Contents

Message froM Director general

the ComPany’s soCial

Profile resPonsibility

01 04
Key performance indicators environmental safety 54
of oJsc “surgutneftegas” 8
hr policy 60
the company today 10
social activity, charity and sponsorship 64
events of the year 12
CorPorate
the company and the oil and gas sector 16 governanCe
and

05
seCurities
Business priorities 21

Key risks related to the company’s

22
operations
the Board of Directors 72
individual executive body 75
rePort of the BoarD of Directors
of oJsc “surgutneftegas” remuneration paid to the members of
on the coMPany’s PerforMance the company’s Board of Directors 75
anD ProsPects for DeveloPMent
of Business Priorities report on the company’s compliance
with the principles and recommendations
ProduCtion
of the corporate governance code 76
oPerations report on declared (accrued) dividends
on shares of oJsc “surgutneftegas” 87
02 additional
information
resource policy 28
oil and gas production 32 06
oil refining and gas processing 39
list of the company’s transactions carried
sales of oil products 42 out in the reporting year 90
Power generation 44 energy resources utilized by the company 91

researCh and baCkground

teChnology information

03 07
r&D profile 48 information about the company in the internet 94
innovations 49 full corporate name 94
information technologies 51 representative offices 94

oJsc “surgutneftegas”, “company”, “surgutneftegas”, “we”, “our”, “us” and “joint stock company” used in the text of the Brochure are interchangeable terms that relate to oJsc “surgutneftegas”
and/or oJsc “surgutneftegas” and its subsidiaries for core activities (llc “Kinef”, llc “lengiproneftekhim”, llc “Kirishiavtoservis”, llc “Kaliningradnefteproduct”, llc “Pskovnefteproduct”,
llc “novgorodnefteproduct”, llc “Ma “tvernefteproduct”) subject to the context.

Annual Report 2017 OJSC “Surgutneftegas”

 dear fellow shareholders!
the reporting year of 2017 was
marked by strong production and inancial
performance for OJSC “Surgutneftegas”.
the external factors and constraints
certainly had a signiicant efect on
the Company. however, once again the
chosen business model based on careful
planning and activities improvement
as well as operational excellence and
high quality assurance had proved its
sustainability.
Over the last three years,
the Company’s operating proit has
remained stable despite diicult
macroeconomic conditions and the
increased tax burden. in 2017, it
amounted to over RuB 232 billion, thus
demonstrating consistent development
and eiciency of all production segments,
our ability to consider potential risks,
faster and successfully respond to the
challenges and changes of the external
environment.
in 2017, oil production of
OJSC “Surgutneftegas” totaled 60.5 million
tonnes, which is below the Company’s
capacity and is due compliance with
international agreements of OPeC and
non-OPeC producers (including Russia) to
cut output. At the same time, we managed
MESSAGE FROM to maintain our drilling activities and keep
up the number of wells put into operation.
DIRECTOR GENERAL We also performed all scheduled well
intervention services and production
infrastructure construction. the Company
continued to introduce innovations and
perform testing of improved equipment
and technology. As a result, the Company
was able to further strengthen its
productive and economic potential.
in 2017, OJSC “Surgutneftegas” put
into operation ive new oil ields, including
the Demyanskoye ield, one of the largest
Annual Report 2017 OJSC “Surgutneftegas”
ields of the uvatsky cluster, which was
discovered by the Company in 2015. its
development was based on the yuzhno-
nyurymskoye ield brought onstream
in 2016. in the reporting year, we put into
operation a 8 MW gas turbine power plant
to supply electric power to the Company’s
facilities in the region. the infrastructure
enables us to develop new oil ields of the
group and increase oil production which
will reach about 3 million tonnes per year
in the mid-perspective.
in the reporting year, the
Rogozhnikov ields achieved target
production levels of about 4.2 million
tonnes of oil. After commissioning in 2017,
the filipenko ield became the ifth one
within the group. Crude output continued
to grow in eastern Siberia and in 2017 it
reached 9 million tonnes or almost 15% of
the Company’s total production.
in 2017, OJSC “Surgutneftegas”
accomplished an extensive development
drilling program with 4.7 million meters
drilled, up 4.2% compared to 2016.
the Company brought online 1,250 new
production oil wells and 622 injection
wells. Prospecting and exploratory
drilling totaled 202.5 thousand meters.
Due to high eiciency of prospecting and
exploration activities, in the reporting year
the additions of the recoverable AB1С1
oil reserves totaled 74.4 million tonnes,
which is 23% higher than oil production.
the Company discovered two oil ields
in Khanty-Mansiysky Autonomous
Okrug – yugra, the vostochno-Serginskoye
ield and the lungorskoye ield, as well
as 18 new oil deposits at the ields
discovered earlier.
in the reporting year, investments in
the upstream sector amounted to about
RuB 200 billion.
3
 the completion of a large-scale
construction project of the lK-2B high-
octane gasoline plant at the Company’s
reinery, llC “Kinef”, was the highlight
of the reporting year for the downstream
sector. the reinery will make it possible
to produce only high-octane gasoline
complying with the standards for
environmental Class 5. Over the last
ive years, the Company has increased
the recovery of light oil products from
40% to 54% due to construction of new
large units and upgrading of the existing
facilities at the reinery. this provides
about 2.5 million tonnes of additional
output with higher added value.
in the sector of power generation,
at the end of the reporting year the
total capacity of the Company’s power
generation facilities exceeded 960 MW.
in-house power generation satisies
about 48% of the Company’s energy
consumption and over 90% of the thermal
energy demand of its upstream sector.
in the reporting year, power generation
amounted to over 5.7 billion kWh.
in 2017, the Company’s net proit
totaled RuB 149.7 billion due to the
achievement of the performance targets,
accomplishment of the scheduled
tasks in all business lines as well as the
growth in oil prices as a result of gradual
rebalancing of the market, and other
factors. At year-end, the Board of Directors
resolved to propose to the general
shareholders’ meeting to pay dividends in
the amount of RuB 0.65 for one ordinary
share and RuB 1.38 for one preference
share of OJSC “Surgutneftegas” allocating
about RuB 33.9 billion for dividends.
in today’s environment, innovations
are drivers of eiciency for the oil and
gas industry. Operating conditions
are getting complicated in terms of
both geological and macroeconomic
factors, thus imposing higher standards
for our competences, knowledge and
ability to work with reserves of diferent
4 5
characteristics. to increase its competitive Oil & gas Companies of Russia organized in OJSC “Surgutneftegas” i would like to
advantages, the Company annually cooperation with the World Wildlife fund. thank all our employees for the results
implements a wide range of activities the Company’s production – oil, achieved in 2017. i am convinced that
to adopt new technological processes gas and reined products which are used their knowledge, experience, innovation
and types of production and equipment as energy sources and raw material to and, above all, innovative engineering
and performs testing of new machinery produce a large variety of goods – will ideas, initiative and creativity in dealing
and technologies. every year these remain essential in the foreseeable with extensive challenges will enable
eforts allow the Company to achieve future. thus, we are aimed at long-term the Company to further enhance its
the signiicant economic beneit which development given the importance of production and economic potential and
amounted to over RuB 11 billion in 2017. the oil and gas industry for our country play the leading role in the Russian oil and
Certainly, these results were mainly and society. OJSC “Surgutneftegas” is gas industry. this promotes conidence
attributed to close cooperation with engaged in social and charity programs that the Company will further achieve
our partners. throughout its existence, as well as regional partnership through new production targets and in 2018 will
OJSC “Surgutneftegas” has been actively joint participation in various territory be able to maintain the momentum and
cooperating with the Russian research development projects. the Company continue its development fostering the
and development organizations, design provides its employees with comfortable interests of the shareholders, employees
institutes, engineering companies, working and living conditions and ofers and society.
iron and steel enterprises, oil and gas extra social beneits and guarantees
equipment manufacturers and other deined by the collective agreements. vladimir l. Bogdanov
representatives of related industries, On behalf of the Board of Director general
therefore contributing to development of Directors and the management of OJSC “Surgutneftegas”
national science and partner companies.
i am conident that, together, we will
not only meet today’s challenges but
also achieve new goals of technical and
technological development.
the environmental policy is
another key priority of the Company.
to this end, we are striving to mitigate
an environmental impact, use natural
resources in a rational way and ind
solutions to employ more eco-friendly
materials and production practices.
Annually, the Company spends over
RuB 20 billion to fund environmental
projects. Sustained investment and
responsible attitude to environmental
safety provide our leadership in
many aspects of environmental
management. in the reporting year,
OJSC “Surgutneftegas” won All-Russia
contest “leader of environmental
protection in Russia – 2017” in the
category “Best environmentally
responsible company in oil production
industry”. Once again the Company
became one of the leaders in the
environmental Responsibility Rating of
Annual Report 2017 OJSC “Surgutneftegas”
 01
The Company’s
profile
Key performance indicators
of OJSC “Surgutneftegas”

The Company today

Events of the year

The Company and the oil

and gas sector

Business priorities

Key risks related

to the Company’s operations
Oil production Gas production
’000 tonnes mn cub m

61,453 61,425 61,622 61,849 60,545 12,058

key performance indicators
9,446 9,560 9,760 9,957 of oJsC “surgutneftegas”
ConsolidaTed operaTing resulTs

indicator unit 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Oil production mn tonnes 60.5
gas production bcm 10.0
Primary hydrocarbon processing mn tonnes 18.2
Output of main types of oil products: mn tonnes 17.7
– motor gasoline 2.5
Revenue (RSBU) Sales profit (RSBU) – diesel fuel 6.5
RUB bn RUB bn – jet kero 0.7
– mazut 6.9
1,144 234 235 232
– others 1.1
978 993 200 Power generation (output) mn kWh 5,718
863 177 gas processing bcm 6.5
814
investments: RuB mn 223,224
– oil production 199,204
– oil reining 23,693
– marketing 327
new oil wells brought online wells 1,250
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 injection wells brought online wells 622
gas stations put into operation and upgraded stations 3
Average number of production wells online wells 22,049
gas stations in operation stations 293
Average number of personnel: people 113,582
– oil production 102,005
Total dividends declared Dividend per share
– oil reining 7,876
RUB bn kop.
– marketing 3,701
821
86 692
75 finanCial performanCe (rsbu)

Revenue RuB mn 1,144,373

40 Cost of sales RuB mn 818,593
34 net proit (loss) RuB mn 149,737
26 236
Average annual value of assets RuB mn 3,619,584
138
60 Sales margin % 20.3
2013 2014 2015 2016 2017 Dividend per share:
2013 2014 2015 2016 2017 – ordinary share kop. 65
– preference share kop. 138
60 65 60 60 65
Dividend per one preference share
Dividend per one ordinary share

Annual Report 2017 OJSC “Surgutneftegas”

9
 oil production
The Company today in Russia
OJSC “Surgutneftegas”
is proud
oJsC “surgutneftegas” is one of the largest private 11.1% of its reputation
vertically integrated oil companies of a reliable partner,
status
in russia
of a highly
development prospecting
The Company technological
drilling 17% performs: 20% and exploratory
in Russia drilling in Russia enterprise
Core operaTions of surguTnefTegas and its title
of the Company
with high
hydroCarbon manufaCTuring produCTion of gas proCessing
exploraTion and markeTing peTroChemiCals and power
6.5% production
and produCTion of oil produCTs generaTion standards.
oil refining
prospecting, crude oil reining conversion of processing in Russia
exploration hydrocarbons of associated
and operation production of into raw materials petroleum gas
of oil and gas a wide range for various operaTions of oJsC “surguTnefTegas”
ields of oil products chemicals sale of commercial
gas and by region
wholesale and retail liquid
trade in oil products hydrocarbons
and related goods
and services construction
and operation
of gas turbine
power plants

oJsC “surguTnefTegas” inCorporaTes:

R&D center “SurgutniPineft” (the city of Surgut, the city of tyumen)

Design institute llC “lengiproneftekhim” (Saint Petersburg)

