Company’s
Policy on the Risk Management
and Internal Control System3
drawing on recommenda-
tions of international firms
engaged in risk management,
internal control and audit ser-
vices (including the Committee
of Sponsoring Organisations
of the Treadway Commission
(COSO) and the Federation
of European Risk Management
Associations (FERMA)). These
are intended to provide reasonable
assurance that the Company will
achieve its following goals:
1
2
3
4
Strategic goals contributing to the accomplishment of the Company’s mission
Operational goals relating to the Company’s financial and operating performance and asset integrity
Goals of maintaining compliance with applicable laws and local regulations, including HSE requirements
and requirements for information and personal security
Goals of preparing reliable financial statements or non-financial reports and non-financial reports for internal and/
or external users in a timely manner
The main principles of the RM&ICS
operation, approaches to iden-
tify and assess risks related
to financial and business oper-
ations and business processes,
as well as to develop measures
for managing financial and busi-
ness risks and control procedures
reducing business process risks
are set out in the Company’s low-
er-level regulations4.
1 Corporate Governance Code recommended by letter of the Bank of Russia No. 06-52/2463 dated 10 April 2014.
2 Federal Law No. 402-FZ On Accounting dated 6 December 2011, Federal Law No. 208-FZ On Joint-Stock Companies dated 26 December
1995, etc.
3 Rosneft’s Policy on the Risk Management and Internal Control System No. P4-01 P-01 approved by Resolution of the Company’s Board
of Directors, Minutes No. 8 dated 16 November 2015.
4 The Company’s Standard on the Corporate-Wide Risk Management System, the Company’s Standard on the Internal Control System,
and the RM&ICS regulations and guidelines.
272
273
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Business Units Providing Certain RM&ICS
Functions
• Prepare and consolidate RM&ICS reports
• Manage the roll-out of RM&ICS elements and develop
proposals for the risk management methodology
• Assist the Company’s management in conducting self-
assessment of internal controls
Employees
Implement risk management controls and initiatives
•
• Assist the Company’s management in managing risks
• Help identify, assess and report on risks and internal controls,
and conduct self-assessment of internal controls
RM&ICS independent monitoring and performance assessment
• Resolves RM&ICS operational disputes
Internal Audit Service
Audit Commission
• Assesses the RM&ICS reliability and performance
• Conducts audits
• Monitors the implementation of RM&ICS improvement
proposals made by internal auditors
• Assists the Company’s executive bodies in investigating
abusive/unlawful practices by the Company’s employees
and third parties
• Audits the Company’s financial and business operations,
verifies the accuracy and reliability of data included
in Rosneft’s annual reports and annual accounting (financial)
statements
Risk and Internal Control
Methodology Department
Security Service
• Develops, updates,
RM&ICS STAKEHOLDERS
Strategic level
Board of Directors and Audit Committee of the Board of Directors
• Approve RM&ICS focus areas
• Approve corporate reports on financial
• Monitor the RM&ICS reliability
and follow up on their progress
and business risks
• Approve risk appetite
and performance
Operational level
Chief Executive Officer
Management Board
Risk Management Committee
• Ensures the establishment
• Validates the RM&ICS issues reported
and operation of an effective RM&ICS
to the Chief Executive Officer
• Validates RM&ICS focus areas
• Validates RM&ICS reports
• Validates risk appetite
Management
• Distributes roles and responsibilities
among employees
• Manages risks
• Develops and implements control
procedures
• Plans RM&ICS focus areas
• Develops, implements and updates
Company-wide RM&ICS guidelines
• Prepares reports on risks and internal
• Conducts self-assessment of internal
controls
controls
• Manages the RM&ICS roll-out
and operation across Rosneft’s
business units and Group Subsidiaries
• Provides guidelines to key RM&ICS
stakeholders, trains them in risk
management and internal controls
and introduces internal anti-fraud
and anti-corruption regulations
and implementing documents
• Participates in ensuring compliance
with internal regulations
and implementing anti-fraud
and anti-corruption initiatives taken
by Rosneft’s executive bodies
• Manages the Security Hotline
• Conducts inspections/investigations
into abusive/unlawful practices
by the Company’s employees
and third parties
274
275
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors RM&ICS ENHANCEMENT
Owing to ongoing improvements
in its RM&ICS, the Company can
promptly respond to changes
in the external environment
and internal business processes,
achieve better performance,
and increase its shareholder value.
Key targets and objec-
tives of the RM&ICS enhance-
ment, as well as critical steps
to achieve them, are set out
in the Comprehensive RM&ICS
Enhancement Plan.
The Comprehensive RM&ICS Enhancement Plan
for 2020–2022 was endorsed by the Company’s Risk
Management Committee and Chief Executive Officer
and approved by Rosneft’s Board of Directors.
RM&ICS ENHANCEMENT HIGHLIGHTS FOR 2020
RM&ICS Enhancement Initiatives
Results
Improving RM&ICS guidelines. Employee
trainings
Developing the Company’s risk manage-
ment and internal control infrastructure
and procedures
Temporary recommendations for managing risks related to business projects (including
the Company’s major projects), together with recommendations for assessing the probabil-
ity of risk materialisation and the risk impact, were developed and communicated to heads
of the Company’s businesses.
Employees of Rosneft and Group Subsidiaries and risk and internal control experts were
trained in the RM&ICS.
The approach to identify and evaluate the Company’s strategic risks, including the assess-
ment of strategic threats for possible impact on the achievement of the Company's strate-
gic targets as set out in its development strategy was updated.
The Company’s quantitative risk assessment models were verified (back-tested).
A model (algorithm) was developed to evaluate the risk of accumulation of unclaimed liq-
uid and non-liquid inventories.
Implementing and maintaining the Internal
Control System
Group Subsidiaries and processes were selected for a self-assessment of internal controls.
The Company’s employees were trained in self-assessment, including control procedure
testing.
Improving the RM&ICS processes across
Group Subsidiaries
Improving information resources to support
and maintain the RM&ICS
The corporate-wide risk management system was implemented by nine Group Subsidiaries.
Risk and internal control experts from Rosneft’s business units and Group Subsidiaries
received an overview training in the Risk Management and Internal Control information
resources.
INTERNAL CONTROL SYSTEM
The internal control system (ICS) is an integral part of the RM&ICS
ICS is fully aligned with RM&ICS.
•
• The ICS is governed by the Company’s
Implementation and Maintenance
of the Internal Control System.
Policy on the Risk Management
and Internal Control System,
Standard on the Internal Control
System, and Regulations on Design,
• The Company relies on these regulations
to identify risks inherent in its business
processes and implement controls,
thus improving manageability
and efficiency across business processes,
reliability of financial statements,
and compliance with the applicable
laws and internal regulations.
TO ACHIEVE THE ICS OBJECTIVES, THE COMPANY NEEDS TO:
1
2
3
4
Define and update key ICS focus areas in alignment with the Company’s needs and stakeholder requirements
Assess business process risks, develop, adopt and follow controls, including the development of uniform guidelines
to support efficient ICS operations
Identify shortcomings in existing controls, develop and implement initiatives to address the same; streamline
and upgrade controls
Develop and implement tools to facilitate communication and information sharing among all RM&ICS stakeholders,
including via information systems
The Company’s management and employees ensure the ICS efficiency
by managing the relevant functions and performing their job duties.
CORPORATE-WIDE RISK MANAGEMENT SYSTEM (CWRMS)
Key CWRMS components
G
NITO RIN
O
K M
IS
6. R
5
.
R
I
S
K
R
E
P
O
R
T
I
N
G
A N N UAL PLANNING
.
1
ONGOING
ENHANCEMENT
OF THE CWRMS
INFRASTRUCTURE
AND PROCESS
REGULATIONS
AND POLICIES
2.
R
I
S
K
I
D
E
N
T
I
F
I
C
A
T
I
O
N
INTERFACES
BETWEEN
THE CWRMS
AND OTHER
PROCESSES
DISTRIBUTION
OF ROLES WITHIN
THE CWRMS
T
N
E
M
S
S
E
3. RIS K ASS
4. RESPONDING TO R I S K S
Risk management
process
A combination of risk management
elements supported by the existing
organisational structure, internal pol-
icies and regulations, risk manage-
ment procedures and techniques that
are applied across all management
levels and functions of the Company
to make its risks acceptable
in the context of achieving Rosneft’s
strategic goals
Risk management
infrastructure
A set of elements that pro-
vide a Company-wide basis, tools,
and framework for risk management
276
277
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors
Risk management at Rosneft
is governed by the Company’s
Policy on the Risk Management
and Internal Control System1
and Standard on the Corporate-
Wide Risk Management System2.
The CWRMS is a combination
of interrelated elements embed-
ded into various business pro-
cesses of the Company (including
strategic and business planning
processes) and implemented at all
management levels by all employ-
ees of the Company.
All strategic and financial and oper-
ational risks of the Company
are reported within the CWRMS.
Risk reports are delivered
for review/approval to the members
of the Board’s Audit Committee /
the Board of Directors and commu-
nicated to the management.
Heads of the Company’s busi-
ness units arrange for, and steer
risk management processes within
their remit. When choosing a risk
response and specific mitigants,
risk owners seek to find an opti-
mal trade-off while maintain-
ing an acceptable risk level (risk
appetite).
ROSNEFT’S RISKS3
Industry-wide risks
Financial risks
Risk of accidents
Risk of occupational
injuries
Risk
of failure to achieve oil
and gas condensate
production targets
Risk related to rising
purchase prices
for electric power
Risk of failure
to achieve natural gas
price targets
Risk of lower quality
of refinery feedstock
Risk
of failure to comply
with the repair plan
in Oil Refining
Risk of failure
to achieve natural gas
sales targets
Risk
of environmental
damage (due to pipe
ruptures on land
and accidents
on the Russian shelf
causing adverse
environmental
impact)
Risk of failure
to achieve natural
gas
and gas condensate
production targets
Risk of accumulation
of unclaimed liquid
and non-liquid
inventories
Risk of tax claims and risk of losing
tax benefits
Market risks
Credit risk related to crude oil, petroleum products,
natural gas, petrochemicals and gas processing
products supply contracts
Counterparty risk related to long-term advance
payment crude oil and petroleum products supply
contracts
Risk of default/cross-default
Legal and country risks
Risk related
to international
projects in Commerce
and Logistics (Nayara
Energy)
Risk of losing overseas
assets in Commerce
and Logistics
Risk of breach
of competition laws
Risk
of adverse judgements
in legal proceedings
to which the Company
is a party
1 Rosneft’s Policy on the Risk Management and Internal Control System No. P4-01 P-01 approved by Resolution of the Company’s Board
of Directors, Minutes No. 8 dated 16 November 2015.
2 Rosneft’s Standard on the Corporate-Wide Risk Management System No. P4-01 P-01 put into effect by order No. 660 dated 22 October
2018.
3 For Rosneft’s key risks, see Appendix 2 to this Annual Report.
Changes in legislation and regulatory environment
External constraints
The Company’s operating results are very
sensitive to changes in the applicable
laws, including tax, currency and customs
regulations, etc. Rosneft continuously
monitors and assesses such changes,
and makes projections as to their likely
effect on the Company’s operations.
Rosneft’s experts are regular members
of working groups drafting bills in various
fields of law.
COVID-19 pandemic
In 2020, the COVID-19 pandemic affected
Rosneft’s operations and key mar-
kets. The Company’s management fac-
tors in the epidemiological situation
when assessing the impact of finan-
cial, operational and strategic risks
on the achievement of the Company’s
mid- and long-term goals, develops
and implements measures to reduce such
impact, as well as initiatives to protect
employees.
Since 2014, the USA, EU and some
other countries have been impos-
ing various economic constraints
on the Russian Federation, among
other things, affecting operations
of certain companies in the Russian
energy and other industries (including
Rosneft and some of its subsidiaries).
Rosneft factors in and continu-
ously monitors existing constraints
to minimise their adverse effects,
and consistently implements its
Import Substitution and Equipment
Localisation Programme in Russia.
RISK APPETITE OF THE COMPANY
In 2020, Rosneft’s Board of Directors
approved the Company’s risk appetite for 2021:
Financial and economic
performance
The Company strictly com-
plies with its financial covenants.
The Company ensures that all its
short- and long-term commitments
are fulfilled as they fall due.
Health, safety and environment
Corporate governance
The Company has zero tolerance for any
form or manifestation of corporate fraud
and corruption.
Recognising the nature and scale
of the footprint of its business, products
and services, the Company feels respon-
sible for safe and accident-free opera-
tion and protects health and safety of its
employees and local residents in regions
of its operation.
As part of its commitment to prevent any
potential adverse impact on the environ-
ment, the Company makes every effort
to protect, preserve and restore natural
resources.
CORPORATE INSURANCE
Rosneft relies on insurance
as a risk management tool ena-
bling it to pass financial losses
from the risks materialised
on to insurers.
Rosneft’s corporate insurance pro-
gramme covers:
• fixed assets of the Company;
• civil liability;
• business risks.
resulting from business interrup-
tion due to accidents and other
accidental exposures, as well
as liability insurance against
the risk of legal action by third
parties arising out of its onshore
and offshore operations.
The most material risks are rein-
sured with international firms
rated A– or higher by S&P,
AM Best or Fitch.
Rosneft has insurance cover-
age in place for its fixed assets
against the risk of damage to (loss
of) property and potential losses
Rosneft insures its liabil-
ity as required by federal
laws, including Federal Law
No. 225-FZ On Compulsory
Insurance of Owners of Hazardous
Facilities against Civil Liability
for Damage Caused by Accidents
at Hazardous Facilities. Clause 1
of Article 1 of the above Law pro-
vides for the compulsory insur-
ance of property interests
of the facility’s owner and its obli-
gation to indemnify for damage
caused to the affected party.
278
279
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INTERNAL AUDIT
In its 2020 operations, Rosneft’s
Internal Audit Service was gov-
erned by the Code of Ethics
of the International Institute
of Internal Auditors, international
professional standards of inter-
nal audit and the Company’s key
internal regulations on the Internal
Audit Service:
• Policy on Internal Audit;
• Regulations on the Internal
Audit Quality Assurance
and Improvement Programme.
The Internal Audit Service assists
Rosneft’s Board of Directors
and its executive bodies
in enhancing the Company’s man-
agement efficiency and improving
its financial and business perfor-
mance, including through a sys-
tematic and consistent approach
to the analysis and evaluation
of the RM&ICS as well as corpo-
rate governance, therefore pro-
viding reasonable assurance that
Rosneft’s internal audit function is performed by the Vice
President – Head of Internal Audit and the Company’s
functional units, specifically the Operational Audit
Department, the Corporate Audit Department,
the Regional Audit Department, the Internal
Audit Methodology and Management Division,
and the Economic and Organisational Analysis Division.
In accordance with Rosneft’s organisational structure
approved by the Board of Directors, units of the Internal
Audit Service report directly to the Head of Internal Audit.
the Company will achieve its
goals. It also helps ensure:
• accuracy, reliability, and integrity
of information on the Company’s
financial and business opera-
tions, including those of Group
Subsidiaries;
• room for improvement available
across the Company’s financial
and business operations, includ-
ing those of Group Subsidiaries;
• integrity of the Company’s
assets, including those of Group
Subsidiaries.
• efficiency and effective-
ness of the Company’s opera-
tions, including those of Group
Subsidiaries;
Rosneft’s Internal Audit Service is mainly responsible for:
• developing an internal audit plan
• analysing audit targets to look
based on the risk-oriented approach;
• assessing the RM&ICS reliability
into, and evaluate specific aspects
of their activity;
and performance as well
as its adequacy given the scale
and complexity of the Company's
business;
• assessing corporate governance;
• conducting audits and activities in line
with the internal audit plan approved
by Rosneft’s Chief Executive Officer
and endorsed by the Board’s Audit
Committee;
• performing other inspections and tasks
as instructed by Rosneft’s Board
of Directors (its Audit Committee)
and/or the Company’s Chief Executive
Officer;
• developing recommendations
for streamlining business processes,
including their integrity, risk management
and internal controls;
• advising the Company’s executive bodies
on risk management, internal controls,
and corporate governance (provided that
the internal audit remains independent
and impartial);
• monitoring the Company’s progress
in addressing breaches and shortcomings
identified during audits;
• assisting the Company’s executive
bodies in investigating abusive/
unlawful practices by the Company’s
employees and third parties,
including negligence, corporate
fraud, corrupt practices, abuses
and various wrongdoings detrimental
to the Company;
• cooperating with the Company’s
business units on internal audit
matters;
implementing the Internal Audit
Quality Assurance and Improvement
Programme;
•
• performing other functions essential
to meet the tasks assigned.
REPORTING AND ACCOUNTABILITY LINES OF INTERNAL AUDIT
Functionally, the Internal Audit
Service reports to Rosneft’s Board
of Directors. This implies:
• approving Policy-level inter-
nal regulations on internal
audit (specifically, the Policy
on Internal Audit that sets out
its goals, objectives, and roles);
• deciding on the appoint-
ment and removal of the Head
of Internal Audit;
• reviewing internal audit plans
and performance reports;
• approving the Internal Audit’s
budget and remuneration
of the Head of Internal Audit;
• the Board’s Audit Committee
reviewing material limitations
of authority and other restric-
tions likely to adversely affect
performance of the Internal
Audit Service.
Administratively, the Internal
Audit reports to Rosneft’s Chief
Executive Officer. This implies:
• allocating necessary funds
within the approved budget;
• approving internal audit plans;
• reviewing internal audit perfor-
mance reports;
• facilitating the coopera-
tion with Rosneft’s and Group
Subsidiaries’ business units;
• administering internal audit pol-
icies and procedures.
management decisions on audited
entities and affecting the impar-
tiality of internal audit.
The existing reporting lines
whereby the Head of Internal
Audit reports to the Board
of Directors and the Company’s
executive bodies provide suffi-
cient independence for performing
internal audit functions.
Heads of the Internal Audit
functional units do not partic-
ipate in managing functional
areas of the Company’s business
requiring management decisions
on audited entities.
In 2020, the Head of Internal
Audit also acted as:
• member of the Management
Board of Rosneft (until
September 2020);
• member of the Management
Board of Bashneft (until
June 2020).
For that reason, the Company
provided for ongoing monitor-
ing of potential conflicts of inter-
est. To ensure independence
and impartiality of internal audit,
the Head of Internal Audit did
not vote on matters requiring
The internal auditors provide writ-
ten confirmation of their per-
sonal impartiality to the heads
of the Internal Audit func-
tional units and to the Head
of Internal Audit at least once
a year, thereby raising aware-
ness among the Internal Audit
employees about potential con-
flicts of interest and related issues,
as well as response procedures
to situations which may influence
the independence and impartiality
of internal audit.
The Head of Internal Audit pro-
vides Rosneft’s Chief Executive
Officer, Board of Directors (its
Audit Committee) with confirma-
tion of the organisational inde-
pendence of the Internal Audit
Service and individual impartiality
of internal auditors at least once
a year, as part of the internal audit
performance report.
280
281
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INTERNAL AUDIT PERFORMANCE IN 2020
Key Focus Areas in 2020
The internal audit plan is based
on an audit model and uses infor-
mation and requests received
from Rosneft’s executive bod-
ies and Board of Directors, as well
as its risk evaluation results. It
includes audits and other activ-
ities and is subject to approval
by Rosneft’s Chief Executive
Officer and endorsement
by the Board’s Audit Committee.
Details of the plan are pre-
sented to the Company’s Board
of Directors as part of the internal
audit report for the previous period.
At least twice a year,
the Head of Internal Audit pro-
cures to prepare and submit
this report to Rosneft’s Board
of Directors and its executive
bodies (including information
about material risks, breaches
and shortcomings, results
and effectiveness of internal audi-
tors’ proposals for eliminating
the same, delivery of the inter-
nal audit plan, and assessment
of reliability and performance
of the Company’s RM&ICS and cor-
porate governance).
The internal audit reports
for the first six months
and the full year of 2020
were reviewed by the Chief
Executive Officer, the Board’s
Audit Committee and the Board
of Directors of Rosneft.
The Internal Audit Service com-
pleted all planned activities
in line with its internal audit plan
for 2020.
The Internal Audit Service prepares
and annually updates a three-
year plan based on the interrela-
tion of processes, risks, and Group
Subsidiaries. The plan cov-
ers the highest risk processes
and major Group Subsidiaries.
In 2020, Rosneft’s Internal Audit
Service ran a number of initia-
tives to improve the control envi-
ronment, including monitoring
of large investment projects, oil
and petroleum products inven-
tory management, well cost
accounting, and implementation
of geological solutions, as well
as customer service quality control
at the Company’s filling stations /
oil depots. To boost ICS effi-
ciency in procurement, the Internal
Audit Service continued
52%
of audits
48%
of audits
Core processes
Exploration and production
Capital construction
Commerce and logistics
Oil refining
and petrochemicals
Regional sales
42%
20%
14%
15%
9%
Supporting processes
Industrial automation
and IT
Health, safety
and environment
Economics and finance
Procurement
Energy, localisation,
and innovations
Corporate services
23%
18%
16%
12%
11%
20%
to implement preventive controls.
In the reporting period, it car-
ried out initiatives to develop
process approach, assess work-
ing environment and employee
awareness of corporate values
across the Company’s business
units, and implemented meas-
ures to enhance internal audit
efficiency.
In 2020, the Internal Audit Service
updated the Assurance Map rep-
resenting a risk and control matrix
across business processes broken
down in three lines of defence.
The RM&ICS assessment results
were reviewed by the Board’s
Audit Committee and the Board
of Directors of Rosneft.
Based on results from the risk management and inter-
nal control system efficiency assessment, the Internal
Audit Service concluded that the RM&ICS ensured
overall support of the risk management process
and efficient ICS, providing reasonable assurance that
the Company would achieve its goals.
In the reporting period, all
employees of the Internal
Audit Service underwent train-
ing in their core business areas,
including internal audit, coun-
tering corruption and fraud, risk
management and internal control,
IT, and more.
The Company supported the mas-
ter’s curriculum in Internal Audit
and Control run by the Financial
Management Department
at Gubkin Russian State University
of Oil and Gas to train inter-
nal audit specialists for the oil
and gas industry.
In the reporting period,
the Internal Audit Service con-
ducted regular in-house self-as-
sessment on its internal audit
quality. It was concluded fol-
lowing the self-assessment that
the internal audit function was
generally in line with the require-
ments of the Company’s Policy
on Internal Audit and other
regulations on internal audit,
the International Standards
for the Professional Practice
of Internal Auditing, and the Code
of Ethics of the International
Institute of Internal Auditors.
The Internal Audit Service
ensures effective communication
with the Board’s Audit Committee,
Rosneft’s Chief Executive
Officer (including through per-
sonal reports on material audit
results), Rosneft’s management,
the Audit Commission, exter-
nal auditor and the management
of the Group Subsidiaries.
282
283
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors 6
INFORMATION
FOR SHAREHOLDERS
AND INVESTORS
6
s
r
e
d
l
o
h
e
r
a
h
s
r
o
f
s
r
o
t
s
e
v
n
i
d
n
a
I
N
O
T
A
M
R
O
F
N
I
286
ROSNEFT / ANNUAL REPORT 2020
Strategy
Operating results
Market Overview
and Competitive
Environment
Sustainable
Development
Corporate
Governance
Information
for Shareholders
and Investors
SHARE CAPITAL
Share Capital Structure
as at 31 December 2020, %
BUYBACK
The Company’s share capital is divided into 10,598,177,817
ordinary shares with a par value of RUB 0.01 each.
2020
The Company has
over 190 thousand
individual and cor-
porate shareholders
and about 500 GDR
holders.
JSC ROSNEFTEGAZ,
Russian Federation and
Group Subsidiaries
BP Russian Investments
Limited (shareholder)
QH Oil Investments LLC
(shareholder)
Free float
Total
50.76%
19.75%
18.53%
10.96%
100%
Rosneft shares are traded
on the Moscow Exchange. Outside
of Russia, the shares are listed
on the London Stock Exchange
in the form of Global Depositary
Receipts (GDRs).
As at 31 December 2020, J.P.
Morgan, acting as a depos-
itary bank, issued GDRs
for 5.4% of ordinary shares
in the Company1.
Key shareholders of the Company2
On 6 August 2018, the Board
of Directors approved the terms
of and launched the buy-
back of Rosneft shares, includ-
ing in the form of GDRs
certifying the rights to such
shares, in the amount of up
to USD 2 bln. The programme
runs from the date of approval
by the Board of Directors up
to and including 31 December
2021. The number of shares
and GDRs to be purchased
under the programme is capped
at 340,000,000. UBS acts
as an independent agent mak-
ing open-market transactions
on behalf of the Company.
In late March 2020, oil mar-
ket volatility prompted Rosneft's
Board of Directors to amend
the terms of the Programme,
and UBS started to buy back
shares and GDRs in the open mar-
ket. In 2020, the Company repur-
chased over 80 million shares/
GDRs worth about USD 370 mln
under the programme, and Rosneft
Group carries them on the bal-
ance sheet. Once the programme
is completed, the Board
of Directors will make a decision
regarding the purchased shares.
2019
2020
91
77
69
Buyback programme in 2020 (mln shares/GDRs and USD mln) and GDR price (USD) on the London Stock
Exchange (LSE)
31.12.2019
31.12.2020
JSC ROSNEFTEGAZ (shareholder)
BP Russian Investments Limited (shareholder)
QH Oil Investments LLC (shareholder)
National Settlement Depository (Nominee
Central Depository)
LLC RN-NeftKapitalInvest
LLC RN-Capital
The Russian Federation represented
by the Federal Agency for State Property
Management
Other minority shareholders (including
individuals, other legal entities, etc.)
Total
50.00000001%
19.75%
18.93%
10.98%
0%
0%
< 0.01%
0.34%
100%
40.40%
19.75%
18.53%
10.62%
9.60%
0.76%
< 0.01%
0.34%
100%
1 One Global Depositary Receipt certifies the right to one ordinary registered share.
2 Based on data from Rosneft’s Shareholder Register. Regular updates on shareholders
owning over 5% of Rosneft's charter capital are posted on the Company’s official website:
https://www.rosneft.ru/Investors/structure/share_capital/
8
7
6
5
4
3
2
36
9
21
22
5
12
2
20
4
3
16
16
14
26
6
<0.04
0.23
January February March
April
May
June
July
August September October November December
mln GDRs
USD mln
GDR price, USD (RHS)
287
DIVIDEND POLICY
The Dividend Policy approved by the Board of Directors
formalises the Company’s key principles of, and approaches
to, dividend payouts to shareholders and introduces
transparent decision-making processes for paying out
(declaring) dividends and determining their amount
and payment procedure.
In 2020, the Company made no
changes to its Dividend Policy.
In 2020, the Company paid
RUB 191.5 bln as dividend for FY2019.
Principles of the Dividend Policy:
• ensuring compli-
• paying out dividends as soon
as practicable.
Dividend Policy
ance with the require-
ments of the Russian laws,
the Company’s Charter
and internal regulations when
paying out (declaring) dividends;
• maximising the transparency
of the dividend calculation
process;
• increasing the Company’s
investment appeal;
• maintaining the balance
of short- and long-term inter-
ests of shareholders;
• supporting shareholder
commitment to improving
the Company’s profitability;
• ensuring that the dividend pay-
out pattern comfortably reflects
an increase in Rosneft’s net
profit;
• making dividend payments
in a way most convenient
for our shareholders;
Rosneft’s dividend history
The decision to pay divi-
dends is made by the General
Shareholders Meeting upon rec-
ommendation of the Board
of Directors.
In 2020, the Company discharged
99.98% of its obligation to pay
out dividends. Dividends were
paid to all shareholders of record,
except for persons who failed
to timely notify the issuer’s reg-
istrar of changes in the data
recorded on their profile.
The Company’s Charter pro-
vides for a five-year period when
shareholders may claim dividends
declared but not paid due to miss-
ing address or banking details,
which is longer than required
by the applicable laws.
On 22 April 2021, the Board
of Directors recommended
that the General Shareholders
Meeting approve RUB 6.94 per
share as dividend for FY2020.
The total amount of dividends
recommended for FY2020
is RUB 73.6 bln. The divi-
dend payout ratio (dividends /
non-consolidated net profit
under RAS) for 2020 is 47 %, while
the dividend payout ratio (divi-
dends / consolidated net profit
under IFRS) is 50 %.
RUB bln
400
300
200
100
0
2010
2.76
2011
7.53
2012
8.05
2013
2014
12.85
8.21
2015
11.75
2016
5.98
2017
2018
2019
2020
10.48
25.91
33.41
6.94
%
60
50
40
30
20
10
0
SHAREHOLDER RELATIONS,
KEY EVENTS IN 2020
The Company has established a multi-level system to protect
the rights of its shareholders.
SHAREHOLDER RIGHTS GUARANTEED BY LAW
Pursuant to the Russian laws,
the Company’s shareholders have
the right to:
• vote at the General Shareholders
• exercise pre-emptive rights
to buy shares in case issues
of new shares or convertible
instruments;
upon request and as established
by the Russian laws;
• freely dispose of Rosneft’s
shares;
Meeting on a one-share-one-
vote basis;
• propose items for the agenda
of the General Shareholders
Meeting and nominate candi-
dates to the Board of Directors
(if a shareholder owns at least
2% of voting shares);
• receive dividends declared
• exercise other rights granted
under the Russian law.
by the Company, in proportion
to the number of shares held;
• review information and mate-
rials provided in preparation
for the General Shareholders
Meeting;
• obtain information
on the Company’s operations
ADDITIONAL RIGHTS GUARANTEED BY THE COMPANY’S CHARTER
AND INTERNAL REGULATIONS
The Company offers equal and fair
opportunities for its sharehold-
ers to exercise their legal rights,
e.g. by securing additional rights
and procedures in the Charter
and internal regulations, specifi-
cally the right to:
• receive part of the Company’s
profit as dividend;
• receive necessary information
on the Company on a timely
and regular basis;
• participate in managing
the Company’s operations.
INDEPENDENT AND PROFESSIONAL BOARD OF DIRECTORS
The composition of the Board
of Directors and the num-
ber of Board members reflect
the Company’s shareholding struc-
ture. Electing Board members
by cumulative voting guarantees
the rights and legitimate interests
of shareholders.
The Board of Directors consists
of four independent directors
of internationally recognised busi-
ness standing.
1H dividends, RUB bln
Dividend per share, RUB
Total dividends declared,
RUB bln
Dividend payout ratio under IFRS, %
288
Interim dividends, RUB
Full-year dividends, RUB
289
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors OFFICIAL CHANNELS OF COMMUNICATION WITH SHAREHOLDERS
PROTECTING SHAREHOLDERS’ TITLE TO SHARES
The Company has established effi-
cient means of communicating
with its shareholders.
The Company has several commu-
nication channels in place to facil-
itate the exercise of corporate
rights and promote efficient share-
holder relations, including:
• Shareholder account
on the Company’s website.
• 24 hour shareholder Hotline
(a multichannel phone line
to receive and handle calls):
8 800 500 1100 (toll-free within
Russia); +7 495 987 3060;
• mailing address for letters:
26/1 Sofiyskaya Embankment,
Moscow, 117997, Russia;
• e-mail for requests: sharehold-
ers@rosneft.ru;
• fax: +7 499 517 8653;
To gain access
to their Shareholder's Personal
Account, shareholders need
to request login and pass-
word from the Moscow Head
Office or regional branches
of the Company’s registrar,
LLC Reestr-RN.
For clients of nominee sharehold-
ers, access to the Shareholder’s
Personal Account is granted
by the registrar upon the disclo-
sure of information thereon by rel-
evant nominee shareholders.
The rules governing the proce-
dure of registering a Shareholder’s
Personal Account can be found
on the website of LLC Reestr-RN
or on the Company’s website.
Any questions concerning access
to the Shareholder’s Personal
Account can be addressed to:
Shareholder’s Personal Account
The Company practices reliable and safe methods of recording title to its shares and has
engaged a professional registrar to maintain its Shareholder Register.
All users of the Shareholder’s
Personal Account, regardless of where
their shares are stored, can now enjoy
a more informative service (with cor-
porate events added to the news feed
and calendar), and an improved inter-
face of the shareholder meeting sec-
tion (with new notifications, brief voting
instructions, and a service that allows
users to request information on and see
materials related to a particular meeting
agenda item using the electronic voting
ballot).
With Shareholder’s Personal
Account put into operation in 2019,
Rosneft's shareholders can now exer-
cise their rights online: take part
in the General Shareholders Meeting,
receive updates on their account, mon-
itor dividend payouts, submit requests,
and request advice.
In 2020, the Shareholder's Personal
Account was updated to include new
functions, which allow shareholders
of record to:
• use the registrar's services remotely
and pay for them online;
• request and receive 2-NDFL earnings
certificate in a convenient way;
• exercise their rights in relation
to several Shareholder's Personal
Accounts within one session (one
account).
Shareholders can log
into their Shareholder's
Personal Account
Answers to frequently
asked questions
can be found
on the Company’s
website.
• LLC Reestr-RN call centre
by phone: +7 (495) 411-79-11 (or
by email: support@reestrrn.ru);
• Hotline for Rosneft shareholders
at: 8 (800) 500-11-00 (toll-free
within Russia) and +7 (495) 987-
30-60 (email: shareholders@
rosneft.ru).
In 2020, the Corporate
Governance Department handled
4,355 applications, including:
• 3,265 phone calls;
• 491 letters;
• 123 e-mails;
• 476 requests claiming unpaid
dividends for prior periods.
Shareholder requests
in 2020, %
Phone calls
Letters
Requests on dividend payout
E-mails
75%
11%
11%
3%
The registrar is LLC Reestr-RN
acting under a perpetual licence
to register security holders.
LLC Reestr-RN has been oper-
ating in the registrar services
market for 20 years and ranks
among the top ten Russian reg-
istrars. The company keeps
registers for more than 1.7 thou-
sand issuers, with an inventory
of 542 thousand personal
accounts to record the rights
of their shareholders. Shareholder
service offices and transfer agent
offices of LLC Reestr-RN operate
in the regions where the major-
ity of Company sharehold-
ers reside and include the Head
Office, 13 branches, 44 trans-
fer agent offices at regional
branches of LLC Reestr-RN’s
partner registrars, 5 transfer agent
offices at Rosneft’s partner banks,
and a contact and service centre
for Rosneft shareholders.
The Company, together with LLC
Reestr-RN, regularly notifies
its shareholders of the need
to update their personal data
recorded in the Shareholders
Register of Rosneft.
Resolutions
of the General
Shareholders
Meeting
Rosneft Regulation
on Provision
of Information
to Rosneft Shareholders
Contact Details
of the Registrar and its
Service Offices
290
291
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INSTITUTIONAL INVESTOR RELATIONS
Rosneft shares are among
the most attractive invest-
ment instruments in the Russian
stock market. The Company
has a free float of 11%, including
5.4% in the form of GDRs traded
on the London Stock Exchange
(LSE). Rosneft enjoys a diversified
investor base of around 500 insti-
tutional investors.
International institutional share-
holders of the Company are based
in major business and financial
hubs, such as New York, Boston,
Los Angeles, London, Frankfurt,
Stockholm, Hong Kong, Singapore,
and Tokyo. For over ten years
since its IPO, Rosneft shares have
been steadily growing in value.
Between 19 July 2006 (IPO)
and 31 December 2020, Rosneft's
share prices on the Moscow
Exchange doubled.
Relations
with the Company’s investors,
both existing and potential,
are maintained by the Chairman
of the Management Board
of Rosneft, First Vice
President, heads of businesses,
and the Investor Relations
Department. In 2020, despite
pandemic-related challenges
and restrictions, the Company
actively engaged with inves-
tors, including through a number
of Rosneft management's
speeches at major international
forums. The Company sent rep-
resentatives to five in-person
conferences (in January–March
2020), held over 300 group
and one-on-one virtual meet-
ings with representatives of more
than 400 funds, and organ-
ised about 200 conference calls
(including four quarterly disclo-
sures) and seven calls dedicated
to the Company's activities.
Feedback from investors
is reported to Rosneft’s manage-
ment on a regular basis.
Currently, 20 investment banks
provide analytical coverage
of the Company, with 18 of them
recommending to buy or hold
Rosneft shares/GDRs.
The Chairman of the Management
Board of Rosneft and heads
of relevant core functions main-
tain regular communications
with the investor community,
where investors, analysts, and rep-
resentatives of international rating
agencies are updated on stra-
tegic trends in the Company’s
development, its operations,
and financial management directly
by the Company’s top execu-
tives. Rosneft holds quarterly
conference calls for investors
Following the dis-
closure of opera-
tional and financial
indicators for 2020
during the trading
session on 26 March
2021, the Company's
market cap
on the Moscow
Exchange set a new
record, going above
RUB 585
per share
involving heads of econom-
ics, finance, and operations
who provide detailed cover-
age of the Company’s perfor-
mance in the reporting period.
Shareholder and investor materi-
als, such as press releases, pres-
entations, Rosneft’s Annual
Report and Sustainability
Report, as well as material facts
on resolutions of the Company’s
Board of Directors are posted
on the Company’s website.
In 2020, the Company also kept
improving its ESG practices
and disclosures. In June 2020,
Rosneft released an updated
public statement on its contri-
bution towards achieving the UN
Sustainable Development Goals
approved by the Company’s Board
of Directors in December 2018.
During the reporting year, Rosneft
maintained regular communica-
tion with investors supporting
the global Climate Action 100+ ini-
tiative. The Company held around
50 investor calls on ESG matters
and an ESG-focused roadshow.
Rosneft maintains an ongoing
dialogue with key ESG analytical
and rating agencies.
Transparency and openness
of the Company’s ESG disclosure
have gained international recog-
nition. In 2020, Rosneft was once
again included in the FTSE4Good
Index of companies demonstrat-
ing strong ESG practices. Rosneft
became the best Russian oil
and gas company in the CHRB,
Bloomberg and Refinitiv ESG rat-
ings, and improved its position
in TPI и MSCI rankings.
Priorities for 2020
• Improve disclosure standards
• Focus on investor
and shareholder relations more
closely
• Promote fast, high-
quality, and skilful financial
communications
292
293
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors Global Energy Conference
Russia: The Inside Track Conference
Pzena Investment Management LLC
2020 IR HIGHLIGHTS
January
May
September
CEEMEA Opportunities Conference
(London)
Berenberg Energy Transition
Outlook 2020 Conference (London)
GEMs EEMEA Conference 2020
Russian Corporate Days Conference
Disclosure of the Company’s perfor-
mance for Q1 2020 Investor confer-
ence call involving heads of finance,
economics, and operations
2020 Virtual GEMS Conference
CEEMEA Global Energy Conference
February
June
2020 Global Emerging Markets Forum
25th Annual Energy Summit (Vail)
The Emerging Markets Debt
and Equity Conference
October
Annual GEMs EEMEA Conference
2020 Global Emerging Markets Forum
GEM Corporate Conference (Miami)
Russian Corporate Days Conference
(Stockholm and Frankfurt)
Disclosure of the Company’s perfor-
mance for 2019 Investor conference
call involving heads of finance, eco-
nomics, and operations
EMEA Commodities – Well Grounded
Conference
November
March
Annual Russia Investor Conference
Global Energy Conference
European Oil & Gas Conference
Oil Conference
VTB Capital Investments
online session
CEEMEA Conference
Global Natural Resources Conference
Russian Corporate Days Conference
August
April
Energy & Utilities Conference
Moscow Exchange Forum
Роуд-шоу с инвесторами по итогам
публикации результатов за 2 кв. 2020 г.
Disclosure of the Company’s perfor-
mance for Q2 2020 Investor confer-
ence call involving heads of finance,
economics, and operations
Global Energy Conference 2020
RUSSIA CALLING Forum
Disclosure of the Company’s perfor-
mance for Q3 2020 Investor conference
call involving heads of finance, econom-
ics, and operations
December
Global Emerging Markets Virtual
Conference
Emerging Europe Conference
Index
MSCI Russia
FTSE Russia
IMOEX
Rosneft share and depositary receipt index weight
as at January 2021, %
3.25%
3.34%
3.33%
List of the largest institutional equity and GDR investors as at 31 December
2020
Free float1
9.45%
4.41%
4.06%
3.55%
2.38%
1.94%
1.82%
1.80%
1.77%
1.45%
1.36%
1.17%
1.05%
1.02%
Capital Group
BlackRock
Vanguard
Arrowstreet Capital, LP
State Street Corp.
GIC Pte Ltd.
SAFE Investment Co. Ltd.
Macquarie Group Ltd.
UBS Group AG
VanEck Associates Corp.
APG Asset Management NV
Legal & General Group plc
Amundi Pioneer
1 Excluding strategic investors.
294
295
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors No
Bank
Recommendation, early 2020
Recommendation, late 2020
Comparative Performance of Rosneft Stocks, Brent prices, MOEX Russia Index, and MICEX Oil and Gas
Index in 2020 (base: 100)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
BCS
Renaissance Capital
ATON
SOVA Capital
Raiffeisen Bank
Gazprombank
Deutsche Bank
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Bank of America Merrill Lynch
Hold
J. P. Morgan
Wood & Co
Goldman Sachs
Sberbank
Veles Capital
Citi
HSBC
Credit Suisse
UBS
Hold
Hold
Hold
Hold
Buy
Buy
Buy
Buy
Buy
Morgan Stanley
Hold
Alfa Bank
Under review
20
VTB Capital
Under review
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Hold
Hold
Hold
Hold
Under review
Under review
%
115
105
95
85
75
65
55
45
35
25
January February March
April
May
June
July
August September October November December
Rosneft
Moscow Exchange index
Brent
MOEX oil and gas index
Rosneft Stock Price and Trading Volumes at LSE and MOEX
USD mln
3,000
2,500
2,000
1,500
1,000
500
January February March
April
May
June
July
August September October November December
Trading volumes on the Moscow Exchange
Trading volumes on the London Stock Exchange (LSE)
Rosneft stock price1 on the Moscow Exchange, RUB (RHS)
RUB
500
450
400
350
300
250
200
150
100
50
297
296
1 Monthly average
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors ROSNEFT BONDS AND CREDIT RATINGS
Issue Number
Par Value, bln
Currency
Issue Date
Maturity Date
Coupon4, %
Eurobonds (issued by Rosneft International Finance DAC)
In 2012, Rosneft placed two
Eurobond issues as part of its
Eurobond Programme for a total
of USD 10 bln: USD 1 bln maturing
in 2017 and USD 2 bln maturing
in 2022. As at 31 December 2020,
the only outstanding issue was
the USD 2 bln maturing in 2022.
Between 2006 and 2010, for-
mer subsidiaries of TNK-BP Group
placed eight Eurobond issues
for a total of USD 5.5 bln maturing
in 2011–2020. As at 31 December
2020, all bonds have been
redeemed.
In 2012–2017, Rosneft launched
four Ruble Bond Programmes
and completed 41 issues of corpo-
rate and exchange-traded ruble
bonds for a total of RUB 2,261 bln.
Four of the issues worth
RUB 400 bln were redeemed
in December 2020 in line
with the offering documents.
