ANNUAL REPORT
2O21
1 About the Company
2 Corporate governance
3 Appendix
Message from the CEO and Chairman
2
of the Management Board
4
COVID-19 measures
Rosneft operations
6
Rosneft–2030: reliable energy and global energy transition 8
9
Strategic objectives and priorities
10
Carbon neutrality
12
Long-Term Development Programme and progress report
13
KPI structure
16
Investment programme in 2021
20
Key operating and financial results
22
Health, safety, environment, climate change
Corporate Governance
Anti-corruption efforts
Audit Commission
Risk Management and Internal Control System
Shareholder relations, key events in 2021
30
36
38
40
54
Appendix 1 (Consolidated financial statements
Rosneft Oil Company for the year
ended December 31, 2021)
Appendix 2 (Report on compliance
with the principles and recommendations
of the Corporate Governance Code)
Appendix 3 (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)
Appendix 4 (Financial statements and auditor’s report)
57
66
91
93
About the Company
MESSAGE FROM THE CEO AND CHAIRMAN
OF THE MANAGEMENT BOARD
This helped us maintain leadership
in hydrocarbon production and keep
operating production expenses per barrel
at a low level.
However, unlike other players, we have
not been scaling down investment in field
development and continued with our new
high-potential projects to ensure energy
security in Russia. We are confident that
their massive resource base will be key
to making up for declining production
at brownfields in Western Siberia to meet
fast-growing energy demand.
Our promising projects boast low
production costs per barrel and a minimal
carbon footprint, which is 75% lower
compared to other major greenfields.
We expect that this will be fully
reflected in Rosneft’s equity valuation
as the projects move forward. Further
to our efforts to improve operating
and financial performance, implement
major oil and gas projects, and upgrade
and expand our refineries, this will drive
the Company’s share price growth
in the years to come.
We pay special attention
to environmental safety and always look
to minimise our environmental impact.
The Board of Directors has approved
the Rosneft-2030: Reliable Energy
and Global Energy Transition Strategy,
I am proud and happy to say that our
team has risen to the challenges brought
on by COVID-19.
Rosneft takes all necessary steps
to protect its employees. We raced
against the clock to arrange vaccine
supplies and make sure all storage
conditions were met. Some deliveries
to remote and hard-to-reach locations
across our footprint involved helicopters.
We set up the logistics and facilitated
smooth operation of medical teams
and vaccination facilities, which helped us
achieve herd immunity within the shortest
time possible.
Employees are still tested regularly
and revaccinated, while also strictly
following health protocols.
Rosneft is progressing towards the goals
and targets set by its strategy. The robust
performance of our team and focus
on major projects boost the Company’s
financial strength and enable us to meet
all commitments on shareholder returns,
making Rosneft an industry leader
and reliable energy producer and supplier.
which seeks to reduce our carbon footprint
amid further improvements in operating
and financial performance. Our status
as a responsible energy supplier and one
of Russia’s energy transition leaders
is evidenced by our emission cut targets
in the Strategy.
We have also developed
an Environmental Development
Concept. It complements the Carbon
Management Plan for the period until
2035 as a key component of our long-term
environmental agenda.
Our efforts in this realm have been praised
internationally, with a number of global
ESG rating providers placing Rosneft above
its local industry peers. Rosneft became
the only Russian oil and gas company
announced as Global Compact LEAD in
the area of sustainable development due
to ongoing commitment to the United
Nations Global Compact and its Ten
Principles for responsible business.
In many regions of operation, from
Eastern Siberia and the Russian Far East
to the Volga Region and the Krasnodar
Territory, Rosneft has been running large-
scale social projects to reshape towns
and settlements by providing access
to modern healthcare, educational, sports,
well-being, and utility services.
Igor SECHIN
Chief Executive Officer and Chairman
of the Management Board
DEAR SHAREHOLDERS
AND INVESTORS,
In the reporting year’s challenging
market environment, Rosneft was able
to promptly react to and successfully
tackle the external challenges.
2
3
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance COVID-19 MEASURES
WE CARE FOR OUR PEOPLE
WE ENSURE BUSINESS CONTINUITY
WE CARE FOR OUR CUSTOMERS
Ad-hoc remote
working introduced
for staff not involved
in ensuring continuous
production
COVID-19 vaccination
and revaccination
among employees,
with strong herd
immunity achieved
within the Company
Providing employees
with PPE and
disinfectants: over
100 million pieces
of personal protective
equipment and
12 million litres
of disinfectants
and sanitisers
Routine testing
(more than
1.3 million tests
administered) 1
Strict compliance
with sanitary
and hygienic
requirements
1 Since the onset of the pandemic.
All Group Subsidiaries
developed plans of priority
response measures
to ensure business
continuity and implemented
a set of initiatives to ensure
production stability
and prevent the spread
of COVID-19
At the peak
of the epidemic,
over 270 observation
facilities with more
than 13,000 beds
and over 200 isolation
wards with 3,000 beds
were arranged
The Company ensured uninterrupted operation of its filling stations,
while also maintaining high customer service standards. We took
all the necessary measures to protect the health of our staff and
customers at the filling stations:
• shops were systematically inspected to ensure there were enough
sanitisers and health products;
• shops and cafés at Rosneft filling stations operated in compliance
with the guidance on preventive and protective measures issued
by the Federal Service for Surveillance on Consumer Rights
Protection and Human Wellbeing (Rospotrebnadzor). The priority
remains to maintain social distance and minimise contact when
communicating with retail customers and suppliers;
• Rosneft kept developing services allowing customers to pay for
fuel and complementary goods from inside the car via mobile apps
(Yandex.Fuel, Yandex.Navigator, Yandex.Maps).
Caring for our people
is our top priority
Health, life and workplace safety of our employees
have always been our highest priority.
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 protect our staff and contractors
and ensure continuous operation of our
production facilities.
The Company continues
with medical and anti-epidemic
measures, which include providing
employees with personal protective
equipment, regular disinfection
of premises and workplaces, special
arrangements for shift workers (pre-
shift observation, isolation facilities
for those with symptoms at the field),
testing employees for COVID-19,
and daily monitoring of employee
morbidity rates and overall changes
in the epidemiological situation across
the regions of operation.
In March 2021, Rosneft launched a large-
scale COVID-19 vaccination programme
for employees by engaging mobile
medical teams across the Company’s
operations, procuring the needed
vaccine doses, and creating all other
conditions required for the vaccination,
including direct arrangements
at production sites and in shift camps.
Our particular focus was on raising
awareness among the Company’s
employees about COVID-19 prevention,
including efforts to promote vaccination
uptake.
These measures helped promptly
achieve a high level of herd immunity
among the Company’s personnel, which
reached 95% at Rosneft and 90% across
the Group Subsidiaries.
To maintain and strengthen the achieved
immunity against the novel coronavirus
infection in line with the relevant
recommendations of the Russian
Ministry of Health, the Company
launched a revaccination programme
for employees, which kicked off
in September 2021.
Our comprehensive approach
to epidemic prevention and response
based on continuous status monitoring
and control gives us ability to react
promptly to new threats, including
the pandemic, by protecting our
employees’ lives and health while
ensuring the continuity of Rosneft’s
operations.
HERD IMMUNITY
95%
of Rosneft employees
90%
of Group Subsidiaries
employees
ROSNEFT
OPERATIONS
Average hydrocarbon production growth
in 2011–2021, %
Hydrocarbons production in 2021,
mmboe per day
Hydrocarbon production costs in 2021,
USD per boe
Hydrocarbon reserves, bboe1
as at 1 January 2022
Production assets
Refining and processing assets
6.8
2.4
1.5
1.0
0.6
0.1
0.1
-0.4
i
a
n
h
C
o
r
t
e
P
n
o
r
v
e
h
C
m
o
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s
a
r
b
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t
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L
l
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h
S
P
B
-1.9
l
i
b
o
M
n
o
x
x
E
5.0
1.1
3.9
4.5
2.0
3.7
1.4
2.4
2.3
i
a
n
h
C
o
r
t
e
P
l
i
b
o
M
n
o
x
x
E
Liquid hydrocarbons
Gas
3.3
1.4
2.0
3.2
1.6
1.7
P
B
l
l
e
h
S
3.0
1.2
1.8
n
o
r
v
e
h
C
2.8
0.5
2.2
s
a
r
b
o
r
t
e
P
2.2
0.5
1.7
L
I
O
K
U
L
12.2
12.3
9.1
9.9
6.71
6.8
2.7
3.5
L
I
O
K
U
L
s
a
r
b
o
r
t
e
P
P
B
l
l
e
h
S
l
i
b
o
M
n
o
x
x
E
i
a
n
h
C
o
r
t
e
P
n
o
r
v
e
h
C
153
55
98
62
25
37
l
i
b
o
M
n
o
x
x
E
58
29
29
P
B
43
24
19
i
a
n
h
C
o
r
t
e
P
42
25
17
l
l
e
h
S
41
20
22
n
o
r
v
e
h
C
31
10
22
L
I
O
K
U
L
26
3
23
s
a
r
b
o
r
t
e
P
Source: company reports for 2021.
Liquid hydrocarbons
Gas
1 Data on Rosneft is provided according to the Russian resource classification
system (АВ1С1+В2С2) as at 1 January 2022, data on other companies is based
on Wood Mackenzie’s appraisal and includes commercial and sub-commercial
reserves.
7
6
Sources: company reports; Wood Mackenzie (Gazprom).
Source: company reports for 2021
1 Petrobras data covers Brazil only.
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance ROSNEFT–2030: RELIABLE
ENERGY AND GLOBAL ENERGY
TRANSITION
A NEW STRATEGY OF A RESPONSIBLE COMPANY
AND THE INDUSTRY’S LEADER
Rosneft–2022
Rosneft–2030
Enhancing
profitability
HIGHER
EFFICIENCY
Ensuring delivery
OPERATIONAL
LEADERSHIP
About the Company
Corporate governance
STRATEGIC
OBJECTIVES AND
PRIORITIES
Retaining leadership
in terms of unit
production costs
Increasing production
by 330 mmtoe
Increasing gas share
in total output by 25%
Higher dividends and returns
Transforming
culture and
technological
capabilities
LOWER CARBON
FOOTPRINT
Drive towards zero fatalities (FAR) and zero accidents (PSER-1)
100% waste disposal and remediation of heritage lands
Prompt implementation of circular economy principles
Biodiversity conservation
8
9
ROSNEFT ANNUAL REPORT 2021 ROSNEFT ANNUAL REPORT 2021
About the Company
Corporate governance
CARBON
NEUTRALITY
2025
5%
reduction of absolute
GHG emissions
2030
<0.2%
methane
emissions intensity
0
routine flaring of associated
petroleum gas
<20 kg of СО2 eq. per boe
specific
GHG emissions
in Upstream
2035
>25%
reduction
of absolute GHG
emissions
2050
CARBON
NEUTRALITY
10
11
GHG reduction targets are set against the base year of 2020.
GHG reduction and carbon neutrality targets cover 100% of Scope 1 and 2 emissions in the Company’s reporting perimeter.
LONG-TERM DEVELOPMENT PROGRAMME
AND PROGRESS REPORT
KPI STRUCTURE
Originally developed in 20141, the Long-
Term Development Programme
(the Programme) is subject to annual
updates2.
In 2021, we revised the Programme,
taking into account the Company’s
performance, action plans to achieve
certain strategic goals, and updated
initiatives drafted pursuant
to the Russian Government’s directives3.
The updated Programme was approved
by the Company’s Board of Directors
(Minutes No. 16 dated 20 December
2021).
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 Company’s
strategic goals.
and the Programme (Investment
Programme in 2021 section) for key
business areas.
The main priorities, key performance
indicators (KPIs) and action plans under
the current Innovation Development
Programme, Import Substitution
and Equipment Localisation Programme,
and Energy Saving Programme take
into account the Programme provisions
and are integrated into the current
version of the document. The
performance indicators include
an integrated KPI for innovations.
Rosneft’s Investment Programme aims
to help the Company achieve its strategic
objectives stipulated in the Strategy
We completed the Programme's
key initiatives planned for core
businesses and functional units in 2021.
For the Programme outcomes in 2021,
see the Operating Results section.
TSATR – Audit Services LLC4,
an independent auditor, has completed
its engagement and provided
assurance about Rosneft's Programme
Progress Report for 2021. The opinion
was received on 21 April 2022.
1 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).
2 In accordance with the Russian Government Directive No. 4955p-P13 dated 17 July 2014.
3 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, and No. 3502p-P13 dated 15 April 2021.
4 Part of the Ernst & Young (EY) gobal network.
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.
Long-Term Development
Programme
The Company’s
Strategy
Consolidated business plan
• Corporate KPIs
• Individual KPIs of the Chief
Executive Officer
• Bonus disqualification
(blocking) indicators
Business plans of business
units
• Collective KPIs of businesses
• Individual KPIs of the Company's
top managers responsible
for the performance
of businesses
Business plans of Group
Subsidiaries
• Collective KPIs of Group
Subsidiaries
• Individual KPIs of Group
Subsidiaries’ senior
management
Assessment of progress against KPIs
12
13
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance 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 corporate and individual KPIs
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 progress against Rosneft’s operating and financial (economic) KPIs and the individual KPIs
of Rosneft’s CEO in 2020–2021
KPI
2021 ACTUAL
PROGRESS IN 20213
PROGRESS IN 2020
Hydrocarbon production, mmtoe
Workforce productivity, RUB mln per
person
Return on average capital employed
(ROACE), %
Financial leverage (net debt / EBITDA)4
Injury rate, %
Integrated KPI for innovations5
245.3
10.8
16.1
1.3
98
100
Above target
Above target
Above target
Above target
Above target
On target
Above target
Above target
Above target
Above target
Above target
On target
The KPI system ensures:
• well-balanced integrated indicators
motivating employees to achieve
the Company’s main goals;
• transparency, measurability, minimum
sufficiency, and consistency of KPIs;
• a top-down approach to cascading
and breaking down KPIs.
The KPI system is aimed at:
• delivering on the Company’s Strategy
and achieving the Programme’s
targets;
• consistently improving the Company’s
financial and operating (industry-
specific) results;
• ensuring compliance with directives
and instructions of federal executive
bodies, including annual cost-cutting
targets.
With both financial (economic)
and operating (industry-specific) KPIs
in place, the system breaks down relevant
indicators into the following groups:
• corporate KPIs based on the key
financial, economic, operating
and industry-specific indicators from
the Company’s consolidated business
plan and business plans of its business
units;
Corporate KPIs and the individual KPIs
of the CEO for 2021 include:
• return on average capital employed
• individual KPIs based on individual
(ROACE);
strategic goals for each top executive.
Aside from that, for the purposes
of motivating the Company’s top
management and employees to deliver
on Rosneft’s strategy and business plan,
we introduced bonus disqualification
(blocking) indicators. A failure to achieve
targets under these indicators reduces
the overall annual bonus amount
in the reporting period.
KPIs, including targets for the senior
management, are set by the Company’s
Board of Directors on an annual basis
subject to preliminary discussion by the
relevant committee.
Based on the current business plan,
the 2021 KPIs for Rosneft’s top managers
were adopted by the Board of Directors
on 15 March 2021 (Minutes No. 20 dated
17 March 2021).
• hydrocarbon production rate;
• accident rate;
• workforce productivity;
• cost reduction vs the previous
reporting period on a comparable
basis;
• financial leverage (net debt / EBITDA);
• integrated KPI for innovations;
• compliance ratio as regards
instructions from Rosneft’s Board
of Directors.
The bonus disqualification (blocking)
indicators for the Company’s top
managers and employees in 2021
included:
• financial leverage (net debt / EBITDA);
• workforce productivity;
• return on average capital employed
(ROACE);
• hydrocarbon production rate;
• compliance ratio as regards
instructions from the Company’s
management.
14
15
1 The Regulations were approved (Minutes No. 27 dated 6 April 2015) and amended (Minutes No. 10 dated 27 September 2021) by Rosneft’s Board of Directors.
2 Approved by Order No. 730 dated 12 December 2019.
3 The assessment is preliminary and can be updated once the KPI progress audit is completed.
4 In RUB terms.
5 Based on the management accounts.
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance INVESTMENT PROGRAMME IN 2021
Rosneft’s 2021 investment programme was approved as part of the 2021–2022 Business Plan
at the Board of Directors on 17 December 2020 (Minutes No. 14 dated 21 December 2020).
Exploration and Production
In 2021, capex amounted to around
RUB 1 trln in line with the Company’s
strategic target. A favourable
macroeconomic environment,
coupled with efficiently implemented
initiatives, enabled Rosneft to ramp up
investment activities aimed at unlocking
the production potential of new
greenfields, upgrading and expanding oil
refineries, and reducing environmental
footprint.
Capex, RUB bln
1,049
854
785
2019
2020
2021
To select and prioritise projects, we
leverage and enhance our portfolio
management toolkit that enables
a proactive response to external
and internal developments and quick
optimisation or reallocation
of investments between different
business segments. We evaluate projects
and investment opportunities within
our portfolio on the basis of project
profitability by taking into account project
risk assessments and the Company’s
financial capacity.
Our investment programme seeks
to achieve key strategic goals, including
an increase in business profitability,
enhancing operational and investment
efficiency, launching projects on time
and on budget, and minimising
the environmental footprint.
Around 98% of our investments
are concentrated in Russia, with ca. 30%
attributable to projects in Eastern Siberia
and the Far East.
