PUBLIC AND GOVERNMENT RELATIONS (PR and GR)

The Company continues to strengthen its dialogue with federal government agencies and organisations to improve legislation in the oil and gas sector and to establish a favourable investment climate in Russia. The implementation of principles and mechanisms aimed at standardising the Company’s work in the regions is ongoing, as part of the Corporate Regional Policy Concept adopted in 2010.

Gazprom Neft’s information policy and interaction with government

“The ‘Strive for Better’ slogan describes the key development principle that Gazprom Neft has been following in recent years. This new promotional concept made it possible to convey the Company’s values and achievements to a wider audience and demonstrate the effectiveness of its social projects,” said Alexander Dybal, member of the Management Board of Gazprom Neft.

In 2013, the Company continued to actively engage with public and government stakeholders using the principles of dialogue and partnership.

As part of its commitment to transparency, the Company informs stakeholders about all aspects of its operations. For example, in 2013, 141 official statements and 20 interviews given by Company management to the largest Russian and foreign business, social and political media were published on Gazprom Neft’s website. In order to raise greater awareness of Gazprom Neft’s projects, press tours were organised to give journalists from federal and regional media an opportunity to visit the Company’s production facilities – the Omsk and Moscow refineries, the facilities of Naftna Industrija Srbije (NIS) (Gazprom Neft’s subsidiary in Serbia), and Gazprom Neft-Khantos’s fields in the KhMAD-Yugra. In addition, Gazprom Neft’s top managers regularly held press conferences and briefings, answering questions concerning the Company’s operations and plans.

The main topics of interest during the year included the ongoing modernisation of the Company’s refineries and their switch to Euro 5 standard fuel production, the implementation of hard-to-recover and non-conventional reserve projects, and the development of large projects in new regions, including in the north of YaNAD and outside Russia.

The Gazprom Neft Group websites, combined in a single integrated system that gives increased access to information about the Group’s activities to all stakeholders, are the most important communications tool.

In 2013, Gazprom Neft’s website won the Business Website Design Award at the 13th All-Russian Internet Contest “Golden Website”.

Increase in corporate website traffic, %

2011/2010

2012

2013

Increase in traffic, %

+ 53

+ 30

+ 37

In 2013, a strategy was developed to promote corporate communications for business audiences. In spring 2013, the Company’s first-ever visual advertising campaign was launched under the slogan ‘Strive for Better’. Conceptual solutions reflecting the trends of the Company’s key business lines and highlighting the aspiration for excellence have appeared in a range of business and industry publications.

Key activities in the area of public and government relations

The Company is actively involved in dialogue to improve legislation in the oil and gas sector and to establish a favourable investment climate in Russia.

Gazprom Neft managers and employees work continuously on building and maintaining an active dialogue with public authorities to improve regulatory activities and stimulate the development of the oil and gas industry.

When interacting with federal executive and legislative authorities, Company representatives placed special emphasis on the tax and customs tariff regulation in the oil and gas industry, particularly with regard to the creation of additional stimuli to develop new fields, extract hard to recover oil, implement cutting-edge technologies to enhance oil recovery and increase Russia’s refining depth, as well as to reduce administrative barriers connected with the regulation of sub-soil asset exploration and mineral resource replacement and improve Russia’s anti-dumping and HSE laws and regulations.

A positive outcome of our work was the passing of Federal Law No. 263-FZ of 30 September 2013, adopted to amend Chapter 26 of the Tax Code of the Russian Federation and to establish a formula-based procedure for the calculation of the mineral extraction tax (MET) levied on extracted flammable natural gas and gas condensate. This law took into account the Company’s suggestions on how to balance its own competitive conditions and those of other Russian independent natural gas producers. From 1 July 2014 the decreasing coefficient was eliminated. The difference in the MET rate for Gazprom and independent producers will be based on a special calculation procedure.

Gazprom Neft has also been actively involved in the processes of improving applicable environmental legislation and developing draft laws by engaging with executive and legislative authorities and taking part in the activities of the Russian Union of Industrialists and Entrepreneurs. In 2013, the Company was involved in the modification of a number of draft laws. For example, suggestions were made to amend Federal Laws On Production and Consumption Waste and On Environmental Expert Examination.

In addition, the Company took an active part in preparing comments and suggestions for the discussion of the following key legal amendments adopted in 2013: amendments to Federal Law No. 213-FZ of July 23, 2013 aimed to stimulate the implementation of new investment projects for the development of hard to recover reserve fields, and Federal Law No. 268-FZ of 30 September 2013, which establishes new tax and customs incentives for hydrocarbon extraction on the Russian continental shelf.

In 2014, the Company will focus on the discussion of steps to improve the tax and customs tariff system within the oil sector, including the adoption of an approach to resource production taxation based on the entity’s financial performance (marginal income tax/profit-based tax), the extension of MET ‘holidays’ with respect to oil extracted in the Yamal Peninsula (YaNAD) and in Eastern Siberia (Krasnoyarsk Territory, Irkutsk Region and the Republic of Sakha), the decrease in oils export customs duties and other topical issues to increase the attractiveness of making investments in the oil industry.

Working meetings with representatives of regional executive and legislative authorities and participation in Russian regional authority-level consultative bodies (working groups) remain the key tools for building and developing relations with the regional authorities and promote the Company’s business processes 1. Working group on the coordination of activities of Fuel and Energy Sector entities operating in the KhMAD-Yugra, and KhMAD-Yugra government.
2. Working group on the discussion of issues and elaboration of suggestions concerning the development and regional legislation related to the creation of favourable conditions for the implementation of investment projects by oil and gas companies in the region.
3. Temporary working groups comprising specialists from the Company and regional administrations are established in order to solve local issues of cooperation in various areas of Gazprom Neft’s activity and business.
The Company’s participation in law making regarding improvements in regional legislation and creating favourable conditions for business development is also an effective tool to establish a favorable investment climate.

In 2013, the Company managed to secure existing State support measures (tax breaks) for its YaNAD and KhMAD subsidiaries. The Gazprom Neft Orenburg investment project was approved by the government of the Orenburg Region as a priority, and in 2014 the enterprise will be entitled to state support. The Company also initiated changes to regional laws in the Tomsk Region to extend investment project tax benefits to oil and gas companies.

The Company is developing its level of cooperation in its sales segment areas, such as aviation fuel supplies, bitumen material supplies and the expansion of the filling station chain. For example, Fuelling Company Omsk (Central), a joint venture with OJSC Omsk Airport, was set up. A joint working group comprising specialists from the Company, the YaNAD government and YaNAD airports was established to develop cooperation in the area of aviation fuel supply in Yamal airports. In a number of regions, an agreement was made to utilise innovative bitumen brands in road construction. As a result, a joint road repair pilot project with the Government of the Omsk Region using polymer-bitumen binding materials was implemented to assess the performance of these materials under higher load levels. Similar pilot projects will be implemented in the Tomsk and Leningrad Regions. A successful outcome will help increase the volume of Gazprom Neft’s innovative bitumen used in road construction.