In November 2017,
the Company registered its
fifth multi-currency Exchange-
Traded Bond Programme
with a total par value of RUB 1.3 trln.
Under the programme, Rosneft
placed ten issues of ruble bonds
BBB–
Baa3
credit rating by S&P Global,
outlook stable
credit rating by Moody’s,
outlook stable
In January 2021, S&P Global reviewed the risk outlook
for the oil and gas sector to the downside which neg-
atively affected credit ratings of a number of interna-
tional oil and gas companies. Rosneft’s credit rating
was reconfirmed at the same level.
Throughout the year, Rosneft’s credit ratings by S&P
Global and Moody’s international rating agencies were
at an investment grade and on a par with the sover-
eign rating of the Russian Federation: BBB-, outlook
stable, and Baa3, outlook stable, respectively. On top
of that, Expert RA, Russian rating agency, maintained
Rosneft's creditworthiness at the highest level (ruAAA)
with a stable outlook.
for a total of RUB 795 bln
between December 2017
and December 2020.
In November 2020, the Company
registered its sixth multi-cur-
rency Exchange-Traded Bond
Programme with a total par value
of RUB 0.8 trln. Under this pro-
gramme, Rosneft placed two
issues of ruble bonds for a total
of RUB 800 bln in November 2020.
Series 2
Bonds
04, 05
07, 08
065, 095, 105
2
20
30
40
Exchange-traded bonds
BO-05, BO-06
BO-01, BO-07
BO-02, BO-03,
BO-04, BO-09
40
35
65
BO-08, BO-10, BO-11,
BO-12, BO-13, BO-14
160
BO-153, BO-163
BO-173, BO-243
BO-18, BO-19,
BO-20, BO-21,
BO-22, BO-23,
BO-25, BO-26
001Р-01
001Р-02
001Р-03
001Р-04
001Р-05
400
400
600
30
20
40
15
001Р-06, 001Р-07
266
001Р-08
100
002Р-01, 002Р-02
600
002Р-03
002Р-04
002Р-05
002Р-06, 002Р-07
002Р-08
002Р-09
002Р-10
30
50
20
30
25
25
15
003Р-01, 003Р-02
800
USD
December 2012
March 2022
4.199
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
October 2012
October 20221
March 2013
March 20231
June 2013
May 20231
December 2013
December 2023
February 2014
February 2024
7.90
7.30
7.00
6.65
8.90
December 2014
November 20241
9.40
December 2014
November 20241
9.40
December 20142
December 20201
7.85
January 20152
January 2021
6.30
December 20162
November 2026
December 2016
December 2026
December 2016
December 20261
May 2017
April 2027
May 20172
May 20251
July 2017
July 2027
October 2017
September 2027
December 2017
November 2027
December 2017
December 2027
February 2018
February 2028
March 2018
February 2028
April 20192
March 2029
July 2019
July 2029
October 20192
October 2029
June 20202
May 2030
November 2020
November 2030
4.35
9.39
9.50
8.65
8.60
8.50
4.35
4.35
7.75
7.50
7.30
8.70
7.95
7.10
5.80
4.35
1 No put option available.
2 Coupon payments every three months.
3 Bonds redeemed as at 31 December 2020.
4 For the coupon period applicable as at 31 December 2020.
5 As at 31 December 2020, part of the issue has been redeemed before maturity.
298
299
StrategyROSNEFT / ANNUAL REPORT 2020Operating resultsMarket Overview and CompetitiveEnvironmentSustainable DevelopmentCorporate GovernanceInformation for Shareholders and Investors INFORMATION DISCLOSURE
INFORMATION POLICY AND TRANSPARENCY
Rosneft is committed to prompt
and reliable disclosure of infor-
mation. The Board of Directors
has approved Rosneft's
Information Policy and over-
sees the Company’s compliance
with it to assist sharehold-
ers, investors, and stakeholders
in making informed investment
and management decisions.
The Company relies on various
disclosure channels and meth-
ods to ensure unrestricted
and easy access to informa-
tion disclosed in accordance
with the applicable laws, rules
of the Moscow Exchange, London
Stock Exchange, and internal
regulations.
To ensure that Russian and for-
eign shareholders and investors
are treated equally, the Company
simultaneously discloses all infor-
mation in Russian and English.
The Company uses its official web-
site and the website of Interfax
Corporate Information Disclosure
Centre1 to publish the Company’s
Charter and other internal reg-
ulations, annual and quarterly
reports (issuer's reports), sustain-
ability reports, annual and quar-
terly RAS financial statements,
IFRS consolidated financial state-
ments and relevant Management
Discussion and Analysis (MD&A),
presentations, press releases,
information on affiliates, and other
data that may have an impact
on the performance of Rosneft
securities.
The Company has established
a reliable system of preventing
the unlawful use and distribution
of insider information and reg-
ularly monitors persons having
access to it.
The Company is committed
to promoting information dis-
closure by its controlled entities
through continuous methodologi-
cal support.
The Company also discloses
additional information that
is not required by law or stock
exchange rules:
• data on operating and finan-
cial performance with notes
of the Company’s top man-
agement to annual and interim
financial statements;
• the Company’s policy on sus-
tainable development, health
and safety;
• the Company’s operational
structure.
The Company holds conference
calls with institutional investors
and its representatives take part
in major investment conferences
by means of video-conferencing.
Key principles of the Information Policy
are prompt disclosure, accessibility, reliability,
and relevance of information.
Rosneft’s Information
Policy
The Company
published and held:
• 613 press releases and news
on its official website;
• 5 media interviews of its top
managers and directors;
• 6 press conferences,
media briefings
of the Company’s management
and representatives of its major
shareholders;
• 4 regular financial performance
presentations.
2020 Disclosure Items
526
disclosures
Acquisition of shares/GDRs
under Rosneft’s Open
Market Share Buyback
Programme
Accrued and paid income on
bonds and shares
Meetings and resolutions of
Rosneft’s governing bodies
Disclosure of the Company’s
reports
Bond issues
Completed transactions and
projects, including stakes
held in other entities
Other
204
154
60
27
27
18
36
1 The documents are available at: http://www.e-disclosure.ru/portal/company.aspx?id=6505
300
ROSNEFT / ANNUAL REPORT 2020 Appendix 1
(CONSOLIDATED FINANCIAL
STATEMENTS ROSNEFT OIL
COMPANY FOR THE YEAR
ENDED DECEMBER 31, 2020
WITH INDEPENDENT AUDITOR’S
REPORT ROSNEFT OIL
COMPANY)
CONSOLIDATED BALANCE SHEET
(IN BILLIONS OF RUSSIAN RUBLES)
Assets
Current assets
Cash and cash equivalents
Restricted cash
Other short-term financial assets
Accounts receivable
Bank loans granted
Inventories
Prepayments and other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Other long-term financial assets
Investments in associates and joint ventures
Bank loans granted
Deferred tax assets
Goodwill
Other non-current non-financial assets
Total non-current assets
Total assets
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities
Loans and borrowings and other financial liabilities
Income tax liabilities
Other tax liabilities
Provisions
Prepayment on long-term oil and petroleum products supply agreements
Other current liabilities
18
18
19
20
21
22
23
24
25
26
27
15
25
28
29
30
31
32
33
As of December 31
As of December 31
Notes
2020
2019 (restated)1
Notes
2020
2019 (restated)1
3,092
2,755
806
17
817
468
131
361
322
228
10
501
620
130
438
469
2,922
2,396
Total current liabilities
Non-current liabilities
Loans and borrowings and other financial liabilities
Deferred tax liabilities
Provisions
Prepayment on long-term oil and petroleum products supply agreements
Other non-current liabilities
Total non-current liabilities
Equity
Share capital
Treasury shares
10,401
8,706
Additional paid-in capital
30
15
32
33
34
36
36
36
16
3,810
1,072
437
1,401
51
6,771
1
(370)
1,100
(66)
34
4,007
4,706
781
5,487
15,350
Reserve for foreign exchange differences on translation of foreign operations
Other funds and reserves
Retained earnings
Rosneft shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
Chief Executive Officer ___________________ I.I. Sechin, February_____, 2021.
155
80
275
846
363
54
82
172
12,428
15,350
1,546
798
14
301
68
357
8
160
66
229
801
291
33
93
171
10,550
12,946
1,162
795
23
379
55
332
9
3,033
843
343
750
73
5,042
1
–
635
(185)
31
4,032
4,514
635
5,149
12,946
303
1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7).
302
Appendix 1.ROSNEFT / ANNUAL REPORT 2020 ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF PROFIT
OR LOSS (IN BILLIONS OF RUSSIAN RUBLES, EXCEPT EARNINGS
PER SHARE DATA, AND SHARE AMOUNTS)
ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME (IN BILLIONS OF RUSSIAN RUBLES)
For the years ended December 31
Notes
2020
2019 (restated)1
For the years ended December 31
Notes
2020
2019 (restated)2
8
27
Revenues and equity share in profits of associates and joint ventures
Oil, gas, petroleum products and petrochemicals sales
Support services and other revenues
Equity share in profits of associates and joint ventures
Total revenues and equity share in profits of associates
and joint ventures
Costs and expenses
Production and operating expenses
Cost of purchased oil, gas, petroleum products, goods
for retail and refining costs
General and administrative expenses
Transportation costs and other commercial expenses
Exploration expenses
Depreciation, depletion and amortization
23–25
Taxes other than income tax
Export customs duty
Total costs and expenses
Operating income
Finance income
Finance expenses
Other income
Other expenses
Foreign exchange differences
Realized foreign exchange differences on hedge
instruments
Income before income tax
Income tax benefit/(expense)
Net income
Net income attributable to:
Rosneft shareholders
non-controlling interests
Net income attributable to Rosneft shareholders per
common share (in RUB) – basic and diluted
Weighted average number of shares outstanding
(millions)
9
10
11
12
13
13
6
15
16
17
5,628
77
52
5,757
767
691
127
661
15
663
2,121
334
5,379
378
95
(220)
533
(463)
(163)
2
162
19
181
147
34
14.88
9,876
8,490
86
100
8,676
715
1,566
200
733
11
687
2,666
793
7,371
1,305
143
(227)
11
(156)
64
(146)
994
(192)
802
705
97
66.52
10,598
6
6
Net income
Other comprehensive income – to be reclassified to profit or loss
in subsequent periods
Foreign exchange differences on translation of foreign operations
Foreign exchange cash flow hedges
Income from changes in fair value of debt financial assets at fair value
through other comprehensive income
Increase in loss allowance for expected credit losses on debt financial
assets at fair value through other comprehensive income
Equity share in other comprehensive loss of associates
Income tax related to other comprehensive income – to be reclassified
to profit or loss in subsequent periods
Total other comprehensive income – to be reclassified to profit
or loss in subsequent periods, net of tax
Other comprehensive income – not to be reclassified to profit
or loss in subsequent periods
Income from changes in fair value of equity financial assets at fair
value through other comprehensive income
Income tax related to other comprehensive income – not to be
reclassified to profit or loss in subsequent periods
Total other comprehensive income – not to be reclassified to profit
or loss in subsequent periods, net of tax
Total comprehensive income, net of tax
Total comprehensive income, net of tax, attributable to:
Rosneft shareholders
non-controlling interests
181
119
(2)
3
1
(1)
–
120
3
(1)
2
303
269
34
1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7).
2 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2019 acquisitions (Note 7).
304
802
(88)
146
5
1
(4)
(29)
31
7
(1)
6
839
742
97
305
Appendix 1.ROSNEFT / ANNUAL REPORT 2020 ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT
OF CHANGES IN SHAREHOLDERS’ EQUITY (IN BILLIONS
OF RUSSIAN RUBLES, EXCEPT SHARE AMOUNTS)
Number
of shares
(millions)
Share
capital
Treasury shares
Additional
paid-in capital
Reserve for foreign
exchange differences
on translation
of foreign operations
Other funds and reserves1
Retained earnings
Rosneft share-holders’ equity
Balance at January 1, 2019
10,598
Net income (restated)
Other comprehensive (loss)/income
Total comprehensive (loss)/income
(restated)
Dividends declared (Note 36)
Change of interest in subsidiaries
Other movements (Note 16)
Balance at December 31, 2019
(restated)
Net income
Other comprehensive income
Total comprehensive income
Dividends declared (Note 36)
–
–
–
–
–
–
10,598
–
–
–
–
Acquisition of treasury shares (Note 36)
(1,098)
Change of interest in subsidiaries (Note
16)
Disposal of subsidiaries
Other movements (Note 16)
–
–
–
Balance at December 31, 2020
9,500
1
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
(370)
–
–
–
(370)
633
–
–
–
–
1
1
(97)
–
(88)
(88)
–
–
–
635
(185)
–
–
–
–
–
469
–
(4)
1,100
–
119
119
–
–
–
–
–
(66)
(94)
–
125
125
–
–
–
31
–
3
3
–
–
–
–
–
34
3,610
705
–
705
(283)
–
–
4,032
147
–
147
(172)
–
–
–
–
4,007
4,053
705
37
742
(283)
1
1
4,514
147
122
269
(172)
(370)
469
–
(4)
4,706
1 Other funds and reserves include a reserve for changes in fair value of equity and debt financial assets at fair value through other
comprehensive income, a reserve for expected credit losses on such debt financial assets, a reserve for equity share in other comprehensive
income of associates and joint ventures, and a reserve for foreign exchange cash flow hedges.
306
Non-controlling
interests
Total equity
624
4,677
97
–
97
(99)
3
10
635
34
–
34
(63)
–
174
1
–
781
802
37
839
(382)
4
11
5,149
181
122
303
(235)
(370)
643
1
(4)
5,487
307
Appendix 1.ROSNEFT / ANNUAL REPORT 2020 ROSNEFT OIL COMPANY CONSOLIDATED STATEMENT OF CASH
FLOWS (IN BILLIONS OF RUSSIAN RUBLES)
For the years ended December 31
Notes
2020
2019 (restated)
For the years ended December 31
Notes
2020
2019 (restated)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation, depletion and amortization
23–25
13
33
6
27
12
11
15
Loss on disposal of non-current assets
Dry hole costs
Offset of prepayments received on oil and petroleum products long term
supply agreements
Offset of prepayments made on oil and petroleum products long term supply
agreements
Foreign exchange gain on non-operating activities
Realized foreign exchange differences on hedge instruments
Offset of other financial liabilities
Equity share in profits of associates and joint ventures
Changes in provisions for financial assets
Non-cash income from acquisitions and sales, net
Loss from changes in reserves and impairment of assets
Finance expenses
Finance income
Income tax (income)/expense
Changes in operating assets and liabilities
Decrease/(increase) in accounts receivable, gross
Decrease/(increase) in inventories
(Increase)/decrease in restricted cash
Decrease/(increase) in prepayments and other current assets
Increase in long-term prepayments made on oil and petroleum products supply
agreements including current portion
(Decrease)/increase in accounts payable and accrued liabilities
(Decrease)/increase in other tax liabilities
Decrease in other current liabilities
Increase in other non-current liabilities
(Decrease)/increase in current reserves
Proceeds under long-term oil and petroleum products supply agreements
Interest paid on long-term prepayment received on oil and petroleum products
supply agreements
Net increase in operating assets of subsidiary banks
Net increase in operating liabilities of subsidiary banks
308
181
663
15
8
(300)
9
252
(2)
(160)
(52)
(14)
(512)
388
220
(95)
(19)
46
48
(7)
58
(12)
(73)
(78)
(3)
–
(3)
1,004
(14)
(34)
227
802
687
16
3
(344)
138
(105)
146
(172)
(100)
41
–
108
227
(143)
192
(139)
(43)
2
(58)
(67)
14
49
(9)
3
2
–
(8)
(61)
4
Net cash provided by operating activities before income tax
and interest
Income tax payments
Interest received
Dividends received
Net cash provided by operating activities
Investing activities
Capital expenditures
Acquisition of licenses and auction fee payments
Acquisition of short-term financial assets
Proceeds from sale of short-term financial assets
Proceeds from sale of long-term financial assets
Acquisition of long-term financial assets
Acquisition of interest and additional capital contribution to the associates
and joint ventures
Acquisition of interest in subsidiaries, net of cash acquired, and joint
arrangements
7
Proceeds from sale of interest in subsidiaries, net of cash acquired
Proceeds from sale of property, plant and equipment
1,741
(126)
98
32
1,745
(785)
(4)
(378)
100
13
(51)
(4)
(633)
31
17
1,185
(202)
77
50
1,110
(854)
(11)
(93)
240
12
(18)
(4)
(12)
5
6
(1,694)
(729)
Net cash used in investing activities
Financing activities
Proceeds from short-term loans and borrowings
Repayment of short-term loans and borrowings
Proceeds from long-term loans and borrowings
Repayment of long-term loans and borrowings
Proceeds from other financial liabilities
Repayment of other financial liabilities
Interest paid
Repurchase of bonds
Proceeds from sale of non-controlling share in subsidiary
Other financing received
Dividends paid to Rosneft shareholders
Dividends paid to non-controlling shareholders
Net cash provided by / (used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange on cash and cash equivalents
Cash and cash equivalents at the end of the year
623
(797)
1,218
(588)
54
(107)
(256)
(29)
644
3
(172)
(63)
530
581
228
(3)
806
16
36
18
18
401
(689)
393
(540)
185
(57)
(280)
–
–
12
(283)
(99)
(957)
(576)
832
(28)
228
309
Appendix 1.ROSNEFT / ANNUAL REPORT 2020 Appendix 2.
(KEY RISK FACTORS)
2
3
4
5
6
7
8
9
No Risk
Risk description
Risk owner
Risk management practices
Industry-wide risks
1
Risk of accidents
Vice President
for Health, Safety
and Environment
The risk of the break-
down of the facilities
and/or equipment used
at a hazardous indus-
trial facility, uncontrolled
explosion and/or pollut-
ant emissions
Risk of occupational
injuries
The risk is related
to lost-time inju-
ries of the Company’s
employees or contractors
Vice President
for Health, Safety
and Environment
Risk of failure
to achieve oil and gas
condensate produc-
tion targets
The risk is related
to the failure to achieve
oil and gas condensate
production targets
First Vice
President for Oil,
Gas, and Offshore
Business
Development
• Programmes supporting the key development
funds and projects in Oil Refining, Gas Processing
and Petrochemicals.
• Insurance programme for the main production assets
(reparation of damages).
• Improving the safety culture: staff training, motivation,
incentivisation and commitment to safe practices. Efforts
to ensure HSE leadership and zero tolerance to violations
at all management levels.
• Drafting and implementing remedial actions based on les-
sons learnt from incidents at Group Subsidiaries;
• holding occupational safety trainings;
• exercising control over equipping vehicles of the Group
Subsidiaries and contractors with in-vehicle monitoring
systems and two-way dashboard cameras.
• Cutting production at the least profitable fields taking
into account the geography, geology and climate condi-
tions of certain projects, including joint ventures;
• ensuring continuous monitoring and timely adjustment
of the production drilling programme; monitoring well
interventions and scheduled initiatives to maintain reser-
voir pressure;
• regular monitoring of procurement requests, contractor
selection and construction and installation contracting.
Risk related to ris-
ing purchase prices
for electric power
Risk of failure
to achieve natural
gas price targets
Risk of lower quality
of refinery feedstock
Risk
of failure to comply
with the repair plan
in Oil Refining
The risk is related
to fluctuating purchase
prices for electric power
in the wholesale market
price zones, indexation
of electricity transmis-
sion tariffs, and new sur-
charges to the capacity
price
The risk is related
to potential lack
of gas price indexa-
tion in the second half
of 2021
Adverse changes
in the Company's
financial and oper-
ating performance
as a result of lower qual-
ity of feedstock supplied
for refining
The risk of a decline
in financial and operat-
ing performance caused
by delays in the mainte-
nance works at the Oil
Refining production
facilities
Risk of failure
to achieve natural
gas sales targets
Risk of environmen-
tal damage (due
to pipe ruptures
on land and accidents
on the Russian shelf
causing adverse envi-
ronmental impact)
The risk is related
to the decline in gas
and gas condensate
sales below the target
The risk is related
to environmental pollu-
tion as a result of pipe-
line incidents/accidents
or well construction
on the shelf
Vice President
for Informatisation,
Innovation
and Localisation
• Promoting the need to restrict the price/tariff growth dur-
ing the energy price discussions with the federal executive
bodies, the Market Council and the expert community
Vice President
for Commerce
and Logistics
• Supporting the indexation of regulated gas prices when
discussing pricing matters with government bodies
and the expert community
Vice President
for Refining
• Making adjustments to the processing units' operation
mode; adjusting the production programme;
• stopping the receipt of a given batch of oil and/or its redi-
rection to storage facilities; filing complaints;
• monitoring supplied feedstock quality; benchmarking
the actual feedstock quality against the target.
Vice President
for Refining
• Monitoring contractual delivery timelines; considering
the purchases of available alternatives; ensuring the mini-
mum emergency stock.
• preparing the procurement and maintenance requests,
including the selection criteria (equipment, the availabil-
ity of qualified personnel, the availability of own repair
facilities);
• organising inspections at the manufacturer's site during
the production of equipment.
Vice President
for Commerce
and Logistics
• On-exchange gas sales / supply contracts with new
consumers
Vice President
for Health, Safety
and Environment
• Implementing the programme to ensure reliability
of reconstructed oilfield pipelines;
• planning and taking actions to remediate oil-contami-
nated land;
• timely emergency response, oil spill containment
and clean-up.
311
Appendix 2.
No Risk
Risk description
Risk owner
Risk management practices
No Risk
Risk description
Risk owner
Risk management practices
Legal and country risks
17
Risk related to inter-
national projects
in Commerce
and Logistics
18
Risk loss of overseas
assets in Commerce
and Logistics
19
Risk of breach
of competition laws
Vice President
for Commerce
and Logistics
The risk is related
to potentially unsta-
ble economic environ-
ment in the regions
hosting international
projects in Commerce
and Logistics
Vice President
for Commerce
and Logistics
First Vice
President
The risk is related
to the potential
loss of Commerce
and Logistics’ assets
in the regions of oper-
ation due to unsta-
ble political and social
environment
Rosneft has a significant
share in Russian whole-
sale markets for petrols,
diesel and aviation fuel,
and fuel oil and therefore
is subject to additional
competitive require-
ments and risks associ-
ated with amendments
to, and potential viola-
tions of anti-trust laws
• In case of risks arising from unstable economic envi-
ronment in the regions hosting Rosneft’s international
projects, the Company’s management will take every rea-
sonable step to minimise their potential adverse impact.
• The actual profile of such measures will be decided
on a case-by-case basis and may include conducting
negotiations with government bodies and project part-
ners, diversifying supply and sales channels, reducing
operating costs, optimising the investment programme,
and introducing restructuring initiatives.
• In case of political, economic, or social risks arising
in Rosneft’s regions of operation, the Company’s man-
agement will take every reasonable step to minimise
their potential adverse impact.
• The actual profile of such measures will be decided
on a case-by-case basis and may include conducting
negotiations with government bodies, reducing operating
costs, optimising the investment programme, introduc-
ing restructuring initiatives, as well as ensuring the safety
of the Company’s employees.
• Ensuring non-discriminating access of independent mar-
ket participants to direct supplies of Rosneft petro-
leum products (creating a level playing field for Group
Subsidiaries and third parties);
• Making sure no less than 10% of the output (includ-
ing monthly production adjustments) are regularly sold
on the exchange.
20
Risk of adverse
judgements in legal
proceedings to which
the Company
is a party
Risk of financial losses
due to adverse court
rulings in proceedings
to which the Company
is a party
Deputy Head
of Legal Support
• Protecting the Company's interests in court
10
11
Risk of failure
to achieve natural
gas and gas con-
densate production
targets
The risk is related to fail-
ure to achieve natural
gas and gas condensate
production targets
First Vice
President for Oil,
Gas, and Offshore
Business
Development
• Support of and monitoring compliance with project net-
work models for key facilities;
• monitoring counterparties’ financials to identify signs
of bankruptcy and timely notify of high relevant risks;
• overseeing the Group Subsidiaries’ initiatives to prevent
the COVID-19 spread during the pandemic;
• making arrangements for the Group Subsidiaries to file
complaints in case of contractual defaults.
Risk of accumula-
tion of unclaimed
liquid and non-liquid
inventories
The risk
is related to an increase
in unclaimed liq-
uid and non-liquid
inventories
Deputy Head
of Procurement
• Inventorying the needs in case of any change of project
timelines or adjustments of production programmes;
• an ongoing inventory categorisation, timely classification
of inventories as idle or unclaimed to make them available
to other Group Subsidiaries;
• streamlining approaches to pricing in case of sell-
ing unclaimed liquid and non-liquid inventories to third
parties;
• random checks of inventory categorisation for correctness.
Financial risks
12
Risk of tax claims
and risk of losing tax
benefits
Risk of financial losses
due to concerns brought
forward by tax authori-
ties or of the Company
being no longer eligible
for tax benefits
13
Market risks
Market risks include
price, currency and inter-
est rate risks
First Vice
President
First Vice
President
14
15
Credit risk related
to crude oil, petro-
leum products,
natural gas, petro-
chemicals and gas
processing products
supply contracts
Counterparty risk
related to long-term
advance payment
crude oil and petro-
leum products supply
contracts
16
Risk of default/
cross-default
The risk is related
to an increase in overdue
receivables as a result
of a counterparty’s
full or partial default
on, or failure to timely
fulfil its obligations
owed to the Company
under any revenue
contract
The risk is related
to losses incurred
as a result of a coun-
terparty's full or par-
tial default on or failure
to timely fulfil their obli-
gations to supply crude
oil and petroleum prod-
ucts under prepaid
contracts
Risk of being unable
to timely and/or fully
meet the Company’s
obligations under its
debt financing agree-
ments or long-term
advance payment crude
oil and petroleum prod-
ucts supply contracts
First Vice
President
• Challenging tax authority claims, if any, in and out
of court;
• monitoring legal precedents;
• checking primary documents for completeness, accuracy
and compliance with applicable tax laws, including con-
trol of reports generated for tax authorities.
Leveraging internal optimisation tools, including:
• non-derivative financial instruments;
• signing long-term contracts with customised terms;
• searching for alternative sales channels for petroleum
products and streamlining logistics.
• Using security interests to cover its credit risks (via bank
guarantees, letters of credit, etc.);
• implementing controls to authorise shipments and ship-
ping orders and ensure that all sales contracts are backed
properly by financial instruments;
• suspending credit risk-related transactions with a default-
ing counterparty.
Vice President
for Commerce
and Logistics
• Monitoring the coverage of outstanding amounts against
the planned supplies;
• discussing and monitoring shipment schedules.
Financial Director
• Regular monitoring of compliance with financial
covenants;
• negotiations with lending banks, if necessary.
312
313
Appendix 2.ROSNEFT / ANNUAL REPORT 2020 Appendix 3.
(REPORT ON COMPLIANCE
WITH THE PRINCIPLES
AND RECOMMENDATIONS
OF THE CORPORATE
GOVERNANCE CODE)
REPORT ON COMPLIANCE
WITH THE PRINCIPLES
AND RECOMMENDATIONS
OF THE CORPORATE
GOVERNANCE CODE
This report on compliance with the principles and recommendations of the Corporate Governance Code (the
Report) was reviewed by Rosneft’s Board of Directors at a meeting held on 22 April 2021 (Minutes No. __
dated __ April 2021) as part of the 2020 Annual Report.
The Board of Directors certifies that this Report contains complete and reliable information on Rosneft’s com-
pliance with the principles and recommendations of the Corporate Governance Code in 2020.1
Rosneft assesses its compliance with the Corporate Governance Code as per the guidelines recom-
mended by the Bank of Russia in Letter No. IN-06-52/8 on Disclosure of Compliance with the Principles
and Recommendations of the Corporate Governance Code in the Annual Report of a Public Joint Stock
Company dated 17 February 2016. Key aspects of the Company’s corporate governance model and practice
are outlined in Section Corporate Governance of Rosneft’s 2020 Annual Report.
1 Specifies either the reporting year or, if the report on compliance with the principles and recommendations of the Corporate Governance
Code contains data related to the post reporting period up to the date of the Report, the date of the Report.
315
Appendix 3. No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
1
of compliance
with a corporate
governance
principle
2
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
1.1. The Company shall ensure equitable and fair treatment of all shareholders exercising their right to participate in managing
the Company.
1.1.1
1.1.2
1.1.3
Complied with
Complied
with in part
Not complied with
The Company provides
the best possible con-
ditions for shareholders
to participate in General
Shareholders Meetings,
make informed decisions
on agenda items, coordi-
nate their actions and express
their opinions on matters
under consideration.
1. The Company’s internal regulation
on conducting General Shareholders
Meetings approved by the General
Shareholders Meeting is publicly
available.
2. The Company provides an easily
accessible communication chan-
nel, such as a hotline, email or online
forum, for shareholders to express
their opinions and put questions
regarding the agenda in preparation
for a General Shareholders Meeting.
The Company provided such com-
munication channels before every
General Shareholders Meeting held
in the reporting period.
To maintain effective relations
with shareholders, Rosneft pro-
vides the following communi-
cation channels: a shareholder
hotline, mail and email, fax.
The Company does not con-
sider setting up a dedicated
online forum, as it has other
communication channels
in place, as well as provides
for the opportunity to dis-
cuss agenda items at General
Shareholders Meetings and, if
relevant, using Rosneft’s social
networks, which are mentioned
on Rosneft’s official website.
Rosneft has the Corporate
Governance analytical infor-
mation system in place.
It enables shareholders
to vote online and interact
with the Company and the reg-
istrar via Shareholder’s Personal
Account.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
The procedure to notify
shareholders of a General
Shareholders Meeting
and provide them with rele-
vant materials enables them
to get well-prepared.
When preparing
for and participating
in a General Shareholders
Meeting, shareholders have
unrestricted and timely
access to any relevant
information and materials,
and are able to put questions
to the Company’s executive
bodies and directors, as well
as communicate with one
another.
1. The notice of a General Shareholders
Meeting is posted on the Company’s
website at least 30 days prior
to the date of the Meeting.
2. The notice specifies the venue
of the Meeting and documents
required for admission to the venue.
3. Shareholders are informed of who
proposed agenda items and nomi-
nated candidates to the Company’s
Board of Directors and Audit
Commission.
1.
In the reporting period, shareholders
had the opportunity to put questions
to the Company’s executive bodies
and directors both before and dur-
ing the Annual General Shareholders
Meeting.
2. The Board of Directors’ opin-
ions (including dissenting opinions
recorded in the minutes) on each
of the agenda items of the General
Shareholders Meetings held
in the reporting period were added
to the materials for the General
Shareholders Meeting.
3. The lists of persons entitled to par-
ticipate in each General Shareholders
Meeting in the reporting period were
made available to the shareholders
eligible to review such lists as soon
as the Company received those.
1 The “complied with” status is assigned only if the Company meets all of the criteria for compliance with a corporate governance principle.
Otherwise, the “complied with in part” or “not complied with” status is assigned.
2 Explanations are given for each criterion for compliance with a corporate governance principle if the Company meets only some
of the criteria or none of them. If the Company indicates the “complied with” status, no explanations are required.
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
No.
1.1.4
1.1.5
1.1.6
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
There are no unjustified diffi-
culties preventing sharehold-
ers from exercising their rights
to convene a General
Shareholders Meeting, nom-
inate candidates to the gov-
erning bodies and propose
items for the agenda.
1.
2.
In the reporting period, shareholders
had the opportunity to propose items
for the agenda of the Annual General
Shareholders Meeting during at least
60 days after the end of the respec-
tive calendar year.
In the reporting period, the Company
rejected no item proposed
for the agenda and no candidate
nominated to the Company’s bodies
due to misprints or other minor flaws
in shareholders’ proposals.
Each shareholder is able
to exercise their voting right
without hindrance, in the sim-
plest and most convenient
way.
The procedure for hold-
ing a General Shareholders
Meeting established
by the Company pro-
vides all persons present
at the Meeting with equal
opportunities to express
their opinions and ask
questions.
1. The Company’s internal regula-
tion (corporate policy) authorises
each General Shareholders Meeting
participant to request a copy
of their completed ballot certi-
fied by the ballot committee before
the end of the respective meeting.
1.
In the reporting period, sufficient
time for reporting on and discuss-
ing agenda items was provided
at General Shareholders Meetings
held in the form of a meeting (joint
presence of shareholders).
2. Candidates nominated
to the Company’s governing
and supervisory bodies were availa-
ble for answering shareholders’ ques-
tions at the Meeting where they were
voted upon.
3. When making decisions
on the preparation and holding
of General Shareholders Meetings
in the reporting period, the Board
of Directors considered using tele-
communications equipment to pro-
vide shareholders with remote access
to participate in the Meetings.
1.2. Shareholders are provided with an equitable and fair opportunity to receive a share of the Company’s profits in the form
of dividends.
1.2.1
The Company has developed
and implemented a trans-
parent and clear procedure
to determine the amount
of dividends and pay them
out.
1.2.2
The Company does
not resolve to pay out div-
idends if such resolu-
tion, though not in breach
of the legislation, is not eco-
nomically viable and may
lead to false assumptions
about the Company’s
operations.
Complied with
Complied
with in part
Not complied with
2.
1. The Company’s Dividend Policy
has been developed, approved
by the Board of Directors
and disclosed.
If, in accordance with the Company’s
Dividend Policy, the amount
of dividends is determined
based on the Company’s results
recorded in its financial state-
ments, the Dividend Policy shall
employ the consolidated financial
statements.
1. The Company’s Dividend Policy
clearly stipulates financial/eco-
nomic circumstances under which
the Company should not pay
dividends.
Complied with
Complied
with in part
Not complied with
316
317
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
1.2.3
1.2.4
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
1.
1.
The Company does not allow
any negative changes
in the dividend rights of its
current shareholders.
The Company makes every
effort to prevent sharehold-
ers from receiving profit (gain)
from the Company other
than in the form of dividends
and liquidation value.
In the reporting period, the Company
did not perform any actions caus-
ing negative changes in the dividend
rights of its current shareholders.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
In order to prevent sharehold-
ers from receiving profit (gain)
from the Company other than
in the form of dividends and liqui-
dation value, the Company’s inter-
nal regulations provide for controls
that ensure timely identifica-
tion and approval of transactions
with affiliates (related parties) of sub-
stantial shareholders (persons enti-
tled to exercise votes attached
to voting shares), where the law does
not formally recognise such transac-
tions as related-party transactions.
1.3. Corporate governance framework and practices ensure equality of all shareholders owning shares of the same class (type),
including minority and foreign shareholders, and their equitable treatment by the Company.
1.3.1
1.3.2
The Company ensures fair
treatment of each share-
holder by its governing bod-
ies and controlling persons,
specifically allowing no abuse
of minority shareholders
by major shareholders.
1.
In the reporting period, the proce-
dures to manage potential conflicts
of interest between substan-
tial shareholders were effective,
and the Board of Directors paid due
attention to conflicts between share-
holders, if any.
Complied with
Complied
with in part
Not complied with
The Company does not per-
form any actions that will
or may result in artificial redis-
tribution of corporate control.
1. The Company has no quasi-treas-
ury shares, or no quasi-treasury
shares were used in voting during
the reporting period.
Complied with
Complied
with in part
Not complied with
Pursuant to the Russian
Government's decision,
Rosneft signed an agreement
with a 100% government-owned
company to sell all of Rosneft
interest and cease participation
in all of its projects in Venezuela,
including the joint ventures
of Petromonagas, Petroperija,
Boqueron, Petromiranda
and Petrovictoria, as well as oil-
field services companies, com-
mercial and trading operations.
Based on the agreement, all
Rosneft assets and trad-
ing operations in Venezuela
and/or those with connec-
tion to Venezuela have been
disposed of, terminated
or liquidated. The agreement
and the sale of assets resulted
in Rosneft's 100% subsidi-
ary receiving a 9.6% stake in its
parent.
In addition, the Company’s
Open Market Share Buyback
Programme, which also covers
GDRs, saw its 100% subsidiary
acquire a further 0.76% stake.
None of these shares were used
in voting during the reporting
period.
1.4. Shareholders are provided with reliable and effective methods of registering their ownership of shares and the opportunity
to dispose of their shares freely and without hindrance.
Shareholders are provided
with reliable and effec-
tive methods of register-
ing their ownership of shares
and the opportunity to dis-
pose of their shares freely
and without hindrance.
1. The quality and reliability of the work
performed by the Company’s regis-
trar to keep the register of security
holders meet the Company’s and its
shareholders’ needs.
Complied with
Complied
with in part
Not complied with
1.4
318
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
2.1. The Board of Directors is responsible for the strategic management of the Company, formulating key principles
of and approaches to the risk management and internal control system in the Company, supervising the work of the Company’s
executive bodies and performing other core functions.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5
2.1.6
The Board of Directors
is responsible for the appoint-
ment of executive bodies
and their dismissal, including
as a result of failure to per-
form properly. The Board
of Directors also ensures
that the Company’s exec-
utive bodies act in accord-
ance with the approved
development strategy
and the Company’s business
profile.
1. The Board of Directors has the pow-
ers stated in the Charter to appoint
and dismiss members of executive
bodies and to determine the terms
and conditions of their contracts.
2. The Board of Directors has
reviewed the report (reports)
of the sole executive body
and members of the collective exec-
utive body on the implementation
of the Company’s strategy.
The Board of Directors sets
major long-term targets
for the Company, as well
as assesses and approves its
key performance indicators
and primary business goals,
along with the Company’s
strategy and business
plans with regard to its core
operations.
1.
In the reporting period, the Board
of Directors addressed mat-
ters related to the strategy imple-
mentation and revision, approval
of the Company’s financial and busi-
ness plan (budget), and review
of criteria and indicators (including
interim ones) as regards delivering
on the Company’s strategy and busi-
ness plans.
1. The Board of Directors has
formulated the principles
of and approaches to risk manage-
ment and internal control system
in the Company.
In the reporting period, the Board
of Directors assessed the Company’s
risk management and internal con-
trol system.
2.
1. The Company has developed
and implemented the policy (policies)
approved by the Board of Directors
on remuneration and reimbursement
of expenses (compensations) to its
directors, executive bodies and other
key managers.
In the reporting period, the Board
of Directors addressed matters
related to the above policy (policies).
2.
1. The Board of Directors plays
a key role in preventing, identifying
and resolving internal conflicts.
2. The Company has developed
a framework for identifying transac-
tions involving a conflict of interest
and a set of measures for resolving
such conflicts.
The Board of Directors
formulates the princi-
ples of and approaches
to risk management
and internal control system
in the Company.
The Board of Directors deter-
mines the Company’s policy
on remuneration and/or reim-
bursement of expenses (com-
pensations) to its directors,
executive bodies and other
key managers.
The Board of Directors
plays a key role in prevent-
ing, identifying and resolv-
ing internal conflicts between
the Company’s bodies, share-
holders and employees.
The Board of Directors
plays a key role in ensuring
the Company’s transparency,
full and timely informa-
tion disclosure, and unhin-
dered access of shareholders
to the Company’s documents.
1. The Board of Directors has approved
a regulation on Information Policy.
2. The Company has determined per-
sons responsible for the implementa-
tion of the Information Policy.
Complied with
Complied
with in part
Not complied with
319
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
No.
2.1.7
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
The Board of Directors
oversees the Company’s
corporate governance prac-
tices and plays a key role
in the Company’s material
corporate events.
1.
In the reporting period, the Board
of Directors reviewed the Company’s
corporate governance practices.
2.2. The Board of Directors is accountable to the Company’s shareholders.
2.2.1
Information
on the performance
of the Board of Directors
is disclosed and provided
to shareholders.
1. The Company’s Annual Report
for the reporting period includes
information on attendance of meet-
ings of the Board of Directors
and Committees by individual
directors.
2. The Annual Report includes infor-
mation on key results of the Board
of Directors’ performance assessment
carried out in the reporting period.
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
2.2.2
The Chairman
of the Board of Directors
is available for con-
tact with the Company’s
shareholders.
3. The Company has a transparent pro-
cedure enabling shareholders to sub-
mit their questions and opinions
thereon to the Chairman of the Board
of Directors.
Complied with
Complied
with in part
Not complied with
2.3. The Board of Directors manages the Company in an effective and competent manner, and is able to make objective
and independent judgements and decisions in the best interests of the Company and its shareholders.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
2.3.1
2.3.2
Elected to the Board
of Directors are only those
individuals who have
an impeccable business
and personal reputation,
as well as the knowledge,
skills and experience required
for making decisions within
the remit of the Board
of Directors and performing
its functions effectively.
2.
1. The Company’s procedure for assess-
ing the Board of Directors’ perfor-
mance includes, among other things,
the assessment of directors’ profes-
sional expertise.
In the reporting period, the Board
of Directors (or its Nomination
Committee) assessed candidates
to the Board of Directors in terms
of their required experience, knowl-
edge, business reputation, lack
of conflict of interest, etc.
1.
The Company’s direc-
tors are elected through
a transparent procedure
providing shareholders
with sufficient information
on candidates to form an opin-
ion about their personal
and professional qualities.
In all cases where the agenda
of a General Shareholders Meeting
held in the reporting period included
election to the Board of Directors,
the Company provided share-
holders with biographical details
of all candidates to the Board
of Directors, results of their assess-
ment by the Board of Directors
(or its Nomination Committee),
information on their compliance
with the independence criteria
as per Recommendations 102–107
of the Code, and their written con-
sent to be elected to the Board
of Directors.
2.3.3
The composition of the Board
of Directors is balanced,
including in terms of direc-
tors’ expertise, experience,
knowledge and business skills,
and worthy of shareholders’
trust.
1. As part of the Board of Directors’
performance assessment
in the reporting period, the Board
of Directors reviewed its own needs
for professional expertise, experience
and business skills.
Complied with
Complied
with in part
Not complied with
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
2.3.4
The number of directors
ensures the most effec-
tive arrangement of activi-
ties of the Company’s Board
of Directors, including by way
of establishing Committees,
and enables a candidate
voted for by the Company’s
substantial minority share-
holders to be elected
to the Board of Directors.
1. As part of the Board
of Directors’ assessment carried out
in the reporting period, the Board
of Directors reviewed whether
the number of directors was in line
with the Company’s needs and share-
holders’ interests.
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
2.4. The Board of Directors includes a sufficient number of independent directors.
2.4.1
2.4.2
An independent direc-
tor is a person with suffi-
cient professional skills,
experience and independ-
ence to form their own opin-
ions and make objective
and fair judgements not influ-
enced by the Company’s
executive bodies, cer-
tain groups of sharehold-
ers or other stakeholders.
Under normal circumstances
a candidate (elected direc-
tor) may not be consid-
ered independent if they
are related to the Company,
its substantial share-
holder, its substantial coun-
terparty or competitor,
or the government.
Candidates to the Board
of Directors are assessed
for compliance with the inde-
pendence criteria, with inde-
pendent directors being
regularly checked against
these criteria. Such assess-
ments should be in line
with the substance over form
principle.
1.
In the reporting period, all inde-
pendent directors met all
of the independence criteria
as per Recommendations 102–
107 of the Code or were recog-
nised as independent by the Board
of Directors.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
1.