3 drilling divisions and 1 prospecting and exploration division

7 oil and gas production divisions
and the intra-ield petroleum gas gathering and utilization division
5 construction trusts
7 transport organizations OJSC “Surgutneftegas”
carries out prospecting,
5 marketing subsidiaries in the sphere of oil products procurement exploration
in the north-West of Russia and appraisal
of hydrocarbon ields
llC “Kinef” reinery in three Russian
oil and gas provinces –
gas processing plant Western Siberia,
eastern Siberia
and timan-Pechora.
auxiliary and service divisions
the key areas of
hydrocarbon production
are Khanty-Mansiysky
Autonomous Okrug –
yugra, yamalo-nenetsky
Autonomous Okrug,
tyumenskaya Oblast in
Western Siberia and the
Republic of Sakha (yakutia)
in eastern Siberia.
Reining facilities
of the Company
are located in two
regions – the oil reinery
in the city of Kirishi,
leningradskaya Oblast, and
the gas processing plant in
Surgutsky District, Khanty-
Mansiysky Autonomous
Okrug – yugra.
the Company’s
oil products supply
subsidiaries carry out
wholesale and retail sale
of petroleum products
in Saint Petersburg,
leningrandskaya, tverskaya,
novgorodskaya, Pskovskaya
and Kaliningradskaya
Oblasts.
events of the year
January
OJSC “Surgutneftegas” puts on stream the logachev
ield located in Western Siberia.
As the result of an auction, the Company obtains
a license for geological study, exploration and
production of hydrocarbons at the Severo-liginsky
license block in nenetsky Autonomous Okrug.
february
OJSC “Surgutneftegas” obtains licenses for
geological exploration, prospecting and appraisal
of mineral deposits at the Chaikinsky license block
in irkutskaya Oblast as well as for exploration and
production of mineral resources at the vostoschno-
nazymsky license block in Khanty-Mansiysky
Autonomous Okrug – yugra.
march
At the drilling site on the training ground of
the Company’s Polytechnic training Center a new drilling
rig Bu 5000/320 eK-BMCh is constructed. this drilling
rig is designed for cluster drilling of wells for oil and gas
production in the far north areas. using the rig equipped
with automated control system training groups
can practice round-trip operations and procedures
performed by the shift team in case of gas, oil and water
shows. this training facility is the only one facility of this
kind in Russia.
april
for the irst time, the Company holds an economic
competition of well workover crews in which more
than 1.3 thousand employees from 99 crews of well
workover take part.
for the ifth time, the Company evaluates the results
of the annual economic competition held among shops
and oil and gas production blocks. in the reporting year,
more than 5.5 thousand employees representing teams
and crews of 54 shops and blocks of seven oil and gas
production divisions take part in the competition.
12
the meeting of Surgutneftegas toolpushers
takes place where the winners of the contest among
the Company’s drilling crews for the Alexander usoltsev
Award have been awarded. More than 2.2 thousand
employees representing 66 drilling crews take part in
the competition.
OJSC “Surgutneftegas” holds the XXXvii Scientiic
and technical conference for young professionals and
scientists attended by 1,162 employees.
may
fifteen employees of OJSC “Surgutneftegas” win
prizes in the Xvii Regional scientiic conference for
young professionals from companies engaged in subsoil
development within KMAO-yugra.
Kinef-Surgutneftegas women’s water polo team
successfully defends the Russia’s champion title for the
15th time. the team becomes the euroleague champion
for the irst time and for the 10th time wins in the inal of
the Russian Cup Competition.
June
At the yuzhno-nyurymskoye ield in uvatsky District,
tyumenskaya Oblast, a gas turbine power plant with a
total capacity of 8 MW is put into operation. it is the irst
gas turbine power plant in this district. the gas turbine
power plant is designed for associated petroleum gas
(APg) utilization as well as for electrical and thermal power
generation for oil production facilities in this district.
OJSC “Surgutneftegas” puts on stream the
Sakhalinskoye ield located in Western Siberia.
July
the Company’s health resort “neftyanik Sibiri” of the
health trust “Surgut” welcomes its 700 thousandth visitor.
the Company holds the inals of professional skills
competitions “Best-in-Profession”. forty three thousand
employees representing 110 professions and specialties
take part in 59 competitions, 1,162 of them reach
the inal.
13
events of the year
august
the Company obtains a license for exploration and
production of mineral resources in the vostochno-
Serginsky license block in Khanty-Mansiysky
Autonomous Okrug – yugra.
september
in tribute to the professional holiday – the Day of
Oil and gas industry Workers – 3,226 employees of
OJSC “Surgutneftegas” and its subsidiaries receive state,
industry and other awards.
the Company brings into development the yuzhno-
Konitlorskoye ield in Western Siberia
october
the Company celebrates the 40th anniversary
of Production Association “Surgutneftegas”. On the
anniversary, for the particular contribution to performing
production tasks by the Company’s business units,
enhancement of their labor eiciency 3,652 employees
of the Company are awarded: of which 112 employees
are awarded with national awards, 230 employees – with
industry awards and 120 employees – with the awards
of municipal and constituent entities of the Russian
federation.
OJSC “Surgutneftegas” puts on stream the filipenko
ield located in Western Siberia.
the Company wins the Xiii All-Russia contest
“leader of environmental protection in Russia – 2017”
in the category “Best eco-responsible company in oil
production industry”.
OJSC “Surgutneftegas” takes part in the iv All-Russia
contest of implemented projects in the sphere of
energy saving and energy eiciency eneS-2017 and
wins irst prize in the category “Best project on creating
the attractive light environment and its elements
(architectural street leD lighting, illumination) based
on energy eicient leD technologies”. the completed
project on illumination of the Palace of Arts “neftyanik”
is featured in the contest.
14
november
for the fourth year in a row, the Company is one of
the leaders among Russian oil companies according to
the results of the environmental Responsibility Rating.
OJSC “Surgutneftegas” is honored with the third prize.
the rating is compiled by CReOn group and World
Wildlife fund (WWf) of Russia with the assistance of
the national Rating Agency and the Ministry of natural
Resources and environment of the Russian federation.
the Polytechnic training Center of
OJSC “Surgutneftegas” holds practice round of the
regional championship “young Professionals” (WorldSkills
Russia) by profession “Oil and gas production operator”.
OJSC “Surgutneftegas” commissions the
Demyanskoye ield located in Western Siberia which is a
part of the uvat ields.
the total amount of energy generated by the Company
since the beginning of operation of in-house power
generation facilities has exceeded 50 billion kWh.
in the international tournament among women’s
water polo teams from european countries, Kinef-
Surgutneftegas team wins len european Champions Cup.
to promote blue-collar and engineering professions,
OJSC “Surgutneftegas” becomes a partner in holding
the v All-Russia forum of working youth. the Polytechnic
training Center of OJSC “Surgutneftegas” organized
educational and discussion venues for the participants
of the forum – young people from diferent territories of
the Russian federation.
the Company obtains licenses for exploration and
production of mineral resources at the lungorsky license
block in Khanty-Mansiysky Autonomous Okrug – yugra,
for geological study, prospecting and appraisal of ields
at the Alyutinsky license block and the yunyagsky license
block in nenetsky Autonomous Okrug.
december
the Company celebrates the ifth anniversary since
the landing of the irst plane at the airport “talakan”. Over
this period the airport in the Republic of Sakha (yakutia)
has received more than 900 thousand people.
15

The Company and
the oil and gas sector
developmenT Trends in The seCTor
in The reporTing year
the global oil and gas market in 2017
witnessed the gradual recovery of supply and
demand balance. this result was achieved
due to implementation of previously reached
agreements on reduction in production of oil
between OPeC and a number of producing
countries (OPeC+) which led to the oil price
growth in the second half of the reporting year.
Moreover, in 2017, investments in global oil
and gas industry increased by 6% against the
previous year.
in the reporting year, the growth of oil
demand continued, however, the growth rate
slightly slowed to 1.5% against 1.9% in 2016.
this growth was driven by countries that are
not members of the OeCD in which total oil
consumption increased by 4.6%. Among them
the highest increase in demand was achieved in
China and india. these countries along with the
uSA, Japan and Russia are the world’s largest oil
consuming countries – they account for 46% of
world oil consumption.
Apart from the increase in demand, the
recovery of balance in the global oil market in
the reporting year was inluenced by control
over the volumes of production. Due to OPeC+
agreement, the world oil production volume
in 2017 remained the same as in 2016 and
totaled about 3.9 billion tonnes. Also, the OPeC’s
share in world oil production decreased by 1.4%
and the share of cartel countries decreased to
41.2%. the largest decrease of production was
noted in Saudi Arabia, venezuela, Kuwait and
the united Arab emirates. this decrease, that
was the result of the agreement, was partly
compensated by the growth of production
in libya, nigeria, iraq and iran. About 75% of
world oil production in the reporting year was
provided by 12 countries, with the leaders in
terms of production among them being Russia,
Saudi Arabia and the uSA.
the reached agreements on the oil
production decrease were followed by the
increase in quotations: the annual average
Brent price increased by more than 10 uSD to
54.19 uSD/bbl. During the irst half of 2017, the
quotations were decreasing and bottomed at
44.28 uSD/bbl in June. in the second half of the Oil production in Russia
year, the quotations were gradually recovering
and topped at 66.54 uSD/bbl in December 2017.
mn tonnes
World proved oil reserves changed
insigniicantly against 2016 and amounted to 547.5 546.8
523.2 526.7 534.0
224.6 billion tonnes with 89% of oil reserves
concentrated in 10 countries: seven countries –
OPeC members as well as Russia, the uSA and
Canada. the oil reserves in OPeC are 74% of
the total world volume. in the reporting year,
they slightly increased (by 0.6%) due to the
increase in nigeria, Angola, iraq and venezuela.
venezuela is still the world’s leader in terms of
oil reserves (41.1 billion tonnes). the largest
decrease of oil reserves (by 8%) occurred in
Western europe. Oil reserves at the current
volume of world production will be suicient for 2013 2014 2015 2016 2017
57.5 years.
World proved gas reserves in 2017
increased by 0.6% against 2016 to 196.8 trillion
cubic meters. the growth was observed in all
regions except for north America and europe
with the largest increase (by 3%) in the Asia-
Paciic region. the global gas production in the
reporting year increased more signiicantly by
4% to 3.6 trillion cubic meters. About 59.6% of
reserves and about 55% of world gas production
are held by four countries: Russia, iran, Qatar
and the uSA. the uSA remains the leader in
terms of gas production. in the reporting year,
the global market of liqueied natural gas (lng)

Idle wells in total well stock of Russian companies Prospecting and exploratory drilling by Russian companies
at the end of 2017 in 2017

11.1% OJSC “Surgutneftegas” 20.4% OJSC “Surgutneftegas”

20.0%
23.2%
28.6%
34.5%
2.1%
34.5% PJSC “nK “Rosneft” 2.6% 28.6% PJSC “nK “Rosneft”
3.8% 546.8 mn tonnes 987.5 thous. meters
14.9% PJSC “luKOil” 5.1% 21.2% PJSC “luKOil”
5.3%
7.2% PJSC “gazprom neft” 5.1% PJSC AnK “Bashneft”

7.2% 5.3% PJSC “tatneft” 2.6% PJSC “tatneft”

21.2%
20.4%
14.9% 3.8% PJSC AnK “Bashneft” 2.1% PJSC “gazprom neft”
11.1%
23.2% Other 20.0% Other

Annual Report 2017 OJSC “Surgutneftegas”

16 17
 has been rapidly growing, with the demand for
lng increased by more than 10%. Main lng
export lows are directed to Asia (about 70%)
and europe (about 18%). that said, Qatar covers
25% of global demand for lng and Australia and
Oceania cover about 22%.
in 2017, the volume of oil production in
Russia amounted to 546.8 million tonnes, 0.1%
lower than in 2016. A slight decrease is due to
Russia’s participation in the agreement with
OPeC countries on oil production limitation.
More than 81% of Russian oil production falls
on vertically integrated oil companies (viOCs),
however, their share in the volume of oil
production gradually decreases. On the contrary,
independent oil producers increase production
(+2.5% in the reporting year). in the regional
structure, the increase in oil production by
Russian companies occurred mainly in eastern
Siberia and the far east. the decrease in oil
production by 0.6% was observed in Western
Siberia mainly at the mature ields.
Despite the insigniicant decrease in oil
production in Russia, in the reporting year
companies increased oil export to 257 million
tonnes. however, the amount of exports to CiS
countries decreased by 0.5% to 18.1 million
tonnes. the oil export to non-CiS countries
increased by 1.2% to 238.7 million tonnes.
Due to the increase in oil production in eastern
Siberia, the highest growth of export was to the
Asian-Paciic region (by 9.5%), mainly to China.
the prospecting and exploratory drilling
meterage in Russia in the reporting year
increased by 8% to 987.5 thousand meters.
Within previously issued licenses 53 new ields
were discovered. the additions of commercial
reserves due to geological prospecting
amounted to 526 million tonnes.
Development drilling by Russian oil
companies increased by 12% to 27.6 million
meters, with 8,184 new oil wells brought online.
At the end of the reporting period, the total
number of production wells amounted to 175,335
and the share of idle wells increased by 1.5% to 14%.
Primary crude oil distillation remained
at the level of previous year and amounted
to 280 million tonnes. At that, there is further
qualitative improvement in the structure of
production of oil products: production of fuel
oil continues to decrease, and production of
diesel fuel went on increasing. in the reporting
year, the conversion ratio on reineries increased
by 2% to 81%, the yield of light oil products
increased to 62.1%. Performance improvement
in oil reining and stable production of quality
motor oils are the result of a comprehensive
modernization of reineries made in recent years.
in accordance with quadripartite agreements Oil refining in Russia
between fAS Russia, Rostekhnadzor, Rosstandart mn tonnes
and oil companies during the period from 2011
to 2017, 78 secondary oil processing units were
commissioned or upgraded. 289.9 282.7 279.4 280.0
the amount of gas production in Russia 275.2
in the reporting year amounted to 691.1 billion
cubic meters, which is 7.9% higher than in
the previous year. vertically integrated oil
companies account for over 14% of Russia’s
gas production. in the reporting year, their
production increased by 5.1%. the volume of
associated petroleum gas produced by the
companies increased by 3.6% to 68.7 billion
cubic meters with the level of APg utilization on
the industry scale continued to decrease and
in 2017 reached 86.8%.
2013 2014 2015 2016 2017
in the reporting year, the following
development trends of the Russian oil and gas
sector were observed:
moderation of oil production due to
Russia’s participation in the agreement
between OPeC+ countries;
increased exploratory and development
drilling;
increased oil export, mainly to Asian-Paciic
region;

Development drilling by Russian companies Actual APG production by Russian VIOCs

in 2017 in 2017*

17.0 % OJSC “Surgutneftegas” 14.4% OJSC “Surgutneftegas”

17.5% 1.0%
1.4% 1.4% 4.3%

2.9%
12.5%
8.8% 50.2%
41.7% PJSC “nK “Rosneft” 50.2% PJSC “nK “Rosneft”
27.6 mn meters 68.7 bcm
41.7% 10.7% PJSC “luKOil” 16.2% PJSC “luKOil”

10.7% 8.8% PJSC “gazprom neft” 12.5% PJSC “gazprom neft”

14.4%
2.9% PJSC “tatneft” 1.4% PJSC “tatneft”

17.0% 1.4% PJSC AnK “Bashneft” 1.0% PJSC AnK “Bashneft”

16.2%
17.5% Other 4.3% Other
* excl. lared gas

Annual Report 2017 OJSC “Surgutneftegas”

