Gazprom Neft

As of 31 December 2012, Gazprom Neft and its subsidiaries hold the mineral rights to 74 license areas located in 11 regions of Russia. In Serbia, the Gazprom Neft's subsidiary Naftna Industrija Srbije, holds 69 licenses. Based on an audit of reserves conducted by DeGolyer and MacNaughton and according to the Petroleum Resources Management System standards, the company's proven reserves at the end of 2012 totaled 1.2 billion tonnes of oil equivalent, and its reserve replacement ratio was over 286%.

Most of the company's oil production operations in Russia are carried out by three subsidiaries: Gazpromneft-Noyabrskneftegaz, Gazpromneft-Khantos and Gazpromneft-Vostok. These companies are developing fields in the Yamalo-Nenets and Khanty-Mansi autonomous areas and the Omsk, Tomsk, Tyumen and Irkutsk regions. Gazprom Neft also holds 50% stakes in three dependent companies: Slavneft, Tomskneft and Salym Petroleum Development. Together with Novatek it owns Arktikgaz.

In 2012, Gazprom Neft refined 43.3 million tonnes of oil. The company wholly or partly owns 5 oil refineries (the Omsk Oil Refinery, Moscow Oil Refinery, Slavneft-Yaroslavnefteorgsintez (YANOS) and two oil refineries in Pančevo and Novi Sad that belong to Naftna Industrija Srbije).

The company operates around 1,100 filling stations in Russia under the 'Gazpromneft' trademark (unlike the name of the company, the filling station brand is written as one word). In total, the company's retail network consists of more than 1,600 filling stations, including in Tajikistan, Kazakhstan, Kyrgyzstan, Belarus, Ukraine and Serbia (under the NIS brand). According to research by Romir Holding, the Gazpromneft brand is one of the top 3 filling station brands in Russia. In April 2011, it won the "Brand of the Year/Effie" award. In 2013 the company's own fuel brands, G-Drive and G-Energy, also received this award. Nielsen, a global information and measurement company, named both Gazpromneft and G-Drive among the top three most popular brands in their categories.

The company also owns a number of distribution companies in the bunkering (Gazpromneft Marine Bunker) and aviation fuel (Gazpromneft-Aero) businesses, as well as a fuel and lubricant production business (Gazpromneft-Lubricants). Production of motor oils under the G-Energy premium brand began in 2010. British actor Jason Statham became the face of G-Energy's advertising campaign in 2011. In addition to G-Energy, the company's oils and lubricants are also sold under the Gazpromneft (industrial oils and lubricants), SibiMotor (light vehicles and commercial transport) and Texaco (marine oils, produced under Chevron's license) brands with over 300 trade names.

The company's production volume in 2012 increased by 4.3% to 59.8 tonnes of oil equivalent.

In 2012 Gazprom Neft switched from US GAAP reporting in dollars to International Financial Reporting Standards (IFRS) reporting in rubles.

Company's financial indicators (US GAAP Standards)

	2008	2009	2010	2011	2012
Sales revenue (mln)	$33,870	$24,305	$32,912	$44,172	RUB 1,230,266
EBITDA (mln)	$8,610	$6,037	$7,271	$10,158	RUB 323,106
Net profit (mln)	$4,658	$3,026	$3,151	$5,352	RUB 176,296

The recoverable C1+ C2 reserves of the Novoportovskoye oil and gas condensate field total over 230 million tonnes of oil and over 270 billion cubic metres (9.5 trillion cubic feet) of gas. The field is located in the Yamal District of the Yamalo-Nenets Autonomous Area, 30 km from the Gulf of Ob. The license for the Novoportovskoye field belongs to Gazprom Neft Novy Port with Gazprom Neft as the operator of the project. In spring 2011, Gazprom Neft confirmed the viability of year-round supply from the field by sea.

The Novoportovskoye field will be developed in two phases, first focussing on the southern part of the field where peak production will reach 5 mln tonnes of oil per year. The second phase will look at the northern part of the field, where peak production is expected to reach 3 mln tonnes of oil per year.

The Messoyakha Group of oil and gas fields consists of the West-Messoyakha and East-Messoyakha sites. Messoyakhaneftegas, an equally owned joint venture with TNK-BP, holds the licenses for both blocks with Gazprom Neft as operator. The recoverable C1+C2 reserves of both blocks total 620 million tonnes of primarily heavy oil.