2.
In the reporting period, the Board
of Directors (or its Nomination
Committee) formed an opinion
regarding the independence of each
candidate to the Board of Directors
and submitted the relevant report
to shareholders.
In the reporting period, the Board
of Directors (or its Nomination
Committee) at least once reviewed
the independence of current directors
specified in the Company’s Annual
Report as independent directors.
3. The Company has developed pro-
cedures determining actions to be
taken by a director if they cease to be
independent, including their obliga-
tion to notify the Board of Directors
accordingly and in a timely manner.
2.4.3
2.4.4
Independent directors
make up at least one third
of the elected directors.
Independent directors play
a key role in preventing inter-
nal conflicts in the Company
and taking material corporate
actions by the Company.
1.
1.
Independent directors make up
at least one third of the Board
of Directors.
Independent directors (with no con-
flict of interest) make a preliminary
assessment of material corporate
actions involving a potential conflict
of interest and submit the results
thereof to the Board of Directors.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
320
321
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
2.5. The Chairman of the Board of Directors ensures that the Board of Directors performs its functions in the most effective way.
2.5.1
2.5.2
2.5.3
The Chairman of the Board
of Directors has been
elected from among
independent directors,
or a senior independent
director has been appointed
from among the elected
independent directors
to coordinate their work
and liaise with the Chairman
of the Board of Directors.
1. The Chairman of the Board
of Directors is an independent direc-
tor, or a senior independent direc-
tor has been appointed from among
independent directors1.
2. The role, rights and responsibili-
ties of the Chairman of the Board
of Directors (and, if applicable,
of the senior independent director)
are duly specified in the Company’s
internal regulations.
Complied with
Complied
with in part
Not complied with
The Chairman of the Board
of Directors ensures con-
structive atmosphere during
meetings, facilitates open
discussion of agenda items
and oversees implementa-
tion of the Board of Directors’
resolutions.
The Chairman of the Board
of Directors ensures that
directors are provided
with information required
to make informed decisions
on agenda items in a timely
manner.
1.
In the reporting period, the perfor-
mance of the Chairman of the Board
of Directors was assessed as part
of the Board of Directors’ perfor-
mance assessment.
Complied with
Complied
with in part
Not complied with
1. The responsibility of the Chairman
of the Board of Directors to ensure
timely provision to directors of mate-
rials on agenda items is specified
in the Company’s regulations.
Complied with
Complied
with in part
Not complied with
2.6. Directors act reasonably and in good faith in the best interests of the Company and its shareholders, based on sufficient
awareness and with due diligence and care.
2.6.1
Directors make decisions tak-
ing into account all available
information, having no conflict
of interest, ensuring equitable
treatment of the Company’s
shareholders and keeping
within the limits of common
business risks.
1. The Company’s internal regulations
specify that directors shall notify
the Board of Directors of any conflict
of interest they might have in relation
to any agenda item prior to the dis-
cussion of that item at a meet-
ing of the Board of Directors or its
Committee.
Complied with
Complied
with in part
Not complied with
2. The Company’s internal regulations
specify that a director shall abstain
from voting on any item where they
have a conflict of interest.
3. The Company has established
a procedure enabling the Board
of Directors to get professional
advice on matters within its remit
at the Company’s expense.
2.6.2
Directors’ rights
and responsibilities
are clearly stated and set
forth in the Company’s inter-
nal regulations.
1. The Company has adopted
and published an internal regulation
clearly specifying directors’ rights
and responsibilities.
Complied with
Complied
with in part
Not complied with
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
2.6.3
Directors have sufficient time
to perform their duties.
1.
Individual attendance of meet-
ings of the Board of Directors
and Committees and the time
spent to prepare for such meet-
ings were taken into account during
the Board of Directors’ assessment
in the reporting period.
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
2. As per the Company’s internal reg-
ulations, directors shall notify
the Board of Directors of their inten-
tion to join the governing bod-
ies of other companies (excluding
those controlled by or affiliated
with the Company) and of the fact
of such an appointment.
1. As per the Company’s internal reg-
ulations, directors have the right
to access documents and make
enquiries related to the Company
and its controlled entities,
and the Company’s executive bodies
are obliged to provide the relevant
information and documents.
2. The Company has a formalised
induction programme for newly
elected directors.
Complied with
Complied
with in part
Not complied with
2.6.4
All directors have equal
access to the Company’s
documents and informa-
tion. Newly elected directors
are provided with sufficient
information on the Company
and the Board of Directors’
activities as soon as practi-
cable.
2.7. The Board of Directors establishes Committees for preliminary consideration of the most important matters related
to the Company’s operations.
2.7.1
2.7.2
2.7.3
Meetings of the Board
of Directors are held as nec-
essary, given the Company’s
scope of operations
and objectives at any given
time.
The Company’s internal reg-
ulations set out a procedure
to prepare and hold meetings
of the Board of Directors ena-
bling directors to make proper
preparations.
The format of a meeting
of the Board of Directors
is determined taking into
account the importance
of agenda items. Resolutions
on the most important mat-
ters are adopted at in-person
meetings.
1. The Board of Directors held at least
six meetings in the reporting year.
1. The Company has approved an inter-
nal regulation setting out the proce-
dure to prepare and hold meetings
of the Board of Directors and spec-
ifying, among other things, that
the notice of a meeting shall be
generally given at least 5 days prior
to the date of the meeting.
1. The Company’s Charter
or another internal regulation
specifies that the most impor-
tant matters (as per the list set out
in Recommendation 168 of the Code)
shall be reviewed at in-person meet-
ings of the Board of Directors.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
1 The Company specifies which of the two suggested approaches it uses and why.
322
323
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
2.7.4
Resolutions on the most
important matters related
to the Company’s opera-
tions are adopted at meet-
ings of the Board of Directors
by a qualified majority vote
or by a majority vote of all
elected directors.
1. The Company’s Charter specifies that
resolutions on the most important
matters, as per Recommendation 170
of the Code, shall be adopted
at meetings of the Board
of Directors by a qualified majority
of at least three quarters of the votes
or by a majority vote of all elected
directors.
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Paragraph 10.5.5 of Rosneft’s
Charter specifies the range
of matters to be resolved
by the Board of Directors
by a qualified majority vote.
Given the scope of Rosneft’s
operations, the number of mat-
ters reviewed by the Board
of Directors, the composi-
tion of the Board of Directors
and the economic sanctions
the Company is exposed
to, expanding this range
to include all matters set
out in Recommendation 170
of the Code may materially
impede or prevent the res-
olution of matters material
to the Company. Therefore, set-
ting a higher quorum as rec-
ommended by the Code may
result in the Board of Directors
not being able to resolve
a number of key matters.
At the same time, the num-
ber of directors, the struc-
ture of the Board of Directors,
including four independent
directors, the procedure to pre-
pare for meetings, discuss
matters at them and disclose
information on them guarantee
the protection of rights of all
shareholder groups and reflect
the Company’s sharehold-
ing structure. The Company
has no intention to change its
approach in the medium term.
2.8. The Board of Directors establishes Committees for preliminary consideration of the most important matters related
to the Company’s operations.
2.8.1
For preliminary con-
sideration of matters
related to the monitoring
of the Company’s finan-
cial and business operations,
an Audit Committee com-
posed of independent direc-
tors has been established.
Complied with
Complied
with in part
Not complied with
1. The board of directors has a standing
audit committee comprised entirely
of independent directors.
2. The Company’s internal regula-
tions specify the Audit Committee’s
objectives, including those set out
in Recommendation 172 of the Code.
3. At least one member of the audit
committee, who is an independent
director, has knowledge and expertise
in the preparation, analysis, evalua-
tion and audit of accounting (finan-
cial) statements.
4. The audit committee held at least
one meeting per quarter during
the reporting period.
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
2.8.2
For preliminary consider-
ation of matters related
to the development
of an effective and transpar-
ent remuneration framework,
a Remuneration Committee
composed of independ-
ent directors and chaired
by an independent direc-
tor not being the Chairman
of the Board of Directors has
been established.
1. The board of directors has a standing
remuneration committee comprised
entirely of independent directors.
2. The remuneration committee
is chaired by an independent director
who is not the chairman of the board
of directors.
3. The Company’s internal regula-
tions specify the Remuneration
Committee’s objectives, includ-
ing, among others, those set out
in Recommendation 180 of the Code.
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
The principle is not com-
plied with inasmuch as the HR
and Remuneration Committee
of the Board of Directors
is not exclusively composed
of independent directors.
The HR and Remuneration
Committee of the Board
of Directors is mostly made
up of independent directors.
The elected Chairman of the HR
and Remuneration Committee
of the Board of Directors
is an independent director.
The remit of the HR
and Remuneration Committee
of the Board of Directors
includes matters reserved
for a Nomination Committee
and a Remuneration Committee
by the Corporate Governance
Code.
Taking into account:
• the Company’s three
standing committees
(the Audit Committee,
HR and Remuneration
Committee, and Strategic
Planning Committee),
• the recommendations
and restrictions set out
in the Code (on the minimum
number of Committee mem-
bers (three), on the maxi-
mum number of Committees
a director may sit
on, on the minimum num-
ber of independent direc-
tors on an Audit Committee
and an HR and Remuneration
Committee, and on the com-
position of Committees
based on directors’ relevant
expertise),
• compliance
with the recommenda-
tion to have all Committees
chaired by independent direc-
tors is impracticable.
At the same time,
the Company’s internal regula-
tions, including the Regulations
on the Board of Directors,
specify procedures to pre-
vent any conflict of interest
and eliminate the risk of rec-
ommendations by the commit-
tee of the Board of Directors
being affected by the con-
trolling shareholder or execu-
tive bodies.
The Company has no inten-
tion to change its approach
in the medium term.
324
325
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
2.8.5
The composition
of Committees enables com-
prehensive discussion of mat-
ters subject to preliminary
consideration with due regard
to varying opinions.
1. Committees of the board of directors
are chaired by independent directors.
2. The company's internal regulations
(policies) contain provisions that pro-
hibit the non-members to attend
meetings of the audit, nomination
or remuneration committees, unless
they are invited by the chairman
of a respective committee.
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
1. The board of directors has a stand-
ing nomination committee (or its
objectives specified in recommen-
dation 186 of the Code are imple-
mented by a different committee1)
with the majority of its members
being independent directors.
2. 2. The Company’s internal regulations
specify the objectives of the nomina-
tion committee (or another relevant
committee with combined function-
ality), including, among others, those
set out in Recommendation 186
of the Code.
1. During the reporting period,
the company’s board of direc-
tors reviewed the relevance of its
standing committees to the board's
functions and the company’s objec-
tives. Additional committees have
been either established or found
unnecessary.
2.8.3
2.8.4
For preliminary consider-
ation of matters related
to human resources (suc-
cession) planning, expertise
and performance of the Board
of Directors, a Nomination
(Appointment, HR)
Committee mostly composed
of independent directors has
been established.
Given the scope of operations
and risk levels, the Company’s
Board of Directors has
ensured that the composi-
tion of its Committees is fully
in line with the Company’s
objectives. Additional com-
mittees have been either
established or found
unnecessary (a Strategy
Committee, a Corporate
Governance Committee,
an Ethics Committee,
a Risk Management
Committee, a Budget
Committee, a Health, Safety
and Environment Committee,
etc.).
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
As recommended
by the Code, the Audit
Committee and the HR
and Remuneration Committee
of the Board of Directors
are chaired by independ-
ent directors. Taking into
account the recommenda-
tions and restrictions set out
in the Code (on the minimum
number of members (at least
three), on the maximum num-
ber of Committees a director
may sit on, on the minimum
number of independent direc-
tors on an Audit Committee
and an HR and Remuneration
Committee, and on the com-
position of Committees based
on directors’ relevant expertise),
compliance with the recommen-
dation to have all Committees
chaired by independ-
ent directors is impractica-
ble. The Strategic Planning
Committee is not chaired
by an independent director.
At the same time, the Strategic
Planning Committee
arranges independent
reviews and engages exter-
nal experts for the Board
of Directors to consider var-
ying opinions when dis-
cussing the Committee’s
recommendations.
Together with independ-
ent directors’ involvement
with the Strategic Planning
Committee, these procedural
guarantees ensure the diver-
sity of opinions it takes into
account before issuing
recommendations.
The Company has no inten-
tion to change its approach
in the medium term.
2.8.6
Committee Chairmen report
on their Committees’ per-
formance to the Board
of Directors and its Chairman
on a regular basis.
1.
In the reporting period, Committee
Chairmen regularly reported
to the Board of Directors
on their Committees’ performance.
Complied with
Complied
with in part
Not complied with
1 If the functions of the nomination committee are performed by another committee, the company specifies its name.
326
327
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
2.9. The Board of Directors arranges performance assessment of the Board of Directors, its Committees and directors.
1.
In the reporting period, self-as-
sessment or external assessment
of the Board of Directors’ perfor-
mance included performance assess-
ment of Committees, individual
directors and the Board of Directors
as a whole.
2. Results of the self-assess-
ment or external assessment
of the Board of Directors carried out
in the reporting period were reviewed
at an in-person meeting of the Board
of Directors.
1. To assess the Board of Directors’ per-
formance on an independent basis,
the Company engaged an external
organisation (consultant) at least
once over the last three reporting
periods.
2.9.1
2.9.2
The Board of Directors’ perfor-
mance assessment is aimed
at evaluating the effective-
ness of the Board of Directors,
its Committees and directors,
checking their performance
against the Company’s devel-
opment needs, enhancing
their activities and identifying
areas for improvement.
Performance assess-
ment of the Board
of Directors, its Committees
and directors is car-
ried out on a regular basis
at least once a year. To assess
the Board of Directors’ per-
formance on an independent
basis, an external organisa-
tion (consultant) is engaged
at least once every three
years.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
At a meeting held
on 19 December 2019,
the Company’s Board
of Directors reviewed
the results of the Board
of Directors’ independent per-
formance assessment carried
out by an external consult-
ant, Ernst & Young Valuation
and Advisory Services LLC.
3.1. The Company’s Corporate Secretary ensures effective day-to-day interaction with shareholders, coordinates the Company’s
efforts to protect shareholder rights and interests, and contributes to the Board of Directors’ efficient work.
3.1.1
3.1.2
The Corporate Secretary has
sufficient knowledge, experi-
ence and expertise to perform
their duties, as well as impec-
cable reputation, and enjoys
shareholders’ trust.
1. The Company has adopted
and disclosed an internal regulation
on Corporate Secretary.
2. The Company’s website and Annual
Report provide biographical details
of the Corporate Secretary compara-
ble to those of the Company’s direc-
tors and executives.
Complied with
Complied
with in part
Not complied with
The Corporate Secretary
is sufficiently independent
from the Company’s executive
bodies and has the powers
and resources required to per-
form their duties.
1. The Board of Directors approves
the appointment and dis-
missal of the Corporate Secretary
and their additional remuneration.
Complied with
Complied
with in part
Not complied with
4.1. Remuneration paid by the Company is sufficient to attract, motivate and retain employees with the required compe-
tence and expertise. Remuneration is paid to the Company’s directors, executive bodies and other key managers in accordance
with the remuneration policy adopted by the Company.
1. The Company has adopted
an internal regulation (regulations)
in the form of a remuneration policy
(remuneration policies) for its direc-
tors, executive bodies and other key
managers clearly stating approaches
to their remuneration.
Complied with
Complied
with in part
Not complied with
Remuneration paid
by the Company to directors,
executive bodies and other
key managers is sufficient
to ensure their efficient work
and enables the Company
to attract and retain com-
petent and qualified spe-
cialists. At the same time,
the Company avoids paying
higher-than-required remu-
neration or creating unreason-
ably wide remuneration gaps
between any of the above
persons and Company
employees.
4.1.1
328
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
1.
In the reporting period,
the Remuneration Committee
reviewed the remuneration policy
(policies) and its (their) implemen-
tation and, where necessary, sub-
mitted relevant recommendations
to the Board of Directors.
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
No.
4.1.2
4.1.3
4.1.4
The Company’s remunera-
tion policy has been devel-
oped by the Remuneration
Committee and approved
by the Board of Directors.
The Board of Directors, sup-
ported by the Remuneration
Committee, monitors
the introduction and imple-
mentation of the remunera-
tion policy in the Company,
and revises and amends
it as necessary.
The Company’s remuneration
policy provides for transpar-
ent mechanisms to determine
the amount of remunera-
tion payable to its directors,
executive bodies and other
key managers, and covers all
types of payments, bene-
fits and privileges provided
to them.
The Company develops
a policy on reimbursement
of expenses (compensa-
tions) specifying reimburs-
able expenses and service
levels that its directors,
executive bodies and other
key managers are entitled
to. This policy may form part
of the Company’s remunera-
tion policy.
1. The Company’s remuneration policy
(policies) provides (provide) for trans-
parent mechanisms to determine
the amount of remuneration paya-
ble to its directors, executive bodies
and other key managers, and covers
(cover) all types of payments, bene-
fits and privileges provided to them.
Complied with
Complied
with in part
Not complied with
1. The Company’s remuneration policy
(policies) or other internal regulations
specify procedures to reimburse its
directors, executive bodies and other
key managers for the expenses
incurred.
Complied with
Complied
with in part
Not complied with
4.2. Remuneration system for directors ensures alignment of their financial interests with the long-term financial interests
of shareholders.
4.2.1
4.2.2
4.2.3
The Company pays fixed
annual remuneration to its
directors. The Company does
not pay remuneration for par-
ticipation in individual meet-
ings of the Board of Directors
or its Committees.
Long-term ownership
of the Company’s shares
ensures best alignment
of directors’ financial interests
with the long-term interests
of shareholders. At the same
time, the Company does
not link the right to sell
shares to achieving cer-
tain performance indicators,
and directors do not partici-
pate in options plans.
The Company does not pro-
vide any additional payments
or compensations to directors
in the event of early termina-
tion of office due to a transfer
of control over the Company
or any other circumstances.
1. Fixed annual remuneration was
the only form of cash remunera-
tion paid to directors for their work
in the reporting period.
Complied with
Complied
with in part
Not complied with
1.
If the Company’s internal regulation
(regulations), namely its remunera-
tion policy (policies), allows (allow)
distribution of the Company’s shares
to directors, clear rules on share own-
ership by directors aimed at encour-
aging their long-term ownership shall
be introduced and disclosed.
Complied with
Complied
with in part
Not complied with
1. The Company does not provide any
additional payments or compensa-
tions to directors in the event of early
termination of office due to a transfer
of control over the Company or any
other circumstances.
Complied with
Complied
with in part
Not complied with
329
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
4.3. Remuneration system for members of executive bodies and other key managers of the Company links their remuneration
to the Company’s performance and their personal contribution thereto.
4.3.1
Remuneration paid to mem-
bers of executive bod-
ies and other key managers
of the Company ensures
a reasonable and justified
balance between the fixed
and variable components,
with the latter depending
on the Company’s perfor-
mance and an employee’s per-
sonal (individual) contribution
thereto.
4.3.2
The Company has introduced
a long-term incentive plan
for members of its executive
bodies and other key man-
agers involving its shares
(options or other derivatives
with its shares as underlying
assets).
4.3.3
The amount of severance pay
(golden parachute) payable
by the Company to members
of its executive bodies or key
managers in the event of early
termination of office, pro-
vided that such termination
is initiated by the Company
with no misconduct
on the part of the respective
employee, does not exceed
twice the size of the fixed
component of their annual
remuneration.
1.
In the reporting period, the variable
remuneration for members of execu-
tive bodies and other key managers
of the Company was linked to annual
performance indicators approved
by the Board of Directors.
2. During the latest assessment
of the remuneration system for mem-
bers of executive bodies and other
key managers of the Company,
the Board of Directors (the
Remuneration Committee) ensured
that the Company maintained
an effective balance between
the fixed and variable components
of remuneration.
3. The Company has a procedure ensur-
ing that bonuses wrongfully received
by members of its executive bodies
and other key managers are returned
to the Company.
1. The Company has introduced a long-
term incentive plan for members
of its executive bodies and other
key managers involving its shares
(financial instruments with its shares
as underlying assets).
2. The long-term incentive plan
for members of executive bod-
ies and other key managers
of the Company specifies that
the right to sell shares and other
financial instruments used in this plan
may be exercised no earlier than
three years after the date of grant-
ing. Moreover, the right to sell
them is subject to the achievement
by the Company of certain perfor-
mance indicators.
1.
In the reporting period, the amount
of severance pay (golden parachute)
paid by the Company to mem-
bers of its executive bodies or key
managers in the event of early ter-
mination of office, provided that
such termination was initiated
by the Company with no miscon-
duct on the part of the respec-
tive employee, did not exceed twice
the size of the fixed component
of their annual remuneration.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
As recommended by the HR
and Remuneration Committee,
the Company continues pilot-
ing a long-term incentive plan
in the controlled entities.
Rosneft will go back to con-
sidering the long-term incen-
tive plan for executive bodies
as soon as pilot results of con-
trolled entities have been
processed.
Complied with
Complied
with in part
Not complied with
5.1. The Company has put in place an effective risk management and internal control system to provide reasonable assurance
that it will achieve its goals.
5.1.1
The Board of Directors
has formulated the prin-
ciples of and approaches
to the risk management
and internal control system
in the Company.
1. Risk management and internal con-
trol functions of the Company’s
governing bodies and divisions
are clearly set out in the Company’s
internal regulations / relevant policy
approved by the Board of Directors.
Complied with
Complied
with in part
Not complied with
No.
5.1.2
5.1.3
5.1.4
The Company’s risk man-
agement and internal
control system provides
an accurate, fair and clear
view of the Company’s
current situation
and prospects, and ensures
integrity and transparency
of the Company’s state-
ments, as well as a reason-
able and acceptable level
of risk-taking.
The Company’s Board
of Directors takes the nec-
essary steps to ensure that
the Company’s Risk
Management And Internal
Control System functions
effectively and is in line
with the relevant principles
and approaches formulated
by the Board of Directors.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
The Company’s executive
bodies ensure the estab-
lishment and maintenance
of an effective risk manage-
ment and internal control sys-
tem in the Company.
1. The Company’s executive bodies
have ensured the distribution of risk
management and internal control
functions and powers among heads
of units and divisions accountable
to them.
1. The Company has approved
an anti-corruption policy.
2. The Company has established
an easily accessible channel to inform
the Board of Directors or its Audit
Committee about violations of law,
internal procedures or the Code
of Corporate Ethics.
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
1.
In the reporting period, the Board
of Directors or its Audit Committee
assessed the performance
of the Company’s Risk Management
and Internal Control System.
Key results of this assessment
are included in the Company’s Annual
Report.
Complied with
Complied
with in part
Not complied with
5.2. The Company conducts internal audits to assess the reliability and effectiveness of its Risk Management, Internal Control
System and corporate governance on a regular and independent basis.
5.2.1
5.2.2
For the internal audit pur-
poses, the Company has
established a dedicated unit
or engaged an independ-
ent external organisation.
Functional accountability
and administrative account-
ability of the internal audit
unit are separated. The inter-
nal audit unit is functionally
accountable to the Board
of Directors.
The internal audit unit
assesses the effectiveness
of the internal control, risk
management and corpo-
rate governance systems.
The Company applies gener-
ally accepted internal audit
standards.
1. For the internal audit purposes,
the Company has established a ded-
icated internal audit unit func-
tionally accountable to the Board
of Directors or its Audit Committee,
or engaged an independent external
organisation with the same account-
ability principle.
Complied with
Complied
with in part
Not complied with
1.
In the reporting period, as part
of internal audit, the effectiveness
of the internal control and risk man-
agement system was assessed.
2. The Company uses generally
accepted approaches to internal con-
trols and risk management.
Complied with
Complied
with in part
Not complied with
6.1. The Company and its operations are transparent to shareholders, investors and other stakeholders.
6.1.1
The Company has devel-
oped and implemented
an Information Policy ensuring
effective exchange of informa-
tion between the Company,
its shareholders, investors
and other stakeholders.
1. The Company’s Board of Directors
has approved its Information
Policy developed in accordance
with the Code’s recommendations.
2. The Board of Directors (or one
of its Committees) reviewed matters
related to the Company’s compliance
with its Information Policy at least
once in the reporting period.
Complied with
Complied
with in part
Not complied with
330
331
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
No.
6.1.2
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
The Company discloses infor-
mation on its corporate gov-
ernance system and practices,
including detailed infor-
mation on its compliance
with the principles and recom-
mendations of the Code.
1. The Company discloses information
on its corporate governance system
and on the general corporate gov-
ernance principles it uses, includ-
ing by disclosing such information
on the Company’s website.
2. The Company discloses infor-
mation on the composition
of its executive bodies and Board
of Directors, on the independence
of directors and their membership
in the Committees of the Board
of Directors (as defined in the Code).
If there is a person controlling
the Company, the Company pub-
lishes a memorandum on behalf
of such controlling person detailing
their plans as regards corporate gov-
ernance in the Company.
3.
6.2. The Company discloses complete, up-to-date and accurate information on the Company in a timely manner to ensure that
its shareholders and investors are able to make informed decisions.
6.2.1
The Company discloses infor-
mation on a regular basis
and in a consistent and timely
manner, in line with the prin-
ciples of data accessibil-
ity, accuracy, completeness
and comparability.
Complied with
Complied
with in part
Not complied with
2.
1. The Company’s Information Policy
specifies approaches and criteria
used to identify information that may
have a material effect on the valua-
tion of the Company and its securi-
ties, and procedures ensuring timely
disclosure of such information.
If the Company’s securities are traded
in established foreign markets, dis-
closures of material information
during a reporting year are made
in Russia and in such markets
on a concurrent and equal basis.
If foreign shareholders own
a substantial number of shares
in the Company, disclosures dur-
ing the reporting year were made
in Russian and in one of the most
widely used foreign languages.
3.
6.2.2
The Company avoids for-
mal approach to informa-
tion disclosures and discloses
material information on its
operations even if such disclo-
sures are not required by law.
Complied with
Complied
with in part
Not complied with
1.
2.
In the reporting period, the Company
disclosed its IFRS financial state-
ments for the full year and for the six
months. The Company’s Annual
Report for the reporting period
includes its full-year IFRS financial
statements and auditor’s report.
In accordance
with Recommendation 290
of the Code, the Company discloses
full information on its capital struc-
ture in the Annual Report and on its
website.
6.2.3
As a key communication
tool to liaise with sharehold-
ers and other stakeholders,
the Annual Report provides
information needed to assess
the Company’s performance
for the year.
1. The Company’s Annual Report con-
tains information on the key aspects
of its operations and its financial
results.
2. The Company’s Annual Report con-
tains information on environmental
and social aspects of its operations.
Complied with
Complied
with in part
Not complied with
No.
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
Status
of compliance
with a corporate
governance
principle
Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
6.3. The Company provides shareholders with equal and unhindered access to information and documents as per their request.
6.3.1
6.3.2
The Company provides
shareholders with equal
and unhindered access
to information and documents
as per their request.
1. The Company’s Information Policy
stipulates procedures ensuring
shareholders’ unhindered access
to information, including informa-
tion on legal entities controlled
by the Company, as per their request.
When providing information
to shareholders, the Company
maintains a reasonable bal-
ance between the interests
of individual shareholders
and those of the Company,
as it is in the Company’s best
interests to keep confiden-
tial any sensitive commercial
information that may have
a material effect on its com-
petitive position.
1.
2.
In the reporting period, the Company
did not refuse to provide share-
holders with requested information,
or such refusals were justified.
If and when required
by the Company’s Information Policy,
shareholders are informed of the sen-
sitive nature of the information
provided and undertake to keep
it confidential.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
7.1. Actions that have or may have a material effect on the Company’s shareholding structure and financial position and, con-
sequently, on the shareholders’ position (material corporate actions) are taken on fair terms ensuring that rights and interests
of the shareholders and other stakeholders are respected.
Complied with
Complied
with in part
Not complied with
7.1.1
Material corporate actions
include reorganisation
of the Company, acqui-
sition of 30% or more
of the Company’s vot-
ing shares (takeo-
ver), major transactions
made by the Company,
increase or reduction
in the Company’s charter
capital, listing and delist-
ing of the Company’s shares,
and other actions that may
result in a material change
in the rights of shareholders
or be against their interests.
The Company’s Charter sets
out a list (criteria) of trans-
actions or other actions
deemed to be material cor-
porate actions and reserved
to the Company’s Board
of Directors.
1. The Company’s Charter sets out
a list of transactions or other actions
deemed to be material corporate
actions and specifies their relevant
criteria. Decision-making with regard
to material corporate actions
is reserved to the Board of Directors.
If and when the law expressly
reserves such corporate actions
to the General Shareholders
Meeting, the Board of Directors pro-
vides shareholders with relevant
recommendations.
2. Material corporate actions specified
in the Company’s Charter include,
but are not limited to, the follow-
ing: reorganisation of the Company,
acquisition of 30% or more
of the Company’s voting shares
(takeover), major transactions made
by the Company, increase or reduc-
tion in the Company’s charter capital,
listing and delisting of the Company’s
shares.
7.1.2
The Board
of Directors plays a key role
in making decisions or rec-
ommendations with regard
to material corporate actions
and relies on the opinion
of the Company’s independ-
ent directors.
1. The Company has established
a procedure for independent direc-
tors to express their opinions
on material corporate actions before
their approval.
Complied with
Complied
with in part
Not complied with
332
333
Appendix 3.ROSNEFT / ANNUAL REPORT 2020 Explanations on the failure
to meet criteria for compliance
with a corporate governance
principle
Status
of compliance
with a corporate
governance
principle
Complied with
Complied
with in part
Not complied with
No.
7.1.3
Corporate governance
principles
Criteria for compliance with a corporate
governance principle
1. Given the specific nature
of the Company’s operations, its
Charter sets out lower than statu-
tory minimum criteria for classifying
the Company’s transactions as mate-
rial corporate actions.
In the reporting period, all material
corporate actions were duly approved
prior to their implementation.
2.
When taking material cor-
porate actions affecting
the rights and legitimate
interests of shareholders,
the Company ensures equi-
table treatment of all of its
shareholders, and, where stat-
utory mechanisms protecting
shareholder rights are insuf-
ficient, takes additional
steps to protect the rights
and legitimate interests
of the Company’s sharehold-
ers. In doing so, the Company
is guided not only by the for-
mal regulatory requirements,
but also by the corporate gov-
ernance principles specified
in the Code.
7.2. The Company ensures that material corporate actions are taken in a manner enabling shareholders to receive full infor-
mation on such actions in due time and influence them, and guarantees respect and due protection of shareholder rights when
such actions are taken.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
Information on material cor-
porate actions is disclosed,
with an explanation of the rel-
evant reasons, conditions
and consequences.
1.
In the reporting period, the Company
disclosed information on its mate-
rial corporate actions in a timely
and detailed manner, including
their rationale and implementation
timelines.
Rules and procedures for tak-
ing material corporate actions
are set forth in the Company’s
internal regulations.
1. The Company’s internal regulations
set out a procedure for engaging
an independent appraiser to deter-
mine the value of the property to be
sold or purchased in a major transac-
tion or a related-party transaction.
2. The Company’s internal regulations
set out a procedure for engaging
an independent appraiser to deter-
mine the value of the Company’s
shares to be purchased or bought
back.
3. The Company’s internal regula-
tions specify additional criteria
for its directors and other persons
stipulated by law to be recognised
as related parties for the purposes
of the Company’s transactions.
The Bank of Russia’s Corporate
Governance Code was
approved at the time when
Article 81 of the Federal Law
On Joint Stock Companies
allowed joint stock compa-
nies to include in their charters
additional criteria for direc-
tors and other persons to be
recognised as related par-
ties in transactions. Article 81
of the Federal Law On Joint
Stock Companies effec-
tive from 1 January 2017 has
an exhaustive list of relat-
ed-party criteria. Therefore,
compliance with the Code’s
recommendation to spec-
ify additional related-party
criteria is impracticable
until the Russian legislation
is changed accordingly.
7.2.1
7.2.2
334
ROSNEFT / ANNUAL REPORT 2020 Appendix 4
(INFORMATION ON COMPLIANCE
WITH INSTRUCTIONS ISSUED
BY THE PRESIDENT OF THE RUSSIAN
FEDERATION AND THE GOVERNMENT
OF THE RUSSIAN FEDERATION)
INFORMATION ON COMPLIANCE
WITH INSTRUCTIONS ISSUED
BY THE PRESIDENT OF THE RUSSIAN
FEDERATION AND THE GOVERNMENT
OF THE RUSSIAN FEDERATION
Rosneft is continuously optimising the portfolio of assets owned by the Company and its
subsidiaries.
The Company has developed and is consistently implementing a non-core and non-perform-
ing asset divestment programme in accordance with the Company Policy on Corporate Property
Management and the Company Standard on Non-Core and Inefficient Assets Management devel-
oped by the Company and approved by the Board of Directors.
The programme outlines key principles of non-core and non-performing asset management, relevant
procedures, stages and deadlines for implementation.
The Company annually identifies assets conforming to the criteria of non-core and non-performing
assets and performs their appraisal, technical audit, and economic and legal expert analysis.
The registers of non-core and non-performing assets of Rosneft and the Group Subsidiaries
are maintained and updated on a regular basis in compliance with the non-core and non-performing
asset divestment programme.
In 2020, Rosneft’s Board of Directors approved the updated registers of the non-core and non-per-
forming assets scheduled to be divested in 2020–2023 (Minutes No. 7 dated 2 October 2020).
Information on the implementation of the non-core asset divestment programme is regularly posted
on the online interdepartmental portal for state property management (the “Interdepartmental
Portal”).
1. Non-core asset divestment
Subparagraph j, paragraph 1
of Instruction of the President
of the Russian Federation
No. Pr-3668 dated 6 December 2011
Subparagraph b, paragraph 1
of Instruction of the President
of the Russian Federation
No. Pr-1092 dated 27 April 2012
Item 4, subparagraph c, para-
graph 2 of Decree of the President
of the Russian Federation No. 596
dated 7 May 2012 On the Long-Term
National Economic Policy
Instruction of First Deputy Prime
Minister of the Russian Federation
Igor Shuvalov No. ISh-P13-6768
dated 13 November 2012
Directives of the Government
of the Russian Federation No.