18 19

continued upgrading of reining capacities
that improves oil conversion ratio and light
oil products yield, qualitative improvement
in the composition of oil products yield;
increase in gas production by vertically
integrated oil companies.
The Company among iTs peers
OJSC “Surgutneftegas” is one of the
largest vertically integrated oil companies in
Russia. it accounts for 11.1% of the Russian oil
production, 6.5% of oil reining, more than 14%
of associated petroleum gas production by
Russian viOCs.
in the reporting year, oil production by
the Company amounted to over 60.5 million
tonnes of oil, including 9 million tonnes at the
ields located in eastern Siberia. the share of
this region in the Company’s oil production
gradually increases and in the reporting year
it reached 14.8%. the Company ensures the
optimal load of production capacities of its
reinery – llC “Kinef”. in the reporting year, the
volume of oil reining amounted to 18.2 million
tonnes. the reinery produced 17.7 million
tonnes of oil products, including 9.8 million
tonnes of light oil products.
OJSC “Surgutneftegas” is one of the
leaders among the Russian oil and gas
producing companies in terms of drilling.
Idle wells in total well stock in Russian oil companies
at the end of 2017
PJSC “tatneft”
PJSC “nK “Rosneft”
PJSC AnK “Bashneft”
PJSC “luKOil”
PJSC “gazprom neft”
OJSC “Surgutneftegas”
Average for the industry – 14%
20
in 2017, the amount of development drilling
increased by 4.2% to 4,687 thousand meters,
the amount of exploratory drilling increased
by 0.5% to 202.5 thousand meters. the share
of OJSC “Surgutneftegas” in the Russian
development drilling amounted to 17%, in the
exploratory drilling – 20.4%.
By the end of the reporting year,
the Company’s number of producing wells
increased to 23,704. the share of idle wells
remained at the lowest level in the industry –
8%. in 2017, the Company put on stream
1,872 wells, including 1,250 oil wells and
622 injection wells.
the volume of production of associated
petroleum gas by OJSC “Surgutneftegas”
in 2017 amounted to 9.9 billion cubic meters.
the level of APg utilization in the Company
is the highest in the industry and amounts to
99.32%. Maintaining such a level of utilization
over the years is due to the comprehensive
system for gas gathering and utilization, as
well as due to the Company’s policy on timely
construction of the required infrastructure
during the development of new ields.
OJSC “Surgutneftegas” incorporates a
network of marketing subsidiaries in the north-
Western part of Russia. in 2017, the Company’s
retail network included 293 running gas
stations. the volume of oil products sales
amounted to 1.32 million tonnes.
24.0%
15.5%
14.2%
9.9%
9.5%
8.0%
business priorities
oil and gas produCTion:
to strengthen and enlarge the Company’s
mineral resource base through geological
exploration and acquisition of new
promising subsoil blocks;
to develop and apply innovative solutions,
extend the introduction of advanced
technologies and equipment enhancing
the eiciency of geological exploration and
ield development, including ields with
marginal reserves;
to provide the volume of hydrocarbon
production according to the current
conditions on the oil and gas market;
to develop new centers of hydrocarbon
production;
to use the produced associated petroleum
gas in the most eicient way;
to provide a high quality of work and
control costs.
oil refining
and gas proCessing:
to enhance reining and processing
eiciency through modernization and
reconstruction of production facilities;
to increase an oil conversion ratio, share of
the light oil products yield and to reduce
the volume of low-margin products;
to provide an extensive range of products
in accordance with the market needs.
markeTing:
to diversify product supplies
by entering new markets
Annual Report 2017 OJSC “Surgutneftegas”
and developing the Russian transportation
infrastructure;
to increase sales of high-margin products;
to attract and retain consumers by
providing high quality products;
to increase the eiciency of retail sales by
developing a network of gas stations and
expanding the range of related services.
power generaTion:
to develop the energy complex which
ensures generation, transmission and sale
of electric and thermal energy;
to introduce energy-saving and energy
eicient solutions and technologies within
every area of the Company’s operations.
soCial responsibiliTy:
to mitigate the environmental impact,
ensure environmental safety of production
facilities and use natural resources in a
responsible and rational way;
to assure high industrial and occupational
safety standards;
to maintain the reputation of an attractive
and responsible employer, creating
environment for personnel development;
to contribute to balanced social and
economic development of the areas where
the Company operates and preserve the
status of a reliable partner and supplier of
high quality products;
to ofer extra social beneits and
guarantees for the employees, their
families and retired employees.
21
 the Company operates in the areas inflation adversely affects operations
key risks related to the Company’s with stable weather conditions that are of OJSC “Surgutneftegas”. it may influence
not characterized by natural hazards like the level of the current and future production
operations hurricanes, loods and other natural disasters.
however, stability of the Company’s operations
costs, lead to lower profitability and revisions
of the investment plans for new projects.
may be inluenced by extremely low OJSC “Surgutneftegas” takes into account
temperatures. Adverse weather conditions may the impact of actual and expected inflation
Production operations and inancial activity of OJSC “Surgutneftegas” result in disturbance of supply of materials and rates when analyzing the results of its
are exposed to a large number of risks which can afect operating and equipment to the ields due to a breakdown current activities and economic feasibility
of transport connection in the areas with poor of new projects in the field of production,
inancial performance reducing inancial sustainability and revision infrastructure. Severe variations in weather refining and marketing of finished products.
of plans for the Company’s development. OJSC “Surgutneftegas” averages may lead to the machinery and to mitigate this risk, the Company holds
employs a risk management system: the Company developed several equipment failures. A long period of adverse procurement tenders to find reliable
weather conditions and emergency situations counterparties and the most favorable ways
procedures for quantitative evaluation of risk impact and risk control in seaports may afect the planned volumes of goods and services delivery.
as well as choosing relevant methods of risk management. The existing and terms of the inished products delivery. OJSC “Surgutneftegas” is exposed to credit
OJSC “Surgutneftegas” is striving to risk mainly in relation to accounts receivable
system of risk management covers all spheres of the Company’s mitigate these risks taking into account the due to the counterparties’ failure to meet the
operations and makes it possible to efectively detect, assess and adverse weather conditions in construction contractual obligations.
manage risks controlled by the Company as well as to mitigate of production and transport infrastructure in order to mitigate this risk, the Company
facilities by use of machinery and equipment has developed various systems and methods of
negative consequences of the risks which can be hardly inluenced by that are resistant to extreme weather cooperation with counterparties. the Company
the Company. conditions and logistics optimization for applies a system of comprehensive assessment
the delivery of materials and equipment to of counterparties which takes into account their
the ields. inancial position, credit history and status of
indusTry risks railroad transportation services to deliver settlements with the budget. Sales of inished
oil and oil products. to mitigate this risk, products to buyers are carried out by advance
Production operations of Surgutneftegas finanCial risks payment and payment by a letter of credit.
the Company regularly implements measures
are exposed to risks related to the peculiarities Making advance payments to counterparties in
to reduce operating costs and improve OJSC “Surgutneftegas” is exposed to
of the oil and gas industry, the most signiicant inancial risks, among which are currency risk, order to reduce possible losses, the Company
eiciency of existing production facilities.
of which are the drop in oil and oil products interest rate risk, inlation risk, credit risk and uses mechanisms of securing the payback in the
OJSC “Surgutneftegas” purchases machinery,
prices, the growth of prices for purchased raw materials and equipment on a tender basis, liquidity risk. these risks may adversely afect form of bank guarantees and sureties.
materials and services. monitors the quality of procurements, the Company’s inancial performance and liquidity risk is not signiicant to
the drop in oil and oil products prices introduces cost-efective technologies, carries lead to lower proitability, cash low and value OJSC “Surgutneftegas”, as the Company does
in foreign and domestic markets adversely out a close examination of economic eiciency of assets. not raise borrowed funds in money and
affects the ratios of the Company’s revenue, of ongoing and planned investment projects Currency risk due to changes in debt markets to inance its current activities
cash flow and operations profitability. as well as diversiies the ways inished products exchange rates afects OJSC “Surgutneftegas”. and implement new investment projects
An extended period of low hydrocarbon are transported. the Company regularly evaluates the because it has suicient liquid inancial assets.
prices may negatively affect investments possible impact of currency risk on eiciency the Company’s system of inancial planning
in hydrocarbon production and refining of its current activities and investments in allows us to make detailed schedules of
segments and lead to impairment of CounTry and regional risks new projects. in order to minimize this risk, future payments and establish a structure
the Company’s assets. OJSC “Surgutneftegas” carries out its OJSC “Surgutneftegas” monitors the key of the Company’s cash lows that maintains
the Company takes into account the business in several regions of the Russian parameters and the structure of inancial suicient liquidity for timely settlement of
risk of changes in oil and oil products prices federation and is subject to the country and assets and carries out operational planning of its liabilities.
when planning its operating and financial regional risks. cash lows. OJSC “Surgutneftegas” does not apply
activities, evaluating economic efficiency unfavorable development of the Risk of luctuations of the interest rates has derivative inancial instruments to hedge
of new investment projects and measures macroeconomic climate due to external and a limited impact on the Company’s activities, as inancial risks, but takes into consideration
to enhance hydrocarbon production at internal factors may result in a more stringent the Company inances operating expenses and their possible application when developing
the existing fields. taxation policy, lower purchasing power of capital investments from its own funds. At the investment projects, making plans and
OJSC “Surgutneftegas” is subject to the population and afect the inancial performance same time, OJSC “Surgutneftegas” constantly budgets. to mitigate inancial risks,
risk of increasing operational and capital of OJSC “Surgutneftegas”. performs an indicative analysis of interest rates, the Company uses instruments of insurance of
expenditures resulting from the growth of OJSC “Surgutneftegas” operates in regions proitability and risk in the money and capital assets and operations to protect its property
prices for raw materials, supplies, equipment, characterized by stable social and economic markets in order to determine the best options interests in the course of its inancial and
fuel, electric power as well as pipeline and conditions and a low unemployment level. for the placement of inancial assets. business activity.

Annual Report 2017 OJSC “Surgutneftegas”

22 23
 legal risks
for OJSC “Surgutneftegas”, legal risks
are risks of changes in the existing regulatory
environment in the ield of currency, tax
legislation as well as customs regulations and
duties, licensing in oil and gas industry. these
risks may result in higher expenses, lower
operating performance and deterioration of
the Company’s inancial results.
Changes in the existing currency legislation
in regard to currency regulation and control
may result in higher transaction expenses and
lower operating performance of the Company.
OJSC “Surgutneftegas” complies with all
requirements of the current legislation of the
Russian federation.
Changes in the tax legislation may
signiicantly afect the Company’s activities, its
inancial performance and implementation of its
long-term projects.
Surgutneftegas fully provides its tax
payment and other binding payments
under the current legislation of the Russian
federation. the Company regularly monitors
these changes in the legislation in the ield of
tax regulation which allows the Company to
evaluate the consequences of such changes
in advance and take them into account in its
plans. OJSC “Surgutneftegas” makes suggestions
related to iscal policy and takes part in
discussions of new tax initiatives in order to
ensure sustainable development of the oil and
gas industry.
Stricter customs clearance may
negatively afect operating activities and
inancial performance of the Company.
OJSC “Surgutneftegas” evaluates terms
and economic eiciency of foreign trade
operations when it makes decisions to carry out
such operations.
the Company is exposed to the risks of
more stringent regulatory requirements in
terms of licensing of core operations. these
risks may limit the opportunities for further
production expansion, higher expenses, lower
operating performance and deterioration of
the Company’s inancial performance.
24
OJSC “Surgutneftegas” is striving for the sTraTegy risk investment planning and makes decisions about
most rational, safe and eicient use of mineral further development of the Company.
Strategy risk is related to the failure of
resources. the Company applies advanced Wrong assessment of the Company’s
achieving the Company’s long-term goals
technologies of hydrocarbon production and capacities to expand its production operations
caused by mistakes made in decisions that
possesses suicient materials and equipment, may cause a shortage of inancial resources,
determine the strategy of the Company’s
inancial and human resources necessary to materials and equipment, human and
development.
fulill all of its obligations under the provisions management resources, lead to longer time
OJSC “Surgutneftegas” is exposed to
of subsoil use and the requirements of the frames necessary for project implementation
the risks of late detection and response to
current legislation of the Russian federation. and disruption to the Company’s current
possible internal and external threats which
may adversely afect its inancial and operating operating activities.
repuTaTion risk performance. the Company possesses necessary
OJSC “Surgutneftegas” analyzes competitive resources to ensure stability of the current
Reputation risk is related to the operating activities and development of
environment in the key markets of inished
loss of trust and unfavorable perception
products, assesses existing pricing possibilities new projects. the Company’s investment
of the Company’s image by the clients,
when making settlements with consumers decision-making standards minimize the risk
counterparties and other stakeholders due to
and suppliers as well as considers current of the resource shortage necessary to achieve
possible non-conformity of inished products
and forecasted macroeconomic indicators in the Company’s production goals.
with declared speciication, violation of the
terms of payment for goods and services as
well as non-compliance with other contractual
obligations, traditional business practice and
principles of professional ethics.
the main products of
OJSC “Surgutneftegas” (oil, reined and
petrochemical products) are produced in
strict compliance with the requirements and
standards stated in the regulatory documents.
the Company has its own accredited
laboratories providing an ongoing quality
monitoring of oil and gas products produced
and sold. OJSC “Surgutneftegas” informs its
clients and counterparties about the quality
of its products and services and controls their
compliance with contractual obligations.
the Company maintains high standards
of environmental and technological safety,
closely monitors technical condition
of motor vehicles, special vehicles,
equipment and production and transport
infrastructure facilities. these measures
minimize risks of environmental and
technological accidents and occupational
injuries. OJSC “Surgutneftegas” duly fulills
its obligations on tax payment, non-tax
payment, settlements with counterparties
and employees maintaining the reputation of
a reliable partner, socially and environmentally
responsible company.
Annual Report 2017 OJSC “Surgutneftegas”
25
 02
RePORt Of the BOARD Of DiReCtORS
Of OJSC “SuRgutneftegAS” On the COMPAny’S
PeRfORMAnCe AnD PROSPeCtS fOR DevelOPMent
Of BuSineSS PRiORitieS

Production
operations
Resource policy

Oil and gas production

Oil reining and gas processing

Sales of oil products

Power generation
 oJsC “surguTnefTegas” liCenses by region
resource policy region number of licenses
Western Siberia 128
One of the strategic priorities of the Company is to enlarge its resource eastern Siberia 25
base. OJSC “Surgutneftegas” annually carries out a signiicant volume timan-Pechora 11
of works to strengthen its resource potential and replenish hydrocarbon
reserves. The Company expands its geographical presence in promising Republic of Sakha (yakutia) were discovered Additions of class AB1C1 recoverable
areas, participates in auctions for acquisition of new blocks, performs and the federal budgetary institution “State oil reserves (due to exploration)
Commission on Mineral Reserves” reviewed
ield prospecting and exploration within its license areas. the reports on them.
mn tonnes
Due to prospecting and exploration
activities the additions of the recoverable 85.5
At the end of 2017, the Company’s license in 2017, OJSC “Surgutneftegas” performed AB1С1 oil reserves totaled 74.4 million 76.9 74.4
blocks fund includes 164 licenses for subsoil geological exploration at 63 license blocks. tonnes in the reporting year, which exceeded 73.3
use which authorize to carry out its operations Prospecting and exploratory drilling totaled 368.8 million tonnes of oil produced over
in Western Siberia, eastern Siberia and timan- 202.5 thousand meters with eiciency of 80% – a ive year period by more than 20%. 58.6
Pechora oil and gas provinces. Among these 80 wells were drilled and completed and 64 of
licenses there are 143 production licenses and them proved productive.
21 licenses for geological study, prospecting and in the reporting year, western siberia
appraisal of ields. OJSC “Surgutneftegas” conducted seismic Over the years, Western Siberia has been
the Company steadily performs geological surveys in the main areas of its operation – remaining the resource base foundation for
exploration and research studies, monitors Khanty-Mansiysky Autonomous Okrug – yugra OJSC “Surgutneftegas”. the Company holds
subsoil blocks put up at auctions and assesses and the Republic of Sakha (yakutia). the volume license blocks in Khanty-Mansiysky Autonomous 2013 2014 2015 2016 2017
the prospects of their acquisition, performs of 2D and 3D seismic surveys reached Okrug – yugra, yamalo-nenetsky Autonomous
registration and re-registration of subsoil rights. 1,263.3 linear kilometers and 1,073.1 square Okrug, the south of tyumenskaya Oblast
in 2017, the Company obtained seven  kilometers respectively. vertical seismic proiling and novosibirskaya Oblast. Despite high
licenses for subsoil use, including one license for was performed in seven wells. As a result, exploration status of the region, geological
geological study, exploration and production 85 targets in 18 structures with 67.8 million exploration and research studies in Western
of mineral resources that was acquired at the tonnes of recoverable oil reserves were prepared Siberia are characterized as highly eicient. underlying beds at the existing ields. in the
auction, and three licenses for exploration and for deep prospecting drilling. the most signiicant amount of prospecting reporting year, the Company performed oil and
production of mineral resources as the result of Striving for active implementation and exploratory drilling and discoveries of dissolved gas reserves estimation for seven
the discovery of these ields at the Company’s of resource potential of the existing ields new oil reserves by the Company is a feature ields and the federal budgetary institution
cost. Also, the Company obtained three licenses the Company carries out further exploration of this region. in the reporting year, 73.5% of “State Commission on Mineral Reserves”
for geological study, prospecting and appraisal of underlying beds. in the reporting year, total meterage and 88.5% of total additions reviewed the reports on four ields. geological
of the ields. During the resource base update 23 production wells were deepened, drilling of class АВ1С1 recoverable oil reserves in models for reserves estimation were created
four licenses were terminated as a result of meterage totaled 17.1 thousand meters. the Company accounted for Western Siberia due for three ields and updated geological models
geological study completion and one license in 2017, the Company’s employees to prospecting and exploratory drilling. were created and reviewed for 39 ields.
was terminated following the results of the completed 91 research studies, including oil in Khanty-Mansiysky Autonomous Okrug – Seventeen geological exploration projects were
assessment of the prospects of further study and gas reserves appraisals for six ields, drew yugra OJSC “Surgutneftegas” owns 115 licenses prepared for 19 license blocks.
and development. up 26 projects for prospecting, appraisal and for subsoil use, including 105 production the performed volumes of work and
geological exploration is the main exploration at 29 license blocks. the federal licenses. in 2017, geological exploration in-house ield discoveries made at its own
source of reserve replacement for budgetary institution “State Commission on was performed at 44 license blocks with expense allowed OJSC “Surgutneftegas”
OJSC “Surgutneftegas”. every year, Mineral Reserves” reviewed and approved the 138.3 thousand meters of prospecting and to register and obtain three licenses for
the Company carries out a signiicant amount reserves assessment reports on six oil and gas exploratory drilling, 47 wells were built, 37 of exploration and production of mineral
of prospecting and exploratory drilling and ields and information on the current reserves which proved productive. in the reporting year, resources – the vostochno-nazymsky,
its eiciency remains at a stable high level. estimates for 45 ields (183 targets). the whole volume of 2D seismic surveys was vostochno-Serginsky and lungorsky licensed
the Company analyzes a mass of geological As a result of the volumes of concentrated in this area reaching 1,263.3 linear blocks. in addition, as a result of geological
and geophysical data, develops project geological exploration conducted in 2017 kilometers, 3D seismic surveys covered exploration 16 new oil deposits were
documentation regarding prospecting and OJSC “Surgutneftegas” registered a discovery 79.2 square kilometers and vertical seismic discovered at the ields discovered earlier. in
appraisal and exploratory drilling as well of two hydrocarbon ields. Sixteen new proiling was performed in three wells. the reporting year, due to exploration additions
as carries out further exploration of the deposits in Khanty-Mansiysky Autonomous twenty two production wells were of class AВ1С1 recoverable oil reserves totaled
existing ields. Okrug – yugra and two new deposits in the deepened in order to further explore the 59.3 million tonnes.

