COMPANY BUSINESS TARGETS

Gazprom Neft’s main strategic targets and business objectives until 2025, by operating segment

EXPLORATION AND PRODUCTION

Gazprom Neft intends to increase hydrocarbon production to 100 million TOE per year by 2020, and to maintain that level through to 2025, with at least 10% of total production coming from overseas projects. While growing its production levels, the Company plans to maintain reserve life of 20 years. To achieve these goals, Gazprom Neft will look to maximize oil recovery from its current resource base by adopting current development optimization best practices, reducing costs through proven technologies, as well as applying and implementing new technology on a large-scale. Gazprom Neft intends to establish a new production centre in the north of the Yamalo-Nenets Autonomous Area and to expand its presence in the Arctic shelf. Gazprom Neft considers non-conventional reserves as a growth opportunity and will develop this asset category as an important element of its portfolio. In addition, the Company plans to bring new production centres in Russia online by 2020, and is building a strong set of competencies to pursue projects on the global scale.

OIL REFINING

Modernisation and improvement of operating efficiency remain the strategic priorities in the development of Gazprom Neft’s refining operations in Russia. The first phase of modernisation, aimed at improving the quality of motor fuels, has been completed, and the Company is launching the second phase to increase the refining yield at its Russian facilities. At its chosen sites, Gazprom Neft is planning to put into operation hydrocracker complexes in the Omsk refinery (2018) and the Moscow refinery (2019), with an annual capacity of 2 million tonnes in each plant. In addition, the Company plans to construct the following large-scale facilities: a flexicoking unit in the Moscow refinery by 2019 (2 million tonnes capacity) and a coking unit in the Omsk refinery by 2018 (2 million tonnes capacity). Currently, a YaNAD modernization program is being extended to include a deep refining complex as well. The implementation of the planned modernization projects will enable Implementation of the planned modernisation projects will enable Gazprom Neft to achieve the following key indicators in the Russian Federation in 2025: refining volume of 40 million tonnes per year, refining yield of 95%, and light petroleum product output of 77%. Gazprom Neft considers international expansion as a way to create more value for shareholders, and global diversification and infrastructure development to ensure long-term business growth. In order to develop oil refining outside Russia the Company is researching suitable assets in the two key regional markets: Europe and South-Eastern Asia.

SALES

Gazprom Neft has two primary sales segments: motor fuel sales via its corporate retail network and distribution depots, and petroleum product sales to commercial customers. The main goal for Gazprom Neft’s sales business is to achieve the scale commensurate with its refining business and to be able to sell 100% of the petroleum products, which the Company produces, on the market in order to attain maximum coverage of the entire oil business value chain, while meeting investment profitability and required margin criteria.

SALES OF MOTOR OILS

Gazprom Neft plans to increase total motor fuel sales in Russia and the CIS to 24.7 million tonnes by 2025. Russia and CIS retail sales will be the main source of growth with the target of 15 million tonnes. Sales via distribution channels are expected to be 9.7 million tonnes in 2025. To achieve these targets, the Company plans to expand its retail network in Russia and the CIS to 1,880 filling stations by 2025, and to completely cover payroll costs of the filling station network by profits from non-fuel sales.

SALES OF PETROLEUM PRODUCTS TO INDUSTRIAL USERS

In order to increase petroleum product sales, Gazprom Neft has identified separate premium business segments, including sales of jet fuel, lubricants, bitumen, petrochemicals and ship bunkering. Individual strategic plans have been developed for each segment in the Company. The CJSC Gazpromneft-Aero sales chain is focused on increasing jet fuel sales to 5.3 million tonnes and further expanding the sales network to 220 airports by 2025 (58 Company-owned fuelling complexes, 162 airport locations). The OJSC Gazpromneft Marine Bunker strategy envisions active growth in international markets: in Europe, the Middle East and Asia, as well as an increase in market share in Russia. There are plans to grow bunker fuel sales to 8.2 million tonnes, and the Company’s own fleet is expected to expand to 20 vessels by 2025. As part of the bitumen business development programme, the Company plans to achieve a sales increase of 2.5 million tonnes per year by 2025. Gazprom Neft-Lubricants plans to create a national lubricant company, which is recognised as the leader in the production of high-specification, premium-grade oils, lubricants and service fluids under a global brand, bringing the annual sales of packaged products to 330,000 tonnes by 2025.