4863p-P13 dated 7 July 2016
Resolution of the Government
of the Russian Federation No. 894-r
dated 10 May 2017
Directives of the Government
of the Russian Federation
No. 6604p-P13 dated
18 September 2017
336
Information about the divestment of non-core assets by Rosneft and Group Subsidiaries in 2020
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
1
2
3
4
1,000,000 ordinary
shares in OJSC SEK
One third
of the charter capi-
tal of DalSatCom
Land plot under fill-
ing station No. 25
Zem10
1170
1170
9101100300/
9110100203
1,000,000.00 1,000,000.00 0.00
91.01/91.02
3,365.00
11,328.32
7,963.32
1210
90.01.1/90.02.1 303.26
359.86
56.60
6 kV power line,
6,388 linear metres
INV-0001
1150
9101030100,
9101030600/
9110030200
407.81
2,244.42
1,836.61
5
Land plot
R-0003026
1150
91.01/91.02
30.66
5,181.30
5,150.64
6
7
Production facil-
ity building,
Pokhvistnevo urban
district, Oktyabrsky
settlement
Auxiliary materials
warehouse
9082-5
1150
9103/9104
68.03
1,940.17
1,872.14
30000001000084
1150
91.01/91.02
38.42
661.94
623.52
8
Apartment
1-13-000179-r3256
1150
91.01.1/91.02.1
333.99
1,900.00
1,566.01
9
Non-residential
building (garage
for special-purpose
machinery)
1325_00005898
1150
91.01/91.02
20.69
536.75
516.06
10 Facilities at 4A,
U8-URS 11
1150
62.01;
91.01/91.02;01.09
117.26
2,379.50
2,262.24
О00055
1150
62.01;
91.01/91.02;01.09
531.00
6,884.13
6,353.13
Voznesenskogo St.,
Sorochinsk
Administrative
building
11
12
Facilities at 5,
Transportnaya St.,
Pervomaysky
settlement
1150
NZDANYuYTT-1393,
NZDANYuYTT-1391,
NUDANYuYTT-1503,
1508_2-8/1, 1508_2-
7/1, 1508_2-6/1
62.01; 91.01/
91.02; 01.09
7,930.06
11,485.21
3,555.15
13 Non-residential
106, 2478
1150
91.1/91.2
90.16
1,958.70
1,868.54
building
14
Building structure
431390
1150
91.1/92.2
9,816.00
19,447.60
9,631.60
15 River vessel
77434
1150
91-03/91-04
0.00
3,896.45
3,896.45
16 Morshansk indus-
730, 11224, 729
1150
91.01/91.02
918.76
1,425.69
506.93
trial site
17
3-room apartment 000059830392500 1150
91.1/91.2
436.22
885.00
448.78
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
337
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
18
3-room apartment 000057240050805 1150
91.1/91.2
244.06
1,956.00
1,711.94
19 Warehouse No. 9
110002700894
1153
9110101001/
0102
0.00
1,573.99
1,573.99
20 Filling station
No. 105
30000682,
30003892
1210
90.01.1/
90.02.1
84.88
507.44
422.56
153254
1150
9103/9104
224.82
892.35
667.53
153255
1150
9103/9104
102.16
750.93
648.77
153256
1150
9103/9104
157.28
1,388.00
1,230.72
153093, 122899
1150
9103/9104
116.37
1,515.08
1,398.72
21
22
23
24
2-room apartment,
Zhigulevsk urban
district
3-room apartment,
Zhigulevsk urban
district
4-room apartment,
Zhigulevsk urban
district
Training cen-
tre building, 9,
Privolzhskaya St.,
Zhigulevsk urban
district
25 Non-residential
150265
1150
9103/9104
302.01
1,014.61
712.60
facility: materials
warehouse at pro-
cess machinery site
of Zhigulevskneft
oil and gas produc-
tion office, Syzran
26 Culinary (ready-to-
eat food) store
27
Zeleny Mys recrea-
tion centre
60100000017221
1150
91.01/91.02
288.85
2,555.00
2,266.15
1150
911100005/
912100005
661.25
3,783.22
3,121.97
05030100263,
05030100263,
05030100263,
05030100263,
05030100263
28 Communication
00025
1150
station
29 2-room apartment
102828
1150
91.0103010101/
91.0203010101
91.0103010101/
91.0203010101
231.53
1,801.97
1,570.44
1,641.93
1,411.82
-230.11
30 5-room apartment 402837
1260
31
Building of store
No. 18
701884
1150
910101010/
910201010
910101010/
910201010
228.82
2,740.60
2,511.78
0.00
1,172.63
1,172.63
338
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a ten-
der The ten-
der resulted
in no bids
to purchase
the asset
at a price
not lower than
the book value
Sales price
determined
during a tender
Sales price
determined
during a tender
32 Building
902446, 902714
1150
of store No. 1
with a warehouse
33 Central dispatch
service room
564127
1150
34 Facilities at 3,
19912 , 0111_1-2
1150
Transportnaya St.,
Pervomaysky
settlement
35 Part
U10-URS 1/1
1150
of the building occu-
pied by a whole-
sale and retail base
located on the first
floor of a five-floor
residential building,
with a total area
of 209.5 sq. m
910101010/
910201010
910101010/
910201010
62.01; 91.01/
91.02; 01.09
62.01; 91.01/
91.02; 01.09
0.00
2,567.58
2,567.58
146.59
2,038.52
1,891.93
617.39
2,101.65
1,484.26
53.57
931.34
877.77
36 Facilities at 12,
Transportnaya St.,
Sorochinsk
1150
NIKSOUTT-888893/1,
NIKSOUTT-1558,
nIKSOUTT-888893В,
nIKSOUTT-888891,
nIKSOUTT-139
62.01; 91.01/
91.02; 01.09
6,397.14
13,838.33
7,441.19
37
Industrial site
in Balabanovo
38 Filling station 64
00034143,
00023354,
00000284
00000285,
00023357,
00023364,
00023352,
00023353
99-277, 99969169,
99969170,
99969171, 99969172,
99969173, 99969174,
99969175,
99973762,
99973763, 99971031
1150
91.01/91.02
13,020.39
50,558.49
37,538.10
1150
62.01; 91.01/
02.01; 01.09
38.61
584.80
546.19
39 Residential
property
49Up
1150
91.01/91.02
165.71
2,735.00
2,569.29
40 Production facil-
ity. Motor transport
unit No. 3
6006, 6007, 6005,
N1r-0337
1150
91.01/91.02
25.93
2,970.35
2,944.43
41
Berezka recreation
centre
00202200321
1150
91.1.1002/
91.2.1002
2,605.40
8,142.74
5,537.34
42 Filling station No. 9 731, 718, 722, 723,
719, 720, 721, 716,
715, 717, 740, 110, 741,
739, 3698, 3695, 732,
Zem18
43
Filling station
No. 72
2978, 2973, 2974,
2975, 2976, 2971,
2972, 2977, 2988,
2986, 2985, 2987,
2970, 2979, 2981,
2980, Zem4
1150
91.01/91.02
42.77
2,979.77
2,937.00
1150
91.01/91.02
131.24
3,372.18
3,240.94
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
339
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
44 Neftyanik store
110002862807
110002700899
1153
9110101001/
9120101001
14,317.97
16,897.72
2,579.75
45
Brewery
7500036А, 41004А,
41004V, 7500036G
1150
90.01.1/90.02.1
11,853.44
24,856.77
13,003.33
8948, 15925
1150
90.01.1/90.02.1
310.52
516.41
205.89
10445, 10453, 15010 1150
90.01.1/90.02.1
327.19
1,042.39
715.19
46 Filling sta-
tion No. 63
(Stavropol Territory,
Aleksandrovsky
district)
47
Filling sta-
tion No. 173
with a service
centre (Stavropol
Territory,
Georgievsky dis-
trict, Lysogorskaya
village)
48 Apartment
KEM00000876
1150
91.01/91.05
3,998.09
4,107.77
109.68
49 Production
facility at 3A,
Promyshlennaya
St., Temryuk
NGT-2060, NGT-
2062, NGT-
2064, NGT-2061,
NGT-2063
1150
91.01/91.02.1.1
314.75
4,886.18
4,571.43
50 Warehouse build-
ing, Sukhodol
settlement
51
52
Building of store
No. 6 on the land
plot
Facilities of a die-
sel engine overhaul
shop in Belebey
34759-5
1150
504324, 693225
1260
910101010/
910201010
910101010/
910201010
31.20
432.68
401.48
77.31
2,274.61
2,197.30
2602625, 2602710,
2602657, 860323
1260
910101010/
910201010
1,512.73
15,831.34
14,318.61
53 Carpentry building 847 312
1260
910101010/
910201010
3,685.96
5,345.30
1,659.34
54 Concrete batching
facility building
518635
2160
1150
910101010/
910201010
2,611.02
5,344.17
2,733.15
55 Apartment
1-13-000184-r3117
1150
91.01.1/91.02.1
518.27
2,165.51
1,647.24
56 Apartment
1-13-000186-r3364
1150
91.01.1/91.02.1
485.99
3,136.91
2,650.92
57 Apartment, Irkutsk
6190703
61907
70606
1,783.00
1,672.65
-110.35
Region, Angarsk
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a ten-
der The ten-
der resulted
in no bids
to purchase
the asset
at a price
not lower than
the book value
340
58 Filling station 82
Kam-514, Anp-13887 1150
59 Filling station 100
Bl00001007,
Anp-13839
60 Filling station 72
Rub-000251,
Rub-807644
61
Filling station 199
Zar-000584,
Anp-13894
1150
1150
1150
62.01; 91.01/
91.02; 01.09
62.01; 91.01/
91.02; 01.09
62.01; 91.01/
91.02; 01.09
62.01; 91.01/
91.02; 01.09
155.58
1,840.32
1,684.74
65.16
3,965.73
3,900.57
298.69
6,027.55
5,728.86
115.71
1,369.79
1,254.08
62 Store (Strezhevoy,
01010097
1150
91-03 /91-04
95.28
1,001.64
906.36
80)
63 Apartment
310000000565
1161
9110101001/
9120141001
61.21
2,229.00
2,167.79
64 Apartment
310000000567
1161
9110101001/
9120141001
372.71
2,548.00
2,175.29
65 Apartment
310000000569
1161
9110101001/
9120141001
818.20
3,230.00
2,411.80
66 Apartment
310000000586
1161
9110101001/
9120141001
584.07
2,600.00
2,015.93
67 Apartment
310000000588
1161
9110101001/
9120141001
360.41
2,269.00
1,908.59
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
341
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
68 Apartment
310000000593
1161
9110101001/
9120141001
479.70
2,691.00
2,211.30
69 Apartment
310000000604
1161
9110101001/
9120141001
452.16
3,408.00
2,955.84
70 Apartment
310000000607
1161
9110101001/
9120141001
786.90
2,900.00
2,113.10
71
Apartment
310000000608
1161
9110101001/
9120141001
372.71
3,316.00
2,943.29
72 Apartment
310000000633
1161
9110101001/
9120141001
219.20
1,961.00
1,741.80
73 Apartment
310000000635
1161
9110101001/
9120141001
387.95
2,669.00
2,281.05
74 Apartment
310000000637
1161
9110101001/
9120141001
21.72
2,713.00
2,691.28
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
342
75 Apartment
310000000638
1161
9110101001/
9120141001
1,285.60
2,199.00
913.40
76 Apartment
310000000644
1161
9110101001/
9120141001
82.38
2,101.00
2,018.62
77 Apartment
310000000646
1161
9110101001/
9120141001
970.98
1,912.00
941.02
78 Apartment
310000000652
1161
9110101001/
9120141001
238.09
1,769.00
1,530.91
79 Apartment
310000000653
1161
9110101001/
9120141001
48.32
1,849.00
1,800.68
80 Apartment
310000000661
1161
9110101001/
9120141001
48.88
2,048.00
1,999.12
81 Apartment
310000000664
1161
9110101001/
9120141001
54.84
2,119.00
2,064.16
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
343
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
82 Apartment
310000000666
1161
9110101001/
9120141001
85.67
3,079.00
2,993.33
83 Apartment
310000000675
1161
9110101001/
9120141001
49.28
1,962.00
1,912.72
84 Apartment
310000000679
1161
9110101001/
9120141001
49.28
2,044.00
1,994.72
85 Apartment
310000000690
1161
9110101001/
9120141001
1,082.85
2,610.00
1,527.15
86 Apartment
310000000713
1161
9110101001/
9120141001
1,036.30
3,961.00
2,924.70
87 Apartment
310000000715
1161
9110101001/
9120141001
520.89
3,404.00
2,883.11
88 Apartment
310000000647
1161
9110101001/
9120141001
644.82
2,450.00
1,805.18
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
344
89 Apartment
310000000673
1161
9110101001/
9120141001
54.14
1,900.00
1,845.86
90 Apartment
310000000682
1161
9110101001/
9120141001
84.74
2,760.00
2,675.26
91 Apartment
310000000683
1161
9110101001/
9120141001
315.37
2,020.00
1,704.63
92 Apartment
310000000731
1161
9110101001/
9120141001
357.09
2,840.00
2,482.91
93 Non-residential
building –
Brandenburg Office
10270
1150
94 Wharf on the Vakh
02-9150
1150
River
1911111001/
2915111000
1911111001/
2915111000
0.00
1,185.87
1,185.87
0.00
2,048.54
2,048.54
95 Non-residential
premises
1580, 1579
1150
91.01/91.02
1,069.77
1,927.59
857.82
96 Fuel oil facilities
of heating plant
No. 1
907, 908, 904, 905,
906
1150
97
Facilities
at Sorochinsko-
Nikolskoye field
1511_2-28611,
1511_2-28610,
SOK_BUPT-_276_
1150
91.01/91.02
0.00
912.25
912.25
62.01; 91.01/
91.02; 01.09
594.81
660.52
65.71
98 Filling station
No. 167
37В, 371, 372, 373,
374V
1150
91.01/91.02
0.00
554.99
554.99
99 Arkadak oil depot
22А, 21А, 24А, 23А,
25А, 26А, 27А, 28А
1150
91.01/91.02
671.72
6,039.47
5,367.75
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
345
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
500134
1260
91.01/91.02
150.46
257.16
106.70
100 Residential build-
ing – 1 floor, solid
sawn lumber, con-
sists of 4 rooms,
with total area
of 134.87 sq m,
including residen-
tial area of 79.94 sq
m
101 Tire fitting shop
500260, 808638
1260
91.01/91.02,
91.03
47.81
183.20
135.39
102 1-room apart-
803046
1260
91.01/91.02
324.55
2,452.40
2,127.86
ment with an area
of 41.2 sq m
103 Aist motor ship
47702
1150
104 Residential apart-
YuG-080259
1150
ment with total
area of 56.8 sq m,
floor: 2
62.20; 91.01/
91.10; 01.02
62.20; 91.01/
91.10; 01.02
9.24
521.34
512.10
502.80
2,297.23
1,794.43
105 Land plot under fill-
3407, Zem23
1210
90.01.1/90.02.1
317.49
353.85
36.36
ing station No. 13
106 BST facility
101050, 203819,
101049
1150
90.01.1/90.02.1
724.50
5,339.62
4,615.12
107 Construction
10010010
1210
90.01.1/90.02.1
1,904.30
5,964.66
4,060.36
and assembling
unit facilities,
Sukhodol settle-
ment, Industrial
Zone 4
108 Filling station
30000893
1210
90.01.1/90.02.1
99.89
697.83
597.94
No. 131
109 Filling sta-
tion No. 87
(Stavropol Territory,
Aleksandrovskoye
village)
8952, 13163
1210
90.01.1/90.02.1
319.14
369.70
50.56
110 Filling sta-
9687, 14999
1150
90.01.1/90.02.1
288.27
2,481.70
2,193.43
tion No. 167
(Stavropol Territory,
Aleksandriyskaya
village)
111
Filling station
No. 195 (Stavropol
Territory, Zolskaya
village)
9782, 13739
1150
90.01.1/90.02.1
609.39
3,175.73
2,566.34
112 Production
91204719, 91204801
1150
90.01.1/90.02.1
1,720.64
3,235.24
1,514.60
facility at 21,
Promyshlennosti
St., Neftegorsk
346
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
113 Wooden building
3820-3
1150
90.01.1/90.02.1
424.28
2,184.92
1,760.64
of the construc-
tion and repair unit,
2, Neftyanikov St.,
Neftegorsk, Samara
Region
114 Filling station 3
00000945,
00002127
1150
91.01/91.02
916.67
9,549.22
8,632.54
115 Apartment
in Peterhof
100003
Page 10
9121209000,
70601810400-
002850101
3,985.00
4,527.38
542.38
20005052,
20005054,
20006029
116 Production facil-
ities of the man-
ufacturing shop
for plastic/metal
pipes, Samara
Region, Otradny,
Industrial Zone 3
1150
9103/9104
2,025.03
7,813.67
5,788.64
117 Residential
60100000015323
1150
91.01/91.02
88.85
2,630.00
2,541.15
premises
with an area of 50.4
sq m, floor 6, type
of residential prem-
ises: apartment
118 Administrative
buildings
28040200305_01,
28040200305_02,
28040200305_03
1260
911100005/
912100005
4,773.91
7,584.00
2,810.09
1-98, PT2-480, 005 1150
91.01/91.02
1,762.91
2,900.90
1,137.99
119 Industrial site
of Kromskaya
oil depot (5,
Elevatornaya St.,
Vozhovo village,
Bolshekolchevskoye
settlement,
Kromskoy district,
Orel Region)
120 Building of a store
118122
1150
910101010/
910201010
0.00
1,760.23
1,760.23
121 Apartment, resi-
dential purpose,
area of 88.1 sq m,
Naryan-Mar
122 Filling station 73
11000202
1260
91.01/91.02
706.86
4,809.68
4,102.82
YuOS-000139,
YuOS-000137,
YuOS-000144
1150
91.01/91.02/91.03 398.62
5,536.70
5,138.08
123 Garage
0000241, 0000247
1260
910101010/
910201010
394.23
649.25
255.02
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
during a tender
347
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
No. Asset
Inventory number
(where applicable)
Balance sheet
item show-
ing the asset
as at the report-
ing date preced-
ing its divest-
ment
Accounts
(including ana-
lytics) that
show income
and expense
from asset disposal
(91.1ххх/91.2ххх)
Asset book
value, RUB
‘000
Actual sales
price, RUB
‘000 (net
of VAT)
Grounds
for the differ-
ence
Difference
between
actual
sales price
and asset
book value,
RUB ‘000
124 Water sup-
ply networks
(water conduit
in Mezhdurechye)
00-000217,
000000027,
000000030,
000000053,
0000000050
1150
91.01/91.02
370.46
20,906.58
20,536.13
125 Facilities at 106,
Gaya St., Buzuluk
SOK_BUPT-_233_
‘SOK_BUPT-_217_,
SOK_BUPT-_235_
1150
62.01; 91.01/
91.02; 01.09
340.48
3,799.89
3,459.41
126 Non-residential
v04147, 2424
1150
91.1/91.2
307.60
2,951.01
2,643.41
building
127 Zalari section
of the Kharik shop
0235, 0237, 0238,
0236
1150
91.1/91.2
965.00
2,408.01
1,443.01
128 Car maintenance
99-138, 00000007
1150
station
62.01; 91.01/
91.02; 01.09
76.05
236.33
160.28
129 Arch warehouse
30033А
1150
130 Warehouse
10210А
1150
1911111001/
2915111000
1911111001/
2915111000
0.00
768.56
768.56
0.00
1,133.76
1,133.76
131 Land plot
00008993
1150
91.1 / 91.2
81.11
1,397.17
1,316.06
132 Canteen in Klintsy
00000647, 1528
1150
91.01/ 91.02
45.17
1,055.57
1,010.41
133 Nizhne-
Maltsevskaya oil
depot
100147, 100150,
100148, 41100153,
100149, 100151,
100154, 318
1260
91.01/ 91.02
238.80
2,625.70
2,386.90
134 Filling station
147, Zem14
1150
91.01/91.02
120.31
3,824.37
3,704.06
No. 47
135 Apartment
310000000582
1161
9110101001/
9120141001
255.44
2,010.00
1,754.56
136 Apartment
310000000707
1161
9110101001/
9120101001
50.94
1,820.00
1,769.06
137 Neftegaz-70 trans-
84105-R50103940
1150
91.01/91.02
1,566.43
10,983.85
9,417.42
port and towing
vessel
348
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
Sales price
determined
during a tender
138 Motor ship
100225029
1150
62.20; 91.01/
91.10; 01.02
5,551.95
2,096.76
-3,455.19
139 Land plot
100000003532-
3533
1150
62.20; 91.01/
91.10; 01.02
4,060.47
3,713.64
-346.83
1150
62.20; 91.01/
91.10; 01.02
5,688.12
27,240.00
21,551.88
140 Facilities
100236110,
100119062,
100119053,
100118896,
100118831,
100118825,
100120765,
100118842,
100118805,
100167907,
100173916,
100236054,
100236055,
100119090,
100118968,
100118975,
100118878,
100118890,
100118801,
100118826
141 Apartment
103334318-1
1150
11000033
1150
142 Upgrade of the
Mamontovskaya
oil depot – opera-
tor station for load-
ing light petroleum
products
62.20; 91.01/
91.10; 01.02
62.20; 91.01/
91.10; 01.02
2,207.53
3,390.42
1,182.89
888.04
1,800.00
911.96
TOTAL
1,154,065.35
1,551,442.30 397,376.95
Sales price
determined
during a ten-
der The ten-
der resulted
in no bids
to purchase
the asset
at a price
not lower than
the book value
Sales price
determined
during a ten-
der The ten-
der resulted
in no bids
to purchase
the asset
at a price
not lower than
the book value
Sales price
determined
during a tender
Sales price
determined
during a tender
Sales price
determined
following
negotiations
with the buyer
taking into
account mar-
ket valuation
report
349
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 2. Procurement of goods, works and services
2.3. Increasing procurements of Russian-made products
2.1. Approval of the Regulation on Procurement. Procurement transparency improvement
Federal Law No. 223-FZ
On Procurement of Goods, Works
and Services by Certain Types
of Legal Entities dated 18 July 2011
Instruction of the Government
of the Russian Federation No. ISh-
P13-8685 dated 17 December 2012
Paragraph 2 of List of Instructions
of the Government of the Russian
Federation No. DM-P9-8413 dated
12 December 2015
Instruction of the Government
of the Russian Federation
No. DM-P13-1100 dated
1 March 2016 (paragraph 89
of the Government Action Plan
for Stable Social and Economic
Development of the Russian
Federation in 2016)
Directives of the Government
of the Russian Federation No.
2793p-P13 dated 19 April 2016
Directives of the Government
of the Russian Federation No
7704p-P13 dated 11 October 2016
Directives of the Government
of the Russian Federation
No. 1519p-P13 dated
20 February 2019
Directives of the Government
of the Russian Federation
No. 10464p-P13 dated
18 November 2019
Directives of the Government
of the Russian Federation
No. 2850p-P13 dated 3 April 2020
On 30 November 2018, Rosneft’s Board of Directors resolved to approve version No. 3 of the Company’s
Regulations on the Procurement of Goods, Works and Services1 (the full version of the Regulations
is posted on the Company’s official website at http://zakupki.rosneft.com/node/459132
and in the Integrated Information System at http://zakupki.gov.ru), which:
• sets out the Company’s procurement principles: information openness and transparency, equality,
fairness and non-discrimination, no unwarranted restrictions on bidders, targeted and cost-effi-
cient expenditures, prevention of corruption or any abuse in the procurement process;
• describes key elements of the procurement process for goods, works and services, including proce-
dures for preparing and carrying out procurements and procedures for signing and performing pro-
curement contracts;
• sets out certain provisions regulating the participation of small and medium-sized enterprises
(SMEs) in procurements;
• provides for the possibility of online procurement.
In 2016, the Company developed procurement standards for goods, works and services to set price
limits on, and define requirements for the quantity, consumer properties and other specifications
of, the said goods, works and services. The list of products regulated by the corporate standards
is posted on the Company’s official website (the full version of the document is available at http://
zakupki.rosneft.ru). The Company also monitors the compliance with applicable standards and annu-
ally reviews procurement results for their compliance with the standards.
Pursuant to Directives of the Government of the Russian Federation No. 7704p-P13 dated
11 October 2016, the Company’s Regulations on Procurement of Goods, Works and Services provides
for the possibility of factoring as a means of financing the procurement of goods, works or services
(paragraph 10.4.7.6).
Pursuant to Directives of the Government of the Russian Federation No. 10464p-P13 dated
18 November 2019, the Company updated its standard procurement documents to allow for specific
means of securing vendor obligations under procurement contracts, including suretyship.
Pursuant to Directives of the Government of the Russian Federation No. 1519p-P13 dated
20 February 2019, the Company developed and approved internal documents providing for a contin-
uous improvement of procurement management procedures.
The Company’s Regulations on Procurement of Goods, Works and Services is in line with Directives
of the Government of the Russian Federation No. 2850p-P13 dated 3 April 2020, and decision-mak-
ing by contract supervisors as to whether apply sanctions for failure to perform or improper perfor-
mance of contractual obligations will be based on the assessment of implications for the Company
and actual circumstances of the contract implementation taking into account the COVID-19
outbreak.
Relevant information is regularly posted on the Interdepartmental Portal.
2.2. Improving efficiency of procurements from small and medium-sized enterprises (SMEs), including procurement of innova-
tive and hi-tech products
Resolution of the Government
of the Russian Federation No. 867-r
dated 29 May 2013
Instruction of the Government
of the Russian Federation
No. DM-P13-77 dated
13 January 2018 to provide infor-
mation under subparagraph
c, paragraph 1 of Instruction
of the President of the Russian
Federation No. Pr-2763 dated
31 December 2017
Directives of the Government
of the Russian Federation No.
4252p-P13 dated 16 June 2016
Directives of the Government
of the Russian Federation No. 4111p-
P13 dated 8 May 2019
The Company implemented a set of measures to improve procurement efficiency. These measures include:
• establishment of the standing Advisory Board; relevant information about the Board is posted
on Rosneft’s official website (more details are available at http://zakupki.rosneft.com/consult);
• development and approval of the following internal documents:
1. Regulations on Procurement of Goods, Works and Services;
2. Regulations on Activity of Advisory Board Carrying Out Public Audit of Efficiency of Purchases
From Small and Medium-Sized Business Entities;
3. Regulations on the Procedure and Rules of the One-Stop-Shop System for the Introduction
4.
of Innovative Products;
Innovation Classification Principles setting out uniform rules and criteria for classifying the Company’s
goods, works and services as innovations subject to Order of the Ministry of Energy of the Russian
Federation No. 1026 dated 25 December 2015;
5. Rosneft’s Guidelines for Assessing the Life Cycle of Procured Goods, Works and Services establishing
the procedure for applying the ‘product life cycle cost’ assessment criterion;
• amendments to the corporate procurement regulations specifying the procedure for SMEs to bid
for procurement contracts of the Company;
• invitation to vendors (including SMEs) to propose innovative solutions through the One-Stop-Shop
System on Rosneft’s website (more details are available at https://www.rosneft.com/Development/
Scienceandinnovation/Innovation_management/One-Stop-Shop_System/);
• development and approval of the Innovative Product Procurement Plan;
• as provided for in applicable procurement laws of the Russian Federation, all procurements from SMEs
are organised online on the TEK-Torg Electronic Trading Platform (and posted in Rosneft’s section);
• pursuant to Directives of the Government of the Russian Federation No. 4111p-P13 dated 8 May 2019,
the Company’s Regulations on Procurement of Goods, Works and Services was amended to provide
for the possibility of factoring as a means of financing the procurement of goods, works or services
from SMEs, regardless of how such procurements are organised.
Following 2020:
• while Rosneft was subject to Federal Law No. 223-FZ (January to May), the total value of con-
tracts made between Rosneft and SMEs (including those made by the Group Subsidiaries on behalf
of Rosneft), including payments due in 2020, amounted to RUB 14.6 bln, or 74.71%, (attributable
to the 20% target) and RUB 9.6 bln, or 49.39% (attributable to the 18% target).
• Rosneft signed contracts for the provision of goods, works, services, and innovative products, including
from SMEs, for RUB 3 bln, and of that amount, contracts for RUB 0.44 bn were signed with SMEs.
Relevant information is regularly posted on the Interdepartmental Portal.
1 By its Order No. 223 dated 3 April 2020, Rosneft amended its Regulations on the Procurement of Goods, Works and Services.
Instructions of the President
of the Russian Federation follow-
ing the meeting of the State Council
Presidium dated 20 February 2009
Paragraph 4 of List of Instructions
of the President of the Russian
Federation No. Pr-2821 dated
5 December 2014
Instructions of the Government
of the Russian Federation
No. AD-P9-9176 dated
8 December 2014 and No. ISh-P13-
1419 dated 5 March 2015
Instruction of the Government
of the Russian Federation No. ISh-
P13-1872 dated 1 April 2016
Paragraph 4, section II
of the Minutes of the Meeting
of the Government Commission
on the Use of Information
Technologies for the Improvement
of Welfare and Business
Environment No. 1 dated
9 February 2018
Directives of the Government
of the Russian Federation
No. 1346p-P13 dated 5 March 2015
Directives of the Government
of the Russian Federation
No. 3425p-P13 dated 1 June 2015
Directives of the Government
of the Russian Federation
No. 4972p-P13 dated 11 July 2016
Directives of the Government
of the Russian Federation
No. 6558p-P13 dated
5 September 2016
Directives of the Government
of the Russian Federation
No. 830p-P13 dated 6 February 2017
Directives of the Government
of the Russian Federation
No. 2602p-P7 dated 17 April 2017
Directives of the Government
of the Russian Federation No. 7923-
P13 dated 26 September 2018
Directives of the Government
of the Russian Federation
No. 10068p-P13 dated
6 December 2018
Directives of the Government
of the Russian Federation No. 584p-
P13 dated 26 January 2019
Directives of the Government
of the Russian Federation
No. 9984p-P13 dated
1 November 2019
Directives of the Government
of the Russian Federation
No. 9712p-P13 dated
25 October 2019
Directives of the Government
of the Russian Federation
No. 6781p-P13 dated 31 July 2020
The Company’s Board of Directors developed and approved an action plan (a set of measures)
aimed at consistent substitution of imported products (including works and services) with equiv-
alent and technically similar products, works and services of Russian origin to be used in invest-
ment projects and day-to-day operations provided that such substitution is economically feasible
and technologically justified (Minutes No. 35 dated 5 June 2015).
The Company’s Regulations on Procurement of Goods, Works and Services are fully compliant
with Directives of the Government of the Russian Federation No. 3425p-P13 dated 1 June 2015,
No. 4972p-P13 dated 11 July 2016 and No. 830p-P13 dated 6 February 2017, enable the Company
to make long-term contracts for the supply of any products and provide for the procurement
of competitive Russian software for Rosneft’s activities.
The Company’s Regulations on Procurement of Goods, Works and Services contain section 13.1
Priority of Goods, Works and Services Supplied by Russian Vendors that provides for:
• the priority of goods, works and services supplied by Russian vendors as set out in the applicable
laws;
• the customer’s discretion to specify certain priorities and conditions for the tendered contract if
such conditions are expressly stated in the procurement documents or directly set out in applica-
ble laws.
Additionally, the Company developed and implemented the Import Substitution and Equipment
Localisation Programme for Rosneft’s Needs for 2019–2021 with an outlook for 2028.
Pursuant to Resolution of the Government of the Russian Federation No. 925 dated
16 September 2016 On Priority of Goods, Works and Services Supplied by Russian Vendors
Over Goods, Works and Services Supplied by Foreign Vendors (Resolution No. 925), the Company
amended its procurement documents accordingly and added Russian origin confirmation forms
for the goods, works and services supplied by Russian vendors.
The Company updated its action plan (a list of measures) for import substitution and localisa-
tion to comply with Directive of the Government of the Russian Federation No. 830p-P13 dated
6 February 2017 and the Guidelines approved by Order of the Russian Ministry of Economic
Development No. 219R-AU dated 11 August 2016. Key actions (measures) were included in Rosneft’s
Long-Term Development Programme as updated and approved by resolution of the Company’s
Board of Directors (Minutes No. 14 dated 21 December 2020).
Relevant resolutions (Minutes No. 6 dated 24 August 2018) were made by the Company’s Board
of Directors to comply with Directives of the Government of the Russian Federation No. 2602p-P7
dated 17 April 2017.
Pursuant to Directives of the Government of the Russian Federation No. 7923-P13 dated
26 September 2018, the Board of Directors (Minutes No. 14 dated 25 January 2019) instructed
the Management Board to inform, annually and in due time, federal executive bodies
(Ministry of Industry and Trade, Ministry of Energy and Ministry of Economic Development)
and the Government of the Russian Federation of the total value of contracts made by Rosneft
and the Group Subsidiaries with defence industry companies for the procurement of civilian prod-
ucts (including works and services) for the Fuel Producing Industries, other than those under defence
procurement contracts, no later than 30 days prior to Rosneft’s Annual General Shareholders
Meeting. Relevant reports were sent to the federal executive bodies on 2 June 2020.
Provisions of Directives of the Government of the Russian Federation No. 584p-P13 dated
26 January 2019 and No. 9984p-P13 dated 1 November 2019 were incorporated into the Company’s
Regulations on Procurement of Goods, Works and Services, which provides, pursuant to Resolution
No. 925, for the priority of Russian-made products, including (i) those used in the implementa-
tion of national projects and the trunk pipeline upgrade and expansion plan; and (ii) advanced
Russian-made means of protection against radiation, chemical and biological hazards. Additionally,
the Company adopted and regularly updates a list of goods to be stocked by Rosneft and the Group
Subsidiaries for the purpose of civil defence and employee protection in case of natural and man-
made disasters.
Pursuant to Directives of the Government of the Russian Federation No. 10068p-P13 dated
6 December 2018 and No. 9712p-P13 dated 25 October 2019, the Board of Directors (Minutes No. 13
dated 3 February 2020) instructed the Management Board to report, annually and in due time,
to the Ministry of Digital Development, Communications and Mass Media of the Russian Federation
on the priority use of Russian software in a form approved by the Company.
In line with Directives of the Government of the Russian Federation No. 6781p-P13 dated 31 July
2020, the Company adopted the Regulations on the Procurement of Goods, Works and Services
and the Album of Document Forms of Template Procurement Documents providing for special/
additional requirements to bidders to be introduced as part of a specific procurement procedure,
including for automotive products. The Company has a long track record of voluntary compliance
with the measures stipulated by the said directives.
Relevant information is regularly posted on the Interdepartmental Portal.
350
351
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 3. Dividend recommendations
Resolution of the Government
of the Russian Federation
No. 774-r dated 29 June 2006
(as amended by Resolution
of the Government of the Russian
Federation No. 2083-r dated
12 November 2012)
4. Annual Report structure
Resolution of the Government
of the Russian Federation
No. 1214 dated 31 December 2010
On Improvement of the Governance
Procedures at Open Joint-Stock
Companies in Federal Ownership
and Federal State Unitary Enterprises
Paragraph 3 of List of Instructions
of the President of the Russian
Federation No. Pr-3013 dated
27 December 2014
Directives of the Government
of the Russian Federation No. 2007p-
P13 dated 6 April 2015
Paragraph 2 of Minutes
of the Meeting Convened by First
Deputy Prime Minister of the Russian
Federation Igor Shuvalov No. ISh-P13-
47pr dated 2 June 2015
Directives of the Government
of the Russian Federation No. 5024p-
P13 dated 31 July 2015
According to the Dividend Policy approved by the Company’s Board of Directors on 5 June 2015
(Minutes No. 35 dated 5 June 2015) as amended by Rosneft’s Board of Directors (Meeting Minutes
No. 15 dated 9 December 2016, No. 29 dated 22 June 2017 and No. 5 dated 31 August 2017),
the Board of Directors, when recommending a dividend to the General Shareholders Meeting,
is guided by the amount of net profit as per Rosneft's Russian Accounting Standards (RAS) financial
accounts and International Financial Reporting Standards (IFRS) consolidated financial statements.
Rosneft’s Board of Directors recommends a dividend based on Rosneft’s annual financial perfor-
mance. The target dividend is no less than 50% of Rosneft’s net income as per IFRS; the target divi-
dend frequency is no less than twice a year.
The history of dividend payments is available on the Company's official website at https://www.ros-
neft.com/Investors/Dividends/
Rosneft’s Annual Report 2020 was prepared in accordance with the annual reporting requirements
of Regulations of the Bank of Russia No. 454-P dated 30 December 2014 and an annual report tem-
plate for joint-stock companies in federal ownership as approved by Resolution of the Government
of the Russian Federation No. 1214 dated 31 December 2010 On Improvement of the Governance
Procedures at Open Joint-Stock Companies in Federal Ownership and Federal State Unitary
Enterprises (Resolution No. 1214) and Directives of the Government of the Russian Federation
No. 2007p-P13 dated 6 April 2015 and No. 5024-P13 dated 31 July 2015.
As for specific sections of the annual report template for joint-stock companies in federal ownership
approved by Resolution No. 1214, it should be noted that:
• Rosneft did not enter into any major transactions in 2020 (paragraph 10 of Resolution No. 1214);
• In compliance with paragraph 70.3 of Regulations of the Bank of Russia No. 454-P dated
30 December 2014, the list of related party transactions entered into by Rosneft in 2020 is posted
on Rosneft’s official website at https://www.rosneft.ru/Investors/information/transactions/ (para-
graph 11 of Resolution No. 1214);
• Rosneft received no subsidies from the federal budget (paragraph 13 of Resolution No. 1214)
in 2020.
5. Strategy development and update, efficiency, and long-term planning
5.1. Formulation and approval of the Innovation Development Programme
Pursuant to subparagraph b, paragraph 1 of List of Instructions of the President of the Russian
Federation No. Pr-307 dated 7 February 2011, the Government Commission for Economic
Modernization and Innovation Development (Minutes No. 2 dated 22 October 2018) and Rosneft’s
Board of Directors approved Rosneft’s Innovation Development Programme for 2020–2024
with an outlook for 2030 (Minutes No. 16 dated 25 December 2020).
The Programme is structured to meet the requirements for innovative development programmes
of state-owned joint-stock companies, state corporations and federal state unitary enter-
prises and the recommendations approved by resolution of the Interdepartmental Commission
on Technological Development under the Government Commission for Economic Modernization
and Innovation Development.
Major focus areas, key performance indicators and activities of the Innovation Development
Programme are integrated in the updated Long-Term Development Programme approved
by Rosneft’s Board of Directors (Minutes No. 14 dated 21 December 2020).
The list of the Long-Term Development Programme KPIs and KPIs for Rosneft’s top managers,
including the Chief Executive Officer, were supplemented with an integrated KPI of innovation
efficiency.
In 2018, the Company benchmarked its technology (innovation) level and relevant KPIs against peers
(leading Russian and international companies) as recommended by the cross-department task
group (Minutes No. 2 dated 19 September 2017).
The Ministry of Energy and the Ministry of Economic Development of the Russian Federation were
presented with proposals for the structure and values of the integrated KPI of innovation efficiency
for 2020.
In 2020, the Board of Directors considered a report on the progress of Rosneft's Innovation
Development Programme in 2019 (Minutes No. 23 dated 22 April 2020). The Company met its action
plan and targets for innovation efficiency KPIs as set out in Rosneft’s Innovation Development
Programme for 2019.
Relevant information is regularly posted on the Interdepartmental Portal.
Subparagraph b, paragraph 1 of List
of Instructions of the President
of the Russian Federation No. Pr-307
dated 7 February 2011
Directives of the Government
of the Russian Federation No. 1221p-
P13 dated 24 March 2011
Presidential Address to the Federal
Assembly dated 12 November 2010
Meeting Minutes of the Government
Commission for Advanced Technology
and Innovation No. 1 dated
30 January 2012
Subparagraphs 32, 33 and 34, par-
agraph 1 of List of Instructions
of the President of the Russian
Federation No. Pr-3086 dated
27 December 2013
Summary of the meeting
of the Government of the Russian
Federation dated 30 January 2014,
Minutes No. 3
Subparagraph b, paragraph 2, sec-
tion 2 of Minutes of the Meeting
of the Presidential Council
for Economic Modernization
and Innovation Development No. 2
dated 17 April 2015
Instruction of the Government
of the Russian Federation
No. DM-P36-7563 dated
7 November 2015
Directives of the Government
of the Russian Federation No. 1471p-
P13 and No. 1472p-P13 dated
3 March 2016
Directives of the Government
of the Russian Federation No. 3262p-
P13 dated 27 April 2018
5.2. Intellectual property rights management
Instruction of the Government
of the Russian Federation No. ISh-
P8-5594 dated 25 August 2017
Directives of the Government
of the Russian Federation
No. 9177p-P13 dated
12 December 2017
Instruction of the Government
of the Russian Federation No. ISh-
P13-1925 dated 5 April 2018
Directives of the Government
of the Russian Federation
No. 7050p-P13 dated
30 August 2018
Recommendations as to intellectual property rights management are fully integrated into
the Company’s Regulations on Intellectual Property Rights (Inventions, Utility Models, Software,
Databases and Know-How) Management (approved and enacted by Order No. 429 dated
25 July 2017) and Rosneft’s Innovation Development Programme for 2020–2024 (approved
by the Company’s Board of Directors).
These Regulations establish a general procedure and requirements for the following processes:
• creation and identification of protectable intellectual property;
• assignment of intellectual property rights in Rosneft’s best interest;
• patent research, including patent landscaping, to plan and conduct world-class research
and development and to create new and upgrade existing technologies;
• registration of intellectual property rights and keeping records of exploration and development
rights (patents, utility models, software and know-how).
As part of the Innovation Development Programme, Rosneft adopted an intellectual property rights
management programme.
In 2018, Rosneft’s Board of Directors considered matters related to intellectual property rights man-
agement as required by Directives of the Government of the Russian Federation No. 9177p-P13
dated 12 December 2017 and No. 7050p-P13 dated 30 August 2018.
Relevant information is regularly posted on the Interdepartmental Portal.
352
353
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 5.3. Development and approval of the Company’s strategy and Long-Term Development Programme
5.4. Reduction of operating expenses
Recommendations for Innovation
Development Programmes
approved by resolution
of the Government Commission
for Advanced Technology
and Innovation (Minutes No. 4
dated 3 August 2010)
Item 2, paragraph 2 of Minutes
of the Meeting Convened
by First Deputy Prime Minister
of the Russian Federation Igor
Shuvalov No. ISh-P13-98pr dated
3 October 2013
Subparagraphs 32
and 34, paragraph 1 of Instructions
of the President of the Russian
Federation No. Pr-3086 dated
27 December 2013
Instruction of the Government
of the Russian Federation
No. DM-P13-9589 dated
30 December 2013
Directives of the Government
of the Russian Federation
No. 4955p-P13 dated 17 July 2014
Directives of the Government
of the Russian Federation
No. 3984p-P13 dated 24 June 2015
Paragraph 6, section 2 of the Action
Plan for Labour Productivity
Improvement approved
by Resolution of the Government
of the Russian Federation
No. 1250-r dated 9 July 2014
Directives of the Government
of the Russian Federation
No. 7389p-P13 dated
31 October 2014
Paragraph 2.3, section I
of Minutes of the Meeting
of the Military and Industrial
Commission with the Government
of the Russian Federation No. 4
dated 25 April 2014
Directives of the Government
of the Russian Federation
No. 3666p-P13 dated 11 June 2015
Subparagraph b, paragraph 2 of List
of Instructions of the President
of the Russian Federation
No. Pr-1627 dated 1 July 2014
Instructions of the Government
of the Russian Federation No. ISh-
P8-6196 dated 15 August 2014
and No. OG-P8-5496 dated
22 July 2014
Directives of the Government
of the Russian Federation
No. 7439p-P13 dated
5 November 2014
Directives of the Government
of the Russian Federation
No. 4531p-P13 dated 28 June 2016
Directives of the Government
of the Russian Federation No. 276p-
P13 dated 17 January 2019
Directives of the Government
of the Russian Federation
No. 11528p-P13 dated 25 December
2019
Directives of the Government
of the Russian Federation
No. 11528p-P13 dated 30 July 2020
In 2017, Rosneft’s Board of Directors approved the Rosneft–2022 Strategy (Minutes No. 8 dated
21 December 2017) aimed at major changes in the Company’s business through advanced manage-
ment approaches and new technologies while increasing returns on the Company’s existing assets.
The Rosneft-2022 Strategy responds to all of the current challenges faced by the energy industry.
The Strategy aims to improve business profitability and increase returns through a more intensive
development of core assets, concentration on key projects, accelerated roll-out of new technology
and new management models, and transformations necessitated by digital era challenges.
While developing the Rosneft-2022 Strategy, the Company conducted an in-depth analysis of exter-
nal environment and challenges faced by each business segment. The Company formulated strate-
gic initiatives across all business segments enabling development and accomplishment of its growth
priorities. The key provisions of the Rosneft–2022 Strategy are available on Rosneft’s official web-
site. For key information and provisions of the Rosneft–2022 Strategy, see section 1 of the Annual
Report.
In 2018, Rosneft's Board of Directors approved additional initiatives to support the Rosneft–2022
Strategy in view of the Address of President of the Russian Federation Vladimir Putin to the Federal
Assembly (Minutes No. 17 dated 28 April 2018). Progress against the Rosneft–2022 Strategy is annu-
ally reviewed by Rosneft’s Board of Directors; in December 2020, the Board of Directors reviewed
the progress for 2020, noting that most of the key indicators of the Rosneft–2022 Strategy for 2020
were met.
Rosneft’s Long-Term Development Programme was originally established in 2014 pursu-
ant to Instruction of the President of the Russian Federation Vladimir Putin No. Pr-3086 dated
27 December 2013 and Directives of the Government of the Russian Federation No. 4955-P13 dated
17 July 2014. On 9 December 2014 (Minutes No. 12), the Board of Directors approved the Long-
Term Development Program, Rosneft’s Standard on the Long-Term Development Programme
Implementation Audit and the Regulations on the Company’s KPI System.
In line with Directives of the Government of the Russian Federation No. 6739p-P13 dated 30 July
2020, Rosneft’s Standard on the Long-Term Development Programme Implementation Audit was
updated and approved by the Board of Directors (Minutes No. 16 dated 25 December 2020).
As provided for in the employment contract of Rosneft’s Chief Executive Officer, he is obliged
to ensure the implementation of the approved Strategy and Long-Term Development Programme
of the Company.
Starting from 2015, the Company annually prepares a report on the implementation of the Long-
Term Development Programme for the previous period and employs an independent auditor to audit
its implementation. Audit results are annually reviewed by the Company’s Board of Directors
and presented at the Annual General Shareholders Meeting.
The Long-Term Development Programme is updated annually.
In 2020, the Long-Term Development Programme was updated to account for:
• the Company's performance in 2019 and an independent auditor's recommendations following
a limited audit on the implementation of the Long-Term Development Programme in 2019;
• changes in the tasks and initiatives for the development of Rosneft’s businesses and corporate
functions under the influence of external factors, including the macro environment in global energy
markets and its influence on long-term goals of the Company;
• resolutions made by the Board of Directors in respect of the Company’s development plans.
The Long-Term Development Programme contains initiatives developed pursuant to the Directives
of the Government of the Russian Federation (No. 4955p-P13 dated 17 July 2014, No. 7558p-
P13 dated 12 November 2014, No. 1346p-P13 dated 5 March 2015, No. 2303p-P13 dated 16 April
2015, No. 7389p-P13 dated 31 October 2014, No. 1472p-P13 dated 3 April 2016, No. 4531p-P13
dated 28 June 2016, No. 4750p-P13 dated 4 July 2017, and No. 830p-P13 dated 6 February 2017)
and includes a set of measures to increase labour productivity, information about demand for human
resources, and a section dedicated to the development initiatives in the Russian Far East.
Efficiency improvement indicators aimed at introducing the lean production methodology are inte-
grated into the existing KPI system for the Company’s top managers and heads of business units.
Provisions of the Long-Term Development Programme is aligned with key provisions of Russian gov-
ernment programmes pertaining to the Company’s lines of business.
The Company met the requirements of Directives of the Government of the Russian Federation
No. 276p-P13 dated 17 January 2019. Its current Long-Term Development Programme accounts
for key provisions of the Address of President of the Russian Federation Vladimir Putin
to the Federal Assembly and Decree of the President of the Russian Federation No. 204
of 7 May 2018. Provisions of strategic and national programmes of the Russian Federation are taken
into account in annual updates of the Long-Term Development Programme (Minutes of the Meeting
of Rosneft's Board of Directors No. 19 dated 1 April 2019).
For information on the Long-Term Development Programme and audited results of its implementa-
tion in 2020, see section 1 of the Annual Report.
In line with Directives of the Government of the Russian Federation No. 12119p-P13 dated
25 December 2019, in 2020 the Board of Directors considered whether the Company had ongo-
ing or planned major investment projects (Minutes No. 16 dated 19 March 2020). For information
on the Company’s major investment projects in 2020, see the Annual Report,
Relevant information is regularly posted on the Interdepartmental Portal.
Rosneft fully complies with Instructions of the President of the Russian Federation
and the Government of the Russian Federation regarding annual reduction of operating expenses.
The Company developed an action plan (a list of initiatives) aimed at reaching the expense (cost)
reduction target and included this plan in Rosneft’s Long-Term Development Programme.
The relevant indicator is integrated in the KPI system for Rosneft’s top managers.
The progress of operating expense reduction initiatives was audited as part of the audit of the Long-
Term Development Programme and reviewed at the meeting of the Company’s Board of Directors.
In 2020, annual average operating expenses were reduced by at least 2% year-on-year through cost
optimisation, energy savings, increased operational efficiency, measures to reduce fuel consumption
and losses, reduction in procurement, and optimisation of employee headcount.
Information on compliance with instructions and directives of the President and the Government
of the Russian Federation is regularly posted on the Interdepartmental Portal.
Subparagraph 5, paragraph 1
of Instructions of the President
of the Russian Federation
No. Pr-2821 dated 5 December 2014
Directives of the Government
of the Russian Federation
No. 2303p-P13 dated 16 April 2015
Item 4, paragraph 2 of Minutes
of the Meeting Convened
by Prime Minister of the Russian
Federation No. DM-P13-2pr dated
18 January 2016
Instruction of the Government
of the Russian Federation No. ISh-
P13-2047 dated 11 April 2016
Directives of the Government
of the Russian Federation
No. 4750p-P13 dated 4 July 2016
5.5. Development of internal regulations
In accordance with the guidelines approved by the Government of the Russian Federation (No. ISh-
P13-4148 dated 24 June 2015), the Company developed, approved and enacted the following
documents:
• Policy on Internal Audit;
• Policy on Operational and Investment Efficiency Improvement;
• Policy on Risk Management and Internal Control System;
• Policy on Onshore Oil Production;
• Policy on Offshore Hydrocarbon Exploration and Production;
• Policy on Gas Business;
• Standard on the Corporate-Wide Risk Management System;
• Regulations on the Procedure for Developing (Updating) and Implementing Rosneft’s Innovation
Development Programme;
• Regulations on the Procedure and Rules of the One-Stop-Shop System for the Introduction
of Innovative Products;
• Standard on Innovation Efficiency Management;
• Regulations on the Petroleum Product Quality Management System.
Rosneft complies with the provisions of the Directives in full.
Relevant information is regularly posted on the Interdepartmental Portal.