Annual Report 2017 OJSC “Surgutneftegas”

28 29
 Within yamalo-nenetsky Autonomous
Okrug the Company owns nine license
blocks, including six production licenses and
three licenses for geological study, prospecting
and appraisal of ields. in the reporting year,
based on the results of previously drilled
production wells the deposit outlines and
geological construction of two deposits were
deined more precisely. the reports on the
reserves reappraisal were reviewed by the
federal budgetary institution “State Commission
on Mineral Reserves”.
in the south of tyumenskaya Oblast
the Company owns three licenses for geological
study, exploration and production of mineral
resources. exploratory drilling was performed
at two blocks and amounted to 7.1 thousand
meters, two wells were drilled and built, both
of them proved productive. One geological
exploration project was prepared for two license
blocks. Also, ive targets in the production string
were tested, four of which yielded commercial
inlows. the federal budgetary institution “State
Commission on Mineral Reserves” reviewed and
approved the reserves estimation reports on the
yuzhno-nyurymskoye and Demyanskoye ields.
As a result of geological exploration performed
by the Company, the volume of C1 recoverable
oil reserves grew by 6.5 million tonnes.
OJSC “Surgutneftegas” holds one license
for subsoil area in novosibirskaya Oblast. in the
3D Seismics
in 2017
7.4%
92.6%
30
reporting year, prospecting and exploratory
drilling in this region reached 3.4 thousand meters
with one prospecting and appraisal well built.
eastern siberia
for OJSC “Surgutneftegas” eastern Siberia
is one of the most important areas ensuring
high hydrocarbon production. At the end of
2017, the Company holds 25 license blocks
located within the Republic of Sakha (yakutia),
irkutskaya Oblast and Krasnoyarsky Krai,
including eight licenses for exploration and
production of mineral resources, 12 licenses
for geological study and production and ive
licenses for geological study, prospecting and
appraisal of ields.
the Republic of Sakha (yakutia) is a key
region for the Company’s operation in eastern
Siberia – the Company owns 20 license blocks,
including 17 of them with production licenses.
in 2017, the Company performed
geological exploration at 13 blocks of this
region, six exploration projects were prepared
for six license blocks, seven new structures were
drilled. Prospecting and exploratory drilling
amounted to 51.1 thousand meters, 27 wells
were built, 22 of which proved productive.
the Company covered 993.9 square kilometers
of 3D seismic surveys and performed vertical
seismic proiling in four wells. Seventy four
targets in the production string were tested,
92.6% eastern Siberia
7.4% Western Siberia
21 of which yielded commercial inlows. At the
yuzhno-talakanskoye oil and gas condensate
ield, one production well was deepened in
order to further explore the underlying beds.
the Company obtained new geological and
geophysical data which helped ascertain the
hydrocarbon reserves at ive ields. for the
irst time, the Company put the reserves of the
lenskoye oil and gas condensate ield on the
state’s balance sheet. OJSC “Surgutneftegas”
discovered and put on the balance sheet
two new deposits within the existing ields.
As a result of the geological exploration
conducted in the Republic of Sakha (yakutia),
the Company obtained 8.6 million tonnes of
AB1C1 recoverable oil reserves added.
Within irkutskaya Oblast and Krasnoyarsky
Krai OJSC “Surgutneftegas” holds ive licenses,
including two licenses for geological study,
prospecting and appraisal of mineral resources.
in the reporting year, the Company performed
processing and interpretation of seismic survey
materials, including those previously performed,
as well as made preparations for building wells
and designed geological studies of subsoil areas.
Timan-pechora
in timan-Pechora oil and gas province
OJSC “Surgutneftegas” holds 11 license blocks
in nenetsky Autonomous Okrug, including
Prospecting and exploratory drilling
in 2017 by region
1.3%
25.2%
Annual Report 2017 OJSC “Surgutneftegas”
eight production licenses. in the reporting year,
the Company obtained three licenses, including
one license for production of mineral resources
that was acquired at the auction for the right
of subsoil use and two licenses for geological
survey, prospecting and appraisal of ields.
geological exploration was performed at
three license blocks, an exploration project was
prepared for one license block. Prospecting and
exploratory drilling totaled 2.6 thousand meters,
three wells were built, all of which proved
productive. thirteen targets in the production
string were tested, ive of which yielded
commercial inlows.
plans and prospeCTs
in 2018, OJSC “Surgutneftegas” plans
replacement of its resource base by means
of geological exploration, participation in
auctions for acquisition of new promising
blocks and further exploration of its existing
operation areas.
the Company expects to perform
prospecting and exploratory drilling amounting
to 198 thousand meters, build 72 prospecting
and exploratory wells, perform 2D seismic
surveys covering 1,300 linear kilometers
and 3D seismic surveys covering 550 square
kilometers as well as vertical seismic proiling in
seven wells.
73.5%
73.5% Western Siberia
25.2% eastern Siberia
1.3% timan-Pechora
31

