JSC Gazprom Neft Board of Directors reviews business development strategy

Press-release

The JSC Gazprom Neft Board of Directors has reviewed information on its petroleum products quality-improvement program, throughout the company’s refineries. Following wide-ranging modernization all JSC Gazprom Neft facilities have (from 2013, significantly ahead of Russian Federation government deadlines) switched to the production of Euro 5 ultra-low-sulfur (ULS) fuels. Total investment in this program since 2007 stands at RUB65 billion.

The next stage of this modernization program will focus on improving the depth of refining. Expected to run to 2020, this program envisages the construction of six new plants and the reconstruction of three pre-existing facilities, with total investment estimated at RUB170 billion. Depth of refining at JSC Gazprom Neft facilities is expected to increase from 80 to 94 percent, with production of light petroleum products growing from 69.1 to 80.6 percent.

The Board of Directors has also reviewed recent results and current strategy on the development of its international business. The JSC Gazprom Neft portfolio currently includes more than 20 international projects, with the company engaged in geological exploration and development in Angola, Bosnia and Herzegovina, Hungary, Iraq, Romania, Serbia and Venezuela, while continuing to investigate other new and viable E&P opportunities in the Middle East, Africa, and the Balkans.

Refining outside of Russia is undertaken at facilities in Serbia and Belarus. 2014 should also see the company enter the South—East Asia market. International refining assets allow access to premium markets in other countries, supplies to which would not be viable from Russian refineries. Increasing sales volumes and the further extension of the company’s geographic presence through its own high-margin retail channels (its filling station network, the wholesale and retail sale of kerosene and marine fuels, and the sale of lubricants and bitumen products) also remains a strategic objective for the development of the company’s international operations.

Results of the company’s activities in the petroleum products markets of Central Asia (Kazakhstan, Kyrgyzstan and Tajikistan) were also presented to the Board of Directors for their review.

The rate of business growth in 2013 exceeded planned targets cited under the company’s Development Strategy. Total retail sales through the company’s filling station networks in Kazakhstan, Kyrgyzstan and Tajikistan in 2013 are expected to be in the order of 833,000 tons — an increase of 23 percent on the 677,000 tons sold in 2012.

The company’s assets as at end-2013 are expected to include 54 filling stations and one storage facility in Kazakhstan, 110 filling stations and one storage facility in Kyrgyzstan, and 25 filling stations and one storage facility in Tajikistan. On that basis, JSC Gazprom Neft’s market share in retail sales of petroleum products stands at six percent in Kazakhstan, 17 percent in Tajikistan, and approximately 72 percent in Kyrgyzstan.