Paragraph 2 of List of Instructions
of the President of the Russian
Federation No. Pr-3013 dated
27 December 2014
Instructions of the Government
of the Russian Federation No. ISh-
P13-1818 dated 23 March 2015
and No. ISh-P13-4148 dated
24 June 2015
Directives of the Government
of the Russian Federation
No. 3984p-P13 dated 24 June 2015
Paragraph 2 of Instruction
of the President of the Russian
Federation No. Pr-769 dated
26 April 2016
Paragraph 6 of Instruction
of the Government of the Russian
Federation No. AD-P36-4292 dated
20 July 2016
Letter of the Federal Agency
for State Property Management
No. RB-11/9968 dated
20 March 2017
Paragraph 2 of Minutes
of the Meeting Convened
by First Deputy Prime Minister
of the Russian Federation Igor
Shuvalov No. ISh-P13-47pr dated
2 June 2015
Directives of the Government
of the Russian Federation
No. 5024p-P13 dated 31 July 2015
As resolved by the Company's Board of Directors pursuant to Directives of the Government
of the Russian Federation No. 5024p-P13 dated 31 July 2015 and in accordance with the guide-
lines approved by Resolution of the Ministry of Economic Development No. 400R-AU dated
22 December 2015 pursuant to Instruction of the Government of the Russian Federation No. ISh-
P13-5231 dated 31 July 2015, the Company's Management Board approved and enacted the following
documents:
• Regulations on the Procedure for Charitable Activities in Rosneft and Group Subsidiaries;
• Regulations on Sponsorship in Rosneft and Group Subsidiaries;
Relevant information is regularly posted on the Interdepartmental Portal.
5.6. Performance optimisation through integration
In 2015, treasury functions of Rosneft’s Group Subsidiaries were centralised and merged into
the Integrated Treasury supported by the Company’s financial department and JSC Russian Regional
Development Bank (RRDB).
Business processes pertaining to solvency management, budgeting and acceptance of financial
transactions in the Group Subsidiaries were formalised and set out in respective policies and internal
regulations of the Company.
Relevant information is regularly posted on the Interdepartmental Portal.
Paragraph 4 of Minutes
of the Meeting Convened by Deputy
Prime Minister of the Russian
Federation Dmitry Rogozin
No. RD-P13-45pr dated 15 June 2012
Paragraph 1 of List of Instructions
of the President of the Russian
Federation No. Pr-1032 dated
7 May 2014, Instruction
of the Government of the Russian
Federation No. ISh-P13-3464 dated
13 May 2014 and Paragraph 4 of List
of Instructions of the President
of the Russian Federation
No. Pr-2821 dated 5 December 2014
Directives of the Government
of the Russian Federation
No. 5110p-P13 dated 8 August 2014
and No. 1796p-P13 dated
26 March 2015
354
355
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 5.7. Alignment of corporate activities with the Bank of Russia’s Corporate Governance Code
Instruction of the Government
of the Russian Federation
No. DM-P36-46pr dated
28 August 2014
Instruction of the Government
of the Russian Federation No. ISh-
P13-5859 dated 31 July 2014
Directives of the Government
of the Russian Federation
No. 5667p-P13 dated
2 September 2014
Directives of the Government
of the Russian Federation No. 989p-
P13 dated 20 February 2015
Based on the analysis of Rosneft’s corporate governance standards and provisions of the Bank
of Russia’s Corporate Governance Code, the Company developed and approved an action plan
(roadmap) to align its activities with key provisions of the Code.
The basic principles of Rosneft’s corporate governance framework are set out in Rosneft’s Corporate
Governance Code and aligned with the best global practices.
The roadmap status was reviewed by Rosneft’s Board of Directors on 20 December 2017 ((Minutes
No. 9 dated 25 December 2017), 24 December 2018 (Minutes No. 13 dated 24 December 2018)
and 13 December 2019 (Minutes No. 10 dated 16 December 2019).
In 2019, all the initiatives scheduled by the roadmap were implemented in full.
5.8. New export contracts providing for rouble as a settlement currency
Subparagraph 1, paragraph 1, sec-
tion I of Minutes of the Meeting
of the National Financial Stability
Board No. 7 dated 10 April 2015
Directives of the Government
of the Russian Federation
No. 4807p-P13 dated 23 July 2015
On 30 September 2016 (Minutes No. 7 dated 3 October 2016), the Company’s Board of Directors
considered that new export contracts should provide for the possibility of using Russian rou-
ble as a settlement currency and decided on a reasonable minimum share of export transactions
denominated in roubles in accordance with Directives of the Government of the Russian Federation
No. 807p-P13 dated 23 July 2015.
The possibility of rouble settlements is provided for in most of petroleum sale contracts signed
by the Group Subsidiaries with buyers from the CIS countries.
As for contracts with buyers from other jurisdictions, the possibility of rouble settlements is provided
for with due assessment of customer loss and sales reduction risks (customers refusing to sign con-
tracts due to extra costs associated with currency conversion) and the risk of Russian rouble devalu-
ation that might lead to a reduction in total revenue from petroleum product exports.
5.9. Remuneration of the Company’s management and employees and KPI system development
The Company introduced a KPI-based incentive system for its management in 2009. Also enacted
were the Regulations on Annual Bonuses for Rosneft’s Top Managers and Heads of Independent
Business Units.
On 9 December 2014 (Minutes No. 12), Rosneft’s Board of Directors approved the Regulations
on the Company’s KPI System in strict compliance with the Guidelines of the Federal Agency
for State Property Management on the Application of Key Performance Indicators by State
Corporations, State Companies, State Unitary Enterprises and Business Entities Where
the Aggregate Share of the Russian Federation or a Constituent Entity of the Russian Federation
Exceeds 50%.
Rosneft’s KPI system includes:
• financial and economic indicators (EBITDA, ROACE, TSR, Net Debt / EBITDA, and cost reduction
indicators);
• industry-wide indicators (hydrocarbon production, reserve replacement, light product yield,
an integrated KPI of innovation efficiency, etc.).
Management bodies of the Company (Board of Directors, Management Board and Chief Executive
Officer) annually revise and approve performance indicators for each category of the Company’s
managers.
Other employees of Rosneft’s Administration receive bonuses based on collective KPIs for Rosneft
and its businesses, and personal performance evaluation (an individual performance factor).
Target KPIs and personal performance of the top management are reviewed annually and approved
by the Board of Directors based on the recommendations of the HR and Remuneration Committee
of the Board of Directors.
As provided for in the employment contract of Rosneft’s Chief Executive Officer, he is obliged
to ensure the implementation of the approved Strategy and Long-Term Development Programme
of the Company.
Relevant information is regularly posted on the Interdepartmental Portal.
Instruction of the President
of the Russian Federation
No. Pr-825 dated 6 April 2009
Instructions of the Government
of the Russian Federation
No. VP-P13-1823 dated
6 April 2009, No. VP-P13-2099
dated 20 April 2009, No. VZ-P13-
4252 dated 28 July 2009, No. ISh-
P13-2232 dated 8 April 2010
and No. KA-P13-8297 dated
4 December 2010
Item 3, paragraph 2 of Minutes
of the Meeting Convened
by First Deputy Prime Minister
of the Russian Federation Igor
Shuvalov No. ISh-P13-98pr dated
3 October 2013
Paragraph 5 of List of Instructions
of the President of the Russian
Federation No. Pr-1474 dated 5 July
2013
Directives of the Government
of the Russian Federation
No. 2579p-P13 dated 25 April 2014
Instruction of the Government
of the Russian Federation No. ISh-
P13-2043 dated 27 March 2014
Directives of the Government
of the Russian Federation
No. 3984p-P13 dated 24 June 2015
Subparagraph b, paragraph 1 of List
of Instructions of the President
of the Russian Federation
No. Pr-2821 dated 5 December 2014
Instruction of the Government
of the Russian Federation
No. DM-P13-9024 dated
4 December 2014
Directives of the Government
of the Russian Federation
No. 2303p-P13 dated 16 April 2015
Directives of the Government
of the Russian Federation
No. 9054p-P13 dated
2 October 2019
356
5.10. Fulfilment of Resolution of the Government of the Russian Federation No. 232 dated 6 March 2018 with Regard
to the Procedure for Approval of Plans and Programmes by the Ministry for Development of the Russian Far East
and Approval of Said Documents by the Ministry
Directives of the Government
of the Russian Federation
No. 8860p-P13 dated
29 October 2018
On 24 December 2018, pursuant to Directives of the Government of the Russian Federation
No. 8860p-P13 dated 29 October 2018, Rosneft's Board of Directors considered the fulfil-
ment of Resolution of the Government of the Russian Federation No. 232 dated 6 March 2018
that requires to introduce a procedure for approval of corporate plans and target programmes
by the Ministry for Development of the Russian Far East and to have these documents approved
by the said Ministry. It was noted, among other things, that the projects initiated by Rosneft
in the Russian Far East as instructed by the President and Government of the Russian Federation
are coordinated with the Ministry for Development of the Russian Far East.
Pursuant to the said directive, Rosneft and the Ministry for Development of the Russian Far
East signed an agreement on 26 October 2019 to establish a procedure for confidential informa-
tion exchange. In addition, Rosneft developed and approved the Regulations on the Provision
of Summary Information about the Company's Plans and Target Programmes to the Ministry
for Development of the Russian Far East and enacted them on 1 January 2020.
Consolidated data based on Rosneft’s plans and target programmes, including information on activ-
ities carried out by Rosneft in the Russian Far East in pursuance of the Instructions of the President
and the Government of the Russian Federation, were provided to the Ministry for Development
of the Russian Far East (Rosneft’s letter No. DK-8573 dated 31 August 2020).
Relevant information is regularly posted on the Interdepartmental Portal.
5.11. Fulfilment of Directives to reduce crude oil production as part of compliance by the Russian Federation with the OPEC
and non-OPEC ministerial meeting’s decisions to that effect
Directives of the Government
of the Russian Federation
No. 4036p-P13 dated 15 May 2020
Directives No. 6883p-P13 dated
4 August 2020
In 2020, as part of compliance by the Russian Federation with the OPEC and non-OPEC ministe-
rial meeting’s decisions, Rosneft received Directives of the Government of the Russian Federation
No. 4036p-P13 dated 15 May 2020 and No. 6883p-P13 dated 4 August 2020 providing for limitations
on crude oil production.
In pursuance of the Directives, the Company engaged in comprehensive efforts to comply
with the above limitations taking into account the changing macroeconomic environment and clas-
sification of assets by economic efficiency.
In 2020, the Company continuously monitored its compliance with the Government’s Directives
on crude oil production, including where needed targeted adjustments in production at specific
assets depending on delivery commitments, technical feasibility, and economic efficiency.
5.12. International cooperation and exports
Directives of the Government
of the Russian Federation
No. 10357p-P13 dated 14 November
2019
In pursuance of the Directives, Rosneft analysed its export operations and determined that
the export structure also includes non-commodity and non-energy products – oil and gas refining
products.
The approved business plan for 2020–2021 and the resulting forecast for the period of up to 2024
provided for the export volume in this category to increase by 118% by 2024 as compared to 2017.
As the target increase in exports of non-commodity non-energy products by the Company is above
the level provided for in the National Project (112.6%), no measures are required to update the tar-
gets in the Company's business plans, and there is no need to update the Company’s Long-Term
Development Programme or implement the Directives across the subsidiaries.
Efficiency metrics reflecting Rosneft’s export activities are already included in the Company’s
Business Plan metrics.
Rosneft is currently involved in implementing the road map for the development of the petrochem-
ical industry in the Russian Federation through 2025 put together by the Ministry of Energy as part
of the National Project. The Directives’ requirements regarding the Company's integration into
the National Project have effectively been complied with.
6. Sustainable development
6.1. Adoption of professional standards
In 2020, Rosneft and Group Subsidiaries took measures to adopt professional standards in accord-
ance with the Action Plan approved by Rosneft’s Board of Directors on 27 December 2019 (Minutes
No. 12).
Rosneft’s Board of Directors was twice updated (as at 1 May 2020 and 2 November 2020)
on the implementation of the Action Plan in Rosneft and the Group Subsidiaries (Minutes No. 3
dated 2 July 2020 and Minutes No. 16 dated 25 December 2020).
By resolution of the Board of Directors, Rosneft approved the Action Plan for Adoption
of Professional Standards at Rosneft and the Group Subsidiaries for 2021 (Minutes No. 16 dated
25 December 2020).
Relevant information is regularly posted on the Interdepartmental Portal.
Paragraph 3, Section I of Minutes
of the Meeting of the Government
of the Russian Federation No. 9-dsp
dated 24 March 2016 in accord-
ance with Federal Law No. 122-FZ
dated 2 May 2015 On Amendments
to the Labour Code of the Russian
Federation and Articles 11 and 73
of the Federal Law on Education
in the Russian Federation
Directives of the Government
of the Russian Federation
No. 5119p-P13 dated 14 July 2016
On the Adoption of Professional
Standards in Joint-Stock
Companies
357
Appendix 4.ROSNEFT / ANNUAL REPORT 2020 6.2. Creation of professional and amateur sports organisations
Subparagraph b, paragraph 2 of List
of Instructions of the President
of the Russian Federation
No. Pr-2179 dated 9 November 2016
Paragraph 1 of Instruction
of the Government of the Russian
Federation No. ISh-P13-8690 dated
26 December 2017
Letter of the Federal Agency
for State Property Management
No. RB-11/1520dsp dated
22 January 2018
In accordance with paragraph 17.1, Article 65 of the Federal Law on Joint-Stock Companies, matters
related to the establishment of, participation in, and withdrawal from commercial and non-commer-
cial organisations fall within the remit of the board of directors or another executive body of a joint-
stock company as is provided for in the company’s charter.
Rosneft places special emphasis on the support and development of sports and considers them one
of the top priorities of its social policy.
In particular, the Company supports sports through charitable activities under social and economic
cooperation agreements with regional authorities and by delivering individual charity projects.
For this purpose, the Company traditionally provides finance to support and develop sports organ-
isations, develop and promote mass and children’s sports, build and upgrade ice arenas, ice rinks
and recreation centres, and buy sports equipment for children’s sports schools and other educational
institutions.
As part of its sponsorship agenda, Rosneft also provides financial support to help organise and hold
important international sports competitions. Its initiatives are aimed at supporting and developing
hockey, football, biathlon, sambo, boxing, motor racing and other sports.
6.3. Advertising contracts between Rosneft and top Russian athletes
Instruction of the President
of the Russian Federation
No. Pr-223 dated 9 February 2018
and Instruction of the Government
of the Russian Federation
No. VM-P12-1271 dated
7 March 2018
Since Rosneft promotes sports, it provides finance to support and develop sports organisations.
Rosneft is a title sponsor of the International SAMBO Federation (FIAS) and finances the official
schedule of annual sambo competitions.
The Company supports motor racing and prioritises national teams and car manufacturers, while
intending to cover the maximum number of regions with the races organised.
The Company also provides full financial support to the Russian ice hockey club CSKA.
Since 2017, Rosneft has been a title sponsor of the Arsenal Tula Football Club in the Russian football
championship, the Avers Basketball Club, and other sports teams.
6.4. Implementation of measures to prevent the spread of COVID-19
Directives of the Government
of the Russian Federation
No. 2150p-P13 dated 16 March 2020
In pursuance of Directives of the Government of the Russian Federation No. 2150p-P13 dated
16 March 2020 on coronavirus, on 23 March 2020, the Company developed and approved the Plan
of Priority Response Measures to Ensure Business Continuity (Minutes of the Board of Directors
No. 18 dated 19 March 2020, P-2212-IS dated 23 March 2020).
To ensure business continuity amid the spread of virus infections, the Group subsidiaries were pro-
vided with a recommended template of the basic action plan to develop their own plans (letter
AA-3527 dated 25 March 2020).
Information about compliance with the Directives was posted on the Interdepartmental Portal.
Rosneft’s Plan of Priority Response Measures to Ensure Business Continuity was not posted
on the portal due to the confidential information that it contains.
Level of net foreign exchange assets
Directives
of the Government of the Russian
Federation No. 8036p-P13 dated
1 September 2020
In 2020, the Company carried out monthly calculations of its net foreign exchange assets based
on its consolidated IFRS data and also of its foreign currency revenue and submitted reports
to the Central Bank of the Russian Federation using the form for the calculation of the maximum
permissible limit of net foreign exchange assets.
Transition to tax monitoring
Directives of the Government
of the Russian Federation
No. 11528p-P13 dated 13 December
2019
In pursuance of the said Directives of the Government of the Russian Federation, on 16 March
2020 Rosneft’s Board of Directors (Minutes No. 16 dated 19 March 2020) approved and coordi-
nated with the Federal Tax Service (No. SD-4-23/9031 dated 1 June 2020) a road map through 2022
to enable the transition of Rosneft and the largest Group Subsidiaries to tax monitoring.
Information on compliance with Directives of the Government of the Russian Federation No. 11528p-
P13 dated 13 December 2019 was posted on the Interdepartmental Portal.
358
ROSNEFT / ANNUAL REPORT 2020 Appendix 5
(INFORMATION ON CORE INTERNAL
REGULATIONS THAT SERVE
AS A BASIS FOR THE PREPARATION
OF THIS ANNUAL REPORT, INCLUDING
KEY INTERNAL DOCUMENTS
REGULATING THE INTERNAL AUDIT
FUNCTION AND THE FUNCTIONING
OF THE IC&RMS)
THIS ANNUAL REPORT HAS BEEN PREPARED BASED
ON THE FOLLOWING LOCAL (INTERNAL) REGULATIONS
OF ROSNEFT:
CHARTER;
Rosneft's Corporate Governance Code;
Code of Business and Corporate Ethics of Rosneft;
Regulations on the General Shareholders Meeting of Rosneft;
Regulations on the Board of Directors of Rosneft;
Rosneft Regulation on the Rosneft Board of Directors Audit Committee;
Rosneft Regulations on Human Resources and Remuneration Committee of Rosneft Board of Directors;
Rosneft Regulation on the Rosneft Board of Directors Strategic Planning Committee;
Rosneft Regulation on Payment of Remuneration and Compensation of Expenses of the Members of Rosneft
Board of Directors;
Rosneft Regulation Procedure for Formation and Work of Rosneft Board of Directors Committees;
Regulations on the Collective Executive Body (Management Board) of Rosneft;
Regulations on the Sole Executive Body (Chief Executive Officer) of Rosneft;
Company Standard on Payments and Сompensations to Top-managers;
Regulations on the Audit Commission of Rosneft;
Rosneft Regulation on Remuneration and Compensation to Rosneft Audit Commission Members;
Rosneft Regulation on Rosneft Corporate Secretary;
Company Information Policy;
Rosneft Regulation on Provision of Information to Rosneft Shareholders;
Rosneft Regulations on Insider Information;
Rosneft Dividend Policy;
Company Policy on Combating Corporate Fraud and Involvement in Corruption Activities;
Company Policy on Internal Audit;
Company Policy on Risk Management and Internal Control System;
Company Policy on Health, Safety and Environmental Protection.
360
ROSNEFT / ANNUAL REPORT 2020 Appendix 6
(FINANCIAL STATEMENTS
AND AUDITOR’S REPORT)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Directors of PJSC Rosneft Oil Company
OPINION
We have audited the financial statements of PJSC Rosneft Oil Company (the “Company”), which comprise
the balance sheet as of 31 December 2020, the income statement for 2020 and appendices thereto.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as of 31 December 2020 and its financial performance and its cash flows for 2020
in accordance with the rules on preparation of financial statements established in the Russian Federation.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Company in accordance with the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit
of the financial statements in the Russian Federation, and we have fulfilled our other ethical responsibilities
in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit
of the financial statements of the current period. These matters were addressed in the context of the audit
of the financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a
separate opinion on these matters. For the matter below, our description of how our audit addressed
the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial
statements section of our report, including in relation to this matter. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the risks of material misstatement
of the financial statements. The results of our audit procedures, including the procedures performed to address
the matter below, provide the basis for our audit opinion on the accompanying financial statements.
Contributions to the charter capital of subsidiaries related to restructuring
Key audit matter
How our audit addressed the key audit matter
In 2020, the Company made a number of new investments of shares/
units of entities that the Company owns and holds on its balance
sheet, to the charter capital of its other subsidiaries in order to create
and spin-off management sub-holdings. As a result of these
transactions, the cost of financial investments should be determined
based on the fair value of assets transferred as a contribution
to the charter capital.
This matter is one of the most significant in our audit
as the respective transactions are significant for financial statements
and the calculation of the value of the transferable financial
investments requires management to make significant judgments.
Information on the above-mentioned transactions is provided
in Note 11 to the financial statements.
We engaged our business valuation experts to review the models
prepared to determine the value of the assets transferred
to the charter capital. We analyzed assumptions used in the models
to verify the value of the assets. We compared discount rates
and projected long-term growth rates with general market
indicators and other available data. We verified arithmetic accuracy
of the models and sensitivity analysis of models to changes in key
assumptions. In addition, we compared the amounts in accounting
postings to the respective value calculations and analyzed
the approach to fair value measurement of financial investments.
OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
Other information consists of the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon. Management is responsible for the other information. The Annual
Report is expected to be provided to us after the date of this auditor’s report.
Our opinion on the financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read other information
when it is provided to us and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the rules on preparation of financial statements established in the Russian Federation,
and for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatements, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease its
operations, or has no realistic alternative but to do so.
The Audit Committee of the Board of Directors is responsible for overseeing the Company’s financial reporting
process.
362
363
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management and related disclosures.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern
• Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with the Audit Committee of the Board of Directors regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the Audit Committee of the Board of Directors with a statement that we have complied
with relevant ethical requirements regarding independence, and have communicated with it all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable, threat
mitigation actions or related safeguards.
From the matters communicated with the Audit Committee of the Board of Directors, we determine those
matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The partner in charge of the audit resulting in this independent auditor’s report is D. E. Lobachev.
D. E. Lobachev
Partner
Ernst & Young LLC
12 February 2021
DETAILS OF THE AUDITED ENTITY
Name: PJSC Rosneft Oil Company
Record made in the State Register of Legal Entities on 12 August 2002, State Registration
Number 1027700043502.
Address: Russia 115035, Moscow, Sofiyskaya nab., 26/1.
DETAILS OF THE AUDITOR
Name: Ernst & Young LLC
Record made in the State Register of Legal Entities on 5 December 2002, State Registration
Number 1027739707203.
Address: Russia 115035, Moscow, Sadovnicheskaya nab., 77, building 1.
Ernst & Young LLC is a member of Self-regulated organization of auditors Association “Sodruzhestvo”
(“SRO AAS”). Ernst & Young LLC is included in the controlled copy of the register of auditors and audit
organizations, main registration number 12006020327.
364
365
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 BALANCE SHEET
AT 31 DECEMBER 2020
Entity PJSC Rosneft Oil Company
Monetary unit: kRUB
Explanatory
note
Item
Line code
31 December
2020
31 December
2019
31 December
2018
Assets
I. Non-current assets
Intangible assets
Research and development results
Intangible exploration assets
Tangible exploration assets
1110
1120
1130
1140
42,463,967
44,331,957
44,599,532
10,511,685
8,950,122
6,728,123
103,846,837
107,173,666
99,214,115
32,202,676
31,140,877
20,222,627
Fixed assets
1150
1,402,928,888
1,325,676,684
1,269,210,761
Income-bearing investments in tangible
assets
1160
–
–
–
Financial investments
Deferred tax assets
Other non-current assets
Total for section I
II. Current assets
Inventories
Value added tax on purchased assets
1170
5,764,322,744
5,833,160,665
6,159,574,705
1180
1190
201,922,448
118,633,694
94,841,893
39,003,899
33,452,714
31,951,119
1100
7,597,203,144
7,502,520,379
7,726,342,875
1210
1220
113,901,023
138,889,747
151,426,199
35,670,961
48,808,809
72,718,694
6
8
7
7
5
11
3.21
9
10
10
15.18
Accounts receivable
1230
4,002,964,504
3,543,076,666
2,653,803,215
Including:
Accounts receivable expected to be settled
within 12 months after the reporting date
Accounts receivable expected to be settled
in over 12 months after the reporting date
Financial investments (other than cash
equivalents)
Short-term derivative financial instruments
at fair value through profit or loss
Long-term derivative financial instruments
at fair value through profit or loss
Cash and cash equivalents
Other current assets
Including:
1231
940,655,282
1,411,354,476
1,005,017,767
1232
3,062,309,222
2,131,722,190
1,648,785,448
1240
1,423,661,785
985,762,573
1,100,833,573
1241
1242
1250
1260
–
–
2,243,018
–
–
–
496,199,797
97,398,766
598,541,224
5,141,916
4,797,785
5,052,039
Unbilled accrued revenue under construction
contracts
1261
–
–
–
Total for Section II
1200
6,077,539,986
4,820,977,364
4,582,374,944
Balance
Liabilities
III. Capital and liabilities
1600
13,674,743,130
12,323,497,743
12,308,717,819
11
12
12
14
366
Explanatory
note
Item
Line code
31 December
2020
31 December
2019
31 December
2018
1.19
19
19
19
19
13
20
16
21
24
12
16
16
15.18
24
12
Charter capital (pooled capital, charter fund,
partners' contributions)
Treasury shares
Revaluation of non-current assets
Additional capital (without revaluation)
Reserve capital
Other funds and reserves
1310
105,982
105,982
105,982
1320
1340
1350
1360
1365
–
3
–
3
–
5
118,170,353
118,168,244
113,279,890
5,299
5,299
5,299
(130,578)
1,389,427
(115,062,581)
Retained earnings (uncovered loss)
1370
2,106,458,991
2,142,102,123
2,028,141,822
Total for Section III
1300
2,224,610,050
2,261,771,078
2,026,470,417
IV. Long-term liabilities
Loans and borrowings
Deferred tax liabilities
Provisions
Long-term derivative financial instruments
at fair value through profit or loss
Other liabilities
Total for section IV
V. Short-term liabilities
Loans and borrowings
Accounts payable
Deferred income
Provisions
Short-term derivative financial instruments
at fair value through profit or loss
Other liabilities
Total for section V
Balance
1410
6,420,308,876
5,397,760,107
5,792,741,747
1420
1430
1440
120,809,294
106,176,347
91,808,512
92,409,353
76,836,351
56,345,080
–
–
–
1450
1,440,610,117
799,125,852
1,134,390,419
1400
8,074,137,640
6,379,898,657
7,075,285,758
1510
787,352,521
946,067,618
817,935,056
1520
2,525,807,379
2,699,900,722
2,333,146,921
1530
1540
1545
2,894,043
2,865,382
2,740,157
46,832,545
32,444,291
19,582,179
12,491,608
–
33,058,044
1550
617,344
549,995
499,287
1500
3,375,995,440
3,681,828,008
3,206,961,644
1700
13,674,743,130
12,323,497,743
12,308,717,819
Chief Executive Officer of Rosneft Oil Company
Chief Accountant of PJSC Rosneft Oil Company
I.I. Sechin
D.B. Torba
12 February 2021
367
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 STATEMENT OF INCOME
AT 31 DECEMBER 2020
Entity PJSC Rosneft Oil Company
Monetary unit: kRUB
Explanatory
note
Item
Revenue
Cost of sales
Oil and gas reserves exploration and estimation
expenses
Gross income (loss)
Selling expenses
Line
code
January-
December
2020
January-
December
2019
2110
4,835,091,105
6,827,526,407
2120
(3,641,355,413)
(4,782,222,071)
2130
(7,543,407)
(6,559,819)
2100
1,186,192,285
2,038,744,517
2210
(772,860,114)
(1,196,815,437)
General and administrative expenses
2220
(90,988,304)
(83,302,902)
Income (loss) from sales
2200
322,343,867
758,626,178
Interest receivable
Interest payable
2320
148,757,678
176,844,160
2330
(360,174,908)
(445,059,171)
Gains from changes in the fair value of derivative
financial instruments
2333
–
35,301,062
Losses from changes in the fair value
of derivative financial instruments
2334
(14,734,626)
–
2020
2019
20
20
20
20
16.20
20
20
Explanatory
note
Item
13.21
Income tax on operations whose result
is not included in net income (loss) for the period
Line
code
January-
December
2020
January-
December
2019
2530
379,474
(29,113,002)
Cumulative financial result for the period
2500
154,293,270
512,976,571
For reference
22
Basic earnings (loss) per share, RUB per share
2900
14.70
37.41
Chief Executive Officer of Rosneft Oil Company
Chief Accountant of PJSC Rosneft Oil Company
I.I. Sechin
D.B. Torba
12 February 2021
13.17.20
13.17.20
Other income
Other expenses
21
21
21
Income (loss) before tax
Income tax
Including
Current income tax
Deferred income tax
Other
Including
Tax on prior year income
Imputed income tax
Income tax re-distribution within consolidated
taxpayer
22
Net income (loss)
Result of revaluation of non-current assets
not included in net income (loss) for the period
2340
190,992,361
124,722,952
2350
(217,629,746)
(302,893,537)
2300
2410
2411
2412
69,554,626
347,541,644
83,547,847
48,185,409
15,271,514
9,648,441
68,276,333
38,536,968
2460
2,708,693
799,156
2461
2464
2465
2400
2510
(6,805)
703,325
–
2,715,498
–
95,831
155,811,166
396,526,209
–
–
13.17
Result from other operations not included in net
income (loss) for the period
2520
(1,897,370)
145,563,364
368
369
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 STATEMENT OF CHANGES IN EQUITY
AT 31 DECEMBER 2020
1. CHANGES IN EQUITY
Entity PJSC Rosneft Oil Company
Monetary unit: kRUB
Item
Line code
Charter capital
Treasury shares
Additional capital
Reserve capital
Other funds
and reserves
Retained earnings (uncovered loss)
Total
Equity at 31 December 2018
For 2019
Total increase in equity:
Including:
Net income
Revaluation of property
Earnings directly increasing equity
Additional issue of shares
Increase in the par value of shares
Legal entity reorganization
Total decrease in equity:
Including:
Loss
Revaluation of property
Expenses directly decreasing equity
Decrease in the par value of shares
Decrease in the number of shares
Legal entity reorganization
Dividends
Changes in additional capital
Changes in reserve capital
Equity at 31 December 2019
3100
3210
3211
3212
3213
3214
3215
3216
3220
3221
3222
3223
3224
3225
3226
3227
3230
3240
3200
105,982
–
х
х
х
–
–
–
–
х
х
х
–
–
–
х
х
х
105,982
–
–
х
x
x
–
x
–
–
х
x
x
–
–
–
х
х
х
–
113,279,895
5,299
(115,062,581)
2,028,141,822
2,026,470,417
4,891,328
х
–
4,891,328
–
–
–
(2,974)
х
–
(2,974)
–
x
–
х
(2)
х
–
х
х
х
х
х
–
–
х
х
х
х
х
–
х
х
–
116,452,008
396,613,701
517,957,037
х
–
396,526,209
396,526,209
х
–
116,452,008
87,492
121,430,828
–
–
–
–
х
–
–
–
–
–
х
–
х
х
–
–
–
x
–
(282,653,402)
(282,656,376)
–
х
–
–
х
–
–
–
(2,974)
–
–
–
(282,653,402)
(282,653,402)
2
–
х
х
118,168,247
5,299
1,389,427
2,142,102,123
2,261,771,078
370
371
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Item
Line code
Charter capital
Treasury shares
Additional capital
Reserve capital
Other funds
and reserves
Retained earnings (uncovered loss)
Total
For 2020
Total increase in equity:
Including:
Net income
Revaluation of property
Earnings directly increasing equity
Additional issue of shares
Increase in the par value of shares
Legal entity reorganization
Total decrease in equity:
Including:
Loss
Revaluation of property
Expenses directly decreasing equity
Decrease in the par value of shares
Decrease in the number of shares
Legal entity reorganization
Dividends
Changes in additional capital
Changes in reserve capital
Equity at 31 December 2020
3310
3311
3312
3313
3314
3315
3316
3320
3321
3322
3323
3324
3325
3326
3327
3330
3340
3300
–
х
х
х
–
–
–
–
х
х
х
–
–
–
х
х
х
105,982
–
х
х
х
–
x
–
–
х
х
х
–
–
–
х
х
х
–
7,532
х
–
7,532
–
–
–
(5,423)
х
–
(5,423)
–
х
–
х
–
х
–
х
х
х
х
х
–
–
х
х
х
х
х
–
х
х
–
–
х
–
–
–
–
–
155,865,941
155,873,473
155,811,166
155,811,166
х
54,775
х
–
–
–
62,307
–
x
–
(1,520,005)
(191,509,073)
(193,034,501)
х
–
(1,520,005)
–
–
–
х
–
х
–
х
–
–
х
–
–
–
(1,525,428)
–
–
–
(191,509,073)
(191,509,073)
–
–
х
х
118,170,356
5,299
(130,578)
2,106,458,991
2,224,610,050
372
373
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 2. ADJUSTMENTS DUE TO CHANGES IN THE ACCOUNTING POLICY
AND CORRECTION OF ERRORS
Item
Line code
31 December
2018
Change in equity for 2019
31 December
2019
Through net income
(loss)
Due to other factors
Total equity
Before adjustments
3400
2,026,470,417
396,526,209
(161,225,548)
2,261,771,078
Adjustment due to:
Changes in the accounting policy
Correction of errors
3410
3420
–
–
–
–
–
–
–
–
After adjustments
3500
2,026,470,417
396,526,209
(161,225,548)
2,261,771,078
Including:
Retained earnings (loss):
Before adjustments
3401
2,028,141,822
396,526,209
(282,565,908)
2,142,102,123
Adjustment due to:
Changes in the accounting policy
Correction of errors
3411
3421
–
–
–
–
–
–
–
–
After adjustments
3501
2,028,141,822
396,526,209
(282,565,908)
2,142,102,123
Other equity items that have been
adjusted: (By item)
Before adjustments
3402
(1,671,405)
Adjustment due to:
Changes in the accounting policy
Correction of errors
After adjustments
3412
3422
3502
–
–
(1,671,405)
–
–
–
–
121,340,360
119,668,955
–
–
–
–
121,340,360
119,668,955
3. NET ASSETS
Item
Line code
At 31 December 2020
At 31 December 2019
At 31 December 2018
Net assets
3600
2,224,610,050
2,261,771,078
2,026,470,417
Chief Executive Officer of Rosneft Oil Company
Chief Accountant of PJSC Rosneft Oil Company
I.I. Sechin
D.B. Torba
12 February 2021
STATEMENT OF CASH FLOWS
AT 31 DECEMBER 2020
Entity PJSC Rosneft Oil Company
Monetary unit: kRUB
Item
Line code
For 2020
For 2019
Cash flows from operating activities
Total proceeds
Including:
From sale of products, goods, work and services
Lease payments, license payments, royalties, commissions and other similar
payments
From resale of financial investments
Other proceeds
Total cash disbursements
Including:
4110
5,206,284,343
6,179,070,239
4111
4112
4113
4119
4,847,679,688
5,498,167,192
137,354,641
150,978,981
–
–
221,250,014
529,924,066
4120
(5,743,175,260)
(6,771,972,637)
Payments to suppliers (contractors) for raw materials, work and services
4121
(3,785,193,585)
(4,708,441,513)
Payroll-related payments
Interest on debt obligations
Income tax
Other taxes and levies
Exploration costs
Other payments
Net cash flows from operating activities
Cash flows from investing activities
Total proceeds
Including:
4122
4123
4124
4125
4128
4129
(39,125,160)
(41,823,850)
(313,392,981)
(372,122,046)
(13,070,756)
(10,184,117)
(679,649,562)
(895,868,770)
(5,206,029)
(6,582,553)
(907,537,187)
(736,949,788)
4100
(536,890,917)
(592,902,398)
4210
2,743,100,312
1,304,175,862
From sale of non-current assets (except for financial investments)
From sale of shares (interests) in other entities
From repayment of loans issued and sale of debt securities (receivables from other
parties)
4211
4212
4213
14,951,874
10,762,256
12,512,096
23,371
1,778,643,916
886,376,455
Dividends, interest on debt financial instruments and similar proceeds from equity
participation in other entities
4214
930,871,922
368,230,520
Other proceeds
Total payments
Including:
4219
6,120,504
38,783,260
4220
(2,124,602,634)
(831,287,612)
Purchase, creation, upgrading, reconstruction and preparation for use of non-
current assets
4221
(195,984,120)
(188,557,971)
374
375
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Item
Line code
For 2020
For 2019
Purchase of shares (interests) in other entities
4222
(184,586,241)
(374,023,314)
Purchase of debt securities (receivables from other parties), issue of loans to other
parties
4223
(1,676,290,753)
(207,069,417)
Interest on debt obligations included in the value of the investment asset
Exploration assets
Other payments
Net cash flows from investing activities
Cash flows from financing activities
Total proceeds
Including:
Loans and borrowings received
Cash contributions of shareholders (participants)
Issue of shares, increase of interest
Issue of bonds, promissory notes and other debt securities, etc.
Other proceeds
Total payments
Including:
4224
4228
4229
–
–
(28,357,906)
(23,773,804)
(39,383,614)
(37,863,106)
4200
618,497,678
472,888,250
4310
9,062,370,952
3,502,514,309
4311
4312
4313
4314
4319
8,213,620,911
3,417,634,273
–
–
4,890,000
–
848,750,041
79,990,036
–
–
4320
(8,753,746,773)
(3,832,591,338)
Payments to shareholders (participants) due to the buyback of shares (interest)
in the entity or due to their withdrawal
4321
–
–
Dividends and other distributions of income among shareholders (participants)
4322
(191,493,418)
(282,632,588)
Repayment (redemption) of promissory notes and other debt securities, repayment
of loans and borrowings
4323
(8,562,253,355)
(3,549,958,750)
Other payments
Net cash flows from financing activities
Net cash flows for the reporting period
Balance of cash and cash equivalents at the beginning of the reporting period
Balance of cash and cash equivalents at the end of the reporting period
Effect of changes in the exchange rate of foreign currency to ruble
4329
4300
4400
4450
4500
4490
–
–
308,624,179
(330,077,029)
390,230,940
(450,091,177)
97,398,766
598,541,224
496,199,797
97,398,766
8,570,091
(51,051,281)
Chief Executive Officer of Rosneft Oil Company
Chief Accountant of PJSC Rosneft Oil Company
I.I. Sechin
D.B. Torba
12 February 2021
EXPLANATORY NOTES
TO THE BALANCE SHEET
AND THE INCOME STATEMENT OF PJSC
ROSNEFT OIL COMPANY FOR 2020
These Explanatory Notes
to the balance sheet
and the income statement
constitute an integral part
of the financial statements
of PJSC Rosneft Oil Company
for the 2020 reporting
year prepared in accordance
with the applicable legislation
of the Russian Federation.
The reporting date of these financial
statements, as of which they
are prepared, is 31 December 2020.
1. ENTITY AND TYPES OF ACTIVITY
1.1 COMPANY DESCRIPTION
Public joint-stock company
Rosneft Oil Company
(the “Company,” “Rosneft Oil
Company”) was established
in accordance with Decree No. 327
of the President of the Russian
Federation, On Priority Measures
for Improving the Activities of Oil
Companies, dated 1 April 1995
and pursuant to Resolution No. 971
of the Government of the Russian
Federation, On the Transformation
of State Enterprise Rosneft
into Open Joint-Stock Company
Rosneft Oil Company, dated 29
September 1995. On 8 July 2016,
the Company was transformed
into public joint-stock company.
The Company is a legal entity
that operates on the basis
of its Charter and the laws
of the Russian Federation.
Location of the Company: Moscow,
Russian Federation.
Address of the Company specified
in the Unified State Register
of Legal Entities:
26/1 Sofiyskaya nab., Moscow,
Russian Federation, 115035.
1.2 EXECUTIVE
AND SUPERVISORY BODIES
OF THE COMPANY
General Shareholders’ Meeting
of the Company
The General Shareholders’
Meeting is the supreme
governing body of the Company.
The scope of authority
of the General Shareholders’
Meeting of the Company,
the procedure for convening
and holding it and its
proceedings are determined
in accordance with federal laws,
the Charter of the Company
and the Regulation on the General
Shareholders’ Meeting
of the Company.
The address of the place
for holding the General
Shareholders’ Meeting
is determined by the Company’s
Board of Directors.
The annual General Shareholders’
Meeting is held not earlier
than two months and not later
than six months after the end
of the financial year.
The General Shareholders’ Meeting
is chaired by the Chairman
of the Company’s Board
of Directors or, in his absence,
a member of the Board
of Directors selected
by the decision of the Board
of Directors.
Board of Directors
of the Company
The Company’s Board of Directors
is responsible for the general
management of the Company’s
activities, except for the matters
376
377
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 that fall within the authority
of the General Shareholders’
Meeting according to federal laws
and the Charter of the Company.
The members of the Company’s
Board of Directors are elected
by the General Shareholders’
Meeting to serve until the next
annual General Shareholders’
Meeting.
The Board of Directors of PJSC
Rosneft Oil Company that
served as of 31 December 2020
was formed by the decision
of the annual General
Shareholders’ Meeting
of the Company held
on 2 June 2020.
As of 31 December 2020,
the Board of Directors of PJSC
Rosneft Oil Company comprised:
Table 1. Composition of the Board of Directors
1.
2.
3.
4.
5.
6.
7.
8.
9.
Faisal Alsuwaidi
Member of the Board of Directors of Rosneft Oil Company, representative of Qatar
Investments Authority
Hamad Rashid Al-Mohannadi
Member of the Board of Directors of Rosneft Oil Company, member of the Board
of Trustees at The Abdullah Bin Hamad Al-Attiyah International Foundation for Energy &
Sustainable Development of Qatar, Chairman of the Board of Trustees at the Community
College of Qatar, representative of the Qatar Investment Authority
Matthias Arthur Warnig
Deputy Chairman of the Board of Directors of Rosneft Oil Company, Independent
Director, Director of Interatis AG (Switzerland), Executive Director of Nord Stream 2 AG
(Switzerland)
Oleg Vyacheslavovich Viyugin
Member of the Board of Directors of Rosneft Oil Company, Independent Director,
professor at the National Research University Higher School of Economics
Robert Warren Dudley
Member of the Board of Directors of Rosneft Oil Company, BP RIL Consultant
Bernard Looney
Member of the Board of Directors of Rosneft Oil Company, Chief Executive Officer
and member of the Board of Directors of BP p.l.c.
Alexander Valentinovich Novak
Member of the Board of Directors of Rosneft Oil Company, Deputy Prime Minister
of the Russian Federation
Maxim Stanislavovich Oreshkin
Member of the Board of Directors of Rosneft Oil Company, Assistant to the President
of the Russian Federation
Hans-Georg Rudloff
Member of the Board of Directors of Rosneft Oil Company, Independent Director,
Chairman of the Management Board of Marcuard Holding, Executive Director of ABD
Capital S.A., President of ABD Capital Eastern Europe S.A.
10.
Igor Ivanovich Sechin
Chief Executive Officer, Chairman of the Management Board, Deputy Chairman
of the Board of Directors of Rosneft Oil Company
11.
Gerhard Schroeder
Chairman of the Board of Directors of Rosneft Oil Company, Independent Director
In accordance with clause 2
of Article 64 of the Federal
Law, On Joint-stock
Companies, and the Regulation
On Payment of Remuneration
and Compensation for Expenses
to the Members of the Board
of Directors of PJSC Rosneft
Oil Company, remuneration
to the members of the Board
of Directors during the period
when they perform their duties
is paid on the basis of a decision
of the General Shareholders’
Meeting.