oil and gas production
In the upstream sector, the priority of OJSC “Surgutneftegas” is to ensure
a steady level of production with due regard to rational use of resources.
For this purpose, the Company operates the mature ields and also
performs phased commissioning of the new ones implementing and
using the latest technologies to improve the eiciency of the existing
ields and develop low proit reserves.
Surgutneftegas produces oil and gas
in oil and gas provinces of Western Siberia
and eastern Siberia. in 2017, oil production
of the Company reached 60.5 million tonnes
and gas production – 10 billion cubic meters.
Seventy four oil ields were under commercial
development. investments in oil and gas
production amounted to RuB 199.2 billion, with
88.6% referred to Western Siberia, 11.2% – to
eastern Siberia and 0.2% – to timan-Pechora oil
and gas province.
oil produCTion
in 2017, the Company’s oil production
decreased by 2.1% compared to 2016
due to external constraints under OPeC+
agreement to reduce oil production, as
well as declining production at the mature
ields of Western Siberia, the main region of
the Company’s operation. At the same time,
oil produCTion in 2017 by field
fields
fedorovskoye
Severo-labatyuganskoye
Central Block of the talakanskoye oil
and gas condensate ield
lyantorskoye
vostochno-Surgutskoye
Rogozhnikovskoye
Russkinskoye
Zapadno-Surgutskoye
Bystrinskoye
Severo-talakanskoye
Other
32
60.5 million tonnes of oil produced in the
reporting year is the Company’s strategic
priority which has remained stable over
many years. to achieve the target level of oil
production, OJSC “Surgutneftegas” is engaged
in commissioning new ields, building new
oil production clusters at new promising
territories, extensive use of the enhanced oil
recovery methods, inding solutions on efective
development of low proit reserves as well as
utilizes experience gained by its service units.
Over the last years, the Company has
created two new oil production hubs in Western
Siberia: the Rogozhnikov ields and the uvat
ields which are further developed to ensure
target production levels. in 2017, the hubs
provided about 8% of the Company’s total
oil production.
Surgutneftegas continues developing
ields in eastern Siberia. the share of this region
in the total volume of the Company’s production
production, ‘000 tonnes
8,461
5,105
4,976
4,084
3,468
3,067
3,045
2,648
2,515
1,903
21,273
annually increases and in 2017 it reached Investment of the Company
9 million tonnes or 14.8%. in oil production
the Company intensely puts on stream RUB bn
new ields, i.e. in the reporting year alone
ive new oil ields were commissioned.
Speciically, two of them were included in new 209.1
206.2 199.2
oil production hubs: the filipenko ield – in 187.2
the Rogozhnikov ields and the Demyanskoye 172.6
ield – in the uvat ields. the Demyanskoye
ield was put on stream earlier due to extensive
exploration activities and faster arrangement of
the production infrastructure.
The Company’s new
oil fields Commissioned
in 2017
fields 2013 2014 2015 2016 2017
logachev ield
Sakhalinskoye ield
yuzhno-Konitlorskoye ield
filipenko ield
Demyanskoye ield
the bulk of oil production – about
65% – comes from 10 key Company’s ields:
fedorovskoye, Severo-labatyuganskoye,
Central Block of the talakanskoye oil and gas
condensate ield, lyantorskoye, vostochno-
Surgutskoye, Rogozhnikovskoye, Russkinskoye, New oil wells brought online
Zapadno-Surgutskoye, Bystrinskoye and wells
Severo-talakanskoye.
in 2017, the Company accomplished
an extensive development drilling program 1,451
with 4,687 thousand meters drilled, which is
up 4.2% compared to 2016. the main bulk of 1,260 1,250
1,183 1,212
the Company’s drilling – 94.2% – was performed
in Western Siberia. OJSC “Surgutneftegas”
ensured the eiciency of drilling and high
quality of well construction.
in the reporting year, the Company
brought online 1,872 wells, including 1,250 new
oil wells. in order to maintain the reservoir
pressure, 539.1 million cubic meters of water
were injected into formations. injection
volume and mode are determined by the
ield development plan of the ield taking into 2013 2014 2015 2016 2017
account the characteristics of each well, which
ensures rational use of resources.
At the end of the reporting year, there were
23,704 oil producing wells in the operating well horizontal
stock of the Company. the share of idle wells
amounted to 8%. Deviated
Annual Report 2017 OJSC “Surgutneftegas”
33
 Average producing wells Annually, the Company has additional oil
wells production at the ields under development
due to optimization of well operation and
ield development systems as well as a large-
21,351 22,049 scale drilling program and a wide array of well
20,364 20,893 20,886 intervention operations. it should be mentioned
that Surgutneftegas performs all operations in
accordance with the program targeted at well
stock operations and taking into account not
only the volume of additional oil production, but
also the expected economic beneit. Advanced
technologies going along with these measures
allow the Company to increase oil recovery
ratio, bring new hydrocarbon reserves into
development and improve operating eiciency.
in 2017, OJSC “Surgutneftegas” performed
2013 2014 2015 2016 2017 about 10 thousand various well intervention
operations which made it possible to produce
about 8 million tonnes of additional oil.
western siberia
in 2017, OJSC “Surgutneftegas” operated
68 ields in Western Siberia, many of which are
mature. to this end, the Company’s priority in
the region is to maintain the productivity of the
existing well stock and bring into development
deposits at the operating ields.
in the reporting year, oil production in
Western Siberia was 51.6 million tonnes or 2.6%
less than in 2016 due to compliance with OPeC+
agreement and natural depletion of the existing
ields. to reduce the production decline rate,
the Company employs eOR methods, develops
new oil ields and implements a large-scale
Development drilling drilling program.
Surgutneftegas boosted its development
‘000 meters
drilling by 4% to 4,417 thousand meters against
the previous year and brought online 1,134 new
4,944 oil wells.
4,687 the Company takes measures to optimize
4,500
4,307 the well stock through the most efective well
4,103
operation methods and modes. in the reporting
year, Surgutneftegas carried out a signiicant
scope of work to maintain the existing well
stock in working order through application of
engineering solutions and usage of tubings with
an internal anti-corrosion coating.
Surgutneftegas continues to develop the
recently created production hubs in the region,
i.e. the Rogozhnikov ields and the uvat ields.
the uvat ields are based on the yuzhno-
2013 2014 2015 2016 2017 nyurymskoye ield put into operation in 2016.
the Company provided the ield with the
necessary production infrastructure, including
34
a gas station, fuel and lubricant storage,
illing station for steam ield units, water
treatment system, service station and two
helicopter landing platforms for passengers
and cargoes. this infrastructure enables
Surgutneftegas to develop new oil ields and
increase oil production of the group. in 2017,
the Demyanskoye ield, one of the largest in
the group, was brought into development. in
the reporting year, development drilling at the
uvat ields grew by 50.8% to 186.7 thousand
meters. Oil production boosted by over 5.5 times
compared to 2016 and totaled 548.5 thousand
tonnes. the Company put online 57 new
oil wells. At the end of the year, there were
92 producing wells and 16 injection wells in the
operating well stock of the group.
the Rogozhnikov ields comprise ive
oil ields, one of which is the filipenko ield
commissioned in the reporting year. in 2017,
the Company achieved target production
levels of the group that is about 4.2 million
tonnes. Cumulative production from the
Rogozhnikov ields exceeded 30 million tonnes
through the whole development period. in the
reporting year, development drilling totaled
379.4 thousand meters. At the end of the
year, there were 1,019 producing wells and
318 injection wells in the group.
At the end of 2017, total number of the oil
wells in Western Siberia was 22,892 with 8.1% of
inactive wells. the operating rate for the oil wells
was 0.972, the utilization rate – 0.920. the well
workover interval totaled 989 days.
eastern siberia
in eastern Siberia, there are six oil ields
put into operation. Surgutneftegas fully
completed development of the operational
oil production facility with well-established
logistics of materials and equipment that allows
the Company to commission new ields, expand
its geographical presence and increase oil and
gas production in the region.
in the reporting year, the Company’s oil
production totaled 9 million tonnes, or 0.8% up
compared to 2016. Development drilling grew
by 7.1% to 270.4 thousand meters with 116 new
oil wells put online, 35 of them were horizontal.
At the end of the year, the operating well stock
of the Company grew up to 812 wells. Water
and surplus amounts of associated petroleum
gas are injected into the formation in order to
maintain the reservoir pressure at the ields of
Annual Report 2017 OJSC “Surgutneftegas”
The share of Eastern Siberia
in the Company’s total oil production
14.4% 14.8%
13.7%
12.6%
11.7%
2013 2014 2015 2016 2017
the region. in 2017, the volume of injected water
was 13.3 million cubic meters, the volume of
injected associated petroleum gas – 552 million
cubic meters.
the Company’s investment in the ields of
eastern Siberia amounted to RuB 22.2 billion in
the reporting year. in the mid-term, annual oil
production in the region is expected to reach
around 9-10 million tonnes.
gas produCTion
in 2017, the Company produced 9.9 billion
cubic meters of associated petroleum gas
and 0.1 billion cubic meters of natural gas.
the Company’s gas utilization rate is one of
the highest in the industry. in the reporting
year, it reached 99.32% through developing
the existing gas gathering and utilization
infrastructure and building it at the new ields.
in the reporting year, APg utilization rate at
16 oil ields of OJSC “Surgutneftegas” amounted
to 100%.
in 2017, the Company performed
maintenance of 27 compressor stations, one
gas compression and treatment unit, one gas
processing unit and 22 operating gas turbine
power plants. the Company renovated a
low pressure separation compressor station
of the central production facility at the
35
 Gas utilization by the Company talakanskoye ield, inished technical re-
equipment of a gas turbine power plant at
the talakanskoye ield and a low pressure
99.2% 99.1% 99.4% 99.3% 99.3% separation compressor station of the iWSu-
2A at the Bystrinskoye ield. Compressor
stations for low pressure separation stages
with a capacity of 22.8 million cubic meters
per year each were built and commissioned
at the booster pump station at the Severo-
talakanskoye ield and the booster pump
station-1 at the Alinskoye ield. the Company
also constructed and commissioned a ield
gas pipeline of 20.3 kilometers long extending
from the booster pump station at the
yuzhno-Konitlorskoye ield. Surgutneftegas
2013 2014 2015 2016 2017 commissioned a gas turbine power plant with
an established capacity of 8 MW at the yuzhno-
nyurymskoye ield.
Associated petroleum gas utilization
is efectively integrated in the Company’s
production processes. Over the years, the
associated petroleum gas has been mainly
used for the following purposes: treatment at
the Company’s gas processing plant, supplies
to outside consumers, the Company’s own
consumption, including consumption by power
generation facilities.
Around 62% of APg is utilized by
the Company’s gas processing plant which
Applications of gas in 2017
3%
14%
62% the Company’s gas
21% processing plant
21% feedstock
for power generation
62%
14% fuel and process
needs
3% Supplies from the ield
facilities to
the domestic market*
* Overal volume of gas supply to the domestic market
(including gas processed at the plant) is 63%
36
produces the most demanded products such
as dry gas, natural gas liquids and commercial
propane-butane. After treatment at the gas
processing plant the dry gas is supplied to
consumers in the domestic market. Overall sales
of the Company’s gas to the market account for
63% of production, including supplies from the
ield facilities.
utilization of the produced gas is
specified in the production process layouts:
for the Company’s needs at the booster pump
stations with iWSus, oil treatment units,
power generation, transport heating and oil
sludge recycle landfills. Around 21% of the
produced gas is utilized by the Company’s gas
turbine power plant and gas reciprocating
engine power plant to generate power, and
more than 14% is consumed as fuel and
process feedstock.
CosT reduCTion program
year after year, OJSC “Surgutneftegas”
implements its comprehensive cost reduction
program aimed to cut costs through import
substitution and reuse of equipment, adjustable
system of labor costs regulation, materials and
equipment, innovations and introduction of
new machinery.
Benefit pattern from cost reduction in 2017
1%
1%
35%
12%
51%
Annual Report 2017 OJSC “Surgutneftegas”
in 2017, the amount of the overall
economic beneit from the cost reduction
program was RuB 5.3 billion, or RuB 88 per
tonne of the recovered oil. Whereas, in the
reporting year, 35% of economic beneit
was achieved in primary production, 51% –
in auxiliary production, 12% – in drilling, 1% –
in construction and 1% – in social sphere.
Surgutneftegas pays much attention to
energy costs reduction. Measures on energy
saving allowed the Company to cut energy
costs by RuB 0.6 billion. in 2017, the total
economic beneit from the Company’s
program on energy saving and enhancement
of energy eiciency of the facilities
and equipment was over RuB 2 billion.
the Company took measures to introduce
energy saving technologies and new energy
eicient equipment as well as organizational
and technical measures to reduce
energy consumption.
high-capacity production and repair
facilities enable the Company to perform timely
and quality repair of equipment and machinery
using its own resources and signiicantly
extend the life of production assets and reduce
the need for new equipment and materials.
Since 2005, OJSC “Surgutneftegas” has been
implementing the equipment and materials
35% Main production
51% Auxiliary production
12% Drilling
1% Construction
1% Social sphere
37
 The total economic benefit from
the comprehensive cost
reduction program
RUB mn
5,593
5,311
5,099
4,832
4,435
2013 2014 2015 2016 2017
Reuse of equipment
import substitution
Other
re-use program with an annual economic
beneit of around RuB 1.7 billion.
the most vital area for the cost reduction
policy is the import substitution program
providing for investment in scientiic and
technical developments and cooperation with
domestic manufacturers of machinery and
equipment. Placing orders with the Russian
plants, Surgutneftegas promotes new jobs,
encourages the development of scientiic
and technological sectors and improves
competitiveness of the Russian manufacturers.
under this program, 1,202 items of
Russian-made parts and equipment substituted
the imported ones, which brought an economic
beneit for the Company in the amount of
RuB 1.9 billion. in this respect, 90% was
purchased from domestic manufacturers and
10% was fabricated in-house.
38
the in-house hi-tech service divisions
provide the Company with additional
competitive advantages, i.e. make it possible to
monitor costs, quickly implement and apply the
best developments in technology, solve complex
production tasks with due consideration for
complicated conditions of reserves development
and lowering the risks of oil production.
plans and prospeCTs
in the mid-term, OJSC “Surgutneftegas”
is striving to maintain oil production at the
target level of 60-62 million tonnes, which
will ensure a rational approach to ield
development. in 2018, oil production is to
reach 61.4 million tonnes and gas production –
9.4 billion cubic meters. the Company is
implementing programs which relect plans to
complete 4.7 million meters of development
drilling, commission 1,201 new oil wells and
546 injection wells, provide well intervention
services aimed at better well productivity.
the Company is intended to commission
four new oil ields within three years. it is
expected to further develop the Rogozhnikov
ields and the uvat ields. in the mid-term
perspective, the annual oil production of these
groups of ields is to be about 5-6 million
tonnes per year. for 2018, Surgutneftegas plans
to start developing the lenskoye oil and gas
condensate ield in eastern Siberia which has
been discovered due to in-house prospecting
and exploration activities.
in the gas sector, OJSC “Surgutneftegas”
is to keep upgrading the system for gathering,
transportation and utilization of associated
petroleum gas at the existing ields and
create new facilities at the new ones. in 2018,
the Company plans to develop infrastructure for
APg utilization at the uvat ields, i. e. construction
of a ield gas pipeline of 20 kilometers long
extending from the booster pump station at the
Demyanskoye ield to the gas turbine power
plant at the yuzhno-nyurymskoye ield. in
addition, Surgutneftegas is expected to build
a low pressure separation compressor station
with a capacity of 150 million cubic meters per
year at the yuzhno-vatlorskoye ield and the
ield gas pipelines at the logachev ield and the
yuzhno-vatlorskoye ield totally covering over
62 kilometers.
oil refining and gas processing
The top priority of OJSC “Surgutneftegas” in the sector of oil reining
and gas processing is making high quality and environmentally friendly
products with high performance characteristics. The Company pays
much attention to technical development of production: the existing
units are upgraded and new units are introduced on a regular basis,
which allows us to use hydrocarbons efectively and improve the range
of products.
the reining and processing sector of LLC “KINEF” crude processing volumes
OJSC “Surgutneftegas” is represented by and recovery of light oil products
reinery llC “Kinef” with a processing capacity mn tonnes
of 20.1 million tonnes of oil per year located in
leningradskaya Oblast, and a gas processing
complex with a capacity of 7.3 billion cubic 19.8 19.3
meters per year located in Khanty-Mansiysky 18.8 18.5 18.2
Autonomous Okrug – yugra.
53.9%
52.5%
oil refining 51.2%
47.3%
llC “Kinef” is the largest reinery in the
north-West of Russia. the reinery produces a
40.5%
wide range of oil products. the main volume
is comprised of various motor fuels: motor
gasoline, diesel fuel, jet kero and mazut.
Petrochemical products are represented by
aromatic hydrocarbons (benzene, toluene, 2013 2014 2015 2016 2017
xylol), normal parains, lAB-lABS products
and solvents. Products for construction are
represented by various grades of road and
rooing bitumen, waterprooing materials.
in the reporting year, the volume of
hydrocarbon processing on the reinery
amounted to 18.2 million tonnes, 1.9% less
against 2016, due to upgrading of production
processes and ensuring optimal capacity of the
reinery in the existing economic conditions.
the volume of production of oil products
in 2017 amounted to 17.7 million tonnes, the
yield of light oil products increased by 1.4%.
the increase in the light oil products yield
was ensured by components produced at
the deep conversion plant, particularly due
to an increase in the operating hours of this
plant. in 2017, total production at the reinery
amounted to 2.5 million tonnes of motor
gasoline, 6.5 million tonnes of diesel fuel,
0.7 million tonnes of jet kero, 6.9 million tonnes
Annual Report 2017 OJSC “Surgutneftegas”
39
 Investments in oil refining of mazut and over 1 million tonnes of other
RUB bn oil products.
the Company steadily implements the
program on modernization and technical
23.7
reequipment of the reinery. the total volume of
investments for these purposes in the reporting
year amounted to RuB 23.7 billion.
17.6 in 2017, llC “Kinef” completed a large-
scale project on the construction of a high-
14.4 octane gasoline plant (lK-2B).the plant includes
a gasoline fraction hydrotreater unit with a
10.9 capacity of 2.3 million tonnes per year, an
izomerization unit with a capacity of 1.1 million
8.2 tonnes and a catalytic reforming unit with
continuous catalyst regeneration with a capacity
of 1.2 million tonnes. Owing to the operation
of lK-2B complex the reinery will produce only
2013 2014 2015 2016 2017 high-octane motor gasoline complying with the
standards for environmental Class 5.
On the existing production capacities
the Company performed the scheduled
repair operations on 17 processing units,
including elOu-Avt-2 crude oil distillation
units, lCh-35-11/600 catalytic reforming units,
Pareks-2 parain production units, uPSK-2
sulfuric acid production unit, lAB-lABS
production unit and six deep conversion plant.
in 2017, the lAB-lABS unit produced
26.2 thousand tonnes of lAB and 47.5 thousand
tonnes of ABSA. the products produced by lAB-
lABS serve as the basis for synthetic detergents
and are in demand both in the domestic and
foreign markets.
in the reporting period, llC “Kinef”
produced 4.1 million square meters of rooing
Gas processing materials. the Company improves eiciency of
bcm this facility using various modiiers and high-
pressure polyethene during the production of
the “isoplast” material. to extend the range of
7.5 products, the Company developed and put into
production a new rooing material.
6.3 6.5 to enhance the abilities on distribution of
6.2 6.2
products, the Company successfully evaluated
the capacity of the reinery to produce bitumen
that meets the requirements of the international
standard (gOSt 33133-2014).
ramps, storage facilities for inished products,
propane cylinder illing unit and other facilities.
the main products of the Company’s gas
processing plant are dry stripped gas and liquid
hydrocarbons.
in 2017, the plant processed 6.5 billion
cubic meters of gas, 95% of which came from the
ields of OJSC “Surgutneftegas”. the Company
produced 6.2 billion cubic meters of dry
stripped gas and 536 thousand tonnes of liquid
hydrocarbons. natural gas liquids (58%) and
commercial propane-butane (39%) form a greater
share in the products range. in addition to that, in
the reporting period the plant produced propane
and stable casing-head gasoline.
the bulk of produced stripped gas is
supplied by the Company to Surgut gReS-1
and gReS-2 and the remaining part is sold
to commercial and municipal enterprises.
liquid hydrocarbons have high qualitative
characteristics and are used as feedstock for
chemical, petrochemical or tire manufacturing
and other industries and also as inal products.
the Company continues to develop its gas
processing plant by making annual upgrades
of the production capacities, implementing
advanced technology and equipment. in the
reporting year, the Company continued to work
on technical reequipment and replacement
of electric equipment of gas processing unit
no. 1, renovation of engineering and technical
solutions for the security of the plant.
PLANS AND PROSPECTS
in 2018, the Company’s reinery expects
to reine 18.2 million tonnes of oil, increase
the production of light oil products, including
ecology Class 5 high-octane motor gasoline and
jet kero. the Company will continue repairing
and upgrading the reining assets of the existing
production: scheduled works on increasing
reliability and eiciency of the equipment will
be performed on elOu-At-6 crude oil distillation
units, Pareks-1 parain production units,
lCh-35-11/1000 catalytic reforming unit,
ortoxylene and paraxylene production units,
lg-35-8/300B benzene reforming units and
other facilities.
in 2018, the Company’s gas processing
plant intends to process 5.8 billion cubic
meters of gas, including 5.4 billion cubic
meters of stripped gas, 598 thousand tonnes
of liquid hydrocarbons. the Company is going
to continue the technical reequipment and
reconstruction of the plant’s facilities.
the total volume of investments in
processing and reining facilities of the Company
in 2018 is expected to be RuB 7.5 billion, the
major part of funds will be spent on oil reining.