In 2021, Exploration and Production
accounted for ca. 91% of our investments,
including 4% spent on gas projects,
with 6% invested in Refining, Commerce
and Logistics.
≈ RUB 1.05 trln
Capex in 2021
Investment programme
breakdown, %
In 2021, E&P capex totalled RUB 956 bln.
These investments help us maintain
and develop mature and new oil and gas
assets to meet the strategic goals related
to hydrocarbon production and reserve
replacement. In 2021, capital investments
in mature onshore and offshore
fields exceeded RUB 520 bln, or 50%
of the Company’s capex.
Capital investments in major and new
oil and gas projects in Russia amounted
to more than RUB 407 bln, or more
than 35% of the Company’s investment
programme.
Refining, Commerce and Logistics
In 2021, the Downstream capex totalled
RUB 64 bln.
Investments focused on highly cost-
effective projects to construct
and upgrade production units
and facilities at refineries, development
of oil depots and refuelling
complexes at major Russian airports,
growth of the catalyst and additive
business, and further implementation
of the programme for renovation
of the retail network and occasional
construction and reconstruction of filling
facilities.
We expect these projects to give a boost
to our refining margins, light product
yield and the output of high-quality
petroleum products, while also increasing
sales through the retail and B2B
channels.
Investments to prevent environmental impact
Upstream
Downstream
Other
91
6
3
Minimisation of the impact on climate
and environment is a key strategic
priority for Rosneft. To this end,
the Company systematically implements
a range of initiatives and investment
projects aimed at reducing APG flaring,
increasing pipeline reliability, enhancing
waste and effluent management,
and remediating land plots. In 2021, green
investments amounted to ca. RUB 55 bln
16
17
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
Rosneft’s investment governance process
is integrated with all related processes,
including strategic and business planning,
budgeting, reporting and financial
control, project management
and corporate governance. It covers
the following areas:
• discipline and responsibility:
business projects are approved
through decision-making delegation
within the permitted limits as per
the investment mandate following
a regulated comprehensive project
analysis process;
• investment decision-making : sound
investment decisions, shorter periods
of approval and review of investment
memoranda, responsibility
of investment project owners
and supervisors for compliance
with timeliness, budget, efficiency
and performance criteria;
• monitoring and control: regular
and thorough project monitoring at all
levels, change management process;
IT-based control of investment
decision availability when assuming
financial obligations (the two-key
principle) at all stages of project
planning and implementation;
• portfolio analysis: building a balanced
portfolio of the Company's projects
and flexible management, relying
on principles of comprehensive
project ranking and optimisation
based on a list of criteria depending
on the Company’s Development
Strategy and current priorities, use
of tools for portfolio scenario analysis;
• IT tools: automating investment
project management, including
the support of investment decision
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
Macroeconomics and external environment
Ongoing projects
Investment initiatives
Individual project results
Overall portfolio results
Improvement recommendations
N
T
PR O JE C
SELEC TI O
A
N
D
P
E
R
M
F
O
O
N
R
M
I
T
A
O
PROJECT
PORTFOLIO
N
C
R
I
E A
N
G
SSESSMENT
I N V E S T M E
O
P
TI
M
A
N
D R
I
S
A
A
T
N
K
I
O
I
N
N
G
G
N
KI
A
N
N-M
P L E M ENTATIO
T D E CISIO
A N D I M
N
Resource and financing constraints
Maximum efficiency and profitability
Investment distribution
Project approval, cancellation, completion
Value creation (NPV)
Investment process
Our investment process hinges on the following key principles:
Availability of all
required investment
decisions
1
Performance above
the minimum threshold
for each project
2
Financing only in case
of an investment
decision and funds
allocated in the business
plan
3
Standardising
approaches
to project assessment
and documentation
4
Authority delegation
5
Comprehensive due
diligence
6
Project responsibility
7
Monitoring and control
throughout the project
life cycle
8
Compatibility
with project stages
9
Alignment with related
processes
10
Our investment activities help us ensure
commitment to the following strategic
priorities:
• sustainable business growth driven
by investments in competitive and high
value-added projects based on ongoing
portfolio optimisation;
• increasing efficiency across all
business streams through an in-
depth analysis of investment needs,
efficient decision-making and project
implementation, monitoring
and control throughout the project life
cycle;
• honouring social responsibility
principles regarding occupational
safety and environmental protection;
• focus on the UN Sustainable
• strengthening investment discipline
by ensuring better project
identification, classification, thorough
project analysis and efficient decision-
making process reliant on delegation
of authority;
Development Goals to help achieve
progress in addressing global economic,
social and environmental challenges,
including those related to carbon
management.
Delegating: investment bodies and limitations
Limits of authority
Investment bodies
>USD 1,500 mln
USD 500–1,500 mln
USD 200–500 mln
USD 0–200 mln
Board of Directors
Management Board
Investment Committee
Dedicated committees
Refining, Commerce
and Logistics
Exploration
and Production
Functional
18
19
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
KEY OPERATING AND FINANCIAL RESULTS
Proved reserves of liquid
hydrocarbons, mmb
Proved reserves of natural gas,
bcm
Oil and gas condensate reserve
replacement ratio, SEC, %
METRIC
Proved SEC reserves of liquid hydrocarbons, mmt
Proved PRMS reserves of liquid hydrocarbons, mmt
Proved SEC reserves of marketable gas, bcm
Proved PRMS reserves of marketable gas, bcm
PRMS hydrocarbon reserves-to-production ratio, years
Production of liquid hydrocarbons, mmt
Natural gas production, bcm
Oil exports, mmt
Oil refining, mmt
Petroleum product and petrochemicals output, mmt
Petroleum product and petrochemicals exports, mmt
METRIC
Revenues and equity share in profits of associates and joint ventures, RUB bln
EBITDA, RUB bln
EBITDA margin
Taxes and customs duties, RUB trln
Net income1, RUB bln
Net income margin
ROACE
ROAE
Capex, RUB bln
Unit capex in exploration and production, USD/boe
Unit opex in production, USD/boe
Free cash flow, RUB bln
Dividend per share, RUB
Total accrued dividends, RUB bln
2021
3,458
3,752
2,093
2,380
24
192.1
64.7
108.4
106.1
103.3
60.9
2021
8,761
2,330
26.1%
3.8
883
10.1%
16.1%
14.9%
1,049
7.6
2.7
1,044
2020
CHANGE
3,489
3,891
2,106
2,423
23
204.5
62.8
115.5
104.0
101.4
64.2
-0.9%
-3.6%
-0.6%
-1.8%
4.3%
-6.1%
3.0%
-6.2%
2.1%
1.9%
-5.3%
2019
3,935
4,383
2,119
2,452
23
230.2
67.0
149.4
110.2
107.5
71.1
2020
CHANGE
2019
5,757
1,209
52%
93%
20.4%
5.7 p.p.
56%
569%
7.8 p.p.
9.2 p.p.
11.9 p.p.
34%
38%
-4%
146%
2.4
132
2.3%
6.9%
3.0%
785
5.5
2.8
425
6.94
73.6
8,676
2,105
24.3%
3.7
802
9.2%
15.7%
14.3%
854
6.1
3.1
941
33.41
354.1
32,354
29,114
28,726
27,704
25,816
25,576
2,452
2,423
2,380
2,119
2,106
2,093
129
1381
1171
2019
2020
2021
2019
2020
2021
2019
2020
2021
SEC reserves
PRMS reserves
SEC reserves
PRMS reserves
Oil and gas condensate
production, mmt
Natural gas production, bcm
230.2
204.5
192.1
67.0
62.8
64.7
Exploration and Production
opex per barrel of produced oil
equivalent, RUB
199
200
196
2019
2020
2021
2019
2020
2021
In 2021, the Company’s liquid hydrocarbon
production was 192.1 mmt following
the disposal of a number of low-margin assets.
Excluding assets disposed of in 2020, average
daily output of liquid hydrocarbons increased
by 1.5% year-on-year. At our existing assets
at the year-end (excluding assets disposed
of in 2020–2021), average daily output of liquid
hydrocarbons rose by 2.3% year-on-year.
In 12M 2021, natural gas production totalled
64.75 bcm, up 3.1% year-on-year. Excluding
assets disposed of in 2020, average daily natural
gas production increased by 14.2% year-on-
year. At our existing assets as at the year-end
and excluding assets disposed of in 2020–2021,
average daily output of natural gas grew by
15.9% year-on-year.
2019
2020
2021
As a result of ongoing efficiency improvements
and asset portfolio optimisation, unit operating
expenses in hydrocarbon production were kept
at a minimum level of RUB 196 per boe, down
2% vs 2020.
EBITDA and net income,
RUB bln
Opex of Russian refineries per
tonne of refined oil, RUB
1,451
1,596
1,716
2019
2020
2021
Operating expenses increased by 7.5% year-
on-year to RUB 1,716 per tonne mainly due
to higher tariffs of natural monopolies,
wage indexation, and growth in scheduled
maintenance costs.
Revenue, RUB bln
4,493
3,997
4,315
3,139
4,246
2,489
186
129
200
2019
2020
2021
2,105
2,330
1,209
802
1,012
1662
2019
2020
2021
EBITDA
Net income
Oil and gas
Petroleum products
and petrochemicals
Other and affiliates
In 2021, revenue increased by 52.2% year-on-
year to RUB 8,761 bln on the back of rising global
oil prices and a recovery of demand for crude
oil and petroleum products in the global market
to almost pre-crisis levels.
In 2021, EBITDA reached an all-time high
mainly thanks to higher prices, a positive effect
from the reverse excise tax, and stringent
cost control. As a result of ongoing efficiency
improvements and asset portfolio optimisation,
unit operating expenses in hydrocarbon
production were kept at a minimum level
of USD 2.7 per boe, down 3.6% vs 2020.
Net income in 2021 rose to a record-breaking
RUB 1,012 bln (USD 13.7 bln).
1 Net income attributable to Rosneft shareholders.
20
1 Including divestments across the relevant assets.
2 Data has been revised.
21
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
HEALTH, SAFETY, ENVIRONMENT,
CLIMATE CHANGE
Strategic HSE guidelines and targets
In December 2021, the Company’s Board
of Directors adopted Rosneft-2030:
Reliable Energy and Global Energy
Transition strategy. It envisages
a breakthrough in the Company’s health
and safety management, prioritising
the targets of zero FAR (fatal accident
rate, including contractors) and zero
PSER-1 (process safety events rate).
Rosneft-2030 Strategy also seeks
to reduce the Company’s carbon
footprint and boost its operational
and financial efficiency. Moreover,
Rosneft aims to achieve net carbon
neutrality by 2050 with respect
to Scope 1 and 2 emissions.
To accomplish this goal, the Company
plans to reduce emissions, leverage low-
carbon energy generation techniques,
develop energy-saving, carbon capture
and storage technologies, and promote
natural absorption.
In line with its strategy, the Company
lays great emphasis on protecting the
environment and biodiversity and
fostering a circular economy. Rosneft
also reaffirms its commitment to 100%
waste disposal and remediation of
heritage lands.
In 2021, Rosneft developed the List
of 2035 Environmental Targets in line
with the UN Sustainable Development
Goals, national environmental goals
of the Russian Federation through 2030,
and the Company’s Environmental
Vision to 20351 previously adopted
by the Strategy and Sustainable
Development Committee. Achieving
these targets will ensure compliance
with the environmental goals
of Rosneft-2030: Reliable Energy
and Global Energy Transition strategy.
HSE management system and principles
Resolutions adopted by the Board
of Directors in 2018 ensure that Rosneft’s
operating and strategic priorities
conform to the 17 UN Sustainable
Development Goals, with five of them
defined as key focus areas: Good Health
and Well-Being, Affordable and Clean
Energy, Decent Work and Economic
Growth, Climate Action and Partnership
for Sustainable Development.
The Company pursues its HSE objectives
within the framework of the Integrated
Health, Safety and Environment
Management System (IMS).
The IMS is part of the Company’s
governance system. It is a set
of processes, procedures, rules
and resources used to implement
the Policy and achieve HSE targets
by efficiently managing risks
and opportunities, monitoring
compliance and improving performance
in this area.
The IMS covers all operations of Rosneft
and Group Subsidiaries, and is mandatory
for all employees of the Company.
The Company’s IMS takes into account
the internal and external factors
(context) impacting its ability to reach
the HSE targets, stakeholder attitudes
and implementation of the commitments
and principles under the Company’s HSE
Policy.
Since 2006, the IMS has been attested
for compliance with the relevant ISO
(and/or GOST R ISO) standards on
an annual basis by procuring relevant
certificates.
• the Group Subsidiaries – self-
assessment, self-control;
• dedicated business units of Rosneft –
HSE Control Department, HSE
Control Commission.
The number of certified Group
Subsidiaries is constantly increasing.
In 2021, Rosneft’s Moscow office
and the Group Subsidiaries engaged
an independent party to conduct
an audit of the Company’s IMS for
compliance with the above-mentioned
standards, including the Environmental
Management Systems and Occupational
Health and Safety Management
Systems. The accredited certification
authority confirmed the system’s
compliance with these standards,
expanded the scope of certification,
and increased the number of certified
Group Subsidiaries from 66 to 76 under
the Company general certificate.
The Company is actively developing
its HSE control system, as stipulated
by the Regulations on HSE Control.
The supervisory procedures serve
to audit the Group Subsidiaries for:
• compliance with HSE requirements;
• HSE performance and efficiency;
• compliance with Environmental
Management Systems and
Occupational Health and Safety
Management Systems standards;
• identification of critical and high
HSE risks and their reduction
to manageable levels.
The control system functions at two
levels:
Management in action
In 2021, the Company’s HSE Committee
held seven meetings. The top managers
acting as its members considered a broad
range of HSE issues, such as:
• managing preparedness for oil spill
response and emergency rescue
operations;
• improving aviation safety;
• reviewing performance of “safety
barriers” based on HSE control
procedures;
• analysing incident investigation
reports;
• implementing HSE risk assessment
tools in hazardous operations
of the Group Subsidiaries;
• reviewing the list of environmental
indicators under Rosneft’s 2035
Environmental Vision;
• analysing the discharge of personal
HSE obligations by CEOs in the Group
Subsidiaries;
• reviewing the report on critical
HSE risk management following
the completion of the annual cycle
in 2021;
• analysing achievement of HSE targets
and reporting this achievement
to the Board of Directors
for consideration..
The Company’s HSE performance reports
were reviewed discussed by the Strategy
and Sustainable Development
Committee and the Board of Directors.
Quarterly meetings of the Carbon
Management Committee were held
in line with the internal procedures.
The agenda focused on progress against
the Company’s Carbon Management Plan
for 2021.
As part of the HSE Committee’s target
performance review, Vice Presidents
within the Committee assisted
with the implementation of the Group
Subsidiaries’ plans and programmes
aimed at attaining the HSE goals set out
in the Rosneft-2022 strategy.
1 The Vision validity was extended from 2030 to 2035.
22
23
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Safe working environment
The Company’s operations are based
on the guidelines of the HSE Policy.
They place an emphasis on health, life
and workplace safety, and prioritise
proactive action over reactive recovery
and response measures.
In 2021, the Company focused
on the implementation of programmes
and action plans, and introduction
of relevant initiatives to ensure
the integrity of production facilities
and prevent occupational injuries.
Safe working conditions in hazardous
operations, equipment reliability, road
and aviation safety remain the key focus
areas.
Health and safety expenses amounted
to RUB 48.3 bln in 2021, covering
activities required by the federal
and corporate regulations,
as well as additional initiatives
and programmes.
LEADERSHIP AND SAFETY
CULTURE
The managers of Rosneft and Group
Subsidiaries annually demonstrate
their HSE leadership by undertaking
to convince employees by personal
example that compliance with the HSE
requirements is a must. The leadership
guidelines are set by employee
communications emphasising the value
of employees’ life and health. They
are delivered by the CEO, Vice
Presidents in charge of businesses units
and the Vice President for Health, Safety
and Environment.
The Golden Rules of Safety cover
key operational safety requirements
of the Company and are communicated
on an ongoing basis. Given the COVID-19
restrictions, the Golden Rules training
course was adapted to meet the needs
of distance learning and make it
available to all the Group Subsidiaries.
In 2021, over 76 thousand employees
were trained.
The Company sets great store
by the quality of in-house HSE
training and the education of internal
trainers for the Group Subsidiaries’
personnel. To boost the trainers’ skills
and qualifications, two conferences
were held in 2021 to discuss Workshops
for Internal HSE Trainers. They
were attended by 70 internal trainers
from 36 Group Subsidiaries.
The 8th Corporate Congress
of Rosneft Ecologists was held
in 2021. The participants included top
management, leaders and environmental
experts from more than 200 Group
Subsidiaries, professionals from allied
business units of the Company’s Head
Office, and Rosneft’s foreign partners.
Global energy transition and circular
economy were key issues in the reports
presented by the Company’s experts
and foreign partners. The participants
took note of Rosneft’s achievements
in implementing the Global Methane
Initiative, and detecting and eliminating
methane leakages. The Congress also
discussed using natural reservoirs
for carbon adsorption.
The event also focused on performance
under the Rosneft-2022 strategy
and the tools used to achieve strategic
environmental goals. The Company
maintains high volumes of green
investments and shows considerable
progress in reducing its impact on water
bodies by curbing pollution discharges
despite the global economic slowdown
and waning demand for hydrocarbons.