On 2 June 2020, the annual
General Shareholders’ Meeting
(Minutes w/n dated 5 June
378
2020) approved remuneration
to the following members
of the Board of Directors
of the Company for the period
during which they performed
their duties:
• Gerhard
Schroeder – USD600,000
• Hamad Rashid
Al-Mohannadi – USD530,000
• Faisal Alsuwaidi – USD 530,000
• Matthias Warnig – USD580,000
• Oleg Vyacheslavovich
Viyugin – USD560,000
• Hans-Georg
Rudloff – USD580,000
In addition, on 2 June 2020,
the annual General Shareholders’
Meeting (Minutes w/n dated
5 June 2020) approved
compensation for all expenses
and costs incurred by members
of the Board of Directors of Rosneft
Oil Company when performing
their duties.
As of 31 December 2020,
the Company fulfilled its
obligation and paid remuneration
to the above members of the Board
of Directors of Rosneft Oil
Company for the period during
which they performed their duties.
In 2020, no remuneration was paid
to the members of the Board
of Directors of Rosneft Oil
Company, namely Andrey
Removich Belousov1 and Aleksandr
Valentinovich Novak, government
officials at the date of the adoption
of the decision to pay remuneration
by the Board of Directors,
and Igor Ivanovich Sechin,
Chairman of the Management
Board of Rosneft Oil
Company, for performing
their duties as members
of the Board of Directors of Rosneft
Oil Company.
Sole executive body
of the Company
Chief Executive Director of Rosneft
Oil Company is its sole executive
body.
Collegial executive body
of the Company
Pursuant to the Charter,
the Management Board
is the collegial executive body
of the Company.
As of 31 December 2020, members
of the Management Board
of the Company included:
Table 2. Composition of the Management Board
1.
Igor Ivanovich Sechin
Chief Executive Officer, Chairman of the Management Board, Deputy Chairman of the Board
of Directors of Rosneft Oil Company
2.
Zeljko Runje
Deputy Chairman of the Management Board, First Vice President for Oil, Gas, and Offshore Business
Development at Rosneft Oil Company
3.
4.
5.
6.
7.
8.
9.
Didier Casimiro
First Vice President of Rosneft Oil Company
Andrey Aleksandrovich
Polyakov
Vice President – Chief Geologist at Rosneft Oil Company
Ilgam Gaffarovich Kuchukov
CEO Consultant in the rank of vice-president, General Director of Suzun JSC
Dina Rinatovna Malikova
CEO Consultant in the rank of vice-president, President, Chairman of the Management Board
of RRDB (JSC)
Igor Borisovich Tabachnikov
CEO Consultant in the rank of vice-president, General Director of RN-Yuganskneftegaz LLC
Khasan Kureishevich Tatriev
CEO Consultant in the rank of vice-president, General Director of Bashneft PJSC JSOC
Vladimir Nikolaevich Chernov
CEO Consultant in the rank of vice-president, General Director of RN-Vankor LLC
The Board of Directors of Rosneft
Oil Company made the following
decisions with respect
to the Management Board
of the Company:
• On appointment of Yury
Igorevich Kurilin, Vice
President – Chief of Staff
of the Company, as a member
of the Management
Board of Rosneft Oil
Company for three (3) years
from 5 April 2020 (Minutes
No. 19 dated 3 April 2020)
• On termination of powers
as members of the Management
Board of Rosneft Oil Company
of Gennady Ivanovich
Bukaev, Elena Vladimirovna
Zavaleeva, Yury Igorevich
Kurilin, Petr Ivanovich Lazarev,
Ural Alfretovich Latypov, Eric
Maurice Liron, and Andrey
Nikolaevich Shishkin
from 29 September 2020
(Minutes No. 7 dated
2 October 2020)
• On appointment of Didier
Casimiro, First Vice President;
Zeljko Runje, First Vice President
for Oil, Gas, and Offshore
Business Development; Ilgam
Gaffarovich Kuchukov, General
Director of Suzun JSC; Dina
Rinatovna Malikova, President,
Chairman of the Management
Board of RRDB (JSC); Igor
Borisovich Tabachnikov, General
Director of RN-Yuganskneftegaz
LLC; Khasan Kureishevich Tatriev,
General Director of Bashneft
OJSC JSOC; Vladimir
Nikolaevich Chernov, General
Director of RN-Vankor LLC,
as members of the Management
Board of Rosneft Oil
Company for three (3) years
from 30 September 2020
(Minutes No. 7 dated 2 October
2020).
1 Resigned from the Board of Directors of Rosneft Oil Company pursuant to the decision of the annual General Shareholders’ Meeting dated
2 June 2020 (Minutes w/n dated 5 June 2020).
379
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Control of the Company’s
financial and business operations
Control of the Company’s
financial and business operations
is exercised by the Audit
Commission. The Audit
Commission’s operating procedure
is specified in the Regulation
on the Audit Commission
of the Company, as approved
by the General Shareholders’
Meeting of the Company.
by the General Shareholders’
Meeting to serve until the next
annual General Shareholders’
Meeting.
The Audit Commission
of the Company comprises
five (5) members who are elected
As of 31 December 2020, the Audit
Commission of the Company
comprised:
Table 3. Composition of the Audit Commission
Chairman of the Audit Commission:
1.
Zakhar Borisovich Sabantsev
Head of Finance Sector Monitoring, Consolidated and Analytical Work Section, Financial Policy
Department, Ministry of Finance of the Russian Federation
Audit Commission members:
2.
Olga Anatolyevna Andrianova
Chief Accountant – Head of Finance and Economics Service of JSC ROSNEFTEGAZ, General
Director of LLC Vostokgazinvest
3.
4.
5.
Tatiana Valentinovna Zobkova Deputy Director of the Department of the Ministry of Energy of the Russian Federation
Sergey Ivanovich Poma
Vice-President of the National Association of Securities Market Participants (NAUFOR)
Pavel Gennadyevich Shumov
Acting Deputy Director of the Department for State Regulation of Tariffs and Infrastructure
Reforms, Ministry of Economic Development of the Russian Federation
On 2 June 2020, the annual
General Shareholders’ Meeting
(Minutes w/n dated 5 June
2020) approved remuneration
to the members of the Audit
Commission of the Company
for the period during which they
performed their duties:
• Olga Anatolyevna
Andrianova – RUB220,000
As of 31 December 2020,
the Company fulfilled
its obligation to pay
the remuneration.
• Sergey Ivanovich
Poma – RUB220,000
1.3 STRUCTURE OF THE COMPANY’S CHARTER CAPITAL*
Information about the shareholders of Rosneft Oil Company as of 31 December 2020 is presented below:
Table 4. Shareholders
No.
Name of legal entity or individual
Number of common (voting) shares and interest in the charter capital
JSC ROSNEFTEGAZ
4,281,663,840 common shares representing 40.40 % of the total number of common
shares and the charter capital of the Company
BP Russian Investments Limited
2,092,900,097 common shares representing 19.75 % of the total number of common shares
and the charter capital of the Company
QH Oil Investments LLC
1,963,898,178 common shares representing 18.53 % of the total number of common shares
and the charter capital of the Company
Non-banking Credit Organization
Joint Stock Company National
Settlement Depository (nominal
holder central depository)
RN-NeftKapitalInvest LLC
1,125,403,844 common shares representing 10.62 % of the total number of common shares
and the charter capital of the Company
1,017,425,070 common shares representing 9.60 % of the total number of common shares
and the charter capital of the Company
RN-Capital LLC
80,975,983 common shares representing 0.76 % of the total number of common shares
and the charter capital of the Company
Russian Federation acting through
the Federal Agency for State
Property Management
1 common share representing 0.000000009 % of the total number of common shares
and the charter capital of the Company
Other minority investors (incl.
individuals, other legal entities, etc.)
35,910,804 common shares representing 0.34 % of the total number of common shares
and the charter capital of the Company
1
2
3
4
5
6
7
8
*
Information is based on the data of Rosneft shareholders’ register.
1.4 DESCRIPTION
OF THE COMPANY’S ACTIVITIES
In accordance with clause 3.4
of Article 3 of Rosneft Oil Company’s
Charter (revised version) approved
by the annual General Shareholders’
Meeting of the Company
on 27 June 2014 (Minutes w/n)
with the amendments approved
by the General Shareholders’
Meeting of the Company
on 15 June 2016 (Minutes
w/n), amendments approved
by the General Shareholders’
Meeting of the Company
on 22 June 2017 (Minutes
w/n), amendments approved
by the General Shareholders’
Meeting of the Company on 29
September 2017 (Minutes w/n),
the Company prospects, explores,
extracts and processes oil, gas
and gas condensate, sells oil, gas,
gas condensate, and oil and gas
products to customers in and outside
the Russian Federation, conducts
any related activities, and works
with precious metals and precious
stones. The Company is engaged,
in particular, in the following principal
activities:
• Geological prospecting
and exploration to find
the deposits of oil, gas, coal
and other minerals; extraction,
transportation and processing
of oil, gas, coal and other
minerals, and timber; production
of oil products, petrochemicals
and other products, including
liquefied natural gas, gas products
and gas chemicals, electric
power, wood products, consumer
goods, and provision of services
to the public; storage and sale
(including domestic and export
sales) of oil, liquefied and gaseous
gas, oil products, gas products
and gas chemicals, coal, electric
power, wood products, and other
products from hydrocarbons
and other raw materials
• Investing, including transactions
with securities
• Managing the fulfillment
of orders placed by the federal
government and regional
consumers of the products
made by the Company and its
subsidiaries, including deliveries
of oil, gas and oil products
• Investment management,
construction, engineering,
technological and other services
for upstream and downstream
projects, and research
and development, procurement
and distribution, economic,
foreign economic and legal
support for the Company,
its subsidiaries and third-
party customers. Surveying
the commodity and services
markets, and the securities
market, conducting sociological
and other research. Regulating
and coordinating the activities
of subsidiaries
380
381
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 • Leasing out immovable and other
property, using leased property
• Assisting in securing the interests
of the Russian Federation when
it prepares and implements
production-sharing agreements
for subsurface areas
and hydrocarbon deposits
• Managing advertising
and publishing activities,
conducting exhibitions, fairs,
auctions, etc.
• Intermediary, consulting,
marketing and other activities,
including foreign economic
activities (including export/
import operations), performing
work and providing services
on a contractual basis
• Ensuring the protection
of the Company’s employees
and property
• Using precious metals
and precious stones
in technological processes
as elements of equipment
and materials
• Arranging and holding
mobilization training and civil
defense events, working with state
secrets and protecting them
At the end of 2020, the average
headcount of the Company
was 4,434 employees.
2. BASIS OF PREPARATION
The accounting records
are maintained in accordance
with Federal Law No. 402-
FZ, On Accounting, dated 6
December 2011 and the Statute,
On Accounting and Reporting
in the Russian Federation,
approved by Order No. 34n
of the Russian Ministry of Finance
dated 29 July 1998 (including
Information No. PZ-10/2012
of the Russian Ministry of Finance),
as well as applicable Accounting
Statements. The Company’s financial
statements for the 2020 reporting
year were prepared in accordance
with the Law, the Statute
and the Accounting Statements.
3. CHANGES IN OPENING BALANCES IN THE FINANCIAL
STATEMENTS FOR THE 2020 REPORTING YEAR
not included in net profit (loss)
for the period.”
• Line 2530 “Income tax
on operations whose result
is not included in net profit
(loss) for the period” includes
the amount of the tax effect
of the results of other operations
not included in net profit
(loss) for the period recorded
in line 2520 “Result from other
operations not included in net
profit (loss) for the period”
in the 2019 income statement.
• Line 2421 “Including permanent
tax assets (liabilities)” is excluded
from the income statement.
In accordance with changes
in Accounting Statement 18/02,
Accounting for Income Tax
of Organizations, introduced
by Order No. 236n of the Russian
Ministry of Finance dated 20
November 2018 and Order No. 61n
of the Russian Ministry of Finance
dated 19 April 2019, On Introduction
of Amendments to Order No. 66n
of the Russian Ministry of Finance
dated 2 July 2010 “On the Forms
of Financial Statements,”
the compatibility of amounts
in the 2019 financial statements
was ensured as follows:
• The sum of lines 2411 “Current
income tax” and 2412 “Deferred
income tax” is presented in line
2410 “Income tax.”
• Line 2412 “Deferred income tax”
is defined as the cumulative
change of deferred tax liabilities
and deferred tax assets
for the period (lines 2430
and 2450 of the 2019 income
statement, respectively) and also
includes line 2466 “Tax effect
of the results of other operations
382
Table 5.1. Changes in the amounts of the income statement, (kRUB)
Item
Line
Amounts for 2019
Changes
Reason
As currently
reported
As previously
reported
Profit (loss) before tax
2300
347,541,644
347,541,644
− To implement from 1 January 2020:
Current income tax
including permanent tax
assets (liabilities)
2410
2421
−
−
9,648,441
(9,648,441)
89,179,905
(89,179,905)
Income tax
2410
48,185,409
including current income tax
Deferred income tax
Change in deferred tax
liabilities
Change in deferred tax
assets
Other
Tax effect of the results
of other operations
not included in net profit
(loss) for the period
2411
2412
2430
2450
2460
2466
9,648,441
38,536,968
−
−
−
−
−
48,185,409
9,648,441
38,536,968
(14,367,835)
14,367,835
23,791,801
(23,791,801)
799,156
29,912,158
(29,113,002)
−
29,113,002
(29,113,002)
• Changes in Accounting Statement
18/02, Accounting for Income Tax
of Organizations, introduced by Order
No. 236n of the Russian Ministry
of Finance dated 20 November 2018
• Order No. 61n of the Russian Ministry
of Finance dated 19 April 2019,
On Introduction of Amendments
to Order No.66n of the Russian
Ministry of Finance dated 2 July 2010
“On the Forms of Financial Statements”
• The lines of the income statement
in the comparative information for 2019
were adjusted.
Net profit (loss)
2400
396,526,209
396,526,209
−
Result from other operations
not included in net profit
(loss) for the period
Income tax on operations
whose result is not included
in net profit (loss)
for the period
Comprehensive financial
result for the period
2520
145,563,364
116,450,362
29,113,002
2530
(29,113,002)
−
(29,113,002)
2500
512,976,571
512,976,571
−
Corrections were made
to the Explanatory Notes
to the balance sheet
and the income statement
for the 2020 reporting year
in line with the above information
to ensure data comparability.
In 2020, the approach
to the presentation of information
in the statement of cash flows
was changed: dividend payments
(other distribution of earnings
to owners (participants))
are recorded including tax
in the “Cash flows from financing
activities” section. To ensure
the comparability of the financial
statements (paragraph 10
of Accounting Statement 4/99),
the data in the 2019 statement
of cash flows were adjusted
as follows.
383
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 the asset it ready for operation.
Using the substance-over-
form principle, the completed
capital construction projects
and purchased real estate items
that are actually in operation
are also included in fixed
assets, regardless of whether
the documents for their state
registration have actually
been submitted. Such items
are depreciated in accordance
with the established procedure.
For accounting purposes, fixed
assets are depreciated using
the straight-line method:
• Assets put into operation
before 1 January 2002:
at the depreciation rates
set by Resolution No. 1072
of the Council of Ministers
of the USSR dated 22 October
1990
• Assets put into operation
after 1 January 2002:
at the depreciation rates
calculated based on the useful
lives set by Resolution
No. 1 of the Government
of the Russian Federation dated
1 January 2002
• Assets put into operation
after 1 January 2018:
The main groups of fixed assets have the following useful lives:
Buildings
Structures
Machinery, equipment and vehicles
Other types of fixed assets
30 to 100 years
7 to 30 years
5 to 20 years
3 to 30 years
Assets that meet the fixed assets
recognition criteria and have
a value of not more than kRUB40
per unit are recognized in financial
statements of the company
as inventories. To ensure the safety
of the assets during production
or operation, the Company
makes arrangements to control
their movements.
Fixed assets include the following
assets (irrespective of their value):
• Assets held for leasing
• Land plots
• Buildings
• Structures
• Transfer devices
• Downhole equipment
• Vehicles
• Assets held as joint shared
property or joint property
Fixed assets are reported
in the balance sheet at their net
book value.
at the depreciation rates
calculated based on the useful
lives set by Resolution
No. 1 of the Government
of the Russian Federation,
dated 1 January 2002
as well as based on useful
lives indicated in the technical
documentation, manufacturers’
recommendations, or based
on other relevant information
that determines the period,
during, which an item of fixed
assets is expected to generate
economic benefits.
Fixed assets are not revalued
following the completion
of the mandatory revaluation
of fixed assets in accordance
with the Resolutions
of the Russian Government.
Table 5.2. Changes in the opening balances of the statement of cash flows, (kRUB)
Item
Line
Amounts for 2019
Changes
Reason
Cash flows from operating activities
As currently
reported
As previously
reported
Cash outflow − total
4120
(6,771,972,637)
(6,780,339,685)
8,367,048 The presentation
Including settlements of other taxes
and levies
Net cash flows from operating
activities
Cash flows from financing activities
4125
(895,868,770)
(904,235,818)
8,367,048
4100
(592,902,398)
(601,269,446)
8,367,048
Payments – total
4320
(3,832,591,338)
(3,824,224,290)
(8,367,048)
including dividends or other
distribution of earnings to owners
(participants)
Net cash flows from financing
activities
4322
(282,632,588)
(274,265,540)
(8,367,048)
4300
(330,077,029)
(321,709,981)
(8,367,048)
of information
in the statement of cash
flows was changed: dividend
payments (other distribution
of earnings to owners
(participants)) are recorded
including tax in the “Cash
flows from financing
activities” section
4. INFORMATION ABOUT THE ACCOUNTING POLICY
The Company developed its
accounting policy in accordance
with the principles established
by Accounting Statement
1/2008, Accounting Policies
of an Organization, approved
by Oder No. 106n of the Russian
Ministry of Finance dated 6
October 2008:
• Economic entity assumption
according to which
the Company’s assets
and liabilities are accounted
for separately from the assets
and liabilities of other legal
entities and individuals
the adopted accounting policy
in its activities
• Going concern assumption
• Time period assumption
according to which the Company
will continue its business
in the foreseeable future
and it neither intends nor has
to liquidate or significantly
curtail its activities,
and, therefore, its liabilities will
be duly discharged
• Consistency assumption
according to which the Company
will consistently apply
Material accounting methods
provided for by the Company’s
accounting policy in 2020
are reflected below
in the respective Explanatory
Notes to the balance sheet
and the income statement
for the 2020 reporting year.
5. FIXED ASSETS AND CAPITAL CONSTRUCTION IN PROGRESS
Assets intended for use
in the manufacturing of products,
performance of work and provision
of services, or for administrative
needs over their useful lives
of more than 12 months
are accounted for as fixed assets.
Assets approved by Order
No. 2018-st of the Federal
Agency on Technical Regulation
and Metrology (Rosstandart)
dated 12 December 2014 is used
to determine the structure
and grouping of fixed assets.
Items intended solely to be leased
out are recorded in line 1150, Fixed
assets. The net book value of such
items was kRUB 543,060,545,
kRUB 597,600,420
and kRUB 566,447,177
as of 31 December 2020, 2019
and 2018, respectively.
Fixed assets include buildings,
structures, machinery, equipment,
measuring and control
instruments and devices,
computers, vehicles, tools,
fixtures and fittings, etc.
Fixed assets also include land
plots and natural resources.
The Russian Classifier of Fixed
Fixed assets are recognized
at historical cost. The historical
cost of fixed assets acquired
for consideration is the total
cost of acquisition, construction
or production, net of value added
tax and other recoverable taxes
(except in instances stipulated
by Russian law).
An asset is recognized
as a fixed asset on the date
it is ready for operation. Fixed
assets the rights to which
are subject to state registration
are included in the fixed
assets at the date of delivery
to their final destination, if
384
385
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 6. Information on fixed assets, (kRUB)
Group of fixed
assets
Period At the beginning of the period
Changes for the period
At the end of the period
Historical
cost
Accumulated
depreciation
Additions
Disposals
Depreciation
charge
Historical
cost
Accumulated
depreciation
Historical
cost
Accumulated
depreciation
Total fixed
assets
Buildings
and structures
Machinery,
equipment
and vehicles
Other fixed
assets
2020 1,737,043,489 (1,063,726,269)
120,709,733 (19,130,491)
10,852,377
(128,647,168)
1,838,622,731
(1,181,521,060)
2019
1,569,277,962
(931,460,440)
172,208,186 (4,442,659)
3,329,206 (135,595,035)
1,737,043,489 (1,063,726,269)
2020
1,544,007,775
(922,772,908)
110,823,903
(11,938,058)
5,222,234
(118,668,381)
1,642,893,620 (1,036,219,055)
2019
1,380,721,200
(801,688,141)
167,139,699
(3,853,124)
2,772,680
(123,857,447)
1,544,007,775
(922,772,908)
2020
187,880,481
(139,197,999)
9,842,393
(7,110,563)
5,567,348
(9,910,629)
190,612,311
(143,541,280)
2019
183,346,891
(128,016,586)
5,037,447
(503,857)
470,965
(11,652,378)
187,880,481
(139,197,999)
2020
5,155,233
(1,755,362)
43,437
(81,870)
62,795
(68,158)
5,116,800
(1,760,725)
2019
5,209,871
(1,755,713)
31,040
(85,678)
85,561
(85,210)
5,155,233
(1,755,362)
Including fixed
assets that are
not depreciated
2020
3,209,846
3,209,893
х
х
−
13
(10,179)
(60)
х
х
х
х
3,199,667
3,209,846
х
х
Table 7. Information on fixed assets requiring state registration, (kRUB)
Real estate whose title has not yet been registered
203,526,157
212,947,138
216,700,282
Including real estate whose registration documents have not yet been
accepted by the state authorities
200,527,191
210,138,389
208,464,386
At 31 December
2020
At 31 December
2019
At 31 December
2018
Table 8. Information on the use of fixed assets, (kRUB)
Group of fixed assets
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total assets leased out (historical cost), including
1,530,960,456
1,557,316,383
1,425,671,402
Buildings
Structures
Buildings
48,462,125
46,838,617
Structures
1,332,392,306
1,207,948,158
Mothballed fixed assets (historical cost)
63,030,567
60,412,857
52,526,131
Total fixed assets leased (contract or cadastral value), including
126,778,668
100,963,500
84,246,854
Land plots
Other fixed assets
Land plots
69,523,734
74,304,769
Other fixed assets
31,439,766
9,942,085
Change in the value of fixed assets as a result of supplementary
construction, retrofitting, refurbishment, modernization or partial liquidation
18,180,882
21,277,842
22,425,172
Table 9. Information on capital investments in progress, (kRUB)
Capital investments in progress by type of asset
At 31 December
2020
At 31 December
2019
At 31 December
2018
Equipment for installation
15,177,920
15,897,385
15,431,560
Construction in progress, including
728,065,887
634,303,095
613,815,168
Advances issued for construction, acquisition, manufacturing of fixed assets
(net of VAT)
49,078,543
50,198,285
45,491,528
Other assets
Total
386
2,583,410
2,158,984
2,146,511
745,827,217
652,359,464
631,393,239
as of the reporting date, advances
for acquisition are recognized
within capital expenditures.
abandoned due to technological
reasons at commercially
recoverable fields
• Digital and electronic maps,
as well as other spatial data
• Complex items comprising
several protected intellectual
properties (including those
combining exclusive and non-
exclusive rights):
– Multimedia product
– Audiovisual works (cinematic
works or works involving
media similar to those used
in cinema (TV movies, videos,
etc.))
– Website, etc.
• Other intangible assets.
In 2020, the value of work
performed under capital
construction projects amounted
to kRUB 214,842,579 (net
of VAT). Investments
in the purchase of equipment,
both requiring and not requiring
installation, fixed assets
and land plots, and in appraisal
and exploration drilling amounted
to kRUB 9,548,019 (net of VAT).
Advances issued for construction,
acquisition and manufacturing
of fixed assets include the share
of advances paid to purchase
fixed assets with a value of up
to kRUB40 per unit included
in inventories. It is impossible
to determine the final value
of assets before the completion
of the work performed to render
them fit for use. Therefore,
6. INTANGIBLE ASSETS
Intangible assets include:
• Exclusive right of a patent
holder to an invention, industrial
design or utility model
• Exclusive right to computer
software and databases
• Exclusive right to integrated
circuit topologies
• Exclusive right to a trademark,
service mark, or appellation
of origin
• Exclusive right to selection
achievements
• Exclusive right to trade secrets
(know-how)
• Licenses for exploration
and production of mineral
resources
• Exclusive subsoil use
rights when entering
into international agreements
that give the right to implement
the mineral resources
exploration and production
projects in a foreign
jurisdiction or in the Russian
Federation (licenses,
concession agreements,
subsoil use contracts,
agreements on the provision
of a participating interest, etc.)
• Geological exploration
and production licenses
(combined licenses), provided
that the production of mineral
resources in the license
area is commercially viable;
such licenses are accounted
for in the same way
as costs arising in connection
with the exploration
and appraisal of fields until
it is confirmed that production
is commercially viable
• Other mineral licenses
(for the construction
of underground gas storage
facilities, the production
of commonly occurring mineral
resources and the abstraction
of underground water)
• Deliverables of 3D and 4D
seismic surveys (including
designing, field works,
supervising, processing,
interpretation, lease
of forest plot) in support
of the development
at commercially recoverable oil
and gas fields
• Information received as a result
of drilling successful onshore
appraisal/exploration wells
387
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Geological exploration
and production licenses
(combined licenses)
are accounted for in the same
way as costs arising in connection
with the exploration and appraisal
of fields until it is confirmed that
production is commercially viable.
The Company created
the following intangible assets
in the reporting period:
• Exclusive right to computer
software and databases
with a historical cost
of kRUB497,816
• Exclusive rights to an invention
Intangible assets are recognized
at their actual (historical) cost
determined in accordance
with Accounting Statement
14/2007, Intangible Assets,
approved by Order No. 153n
of the Russian Ministry of Finance
dated 27 December 2007.
When an intangible asset
is created in-house, the related
costs are to be capitalized
beginning from the development
stage, i.e. when the Company can
demonstrate:
• The technical feasibility
of creating the intangible asset
• Its intention and ability to create
the intangible asset and use it
• How the intangible asset will
generate probable economic
benefits
• The availability of sufficient
technical, financial and other
resources to complete
development and use
the intangible asset
• Ability to reliably estimate costs
related to the intangible asset
during its development
Costs incurred at the research
stage are not capitalized and are
treated as either expenses
related to ordinary activities
or other expenses, depending
on the purpose of research.
• Intangible assets created
in-house mean:
with a historical cost
of kRUB559,298
The actual (historical)
cost of an intangible asset
acquired under a contract
providing for non-monetary
compensation (settlement)
is determined on the basis
of the cost of assets transferred
or transferable by the Company.
The cost of assets transferred
or transferable by the Company
is determined on the basis
of the price it would normally use
to determine the cost of similar
assets under comparable
circumstances.
Where it is impossible
to determine the cost of assets
transferred or transferable
by the Company under such
contracts, the cost of an intangible
asset received by the Company
is determined on the basis
of the price at which similar
intangible assets are purchased
under comparable circumstances.
Intangible assets are amortized
using the straight-line method
or the unit-of-production method:
• Exclusive right of a patent
holder to an invention, industrial
design or utility model: straight-
line method
• Exclusive right to computer
software and databases:
straight-line method
• Intangible assets created
• Exclusive right to integrated
by the Company’s employees
when performing their job duties
circuit topologies: straight-line
method
• Exclusive subsoil use rights
when entering into international
agreements that give the right
to implement oil and gas
exploration and production
projects in a foreign
jurisdiction or in the Russian
Federation (licenses,
concession agreements,
subsoil use contracts,
agreements on the provision
of a participating interest, etc.):
unit-of-production method
• Geological exploration
and production licenses
(combined licenses), provided
that the production of mineral
resources in the license area
is commercially viable: unit-of-
production method. Proved oil
and gas reserves are defined
in accordance with Petroleum
Resources Management System
(PRMS). For the purposes
of evaluation of the reserves
as of 31 December 2020,
the Company used proved oil
and gas reserves data prepared
by DeGolyer and MacNaughton,
independent reservoir engineers.
• Other mineral licenses
(for the construction
of underground gas storage
facilities, the production
of commonly occurring mineral
resources and the abstraction
of underground water): straight-
line method
• Deliverables of 3D and 4D
seismic surveys in support
of the development
at commercially recoverable
oil and gas fields: unit-of-
production method
• Information received as a result
of drilling successful appraisal/
exploration wells abandoned
due to technological reasons
at commercially recoverable
oil and gas fields: unit-of-
production method
• Exclusive right to a trademark,
service mark, or appellation
of origin: straight-line method
• Oil and gas production licenses:
unit-of-production method
• Digital and electronic maps,
as well as other spatial data:
straight-line method
• Other intangible assets:
straight-line method
Intangible assets resulting
from the work performed
by contractors under contracts
in which the risks of negative
results are borne by the Company.
388
The Company determines
the useful life of an intangible
asset upon its recognition.
and the period of control
over the asset
• The period during which
The useful life of an intangible
asset is determined on the basis of:
• The term of the Company’s
rights to intellectual property
or means of individualization,
the Company is expected to use
the asset and receive economic
benefits
The Company annually
reviews the useful life
of an intangible asset
in order to determine whether
or not it should be revised.
In the event of a significant
change in the period, during which
the company expects to use
the asset, the asset’s useful life
should be revised. The resulting
adjustments are recorded
and reported as changes
in estimates.
The main groups of intangible assets have the following useful lives:
Trademarks
5 to 10 years
Exclusive rights to an invention, utility model or industrial design
5 to 25 years
Exclusive rights to computer software and databases
1.1 to 10 years
Exploration and mining licenses1
5 to 163 years
Survey, exploration and mining licenses (combined license)1
10 to 166 years
Other mineral licenses (for the abstraction of underground water,
construction of subsurface gas storage facilities, etc.)
7 to 29 years
Intangible assets
are not amortized if their useful
lives cannot be determined.
The Company annually reviews
the amortization method
for an intangible asset during
inventory counts in order
to determine if it should be revised.
If the calculation of the expected
flow of future economic
benefits from an intangible
asset has changed significantly,
the amortization method
for that asset is also changed.
The resulting adjustments
are recorded and reported
as changes in estimates.
If the timing for receiving future
economic benefits is not reliably
estimated during inventory
counts, no changes are made
to the amortization method.
Intangible assets are not revalued
and are not tested for impairment
by the Company.
The Company determined that
there was no need to revise
the amortization method
and the useful lives of intangible
assets in the reporting period.
The Company has determined
useful lives for all intangible
assets.
Intangible assets are reported
in the balance sheet at their net
book value.
1 Provided that the production of mineral resources in the license area is commercially viable.
389
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 10. Information on intangible assets, (kRUB)
Group of intangible assets
Period
At the beginning of the period
Changes for the period
At the end of the period
Historical cost
Accumulated
amortization
Additions
Disposals
Amortization
charge
Historical cost
Accumulated
amortization
Historical cost
Accumulated
amortization
Total intangible assets:
Trademarks
Exclusive rights to an invention, utility model or industrial design
Exclusive rights to computer software and databases
Mineral licenses (including combined exploration and production licenses
issued after commercial viability is confirmed)
Other licenses
Information received as a result of drilling successful onshore appraisal/
exploration wells abandoned due to technological reasons
Results of 3D and 4D seismic surveys at sites after commercial viability
is confirmed
Other intangible assets
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
49,636,646
(9,047,370)
47,940,031
(7,471,211)
23,967
21,306
757,730
750,705
(13,123)
(11,374)
(498,713)
(352,283)
2,566,396
(1,560,236)
2,277,299
(1,281,842)
42,838,732
(6,583,337)
42,772,552
(5,527,300)
307
814
555,770
555,770
2,669,011
1,347,653
224,733
213,932
(205)
(563)
(21,623)
(6,663)
(170,033)
(99,032)
(200,100)
(192,154)
2,128,810
1,704,071
−
2,661
559,298
7,025
497,816
296,046
90,522
66,180
−
−
981,174
−
−
1,321,358
−
10,801
(2,267,711)
188,354
(3,523,994)
49,497,745
(12,383,010)
(7,456)
7,332
(1,583,491)
49,636,646
(9,047,370)
−
−
−
−
(2,733)
(6,949)
−
−
−
−
2,733
6,949
(1,842)
(1,749)
(184,737)
(146,430)
(375,508)
(285,343)
23,967
23,967
1,317,028
757,730
(14,965)
(13,123)
(683,450)
(498,713)
3,061,479
(1,933,011)
2,566,396
(1,560,236)
(2,264,864)
185,525
(2,845,091)
40,664,390
(9,242,903)
−
(114)
(507)
−
−
−
−
−
−
−
96
383
−
−
−
−
−
−
(1,056,037)
42,838,732
(6,583,337)
(18)
(25)
(13,620)
(14,960)
(94,285)
(71,001)
(8,893)
(7,946)
193
307
1,536,944
555,770
2,669,011
2,669,011
224,733
224,733
(127)
(205)
(35,243)
(21,623)
(264,318)
(170,033)
(208,993)
(200,100)
390
391
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 11. Information on intangible assets created by the Company, (kRUB)
7. OIL AND GAS RESERVES EXPLORATION AND ESTIMATION COSTS
Historical cost by group of intangible assets
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total, including
4,596,848
3,542,467
3,235,544
Exclusive rights to computer software and databases
3,061,479
2,566,396
2,277,299
Exclusive rights to an invention, utility model or industrial design
Other
1,310,636
224,733
751,338
224,733
744,313
213,932
Table 12. Information on investments in progress made to create intangible assets, (kRUB)
Investments in progress
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total investments in creation of individual intangible assets, including
by type:
5,349,232
3,742,681
4,130,712
Exclusive rights to computer software and databases
4,934,246
3,709,159
2,808,226
3D and 4D seismic surveys
Exclusive rights to an invention, utility model or industrial design
Trademarks
Other intangible assets
410,526
872
3,415
173
17,522
872
2,947
12,181
1,304,261
897
5,103
12,225
Intangible assets received for use are recorded off the balance sheet and are measured on the basis
of the amount of remuneration specified in the contract.
Table 13. Information on intangible assets received by the Company for use, (kRUB)
Cost by group of intangible assets
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total, including
Non-exclusive rights to software programs, rights of access to information
resources
11,879,018
9,201,500
8,870,210
11,879,018
9,201,500
8,870,210
Table 14. Information on fully amortized intangible assets, (kRUB)
Intangible assets
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total, including
1,689,678
1,327,933
1,266,602
1,152,914
332,765
5,409
9,058
21
189,511
1,064,121
1,071,022
79,003
5,483
7,808
21
13,715
5,373
6,361
61
171,497
170,070
Exclusive rights to computer software and databases
Exclusive rights to an invention, utility model or industrial design
Oil and gas production licenses
Trademarks
Other licenses
Other
392
Oil and gas reserves exploration
and estimation costs are recognized
using the successful efforts method
of accounting, according to which
only those costs are capitalized that
are directly incurred in the discovery
of new fields that will result in future
economic benefits, while exploration
costs (both direct and indirect),
including geological and geophysical
costs, are charged to expenses
as incurred.
The following oil and gas reserves
exploration and estimation costs
should be capitalized:
• Costs related to acquiring
of subsoil use rights for oil
and gas reserves (geological
prospecting and exploration
licenses, geological exploration
and production licenses)
• Costs related to the construction
of appraisal/exploration wells
• Information on the results
of drilling successful abandoned
appraisal/exploration wells
Capitalized exploration
and estimation costs lead
to the creation of exploration assets:
• Appraisal/exploration wells –
tangible exploration assets
• Licenses, information
on the results of drilling successful
abandoned appraisal/exploration
wells – intangible exploration
assets
Expenses related to the construction
of successful abandoned appraisal/
exploration wells in the license areas
that didn’t prove to be commercially
viable to recover oil and gas
are capitalized as follows:
• Expenses related
to the construction of appraisal/
exploration wells are initially
recognized as tangible exploration
assets and then transferred
to intangible exploration
assets in the event that
the discovery of hydrocarbon
reserves is confirmed and there
is a possibility that these reserves
will be approved by the State
Committee on Reserves
both with regard to the well
(current reserves estimation)
and the subsurface area (reserves
estimation based on geological
results of the well)
• Until the decision
on commercial viability has
been reached, expenses related
to the construction of successful
abandoned appraisal/exploration
wells are recognized as intangible
exploration assets in the form
of information received
as the result of drilling the offshore
appraisal/exploration wells
As of the reporting date,
the Company annually tests
exploration assets for any indication
of impairment when making
the decision on the commercial
viability of oil and gas production
in a licensed area. Impairment testing
is performed by field (licensed
area). Where there is evidence
of impairment, the Company
writes down the exploration assets
by the amount of the carrying
amount of the licenses, wells
and 3D seismic surveys during
the stage of exploration
and prospecting at a field
(licensed area) or, in the event
of the recoverability of exploration
assets, to the realizable value.
Once the commercial viability
of the subsurface area has
been established, exploration
assets in this area are subject
to reclassification:
• Exploration and production
licenses, as well as information
on the results of drilling successful
abandoned appraisal/exploration
wells become intangible assets
• Appraisal/exploration wells
become fixed assets (development
wells construction in progress)
If production proves
to be impractical, exploration assets
are subject to impairment and are
subsequently written off to other
expenses of the Company.
Exploration assets
are not depreciated.
The following costs
are not capitalized in the value
of assets and are taken to current-
period expenses as oil and gas
exploration and estimation costs:
• Costs incurred at the regional
stage
• Exploration costs not related
to drilling of appraisal/exploration
wells or 3D and 4D seismic
surveys at commercially
recoverable oil and gas fields,
including costs for the follow-up
exploration of fields which
have been put on stream
and considered commercially
developed
• Costs related to the maintenance
of subsurface areas where
exploration is being carried
out and of fields which
are not commercially operated
• Costs related to the preparation
of project technical
documentation for developing
fields which are not commercially
operated
The Company derecognizes
exploration assets
at the respective subsurface area
if it proves to be commercially
viable or if production is considered
impractical.
393
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 15. Information on exploration assets, (kRUB)
Group of licenses
Period
At the beginning
of the period
Changes for the period
At the end of the period
Historical
cost
Accumulated
impairment
losses
Additions
Disposals
At historical
cost
Accumulated
impairment
losses
Historical
cost
Accumulated
impairment
losses
Tangible
exploration assets
2020
29,230,855
2019
20,170,757
–
–
24,466,718
(23,121,826)
9,604,440
(544,342)
2020 107,173,674
(8)
20,976,896
(24,303,733)
2019
99,214,265
(150)
8,975,984
(1,016,575)
142
107,173,674
2020
63,057,243
2019
56,623,639
–
–
1,364,659
(22,912,979)
7,437,552
(1,003,948)
Intangible
exploration assets,
including
License to use
subsurface
resources
with the right
of extraction
License to use
subsurface
resources
without the right
of extraction
Information
on the results
of drilling
successful
abandoned
appraisal/
exploration wells
Costs related
to acquiring
of subsoil use
rights for oil
and gas reserves
2020
86,768
(8)
2,631
2019
2,421
(150)
84,520
19,120,460
472,973
2020
43,021,612
2019
42,548,639
2020
1,008,051
2019
39,566
–
–
–
–
489,146
(1,390,701)
980,939
(12,454)
(53)
(173)
–
–
–
–
8
30,575,747
29,230,855
103,846,837
–
–
8
41,508,923
63,057,243
89,346
–
–
–
(8)
–
–
142
86,768
(8)
–
–
–
–
62,142,072
43,021,612
106,496
1,008,051
–
–
–
–
Information on tangible exploration
assets as of 31 December 2020
is disclosed in line 1140, Tangible
exploration assets, including
advances issued of kRUB811,632
and materials of kRUB815,297
intended for creating tangible
exploration assets in the balance
sheet.
Change in tangible exploration
assets was mainly due
to the completion of exploratory
drilling in 2020 amounting
to kRUB24,466,718, reclassification
of information on the results
of drilling successful abandoned
appraisal/exploration wells
in the amount of kRUB19,120,460
to intangible exploration assets.
In 2020, the change
in intangible exploration
assets was primarily due
to the disposal of 17 geological
survey licenses with the right
of extraction in connection
with the reissue of licenses
to use subsurface resources
in the amount of kRUB22,912,979;
reclassification of information
on the results of drilling appraisal/
exploration wells in the amount
of kRUB19,120,460 to intangible
exploration assets; and acquisition
of 2 subsurface use licenses
permitting geological survey
and exploration in the amount
of kRUB1,364,659.
8. RESEARCH AND DEVELOPMENT RESULTS
Research and development
results include costs incurred
during the stage of development
of R&D work in progress (recorded
as investments in non-current
assets) and completed (recognized
as intangible assets/R&D).
The Company’s costs
are recognized in the accounts
as R&D in progress if all
of the following conditions are met:
• R&D contracts indicate that
in the course of work new
scientific knowledge is expected
to be produced and/or used
(information, which is unknown,
given the current level
of technology)
• It is assumed that the positive
result of R&D activities will
create an opportunity for future
economic benefits
• It is assumed that the positive
completion of R&D activities will
make it possible to demonstrate
the use of its results
in production for management
requirements
• The amount of expenses can
be defined and confirmed
When R&D projects
are developed in-house,
the related costs are capitalized
from the beginning of the project
stage if the Company is able
to demonstrate:
• The technical feasibility
of developing such R&D projects
• Its intention and ability
to develop and use an R&D
project
• How the R&D project is likely
to generate economic benefits
• The availability of sufficient
technical, financial and other
resources to complete
the development of and use
the R&D projects
• The ability to reliably
measure costs related
to the development of the R&D
project
• R&D projects developed
by Company employees
in the course of performing
their job duties
• R&D projects resulting
from contractor work
under contracts in respect
of which the Company bears
the risk of negative results
R&D costs incurred at the research
stage are not capitalized
and are recognized as expenses
relating to ordinary activities
or other expenses depending
on the purpose of the research.
R&D costs are written off
to expenses relating to ordinary
activities on the first day
of the month following the month
in which the actual use
of the obtained results began.
Upon the completion of R&D
activities, in the event of a positive
result, the costs related to R&D
in progress form the value of R&D
project. In the event of a negative
result, R&D costs are written off
to other expenses.
R&D projects developed in-house
include:
The R&D project value is written
off on a monthly basis using
the straight-line method
in the amount of 1/12 of the annual
amount.
In the event that the use
of an R&D project is suspended,
the related costs in the form
of a monthly write-off amount
are to be recognized as other
expenses during the period
for which the use of the R&D
project has been suspended.
Where the Company early
terminates using the results
of R&D activities in accordance
with the Order, On Writing Off
R&D Expenses, R&D expenses
are taken to other expenses.
The write-off period for R&D costs
is determined by the Company
based on the expected period
of use of the results from these
activities. This period may
not exceed 5 years.
This period for most significant
R&D results ranges from two
to five years.