GAS PROCESSING
the Company’s gas processing plant is
an essential element of the production chain
on gathering and utilization of the associated
2013 2014 2015 2016 2017 petroleum gas produced. Production facilities
of the plant include three gas processing and
compression units, tank farms with loading

Annual Report 2017 OJSC “Surgutneftegas”

40 41
 the Company is concerned about the Revenues from the sales of related
Sales of oil products quality of distributed products. each marketing products and services at gas stations
subsidiary runs its own laboratory for analyzing RUB mn
oil products and providing quality control
at every stage of the fuel low process. test
A priority of OJSC “Surgutneftegas” in the sector of sales of oil products equipment is constantly renewed with new 2,550
is providing the customers with fuel and services of the highest quality. high-tech units. in addition, quality is ensured 2,394
The marketing subsidiaries reconstruct and build new gas stations, due to fuel supplies from the Company’s own 2,124
reinery llC “Kinef” providing the bulk of the oil
implement modern services for the customers’ convenience. The quality products sold by the marketing network.
1,884
of oil products is ensured by a direct supply of fuel from the Company’s 1,631
reinery and multilevel control at all stages the fuel goes through on its PLANS AND PROSPECTS
way to the customer. for 2018, the Company plans to continue
developing the gas station network, expanding
the related goods and services range, and
the marketing subsidiaries of stations. Revenues from the sales of related further improvement of the customer services
OJSC “Surgutneftegas” are located in the products and rendering additional services and loyalty programs.
north-West of Russia and are engaged in at the gas stations in 2017 increased by the Company will keep on optimizing the 2013 2014 2015 2016 2017
wholesale and retail sales of fuel, oil products 6.5% and amounted to RuB 2.5 billion. marketing network assets and the program on
storage, and render a set of supplementary As the Company improves eiciency in this production process automation.
services at the gas stations. in order to retain and sphere, it evaluates the functionality of
strengthen its positions under the conditions retail areas, the range of goods and services,
of intensifying competition in the fuel market, enhances the employee focus on customer
the Company’s marketing subsidiaries strive requirements and develops the customer
to meet the needs of customers, improve the loyalty program. the gas station shops sell
quality and extend the range of products a wide range of motor oils, car chemicals,
and services. car care products, spare parts and accessories
By the end of the reporting year, as well as a variety of everyday goods and
the Company’s marketing network included provide fast food restaurants. for customers’
293 active gas stations and 14 oil storage convenience, and to streamline the payment
depots. in 2017, the Company’s marketing process, gas stations employ fuel cards and
subsidiaries sold over 1.3 million tonnes of oil electronic payment systems. Turnover of the Company’s marketing subsidiaries
products, which is a 11.4% increase against the in order to attract and retain customers, in 2017
previous year. the main volume of oil product the marketing subsidiaries further implement
sales (57%) accounts for retail sales through the customer loyalty programs. All participants
a network of gas stations. of the program can purchase fuel and related
in the reporting year, the Company products at the gas stations at beneicial prices, 10.7%
further implemented the program on retail accumulate bonuses and use them to pay for
network upgrade. the Company employs the goods and services at the gas stations.
modern engineering and project development Card owners have beneits in the form of
solutions in design and construction of gas discounts and special terms of service.
stations. the introduced gas stations employ OJSC “Surgutneftegas” pays close
two-sided fuel dispensers with various attention to production process automation
fuels which ensure fast and convenient that allows us to reduce the expenses 44.7%
motor transport fueling. the volume of of the marketing subsidiaries. high on
capital investments in construction and the Company’s agenda over the past
reconstruction of gas stations amounted to years has been the conversion of the gas
RuB 190 million. stations to work automatically, without the 44.6%
A wide range of related goods and presence of operating personnel. Besides, 44.7% Motor gasoline
services is an integral part of the modern gas processes of fuel level control are being
station. in the reporting year, the Company’s automated. the Company uses mobile 44.6% Diesel fuels
retail network included 273 shops, 42 cafes, teams for maintenance of gas stations and
18 car washes, seven car parks and 17 service storage depots. 10.7% Other oil products

Annual Report 2017 OJSC “Surgutneftegas”

42 43

Power generation
The energy complex is the key element of the Company’s technological
processes which exercises signiicant inluence on economic eiciency
of Surgutneftegas. Rational use of energy resources and energy cost-
cutting solutions are provided at all stages of the production processes.
in the upstream sector, in-house power
capacities allow the Company to ensure
reliability of power supply to the production
facilities that are remote from the well-
developed infrastructure as well as a high level
of associated petroleum gas utilization and
lower cost of the construction of gas pipelines,
compressor stations and transmission lines.
At the end of 2017, small-scale power
generation facilities of OJSC “Surgutneftegas”
included 23 gas turbine power plants and
seven gas reciprocating engine power plants
with an established capacity of 789.6 MW and
diesel power plants with a total capacity of
170.6 MW. A great part of the Company’s power
generation facilities is located at the oil ields of
Western Siberia. there are also the gas turbine
power plant and gas reciprocating engine
power plant with a total capacity of 157 MW in
eastern Siberia. they provide electricity to all
Company’s ields in the region as well as the
facilities of the eastern Siberia – Paciic Ocean
trunk oil pipeline. in the reporting year, the total
volume (output) of power produced by power
generation facilities of OJSC “Surgutneftegas”
reached 5,718.4 million kWh which is 1%
compared to 2016. in 2017, in-house power
generation satisied 47.8% of the Company’s
upstream demand.
in 2017, a gas turbine power plant was
put in operation at the yuzhno-nyurymskoye
ield with an established capacity of 8 MW to
supply electric power to the Company’s facilities
located in uvatsky District of tyumenskaya
Oblast. the gas turbine power plant is furnished
with high-eiciency domestic equipment which
makes it possible to organize routine repairs
and overhaul without complete shutdown. in
the reporting year, among other power facilities,
Surgutneftegas also constructed a substation
at the Demyanskoye ield and renovated
44
the transforming substation at the yuzhno-
nyurymskoye ield.
Due to construction of the gas turbine
power plant and gas reciprocating engine
power plant, the Company is able to successfully
solve the problem of associated petroleum gas
utilization at the active ields. Over six years,
Surgutneftegas has been keeping leading
positions in the industry in terms of associated
petroleum gas utilization (over 99%).
the number of thermal and power
facilities of the Company is growing due
to development of infrastructure at new
territories. in-house sources of heat supply
cover 90.6% of the Company’s demand.
generated thermal energy is used for heating,
ventilation, hot water supply and process
needs of the production and public facilities of
the Company.
the Company’s thermal and power facilities
were represented by 438 boiler houses with an
established capacity of 1,483 gcal/hour. in the
reporting year, Surgutneftegas commissioned
ive new stationary automated boiler houses
and overhauled 10 boiler houses.
OJSC “Surgutneftegas” annually develops
and implements the program for energy saving
and energy eiciency which covers all areas
of the Company’s activities – from drilling to
raw material processing. in 2017, under this
program, energy resources economy accounted
to 1,497.2 million kWh of electric energy and
14,239.6 gcal of thermal energy.
the automation of control processes and
active adoption of information technologies
are the most important means to implement
this program. the Company developed
a comprehensive system project “Power
generation” which became a reliable basis for a
robust integrated system able to manage energy
infrastructure and energy consumption.
in 2017, as part of the energy-saving
program, Surgutneftegas decommissioned
highly watered (non-commercial) production
wells and transferred them to the diferent well
stock, improved operation modes, head and
rate speciication of electric submersible pumps
as well as vertical lift performance of water
injection pumping stations, performed reactive
power compensation, introduced energy
eicient and energy-saving lamps and spotlights
in indoor and outdoor lighting systems and
exhaust gas utilization system of the gas turbine
power plant at the yuzhno-nyurymskoye ield.
Moreover, one of the most critical aspects of
the energy eiciency is to raise employees
awareness of energy saving. to this end, Power generated in-house and
the Company regularly holds activities aimed at its share of total demand
strengthening their knowledge on techniques mn kWh
and methods of energy saving.
in the reporting year, Surgutneftegas on
its own conducted the mandatory energy audit 5,666 5,718
of all technological complexes. the Company 5,528
5,105 5,270
carried out a detailed analysis of various
types of energy resources, determined energy
eiciency indexes of its systems and equipment
and identiied energy saving potential
with further development of the relevant
46% 47% 48%
promising activities. 42% 44%
the Company’s eiciency in the sphere
of energy saving was repeatedly mentioned
at various competitions and exhibitions. in
October 2017, OJSC “Surgutneftegas” took part
in the iv contest of implemented projects in the
2013 2014 2015 2016 2017
sphere of energy saving and energy eiciency
eneS – 2017 within the “Russian energy Week”
energy Development international forum.
the Company became the winner in nomination
“Best project on creating the attractive light
environment and its elements (architectural
street leD lighting, illumination) based on
energy eicient leD technologies” for the
project “the Palace of Arts “neftyanik”.
PLANS AND PROSPECTS
Surgutneftegas is to continue further
development of its energy complex, solve
energy-saving issues and enhance economic
eiciency.
in 2018, it is planned that in-house
electricity production will reach 5,701.5 million
kWh that will meet 48.8% of total demand of
the Company.
Annual Report 2017 OJSC “Surgutneftegas”
45
 03
Research
and technology
R&D proile

Innovations

Information technologies
 R&D profile
Development of its own scientiic base
and improvement of innovation capacity
as well as involvement of the personnel in
solving industrial and technological problems
are key drivers to enhance the Company’s
eiciency. Surgutneftegas has two scientiic
and project centers: Surgut R&D and Project
Design institute “SurgutniPineft” with a
branch in tyumen, and Oil Reining and
Petrochemical facilities Design institute
“lengiproneftekhim” (Saint Petersburg) which
can boast unique competence in development
of innovative solutions within business lines of
the Company’s activity.
“SurgutniPineft” is a general design
institute for building surface facilities at
Surgutneftegas ields. the main areas the
institute engaged in are R&D, engineering
survey and project design activities.
in 2017, institute “SurgutniPineft” carried
out 96 projects, including 9 projects on a
laboratory based core and formation luids
analysis, 29 projects on geology, 32 projects on
ield development, 15 projects on oil recovery
enhancement, 10 projects on construction of
oil and gas wells and one project on oil and gas
production, gathering and processing.
48
Over many years, llC “lengiproneftekhim”
has been a general designer and developer
of processing units, including naphtha,
kerosene and diesel hydrotreating units,
catalytic reforming and isomerization units,
a wide range of large integrated units of lK-6u,
lKS 35-64, lK-2B type as well as ofsite facilities
for major reineries.
in 2017, the institute performed a
number of activities for the Company’s reinery
llC “Kinef”. to this end, llC “lengiproneftekhim”
completed development of engineering
documents for the irst stage of technical
re-equipment with partial replacement
of equipment of elOu-Avt-6, for a crude
distillation complex with oil desalting,
developed engineering documents for the high-
octane gasoline plant (lK-2B), completed the
bulk of detailed design of gasoline and diesel
fuel pumphouses, completed development of
engineering documents for the major part of
the lg-35-8/300B unit as well as carried out
technical re-equipment of the deep conversion
plant facilities and crude oil tank farms.
llC “lengiproneftekhim” actively cooperates
with a number of Russian reineries in terms of
designing processing units and complexes.
Innovations
the innovation policy of Economic benefit from
OJSC “Surgutneftegas” is focused on better new technological processes,
eiciency and resource-saving within every production methods and equipment
area of its operations. every year the Company
RUB bn
renews its innovative development plan based
on a feasibility analysis. Development and
introduction of innovations are coordinated 11.4
11.1
by the Council of engineers and scientists
10.0 10.2 10.2
of Surgutneftegas.
in the upstream sector, new
technologies are one of the most vital areas
for the Company, as they make it possible to
enhance hydrocarbon production, cut costs
and develop oil ields with the deposits of
diferent characteristics. in the reporting
year, 279 measures were taken to adopt
new technological processes, new types
of production and equipment with a total
economic beneit of RuB 11.2 billion. in 2017,
2013 2014 2015 2016 2017
the greatest economic efect was achieved
in the areas of enhanced oil recovery, well
construction, oil production, formation
pressure maintenance and well servicing
and workover operations. in the reporting
year, the Company conducted 97 tests of
new equipment and technologies. tests of
76 models of new equipment were completed
with positive results.
in the drilling sector, in 2017 the unmanned drones have become
Surgutneftegas launched new core sampling widely used within various areas of
units with length of the core catcher the Company’s operations. Over the last years,
extended from 11 m to 13 m, which allowed the scope of their application has considerably
the Company to cut core sampling costs due extended: environmental monitoring of
to reduction of the round trip operations. in production facilities and operations, detection
addition, in the reporting year the Company of oil spills, industrial and ire safety and route
reduced purchase cost of new drill pipes and surveys. All of this allowed the Company
process pipes due to application of rolling to reduce cost of aviation equipment use,
system of standard-sized drill pipes and transport expenses for inspecting the pipelines
adoption of technologies of reinforcement and to start developing a single structured
of tool joints with hard alloy metal and wear- database to monitor facilities.
resistant hardening of pipe thread after repair. in the reporting year, new machinery
As for equipment overhauling, in 2017 and technologies introduced in the marketing
Surgutneftegas completed a large-scale were aimed to increase efectiveness of gas
reconstruction of the repair line of electric stations and oil storage depots, improve
submersible pumps resulting in improvement and automate customer services and ensure
of the repair process, introduction of up-to- environmental safety.
date equipment and better work environment. in 2017, Surgutneftegas completed
A great part of new equipment was developed construction of the lK-2B high-octane gasoline
in-house. plant which will make it possible to fully
Annual Report 2017 OJSC “Surgutneftegas”
49
 switch to production of only high-octane
gasoline and reduce consumption of additives
increasing octane levels. in the reporting
year, the Company introduced two innovative
technologies of oil products production
with the economic beneit in the amount of
RuB 0.2 billion.
OJSC “Surgutneftegas” represents
its achievements and shares experience
with oil producers in diferent exhibitions,
conferences and workshops. in the reporting
year, the Company arranged the anniversary
exposition at the XXii international specialized
exhibition “Surgut. Oil and gas – 2017” which
hosted both companies from 20 Russian
Economic benefit from regions and abroad. State-of-the-art equipment
innovation proposals and tools for exploration and development
RUB mn of oil and gas ields, drilling and well repair
monitoring systems, the latest information
technologies, safety and ire protection systems
1,088 1,095 1,090 were displayed at the exhibition.
the Company’s employees are actively
952
engaged in innovation activity which enables
the Company to ind efective solutions
to a wide range of its industrial issues.
in the reporting year, 3,455 employees
552 of OJSC “Surgutneftegas” participated in
innovation activity and 2,293 innovative
solutions were implemented producing
an economic beneit of RuB 952.3 million,
including the savings of materials and
equipment amounting to RuB 525.1 million,
2013 2014 2015 2016 2017 electric power – RuB 26.3 million and labor
costs – RuB 48.2 million.
Moreover, to find unconventional
approaches and solutions, the Company
actively involves its employees in scientific
activity and protects their scientific
and technical developments. in 2017,
Surgutneftegas drew up and submitted
seven intellectual property applications to
the federal institute of industrial Property
(Rospatent), including three applications
for inventions, two applications for a utility
model, two applications for official software
registration. in the reporting year, the Company
obtained ive documents of title from Rospatent.
50
Information technologies
the Company’s production operations
represent a complex technological system
which combines upstream and downstream
processes as well as a wide range of other
supporting processes. to ensure eiciency
of every process and make proper decisions,
a large amount of data is required to be well
integrated and processed in information
systems: planning and construction of facilities,
quality of hydrodynamical (geological) models,
level of production, etc.
in the upstream sector, technological
processes are managed by remote metering
devices integrated with such information
systems as “OKO”, “Display Wall”, “Well
Stock uniied System” and “Alpha” oil ield
it platform. Since 2016, the operating well
stock equipped with production rate remote
metering systems, the artiicial-lift well
stock controlled remotely and the operating
injection well stock equipped with water
injection low meters have reached 100%.
in 2017, the Company connected 587 injection
wells and 1,284 pumping wells to the oilield
remote control systems and launched two
uniied remote metering systems at new oil
ields. in the reporting year, Surgutneftegas
implemented the system which enables it to
automatically reveal malfunctions of electric
submersible pumps to take timely measures
and avoid failures in oil ield facilities.
As part of the efort to develop the
information system of production process
management, in 2017 the Company put into
pilot development the system of planning,
accounting and control of well workover to
improve the quality of planning and hydraulic
fracturing as well as reduce time input of well-
servicing and workover crews. in the reporting
year, Surgutneftegas developed automated
Annual Report 2017 OJSC “Surgutneftegas”
centralized distribution of motor vehicles
on freight transportation requests resulting
in 170 units of equipment released during
the year.
in 2017, to provide technological
independence and reduce costs of both new
licenses and maintenance of the existing
software, the Company replaced database
management system used on geoinformation
system servers with free software which was
applied to the new ongoing projects. in the
reporting year, to advance an import software
substitution program, Surgutneftegas launched
its own geoPro software.
As part of the development of the
geoinformation system, in 2017 the Company
engineered and introduced the technology
of binding capital construction facilities in
giS with the corporate information system,
updated the Road Atlas software: calculation
function of standard travel hours required
when maintaining oil ield and drilling
equipment was developed and calculation
function of the routes to project facilities
was implemented.
in the oil reining sector, in 2017
the Company modiied its software and
dataware in automated systems of core
production and shipping of oil products due to
the changes in data processing requirements
and the regulatory documents and legislation
as well as data inconsistency issues.
in the marketing sector, in 2017
the Company improved software to
implement new business processes, perform
testing of new modules and correct errors.
Surgutneftegas also improved software and
hardware of the corporate smart card payment
system and introduced electronic vouchers
accounting system in its marketing subsidiaries.
51
 04
Social
responsibility
Environmental safety