One of the Congress highlights
was the presentation of Rosneft’s 2030
Environmental Vision and Carbon
Management Plan for the period until
2035. The participants discussed
approaches to these fundamental
documents, the Company’s long-
term strategic goals in environmental
and climate safety, and the ways
to achieve them.
To raise awareness of the Company’s
climate action among its employees,
Rosneft continued to stage its Carbon
Management corporate courses in 2021.
In the reporting year, the Company
provided training to 66 of its executive
officers from various business units of
the Company’s Head Office, as well as to
397 employees of Groub Subsidiaries in
Exploration and Production engaged in
methane identification projects.
CONTRACTOR RELATIONS
Contractor relationship management
in the context of operational safety
is a major part of the safety culture
and a driver of the Company’s sustainable
development. The need to manage
safety issues among contractors arises
from the risk of adverse consequences
for the Company in case of unsafe
operational practices employed
by the contractors.
The main objectives of the contractor
relationship management strategy
in the realm of HSE are:
• to reduce injury rates among
the contractor employees performing
their contractual operations
for the benefit of the Company on its
premises and licence areas;
• to reduce accident rates and bring
operational damages inflicted
on the Company to zero;
• to provide for consistent fulfilment
of the Company’s production plans
under the contract obligations in line
with the Russian laws and Rosneft’s
internal HSE regulations.
In an attempt to nurture safety
culture, in 2021 the Company
developed and introduced
the Contractor Leadership Declaration
as an indispensable part of the contractor
agreement. The document sets forth key
areas and activities that the contractor’s
management undertakes to perform
as part of its contractual dealings
with the Company’s businesses.
The measures are primarily aimed
at ensuring the greater involvement
of the contractor’s management
in the safety process, building more
efficient communications and controlling
occupational health and safety
on the ground.
RISK-ORIENTED APPROACH
The aim of HSE risk management
is to introduce and maintain adequate
and sufficient management actions
regarding all identified risks that are:
• consistent with the level of the risk
assessed;
• provided with the necessary resources
allocated by priority;
• approved on the required management
level of the Company.
HSE risk management is a set of tools
helping managers at various levels, from
senior executives to line managers,
to make the best and most efficient
comprehensive decisions on operational
safety when having limited resources.
It is based on HSE risk analysis
and assessment using a bow-tie diagram
and single matrix of HSE risk assessment,
with the findings being recorded in risk
registers. These findings are a starting
point in prioritising mitigation efforts
24
25
and defining the governance level
to resolve on the risk management
strategy.
by design solutions and/or
specifications in every case and plan
specific remedial actions;
in current and planned operations,
and recommendations issued to eliminate
these inconsistencies and violations.
on revision of key federal standards
and rules dealing with oil and gas
industrial safety.
A bow-tie diagram provides a visually
simple representation of the risk
and overview of the current state
of proactive and reactive barriers.
It also offers the opportunity
to prioritise potential corrective actions
for the drawbacks identified (weak
or missing barriers). The advantages
of this method serve to develop
common diagrams with varying levels
of detail for the most significant
and frequent risks. The Company has
already developed diagrams for fire,
road, blowout, and pipeline leakage
risks, specifying a set of proactive
and reactive barriers (actions) for each
type of accident. Based on these
common solutions, Group Subsidiaries
develop programmes for barrier creation/
consolidation. For example, a risk-
oriented approach was used to develop
and implement fall and road accident
prevention programmes.
Along with the proactiveness of a risk-
oriented approach, which implies risk
assessment, analysis, and management
based on global and industry-
specific practices and forecasting,
the Company uses a risk-oriented
barrier approach to investigating HSE
incidents and planning remedial actions.
The barrier approach to investigation:
• considerably expands the scope
and efficiency of risk management;
• serves to identify gaps
in the applicable preventive
and reactive barriers stipulated
• is key to reducing occupational injury
and accident rates.
Training courses were developed
for heads and members of incident
investigation commissions to enhance
their competencies:
• a course titled “Procedure
for the Internal Investigation
of Incidents” is run at Gubkin Russian
State University of Oil and Gas
and internally by the Company’s
coaches;
• an internal training course titled
“Using a Risk-Oriented Barrier
Approach to Investigating Incidents,
Learning Lessons, and Planning
Remedial Actions” was developed;
• the following interactive multimedia
(distance) learning courses are being
developed: “Using a Barrier Approach
in Investigating Incidents Internally”
and “Using a Risk-Oriented Approach
to Falling and Stumbling Prevention”.
Our diverse learning formats
cover as many employees involved
in investigations as possible.
Since 2020, a risk-oriented approach has
been used in carrying out comprehensive
and targeted HSE audits. In 2021, 65
HSE audits were conducted at Group
Subsidiaries (up 22% year-on-year),
with inconsistencies and violations
assessed based on the availability,
lack, or inadequacy of safety barriers
Taking into account the Rosneft-2030
strategy, a risk-oriented approach remains
a major aspect of the Company’s health
and safety efforts – from planning
to auditing.
PROCESS SAFETY
The Company complies with federal
and corporate regulations on process
safety. Operational functions and HSE
units of Group Subsidiaries oversee
both the planning and implementation
of necessary actions (in developing
operational programmes and business
plans at the Group Subsidiaries), while
Rosneft exercises centralised control.
The Company plays an active role
in improving legislation on process
and fire safety, including the large-scale
revision on the federal level. In 2021,
the Company reviewed and finalised
consolidated comments on, and additions
to 214 draft regulations of the Russian
Federation.
Rosneft is a regular participant
in industry-specific meetings
and conferences held by Rostekhnadzor’s
R&D Council, the Ministry of Energy,
and Industrial Safety Committee
of the Russian Union of Industrialists
and Entrepreneurs (including remote
participation). The Company’s
representatives contribute actively
to Rostekhnadzor’s working groups
Since January 2019, the Company
has been extensively using a PSE
methodology to keep record
of and categorise industrial incidents.
The risk-oriented (barrier) approach
is accompanied by target programmes
developed and implemented to ensure
integrity of operational facilities, which
is achieved primarily by including
target checks and audits in action plans
aiming to establish/strengthen barriers
where the incidents have revealed
inconsistencies.
In 2021, the Company performed
the following actions under a pipeline
integrity programme titled “Pipeline
Reliability Improvement in 2020‒2025”:
• revamp and repair of 1,400 km of
oilfield pipelines;
• inhibition of more than 18,000 km of
oilfield pipelines;
• in-line cleaning of 24,000 km of
pipelines;
• diagnostics and safety reviews of
22,900 km of oilfield pipelines1.
Since 2015, the Company has been
analysing the causes of technical
accidents in Oil Refining and
Petrochemicals, identifying systemic
failures of technical equipment. Based
on the results of the analysis, the
Company has developed nine integrity
programmes aimed at improving the
reliability of technical devices and
equipment, earmarking RUB 1.23 bn for
the implementation in 2021.
ROAD TRAFFIC SAFETY
In 2021, under its 2020–2022 Road
Safety plan, the Company implemented
the following preventive measures
to reduce road safety risks and prevent
accidents:
• assessing the equipment
of the Company’s and contractors’
vehicles using in-vehicle monitoring
systems and video recorders;
• identifying dangerous locations
on oilfield, on-site, or industrial
roads and installing warning systems,
traffic signs, and cameras that could
help detect violations;
• educating employees of Group
Subsidiaries and contractors
on compliance with traffic
regulations and road safety
management system requirements;
• running accident prevention
campaigns “Safe road – 2021”
and “We are for road safety –
2021” in the regions of operation,
in addition to a road safety
campaign “Beware, Children!”
held by the Company’s employees
and transportation contractors
in cooperation with the traffic police
at the beginning of the school year;
• monitoring road infrastructure
and maintenance (de-icing agents
(sand and salt mixture) in stock,
timely cleaning and treatment
of road surfaces, placement of traffic
signs, condition of ice and winter
roads, readiness of utility vehicles);
• auditing vehicle operation safety
in active parts of the Company’s
licence areas;
• running the following training
courses for drivers (machine or
tractor operators):
– What to Do If Your Vehicle or
Machine Has Been Exposed
to Electric Current,
– How to Escape from Your Vehicle
If It Has Started to Plunge into Icy
Water,
– How to Do an Emergency Stop
at Night,
– What to Do If Your Gasoline Truck’s
Tank Is on Fire;
• making on-site visits in cooperation
with the traffic police and private
security companies (involved mobile
drug testing).
26
27
1 Excluding well pad assets and divested assets as at 1 January 2022
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Environmental responsibility
IMPROVEMENT
OF THE EFFICIENCY OF OIL
SPILL MANAGEMENT
Rosneft seeks to improve and systematise
response procedures related to oil spills
and other incidents. In 2021, these efforts
yielded a concept of how to strengthen
our oil spill response and emergency
rescue operations by 2030. It provides
for the following:
• a tiered response taking into account
the location of the Company’s
facilities;
• revision/development of oil spill
prevention and response plans;
• a review of the needs for response
teams and equipment;
• creation, equipment, and training
of local rescue teams.
DRILLING WASTE AND OILY
WASTE HANDLING
In 2021, the Company processed around
4.5 mmt of drilling waste, which enabled
it to reduce the previously accumulated
waste by 23%. In addition, over 1.1 mmt
of oily waste was processed in 2021.
Rosneft works continuously to improve
its waste management practices
and thus maintain the high rates of waste
management it has already achieved.
LAND REMEDIATION
The Company continued to implement
measures for land protection
and rehabilitation, including through
establishment and development
of ecological services (remediation units)
at the key Group Subsidiaries. Over 470
hectares of oil-contaminated land
were remediated in 2021 (more than 90%
owing to the efforts of internal ecological
services).
GREEN INVESTMENTS
The Company is implementing
a number of initiatives and investment
projects to improve its environmental
performance, minimise its environmental
footprint, and facilitate biodiversity
conservation. In 2018‒2021, green
investments to reduce the flaring
of associated petroleum gas
(APG), improve pipeline reliability
and wastewater treatment and waste
management practices, and remediate
contaminated land exceeded
RUB 200 bln.
NON-GREENHOUSE GAS
EMISSIONS
In 2021, the Company reduced
gross pollutant emissions by 12%,
with some of this reduction resulting
from the continued implementation
of the Gas Investment Programme.
WATER PROTECTION
One of the Company’s strategic priorities
is to minimise the demand for fresh water
in alignment with the United Nations
Sustainable Development Goals. This
is achieved through the implementation
of infrastructure modernisation
projects and the use of the best
available technologies. In 2021,
the Company continued to improve
the quality of wastewater discharges
through construction and renovation
of treatment facilities. This was helped
by the renovated facilities reaching their
design capacity and existing ones being
maintained to show the same efficiency
as before.
28
BIODIVERSITY
CONSERVATION
The Company pays special attention
to activities aimed at biodiversity
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 deeper
cooperation on biodiversity
conservation. The goal of the project
is to assess the current natural state
and population dynamics of key species
in the marine and terrestrial ecosystems
of the Arctic. These species are indicated
in the Agreement and include
wild reindeer, ivory gull, Atlantic
walrus, and polar bear – all (except
for the reindeer) listed in the Red Book
of the Russian Federation.
Following up on the field work to study
such species in 2020, further field
studies were carried out in spring
and summer 2021, focusing on polar bear
and walrus populations on Alexandra
Land, an island in Franz Josef Land,
as well as the Orange Islands and Cape
Zhelaniya, part of the Novaya Zemlya
archipelago. Reconnaissance and aerial
surveys were conducted in wild reindeer
habitats near the Kheta and Khatanga
rivers, with their migration routes
studied in the Taimyrsky Dolgano-
Nenetsky and Evenki districts,
Krasnoyarsk Territory. An office analysis
of the findings and ivory gull biological
specimens offered insights about eight
ivory gull colonies in the Kara Sea.
The actual cost of activities performed
under the Agreement in 2021 was more
than RUB 116 mln
Carbon management – risk and opportunity management
The Company takes into account the
importance and impact of carbon
management risks (including risks
associated with climate change) on
its operations. Our commitment to
sustainability principles was further
highlighted in the new Rosneft-2030
Strategy, which provides for a reduction
of the Company’s carbon footprint while
boosting its operational and financial
efficiency.
Rosneft plans to achieve carbon
neutrality by 2050 through a number of
strategic initiatives to reduce emissions.
These initiatives imply:
• a more than 25% reduction in Scope 1
and 2 emissions by 2035 as compared
to 2020;
• achievement of zero routine APG
flaring in line with the World Bank’s
Zero Routine Flaring by 2030
initiative;
• a reduction of methane intensity to
below 0.2%;
• a gradual transition of the Company’s
vehicles to low-carbon fuels;
These initiatives will contribute to
the goals set by Russia’s Long-Term
Development Strategy with Low
Greenhouse Gas Emissions to 2050 and
will help Russia fulfil its obligations under
the Paris Climate Agreement and UN
Sustainable Development Goals.
29
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Corporate governance
CORPORATE GOVERNANCE
Key corporate governance principles and improvements
in 2021
Rosneft’s leading market position, both domestically and globally, and its commitment to creating a long-
term sustainable value make it of the utmost importance that our corporate governance framework
ensures efficient communication and cooperation between the shareholders, Board members, top
managers, employees, business partners, and local communities across the Company's footprint.
Our corporate governance framework seeks to drive the long-term sustainable growth of the Company's
shareholder value.
Rosneft’s corporate governance framework relies on the Corporate Governance Code developed in line
with internationally recognised standards.
Adhering to high corporate governance standards is a strategic
priority that powers the long-term sustainable growth
of Rosneft’s shareholder value.
Corporate Governance
Code
GUIDING PRINCIPLES FOR THE COMPANY’S GOVERNING BODIES
Commitment to shareholders
Rosneft has adopted the world’s best corporate governance practices, 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 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 (references to Appendix 2 and the Corporate
Governance Code).
A substantial share of the Company’s net income is distributed as dividends. In 2021, our
shareholders received RUB 264.6 bln. We continue enhancing Shareholder’s Personal
Account, a powerful tool for shareholders to stay in contact with the Company
Innovation and global leadership
In the pursuit of continuous improvement and global leadership, we are developing
and investing in cutting-edge technologies
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ROSNEFT ANNUAL REPORT 2021 Favourable environment for sustainable
growth
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, having adopted an integrated
framework to respond to epidemic threats. Amid the pandemic, we supplied all production
sites and offices with personal protective equipment and arranged for the regular testing
of our employees and contractors for COVID-19.
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.
Corporate governance plans for 2022
• Enhancing the Shareholder’s Personal
Account as part of digitalising
communications with shareholders.
• External assessment of the Board
of Directors’ efficiency.
• Review of the corporate governance
framework for compliance
with the Rosneft-2030: Reliable
Energy and Global Energy Transition
strategy as regards the climate agenda
and reliable supplies of affordable
and clean energy.
Partnership with non-governmental
organisations and cooperation with state
institutions
Protection of shareholders and key
stakeholders
The Company is a party to the UN Global Compact.
For several years running, Rosneft has been one of Russia's largest taxpayers.
The Company implements best internal control and risk management practices, develops
technologies for industrial safety and information security, and ensures product safety,
protecting its customers and contractors.
Rosneft maintains compliance with the Bank of Russia’s
Corporate Governance Code at a high level. For evaluation
of compliance with the Bank of Russia’s Code, see Appendix 3
to this Annual Report.
The internal documents regulating corporate governance
are available on the Company’s official website.
The Corporate
Documents section
of the Company’s
website
Key Achievements in 2021
The Board of Directors approved
the Rosneft-2030: Reliable Energy
and Global Energy Transition strategy.
RA GmbH (RAEX-Europe), with its
performance in corporate governance
earning an especially high score.
Rosneft was ranked first in the oil and gas
industry and among Top 5 Russian
companies by the independent European
rating agency Rating-Agentur Expert
The Board of Directors conducted its
self-assessment and reviewed the results.
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ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance 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.
BOARD OF DIRECTORS
The Board of Directors performs the two
key functions:
• strategic management of the joint-
stock company, which includes
approving strategic documents
and material transactions;
• oversight of the executive bodies.
EXECUTIVE BODIES
• The law requires companies to have
a sole executive 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
executive body (Management Board)
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.
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General Shareholders Meeting
Rosneft’s supreme governing body responsible for decision-making
on key matters of the Company’s business.
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.
Set-up
Committees of the Board of Directors
Audit Committee
Reviews and then issues
recommendations for overseeing
the Company’s business;
preparing complete and accurate
accounting (financial) statements
and other reports; and ensuring
reliability and effectiveness of risk
management and internal control
systems, compliance, internal audit,
and corporate governance.
HR and Remuneration Committee
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 independence
of independent directors;
and conducting performance
assessments of the Board
of Directors, the executive bodies,
and top managers of the Company.
Strategy and Sustainable
Development Committee
Assists in defining the Company’s
strategic goals and growth targets,
including ESG goals, and issues
strategic and business planning
recommendations.
Reporting
Executive bodies (Chief Executive Officer and Management Board)
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
Sole executive body
Management Board
Collective executive body
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Coordinating and consultative bodies
Coordinating and consultative
bodies of the Chief Executive
Officer carry out in-depth reviews
of matters that are reserved
to them.
These bodies include:
• Technological Council;
• Investment Committee;
• Budget Committee;
• Compliance Committee;
• Metrology Board;
• Carbon Management Committee;
• HSE Committee;
• Central Procurement Committee;
• Central Conflict Resolution
Commission;
• Commission on Energy Efficiency;
• Information Technology Expert
Council;
• Expert Council for Quality
and Safety of Oil Products and other
coordinating and consultative bodies
of the Company.