.
Table 16. R&D results profile, (kRUB)
R&D
type
Period
At the beginning of the period
Change for the reporting period
At the end of the period
Historical cost
Part
of the value
written off
to expenses
Additions
Disposals
Part
of the value
written off
to expenses
Historical
cost
Part
of the value
written off
to expenses
R&D
2020
1,079,758
(538,192)
455,732
(368,792)
(150,562)
1,166,698
(688,754)
2019
550,847
(360,890)
535,911
(7,000)
(177,302)
1,079,758
(538,192)
Changes in the R&D value
in the amount of kRUB368,792
in 2020 and kRUB7,000 in 2019
were made in the course of R&D
reclassifying to intangible assets
at cost upon receipt of protection
documents.
394
395
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 17. R&D in progress and pending registration, (kRUB)
R&D type
Period
At the beginning
of the period
Change for the reporting period
At the end
of the period
Costs
for the period
Costs expensed
as unsuccessful
Recognized
as intangible
assets, R&D
or fixed assets
Costs of R&D
in progress
2020
2019
8,408,556
2,816,700
(1,781)
(1,189,734)
10,033,741
6,538,166
2,406,301
−
(535,911)
8,408,556
9. OTHER NON-CURRENT ASSETS
Other non-current assets include
assets which are assumed
to produce economic benefits
over a period exceeding 12 months.
This line includes prepaid expenses,
fixed assets and tangible exploration
assets retirement obligations
(discounted) (hereinafter, the “ARO
asset”), and other assets.
Other non-current assets are valued
based on actual costs, except
for ARO assets that are subject
to accounting estimates.
Prepaid expenses relating to several
periods are written off using
the straight-line method.
The amount of the ARO assets (with
regard to sites or facilities which,
when abandoned, require disposal
of materials and/or remediation
of a land plot) is determined
based on the estimated costs
at the reporting date, which
the Company is expected to incur
when dismantling fixed assets
and remediating natural resources
on occupied land plots.
The ARO asset is depreciated
on a monthly basis using the unit
of production method. Proved
developed oil and gas reserves
are defined in accordance
with Petroleum Resources
Management System (PRMS).
For the purposes of evaluation
of the reserves as of 31 December
2020, the Company used proved
oil and gas reserves data prepared
by DeGolyer and MacNaughton,
independent reservoir engineers.
The rate is applied to the book value
at the beginning of the reporting
month and reserves in denominator
are adjusted to the production
volume from the beginning
of the year to the beginning
of the reporting month.
The ARO asset related
to the retirement of tangible
exploration assets at the fields
where it is not confirmed that
the production is commercially
viable is not depreciated.
Table 18. Information on other non-current assets, (kRUB)
Other non-current assets by type
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total other non-current assets
39,003,899
33,452,714
31,951,119
Prepaid expenses with the write-off period exceeding 12 months
19,440,293
12,157,493
9,812,024
including by type: software
ARO asset
Other non-current assets
19,440,293
12,157,493
9,812,024
19,128,439
20,962,554
21,814,156
435,167
332,667
324,939
10. INVENTORIES, VALUE ADDED TAX, EXCISE DUTIES
ON SELF-PRODUCED OIL PRODUCTS
In accordance
with the requirement of prudence,
the Company accounts
for the impairment of inventories
using the method of provisioning.
Allowances for impairment
of inventories are made for similar
or related inventory items,
in respect of which there was one
of the following circumstances
in the reporting year that caused
the decrease of their current
(market) value:
• Drop in market prices
for the respective inventories
• Inventories becoming obsolete
• Inventories becoming partially
or fully damaged
The amount of the impairment
allowance is calculated
as the difference between current
market value and actual cost
of inventories.
The cost of inventories at the end
of the reporting year is recognized
in the balance sheet less total
allowances for impairment
of inventories accrued.
The information on allowances
for impairment of inventories
accrued and reversed
in the reporting year is recorded
net in line 2340, Other income,
or line 2350, Other expenses,
of the income statement.
Inventories are accounted
for at their actual cost calculated
based on the amount of actual
acquisition/production costs,
net of value added tax and other
recoverable taxes (except
in instances stipulated by Russian
law).
Upon disposal, inventories
are depreciated using the following
methods:
• Oil, construction materials,
equipment, spare parts, fuel,
packaging, fixtures and fittings,
instruments and tools, other
inventories – by the cost of every
inventory unit (inventory unit
is a consignment)
• Oil products – by the average
cost of production broken down
by refinery
• In-house semi-finished
products – by the average cost
of production broken down
by refinery
• In-house oil and gas –
by the average cost of production
broken down by operator
Special protective clothes handed
over for use are accounted for as
materials. The value of special
protective clothes with the service
life of more than 12 months
is depreciated using the straight-
line method over the specified
period of its use. The value
of special protective clothes
with the service life of less
than 12 months is written off
when the clothes are handed
over for use.
Materials, fuel, spare parts
and other material resources
are recorded at their actual
acquisition cost.
Work in progress and finished
products are recorded at their
actual cost; goods are recorded
at their acquisition cost.
Shipped finished products
and shipped goods, the title
to which is not yet transferred
to the buyer, are recorded within
inventories.
Inventories also comprise
transportation and procurement
costs attributable to the balance
of goods at the warehouse
and shipped but unsold goods.
Costs to sell (transportation
costs, storage costs, intermediary
service costs, customs duties etc.)
are recorded within inventories
where it is possible to relate
them to certain consignments
of finished products and goods
recognized in accounting records
before the sale of consignments
to which they relate.
The amounts of VAT related
to the acquired goods, work,
services and property rights
to be deducted and not included
in the cost of the assets acquired,
or in expenses, are recorded in line
1220 of the balance sheet.
This line also includes the excise
duty assessed by the Company
upon accounting for straight-
run gasoline, benzene,
medium distillate, orthoxylene,
paraxylene subject to appropriate
certificate and deductible during
their refining/disposal.
If there is any indication
of impairment, the Company
recognizes the decrease in value
of inventories in the financial
statements.
396
397
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 19. Information on VAT and excise duties, (kRUB)
Tax
At 31 December
2020
At 31 December
2019
At 31 December
2018
Input value added tax charged
29,515,326
43,878,882
66,860,529
Excise duty assessed upon accounting for straight-run gasoline, benzene,
orthoxylene, paraxylene
6,155,635
4,929,927
5,858,165
Table 20. Information on inventories, (kRUB)
Inventories by type
At 31 December 2020
At 31 December 2019
At 31 December 2018
Cost
Allowance
for impairment
Cost
Allowance
for impairment
Cost
Allowance
for impairment
Total inventories
113,986,622
(85,599)
138,946,748
(57,001)
151,463,844
(37,645)
Raw and other
materials
Costs related to work
in progress
Finished products
and goods
14,610,458
(83,414)
15,838,148
(57,001)
18,883,705
(37,426)
9,955,929
х
11,722,717
89,420,235
(2,185)
111,385,883
х
х
11,326,184
х
121,253,955
(219)
Change in the cost of inventories
is related to the change
in oil prices and, therefore,
to the change in tax rates included
in the cost of products. In addition,
the carrying amount of inventories
was affected by the change
in production volumes. In 2018–20,
inventories were not pledged.
Table 21. Information on the movements in allowances for impairment of inventories, (kRUB)
Item
Period
Allowance
at the beginning
of the period
Change in the allowance over the reporting
period
Accrued, +
Reversed (adjusted), -
Allowance
at the end
of the period
Total allowance
2020
2019
57,001
37,645
38,039
20,330
(9,441)
(974)
85,599
57,001
11. FINANCIAL INVESTMENTS
Financial investments are initially
recognized at their actual
acquisition cost. Subsequently,
financial investments whose
market value can be determined
are remeasured at market
value; and financial investments
whose market value cannot
be determined are not remeasured,
but tested for impairment.
When a sustained material
decline in the value of financial
investments is supported
by impairment tests, the Company
creates (adjusts) an allowance
for impairment of such financial
investments as of the last
day of the quarter (last day
of the reporting year).
The valuation of financial
investments whose market value
can be determined is adjusted
to the current market value
on a quarterly basis. Long-term
shares and short-term bonds
include investments whose
market value can be determined.
The difference between current
market value as of the reporting
date, 31 December 2020,
and previous valuation of long-
term financial investments
whose market value can
be determined as of 31 December
2019 is kRUB239,016 (income);
for the previous 2019:
kRUB1,078,147 (income).
The amount of adjustment
was taken to the financial result
and recorded as other income.
In general, the current market
value may be determined
if the relevant quotations
are available in the securities
market. In this case, the current
market value of financial
investments is their market
value determined as appropriate
by an organizer of the trade
in the securities market.
Financial investments
in the form of shares of PJSOC
Bashneft (“Bashneft”) quoted
in the securities market
are accounted for following
Debt securities and loans issued
are not measured at present value.
to maturity under the agreement
remains 365 days or less after
the reporting date.
the procedure provided for financial
investments, for which the current
market value is not determined.
It is due to the fact that quotes
in the securities market do
not represent a market price
(control premium). The volume
of shares available for free
circulation in the market
is insignificant and their
sales are not representative
for appraising the value
of the majority shareholding
since they are easily manipulated
by stock players.
At disposal of assets recognized
as financial investments,
for which the current market value
is determined, the value of such
assets is based on their most
recent valuation.
Financial investments whose
current market value cannot
be determined are measured
at historical cost of each unit
disposed.
The historical cost of debt
securities whose current market
value cannot be determined
is not adjusted for the difference
between the historical cost
and nominal value.
Deposits with the maturity
period not exceeding 91 days
are not considered to be financial
investments and are recorded
within cash in the financial
statements.
Where it is impossible
to determine the cost of assets
transferred or transferable
by the Company, the value
of financial investments received
by the Company under contracts
providing for non-monetary
compensation (settlement)
is based on the price at which
the Company normally purchases
similar financial investments
under comparable circumstances.
Short-term debt related
to financial investments
is reclassified to long-term debt
in cases when the payment terms
envisaged by the agreement
are revised and increased
to exceed 365 days after
the reporting date.
Long-term debt related to financial
investments is reclassified
to short-term debt when the term
Table 22. Information on financial investments, (kRUB)
The value of all financial
investments previously
remeasured at market value
is recorded at the current market
value as of the reporting date.
The Company did not record
any financial investments
measured at market value
with undetermined market value
at the reporting date.
The Company did not record
financial investments pledged
or transferred to third parties
(except for sale).
Contributions to assets
and other investments
to improve the financial position
of the Group’s entities (financial
aid, free of charge transfer
of assets, etc.) are subject
to capitalization in the cost
of the financial investments
in the entities, in which additional
investments are made.
Financial investments by type
At 31 December
2020
At 31 December
2019
At 31 December
2018
Total
7,187,984,529
6,818,923,238
7,260,408,278
Total long-term investments
5,764,322,744
5,833,160,665
6,159,574,705
Units and shares (interests), including:
4,630,135,324
4,409,568,942
3,946,983,553
Shares (interests) in subsidiaries and associates
4,625,149,142
4,403,720,303
3,942,196,509
Long-term loans issued
1,008,162,802
1,220,410,862
1,954,261,188
Other long-term financial investments
126,024,618
203,180,861
258,329,964
Total short-term investments
Short-term loans issued
Deposits
1,423,661,785
985,762,573
1,100,833,573
646,307,340
712,067,647
655,165,832
436,110,717
55,642,502
216,368,210
Promissory notes and bonds received
124,115,954
119,019,389
130,282,140
Accounts receivable acquired under assignment agreements
−
−
456
Other short-term financial investments
217,127,774
99,033,035
99,016,935
398
399
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 23. Information on movements in allowance for impairment of financial investments, (kRUB)
Item
Period
Allowance
at the beginning
of the period
Movements in allowance over the reporting period
Accrued, +
Recognized
in other income
(reversed)
Used (upon
disposal
of the financial
investment)
Revaluation
Allowance
at the end
of the period
2020
44,802,708
6,710,881
(4,027,380)
(12)
2,727,971
50,214,168
2019
48,629,313
3,188,614
(2,326,606)
(3,102,763)
(1,585,850)
44,802,708
Allowance
for impairment
of financial
investments (not
having a market
value)
In 2020, change in the value
of long-term financial investments
from kRUB5,833,160,665
to kRUB5,764,322,744
was primarily due
to the decrease in loans issued
of kRUB212,248,060, including
due to the repayment, revaluation
and reclassification of debt;
decrease in other financial
investments of kRUB77,156,243,
including due to reclassification
and revaluation of credit notes,
placement and revaluation
of long-term deposits; increase
in interests and investments
in charter capitals of subsidiaries
of kRUB255,743,135; decrease
in interests and investments
in charter capitals of affiliates
in the amount of kRUB34,314,296.
In 2020, changes mainly occurred
in the following interests
and investments: the value
of investments in RN-NKI LLC
increased by kRUB110,000,000;
in RN-Razvedka i dobycha
LLC – by kRUB66,038,078;
in RN-Kommerciya
LLC – by kRUB30,970,550;
in RN-Vankor LLC –
by kRUB30,000,000; in RN-Aktiv
LLC – by kRUB18,992,833.
In 2020, change
in the value of short-
term financial investments
from kRUB985,762,573
to kRUB1,423,661,785 was primarily
due to the placement
and reclassification of short-
term deposits, increase in other
short-term investments
due to the reclassification
and revaluation of credit notes,
repayment and reclassification
of short-term loans, acquisition
and revaluation of short-term
bonds, repayment and revaluation
of short-term promissory notes.
12. DERIVATIVE FINANCIAL INSTRUMENTS AT FAIR VALUE
THROUGH PROFIT OR LOSS
Derivatives are financial
instruments that simultaneously
meet the following criteria:
• The value of a financial
instrument is changed in line
with the changes in the applied
interest rate, security rate,
price of goods, foreign currency
exchange rate, price or interest
rate index, credit rating or credit
index or other “basic” variables
• The acquisition of a financial
instrument does not require
any investments or requires
initial net investments
but in amounts lower than
for other instruments, the price
of which has a similar response
to market factor changes;
and other types of contracts that
are expected to have a similar
response to market factor
changes
• Financial instrument calculations
are performed subsequently
In managing foreign currency
and interest rate risks,
the Company entered into a cross
currency and interest rate
swap and a deliverable cross-
currency swap to sell US
dollars and euro that help
match the currency of revenue
and the currency of liabilities,
and in 2020, the Company also
entered into a series of options
that helped to reduce the interest
rates for the debt financing raised.
Derivative financial instruments
are measured at fair value.
The method for determining
the fair value of transactions
is based on the assessment
of the present discounted
value of future cash flows using
the consensus projections
of foreign exchange rates
and interest rates. The consensus
projections comprise forecasts
of key international banks
and agencies. The Bloomberg
system is the key source
of information for making
projections.
Profit or losses arising during
the period asц adjustments
upon change in the fair value
are recognized in the income
statement.
The change in the fair value
of the derivative financial
instrument means the difference
between the fair value
at the beginning of the reporting
period (or at the date
of acquisition, whichever
is more recent) and at the end
of the reporting period.
As of the reporting date, short-term
liabilities on derivative financial
instruments include liabilities arising
from the cross currency and interest
rate swap and the deliverable cross-
currency swap.
Derivative financial instruments
at fair value through profit or loss
are recorded as assets (liabilities)
in the balance sheet in similar lines
depending on their maturity.
Transactions with derivative
financial instruments are presented
below:
Table 24. Information on transactions with derivative financial instruments
Financial
instrument
Period
Nominal amount at 31 December
2020
Interest rate
type
Fair value of asset (liability) at 31
December (kRUB)
Issue
Repayment
kEUR / kUSD
kRUB*
2020
2019
2018
Swaps
Swap
Swap
2014
2019
2020
2019
2021
2021
−
−
Floating
−
−
(33,058,044)
985,718 €
89,387,274
Floating (11,745,463)
2,243,018
1,000,000€
90,682,400
Fixed
(746,145)
−
−
−
In 2019, the Company completed
transactions with derivative
financial instruments entered
into in 2014 in the nominal amount
of kUSD1,009,518.
13. INFORMATION ON HEDGING TRANSACTIONS
MANAGING CURRENCY
RISK RELATED TO CHANGES
IN CASH FLOWS FROM FUTURE
PROCEEDS IN FOREIGN
CURRENCY
Hedging transactions
are operations (set of operations)
with term transaction financial
instruments (including those
of different types), performed
to minimize (compensate for)
adverse effects, fully or partially,
caused by the loss incurred,
income deficiency, decrease
in revenue, decrease in market
value of the property, including
property rights (rights of claim),
increase in the Company’s
liabilities due to change
in price, interest rate, currency
exchange rate, including the rate
of a foreign currency to the rate
of the currency of the Russian
Federation, or another indicator
(set of indicators) of a hedged item
(items).
The Company designated
part of its USD-denominated
borrowings as a hedging
instrument for export revenue
which is likely to be received.
A portion of the future
monthly export revenue
expected to be received
in US dollars was designated
as a hedged item. The nominal
amounts of the hedged item
and the hedging instrument
are equal. To the extent that
a change in the foreign currency
rate impacts the hedging
instrument, the effects
were recorded in other funds
and reserves in accordance
with the Company’s accounting
policy; subsequently these effects
should be transferred into profit
or loss for the period, in which
the hedged revenue is recognized.
According to the strategy
for managing foreign currency risk
related to cash flows from future
proceeds in foreign currency,
export revenue should be hedged
in the amount of net monetary
position denominated in US dollars.
The Company regularly aligns
the nominal amount of hedging
and net monetary position in US
dollars. As of 31 December 2020
and 31 December 2019, there
were no designated hedging
instruments.
* Equivalent of the nominal amount at the CBR official exchange rate as of 31 December 2020.
400
401
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 25. Information on amounts recognized in other funds and reserves on hedging transactions, (kRUB)
Item
2020
2019
2018
Recognized in other funds and reserves
at the beginning of the year
Foreign exchange differences on cash flow hedges
before tax
1,389,427
(115,062,581)
(231,748,689)
–
–
333,196
Reclassified to profit or loss
(1,900,007)
145,565,010
145,524,439
Difference between the accounting profit (loss)
and the taxable profit (loss) of the reporting period
resulting from recognition of hedging transactions*
Recognized in other funds and reserves at the end
of the year
380,002
(29,113,002)
(29,171,527)
(130,578)
1,389,427
(115,062,581)
The forecast of reclassification
of amounts from the revaluation
of hedges accumulated in other
funds and reserves into profit
or loss as of 31 December 2020
is presented below:
Table 26. Forecast of revaluations reclassified to profit or loss, (kRUB)
Item
Reclassifications
Income tax
Total net of income tax
2021
(163,222)
32,644
(130,578)
14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents
include the Company’s amounts
with banks and credit institutions,
in operational and other cash
offices, as well as deposits
and other cash equivalents
with the maturity period
not exceeding 91 days.
For the purposes of the statement
of cash flows, cash flows
are classified based on the criteria
specified in clauses 9–11
of Accounting Statement 23/2011.
Cash flows that cannot be reliably
classified are recognized as cash
flows from operating activities.
Federation at the date of payment
or receipt. The average
exchange rate is not applied
to translate cash flows. There
is no cash unavailable for use
by the Company.
Foreign currency cash flows
are translated into Russian rubles
at the official rate of the foreign
currency to Russian ruble set
by the Central Bank of the Russian
Table 27. Information on cash and cash equivalents, (kRUB)
Cash
At 31 December
2020
At 31 December
2019
At 31 December
2018
Cash
including restricted cash**
Deposits with the maturity period not exceeding 91 days and other cash
equivalents
419,331,940
46,481,256
504,118,733
1,310,173
2,333,436
3,366,005
76,867,857
50,917,510
94,422,491
* Recognized in line 2412, Deferred income tax.
** Information on cash at the exchange and on accounts open with the territorial bodies of the Federal Treasury.
15. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE, OTHER
CURRENT ASSETS
Short-term accounts receivable
and payable are reclassified
into long-term in cases
where payment periods
under existing contracts
are revised and increased
to exceed 365 days.
Long-term accounts receivable
and payable are reclassified
into short-term where the term
to maturity under existing
contracts becomes 365 days
or less.
Similarly, part of long-term
accounts receivable and payable
is reclassified into short-term if
the debt under existing contracts
is repaid by installments
in different periods.
Accounts receivable and payable
are accounted for and recorded
in financial statements
in accordance with the respective
existing agreements. Net result
is recognized in the financial
statements if there are advances
issued/received and accrued
accounts receivable/payable
under the same agreement.
Accounts receivable
from suppliers and contractors
include advances issued that
are recorded in the balance
sheet less VAT deductible
or deducted at the reporting
date in accordance with the Tax
Code of the Russian Federation.
VAT on advances (deductible
but not claimed for deduction
at the reporting date) is recorded
in the balance sheet within other
current assets.
Accounts payable to suppliers
and contractors include advances
received that are recorded
in the balance sheet less VAT
on advances received.
Accounts receivable include
non-income-bearing financial
investments within Rosneft Oil
Company Group.
The Company receives no
government financing.
Allowance for impairment
of accounts receivable is made
on the basis of settlements
with other organizations
and individuals for products,
goods, work and services,
advances issued and other
accounts receivable, and is
recorded in the income statement
as other expenses.
From 2018, allowances are created
for trade accounts receivable
in accordance with the expected
credit losses concept pursuant
to IFRS 9, Financial Instruments.
Allowance for impairment
of doubtful accounts receivable
is created for accounts receivable
not covered by IFRS 9, Financial
Instruments. No allowance
is created for accounts receivable
of Rosneft Oil Company Group.
Table 28. Information on accounts receivable, (kRUB)
Accounts receivable by type
Total accounts receivable
Long-term accounts receivable
Including: trade accounts receivable
Advances paid
Other debtors, including
At 31 December
2020
At 31 December
2019
At 31 December
2018
4,002,964,504
3,543,076,666
2,653,803,215
3,062,309,222
2,131,722,190
1,648,785,448
46,474
832,457
63,543
571,607
53,330
592,718
3,061,430,291
2,131,087,040
1,648,139,400
Loans issued to the companies within Rosneft Oil Company Group
2,788,145,043
1,869,506,975
1,330,769,489
Interest on long-term loans, promissory notes
270,705,745
234,673,280
288,968,440
Short-term accounts receivable
940,655,282
1,411,354,476
1,005,017,767
Including: trade accounts receivable
360,332,405
453,183,557
490,499,629
Advances paid
Other debtors, including
107,665,207
42,524,293
37,565,998
472,657,670
915,646,626
476,952,140
402
403
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Receivables from the budget and state non-budgetary funds
88,722,094
110,217,319
96,014,921
Loans and promissory notes issued to the companies within Rosneft Oil
Company Group
68,396,541
197,716,914
109,168,244
Interest (discount) on deposits, loans, promissory notes
189,806,746
240,049,474
126,541,234
Settlements under commission agreements, other debtors
57,628,725
90,050,833
80,463,919
Table 29. Information on movements in allowance for impairment of accounts receivable, (kRUB)
Item
Period
Allowance
at the beginning
of the period
Movements in allowance over the reporting period
Accrued, +
Recognized
in other income
(reversed)
Used (upon
disposal
of accounts
receivable)
Translation
differences
Allowance
at the end
of the period
Allowance
for impairment
of accounts
receivable
2020
2019
54,377,152
12,296,667
(14,820,737)
(788,324)
7,460,870
58,525,628
30,518,051
28,611,345
(1,824,700)
(1,021,299)
(1,906,245)
54,377,152
As of 31 December 2020,
the Company’s accounts
receivable amounted
to kRUB4,002,964,504, including
the allowance for impairment
of accounts receivable. In 2020,
accounts receivable increased
by kRUB459,887,838. The increase
in accounts receivable was primarily
attributed to the increase
in amounts due from companies
within Rosneft Oil Company Group
on interest-free long-term loans
to finance operating activities.
Table 30. Information on accounts payable, (kRUB)
Accounts payable by type
At 31 December
2020
At 31 December
2019
At 31 December
2018
Accounts payable
Trade accounts payable
2,525,807,379
2,699,900,722
2,333,146,921
1,738,450,553
1,867,264,817
1,526,096,089
Payables to the Company’s employees
12,507
34,712
35,661
Payables to the budget and non-budgetary funds
80,441,063
100,730,066
72,371,917
Advances received
428,474,708
384,794,432
394,999,901
Settlements under commission agreements, other payables
278,428,548
347,076,695
339,643,353
In 2020, accounts payable
decreased by kRUB174,093,343
year-on-year, and as of 31
December 2020, amounted
to kRUB2,525,807,379. The decrease
in accounts payable was primary
attributed to settlements
with the companies within Rosneft
Oil Company Group for purchased
products and operator
services relating to production
and processing.
16. LOANS AND BORROWINGS, OTHER LIABILITIES
AND COLLATERAL PLEDGED
Loans payable recorded
in the financial statements
as of the reporting date include
the accrued interest.
Borrowing costs included in other
expenses amounted to kRUB165,913.
Total interest accrued
on the Company’s loans
for the reporting period amounted
to kRUB76,799,677.
Interest payable decreased
by kRUB5,025,780 year-on-year.
Interest capitalized in the cost
of investment assets created
(acquired) was kRUB15,086,851,
including the capitalized interest
on loans received for purposes other
than acquisition, construction and/or
production of the investment asset
in the amount of kRUB15,077,508.
Loans and borrowings payable
are accounted for and recorded
in financial statements in accordance
with the respective existing
agreements.
The Company reclassifies short-
term loans and borrowings
payable into long-term payables
if the repayment period
under the existing agreement
is revised and increased to exceed
365 days. The Company reclassifies
long-term payables into short-term
payables where the outstanding
period to maturity becomes 365
days or less.
The interest amounts payable
under loans and borrowings received
are accrued on a straight-line basis
regardless of the conditions of loans
(borrowings). Additional expenses
for loans (borrowings), other than
commissions on loans (borrowings)
raised, such as bank commissions
for using loan funds, originating
a loan, obtaining and maintaining
a line of credit, and other bank
commissions (fees) related to raising
loans (borrowings) are recorded
as a lump sum in other expenses.
Where commissions on loans
(borrowings) are material, they
are included in other expenses
on a straight-line basis over the loan
(borrowing) maturity period.
The commissions on loans
(borrowings) that are not written off
as of the reporting date are shown
on the balance sheet as other non-
current assets or other current
assets depending on their remaining
period of recognition as expenses
(more than 12 months or less than 12
months, respectively).
For the purposes of capitalizing
interest on loans and borrowings
into the cost of acquired assets,
such investment assets shall
comprise those assets that take
a substantial period of time (over 12
months) and significant expenses
on acquisition, construction
or production to get ready for their
intended use.
Investment assets consist of items
of non-current assets, work-in-
progress and construction-in-
progress which will subsequently
be accounted for by the borrower
and/or customer (investor, buyer)
as fixed assets (including land),
intangible assets, exploration
and evaluation costs or other non-
current assets.
In 2020, the Company raised loans
from Russian banks at floating
and fixed rates to replenish
working capital. Loans were repaid
under relevant agreements
both early and in accordance
with the schedule.
404
405
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 31. Information on long-term and short-term loans and borrowings, (kRUB)
Table 32. Information on RUB-denominated interest-bearing non-convertible bearer bonds, (kRUB)
Change for the reporting period
Balance at 31
December 2020
Type of bonds
Series number
Issue date
Total nominal
value
Coupon
rate*
31 December
Loans and borrowings by type
Balance at 31
December
2019
Received
(accrued)
Repaid (paid)
Reclassified
Long-term loans and borrowings
5,397,760,107
5,944,249,540
(4,354,949,170)
(566,751,601)
6,420,308,876
including
• Long-term loans
905,750,857
832,629,783
(30,000,000)
(132,003,244)
1,576,377,396
• Long-term borrowings
1,745,174,492
4,236,099,114
(4,311,878,697)
15,270,039
1,684,664,948
• Long-term interest accrued
171,780,471
26,638,165
(13,070,473)
6,878,818
192,226,981
under loan and borrowing agreements
• Long-term promissory notes issued
1,920,814
−
• Long-term interest accrued
on promissory notes
1,285,686
119,297
• Long-term bonds issued
2,571,847,787
848,763,181
−
−
−
(1,097,608)
823,206
(779,886)
625,097
(455,019,720)
2,965,591,248
Short-term loans and borrowings
946,067,618
3,797,654,293
(4,523,120,991)
566,751,601
787,352,521
including
• Short-term loans
80,000,000
841,770,250
(831,770,250)
−
90,000,000
• Short-term borrowings
197,271,659
2,644,550,917
(2,755,858,333)
(15,270,039)
70,694,204
• Current portion of long-term loans
219,291,370
13,089,827
(231,991,981)
132,003,244
132,392,460
and borrowings
• Current portion of long-term interest
accrued under loan and borrowing
agreements
1,262,729
68,631,786
(68,537,287)
−
1,357,228
• Short-term interest accrued
11,160,682
20,102,313
(21,389,574)
(6,878,818)
2,994,603
under loan and borrowing agreements
• Current portion of long-term bonds
400,000,000
−
(400,000,000)
455,019,720
455,019,720
issued
• Short-term interest accrued on bonds
35,248,893
209,412,102
(211,697,758)
−
32,963,237
(coupon income)
• Short-term promissory notes issued
1,097,608
−
(1,097,608)
1,097,608
1,097,608
• Short-term interest accrued
on promissory notes
734,677
97,098
(778,200)
779,886
833,461
Information on RUB-denominated
interest-bearing non-convertible
bearer bonds issued as of 31
December is provided below:
406
Bonds
Bonds
Bonds
04, 05
07, 08
October 2012
20,000,000
7.90 %
20,000,000
20,000,000
20,000,000
March 2013
30,000,000
7.30 %
30,000,000
30,000,000
30,000,000
06**, 09**, 10**
June 2013
40,000,000
7.00 %
4,610,968
610,968
610,968
Exchange-traded
bonds
BO-05, BO-06
December
2013
40,000,000
6.65 %
40,000,000
10,236,819
10,236,819
2020
2019
2018
Exchange-traded
bonds
Exchange-traded
bonds
BO-01, BO-07
February 2014
35,000,000
8.90 %
35,000,000
35,000,000
35,000,000
BO-02, BO-03,
BO-04, BO-08,
BO-09, BO-10,
BO-11, BO-12,
BO-13, BO-14
December
2014
225,000,000
9.40 %
225,000,000
225,000,000
225,000,000
Exchange-traded
bonds
BО-15, BО-16,
BО-17, BО-24***
December
2014
400,000,000
7.85 %
−
400,000,000
400,000,000
Exchange-traded
bonds
BO-18, BO-19,
BO-20, BO-21,
BO-22, BO-23,
BO-25, BO-26
Exchange-traded
bonds
001R-01
Exchange-traded
bonds
001R-02
Exchange-traded
bonds
001R-03
Exchange-traded
bonds
001R-04
Exchange-traded
bonds
001R-05
Exchange-traded
bonds
001R-06
Exchange-traded
bonds
001P-07
January 2015
400,000,000
6.30 % 400,000,000
400,000,000
400,000,000
December
2016
December
2016
December
2016
600,000,000
4.35 % 600,000,000
600,000,000
600,000,000
30,000,000
9.39 %
30,000,000
30,000,000
30,000,000
20,000,000
9.50 %
20,000,000
20,000,000
20,000,000
May 2017
40,000,000
8.65 %
40,000,000
40,000,000
40,000,000
May 2017
15,000,000
8.60 %
15,000,000
15,000,000
15,000,000
July 2017
90,000,000
8.50 %
90,000,000
90,000,000
90,000,000
July 2017
176,000,000
8.50 %
176,000,000
176,000,000
176,000,000
Exchange-traded
bonds
001P-08
October 2017
100,000,000
4.35 %
100,000,000
100,000,000
100,000,000
Exchange-traded
bonds
002P-01
Exchange-traded
bonds
002P-02
Exchange-traded
bonds
002P-03
December
2017
December
2017
December
2017
300,000,000
4.35 %
300,000,000
300,000,000
300,000,000
300,000,000
4.35 %
300,000,000
300,000,000
300,000,000
30,000,000
7.75 %
30,000,000
30,000,000
30,000,000
002P-04
February 2018
50,000,000
7.50 %
50,000,000
50,000,000
50,000,000
002P-05
March 2018
20,000,000
7.30 %
20,000,000
20,000,000
20,000,000
002P-06
April 2019
10,000,000
8.70 %
10,000,000
10,000,000
Exchange-traded
bonds
002P-07
April 2019
20,000,000
8.70 %
20,000,000
20,000,000
Exchange-traded
bonds
Exchange-traded
bonds
Exchange-traded
bonds
−
−
407
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Type of bonds
Series number
Issue date
Total nominal
value
Coupon
rate*
31 December
2020
2019
2018
Exchange-traded
bonds
002P-08
July 2019
25,000,000
7.95 %
25,000,000
25,000,000
Exchange-traded
bonds
002P-09
October 2019
25,000,000
7.10 %
25,000,000
25,000,000
Exchange-traded
bonds
002P-10
Exchange-traded
bonds
003P-01
Exchange-traded
bonds
003P-02
June 2020
15,000,000
5.80 %
15,000,000
November
2020
November
2020
400,000,000
4.35 % 400,000,000
400,000,000
4.35 % 400,000,000
−
−
−
−
−
−
−
−
Total long-term RUB-denominated bonds
3,420,610,968
2,971,847,787
2,891,847,787
* For the coupon period valid as of 31 December 2020.
** Part of the issue was repurchased by the issuer as of 31 December 2020.
*** Issues of bonds are repaid as of 31 December 2020.
Upon placement, all these bond
series have maturity of six, eight
or ten years.
Early purchase/buyback
of the bonds does not mean
their early repayment.
On 24 July 2012, the Company
issued and sold 40 promissory
notes with a par value kRUB
274,401.98 each and a total amount
of kRUB 10,976,079.12, which have
consecutive (quarterly) maturity
dates over a ten-year period,
and bear an interest rate of 9% p.a.
These promissory notes were partly
paid in 2012 to 2020.
The repayment schedule
of long-term loans and borrowings
as of 31 December 2020 is as follows:
Table 33. The repayment schedule of long-term loans and borrowings as of 31 December 2020
Year
2021
2022
2023
2024
2025 and after
Total long-term loans and borrowings
Amount
587,412,180
570,412,420
1,112,580,741
617,072,904
3,927,390,733
6,814,868,978
Table 34. Information on other long-term liabilities
Amounts of loan facilities provided to and not used
Restrictions on use of loan facilities (including required minimum balances)
At 31 December
2020
At 31 December
2019
At 31 December
2018
−
−
10,000,000
−
Loans are partially secured
by crude oil export contracts.
As of 31 December 2020,
guarantees and sureties issued
by the Company totaled kRUB
68,747,667 and included collateral
provided in foreign currency
in the amount of kUSD 331,522
at the CBR exchange rate ruling
at the transaction date.
Items pledged as collateral
for 2020 were as follows:
Table 35. Information on items pledged as collateral by type of pledge
Items pledged as collateral
Revenue from sales of oil and oil products
Sureties
Share in the total
collateral amount, %
31.89
68.11
In the course of operating
activities, the Company follows
the unconditional, unlimited
and indefinite guarantee (surety)
provided to the government
of Norway and Norwegian
government authorities in 2013,
which fully covers the contingent
obligations of RN Nordic Oil AS
that this company may incur
as a result of its operations
on the Norwegian continental
shelf. Provision by the parent
company of a guarantee to cover
RN Nordic Oil’s obligations
arising from environmental risks
is an imperative requirement
of Norwegian legislation and is
a prerequisite for RN Nordic Oil AS
to be granted a license for operating
on the Norwegian continental shelf
jointly with Equinor (before July
2018 – Statoil ASA).
The cooperation between
the Company, Eni S.p.A and Equinor
(before July 2018 – Statoil
ASA) related to the projects
on the Russian continental shelf
is governed by mutual unlimited,
unconditional and indefinite
guarantees provided in 2013.
The cooperation between
the Company and Equinor (before
July 2018 – Statoil ASA) to develop
tight oil and gas reserves is governed
by mutual liability guarantees
provided by affiliates of the parties
in 2015. The guarantees
are unlimited, unconditional
and indefinite.
Table 36. Information on other long-term liabilities, (kRUB)
Other long-term liabilities by type
Period
Balance
at the beginning
of the year
Received
(accrued)
Repaid, reclassified
(to short-term
debt/loans
and borrowings)
Balance at the end
of the year
Other long-term liabilities,
including:
Long-term prepayments under crude
oil and oil product supply contracts
2020
799,125,852
1,005,299,311
(363,815,046)
1,440,610,117
2019
1,134,390,419
−
(335,264,567)
799,125,852
2020
744,374,508
1,003,888,125
(351,743,844)
1,396,518,789
2019
1,058,520,678
3,267,967
(317,414,137)
744,374,508
In 2013 and 2014, the Company
signed a number of long-term oil
and oil product supply contracts that
provide for receipt of a prepayment.
The total minimum amount of future
supplies under these contracts
is around 400 million tons.
The contracts include the following
main terms:
• Prepayment shall not exceed 30 %
of the cost of the total contracted
amount of crude oil
• The oil price shall be based
on current market quotes
• Prepayment is settled through
physical deliveries of crude oil
From 1 January 2015,
scheduled oil supplies started
under the long-term contracts
that provide for prepayments.
In 2020, offset of prepayments
under these contracts amounted
to RUB291 billion (USD6 billion
and EUR31 million at the exchange
rate at the dates of prepayments,
not subject to revaluation
at the current exchange rate).
In the course of performing
functions under the technical
customer agreements, construction
agreements are concluded, one
of the terms of which is provisioning
by a customer of a part of the cost
of construction work to be paid
to the contractor after acceptance
of completed facility. As of 31
December 2020, liabilities totaling
RUB3 billion are reclassified
to long-term accounts payable
under the agreements, the terms
of which provide for repayment
of the reserved amounts in one year
and later.
408
409
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 17. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN
CURRENCIES
Changes in foreign exchange
rates, particularly in US dollar
rates, have a significant effect
on the Company’s financial
and business performance.
Table 39. Settlements with the budget and state non-budgetary funds, (kRUB)
Total receivables from the budget and state non-budgetary funds
88,722,094
110,217,319
96,014,921
Value-added tax (VAT)
84,730,799
95,094,406
91,483,038
At 31 December
2020
At 31 December
2019
At 31 December
2018
Excise duty
Income tax
3,540,687
15,043,880
11,611
331,330
79,632
39,646
−
4,433,051
62,225
16,808
66,945
20,276
Table 37. Information on changes in RUB/USD and RUB/EUR exchange rates
Other taxes and levies receivable
31 December
Exchange rate
Receivables from state non-budgetary funds
US dollar
Euro
Total payables to the budget and state non-budgetary funds
80,441,063
100,730,066
72,371,917
2020
2019
2018
73.88
61.91
69.47
90.68
69.34
79.46
For financial reporting purposes,
foreign exchange differences
are all operations to translate
the value of assets and liabilities
denominated in foreign currency
to be recorded as other income
or other expenses. In the reporting
period, total (net) amount
of all operations to translate
the value of assets and liabilities
denominated in foreign
currency was kRUB61,121,561
and was recorded as other income
of the Company.
Foreign exchange differences
from the Company’s operations
outside the Russian Federation
taken to additional capital
in the reporting period
included: foreign exchange
gains of kRUB9,414 and foreign
exchange losses of kRUB6,779.
Foreign exchange differences
arising in the reporting period
from operations involving assets
and liabilities denominated
in foreign currency, and from
translation of such assets
and liabilities as of the reporting
date, were taken to the other
income and expense account,
except for liabilities designated
as hedging instruments (refer
to Note 13).
Currency conversion transactions
are recorded separately on a net
basis in the income statement;
the financial result is recorded
either in other income or in other
expenses depending on the net
amount of income (expense)
for each such transaction.
Table 38. Income and expenses from dealing in foreign currency, (kRUB)
Income and expenses
For 2020
For 2019
Income
Expenses
14,604,422
7,650,755
(6,954,949)
(34,464,085)
18. TAXES AND LEVIES, CUSTOMS DUTIES
The Company’s tax liabilities
are recorded in accounting using
the periodicity convention.
was appointed responsible
participant of the consolidated
taxpayer group.
and services sold amounted
to kRUB512,441,314 in 2020 (2019:
kRUB851,463,520).
In 2020, statutory rates
of the main taxes were as follows:
• Income tax – 20 %
• Value added tax – 20 %
Since 1 January 2012, Rosneft
Oil Company and its 21
subsidiaries were combined
into the consolidated taxpayer
group. Rosneft Oil Company
Currently, in accordance
with the provisions
of the agreement, the number
of participants of the consolidated
taxpayer group increased to 64
entities.
The mineral extraction tax
to be included in the cost
of products, goods, work
In 2020, the accrued export duty
amounted to kRUB302,490,410
(2019: kRUB702,733,622).
Information on settlements
with the budget and non-
budgetary funds is presented
in the table below.
Mineral extraction tax (MET)
55,963,140
70,443,836
65,315,239
Tax on additional income from extraction of hydrocarbons (additional income
tax, AIT)
16,639,568
21,752,473
151,866
952,179
−
−
Income tax
Excise duty
Property tax
Other taxes and levies payable
Payables to state non-budgetary funds
Taxes and levies receivable
decreased by kRUB21,495,225
from 31 December 2019
primarily due to the decrease
in the amount of VAT recoverable
from the budget as of the end
of the fourth quarter of 2020 year
on year and due to the decrease
in the excise duty applied to its
refined crude oil (reverse excise
duty) in relation to the change
in macroeconomic indicators.
Taxes and levies payable
decreased by kRUB20,289,003
from 31 December 2019
19. EQUITY
CHARTER CAPITAL
As of 31 December 2020,
the Company’s charter capital
amounts to RUB105,981,778.17 and is
divided into 10,598,177,817 common
shares with a par value of RUB0.01
each. There were no changes
in the charter capital as compared
to 31 December 2019 and 2018.
4,126,697
3,141,026
4,115,943
3,130,165
3,273,315
2,826,990
112,964
316,663
122,613
1,044,624
112,463
1,282
primarily due to the decrease
in MET by kRUB14,480,696
and the decrease in AIT
by kRUB5,112,905. The decrease
in MET and AIT results
from the decline in world prices
of Urals oil and drop in production
volumes due to the compliance
with restrictions pursuant
to the OPEC+ agreement.
As of 31 December 2020, 2019
and 2018, the Company did
not have any overdue taxes
and levies payable.
According to provisions
of the Russian Tax Code, desk-
top and field tax audits may cover
three calendar years preceding
the year in which a decision
to hold the tax audit is taken.
The Company’s management
believes that the results of tax
audits will not have a material
impact on the Company’s financial
position because tax liabilities
are determined in accordance
with requirements of the tax
legislation.
RESERVE AND ADDITIONAL
CAPITAL
The Company’s equity also includes
reserve and additional capital.
The Company’s reserve capital
represents reserve capital formed
in accordance with constituent
documents and is equal to 5 %
of the charter capital. As of 31
December 2020, the reserve capital
is fully formed and amounts
to kRUB5,299. There were no
changes in the reserve
and additional capital as compared
to 31 December 2019 and 2018.