HR policy

Social activity,
charity and sponsorship

Environmental safety
Environmental policy of OJSC “Surgutneftegas” is aimed at ensuring
rational use of natural and energy resources and mitigation of the
negative impact of the Company’s operations on the environment.
The use of modern environmental technologies, maintaining
production facilities in good technical condition, forming corporate
environmental culture help the Company reach a high level of
environmental safety.
the Company annually commits substantial
funds to implement environmental programs,
solving the issues of careful and eicient use
of natural resources, biodiversity conservation
and mitigation of the negative environmental
impact when carrying out its operations in all
regions of the Company’s presence. in 2017,
the Company’s investments in environmental
protection totaled RuB 23.9 billion, including
RuB 21.1 billion and RuB 2.8 billion spent on the
upstream and downstream sectors respectively.
A steady level of investments, total
compliance with the current environmental
legislation, responsible attitude to
environmental safety ensure the Company’s
leading positions in the industry in many
aspects of environmental protection and its
high appraisal in various environmental events
and ratings.
in 2017, OJSC “Surgutneftegas” won
All-Russia contest “leader of environmental
protection in Russia – 2017” in the category
“Best eco-responsible company in oil
production industry”.
the activity of OJSC “Surgutneftegas”
in the ield of environmental safety was
recognized by a commemorative token and
an honorary diploma in the v All-Russia
environmental congress and international
exhibition and forum “eCOteCh – 2017”.
for four years running,
OJSC “Surgutneftegas” has been one of the
leaders of the Rating of eco-responsible
Russian oil companies compiled by the
World Wildlife fund of Russia.
54
in the reporting period,
OJSC “Surgutneftegas” established the
ecological council to make recommendations
and adopt optimal environmental solutions.
RELIABILITY CONTROL
OF PRODUCTION EQUIPMENT
the key element of environmental safety
in the oil and gas industry is the performance
reliability of ield pipeline systems. in order
to mitigate risks of failures on pipelines,
OJSC “Surgutneftegas” annually implements the
following measures to improve their reliability:
use of pipes and ittings with an internal
anti-corrosion coating;
receipt inspection of pipe products;
ield pipeline corrosion monitoring;
inhibitor protection and cleaning of
pipelines inner surface;
use of initial water separation units (iWSu);
implementation of programs on overhaul
and construction of pipelines;
operation and maintenance of ield
pipeline databases, collection and analysis
of technological parameters, computer
modeling of the existing systems of
ield pipelines for the purpose of their
optimization.
to mitigate accident risks due to use of
low-quality tubular products in pipeline capital
construction and overhaul, the Company
performs destructive and non-destructive
receipt inspection of pipes and check their
compliance with technical requirements.
in 2017, 32.4% of the total number of the
delivered pipes underwent receipt inspection
by destructive testing.
One of the methods of pipeline accidents
prevention is the use of pipes mainly with
an internal anti-corrosion coating during the
construction of the Company’s oil and gas
pipelines. in 2017, the Company constructed
796.5 kilometers of pipelines with an
internal anti-corrosion coating and by the
end of the reporting period the length of
such type of oil and gas pipelines was 44%
of the total amount of pipelines owned by
the Company. OJSC “Surgutneftegas” has its
own production capacities for the application
of an internal anti-corrosion coating on pipes
and pipeline ittings. in 2017, the area covered
by the internal coating increased by 3.8%.
the Company produced 619.1 kilometers of
pipes and 27,675 ittings with an internal anti-
corrosion coating.
to improve the eiciency of pipelines
in operation, the Company applies corrosion
inhibitors. the efectiveness of the used reagents
is ensured by the receipt inspection of their
quality with the use of infra-red spectrometry
and checking their storage conditions. in 2017,
the Company treated 2,488 kilometers of
pipelines with corrosion inhibitors. Corrosion
inhibitors were injected by chemical injection
units, 76% of which are equipped with devices
for automatic control of operating parameters
with an option of data transmission to real-time
monitoring systems of OJSC “Surgutneftegas”.
to mitigate the risks of corrosion,
the Company performs inner surface deposition
cleaning of pipelines on a regular basis.
the rate of pipeline internal corrosion
process is reduced along with the mitigation
of accidents risks due to oil dehydration in
111 initial water separation units (iWSus)
mounted at booster pump stations.
OJSC “Surgutneftegas” has a pipeline
corrosion monitoring system which employs
pipeline pigging, thickness gauging,
aggressiveness monitoring of transported
mediums and other methods of timely corrosion
detection. the information received during
the monitoring helps the Company develop a
schedule of routine repairs and overhauls.
Annual Report 2017 OJSC “Surgutneftegas”
Environmental investments
of the Company
RUB bn
24.4 23.9
21.5
20.6 20.9
2013 2014 2015 2016 2017
As part of measures on protection of
equipment and pipelines from corrosion,
scaling and biofouling, the Company’ reinery
performed the comprehensive chemical
treatment of circulating water. the Company’s
marketing subsidiaries on a regular basis
perform anti-corrosion works on tanks and
pipelines, carry out inspection of vehicles, local
treatment plants, tanks and pipelines at the gas
stations and other production facilities.
PROTECTION AND RATIONAL USE
OF LAND
OJSC “Surgutneftegas” puts special
emphasis on the issues of rational use of lands
and prevention of their contamination.
Oil spills are eliminated by an out-of-staf
accident rescue unit of OJSC “Surgutneftegas”
consisting of eight accident rescue squads.
the unit employs a wide range of specialized
equipment for oil spills elimination such as oil-
skimmers, vacuum dump trucks and tank cars,
multifunctional loating platforms equipped
with an attached system for water bodies and
inshore zone integrated treatment, clean-up
boats and other equipment.
to maintain a favorable environmental
situation in the regions of the Company’s
55
 presence, OJSC “Surgutneftegas” annually
implements a complex of measures on technical
and biological reclamation of lands with regard
to actual local environmental conditions in
their location. the result of the works carried
out is rehabilitation of disturbed lands and
their reclamation to applicable use followed
by their return to the forest fund of the
Russian federation.
in 2017, the Company completed the
technical stage of reclamation at 180 sites of
development and prospecting and exploratory
drilling. the forest Reclamation biological
stage was completed at 21 sludge pits.
implementation of such measures mitigated a
negative environmental impact by reducing the
amount of active sludge pits.
in the reporting year, works on reclamation
were performed in the territory of 1.26 ha, and
5.06 ha of previously reclaimed oil contaminated
lands were inspected and excluded from the
Register oil contaminated territories.
WATER RESOURCES
PROTECTION
OJSC “Surgutneftegas” implements
measures on water resources protection aimed
at rational water management and prevention
of water bodies pollution with sewage, industrial
and consumption wastes.
Annually, the Company’s actions
towards rational use of water resources in
the upstream sector allow us to maintain
speciic water consumption at the level of
less than 2 cubic meters of water per tonne of
oil produced.
the Company monitors the amount of
fresh subsoil water, extracted from the water
supply points, used for drinking and household
as well as for production and technological
supply of production facilities. the Company
evaluated soft groundwater reserves at all
water supply points and appropriate additions
to the license agreements for subsoil use were
made. there are sanitary protection zone
projects developed for all drinking water supply
points and all of them have a positive sanitary-
epidemiological opinion.
All treated wastewater from the ield
facilities of the Company serves as injectant
for a reservoir pressure maintenance system
56
to signiicantly decrease a freshwater intake
from the surface and underground water
bodies. household sewage from the Company’s
facilities in the village of vitim in the
Republic of Sakha (yakutia) is discharged into
biological treatment facilities to be treated
until they satisfy the requirements of the
environmental regulations.
in 2017, the Company provided 21 well
pads with drain tanks, reconstructed ramps
and installed barrier gates at 80 well pads.
in the reporting year, the Company’s capital
investments in construction of water protecting
facilities (iWSus, sewage water treatment units,
stations for biological treatment of sewage
waters, etc.) totaled RuB 111.6 million.
in llC “Kinef” in 2017, speciic
consumption of circulating water per tonne
of reined oil amounted to 16.48 cubic meters.
in order to increase environmental safety and
prevent accidents when handling production
waste waters, in the reporting period
the Company performed works on restoration,
cleaning and development of bufer ponds,
optimization of treating facilities, improving the
reliability of the drain system. Application of
biological dephosphatization allows llC “Kinef”
to signiicantly decrease the amount of
phosphates in treated waste waters.
Discharged waste waters of the Company’s
marketing subsidiaries are treated at local
treatment plants and oil traps. the Company
monitors the quality of waste waters
treatment, conducts regular maintenance of
local treatment facilities, cleans oil traps and
replaces ilters.
AIR PROTECTION
Air protection measures of the Company
are aimed at diminishing air pollutant emissions
and rational use of associated petroleum gas.
OJSC “Surgutneftegas” has a complete
infrastructure for APg utilization at the existing
objects: gas is used for the Company’s own
needs, processed and supplied to consumers
(see more information on application of
associated gas supplied to consumers in the
“gas production” section). Such an integrated
approach allows us to keep leading positions in
the industry in terms of APg utilization. in 2017,
it was 99.32%.
to diminish air pollutant emissions,
OJSC “Surgutneftegas” performs regular
operating setup of fuel-ired equipment, uses
motor transport with high fuel eiciency and
environmental safety, controls operational
efectiveness of dust and gas catchers as well
as assesses their technical condition, performs
current repair and scheduled preventive
maintenance. the Company constantly controls
air pollutant emissions at all stationary and
mobile units.
llC “Kinef” employs eicient gas and dust
removal facilities, elemental sulfur production
unit and other air protection facilities. to ensure
stable operation of these facilities, the Company
conducts their regular maintenance. the
lower impact on the environment in the
reporting period was also reached through
partial replacement of mazut with gas fuel
in the production process. in 2017, the level
of air pollutant emissions remained below
established standards.
in the reporting year, the Company’s
marketing subsidiaries took the following
measures with regard to maintaining air
pollutant emissions at the established
standards: maintenance and repairing of tank
pressure vent valves and sustaining the gas
space in the tanks.
MANAGEMENT OF PRODUCTION
AND CONSUMPTION WASTES
Collection and utilization of waste that is
generated during oil production and processing
help reduce the industrial impact on the
environment, thus making the environmental
safety one the Company’s activities. to
solve this task, the Company employs up-
to-date technology that ensures eicient
decontamination, processing and recycling
of wastes.
Drill cuttings make up a signiicant
portion of the Company’s production waste.
to reduce the negative impact of drilling waste
on the environment, OJSC “Surgutneftegas”
excludes toxic chemicals in preparation of
drilling luids, reduces drill cuttings generation
by using pitless drilling technology. Puriied
and dehydrated drill cuttings are subsequently
utilized as soil for earth illing of drilling
pads. there is also a favorable impact on the
Annual Report 2017 OJSC “Surgutneftegas”
environment as a result of the application of
this technology due to the decreasing number
of quarries being developed for extraction
of sand, reduction in pollutant emissions by
motor vehicles and other factors. environment-
friendly and resource saving properties of
the above technology are certiied by the
State environmental expert Commission. its
application allows the Company to conduct
production activities in the areas with a special
mode of management and maintain a high
level of drill cuttings recycling which amounted
to 75% in the reporting year.
When cleaning specialized equipment,
pipelines, tubing and other production facilities,
oil sludge is formed, which requires further
processing. Decontamination of this type of
waste is performed using a thermal method
with 10 “Szhigatel” incineration units and a
panning method at six centers and four lines
for luid phase recycling. the technology allows
the Company to achieve 100% decontamination
of oil sludge.
OJSC “Surgutneftegas” uses special sludge
storage ponds in order to ensure the continuity
of accumulation of oil sludge and drill cuttings,
oil-containing liquids and contaminated soils for
their subsequent processing.
in the reporting year, the Company
completed upgrading and construction of
up-to-date oil sludge utilization sites at the
fedorovskoye and vatlorskoye ields.
Solid oily waste is decontaminated with the
help of 24 “forsazh” thermal destruction units.
following the policy of minimizing the
amount of waste disposed to the environment,
OJSC “Surgutneftegas” strives for the maximum
recycling and reuse of paper, cardboard and
plastic waste, used oils, worn-out tires and
other industrial waste. in-house processing
of worn-out car tires enables a complete
recycle of waste generated by maintenance of
the Company’s vehicles and, as a result, making
certiied products – rubber chips, which are
then used at our own asphalt concrete plants
to improve the characteristics of the road
surface. the Company has the equipment
for shredding and pressing paper, cardboard
and polymer-containing wastes with their
subsequent sale as secondary raw materials.
Selective accumulation of wastes in
specially marked containers is arranged at
57
 the Company’s reinery; the wastes are further
weighed, checked for radioactivity and placed
at the waste storage and disposal site. in
order to reduce the negative impact on the
environment, a signiicant amount of waste is
reused by the reinery: processed construction
wastes serve as material for strengthening
storage pond dams, an insulating layer at waste
storage and burial sites. Wastes of i hazard class
are transferred to specialized companies for
further decontamination.
A comprehensive approach to solving
waste management tasks, use of modern
equipment and technologies allows
the Company to maintain low speciic
indicators of waste generation and disposal.
ENVIRONMENTAL
MONITORING
Production environmental monitoring
allows the Company to control and identify
negative changes that occur under the
inluence of anthropogenic factors. As part
of production environmental monitoring
OJSC “Surgutneftegas” runs a monitoring
system on the quality of environment
components (surface and ground waters,
bottom sediments, soils, snow, ambient
air), regular assessment of changes in their
condition is made.
in 2017, the Company conducted
environmental monitoring at 122 license blocks
and inspected environment components at
5,468 locations. Production environmental
monitoring of OJSC “Surgutneftegas” at
industrial facilities includes such important
aspects as monitoring of cluster well pads,
waste landills, sludge storage ponds, pipeline
crossings over the watercourses. the sample
analysis is performed by 11 laboratories,
including the Central Base laboratory for
ecoanalytical and technological Studies of the
engineering and economic implementation
Center of OJSC “Surgutneftegas” and the
Production and Research laboratory of
the R&D and Production Work Site of
OgPD “talakanneft” in eastern Siberia.
in order to prevent disturbances in the
hydrological regime as a result of unsatisfactory
technical condition and low eiciency of the
culverts, the Company monitors looding,
58
which results in the development of measures with an internal anti-corrosion coating, to apply the negative impact of the production activities
to eliminate the identiied violations. inhibitor protection to 2,318 kilometers of on water bodies and ambient air.
Remote monitoring is arranged in pipelines with consideration of environmental As part of the production and
the Company using air patrols and large-scale risks depending on their location. consumption waste management program,
aerial photography in the areas of production it is planned to reclaim 179 oil sludge it is planned to complete construction and
activities of OJSC “Surgutneftegas”. Based on pits as part of measures for the protection and renovation of waste disposal, recycling and
the information obtained through monitoring, rational use of land. utilization sites: commission a site at the
the Company draws up an inventory of Construction and upgrading of iWSu, yuzhno-nyurymskoye ield and extend the
disturbed lands, develops and updates projects pump stations for pumping discharges, sewage existing landill of llC “Kinef”.
for sludge pit reclamation, evaluates the current treatment facilities, sewage networks, gas Production environmental monitoring
environmental situation within license blocks separation facilities, compressor stations and of the environment parameters will continue
and solves other environmental issues. other facilities will continue in order to reduce in full.
Production environmental monitoring in
llC “Kinef” is based on a constant evaluation
of the contamination level for air, forest and
water resources. the reinery carries out
sanitary-hygienic, bacteriological and
parasitological studies in order to monitor
the quality of water resources and bottom
sediments as well as the efectiveness of
the ultraviolet disinfection unit. Morphometric
research of the characteristics of water bodies
is conducted. Air condition and noise pollution
are monitored along the borders of the sanitary
protection zones surrounding llC “Kinef”,
the inventory of sources of pollutant emissions
into the atmosphere is taken, the volume of
these emissions is checked. Moreover, we
continuously monitor the efect of the complex
of waste disposal and burial on surface and
subsurface waters, air and soil.
the Company’s marketing subsidiaries
measure noise pollution and pollutant
emissions along the borders of the sanitary
protection zones, in the emission sources and
in the settlements. Condition of soil, water
bodies and their water protection zones is
routinely monitored, the amount of emissions
of pollutants into the atmosphere is checked,
the safety of treated sewage is assessed, the air
and noise pollution in the sanitary protection
zone is analyzed.
PLANS AND PROSPECTS
in 2018, OJSC “Surgutneftegas” will
continue implementation of measures to
ensure environmental safety of the Company’s
production activities.
in order to increase reliability of the
ield pipelines, it is planned to manufacture
633.1 kilometers of pipes and 29,511 ittings
Annual Report 2017 OJSC “Surgutneftegas”
59