Head of Internal Audit and Corporate Secretary are appointed by the Board
of Directors
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 performance, including that
of the Group Subsidiaries.
Ensures the governing bodies’ compliance
with the applicable laws, the Company Charter
and internal regulations, which guarantee protection
of shareholders’ rights and legitimate interests.
Organises the work of the Board of Directors
and is responsible for efficient communication
between the Company’s shareholders, governing
and supervisory bodies, and management.
Functional subordination
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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.
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ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
ANTI-CORRUPTION EFFORTS
Rosneft works to maintain compliance with the requirements of the anti-corruption laws of the Russian
Federation, including through a set of measures aimed at building an organisational structure and
elements of corporate culture, and establishing rules and procedures to prevent corporate fraud and
corruption.
The effort was also aligned with the
National Anti-Corruption Plan for
2021–2024 approved by Presidential
Executive Order No. 478 dated 16
August 2021.
The new anti-corruption procedures
were developed in accordance with
the applicable international anti-
corruption 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 (the Audit
Committee of the Board of Directors)
approved strategic documents1 and
guiding principles, and regularly
assesses the efficiency of such efforts;
considered and approved2 the results
of a review of the anti-corruption risk
management and internal control
process.
2. Rosneft’s Chief Executive Officer
3. In accordance with the National
ensures the implementation of the
Company’s Policy on Combating
Corporate Fraud and Involvement in
Corruption Activities, and approves the
relevant internal regulations.
In 2021, the Group implemented the
following measures:
• updated the Company’s Regulations
No. P3-11.03 R-0077 version 2.00
on Managing Conflicts of Interest,
approved by the Rosneft’s Board
of Directors (Minutes No. 5 dated
16 August 2021), enacted by Order
No. 488 dated 28 September 2021;
• revised the Company’s Regulations
No. P3-11.03 R-0220 version 1.00 on
Coordinating Anti-Fraud and Anti-
Corruption Processes,approved by
Order No. 49 dated 7 February 2021;
• updated the Company’s Regulations
No. P3–11.03 R-0025 version 4.00
on Reviewing Information Received
Through the Security Hotline,
approved by Order No. 97 dated
3 March 2021;
• developed the Company’s Standard
Requirements “Regulations No.
P3-11.03 TTR-0002 version 1.00 on the
Conflict of Interest Commissions at
the Group Subsidiaries,” approved by
order No. 235 dated 24 May 2021.
Anti-Corruption Plan for 2021–2024
approved by Presidential Executive
Order No. 478 dated 16 August
2021 (Instruction of the Russian
Government No. MM-P17-12165
dated 6 September 2021) we drafted a
Comprehensive Anti-Fraud and Anti-
Corruption Programme for 2021–2024.
In the reporting period, Rosneft:
• updated its employees on typical
violations of anti-fraud and anti-
corruption rules (including
management of conflicts of interest)
on a quarterly basis;
• on an ongoing basis informed the
relevant units about new regulations
and government initiatives aimed at
combating corruption;
• assessed/reassessed the risk of
corporate fraud and corruption on
a quarterly basis in line with the
approved methodology.
• conducted ongoing anti-corruption
audits of draft internal regulations;
• published the quarterly All about
Compliance information bulletin, and
distributed the bulletin devoted to the
International Anti-Corruption Day to
all Rosneft employees on 9 December
2021.
The Company manages conflicts of
interest at all levels.
The rules for the avoidance and
prevention of conflicts 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.
The Regulations set out a framework
to classify conflicts of interest,
including conflicts of interest between
shareholders and members of the
Company’s governing bodies (e.g.
decisions made by corporate governing
bodies that might adversely affect the
Company’s financial and operating
performance; the Company failing
to make a statutory disclosure or
members of corporate governing bodies
underreporting on their positions in
governing bodies of other entities,
on interests (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 interest 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.
Apart from that, the Company collects
annual declarations on property and
property-related obligations of its
officers and employees, as well as on
income, property and property-related
obligations of their spouses and minor
children who are included in the list
of persons required to submit such
declarations; It also carries out an
annual campaign to collect ethical
declarations of the Company’s officers
and employees in order to monitor their
compliance with restrictions, prohibitions
and requirements of anti-corruption
laws. When hiring new employees and
appointing to new positions we sign
an anti-corruption clause, which forms
part of their employment contracts and
includes the restrictions, prohibitions and
requirements aimed at preventing the
conflict of interest.
All Group Subsidiaries have set up
conflict of interest commissions.
The Company runs ongoing corporate
training programmes in the field
of countering corporate fraud and
corruption for its employees, including
those whose job responsibilities include
participation in combating corruption,
and new hires.
We worked to introduce anti-corruption
compliance requirements at joint
ventures with Norway’s Equinor.
The Company operates a 24/7 Security
Hotline to report on suspected, proven
and potential cases of corporate fraud,
corruption and conflict of interest.
In 2021, the Security Hotline received
23,851 reports.
Identified/prevented damage amounted
to RUB 75.3 mln. The Company
terminated 49 employment contracts,
took disciplinary action against
134 employees, 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.
The Corruption Control section on the
official corporate website has:
• 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.
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). In 2021, the Policy was updated (Minutes No. 21 dated 5 April 2021).
2 The results for 2020 were reviewed and approved by Rosneft’s Board of Directors (Minutes No. 21 dated 5 April 2021).
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ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance AUDIT COMMISSION
MEMBERS OF THE AUDIT COMMISSION
The Audit Commission monitors
the Company's financial and business
activities and comprises five members
elected on an annual basis by the Annual
General Shareholders Meeting.
The Audit Commission 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, and prepares proposals
and recommendations for improving
the asset management efficiency
and RM&ICS.
In 2021, 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
following the audit were communicated
as part of the materials for the General
Shareholders Meeting in the form
of an opinion of the Audit Commission
on the accuracy and reliability of data
included in Rosneft’s Annual Report
and annual accounting (financial)
statements as at 31 December 2021.
The Audit Commission
is governed
by the Regulations
on Rosneft ’s Audit
Commission.
On 1 June 2021, the Annual General
Shareholders Meeting resolved to elect
the Audit Commission as follows:
CHAIRMAN
Zakhar Sabantsev
Born in 1974.
Graduated from the Moscow State University
of Economics, Statistics, and Informatics.
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.
Olga Andrianova
Born in 1958.
Graduated from the All-Russian State Distance-
Learning Institute of Finance and Economics.
Sergey Poma
Born in 1959.
Graduated from Nakhimov Black Sea Higher
Naval School and St Petersburg State
University.
Pavel Buchnev
Born in 1986.
Graduated from the Russian State University
for the Humanities.
Aleksey Kulagin
Born in 1986.
Graduated from Lomonosov Moscow State
University and Tula State University.
Holder of a ministerial award – Acknowledgement
of the Russian Ministry of Energy.
On 1 June 2021, the Annual General
Shareholders Meeting resolved to pay
the following amounts to the following
members of the Audit Commission pro
rate to the time served:
• Olga Andrianova: RUB 220,000;
• Tatyana Zobkova: RUB 55,452.05;
• Sergey Poma: RUB 220,000;
Holder of a ministerial award – Certificate
of Merit of the Russian Ministry of Energy.
Chief Accountant – Head of Finance
and Economics at JSC ROSNEFTEGAZ.
Vice President of the National Association
of Securities Market Participants (NAUFOR).
Head of the Investment Relations Department
of the Federal Agency for State Property
Management.
Deputy Director of Department – Head
of Economic Analysis Unit, Deputy Director
of the Department for Consolidated State Policy
and Digital Transformation of the Russian Ministry
of Energy.
No compensation was paid to public
officers serving on the Audit Commission.
The total compensation to members
of the Audit Commission for 2021
totalled RUB 495,452.05.
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.
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ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance RISK MANAGEMENT AND INTERNAL
CONTROL SYSTEM
The principles and objectives
of the RM&ICS are set out
in the Company’s Policy on the Risk
Management and Internal Control
System1 developed in accordance
with the Russian regulatory requirements
and drawing on recommendations
of international firms engaged in risk
management, internal control and audit
services. These are intended to provide
reasonable assurance that the Company
will achieve its goals.
Rosneft has established and is continuously improving its Risk Management and Internal Control System
(RM&ICS) aimed at proactive identification and analysis of risks that may impact the Company’s long-
term targets as well as its ongoing financial and business operations.
To develop a well-structured
and integrated risk management
and internal control system, the Company
has put in place a multi-level regulatory
framework for RM&ICS which outlines
key RM&ICS principles at various stages.
Key categories of the Company’s goals
Principle of se p ara � o n
of d u � es a n d p o w ers
Principle of
con�nuity
1. Strategic goals contributing to the
accomplishment of the Company’s mission
Principle of
integra
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Company policy
Policy on the Risk Management
and Internal Control System
Company standards: Standard on the
Corporate-Wide Risk Management System
and Standard on the Internal Control System
Company regulations: Regulations on Market Risk Management,
Regulations on Design, Implementation and Maintenance of the
Internal Control System, and Regulations on Development and
Use of the Company-Wide Register of Standard Risks and Controls
Other internal regulations on risk management and internal control:
Rosneft’s guidelines, including Guidelines for Determining and Applying Risk Appetite and
a Set of Risk Assessment Guidelines
Company-Wide Register of Standard Risks and Controls
Rosneft’s risk management and internal
control guidelines define its approach
to identifying and assessing strategic risks
that may hinder the delivery against long-
term targets, financial and operational
risks that affect the implementation
of the Company’s current business plan,
and business process risks that may
hamper the Company’s ability to achieve
business targets, as well as the approach
to developing risk management
and internal control initiatives.
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2. Operational goals relating to the Company’s financial
and operating performance and asset integrity
3. Goals of maintaining compliance with applicable local regulations, including
HSE requirements and requirements for information and personal security
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4. Goals of preparing reliable financial statements or
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1 Rosneft’s Policy on the Risk Management and Internal Control System No. P4–01 P-01 approved by the Company’s Board of Directors, Minutes No. 8 dated
16 November 2015.
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
RM&ICS stakeholders
Rosneft’s Risk Management and Internal Control System (RM&ICS) has various stakeholders whose
roles are distributed depending on their involvement in developing, introducing and monitoring
the performance of the system. The RM&ICS has three management levels.
Strategic level
Operational level
Board of Directors and Audit
Committee of the Board
of Directors
• Approve RM&ICS focus areas
and follow up on their progress
• Approve corporate reports
on financial and operational risks
• Approve risk appetite
• Monitor the RM&ICS reliability
and performance
Chief Executive Officer
Management
• Validates RM&ICS focus areas
• Validates RM&ICS reports
• Validates risk appetite
Management Board
• Ensures the establishment
and operation of an effective
RM&ICS
Risk Management Committee
• Validates the RM&ICS issues
reported to the Chief Executive
Officer
• Resolves RM&ICS operational
disputes
• Distributes roles and responsibilities
among employees
• Manages risks
• Develops and implements control
procedures
• Conducts self-assessment
of internal controls
Risk and Internal Control
Methodology Department
• Plans RM&ICS focus areas
• Develops, implements and updates
Company-wide RM&ICS guidelines
• Prepares reports on risks
and internal 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
Security Service
• Develops, updates, 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
RM&ICS independent
monitoring and performance
assessment
Internal Audit Service
• Monitor 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
Audit Commission
• 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
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 assessment of internal
controls
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ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Enhancing the risk management and internal control system
Internal Control System (ICS)
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 objectives
of the RM&ICS enhancement,
as well as critical steps to achieve them,
are set out in the RM&ICS Enhancement
Plan.
The RM&ICS Enhancement
Plan for 2021–2023
was endorsed
by the Company’s Risk
Management Committee
and Chief Executive Officer
and approved by Rosneft’s
Board of Directors.
The internal control system (ICS) is an integral part of the RM&ICS
• The both systems have aligned goals.
• The ICS is governed by the Company’s Policy on the Risk Management and Internal Control
System, Standard on the Internal Control System, and Regulations on Design, Implementation
and Maintenance of the Internal Control System.
• 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.
RM&ICS enhancement highlights for 2021
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.
RM&ICS ENHANCEMENT INITIATIVES
RESULTS
Development and improvement
of guidelines on the Risk Management
and Internal Control System
Development and implementation
of an RM&ICS training programme
for the employees of Rosneft and Group
Subsidiaries
Enhancement of the risk assessment
framework leveraging economic
and mathematical models and expert
reviews
Implementing and maintaining the Internal
Control System
• The Policy on Risk Management and Internal Control System was updated
and approved by the Board of Directors.
• Methodological guidelines have been developed and approved to assess corporate
financial and operational risks, including the risk of default / cross-default, litigation
risk, and risk of accumulation of unclaimed liquid and non-liquid inventories.
• Employees and risk and internal control experts of Rosneft and Group Subsidiaries
were trained in the RM&ICS.
• A distance course on the basics of strategic risk management was developed.
• The existing risk management and internal control distance course was updated.
• The Company’s quantitative risk assessment models were verified (back-tested).
• Approaches were proposed to cascade the financial and economic indicators
of the Company’s risk appetite (financial covenants) down to key company-wide risks
associated with the current financial and business operations.
• A self-assessment of the Company’s internal control was carried out, including
the evaluation of control procedures conducted as part of the 2021 plan for testing
their implementation.
• A plan for developing, implementing and maintaining the Internal Control System
was drawn up and approved.
• The corporate-wide risk management system was implemented by 10 Group
Improving the RM&ICS processes across
Group Subsidiaries
Subsidiaries.
• The criteria for including Group Subsidiaries in the RM&ICS framework
were updated.
44
45
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance CORPORATE-WIDE RISK MANAGEMENT SYSTEM (CWRMS)
ROSNEFT’S RISKS1
Key CWRMS components
RIN G
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O
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S
I
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.
6
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.
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E
P
O
R
T
I
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G
. A N N U AL PLANNING
1
2.
R
ONGOING
ENHANCEMENT
OF THE CWRMS
INFRASTRUCTURE
AND PROCESS
INTERFACES
BETWEEN
THE CWRMS
AND OTHER
PROCESSES
REGULATIONS
AND POLICIES
DISTRIBUTION
OF ROLES WITHIN
THE CWRMS
I
S
K
I
D
E
N
T
I
F
I
C
A
T
I
O
N
T
N
E
M
S
3. RISK ASSES
4. RESPONDING TO R I S K S
Risk management process
A combination of risk management
elements supported by the existing
organisational structure, internal
policies and regulations, risk
management 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 provide
a Company-wide basis, tools,
and framework for risk management
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 embedded
into various business processes
of the Company (including strategic
and business planning processes)
and implemented at all management
levels by all employees of the Company.
As part of CWRMS management
at various organisational levels,
including the Group Subsidiaries
and the Company, we regularly identify
and assess risks and develop response
measures covering, among others, risks
that affect the Company’s long-term
goals (strategic risks) along with financial
and operational risks. Risk reports
including all the information on risks,
their assessment and description
of mitigants are submitted to the Board
of Directors, its Audit Committee,
Company's top management
and employees.
Heads of the Company’s business 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 optimal trade-off while maintaining
an acceptable risk level (risk appetite).
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. P 4–01 P-01 put into effect
by order No. 660 dated 22 October 2018.
Industry-wide risks
Risk of occupational injuries
Risk of lower quality of refinery feedstock
Risk of failure to comply with the repair plan in Oil Refining and Petrochemicals
Risk of failure to achieve natural gas and gas condensate production targets
Risk of accumulation of unclaimed liquid and non-liquid inventories
Risk of accidents
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 penalties for the quality of gas fed into transportation systems
Market risks
Financial risks
Credit risk related to crude oil, petroleum products, natural gas, petrochemicals and gas processing
products supply contracts
Risk of tax claims and risk of losing tax benefits
Counterparty risk related to long-term advance payment crude oil and petroleum products supply contracts
Risk of default/cross-default
Counterparty risks related to changes in advance payment schedules under long-term crude oil
and petroleum products supply contracts
Legal and country risks
Risk of breach of competition laws
Litigation risk
46
1 For Rosneft’s key risks in 2022, see Appendix 2 to this Annual Report.
47
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
External constraints
Since 2014, the USA, EU
and some other countries have been
imposing 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 continuously
monitors existing constraints
to minimise their adverse effects,
and consistently implements its
Import Substitution and Equipment
Localisation Programme in Russia.
Changes in legislation and regulatory environment
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.
ESG RISKS
Rosneft is fully aware of the importance
and impact of sustainability risks,
including ESG, on the Company’s
business. Our commitment
to sustainable business principles
was further highlighted in the new
Rosneft–2030 strategy. It seeks
to reduce the Company’s carbon
footprint and boost its operational
and financial efficiency. The Strategy
will help solidify Rosneft’s position
in the global hydrocarbon market
as a reliable producer and supplier
of energy, minimising its environmental
and climate impact. Rosneft aims
to achieve net carbon neutrality by 2050
with respect to Scope 1 and 2 emissions.
To accomplish this goal, the Company
plans to reduce emissions, leverage low-
carbon generation, develop energy-
saving, carbon capture and storage
technologies, and promote natural
absorption.
We analyse sustainability risks as part
of the effort to identify and assess risks
that can affect the Company’s long-
term goals (strategic risks and threats).
The annual process to identify
and assess (prioritise) strategic risks
and threats takes into account Russian
and international research on the oil
and gas industry development,
and is based on the Company’s strategic
targets as set out in its development
strategy. Following this analysis, we
determine a list of strategic threats that
can potentially impact the Company’s
ability to achieve its strategic goals. This
list includes threats related to various
aspects of sustainable development,
including the following strategic threats.