The fields were discovered in the 1980s and are the most northern-located onshore Russian fields. The Messoyakha oil and gas fields are located on the Gyda Peninsula in the Tazovsky District of the Yamalo-Nenets Autonomous Area - an Arctic climate zone with undeveloped infrastructure.

By 2020 the Messoyakha fields are expected to be producing 8 mln tonnes per year with the first million produced by 2016.

• Serbia. Naftna industrija Srbije. NIS is the largest international asset of Gazprom Neft which owns 56.15% of share capital. NIS's main hydrocarbon production centres are located in Serbia, Angola, Bosnia and Herzegovina, Hungary and Romania with total volume of 1.233 mln tonnes of hydrocorbones produced in 2012. The company operates two refineries in the towns of Pancevo and Novi Sad with a total refining capacity of 7.3 mln tonnes per year and has a network of over 480 petrol stations and oil storage facilities.
• Angola. The company gained a presence in Angola in 2009 after acquiring NIS.
• Venezuela. Development of the Junin-6 field together with PDVSA. Reserves: 10.96 billion barrels.
• Iraq. Development of the Badra field. The Badra oil field is situated in Wasit Province in Eastern Iraq. The geologic reserves at Badra field have been determined to amount to 3 billion barrels of oil.

The service contract for development of the oil field was signed in the beginning of 2010. The winning bid was submitted by a consortium of companies consisting of:

• Gazprom Neft (Russian Federation, the Project operator);
• KOGAS (Korea);
• PETRONAS (Malaysia);
• TPAO (Turkey);
• The Iraqi Government, represented by the Iraqi Oil Exploration Company (OEC).

The Badra oil field development project is scheduled to last 20 years with a possible 5-year extension. Production is expected to reach 170,000 barrels of oil per day, which is around 8.5 million tons a year by 2017, and it will remain at this level for 7 years.

Over a short period, new infrastructure for the field's commercial development has been installed at the oil field. It allowed for the commercial production of oil to begin in May 2014.

The first line of the central processing facility (CPF) has already been put into operation with a capacity of 60 thousand barrels per day. Oil gathering and preparation are carried out at this industrial facility. The Badra field was connected to the main Iraqi oil pipeline system by a 165-kilometer-long pipeline.

In the Iraqi's point of view, the Badra oil field in one of the most difficult in the region, primarily due to geological circumstances. The geological structure of the deposit can be compared with a "layer cake": argillaceous deposits are interleaved by limestone, which makes drilling difficult. Therefore, specialists are facing a more labor-intensive task. At the moment all these difficulties have been successfully overcome. Three development wells have now been constructed, successfully tested and their outputs have exceeded planned expectations.

New innovative technologies are applied at Badra. Among them are:

• smart wells system (smart completion), which allows controlling of each individual layer of the drilling well, and adjusting the equipment remotely;
• CPF SCADA system (central processing facility supervisory control and data acquisition);
• PLDS (pipe leak detection system);

Solar panels can be another example of the usage of modern technologies. They allow the block valve station to work independently from electricity.

The Badra oil field development consortium annually invests in education, medicine and other social projects in Iraq. In 2013 Gazprom Neft donated some buses to the University in Kut, allowing students from the surrounding villages to regularly attend classes. In Badra City additional buildings for three secondary schools have been built in 2014. Moreover, Gazprom Neft provided modern computer equipment to the schools of the city. Gazprom Neft financed the renovation of the town medical clinic in Badra and supplied an emergency medical care unit with modern medical equipment. Also, the renovation and construction of power grids in Badra was financed in 2013.

For the town of Badra the oil field is, in fact, a local economic mainstay, as almost 30% of its residents work at the production field. The company is conducting a program of the retraining of Iraqi professionals to work in the field. Selection is made on a competitive basis. Prospective employees undergo a special 2-year profession and language training program. Today, more than 90 Iraqis have already been employed at the field.

Gazprom Neft launched the project from the initial stage and in a short period of time was able to complete work necessary for the commencement of commercial production at one of the most challenging fields in Iraq. International experience gained in Badra will be extremely useful for future international projects of Gazprom Neft.

Acquisition of interest in the Garmian (40%) and Shakal (80%) projects in Kurdistan region in 2012. In 2013 the company entered the Halabja project (80% share) with reserves of 90 mln tonnes of oil.

• Italy. Gazprom Neft acquired an oil and lubricant plant in the city of Bari in 2009.
• Cuba. A 30% stake in a project for the development of four shelf blocks with reserves of 450 million tonnes. First appraisal well was drilled in 2011.