410
411
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 NET ASSETS
Table 40. The Company’s income and expenses, (kRUB)
TREASURY SHARES
In August 2018, the Board
of Directors of Rosneft Oil
Company approved the features
and commenced the implementation
of the program for purchasing
shares of Rosneft Oil Company
in the open market, including
in the form of global depositary
receipts which certify rights to such
shares, in the maximum amount
of USD2 billion (hereinafter,
the “Program”). The Program will
be implemented from the date
of approval by the Board of Directors
of Rosneft Oil Company through 31
December 2021.
The maximum number of shares
and global depositary receipts that
may be purchased under the Program
is 340,000,000 units.
Shares and GDRs purchased
under the Program will be recorded
on the balance sheet of Rosneft Oil
Company Group.
As of 31 December 2020, 2019
and 2018, the Company’s net assets
amounted to kRUB2,224,610,050,
kRUB2,261,771,078,
and kRUB2,026,470,417, respectively.
The net assets decreased
by kRUB37,161,028 or 1.6 % compared
with the prior reporting date. As of 31
December 2020, the Company’s net
assets exceed its charter capital
by kRUB2,224,504,068.
20. INCOME AND EXPENSES, RETAINED EARNINGS
Revenue from sales of goods,
work and services is recognized
as and when the goods are shipped,
work is performed and services
are rendered, and settlement
documents are presented
to customers (clients).
To ensure timely reflection of business
events, if necessary, the Company
uses the accrual method
in accordance with Accounting
Statement 9/99, Revenues
of an Organization, provided that
the criteria for revenue recognition
are met. In this case, revenue
is recognized based on updates
provided by Company’s business
units.
The Company applies a method
that involves calculating
incomplete cost of goods (direct
costing), and therefore general
and administrative expenses
are fully debited to the “Sales”
account, i.e. are fully recognized
in the reporting period without
allocating them to balances of work
in progress and finished goods
(except for general expenses directly
related to acquisition, construction
and production of assets, which
are included in the cost of assets).
From 1 January 2019, the Company
realizes its right to refund
the excise duty applied to its
locally refined crude oil (reverse
excise duty). This excise duty
is recorded in the line, Cost of sales,
in the income statement, increasing
and decreasing the line amount
depending on the macroeconomic
indicators. In 2020, the excise duty
applied to crude oil amounted
to kRUB64,794,749 and was paid
to budget thus increasing the cost
of sales in the reporting period;
in 2019, the excise duty amounted
to kRUB145,899,744 and the Company
paid this excise duty out of budget
thus reducing the cost of sales.
From 1 January 2019, tax on additional
income from the extraction
of hydrocarbons was introduced
with respect to certain license areas
of the Company and is subject
to recognition within costs included
in the cost of sales, without inclusion
to the unit cost of finished goods.
Selling expenses are allocated
between sold goods and goods that
were shipped but not sold, including
finished goods at the warehouse.
The Company’s total advertising
expenses (not broken down by type
of goods) are recognized in selling
expenses.
The Company’s additional personnel
expenses related to measures
imposed to contain the spread
of the coronavirus infection
in line with the requirements
of Rospotrebnadzor and other
executive bodies of the Russian
Federation, are classified
as other expenses arising as a result
of extraordinary economic
circumstances (pandemic).
The use of profit is recognized
in accounting records and financial
statements in the year following
the reporting years pursuant
to the decision of the shareholders’
meeting. A portion of the profit
that was not paid out as dividends
pursuant to the decision
of the shareholders, is recognized
in the financial statements
in retained earnings (uncovered
loss). If this profit is used for capital
investments, the total balance
of the retained earnings (uncovered
loss) is not decreased.
As of 31 December 2020, 2019, 2018,
retained earnings of prior years
amounted to kRUB1,950,647,825,
kRUB2,142,102,123
and kRUB2,028,141,822, respectively.
Changes in the profit of prior
years resulted mainly
from accrued dividends
in the amount of kRUB191,509,073.
The following income and expenses
affected the retained earnings
for the reporting year:
Revenue (net) from the sale of goods, work, services (net of value added tax)
4,835,091,105
6,827,526,407
Item
For 2020
For 2019
Including: sales related to principal activities
Trading and procurement
Gains from shareholding in other entities
Intermediation
Cost of goods, products, work and services sold
Including: related to principal activities
Trading and procurement
3,103,513,772
4,351,246,655
1,199,726,357
1,954,897,814
528,570,288
516,331,673
3,280,688
5,050,265
(3,641,355,413)
(4,782,222,071)
(2,579,599,446)
(3,230,653,508)
(1,061,755,967)
(1,551,568,563)
Oil and gas reserves exploration and estimation expenses
(7,543,407)
(6,559,819)
Gross profit
Selling expenses
General and administrative expenses
Profit (loss) from the sale of goods, work and services
Profit (loss) from other income and expenses
Including: interest receivable
Interest payable
1,186,192,285
2,038,744,517
(772,860,114)
(1,196,815,437)
(90,988,304)
(83,302,902)
322,343,867
758,626,178
(252,789,241)
(411,084,534)
148,757,678
176,844,160
(360,174,908)
(445,059,171)
Including: expenses on unwinding of the ARO asset discount
(5,003,226)
(4,193,305)
Gains from change in the fair value of derivative financial instruments
−
35,301,062
Losses from changes in the fair value of derivative financial instruments
(14,734,626)
−
Gains from the sale and other disposal of other property
33,828,628
5,807,645
Including: gains from the sale of fixed assets and capital construction in progress
21,715,347
2,317,813
Gains from the sale of long-term securities
Losses from the sale and other disposal of other property
Including: losses from the sale of long-term securities
Losses from write-off of exploration assets
9,826,624
2,255
(77,831,190)
(5,956,251)
(35,784,160)
(3,246)
(22,962,194)
(1,006,321)
Losses from the sale of fixed assets and capital construction in progress
(14,897,519)
(1,985,202)
Other expenses
Including difference between the carrying amount, transferred financial investments of shares
(interests) as a contribution to the charter capital and their market value
Refund of the excise duty
Recognition of the deferred effect of hedging within other income
Other expenses
157,163,733
118,915,307
63,942,359
88,083,562
6,882,665
6,484,435
1,900,007
−
(139,798,556)
(296,937,286)
Including recognition of the deferred effect of hedging within other expenses
−
(145,565,010)
Translation differences
Dividend income tax
Other expenses directly related to the pandemic
(61,121,561)
(41,638,090)
(3,621,931)
(370,537)
(224,038)
−
412
413
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 41. Allocation of the Company’s expenses recognized in the income statement by type, (kRUB)
Table 43. Deferred taxes and permanent tax expenses and income, (kRUB)
Item
Material costs
Payroll
Social charges
Depreciation and amortization*
Other costs**, including reverse excise duty, AIT, MET and oil and gas reserves exploration
and estimation expenses
For 2020
For 2019
3,640,216,495
5,062,926,686
41,753,510
37,053,917
7,299,228
6,832,450
132,707,266
149,353,651
690,770,739
812,733,525
Total for types of expenses
4,512,747,238
6,068,900,229
Change (increase [-], decrease [+]) in balances of work in progress, finished goods, etc.
(21,993,776)
(12,599,481)
Total expenses related to ordinary activities**
4,512,747,238
6,068,900,229
* Recalculation of the effect of the revised estimates:
• For the ARO asset (fixed assets retirement obligation) the total amount is included in depreciation and amortization, for the ARO asset
(tangible exploration assets retirement obligation) – in other costs (oil and gas reserves exploration and estimation expenses).
• For the HSE that due to their nature were recognized:
– In expenses related to ordinary activities – the total amount is included in the expenses for the period in other costs (cost of sales);
in exploration costs – in other costs (oil and gas reserves exploration and estimation expenses)
– In the cost of finished products (sand) – the total amount is included in the expenses for the period in material costs (cost of sales)
– In fixed assets and tangible exploration assets – the total amount is included in expenses for the period in depreciation
and amortization or in other costs (oil and gas reserves exploration and estimation expenses) respectively
** Including general and administrative expenses, selling expenses and oil and gas reserves exploration and estimation expenses
21. INCOME TAX
Permanent and temporary
differences between the accounting
profit and the taxable profit
for the reporting period
are recognized in the accounting
records. Temporary and permanent
differences, which are calculated
by comparing financial and tax
accounting data on income
and expenses, result in permanent
tax income and expenses
and deferred tax liabilities
and assets.
Current income tax is determined
in the accounting records through
recognizing the following indicators:
• Nominal expense (income)
• Permanent tax income
• Permanent tax expense
• Deferred tax asset
• Deferred tax liability
The Company prepares indicators
representing the accounting
for income tax settlements
on a monthly basis.
The Company recognizes deferred
income tax assets and deferred
income tax liabilities on a gross basis
as non-current assets and long-term
liabilities, respectively.
A 20 % income tax rate is used
to calculate deferred tax assets
and liabilities, and permanent tax
income and expenses.
Table 42. Permanent and temporary differences that gave rise to income tax, (kRUB)
Item
2020
2019
Accrued
(charged)
Repaid (written
off)
Accrued
(charged)
Repaid (written
off)
Deductible temporary differences
604,841,595
(188,397,825)
287,958,690
(168,999,685)
Taxable temporary differences
(173,390,825)
100,226,090
(139,404,710)
67,565,535
Positive permanent differences
Negative permanent differences
(50,466,295)
601,843,755
х
х
(236,040,830)
681,940,355
х
х
Item
2020
2019
DTA (deferred tax asset)
DTL (deferred tax liability)
PTE (permanent tax expenses)
PTI (permanent tax income)
Accrued
(charged)
Repaid (written
off)
Accrued
(charged)
Repaid (written
off)
120,968,319
(37,679,565)
57,591,738
(33,799,937)
(34,678,165)
20,045,218
(27,880,942)
13,513,107
(10,093,259)
120,368,751
х
х
(47,208,166)
136,388,071
х
х
Deferred income tax
for 2020 and 2019 amounted
to kRUB68,276,333
and kRUB38,536,968, respectively.
Movement in deferred taxes
for the reporting period recorded
in line 2412, Deferred income tax,
includes deferred taxes written
off and/or accrued due to filing
updated tax returns, deferred tax
liabilities and assets written off,
which will never be reversed.
for taxation purposes
in subsequent reporting (tax)
periods.
The deferred tax asset
includes the Company’s
losses carried forward, which
are not used to reduce income
tax in the reporting (tax) period,
but which will be recognized
The relation between the theoretical
income tax expense calculated
as the accounting profit before
tax multiplied by the 20 % tax
rate and the income tax expense
is provided in the table below.
Table 44. Indicators affecting the income tax expense, (kRUB)
Indicator
For 2020
For 2019
Permanent and temporary
differences, deferred tax assets
and deferred tax liabilities related
to them, and permanent tax
income and expenses resulting
in an adjustment to the theoretical
income tax expense are provided
in the tables below.
Profit (loss) before tax
Current income tax (line 2411)*, including:
Nominal income tax expense (income)
Change in deferred tax assets
Change in deferred tax liabilities
Permanent tax expense
Permanent tax income
Tax effect of the results of other operations not included in net profit (loss) for the period
Tax on income in the form of profits of controlled foreign companies
Deferred income tax (line 2412)
Income tax (line 2410) = line 2411 + line 2412
69,554,626
347,541,644
15,271,514
9,648,441
13,910,925
69,508,329
85,424,958
25,637,662
(3,952,431)
(15,633,038)
10,093,259
47,208,166
(120,368,751)
(136,388,071)
(379,474)
−
−
18,511
68,276,333
38,536,968
83,547,847
48,185,409
The difference between
the amount of the current income
tax calculated by a participant
(including the responsible
participant) of the consolidated
group of taxpayers to be included
in the consolidated tax base
of the consolidated group
of taxpayers and the amount
of cash owed by a participant
(due to a participant)
under the agreement
on the establishment
of a consolidated group
of taxpayers is disclosed
in the income statement
separately and is referred to as
income tax re-distribution
within the consolidated group
of taxpayers.
* Current income tax on the tax loss is a positive amount (it is recorded without parentheses in the income statement).
414
415
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 that dividends should be paid
on Rosneft Oil Company’s
common shares in the amount
of kRUB191,509,073 or RUB18.07
per share. As of 31 December
2020, the Company paid
dividends in the amount
of kRUB191,466,412. Dividends
were paid to all of the issuer’s
registered shareholders except
for shareholders who did
not promptly notify the issuer’s
registrar of changes in relevant
data.
22. DIVIDENDS DISTRIBUTION
NUMBER OF SHARES AND THEIR
PAR VALUE
According to constituent
documents, charter capital
represents the Company’s capital.
The holders of common shares
are entitled to one vote per share
at shareholders’ meetings.
The Company issued 10,598,177,817
common shares with a par value
of RUB0.01 each for the total
amount of RUB105,981,778.17.
AMOUNT OF DIVIDENDS
In 2020, the Company’s net income
amounted to kRUB155,811,166
and basic earnings per share
amounted to RUB14.70. In 2019,
it was kRUB396,526,209
and RUB37.41 per share, respectively.
Diluted earnings per share were not
calculated.
In the first half of 2021,
the Board of Directors will
provide recommendations
to the General Shareholders’
Meeting on the amount of dividends
on the Company’s shares for 2020.
Based on the Company’s results
for 2019, the annual General
Shareholders’ Meeting that
was held on 2 June 2020 (Minutes
w/n dated 5 June 2020) decided
23. SUBSEQUENT EVENTS
There were no economic events
after 31 December 2020 that
have had or may have an effect
on the financial position, cash
flows or operating results
of the Company.
24. PROVISIONS. CONTINGENCIES
The Company is involved
in litigations, which arise
from time to time in the course of its
business activities. Management
of the Company believes that
the ultimate result of those
litigations will not materially
affect the performance or financial
position of the Company.
Due to the pollution of oil
in the “Druzhba” trunk oil
pipeline in April 2019, a number
of claims from the customers
were submitted to the Company,
stating that the supplied
oil substantially exceeded
maximum permitted levels
of organochlorine compounds
(compared to the levels determined
by the relevant technical
regulations and standards).
However, the Company delivered oil
to the system of oil trunk pipelines
of PJSC Transneft in compliance
with the requirements of technical
regulations and standards.
and legally supported claims
from all counterparties and their
re-submission to PJSC Transneft
for compensation.
In addition, the Company received
claims from customers that did
not receive the contracted amounts
of oil due to the oil pumping
interruption in the “Druzhba” trunk oil
pipeline resulting from the pollution.
Currently, the Company
is in the process of settling claims
with foreign customers and PJSC
Transneft. The calculation of losses
incurred by the Company can
be finalized after completing
the comprehensive assessment
of the impact of the incident
on the Company’s activities
(including the forced reduction
in oil production due to the reduced
oil intake into the system of PJSC
Transneft), obtaining complete
A provision is an obligation
of the Company with an indefinite
amount and/or time of settlement.
A provision may arise:
• From laws and other regulations,
court rulings or agreements
• As a result of the Company’s
activities which indicate, based
on the existing practices
or statements of the Company,
that the Company undertakes
certain obligations
and, consequently, is reasonably
expected to settle these
obligations.
A provision is recognized
in accounting records when all
of the following criteria are met:
• The Company has an obligation
resulting from its past business
operations that cannot
be avoided. In case of doubt
concerning such liability,
the Company shall recognize
an estimated liability if, based
on the results of analysis of all
circumstances and conditions,
including expert opinions,
it is more likely than not that
a liability exists
• It is likely that settling
the provision will result
in an outflow of the Company’s
economic benefits (the likelihood
is > 50 %)
• The amount of the provision can
be reliably estimated
Table 45. Provisions, (kRUB)
Provision
Description
Period
Provisions, contingencies
and commitments are not absolute
legal obligations of Rosneft Oil
Company.
Pursuant to Accounting Statement
8/2010, Provisions, Contingent
Liabilities and Contingent Assets
(effective from the date of issue
of the financial statements in 2011),
the Company has environmental
provisions.
An environmental provision arises
from the environmental impact
resulting from the Company’s
operations.
The amount of the environmental
provision is determined based
on the estimated expenditures
(planned expenditures)
of the Company that are expected
to be incurred for settling
the provision during restoration
of the impacted lands and water
bodies as of the reporting date.
The estimation is performed
based on the Company’s internal
(management) reports that form
the system of environmental
information.
The information
about the Company’s provisions
is presented in the table below.
Balance
at the
beginning
of the
period
Recognized
(accrued)
for the
reporting
period
Written off
as excessive or if
recognition criteria
are no longer met
(repaid)
against
costs
or accounts
payable
recognized
Increase (+)/
decrease (–)
of provision,
when expense/
income
is recognized/
reversed upon
the change
in provisions
Balance
at the
end of the
period
Total provisions created from expenses on ordinary activities, including by type of provisions:
Total
2020 32,874,094
27,371,495
(12,174,693)
(2,868,361)
3,087,255
48,289,790
2019
22,176,271
29,837,142
(17,677,979)
(719,991)
(741,349)
32,874,094
2020
11,108,332
13,443,422
(8,273,062)
2019
10,594,452
14,437,851
(13,923,971)
2020
2,450,521
5,519,871
(2,822,494)
2,821,660
2,914,341
(3,285,480)
−
−
−
−
−
−
−
−
16,278,692
11,108,332
5,147,898
2,450,521
2020
7,451,071
687,558
(201,025)
−
382,931
8,320,535
2019
8,185,110
639,784
(398,469)
(234,005)
(741,349)
7,451,071
Provision
for annual
year-end
bonuses
Provision
for future
vacation
payments
Environmental
provisions
Planned
amount
of annual year-
end bonuses
to employees,
with insurance
contributions
at the effective
interest rate
The Company’s
obligation
for vacation
payments
based
on the number
of unused
vacation days
at the end
of the reporting
period,
with insurance
contributions
at the effective
interest rate
Formed on all
environmental
obligations.
The estimation
is made by place
of occurrence.
Recognized
at present value
416
417
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Provision
Description
Period
Balance
at the
beginning
of the
period
Recognized
(accrued)
for the
reporting
period
Written off
as excessive or if
recognition criteria
are no longer met
(repaid)
against
costs
or accounts
payable
recognized
Increase (+)/
decrease (–)
of provision,
when expense/
income
is recognized/
reversed upon
the change
in provisions
Balance
at the
end of the
period
Provisions
for legal
claims
Provisions
are recognized
separately
for each legal
claim
2020
11,864,170
7,720,644
(878,112)
(2,868,361)
2,704,324
18,542,665
2019
575,049
11,845,166
(70,059)
(485,986)
−
11,864,170
Provisions created by increasing the value of assets:
Total
2020 76,406,548
7,187,946
(3,920,397)
(33,625)
11,311,636
90,952,108
2019
53,750,988
8,482,687
(2,376,729)
(221,413)
16,771,015
76,406,548
of the voting shares, or having
significant impact based on other
reasons) and state-controlled
entities
of related parties (more than
10 % of any item of the cash flow
statement).
• Joint venture participants
(that are not a legal entity
and proportionately
consolidated)
• Other related parties
The Cash flows section of the Table
discloses information in the event
of significant cash flows by group
25.1 SUBSIDIARIES
This section discloses information
concerning transactions with those
subsidiaries in which the Company
holds, directly or through other entities,
more than 50 % of the common voting
shares, or which are controlled by other
means.
2020
73,535,311
6,049,838
(2,273,926)
(33,625)
11,648,833
88,926,431
Table 46. Information on transactions with subsidiaries, (kRUB)
Provision
for fixed asset
liquidation
Environmental
provisions
Formed on all
immovable oil
and gas assets.
The estimation
is made by field.
Recognized
at present value
Obligations
to be included
in the value
of assets (08*)
2019
52,094,640
6,042,093
(1,548,844)
2020
2,871,237
1,138,108
(1,646,471)
−
−
(337,197)
2,025,677
Petroleum products and petrochemicals sales
Sales revenue and other income
Oil and gas sales
2019
1,656,348
2,440,594
(827,885)
(221,413)
(176,407)
2,871,237
16,947,422
73,535,311
Transactions
For 2020
For 2019
The provision for fixed
asset liquidation presented
in the column Recognized (accrued)
for the reporting period includes
the provision and expenses
on discount amortization
(interest) recognized as a result
of nearing the settlement date
of the provision. The increase
in the provision for the reporting
period (interest) as a result
of nearing the provision settlement
date should be recognized
as expenses for the reporting
period in the accounting records
and financial statements.
The effects from changes
in the provision for liquidation,
the rate and the discount period
are presented in the column
Increase (+)/decrease (–)
of provision, when expense/income
(reversal of expense) is recognized
upon recognition of provisions.
The environmental provision
presented in the column Increase
(+)/decrease (–) of provision,
when expense/income (reversal
of expense) is recognized
upon recognition of provisions
includes effects from the revised
estimations of value and the extent
to which an obligation is settled,
effects of discount rate change,
reclassification between
types of provisions created
from expenses on ordinary
activities and by increasing asset
value.
25. TRANSACTIONS WITH RELATED PARTIES
In the normal course of its
business, the Company enters
into transactions with entities
which are related parties
in accordance with Russian law.
The list of related parties
was developed based
on the relationships between
the entities, taking into account
the substance over form
requirement.
The Company’s related parties
also include entities that
are not affiliates according
to Russian law, but meet
the definition of an affiliate
in accordance with IFRS 24,
Related Parties Disclosures.
The total amounts of transactions
and balances with related
parties are disclosed separately
for the following groups of related
parties that have different
relationships with the Company:
• Subsidiaries (entities
consolidated by the Company
as subsidiaries)
• Associates (legal entities
consolidated by the Company
using the equity method
and proportionate consolidation
method)
• Principal owners (shareholders
holding more than 10 %
Income from leasing out property
Income from shareholding in other entities
Other income
Costs and expenses
Oil and gas purchases
Petroleum products and petrochemicals purchases
Logistics and transportation
Oil and gas production services
Cost of processing
Leases of assets
Other expenses
Other transactions
Purchase of fixed assets
Loans and borrowings issued
Repayment of loans and borrowings issued
Short-term loans and borrowings received
Repayment of short-term loans and borrowings
Long-term loans and borrowings received
Repayment of long-term loans and borrowings
Deposits placed
Deposits repaid
Interest receivable
Interest payable
2,001,748,939
3,223,100,840
378,849,970
1,036,105,402
884,048,605
1,420,121,766
136,007,310
149,161,243
526,843,795
514,872,917
75,999,259
102,839,512
2,234,499,902
3,090,283,729
1,530,744,141
2,357,618,751
4,946,680
5,516,359
134,960,618
146,469,209
340,127,544
346,374,644
157,832,109
166,537,773
464,482
655,035
65,424,328
67,111,958
58,223
111,252
3,126,819,253
1,285,097,529
2,801,714,337
1,209,323,653
2,310,349,737
1,576,442,009
2,503,321,828
1,580,578,845
4,119,923,382
1,476,368,478
4,311,336,168
1,289,364,023
3,146,609,058
541,381,292
3,071,319,316
561,700,338
116,551,250
136,096,049
29,103,981
58,806,165
418
419
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Transactions
For 2020
For 2019
Assets and liabilities
Balance at 31 December
Cash flows
Cash flows from operating activities
Proceeds:
From sale of products, goods, work and services
1,322,217,389
2,424,042,134
From lease payments, license payments, royalties, commissions and other similar payments
136,365,889
150,188,103
Other proceeds
Payments:
42,891,731
36,553,233
To suppliers (contractors) for raw materials, other materials, work and services
(2,486,501,802)
(3,003,608,814)
Exploration costs
Other payments
Cash flows from investing activities
Proceeds:
(4,998,154)
(6,061,861)
(809,380,724)
(633,340,385)
From sale of non-current assets (other than financial investments)
4,823,994
10,580,966
From repayment of loans issued, receivables from other parties, etc.
1,710,390,109
714,872,671
From dividends, interest on debt financial investments and similar proceeds from equity
participation in other entities
901,079,171
355,362,963
Payments:
To purchase, create, upgrade, reconstruct and prepare non-current assets for use
(179,692,790)
(169,023,407)
To purchase shares (interests) in other entities
To issue loans to other parties
Exploration assets
Cash flows from financing activities
Proceeds:
(184,353,841)
(374,023,314)
(1,322,552,799)
(164,513,879)
(13,330,314)
(12,968,542)
From loans and borrowings received
6,430,174,832
3,052,860,148
Payments:
Repayment of loans and borrowings, repayment (redemption) of promissory notes, etc.
(6,815,736,935)
(2,870,276,820)
Table 47. Assets and liabilities under transactions with subsidiaries, (kRUB)
Assets and liabilities
Balance at 31 December
Assets
Cash and cash equivalents
Accounts receivable, including
2020
2019
2018
9,800,230,062
9,261,689,608
8,634,149,778
38,044,521
23,903,215
59,038,002
3,432,469,680
2,970,447,681
2,085,545,419
• Long-term accounts receivable
3,051,182,593
2,098,170,151
1,610,680,068
Accounts payable
1,799,655,565
1,927,536,974
1,560,159,472
Short-term and long-term loans and borrowings (including interest),
1,739,876,146
1,951,309,008
1,869,749,149
Including long-term
1,652,642,642
1,732,886,115
979,725
2020
2019
2018
25.2 ASSOCIATES
This section discloses information
concerning transactions
with those associates in which
the Company holds, directly
or through other entities, more
than 20 % but less than 50 %
of the common voting shares (or
no control is provided for other
reasons), and which the Company
holds significant influence over.
Table 48. Information on transactions with associates, (kRUB)
Transactions
For 2020
For 2019
Sales revenue and other income
Oil and gas sales
Petroleum products and petrochemicals sales
Income from leasing out property
Gains from shareholding in other entities
Other income
Costs and expenses
Oil and gas purchases
Logistics and transportation
Leases of assets
Cost of processing
Other expenses
Other transactions
Loans and borrowings issued
Repayment of loans and borrowings issued
Short-term loans and borrowings received
Repayment of short-term loans and borrowings
Long-term loans and borrowings received
Repayment of long-term loans and borrowings
Interest receivable
Interest payable
Cash flows
254,888,210
213,758,393
8,008,936
9,824,798
225,771,549
200,590,043
578,151
1,544,033
339,993
1,247,139
18,985,541
1,756,420
255,658,783
420,043,491
206,718,509
370,590,472
32,762,210
32,394,201
241,743
239,032
14,509,633
15,352,240
1,426,688
1,467,546
5,163,637
4,615,969
1,914,619
2,197,300
160,661,178
26,351,823
161,235,770
25,235,622
7,881,048
33,577,913
318,755
671,596
1,500,229
2,399,869
7,524,678
5,577,670
62,979,522
94,455,926
• Advances issued for capital construction and equipment for installation
13,784,619
14,467,016
14,910,443
Cash flows from operating activities
• Short-term advances issued
9,326,746
7,303,321
7,568,489
• Allowance for impairment of accounts receivable
1,600,959
1,679,073
2,999,318
Proceeds:
Other proceeds
Short-term and long-term financial investments,
6,329,715,861
6,267,338,712
6,489,566,357
Cash flows from investing activities
Including long-term
Liabilities
420
5,615,119,187
5,571,861,514
5,836,049,136
Receipts:
3,539,531,711
3,878,845,982
3,429,908,621
Sale of non-current assets (except for financial investments)
10,056,393
64,335
421
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 Table 49. Assets and liabilities under transactions with associates, (kRUB)
Transactions
For 2020
For 2019
Assets and liabilities
Balance at 31 December
2020
2019
2018
52,029,378
85,562,815
82,847,765
Costs and expenses
Oil and gas purchases
Oil products purchases
490
−
−
Logistics and transportation
45,603,262
34,347,960
33,863,180
2,053,515
1,190,904
4,148,305
Customs duties
Leases of assets
Assets
Cash and cash equivalents
Accounts receivable, including
- Long-term accounts receivable
731,414,250
1,250,529,709
55,309,919
124,248,816
3,103,540
1,386,417
333,765,072
362,053,540
334,977,590
728,078,630
147,444
112,808
- Advances issued for capital construction and equipment for installation
573
153
4,979
Expenses from transactions involving term transaction financial instruments
92,154
31,832,282
- Short-term advances issued
2,756,341
1,900,177
1,470,657
- Allowance for impairment of accounts receivable
10,519,909
9,390,197
9,473,083
Short-term and long-term financial investments,
6,425,626
51,214,855
48,984,585
Including long-term
Liabilities
Accounts payable
6,406,135
40,217,926
47,338,161
294,699,357
381,242,196
332,672,518
234,752,591
330,970,899
317,267,080
Short-term and long-term loans and borrowings (including interest),
59,946,766
50,271,297
15,405,438
Including long-term
43,074,750
33,414,515
15,394,669
25.3 INFORMATION
ON COMPENSATION PAID
TO KEY MANAGEMENT
PERSONNEL
For information disclosure
purposes, key management
personnel include members
of the Management Board
and members of the Board
of Directors of Rosneft Oil
Company.
In 2020 and 2019, short-term
compensation to the members
of the Management Board
taking in account the rotation
of the management staff,
including salary and bonuses
and considering personal income
tax, amounted to kRUB3,531,264
and kRUB3,570,285, respectively
(social insurance contributions
paid to the budget of the Russian
Federation under the law, which
are not income of the members
of the Management Board,
amounted to kRUB519,885
and kRUB513,128, respectively).
The amount of short-term
compensation to members
of the Management Board
and members of the Board
of Directors for 2020 is disclosed
in accordance with the Russian
legal requirements for disclosure
of information by issuers
of securities.
25.4 PRINCIPAL OWNERS
AND ENTITIES CONTROLLED
BY PRINCIPAL OWNERS
This section discloses
the information about transactions
with principal owners (legal
entities and individuals) that
hold more than 10 % of the total
number of votes that relate
to voting shares, and entities
controlled by principal owners,
including state-controlled entities.
Other expenses
Other transactions
Purchase of fixed assets
Loans and borrowings issued
Repayment of loans and borrowings issued
Short-term loans and borrowings received
Repayment of short-term loans and borrowings
Long-term loans and borrowings received
Repayment of long-term loans and borrowings
Deposits placed
Deposits repaid
Interest payable
Interest receivable
Cash flows
Cash flows from operating activities
Payments:
4,018,531
2,817,216
7,090
165,254
2,082,408
4,572,586
2,209,915
−
433,744,950
105,000,000
543,275,300
252,000,000
546,246,360
−
−
112,500,000
1,581,044,163
3,046,277,335
1,460,771,305
3,114,766,129
32,876,541
34,313,321
6,446,437
9,756,564
To suppliers (contractors) for raw materials, other materials, work and services
(536,109,764)
(415,334,855)
Interest on debt obligations
Cash flows from financing activities
Proceeds:
From loans and borrowings
Payments:
(32,478,763)
(35,602,786)
979,991,310
105,000,000
Dividends or other distribution of earnings to owners (participants)
(151,437,611)
(242,388,808)
Table 50. Information on transactions with principal owners and entities controlled
by principal owners, (kRUB)
Table 51. Assets and liabilities under transactions with principal owners and entities controlled by principal
owners, (kRUB)
Transactions
For 2020
For 2019
Assets and liabilities
Balance at 31 December
Sales revenue and other income
Oil and gas sales
Petroleum products and petrochemicals sales
Income from transactions involving term transaction financial instruments
Income from shareholding in other entities
Other income
422
372,038,417
399,684,893
182,560,483
264,219,112
184,331,141
134,202,571
815,304
182,459
4,149,030
729,800
211,618
321,792
Assets
Cash and cash equivalents
Accounts receivable, including
• Long-term accounts receivable
2020
2019
2018
699,998,366
252,970,839
738,888,392
391,294,769
33,562,166
475,694,965
111,378,331
126,154,406
97,499,791
5,913,837
4,936,200
5,132,184
• Advances issued for capital construction and equipment for installation
33,809,648
32,809,682
28,237,506
423
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 • Short-term advances issued
24,985,217
35,002,026
29,803,656
• Allowance for impairment of accounts receivable
49,983
10,345
9,136
Short-term and long-term financial investments,
197,325,266
93,254,267
165,693,636
Including long-term
Liabilities
Accounts payable
101,333,698
87,663,843
96,324,663
831,035,023
367,274,279
615,323,703
16,389,599
6,755,387
10,170,206
Short-term and long-term loans and borrowings (including interest)
814,645,424
360,518,892
605,153,497
Including long-term
737,508,223
180,477,410
408,917,660
25.5 JOINT VENTURE
PARTICIPANTS
25.6 OTHER RELATED
PARTIES
There are no transactions
with companies involved in joint
activities with the Company
for the period of 2019–20.
Other related parties include
a non-state pension fund
operating in the interests
of the Company’s employees.
Table 52. Information on transactions with other related parties, (kRUB)
Transactions
For 2020
For 2019
Sales revenue and other income
Other income
Costs and expenses
Other expenses
1,435
1,435
3,561,345
3,561,345
182
182
1,100,112
1,100,112
Company Group as a whole.
Given the fact that the business
of the Company as a legal entity
is an integral part of the Group
management, management
decision-making and resource
allocation is performed by the duly
authorized persons at the level
of Rosneft Oil Company
Group; certain management
reports reflecting financial
performance, the amount
of assets and liabilities
by segment, which refer only
to the Company’s operations
and are not related to the Group
in general, are not prepared
for business lines. Therefore,
segment information is fully
disclosed in the consolidated
financial statements of Rosneft Oil
Company Group.
Information on revenue broken
down by segment is presented
in the explanatory notes
below, as this data is provided
to the Company’s authorized
representatives on a regular
basis. Segment information
was prepared taking into account
the economic, foreign currency,
credit and price risks the Company
may be exposed to.
Table 54. Information on sales revenue by segment, (kRUB)
Segment
Oil
Gas
Net revenue for the reporting year
Total
External market
Domestic market
2,014,057,411
1,636,908,853
377,148,558
165,231,269
−
165,231,269
Oil products and petrochemicals
1,982,814,798
869,127,488
1,113,687,310
Other sales
Total
Oil includes sales of oil and gas
condensate.
Gas includes sales of natural gas,
APG and DSG.
672,987,627
−
672,987,627
4,835,091,105
2,506,036,341
2,329,054,764
Oil products and petrochemicals
include sales of oil and gas refinery
products.
Other sales include the sales
of other goods, public catering
products, rendering of services,
dividends, lease of fixed assets, etc.
Table 53. Assets and liabilities under transactions with other related parties, (kRUB)
Assets and liabilities
Balance at 31 December
27. RELATED INFORMATION
Assets
Accounts receivable
Liabilities
Accounts payable
In the reporting period,
the Company mainly used
the monetary form of settlements
with related parties.
26. SEGMENT INFORMATION
2020
2019
2018
27.1 ENVIRONMENTAL MATTERS
176
176
−
−
3
3
1
1
−
−
3,804,684
3,804,684
The activities of oil and gas
companies are always subject
to environmental risks.
The Company’s management
believes that its activities comply
with legislative requirements
regarding environmental
protection, and, therefore,
the Company has no risk
of significant liabilities in this area,
27.3 ENERGY RESOURCES
Information on the total costs
related to energy resources used
is given below1.
except for those already disclosed
and recorded in these financial
statements.
27.2 INSURANCE
The Company continues to insure
its property, motor vehicles,
cargoes, shipments, construction
works and the liability of its
officials.
The Company, its subsidiaries
and associates (hereinafter,
the “Rosneft Oil Company
Group”) operate as a vertically
integrated business. Rosneft Oil
Company Group is principally
engaged in the exploration,
development, production
and sales of oil and gas, as well
as the production, transportation
and sales of petroleum products
in the Russian Federation
and abroad. Management
information, which is regularly
analyzed by those persons
with the power to make
decisions on resource allocation
in the Company and further
performance evaluation,
is prepared for the business
purposes of Rosneft Oil
Table 55. Information on resources used, (kRUB)
№
1
2
Electric energy
Heat energy
Energy resource
For 2020
For 2019
35,345
4,345
36,475
4,508
1 Тhe requirement of Article 22 of Federal Law No. 261-FZ, On Saving Energy and Increasing Energy Efficiency, and on Amendments to Certain
Legislative Acts of the Russian Federation, dated 23 November 2009.
In accordance with Article 2 of Federal Law No. 261-FZ, an energy resource is an energy carrier that is used or can be used for both
economic and other activities, as well as a type of energy (atomic, heat, electrical, electromagnetic or other type).
424
425
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 in technologies, market risks,
reputational risks, etc.). In addition,
the risks and opportunities
associated with climate change
and the transition to low-
carbon energy are considered
in the Company’s strategic
management and business
planning processes (especially
for projects located in climate-
sensitive regions: marine
projects, Arctic projects,
etc.) as well as in preparing
various development scenarios
for the world energy industry.
GENERAL INFORMATION ABOUT ROSNEFT
Date of state registration
and registration number of Oil
Company Rosneft:
• Date of state registration
Constituent entity of the Russian
Federation in whose territory
the Company is registered:
Moscow.
of the Company as a legal entity:
December 7, 1995;
• Number of State Registration
Certificate of the Company:
024.537;
• Date of entry in the Uniform
State Register of Legal Entities
about a legal entity established
prior to July 1, 2002: August 12,
2002;
• Series and number of Certificate
of Entry in the Uniform State
Register of Legal Entities
about a legal entity established
prior to July 1, 2002: Series 77
No. 004856711;
• Primary State Registration
Number under which entry
about establishment
of the Company is made in the
Uniform State Register of Legal
Entities: 1027700043502.
Main types of operations
of the Company: geological
prospecting and geological
exploration work aimed at oil,
gas, coal and other minerals
search; extraction, transportation
and processing of oil, gas, coal
and other minerals and timber;
production of oil products,
petrochemicals and other
products, including electric
power, woodworking products,
fast moving consumer goods
and provision of services
to the public; storage and sale
(including sale in the domestic
market and export sale) of oil, gas,
oil products, coal, electric power,
woodworking products, and other
hydrocarbon and other derivatives.
Pursuant to Decree
of the Government of the Russian
Federation dated August 20,
2009, No. 1226-r, Rosneft has
been included into the list
of strategic enterprises charged
with implementation of uniform
public policy in those branches
of economy where such entities
operate.
Pursuant to Decree
of the President of the Russian
Federation dated May 21, 2012,
No. 688, Rosneft has been
included into the list of strategic
enterprises and strategic joint
stock companies.
27.4 RISK MANAGEMENT
Country risks
Russia continues economic
reforms and development
of its legal, tax and regulatory
frameworks as required
by a market economy. The future
stability of the Russian economy
is largely dependent upon these
reforms and developments
and the effectiveness of economic,
financial and monetary measures
undertaken by the Russian
government.
The Russian economy has been
negatively affected by sanctions
imposed on Russia by a number
of countries.
Starting early March 2020,
the COVID-19 pandemic, among
other factors, caused a significant
fall in oil demand and oil prices
in global markets, as well as a drop
in the ruble exchange rate against
the world’s major currencies.
Provided current trends persist
in the long term, these factors
may continue to significantly
affect the Company’s financial
position, cash flows and financial
performance.
Management is taking
appropriate measures to support
the sustainability
of the Company’s business
in the current circumstances.
Financial risks
The Company receives USD-
denominated export revenue.
The Company enters into hedge
transactions to mitigate
the foreign exchange risk. A part
of USD-denominated loans
and borrowings is designated
as a hedging instrument for export
revenue (Note 13).
Other risks
Environment
The Company periodically
evaluates its environmental
liabilities pursuant
to environmental regulations.
Such liabilities are recognized
in the financial statements
as identified. Potential liabilities,
which might arise as a result
of changes in the applicable
legislation or settlement of civil
disputes or changes in regulations,
cannot be reliably measured
and are recognized as contingent
environmental provisions.
With the existing control,
the Company’s management
believes that currently there
are no significant liabilities related
to the environmental damage,
other than those disclosed
in these financial statements
(Note 24)..
Risks and opportunities
associated with climate change
Within the framework of its
corporate risk management
system, the Company on an annual
basis identifies and evaluates risks
and opportunities relevant to its
business activities, including those
related to climate change.
In the process of investment
decision making, the risks
associated with health, safety
and environment (HSE),
ecology, and climate change
are analyzed. For large projects,
the analysis of the alignment
with the Company’s strategic
goals, environmental standards
and requirements of the Russian
legislation and international
organizations is performed, as well
as the analysis and assessment
of external risks related
to the impact on the environment
(changes in legislation, changes
426
427
Appendix 6.ROSNEFT / ANNUAL REPORT 2020 CONTACT DETAILS
FULL NAME:
RAS AUDITOR OF THE COMPANY:
Public Joint-Stock Company
Rosneft Oil Company
ABBREVIATED NAME:
PJSC Rosneft Oil Company
LLC Ernst & Young
77 Sadovnicheskaya Embankment,
Bldg. 1, Moscow, 115035, Russia
Telephone: +7 (495) 705-97-00;
+7 (495) 755-97-00
Facsimile: +7 (495) 755-97-01
LOCATION OF THE COMPANY:
REGISTRAR OF THE COMPANY:
26/1 Sofiyskaya Embankment,
Moscow, 117997, Russia
POST ADDRESS:
26/1 Sofiyskaya Embankment,
Moscow, 117997, Russia
LLC Reestr-RN
2/6, Podkopaevsky sidest.,
Bldg. 3-4, Moscow 109028, Russia
Telephone: +7 (495) 411-79-11
Facsimile: +7 (495) 411-83-12
E-mail: support@reestrrn.ru
Website: www.reestrrn.ru
INFORMATION SERVICE:
GDR DEPOSITARY:
J. P. Morgan
MOSCOW OFFICE:
10, Butyrskiy Val, Bldg. A,
13th Floor, Moscow,
125047, Russia
Telephone: +7 495 967-71-13
LONDON OFFICE:
25 Bank Street, Canary Wharf, 17th Floor, London E14
5JP, UK Telephone: +44 207 134-55-18
Website of the Company:
Russian Version: www.rosneft.ru
English Version: www.rosneft.com
Telephone: +7 (499) 517-88-99
Facsimile: +7 (499) 517-72-35
Telex: 114405 DISVO.RU
E-mail: postman@rosneft.ru
FOR SHAREHOLDERS:
Shareholder Relations Division,
Corporate Governance Department, Rosneft
Telephone: +7 (495) 987-30-60;
8-800-500-11-00
(calls from Russia toll-free)
Facsimile: +7 (499) 517-86-53
E-mail: shareholders@rosneft.ru
FOR INSTITUTIONAL INVESTORS:
Investor Relations Department,
Rosneft
Telephone: +7 (495) 411-05-04
E-mail: ir@rosneft.ru
IFRS AUDITOR OF THE COMPANY:
LLC Ernst & Young
77 Sadovnicheskaya Embankment,
Bldg. 1, Moscow, 115035, Russia
Telephone: +7 (495) 705-97-00;
+7 (495) 755-97-00
Facsimile: +7 (495) 755-97-01
428
ROSNEFT / ANNUAL REPORT 2020