COVID-19 pandemic
In 2020 and 2021, the COVID-19
pandemic affected Rosneft’s
operations and key markets.
The Company’s management factors
in the epidemiological situation when
assessing the impact of financial,
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.
Environmental
Changes in the structure/
volume of energy consumption
Energy saving and efficiency
Fast advance of alternative energy
RISK APPETITE OF THE COMPANY
In 2021, Rosneft’s Board of Directors approved the Company’s risk appetite for 2022:
Financial and economic
performance
The Company strictly complies with its
financial covenants.
The Company ensures that all its
short- and long-term commitments
are fulfilled as they fall due.
Health, safety, 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 responsible for safe and accident-
free operation 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 environment, the Company
makes every effort to protect, preserve
and restore natural resources.
Climate change in the regions where
the Company operates
Business restrictions stemming from
climate initiatives
Changes in corporate governance
standards and regulations
Carbon regulation
Corporate Governance
Tighter regulation and requirements
in the industry
Deterioration of the tax regime
Employee safety, HR and social policy
Accidents and environmental damage
Natural disasters
Armed conflicts, terrorism, civil
disturbance
Cyber security
HR and social risks
Epidemics and diseases
Safety of critical facilities
Rosneft's management evaluates
the impact of strategic threats
(including those related to sustainable
development) on the Company’s
strategic targets using expert
analysis and statistical approaches.
The assessment horizon and the metrics
used depend on the way specific
targets are set out in the Strategy.
The results are then consolidated using
the probability theory and mathematical
statistics methods to identify the key
strategic threats, assess strategic risks
and develop measures to mitigate them.
Based on the 2021 strategic risks
and strategic threats assessment,
the Company's management
specified the following strategic
sustainability threats: tighter regulation
and requirements in the industry,
accidents and environmental damage.
48
49
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Internal audit
In 2021, Rosneft’s Internal Audit Service
was governed by the Company’s Policy
on Internal Audit, Code of Ethics
of the International Institute of Internal
Auditors and international professional
standards of internal audit.
The Internal Audit Service assists
Rosneft’s Board of Directors and its
executive bodies in enhancing
the Company’s management efficiency
and improving its financial and business
performance, including through
a systematic and consistent approach
to the analysis and evaluation of the Risk
Management and Internal Control
System (RM&ICS) as well as corporate
governance, therefore providing
reasonable assurance that the Company
will achieve its goals. It also helps ensure:
• accuracy, reliability, and integrity
of information on the Company’s
financial and business operations,
including those of Group Subsidiaries;
• efficiency and effectiveness
of the Company’s operations,
including those of Group Subsidiaries;
• room for improvement available across
the Company’s financial and business
operations, including those of Group
Subsidiaries;
• integrity of the Company’s assets,
including those of Group Subsidiaries.
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.
Rosneft’s Internal Audit Service is mainly responsible for:
• developing an internal audit
plan based on the risk-oriented
approach;
• assessing the RM&ICS reliability
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;
• analysing audit targets to look
into, and evaluate specific
aspects of their activity;
• 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
• assisting the Company’s
executive bodies in investigating
abusive or 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;
progress in addressing breaches
and shortcomings identified
during internal audits;
• performing other functions
essential to meet the tasks
assigned.
Reporting and Accountability Lines of Internal Audit
issues, as well as response procedures
to situations which may influence
the independence and impartiality
of internal audit.
The Head of Internal Audit provides
Rosneft’s Chief Executive Officer, Board
of Directors (its Audit Committee)
with confirmation of the organisational
independence of the Internal Audit
Service and individual impartiality
of internal auditors at least once a year,
as part of the internal audit performance
report.
Functionally, the Internal Audit Service
reports to Rosneft’s Board of Directors.
This implies:
• approving Policy-level internal
regulations on internal audit
(specifically, the Policy on Internal
Audit that sets out its goals,
objectives, and roles);
• deciding on the appointment
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 restrictions
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 performance
reports;
• facilitating the cooperation
with Rosneft’s and Group Subsidiaries’
business units;
• administering internal audit policies
and procedures.
The existing reporting lines
whereby the Head of Internal Audit
reports to the Board of Directors
and the Company’s executive bodies
provide sufficient independence
for performing internal audit functions.
Heads of the Internal Audit functional
units do not participate in managing
functional areas of the Company’s
business requiring management decisions
on audited entities.
In 2021, the Head of Internal Audit
additionally acted as a member
of the Board of Directors at Bashneft
(from 2 December 2021). For that reason,
the Company provided for ongoing
monitoring of potential conflicts
of interest. To ensure independence
and impartiality of internal audit,
the Head of Internal Audit did not
vote on matters requiring management
decisions on audited entities
and affecting the impartiality of internal
audit.
The internal auditors provide written
confirmation of their personal
impartiality to the heads of the Internal
Audit functional units and to the Head
of Internal Audit at least once a year,
thereby raising awareness among
the Internal Audit employees about
potential conflicts of interest and related
50
51
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance External assessment of the Internal Audit Service
In September 2021, our Internal
Audit Service underwent assessment
by a qualified independent auditor –
KPMG. The Internal Audit Service
of Rosneft is generally in line
with the International Standards
for the Professional Practice of Internal
Audit and the Code of Ethics
of the International Institute of Internal
Auditors.
KPMG experts benchmarked Rosneft's
internal audit practice against global
natural resources peers to conclude that
the Company’s Internal Audit Service
conforms to the best international
practices.
Internal Audit Performance in 2021
The Internal Audit Service completed all
planned activities in line with its internal
audit plan for 2021.
The internal audit reports for the first
six months and the full year of 2021
were reviewed by the Chief Executive
Officer, the Board’s Audit Committee
and the Board of Directors of Rosneft.
Key focus areas in 2021%
Core processes, including:
Exploration and production
Capital construction
Commerce and logistics
Oil refining and petrochemicals
Regional sales
Gas business
35
22
19
15
5
4
50%
The internal audit plan is based
on an audit model and uses information
and requests received from Rosneft’s
executive bodies and Board of Directors,
as well as its risk evaluation results.
It includes audits and other activities
and is subject to approval by Rosneft’s
Chief Executive Officer and endorsement
by the Board’s Audit Committee.
Details of the plan are presented
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 procures to prepare and submit this
report to Rosneft’s Board of Directors
and its executive bodies (including
information about material risks, breaches
and shortcomings, follow-up monitoring
of their elimination, performance against
the internal auditors’ proposals following
the check of progress in remedial
actions, delivery of the internal audit
plan, and assessment of reliability
and performance of the Company’s
RM&ICS and corporate governance).
The Internal Audit Service prepares
and annually updates a three-year plan
comprising information on:
• processes at the top level
and at Group Subsidiaries;
• assessment of risks related to top-
level processes;
• planned checks and internal audits
of top-level processes over the three-
year period.
The plan covers the highest-risk
processes and major Group Subsidiaries.
In 2021, Rosneft’s Internal Audit Service
continued to implement projects aimed
at improving and examining the control
environment at the Company. These
are based on the Company’s strategic
goals, business process assessments,
and internal audits. The key initiatives
focus on:
• accounting of oil and petroleum
products inventory and well costs;
• monitoring the efficiency of geological
solutions, field development,
as well as drilling and well workover
processes;
• improving HSE processes
and management systems;
• preventive procurement control
at Rosneft and Group Subsidiaries.
The assessment results were reviewed
by the Board’s Audit Committee
and the Board of Directors of Rosneft.
In the reporting period, all employees
of the Internal Audit Service underwent
training in their core business
areas, including internal audit, IT,
countering corruption and fraud, risk
management and internal control,
and more. Some Internal Audit Service
employees successfully completed
professional retraining programme
on internal audit and control at Gubkin
Supporting processes:
Corporate services
and Corporate government
Procurement
Energy, localisation,
and innovations
Health, safety
and environment
Social development
Economics and finance
IT and information security
28
17
14
12
11
9
9
50%
Following the 2021 assessment of the risk management
and internal control system, the Internal Audit Service concluded
that the RM&ICS ensured overall support of the risk management
process and efficient internal control system, providing
reasonable assurance that the Company would achieve its goals.
In 2021, we held two Internal Audit
Service staff meetings involving
Rosneft businesses and functional
units. The Internal Audit Service
ensures effective communication
with the Board’s Audit Committee,
Rosneft’s Chief Executive Officer
(including through personal reports
on material audit results), Rosneft’s
management, the Audit Commission,
external auditor and the management
of the Group Subsidiaries.
Russian State University of Oil
and Gas. The programme is sponsored
by Rosneft’s Internal Audit Service.
The Company supported the master’s
curriculum in Internal Audit and Control
run by the Financial Management
Department at Gubkin Russian State
University of Oil and Gas to train internal
audit specialists for the oil and gas
industry.
In the reporting year, we organised
and held meetings to share experience
with internal audit professionals
from foreign and Russian oil and gas
companies.
52
53
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance
SHAREHOLDER RELATIONS,
KEY EVENTS IN 2021
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
Meeting on a one-share-one-vote
basis;
• propose items for the agenda
of the General Shareholders Meeting
and nominate candidates to the Board
of Directors (if a shareholder owns
at least 2% of voting shares);
• exercise pre-emptive right to buy
• obtain information on the Company’s
shares in any future issue and issue-
grade securities convertible
into shares;
• receive dividends declared
by the Company, in proportion
to the number of shares held;
• review information and materials
provided in preparation
for the General Shareholders Meeting;
operations upon request
and as established by the Russian laws;
• freely dispose of Rosneft’s shares;
• exercise other rights granted under
the Russian law.
Additional rights guaranteed by the Company’s Charter
and internal regulations
The Company offers equal and fair
opportunities for its shareholders
to exercise their legal rights by securing
additional rights and procedures
in the Charter and internal regulations,
including the right to:
• receive part of the Company’s profit
• receive necessary information
on the Company on a timely
and regular basis;
• participate in managing the Company’s
as dividend;
operations.
Independent and professional Board of Directors
The composition of the Board
of Directors and the number of Board
members reflect the Company’s
shareholding structure. 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 business standing.
Official channels of communication with shareholders
The Company has established efficient
means of communicating with its
shareholders.
• Shareholder account on the Company’s
• e-mail for requests:
website;
• 24 hour shareholder Hotline
shareholders@rosneft.ru;
• fax: +7,499,517 8653.
The Company has several
communication channels in place
to facilitate the exercise of corporate
rights and promote efficient shareholder
relations, including:
(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;
Shareholder’s Personal Account
Shareholder’s Personal Account put into operation
in 2019 enables Rosneft’s shareholders, regardless
of where their shares are kept, to take part
in the General Shareholders Meeting online:
register, vote on the agenda items, review
information for the meeting, and ask their
questions to the speakers.
All Rosneft shareholders of record also can:
• receive updates on their accounts in the register
of shareholders online;
• use the registrar’s services remotely (request
and receive certificates, extracts, and notices)
and pay for them online;
• monitor accrued dividends;
• request and receive 2-NDFL earnings certificates
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
To gain access to their Shareholder’s
Personal Account, shareholders need
to request login and password from
the Moscow Head Office or regional
branches of the Company’s registrar,
LLC Reestr-RN.
The rules governing the procedure
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:
• LLC Reestr-RN call centre by phone:
+7,495,411 7911 (email: support@
reestrrn.ru);
• Hotline for Rosneft shareholders
at: 8,800,500 1100 (toll-free
within Russia) and +7,495,987 3060
(email: shareholders@rosneft.ru).
In 2021, the Corporate Governance Department
handled 5,483 applications, including:
• 4,212 phone calls;
• 640 letters;
• 183 emails;
• 448 requests claiming unpaid dividends for prior
periods.
Answers to frequently asked questions can
be found on the Company’s website.
54
55
ROSNEFT ANNUAL REPORT 2021About the CompanyCorporate governance Protecting shareholders’ title to shares
The Company practices reliable and safe methods of recording title to its shares and has engaged
a professional registrar to maintain its Shareholder Register.
The registrar is LLC Reestr-RN acting
under a perpetual licence to register
security holders.
LLC Reestr-RN has been operating
in the registrar services market
for over 20 years and ranks among
the top ten Russian registrars.
The company keeps registers
for more than 1.6 thousand issuers,
with an inventory of 530.7 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 majority of Company
shareholders reside and include
the Head Office, 13 branches, 44 transfer
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
APPENDIX 1
(Consolidated financial statements
Rosneft Oil Company for the year
ended December 31, 2021)
56
ROSNEFT ANNUAL REPORT 2021 NOTES
AS OF DECEMBER 31,
2021
2020 (RESTATED)1
CONSOLIDATED FINANCIAL
STATEMENTS ROSNEFT OIL COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2021
Consolidated balance sheet (in billions of Russian rubles)
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities
Loans and borrowings and other financial liabilities
Income tax liabilities
Other tax liabilities
Provisions
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Other short-term financial assets
Accounts receivable
Bank loans granted
Inventories
Value added tax, excise and other taxes receivable
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
NOTES
18
18
19
20
21
22
23
24
25
26
27
28
15
26
29
AS OF DECEMBER 31,
Prepayment on long-term oil and petroleum products supply
2021
659
14
921
698
188
498
354
203
3,535
10,585
143
86
332
877
524
39
82
254
12,922
16,457
2020 (RESTATED)1
agreements
Other current liabilities
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
Additional paid-in capital
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
806
17
817
468
131
360
176
146
2,921
10,405
155
80
275
846
363
54
82
172
12,432
15,353
30
31
32
33
34
31
15
33
34
35
37
37
37
16
1,634
904
16
635
56
431
7
3,683
3,801
1,048
342
953
141
6,285
1
(370)
1,291
(55)
27
4,638
5,532
957
6,489
16,457
1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2020 acquisitions (Note 7).
58
Chief Executive Officer
I.I. Sechin February 11, 2022
1,563
798
14
301
68
357
8
3,109
3,810
1,073
437
1,401
51
6,772
1
(370)
1,100
(66)
34
3,992
4,691
781
5,472
15,353
59
Appendix 1ROSNEFT / ANNUAL REPORT 2021 Consolidated statement of profit or loss
(in billions of Russian rubles, except earnings per share data, and share amounts)
Consolidated statement of comprehensive income
(in billions of Russian rubles)
NOTES
FOR THE YEARS ENDED DECEMBER 31,
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
8
28
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
24–26
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 (expense)/benefit
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
2021
8,561
112
88
8,761
654
1,572
149
640
8
668
3,103
463
7,257
1,504
129
(229)
34
(188)
2
–
1,252
(240)
1,012
883
129
92.95
9,500
2020 (RESTATED)1
5,628
77
52
5,757
767
691
127
661
15
663
2,121
334
5,379
378
95
(220)
518
(463)
(163)
2
147
19
166
132
34
13.37
9,876
Net income
NOTES
FOR THE YEARS ENDED DECEMBER 31,
2021
1,012
OTHER COMPREHENSIVE INCOME/(LOSS) – TO BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS
Foreign exchange differences on translation of foreign operations
Foreign exchange cash flow hedges
(Loss)/income from changes in fair value of debt financial assets
at fair value through other comprehensive income
(Decrease)/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 loss –
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
6
6
11
–
(5)
(6)
–
2
2
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
2
–
2
1,016
887
129
2020 (RESTATED)1
166
119
(2)
3
1
(1)
–
120
3
(1)
2
288
254
34
Consolidated statement of changes in equity
(in billions of Russian rubles, except share amounts)
NUMBER
OF SHARES
(MILLIONS)
SHARE
СAPITAL
TREASURY
SHARES
ADDITIONAL
PAID-
IN CAPITAL
RESERVE
FOR FOREIGN
EXCHANGE
DIFFERENCES
ON TRANSLA-
TION
OF FOREIGN
OPERATIONS
OTHER FUNDS
AND RESERVES2
RETAINED
EARNINGS
ROSNEFT
SHARE-
HOLD-
ERS’
EQUITY
NON-CON-
TROLLING
INTERESTS
TOTAL
EQUITY
Balance
at January 1,
2020
Net income
10,598
–
1
–
–
–
635
–
(185)
–
31
–
4,032
132
4,514
132
635
34
5,149
166
1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2020 acquisitions (Note 7).
60
1 Certain amounts have been restated to reflect the effects of finalized purchase price allocation of 2020 acquisitions (Note 7).
61
Appendix 1ROSNEFT / ANNUAL REPORT 2021 NUMBER
OF SHARES
(MILLIONS)
SHARE
СAPITAL
TREASURY
SHARES
ADDITIONAL
PAID-
IN CAPITAL
RESERVE
FOR FOREIGN
EXCHANGE
DIFFERENCES
ON TRANSLA-
TION
OF FOREIGN
OPERATIONS
OTHER FUNDS
AND RESERVES2
RETAINED
EARNINGS
ROSNEFT
SHARE-
HOLD-
ERS’
EQUITY
NON-CON-
TROLLING
INTERESTS
TOTAL
EQUITY
Consolidated statement of cash flows
(in billions of Russian rubles)
NOTES
FOR THE YEARS ENDED DECEMBER 31,
Other
comprehensive
income
Total
comprehensive
income
(restated)
Dividends
declared
(Note 37)
Acquisition
of treasury
shares (Note
37)
Change
of interest
in subsidiaries
(Note 16)
Disposal
of subsidiaries
Other
movements
(Note 16)
Balance
at December
31, 2020
(restated)
Net income
Other
comprehensive
income/(loss)
Total
comprehensive
income/(loss)
Dividends
declared
(Note 37)
Change
of interest
in subsidiaries
(Note 16)
Disposal
of subsidiaries
Other
movements
(Note 16)
Balance
at December
31, 2021
–
–
–
(1,098)
–
–
–
9,500
–
–
–
–
–
–
–
9,500
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
1
–
–
–
(370)
–
–
–
–
–
–
–
469
–
(4)
119
119
–
–
–
–
–
(370)
1,100
(66)
–
–
–
–
–
–
–
–
–
–
–
207
–
(16)
–
11
11
–
–
–
–
–
122
–
122
OPERATING ACTIVITIES
Net income/(loss)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation, depletion and amortization
24–26
132
254
34
288
Loss on disposal of non-current assets
Dry hole costs
(172)
(172)
(63)
(235)
Offset of prepayments received on oil and petroleum
(370)
–
(370)
products long term supply agreements
Offset of prepayments made on oil and petroleum products
long term supply agreements including interests
Foreign exchange (loss)/gain
Realized foreign exchange differences on hedge instruments
469
174
643
Offset of other financial liabilities
3
3
–
–
–
–
–
34
–
(7)
–
–
–
–
–
(4)
1
–
1
(4)
3,992
883
4,691
883
781
129
5,472
1,012
–
4
–
4
Equity share in profits of associates and joint ventures
Non-cash loss/(income) from acquisitions and sales, net
Changes in provisions for financial assets
Loss from changes in reserves and impairment of assets
Finance expenses
Finance income
Income tax expense/(income)
CHANGES IN OPERATING ASSETS AND LIABILITIES
(Increase)/decrease in accounts receivable, gross
(Increase)/decrease in inventories
Decrease/(increase) in restricted cash
13
34
6
28
12
11
15
(7)
883
887
129
1,016
(Increase)/decrease in prepayments and other current assets
–
–
–
–
(237)
(237)
(66)
(303)
–
–
–
207
91
298
–
(16)
1
21
1
5
Increase in long-term prepayments made on oil
and petroleum products supply agreements including
current portion
Increase/(decrease) in accounts payable and accrued
liabilities
Increase/(decrease) in other tax liabilities
Increase/(decrease) in other current reserves
Decrease in other current liabilities
2021
1,012
668
19
4
(374)
12
(27)
–
(143)
(88)
1
2
110
229
(129)
240
(180)
(146)
3
(150)
(182)
81
345
3
(1)
(370)
1,291
(55)
27
4,638
5,532
957
6,489
2 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.
62
2020 (RESTATED)
166
663
15
8
(300)
9
252
(2)
(160)
(52)
(512)
(14)
388
220
(95)
(19)
46
48
(7)
58
(12)
(58)
(78)
(3)
(3)
63
Appendix 1ROSNEFT / ANNUAL REPORT 2021 NOTES
FOR THE YEARS ENDED DECEMBER 31,
Decrease in other non-current liabilities
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
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
Proceeds from sale of interest in subsidiaries, net of disposal
cash
Proceeds from sale of joint operations
Proceeds from capital repayment by associates
Acquisition of interest in subsidiaries, net of cash acquired,
and joint arrangements
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
7
7
2021
(3)
–
(4)
(224)
182
1,260
(238)
103
41
1,166
(1,049)
(24)
(482)
382
17
(100)
(3)
4
38
15
(111)
15
(1,298)
2020 (RESTATED)
–
1,004
(14)
(34)
227
1,741
(126)
98
32
1,745
(785)
(4)
(378)
100
13
(51)
(4)
31
–
–
(633)
17
(1,694)
NOTES
FOR THE YEARS ENDED DECEMBER 31,
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
Distributions to non-contorting shareholders of subsidiaries
Interest paid
Other financing received
Repurchase of bonds
Proceeds from sale of non-controlling share in subsidiaries
Dividends paid to non-controlling shareholders
Dividends paid to shareholders
Net cash (used in)/provided by financing activities
Net (decrease)/increase 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
16
37
18
18
2021
93
(159)
672
(534)
177
(32)
(4)
(262)
9
–
299
(41)
(237)
(19)
(151)
806
4
659
2020 (RESTATED)
623
(797)
1,218
(588)
54
(107)
–
(256)
3
(29)
644
(63)
(172)
530
581
228
(3)
806
64
65
Appendix 1ROSNEFT / ANNUAL REPORT 2021 APPENDIX 2
(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 __ _________ 2022 (Minutes No. __ dated
__ April 2022) as part of the 2021 Annual
Report.
The Board of Directors certifies that this
Report contains complete and reliable
information on Rosneft’s compliance
with the principles and recommendations
of the Corporate Governance Code
in 2021.
Rosneft assesses its compliance
with the Corporate Governance Code
as per the guidelines recommended
by the Bank of Russia in Letter
No. IN-06–28/102 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 27 December 2021. Key aspects
of the Company’s corporate governance
model and practice are outlined
in Section __________________________________
of Rosneft’s 2021 Annual Report.
NO.
1.1.
1.1.1
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS¹
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS² ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
THE COMPANY SHALL ENSURE EQUITABLE AND FAIR TREATMENT OF ALL SHAREHOLDERS EXERCISING THEIR RIGHT TO PARTICIPATE
IN MANAGING THE COMPANY.
The Company provides
the best possible
conditions for shareholders
to participate in General
Shareholders Meetings,
make informed decisions
on agenda items, coordinate
their actions and express
their opinions on matters
under consideration
1. The Company provides an easily
accessible communication channel,
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
communication channels and made them
available to shareholders before every
General Shareholders Meeting held
in the reporting period
Complied with
Complied
with in part
Not complied with
To maintain effective relations
with shareholders, Rosneft provides
the following communication channels:
a shareholder hotline, mail and email, fax.
The Company does not consider setting
up a dedicated online forum, as it has
other communication channels in place,
as well as provides for the opportunity
to discuss agenda items at General
Shareholders Meetings and, if relevant,
using Rosneft’s social networks, which
are mentioned on Rosneft’s official website
66
1 The “complied with” status is assigned only if the Company’s corporate practice meets all the criteria for compliance with a corporate governance principle
set out in the third column of the form to be used for reporting on compliance with the Code’s principles. If the Company’s corporate practice meets only
some of the compliance criteria or none of them, the “complied with in part” or “not complied with” status is assigned in the fourth column of the form to be used
for reporting on compliance with the Code’s principles.
2 Explanations are given for each criterion for compliance with a corporate governance principle (assessment criterion) if the Company meets only some of the criteria or
none of them.
67
Appendix 2 EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
NO.
1.1.6
CORPORATE GOVERNANCE
PRINCIPLES
The procedure for holding
a General Shareholders
Meeting established
by the Company provides
all persons present
at the Meeting with equal
opportunities to express
their opinions and ask
questions
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
Explanation on items 1–3: no General
Shareholders Meetings were held
in the form of a meeting (joint presence
of shareholders) during the reporting
period due to the restrictions induced
by the COVID-19 pandemic (for example,
see Orders of the Mayor of Moscow
No. 12-UM dated 5 March 2020 and No.
68-UM dated 8 June 2020) and in line
with Federal Law No. 17-FZ On Amending
the Federal Law On International
Companies and International Foundations
and Suspending Certain Provisions
of the Federal Law On Joint-Stock
Companies and the Federal Law On Limited
Liability Companies dated 24 February 2021.
Explanation on item 4: the Company
has the Corporate Governance
analytical information system in place.
It enables shareholders to vote online
and interact with Rosneft and the registrar
via Shareholder’s Personal Account
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
1. In the reporting period, sufficient
time for reporting on and discussing
agenda items was provided at General
Shareholders Meetings held
in the form of a meeting (joint presence
of shareholders), with shareholders
having an opportunity to express their
opinions and ask questions on agenda
items.
2. The Company extended invitations
to the candidates nominated
to the Company’s governing
and supervisory bodies and took all
the necessary steps to make sure they
participate in the General Shareholders
Meeting convened to vote on their
candidacies. During the Meeting,
candidates to the Company’s governing
and supervisory bodies were available
for questions from the shareholders.
3. The sole executive body, the officer
in charge of accounting, the Chairman
or other members of the Board’s
Audit Committee were all available
for questions from the shareholders
during the General Shareholders
Meetings held in the reporting period.
4. In the reporting period, the Company
used telecommunications equipment
to provide shareholders with remote
access to participate in the General
Shareholders Meetings, or the Board
of Directors made a well-informed
decision to abstain from using such
equipment in the reporting period due
to its irrelevance (unavailability)
NO.
1.1.2
CORPORATE GOVERNANCE
PRINCIPLES
The procedure to notify
shareholders of a General
Shareholders Meeting
and provide them
with relevant materials
enables them to get
well-prepared
1.1.3 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
1.1.4
There are no unjustified
difficulties preventing
shareholders from
exercising their rights
to convene a General
Shareholders Meeting,
nominate candidates
to the governing bodies
and propose items
for the agenda
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
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
PRINCIPLE
1. In the reporting year, the notice
of a General Shareholders
Meeting was posted (published)
on the Company’s website at least 30
days prior to the date of the Meeting,
unless the applicable law established
a longer period.
2. The notice specified the documents
required for admission to the Meeting
venue.
3. Shareholders were informed
about the persons who proposed
agenda items and nominated
candidates to the Company’s Board
of Directors and Audit Commission
(if the Company’s Charter required
establishing such Commission)
1. In the reporting period, shareholders
had the opportunity to put questions
to the Company’s executive bodies
and directors both before and during
the General Shareholders Meeting.
2. The Board of Directors’ opinions
(including dissenting opinions (if any)
recorded in the minutes) on each
of the agenda items of the General
Shareholders Meetings held
in the reporting period were added
to the Meeting materials.
3. The lists of persons entitled
to participate 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 Charter enables shareholders
to propose items for the agenda
of the Annual General Shareholders
Meeting during at least 60 days after
the end of the respective calendar year.
2. In the reporting period, the Company
rejected no item proposed
for the agenda and no candidate
to the Company’s bodies due
to misprints or other minor flaws
in shareholders’ proposals
1.1.5
Each shareholder is able
to exercise their voting
right without hindrance,
in the simplest and most
convenient way
1. The Company’s Charter enables
shareholders to fill out an electronic
voting ballot on the website specified
in the notice of a General Shareholders
Meeting
Complied with
Complied
with in part
Not complied with
68
69
Appendix 2ROSNEFT / ANNUAL REPORT 2021 CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
SHAREHOLDERS ARE PROVIDED WITH AN EQUITABLE AND FAIR OPPORTUNITY TO RECEIVE A SHARE OF THE COMPANY’S PROFITS IN THE FORM
OF DIVIDENDS
NO.
1.2.
1.2.1
The Company
has developed
and implemented
a transparent and clear
procedure to determine
the amount of dividends
and pay them out
1. Regulations on the Company’s
Dividend Policy have been approved
by the Board of Directors and disclosed
on the Company’s website.
Complied with
Complied
with in part
Not complied with
2. If, in accordance with the dividend
policy of a company issuing
consolidated financial statements,
the amount of dividends is determined
based on the company’s results
recorded in its financial statements,
the dividend policy shall employ
the consolidated financial statements.
3. In the reporting period, substantiation
of the suggested net income
distribution arrangements, including
dividend payments and allocations
for the Company’s own needs,
and their assessment for compliance
with the Company’s dividend
policy (including explanations
and the economic rationale
for allocating part of the net income
to cover the Company’s own needs)
were included in the materials
for the General Shareholders Meeting
set to consider income distribution
(including dividend payments /
dividend declaration)
1. In addition to statutory restrictions,
the Regulations on the Company’s
Dividend Policy define financial/
economic circumstances under
which the Company shall not pay out
dividends.
Complied with
Complied
with in part
Not complied with
The Company has approved a Rosneft
Dividend Policy. In line with this Policy,
the Company shall distribute at least 50%
of its net income recorded in the IFRS
consolidated financial statements
(subject to Resolution of the Government
of the Russian Federation No. 774-r dated
29 May 2006). The Board of Directors also
works to establish if it is possible to pay
out dividends in the amount determined
pursuant to the Rosneft Dividend Policy
and includes the relevant analysis
in the Meeting materials.
In accordance with recommendations
approved by the Bank of Russia with respect
to the disclosure of a report on compliance
with the principles and recommendations
of the Corporate Governance Code
in the annual report of a public joint-stock
company (the Bank of Russia’s Letter No.
IN-06–28/102 dated 27 December 2021),
the Company included explanations
of the Board of Directors on allocating
part of the Company’s income for certain
needs in the materials for the General
Shareholders Meeting set to consider
income distribution (for 2021)
Pursuant to Resolution of the Government
of the Russian Federation No. 774-r dated
29 May 2006, the Rosneft Dividend Policy
sets the target dividend at no less than 50%
of Rosneft’s IFRS net income.
In accordance with recommendations
approved by the Bank of Russia
with respect to disclosure of compliance
with the principles and recommendations
of the Corporate Governance Code
in the annual report of a public joint-stock
company (the Bank of Russia’s Letter No.
IN-06–28/102 dated 27 December 2021),
the Company included explanations
of the Board of Directors on the absence
of any financial limitations on dividend
payments in the materials for the General
Shareholders Meeting set to consider
income distribution (for 2021).
1.2.2
The Company does
not resolve to pay
out dividends if such
resolution, though not
in breach of the legislation,
is not economically viable
and may lead to false
assumptions about
the Company’s operations
1.2.3
The Company does not
allow any negative changes
in the dividend rights of its
current shareholders
1. In the reporting period, the Company
did not perform any actions causing
negative changes in the dividend rights
of its current shareholders
Complied with
Complied
with in part
Not complied with
NO.
1.2.4
1.3.
1.3.1
1.3.2
1.4.
1.4.1
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
CORPORATE GOVERNANCE
PRINCIPLES
The Company makes
every effort to prevent
shareholders from
receiving profit (gain) from
the Company other than
in the form of dividends
and liquidation value
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
1. In the reporting period, persons
controlling the Company did not use
any means to receive profit (gain) from
the Company other than in the form
of dividends (for example, by resorting
to transfer pricing, unjustifiably
rendering services to the Company
at inflated prices, or using internal
loans issued to controlling persons
and/or their controlled entities
as a substitution for dividends).
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
The Company ensures
fair treatment of each
shareholder by its
governing bodies
and controlling persons,
specifically allowing
no abuse of minority
shareholders by major
shareholders
The Company does not
perform any actions
that will or may result
in artificial redistribution
of corporate control
1. In the reporting period, persons
controlling the Company did not
abuse the rights of the Company’s
shareholders, and there were no
conflicts between persons controlling
the Company and the Company’s
shareholders (or even if there were any,
the Board of Directors gave such
conflicts due consideration)
Complied with
Complied
with in part
Not complied with
1. The Company has no quasi-
treasury 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
resolution, Rosneft signed an agreement
with a 100% government-owned
company to sell all of Rosneft’s interests
and cease participation in all of its
projects in Venezuela, including the joint
ventures of Petromonagas, Petroperija,
Boqueron, Petromiranda and Petrovictoria,
as well as oilfield services companies,
commercial and trading operations.
Based on the agreement, all
of the Company’s assets and trading
operations in Venezuela and/or those
with connection to Venezuela have been
disposed of, terminated or liquidated.
The agreement and the sale of assets
resulted in Rosneft’s wholly-owned
subsidiary receiving a 9.6% stake in its
parent company.
In addition, the Company’s Open Market
Share Buyback Programme, which also
covers GDRs, saw its wholly-owned
subsidiary acquire a further 0.76% stake
in the Company. None of these shares
were used in voting during the reporting
period
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 effective
methods of registering
their ownership of shares
and the opportunity
to dispose of their shares
freely and without
hindrance
1. The technologies used
by the Company’s registrar
and the terms and quality
of rendered services meet the needs
of the Company and its shareholders
and ensure the most effective way
to keep record of share ownership
and exercise shareholder rights
Complied with
Complied
with in part
Not complied with
70
71
Appendix 2ROSNEFT / ANNUAL REPORT 2021 CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
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.
NO.
2.1.
2.1.1
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 Board of Directors has the powers
stated in the Charter to appoint
and dismiss members of executive
bodies and to determine the terms
and conditions of their contracts.
2. In the reporting period,
the Nomination (Appointment, HR)1
Committee considered the matter
regarding whether the members
of executive bodies had the necessary
professional qualification, skills
and expertise to meet the current
and expected needs of society in line
with the Company’s approved strategy.
3. In the reporting period, the Board
of Directors reviewed the report
(reports) of the sole executive body
and the collective executive body (if
applicable) on the implementation
of the Company’s strategy.
1. In the reporting period,
the Board of Directors addressed
matters related to the strategy
implementation and revision,
approval of the Company’s financial
and business plan (budget),
and review of criteria and indicators
(including interim ones) as regards
delivering on the Company’s strategy
and business plans.
1. The principles of, and approaches
to, organising the Company’s risk
management and internal control
system were established by the Board
of Directors and are set out
in the Company’s internal regulations
defining the risk and internal control
management policy.
2. In the reporting period, the Board
of Directors approved (revised)
the Company’s acceptable risks (risk
appetite) or the Audit Committee and/
or the Risk Committee (if applicable)
considered the feasibility of putting
forward the revision of the Company’s
risk appetite for consideration
by the Board of Directors.
The Board of Directors
is responsible
for the appointment
of executive bodies
and their dismissal,
including as a result
of failure to perform
properly. The Board
of Directors also ensures
that the Company’s
executive bodies
act in accordance
with the approved
development strategy
and the Company’s
business profile.
2.1.2
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.
2.1.3
The Board of Directors
formulates the principles
of and approaches
to risk management
and internal control system
in the Company.
1 the «Nomination Committee»
72
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
NO.
2.1.4
2.1.5
2.1.6
2.1.7
CORPORATE GOVERNANCE
PRINCIPLES
The Board of Directors
determines the Company’s
policy on remuneration
and/or reimbursement
of expenses
(compensations) to its
directors, executive bodies
and other key managers.
The Board of Directors
plays a key role
in preventing, identifying
and resolving internal
conflicts between
the Company’s
bodies, shareholders
and employees.
The Board of Directors
plays a key role
in ensuring the Company’s
transparency, full
and timely information
disclosure, and unhindered
access of shareholders
to the Company’s
documents.
The Board of Directors
oversees the Company’s
corporate governance
practices and plays a key
role in the Company’s
material corporate events.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
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.
2. In the reporting period, the Board
of Directors addressed matters related
to the above policy (policies).
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
transactions involving a conflict
of interest and a set of measures
for resolving such conflicts.
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
1. The Company has determined persons
responsible for the implementation
of the Information Policy in its internal
regulations.
Complied with
Complied
with in part
Not complied with
1. In the reporting period, the Board
of Directors reviewed the results
of self-assessment and/or external
assessment of the Company’s
corporate governance practices.
Complied with
Complied
with in part
Not complied with
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.
2.2.2 The Chairman
of the Board of Directors
is available for contact
with the Company’s
shareholders.
1. The Company’s Annual Report
for the reporting period includes
information on attendance
of meetings of the Board of Directors
and Committees by each of directors.
2. The Annual Report includes
information on key results of the Board
of Directors’ performance assessment
(self-assessment) carried out
in the reporting period.
1. The Company has a transparent
procedure in place, which allows
its shareholders to submit requests
to the Chairman of the Board
of Directors (or senior independent
director, if applicable) and receive
relevant feedback.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
73
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
2.3.
2.3.1
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
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.
1. 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,
knowledge, business reputation, lack
of conflict of interest, etc.
Complied with
Complied
with in part
Not complied with
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.
1. 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
shareholders with biographical
details of all candidates to the Board
of Directors, results of assessment
carried out by the Board of Directors
(or its Nomination Committee)
to determine whether the members
had the necessary professional
qualification, skills and expertise
to meet the current and expected
needs of society, information on their
compliance with the independence
criteria as per Recommendations
102–107 of the Code, and their written
consent to be elected to the Board
of Directors.
1. In the reporting period, the Board
of Directors analysed its needs
in terms of professional qualifications,
expertise and skills and identified
the competencies the Board
of Directors needs to develop in short
and long run.
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 reviewed whether
the number of directors was in line
with the Company’s needs
and shareholders’ interests.
Complied with
Complied
with in part
Not complied with
2.3.2 The Company’s directors
are elected through
a transparent procedure
providing shareholders
with sufficient information
on candidates to form
an opinion about their
personal and professional
qualities.
2.3.3 The composition
of the Board of Directors
is balanced, including
in terms of directors’
expertise, experience,
knowledge and business
skills, and worthy
of shareholders’ trust.
2.3.4 The number of directors
ensures the most effective
arrangement of activities
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
shareholders to be elected
to the Board of Directors.
NO.
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
2.4.
THE BOARD OF DIRECTORS INCLUDES A SUFFICIENT NUMBER OF INDEPENDENT DIRECTORS.
1. In the reporting period, all independent
directors met all of the independence
criteria as per Recommendations 102–
107 of the Code or were recognised
as independent by the Board
of Directors.
Complied with
Complied
with in part
Not complied with
2.4.1 An independent
director is a person
with sufficient professional
skills, experience
and independence to form
their own opinions
and make objective and fair
judgements not influenced
by the Company’s
executive bodies, certain
groups of shareholders or
other stakeholders.
Under normal
circumstances a candidate
(elected director) may
not be considered
independent if they
are related to the Company,
its substantial shareholder,
its substantial counterparty
or competitor, or
the government.
2.4.2 Candidates to the Board
of Directors are assessed
for compliance
with the independence
criteria, with independent
directors being regularly
checked against these
criteria. Such assessments
is in line with the substance
over form principle.
2.4.3
Independent directors
make up at least one third
of the elected directors.
1. 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.
2. The Board of Directors (or
the Nomination Committee)
considered the independence
of the current directors (after they
had been elected) at least once
in the reporting period.
3. The Company has developed
procedures determining actions
to be taken by a director if they
cease to be independent, including
their obligation to notify the Board
of Directors accordingly and in a timely
manner.
1. Independent directors make up at least
one third 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
2.4.4 Independent directors play
a key role in preventing
internal conflicts
in the Company and taking
material corporate actions
by the Company.
1. In the reporting period, independent
directors (with no conflict 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
74
75
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
2.5.
2.5.1
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
THE CHAIRMAN OF THE BOARD OF DIRECTORS ENSURES THAT THE BOARD OF DIRECTORS PERFORMS ITS FUNCTIONS IN THE MOST EFFECTIVE
WAY.
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 director, or a senior
independent director has been
appointed from among independent
directors¹ .
2. The role, rights and responsibilities
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
2.5.2 The Chairman of the Board
of Directors ensures
constructive atmosphere
during meetings, facilitates
open discussion of agenda
items and oversees
implementation
of the Board of Directors’
resolutions.
2.5.3 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 performance of the Chairman
of the Board of Directors
was assessed as part of the Board
of Directors’ performance assessment
(self-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 complete and reliable information
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.
Complied with
Complied
with in part
Not complied with
2.6.1 Directors make decisions
taking 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 discussion of that item
at a meeting of the Board of Directors
or its Committee.
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.
NO.
CORPORATE GOVERNANCE
PRINCIPLES
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
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
2.6.2 Directors’ rights
1. The Company has adopted
and responsibilities
are clearly stated and set
forth in the Company’s
internal regulations.
and published an internal regulation
clearly specifying directors’ rights
and responsibilities.
2.6.3 Directors have sufficient
1. The assessment (self-assessment)
time to perform their duties
2.6.4 All directors have equal
access to the Company’s
documents and information.
Newly elected
directors are provided
with sufficient information
on the Company
and the Board
of Directors’ activities
as soon as practicable
of the Board of Directors
in the reporting period included
the analysis of individual attendance
of meetings of the Board of Directors
and the Committees and a review
of whether a director had been
on the Board long enough.
2. As per the Company’s internal
regulations, directors shall notify
the Board of Directors of their
intention to join the governing
bodies of other companies (excluding
those controlled by the Company)
and of the fact of such an appointment.
1. As per the Company’s internal
regulations, directors have the right
to access information and documents
needed for the performance of their
duties related to the Company and its
controlled entities, and the Company’s
executive bodies are obliged
to procure the relevant information
and documents.
2. The Company has a formalised
induction programme in place
for newly elected directors.
2.7.
MEETINGS OF THE BOARD OF DIRECTORS, PREPARATION FOR AND ATTENDANCE OF THESE MEETINGS ARE KEY TO THE EFFECTIVENESS
OF THE BOARD OF DIRECTORS
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
2.7.1 Meetings of the Board
1. The Board of Directors held at least six
2.7.2
of Directors are held
as necessary, given
the Company’s
scope of operations
and objectives at any given
time.
The Company’s internal
regulations set out
a procedure to prepare
and hold meetings
of the Board of Directors
enabling directors to make
proper preparations.
meetings in the reporting year.
1. The Company has approved
an internal regulation setting out
the procedure to prepare and hold
meetings of the Board of Directors
and specifying, among other things,
that the notice of a meeting shall
be generally given at least 5 days prior
to the date of the meeting.
2. In the reporting period, the directors
who were unable to attend the meeting
in person had the opportunity
to participate in discussion
and voting on agenda items remotely
– via conference calls and video
conferencing
1 The Company specifies which of the two suggested approaches it uses.
76
77
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
2.7.3
CORPORATE GOVERNANCE
PRINCIPLES
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
matters are adopted at in-
person meetings.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
1. The Company’s Charter or another
internal regulation specifies that
the most important matters (including
those listed in Recommendation
168 of the Code) shall be reviewed
at in-person meetings of the Board
of Directors.
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
2.7.4 Resolutions on the most
important matters
related to the Company’s
operations are adopted
at meetings 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.
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 matters reviewed
by the Board of Directors, the composition
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 resolution of matters material
to the Company. Therefore, setting a higher
quorum as recommended 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 number
of directors, the structure of the Board
of Directors, including four independent
directors, the procedure to prepare
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
shareholding structure. The Company
has no intention to change its approach
in the medium term.
THE BOARD OF DIRECTORS ESTABLISHES COMMITTEES FOR PRELIMINARY CONSIDERATION OF THE MOST IMPORTANT MATTERS RELATED
TO THE COMPANY’S OPERATIONS.
For preliminary
consideration of matters
related to the monitoring
of the Company’s financial
and business operations,
an Audit Committee
composed of independent
directors has been
established.
1. The board of directors has a standing
audit committee comprised entirely
of independent directors.
2. The Company’s internal regulations
specify the Audit Committee’s
objectives, including, among others,
those set out in Recommendation 172
of the Code.
3. At least one member of the audit
Complied with
Complied
with in part
Not complied with
committee, who is an independent
director, has knowledge and expertise
in the preparation, analysis, evaluation
and audit of accounting (financial)
statements.
4. The audit committee held at least
one meeting per quarter during
the reporting period.
2.8.
2.8.1
78
NO.
CORPORATE GOVERNANCE
PRINCIPLES
2.8.2 For preliminary
consideration of matters
related to the development
of an effective
and transparent
remuneration framework,
a Remuneration Committee
composed of independent
directors and chaired
by an independent director
not being the Chairman
of the Board of Directors
has been established.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
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 regulations
specify the Remuneration
Committee’s objectives, including,
among others, those set out
in Recommendation 180 of the Code
as well as the circumstances
(events) on the occurrence of which
the Remuneration Committee shall
consider a revision of the Company’s
remuneration policy for members
of the Board of Directors, executive
bodies and other key executive officers.
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
The principle is not complied
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.
Given 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
members (three), on the maximum number
of Committees a director may sit on,
on the minimum number of independent
directors on an Audit Committee
and an HR and Remuneration Committee,
and on the composition of Committees
based on directors’ relevant expertise),
compliance with the recommendation
to have all Committees chaired
by independent directors is impracticable.
At the same time, the Company’s internal
regulations, including the Regulations
on the Board of Directors, specify
procedures to prevent any conflict
of interest and eliminate the risk
of recommendations by the committee
of the Board of Directors being affected
by the controlling shareholder or executive
bodies.
The Company has no intention to change its
approach in the medium term.
79
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
CORPORATE GOVERNANCE
PRINCIPLES
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
NO.
CORPORATE GOVERNANCE
PRINCIPLES
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
The functions of the nomination committee
are performed by HR and Remuneration
Committee.
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
2.8.3 For preliminary
1. The Board of Directors has
consideration of matters
related to human resources
(succession) planning,
expertise and performance
of the Board of Directors,
a Nomination
(Appointment, HR)
Committee mostly
composed of independent
directors has been
established.
a standing nomination committee
(or its objectives specified
in recommendation 186 of the Code
are implemented by a different
committee1) with the majority of its
members being independent directors.
2. The Company’s internal
regulations specify the objectives
of the nomination committee
(or another relevant committee
with combined functionality),
including, among others, those set out
in Recommendation 186 of the Code.
3. To align the composition of the Board
of Directors with the objectives
and purposes of the Company,
in the reporting period, the Nomination
Committee, acting on its own or
jointly with other Committees
of the Board of Directors, or
an authorised shareholder engagement
division arranged for interaction
with a broad range of shareholders
to discuss the selection of candidates
for the Company’s Board of Directors.
2.8.4 Given the scope
1. In the reporting period, the Company’s
Board of Directors reviewed
the relevance of the structure of its
Board of Directors to the scale, nature,
objectives, needs of the Company
and its risk profile. Additional
committees have been either
established or found unnecessary.
of operations and risk
levels, the Company’s
Board of Directors
has ensured that
the composition of its
Committees is fully in line
with the Company’s
objectives. Additional
committees 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.).
1 If the functions of the nomination committee are performed by another committee, the company specifies its name.
80
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
2.8.5 The composition
1. The Audit Committee,
of Committees enables
comprehensive
discussion of matters
subject to preliminary
consideration with due
regard to varying opinions.
the Remuneration Committee
and the Nomination Committee
(or another relevant committee
with combined functionality)
were chaired by independent directors
in the reporting period.
2. The company’s internal regulations
(policies) contain provisions that
prohibit the non-members to attend
meetings of Audit Committee,
the Remuneration Committee
and the Nomination Committee
(or another relevant committee
with combined functionality), unless
they are invited by the chairman
of a respective committee.
2.8.6 Committee Chairmen
1. In the reporting period, Committee
report on their Committees’
performance to the Board
of Directors and its
Chairman on a regular basis.
Chairmen regularly reported
to the Board of Directors on their
Committees’ performance.
Complied with
Complied
with in part
Not complied with
2.9.
THE BOARD OF DIRECTORS ARRANGES PERFORMANCE ASSESSMENT OF THE BOARD OF DIRECTORS, ITS COMMITTEES AND DIRECTORS.
1. The Company’s internal regulations
set out the procedure for carrying
out the assessment (self-assessment)
of the Board of Directors.
2. In the reporting period, assessment
(self-assessment) of the Board
of Directors’ performance included
performance assessment of individual
directors and the Board of Directors
as a whole.
3. Results of the assessment (self-
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’
performance on an independent basis,
the Company engaged an external
organisation (consultant) at least once
over the last three reporting periods.
2.9.1
The Board of Directors’
performance assessment
is aimed at evaluating
the effectiveness
of the Board of Directors,
its Committees
and directors, checking
their performance
against the Company’s
development needs,
enhancing their activities
and identifying areas
for improvement.
2.9.2 Performance assessment
of the Board of Directors,
its Committees
and directors is carried
out on a regular basis
at least once a year.
To assess the Board
of Directors’ performance
on an independent basis,
an external organisation
(consultant) is engaged
at least once every three
years.
Complied with
Complied
with in part
Not complied with
Explanation on item 3: due
to the pandemic, the Board of Directors
reviewed the results of its self-assessment
by absentee voting
Complied with
Complied
with in part
Not complied with
At a meeting held on 19 December 2021,
the Company’s Board of Directors reviewed
the results of the Board of Directors’
independent performance assessment
carried out by an external consultant, Ernst
& Young Valuation and Advisory Services
LLC.
3.1.
3.1.1
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.
The Corporate Secretary
has sufficient knowledge,
experience and expertise
to perform their duties,
as well as impeccable
reputation, and enjoys
shareholders’ trust.
1. The Company’s website and Annual
Report provide biographical details
of the Corporate Secretary (including
the age, eduction, qualification
and expertise) and positions
the Corporate Secretary held
in governing bodies of other legal
entities at least over the last five years
Complied with
Complied
with in part
Not complied with
81
Appendix 2ROSNEFT / ANNUAL REPORT 2021 EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
NO.
3.1.2
CORPORATE GOVERNANCE
PRINCIPLES
The Corporate Secretary
is sufficiently independent
from the Company’s
executive bodies and has
the powers and resources
required to perform their
duties.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
1. The Company has adopted
and disclosed an internal regulation
on Corporate Secretary.
2. The Board of Directors approves
the candidate for the position
of Corporate Secretary, terminates
the Corporate Secretary’s powers
and considers the payment
of additional remuneration
to the Corporate Secretary.
3. The Company’s internal regulations
define the Corporate Secretary’s
right to request and receive
the Company’s documents
and information from governing bodies,
structural subdivisions and officers
of the Company
REMUNERATION PAID BY THE COMPANY IS SUFFICIENT TO ATTRACT, MOTIVATE AND RETAIN EMPLOYEES WITH THE REQUIRED COMPETENCE
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 remuneration of members
of the Board of Directors, governing
bodies and other key executive officers
of the Company is based on pay
benchmarking against peers
Complied with
Complied
with in part
Not complied with
1. In the reporting period,
the Remuneration Committee reviewed
the remuneration policy (policies)
and (or) its (their) implementation
practices, assessed their effectiveness
and transparency and, where necessary,
submitted relevant recommendations
to the Board of Directors to revise this
policy (policies).
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 competent
and qualified specialists.
At the same time,
the Company avoids
paying higher-than-
required remuneration or
creating unreasonably wide
remuneration gaps between
any of the above persons
and Company employees.
The Company’s
remuneration policy
has been developed
by the Remuneration
Committee and approved
by the Board
of Directors. The Board
of Directors, supported
by the Remuneration
Committee, monitors
the introduction
and implementation
of the remuneration policy
in the Company, and revises
and amends it as necessary.
4.1.
4.1.1
4.1.2
82
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
1. The Company’s remuneration
policy (policies) provides (provide)
for transparent mechanisms
to determine the amount
of remuneration payable to its
directors, executive bodies and other
key managers, and covers (cover)
all types of payments, benefits
and privileges provided to them.
GOVERNANCE
PRINCIPLE
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
CORPORATE GOVERNANCE
PRINCIPLES
The Company’s
remuneration policy
provides for transparent
mechanisms
to determine the amount
of remuneration payable
to its directors, executive
bodies and other key
managers, and covers all
types of payments, benefits
and privileges provided
to them.
The Company develops
a policy on reimbursement
of expenses
(compensations) specifying
reimbursable 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
remuneration policy.
REMUNERATION SYSTEM FOR DIRECTORS ENSURES ALIGNMENT OF THEIR FINANCIAL INTERESTS WITH THE LONG-TERM FINANCIAL
INTERESTS OF SHAREHOLDERS.
NO.
4.1.3
4.1.4
4.2.
4.2.1
The Company pays fixed
annual remuneration to its
directors. The Company
does not pay remuneration
for participation
in individual meetings
of the Board of Directors or
its Committees.
The Company does not
offer short-term motivation
plans and additional
financial incentives
to the members of its Board
of Directors.
1. In the reporting period, the Company
paid remuneration to members
of the Board of Directors in line
with the Company’s remuneration
policy.
2. In the reporting period, the Company
did not offer the members of its
Board of Directors any short-term
motivation plans and additional financial
incentives based on the Company’s
performance (performance indicators).
The Company did not pay remuneration
for participation in individual meetings
of the Board of Directors or its
Committees.
4.2.2 Long-term ownership
1. If the Company’s internal regulation
(regulations), namely its remuneration
policy (policies), allows (allow)
distribution of the Company’s
shares to directors, clear rules
on share ownership by directors
aimed at encouraging their long-
term ownership shall be introduced
and disclosed.
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 certain
performance indicators,
and directors do not
participate in options plans.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
83
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
CORPORATE GOVERNANCE
PRINCIPLES
4.2.3 The Company does not
provide any additional
payments or
compensations to directors
in the event of early
termination of office due
to a transfer of control
over the Company or
any other circumstances.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
1. The Company does not provide
any additional payments or
compensations to directors
in the event of early termination
of office due to a transfer of control
over the Company or any other
circumstances.
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
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.
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
1. In the reporting period, the amount
of severance pay (golden parachute)
paid by the Company to members
of its executive bodies or key
managers in the event of early
termination of office, provided
that such termination was initiated
by the Company with no misconduct
on the part of the respective employee,
did not exceed twice the size
of the fixed component of their annual
remuneration.
NO.
CORPORATE GOVERNANCE
PRINCIPLES
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,
provided 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.
4.3.1 Remuneration paid
to members of executive
bodies 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
performance
and an employee’s personal
(individual) contribution
thereto.
4.3.2 The Company has
introduced a long-term
incentive plan for members
of its executive bodies
and other key managers
involving its shares (options
or other derivatives with its
shares as underlying assets).
1.
In the reporting period, the variable
remuneration for members of executive
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 members
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 remuneration payable to members
of the executive bodies and other officers
of the Company factors in the risks
to which the Company is exposed
to prevent excessively risky decision-
making in management.
1. If the Company introduces a share-
based long-term incentive plan
for members of its executive bodies
and other key officers (share-based
financial instruments), the right
to sell shares and other financial
instruments may be exercised no
earlier than three years after the date
on which they were granted. Moreover,
the right to sell them is subject
to the achievement by the Company
of certain performance indicators.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
5.1.
5.1.1
5.1.2
5.1.3
5.1.4
THE COMPANY HAS PUT IN PLACE AN EFFECTIVE RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM TO PROVIDE REASONABLE ASSURANCE
THAT IT WILL ACHIEVE ITS GOALS.
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
The Board of Directors has
formulated the principles
of and approaches
to the risk management
and internal control system
in the Company.
1. Risk management and internal control
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.
The Company’s
executive bodies ensure
the establishment
and maintenance
of an effective risk
management and internal
control system
in the Company.
The Company’s risk
management 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
statements,
as well as a reasonable
and acceptable level
of risk-taking.
The Company’s
Board of Directors
takes the necessary
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.
1. The Company’s executive bodies
have ensured the distribution of risk
management and internal control
duties, powers and responsibilities
among heads of units and divisions
accountable to them.
1. The Company has approved an anti-
corruption policy.
2. The Company has established
a safe, secure and easily accessible
channel (hotline) to inform the Board
of Directors or its Audit Committee
about violations of law, internal
procedures or the Code of Corporate
Ethics.
1. In the reporting period, the Board
of Directors (the Audit Committee
and/or the Risk Committee (if
applicable) arranged for an assessment
of reliability and effectiveness
of the risk management and internal
control system.
2. In the reporting period, the Board
of Directors reviewed the findings
from the assessment of reliability
and effectiveness of the risk
management and internal
control system to include them
in the Company’s annual report.
84
85
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
5.2.
5.2.1
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
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.
1. For the internal audit purposes,
the Company has established
a dedicated internal audit
unit functionally accountable
to the Board of Directors, or engaged
an independent external organisation
with the same accountability principle.
Complied with
Complied
with in part
Not complied with
For the internal audit
purposes, the Company
has established
a dedicated unit or
engaged an independent
external organisation.
Functional accountability
and administrative
accountability
of the internal audit unit
are separated. The internal
audit unit is functionally
accountable to the Board
of Directors.
Complied with
Complied
with in part
Not complied with
5.2.2 The internal audit
unit is responsible
for assessment of reliability
and effectiveness
of the risk management
and internal control
system and the corporate
governance system
and relies on generally
accepted internal audit
standards.
1. In the reporting period, as part
of internal audit, the reliability
and effectiveness of the internal
control and risk management system
was assessed.
2. In the reporting period, as part
of the internal audit, the corporate
governance practice (practices)
were assessed, including
the communication procedures
(including those relating to internal
control and risk management) at all
levels of the Company’s governance
and the stakeholder engagement
procedures
6.1.
THE COMPANY AND ITS OPERATIONS ARE TRANSPARENT TO SHAREHOLDERS, INVESTORS AND OTHER STAKEHOLDERS.
6.1.1
The Company
has developed
and implemented
an Information Policy
ensuring effective
exchange of information
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. In the reporting period, the Board
of Directors (or its Committee)
considered the effectiveness
of communication between
the Company, shareholders,
investors and other stakeholders
and the advisability of (need
for) a revision of the Company’s
Information Policy.
Complied with
Complied
with in part
Not complied with
NO.
6.1.2
6.2.
6.2.1
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
CORPORATE GOVERNANCE
PRINCIPLES
The Company
discloses information
on its corporate
governance system
and practices, including
detailed information
on its compliance
with the principles
and recommendations
of the Code.
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
PRINCIPLE
1. The Company discloses information
on its corporate governance system
and on the general corporate
governance principles it uses, including
by disclosing such information
on the Company’s website.
2. The Company discloses
information 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).
3. If there is a person controlling
the Company, the Company publishes
a memorandum on behalf of such
controlling person detailing their
plans as regards corporate governance
in the Company.
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.
Complied with
Complied
with in part
Not complied with
The Company discloses
information on a regular
basis and in a consistent
and timely manner,
in line with the principles
of data accessibility,
accuracy, completeness
and comparability.
1. The Company has in place a procedure
streamlining the work of all
the Company’s structural subdivisions
and employees involved in disclosing
information or whose activity may lead
to the need for disclosing information.
2. If the Company’s securities are traded
in established foreign markets,
disclosures of material information
during a reporting year are made
in Russia and in such markets
on a concurrent and equal basis.
3. If foreign shareholders own
a substantial number of shares
in the Company, disclosures during
the reporting year were made
in Russian and in one of the most
widely used foreign languages.
86
87
Appendix 2ROSNEFT / ANNUAL REPORT 2021 NO.
CORPORATE GOVERNANCE
PRINCIPLES
PRINCIPLE
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
6.2.2 The Company avoids formal
1. The Company’s Information Policy
approach to information
disclosures and discloses
material information on its
operations even if such
disclosures are not required
by law.
defines approaches to non-mandatory
disclosure of information on other
events (actions) that have a material
effect on the price and quotes of its
securities.
2. In accordance with Recommendation
290 of the Code, the Company
discloses information on its capital
structure in the Annual Report
and on its website.
3. The Company discloses information
on its material controlled legal
entities, including their key business
areas, mechanisms for ensuring
their accountability, and the powers
of the Company’s Board of Directors
to define their strategy and assess their
performance.
4. The Company publishes a non-financial
report, i. e. a sustainability report,
environmental report, corporate social
responsibility report or another report
providing non-financial information,
including that on the Company’s
environmental (environment
protection and climate change), social,
and governance (ESG) performance,
other than the report of the issuer
of issue-grade securities or the annual
report of a joint-stock company.
6.2.3 As a key communication
1. The Company’s Annual Report
tool to liaise
with shareholders
and other stakeholders,
the Annual Report provides
information needed
to assess the Company’s
performance for the year.
provides information on the results
of the external and internal audit
assessment by the Audit Committee.
2. The Company’s Annual Report
provides information on the Company’s
environmental and social policies.
Complied with
Complied
with in part
Not complied with
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
Explanation on item 3: The Company
discloses information on its material
controlled legal entities, including their key
business areas and mechanisms for ensuring
their accountability.
Rosneft’s Board of Directors oversees
the development of the strategy
and performance assessment at controlled
legal entities using the following
mechanisms:
1. control over executive bodies whose
remit includes the approval of the Group
Subsidiaries’ plans as per Rosneft’s
Charter;
2. corporate procedures governed
by Rosneft’s internal regulations,
which ensure alignment of all
strategic planning documents
of Rosneft and the Group Subsidiaries
with Rosneft’s Strategy approved
by the Board of Directors.
The powers of the Board of Directors
to approve Rosneft’s Strategy and monitor
its implementation, and the powers
of the Chief Executive Officer
and the Management Board to approve
the planning documents of the Group
Subsidiaries are set forth in Rosneft’s
Charter. The powers of the Strategy
and Sustainable Development Committee
of Rosneft’s Board of Directors to define
the Company’s policy with respect
to the Group Subsidiaries are set forth
in the Regulations on Rosneft Board
Committees and disclosed on the corporate
website.
Detailed information on internal procedures
for approval of strategic documents
of the Group Subsidiaries and control
over their implementation by the Board
of Directors (its committees) is not
disclosed. The Company has no intention
to change its approach in the medium term.
NO.
CORPORATE GOVERNANCE
PRINCIPLES
CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
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.
1. The Company’s information policy
(internal regulations setting forth
the information policy) define(s)
the procedure ensuring unhindered
access to the Company’s information
and documents at the shareholders’
request.
2. The Company’s information policy
(internal regulations setting out
the information policy) contain(s)
provisions stipulating that the Company
shall take all necessary steps to obtain
the information on its controlled
entities from the relevant controlled
entities, as may be requested
by the shareholders.
1. In the reporting period, the Company
did not refuse to provide shareholders
with requested information, or such
refusals were justified.
2. If and when required by the Company’s
Information Policy, shareholders
are informed of the sensitive
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
6.3.1 No unreasonable
difficulties prevent
the shareholders
from exercising
their right to access
the Company’s documents
and information.
6.3.2 When providing
information
to shareholders,
the Company maintains
a reasonable balance
between the interests
of individual shareholders
and those of the Company,
as it is in the Company’s
best interests to keep
confidential any sensitive
commercial information
that may have a material
effect on its competitive
position.
7.1.
ACTIONS THAT HAVE OR MAY HAVE A MATERIAL EFFECT ON THE COMPANY’S SHAREHOLDING STRUCTURE AND FINANCIAL POSITION AND,
CONSEQUENTLY, 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
1. The Company’s Charter sets out
a list (criteria) of transactions or
other actions deemed to be material
corporate actions. As per
the Company’s Charter, 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 provides shareholders
with relevant recommendations.
7.1.1 Material corporate actions
include reorganisation
of the Company,
acquisition of 30% or
more of the Company’s
voting shares (takeover),
major transactions
made by the Company,
increase or reduction
in the Company’s charter
capital, listing and delisting
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 transactions or
other actions deemed
to be material corporate
actions and reserved
to the Company’s Board
of Directors.
88
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Appendix 2ROSNEFT / ANNUAL REPORT 2021 CRITERIA FOR COMPLIANCE
OF COMPLIANCE
WITH A CORPORATE GOVERNANCE
WITH A CORPORATE
STATUS
PRINCIPLE
GOVERNANCE
PRINCIPLE
1. The Company has established
a procedure for independent directors
to express their opinions on material
corporate actions before their approval.
Complied with
Complied
with in part
Not complied with
EXPLANATIONS ON THE FAILURE
TO MEET CRITERIA FOR COMPLIANCE
WITH A CORPORATE GOVERNANCE
PRINCIPLE
Complied with
Complied
with in part
Not complied with
1. Approval of the Company’s material
transactions is reserved to Board
of Directors as per the Company’s
Charter, with due regard to the specifics
of the Company’s operations
and in addition to regulatory
requirements for transaction approvals.
2. In the reporting period, all material
corporate actions were duly approved
prior to their implementation.
NO.
7.1.2
CORPORATE GOVERNANCE
PRINCIPLES
The Board of Directors
plays a key role
in making decisions
or recommendations
with regard to material
corporate actions
and relies on the opinion
of the Company’s
independent directors.
7.1.3 When taking material
corporate actions affecting
the rights and legitimate
interests of shareholders,
the Company ensures
equitable treatment of all
of its shareholders, and,
where statutory mechanisms
protecting shareholder
rights are insufficient, takes
additional steps to protect
the rights and legitimate
interests of the Company’s
shareholders.
In doing so, the Company
is guided not only
by the formal regulatory
requirements, but also
by the corporate governance
principles specified
in the Code.
7.2.
7.2.1
THE COMPANY ENSURES THAT MATERIAL CORPORATE ACTIONS ARE TAKEN IN A MANNER ENABLING SHAREHOLDERS TO RECEIVE FULL
INFORMATION ON SUCH ACTIONS IN DUE TIME AND INFLUENCE THEM, AND GUARANTEES RESPECT AND DUE PROTECTION OF SHAREHOLDER
RIGHTS WHEN SUCH ACTIONS ARE TAKEN.
Information
on material corporate
actions is disclosed,
with an explanation
of the relevant
reasons, conditions
and consequences.
1. In the reporting period, the Company
disclosed information on its material
corporate actions (if any) in a timely
and detailed manner, including
the relevant reasons, conditions
and consequences for the shareholders.
Complied with
Complied
with in part
Not complied with
Complied with
Complied
with in part
Not complied with
7.2.2 Rules and procedures
1. The Company’s internal regulations set
for taking material
corporate actions are set
forth in the Company’s
internal regulations.
out the rules and procedure for engaging
an appraiser to determine the value
of the property to be sold or purchased
in a major transaction or a related-party
transaction.
2. The Company’s internal regulations set
out a procedure for engaging an appraiser
to determine the value of the Company’s
shares to be purchased or bought back.
3. If a member of the Company’s Board
of Directors, the sole executive body, a
member of the collegial executive body,
or a person who is a controlling person
of the Company or a person entitled to
give the Company binding instructions
has no formal interest in the Company’s
transactions, but has a conflict of interest
or other actual interest with regard to
such transactions, such persons shall
abstain from voting on the approval of
such transactions as required by the
Company’s internal documents.
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APPENDIX 3
(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)
ROSNEFT / ANNUAL REPORT 2021 APPENDIX 4
(Financial statements
and auditor’s report)
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;
Regulations on the Board of Directors;
Regulations on Rosneft Board Сommittees;
Regulations on Remunerations and Compensations Payable to Members of the Board of Directors;
Regulations on the Collective Executive Body (Management Board);
Regulations on the Sole Executive Body (Chief Executive Officer);
Standard on Payments and Сompensations to Top Managers;
Regulations on the Audit Commission;
Regulations on Remunerations and Compensations Payable to Rosneft’s Audit Commission Members;
Regulations on the Corporate Secretary;
Regulations on Information Policy;
Regulations on Provision of Information to Rosneft Shareholders;
Regulations on Internal Control Rules for the Prevention, Detection and Suppression of Illegal Use
of Insider Information in Rosneft and/or Market Manipulation;
Rosneft’s 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.
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ROSNEFT / ANNUAL REPORT 2021 Rosneft’s accounting (financial) statements and the independent auditor’s report are available at:
https://www.rosneft.ru/upload/site1/document_report/RSBU_12m2021.pdf
General information about Rosneft
Date of state registration and registration
number of Oil Company Rosneft:
• Date of state registration
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.
Constituent entity of the Russian
Federation in whose territory
the Company is registered: Moscow.
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.
94
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ROSNEFT / ANNUAL REPORT 2021 Contact details
FULL NAME:
FOR INSTITUTIONAL INVESTORS:
REGISTRAR OF THE COMPANY:
LLC Reestr-RN
2/6 Podkopaevsky Lane,
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
MOSCOW OFFICE:
10 Butyrskiy Val, Bldg. A,
13th Floor, Moscow,
125047, Russia
Telephone: +7 (495) 967–71–13
Public Joint-Stock Company
Rosneft Oil Company
ABBREVIATED NAME:
Investor Relations Department,
Rosneft
Telephone: +7 (495) 411–05–04
E-mail: ir@rosneft.ru
PJSC Rosneft Oil Company
RAS 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
LOCATION OF THE COMPANY:
26/1 Sofiyskaya Embankment,
Moscow, 117997, Russia
POST ADDRESS:
26/1 Sofiyskaya Embankment,
Moscow, 117997, Russia
INFORMATION SERVICE:
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
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ROSNEFT / ANNUAL REPORT 2021 www.rosneft.com