HR policy
The Company’s personnel is a key asset that ensures stable
production results and efective development of the Company.
OJSC “Surgutneftegas” seeks to create optimal conditions for well-
coordinated work of the team and full exploitation of the intellectual,
professional, creative potential of employees and to motivate them
to work eiciently.
the Company is one of the largest
employers in Russia. in 2017, the average
number of employees equaled 113.6 thousand
people, 89.8% of which are engaged in oil and
gas production, 6.9% – in reining, and 3.3% –
in marketing.
PERSONNEL TRAINING
AND DEVELOPMENT
Personnel training and development is
a priority of the Company’s hR policy in the
context of rapid development of technologies
and management systems, which increases
production eiciency and competitiveness of
OJSC “Surgutneftegas”.
the Company boasts a continuous
professional learning system represented by
in-house training centers: the Polytechnic
training Center (PtC) and Center of vocational
training and Retraining of llC “Kinef” where
78.6% employees received training in the
reporting year. Alongside in-house centers,
the Company uses services of Russian and
foreign training institutions.
training facilities and grounds of the
Polytechnic training Center for practicing skills
in drilling, well servicing and workover, oil
production and treatment, for studying fuel
transportation process, construction, assembly
and other operations are outitted with
oilield equipment simulating real operating
conditions, and are unparalleled in the region.
the branches of the Polytechnic training Center
are located in close proximity to the production
sites: Zapadno-Surgutskoye, fedorovskoye,
lyantorskoye and nizhnesortymskoye branches
in Khanty-Mansiysky Autonomous Okrug –
yugra and talakanskoye branch in the Republic
of Sakha (yakutia), and this fact makes it possible
to arrange training even though the production
60
area of the Company is so vast. every day around
500 people visit production sites and attend
classes at PtC. training programs in the center
are focused on training practical skills. there
are over 1,800 training programs for workers,
advanced training for managers and experts
included in the curriculum of the Polytechnic
training Center.
in the reporting year, the training facility of
the Polytechnic training Center was extended
due to commissioning of a drilling testing
ground equipped with a modern drilling rig
Bu-5000/320 eK-BMCh with a load capacity
of 320 tonnes and a supposed drilling depth
of 5 thousand meters. Also, the Company
commissioned a site to practice oil spill response
which is located on a natural water body
and used for practical training of workers to
eiciently eliminate spills of hydrocarbons. Apart
from that, the training areas of the training
ground were upgraded with new equipment,
including the truck-mounted workover rig
APRS-50, ishing equipment and tools for ishing
operations in a well, remedial cementing,
simulator of a car frontal collision.
Practice round “Oil industry. Oil and
gas production operator” of the regional
championship WorldSkills Russia “young
Professionals of KhMAO-yugra” has been held
for two years running at the Polytechnic training
Center, attaching importance and prestige
to blue-collar jobs, helping the professional
orientation of schoolchildren, attracting the
youth to the real sector of the economy of the
region and identifying the best representatives
of professions.
in the oil reining sector of the Company
the personnel training is conducted at the
premises of vocational training center of
llC “Kinef” under the programs of vocational
training, retraining and advanced training
of workers and oice employees. there are Average number of employees
12 classrooms in the center which are equipped of the Company
with up-to-date teaching facilities that enable thousand people
to provide a high-quality training of the staf
within the reinery’s core business lines. the
system for assessing the efectiveness of the 114.8 115.5 115.2 114.3 113.6
training is conducted on the basis of the results
of the qualiication examinations and testing
as well as feedback from the students. in 2017,
ive educational programs for professional
development in blue-collar vocations were
developed, 2,673 people underwent training.
in the reporting year, about 31 thousand
persons, or over 27.3% of the average number
of the Company’s employees, were trained
under various programs.
COMPETENCE AND MENTORING 2013 2014 2015 2016 2017
DEVELOPMENT
OJSC “Surgutneftegas” operates
a comprehensive system of evaluation and
development of vocational, managerial
competencies and professional qualities of
personnel aimed at identifying actual training
needs. the evaluation results are used to plan
and provide timely training, develop and revise
curricula and create a candidate pool.
the Company is making a candidate pool.
the objectivity of the selection procedure is
ensured by the use of automated methods
for assessing vocational and managerial
competencies, as well as professional qualities
of employees.
to efectively use labor of each employee
of the Company, motivate employees
and determine the need to develop their In-house training
skills, a comprehensive assessment of the thousand people
professional and managerial competencies
of 18,605 employees of the Company was
carried out. A mechanism for monitoring the 38.7 39.7
annual evaluation in information systems has 36.4
been created. 31.6 31.0
in 2017, the Polytechnic training Center
conducted a computer-aided testing of
5,900 candidates for 99 blue-collar vocations
pursuing the goal to staf the Company with
qualiied personnel of the required professions
and qualiications.
OJSC “Surgutneftegas” applies a mentoring
system for newly employed personnel and
for those who have been transferred from
other business units. in the reporting year, 2013 2014 2015 2016 2017
1,523 persons attended a mentoring program
of the Company; 1,218 interns completed
Annual Report 2017 OJSC “Surgutneftegas”
61
 the mentoring course, the competition “Best
Mentor” was held where prize-winners were
given certiicates and prize money.
in order to efectively select personnel,
improve the quality of staing and exclude
the admission of specialists who do not
meet the qualiication requirements,
the Company is engaged in making a directory
of uniied requirements for education to ill
the positions of managers and specialists
of the Company’s divisions. in 2017, the
requirements for education were approved
in the following areas: geology, drilling,
oil production, geophysics, well workover,
metrology, occupational health, environmental
protection, surveying services and health
paramedic posts. the abovementioned
requirements for education cover 101 positions
or 7,794 employees of the oil and gas
production sector.
WORK WITH THE YOUTH
the priority of the hR policy of
OJSC “Surgutneftegas” is to attract motivated,
trained young professionals. to this end,
the Company takes measures to promote
professions and specialties of the oil
and gas sector among schoolchildren,
builds partnerships with institutions of
higher education.
As part of complex cooperation with
comprehensive education organizations, theme
classes on the lines of the Company’s activity
are held, familiarization trips to the production
sites and the museum of OJSC “Surgutneftegas”
are arranged.
Over many years, the Company has been
collaborating with educational organizations
of the Russian federation, including industrial
university of tyumen, Saint Petersburg
Mining university, Saint Petersburg State
institute of technology, gubkin Russian
State university of Oil and gas (national
Research university), Kazan national Research
technological university, yugra State university,
Kaliningrad State technical university, Surgut
Polytechnic College, national Research tomsk
Polytechnic university, Ammosov north-
eastern federal university, ufa State Petroleum
technological university, Kirishi Polytechnic
College, Saint Petersburg technical College
62
of Management and Commerce, Surgut
State university.
As part of this collaboration, the Company
annually has open days and participates
in events for the preliminary distribution
of graduates to employers, and assesses
students. Such collaboration helps improve
a learning process, develop and implement
special programs for better training as required
by the Company. industrial university of
tyumen is the key institution to train main oil
and gas specialists for the Company. in the
reporting year, the university held the Days
of OJSC “Surgutneftegas”, the event attended
by over 180 students specializing in six areas
that are in demand by the Company. At the
end of 2017, more than 8,000 graduates of
this education institution were working in
the Company.
the Company annually provides its
specialists with referrals to the institutions of
vocational training and higher education. As
many as 1,555 students studied under such
programs in 2017. Besides, there are 24 persons
who study under the treaty on Cooperation
in economic Development of lensky District
Municipal unit, the Republic of Sakha (yakutia).
Students can intern at the Company’s
business units to reinforce and improve their
professional knowledge, learn the ins and
outs of the job and acquire work experience.
in 2017, 3,490 students successfully completed
internship in the Company.
graduates of educational institutions who
come to work in OJSC “Surgutneftegas” are given
the status of “young professional”. Meetings with
managers of the Company and the united trade
union Organization of OJSC “Surgutneftegas”
are regularly held for them alongside other
trainings, workshops, forums of young
professionals, master classes, business games,
corporate competitions “My Company”,
competitions of professional skills among
young workers, business training “Oil Proile”, an
innovation forum “theory of inventive problem
solving”. these events are aimed at revealing
the creative potential of talented youth and
developing professionalism and their personal
growth. At the end of the reporting year, there
were 2,003 young professionals working for
the Company, including 536 employees hired
in 2017.
for 37 years, the Company has annually
held Scientiic and technical conference
for young and scientists and professionals
of OJSC “Surgutneftegas” that gives an
opportunity to engage younger specialists
in improvement of technological processes,
introduction of new technologies and
enhancement of production eiciency.
in 2017, the XXXvii Conference was held, it
was attended by 1,162 people. first place
winners of the conference were given an
opportunity to learn best practices of energy
sector companies.
three young professionals received the
viktor Deshura Award that is presented to
those participants of the last year conference
whose scientiic developments gave a greater
economic efect. the expected economic
beneit from their innovative projects is over
RuB 26 million.
young professionals of the Company
annually participate in national and regional
scientiic and specialized conferences, forums,
competitions, show high professionalism
and interest in work. in December 2017,
16 young professionals of the Company
took part in the Russian national contest
“new idea”, led by the Ministry of energy of
the Russian federation, where they competed
for the best research and development
project among young specialists of energy
companies. fifty-eight young professionals
of the Company took part in the Russian
national contest “engineer of the year”, of which
12 won prizes. in the reporting year, 40 young
employees of the Company took part in the
Xvii regional scientiic conference for young
professionals of the companies engaged in
subsoil development within Khanty-Mansiysky
Autonomous Okrug – yugra, 15 of them
won prizes.
PERSONNEL MOTIVATION
Another important factor in the hR policy is
the ongoing comprehensive incentive program
that includes material and moral stimulation
of employees.
the material incentives of the personnel
are based on the wage system with adjustment
for inlation, annually and quarterly paid
premiums to recognize strong production,
Annual Report 2017 OJSC “Surgutneftegas”
technical and economic performance, and
also on methods of incentive payments for
accomplishment of the most important
tasks, innovative research, introduction
of new technological processes, new
production methods, equipment and import
substitution. the existing collective agreement
of the Company provides a wide range of
beneits, guarantees and compensations for
the employees, their family members and
retired employees.
for years, OJSC “Surgutneftegas” has
held professional skills competitions,
encouraged and rewarded employees for
signiicant contribution to the development of
the Company and the industry.
in 2017, 4,200 employees of
OJSC “Surgutneftegas” were awarded for many
years of conscientious work, professionalism
and successful performance as well as in
connection with the 40th anniversary of
the Company, the celebration of the Day
of Oil and gas industry Workers, and other
signiicant events: 121 of them received
national awards, 764 – industry awards,
366 – regional awards, 2,215 – Surgutneftegas
awards and 734 – subsidiaries awards.
Besides, 8,348 employees received awards
of the Company’s business units in the
reporting year.
economic competition between the teams
of business units remains an efective way
of stimulating teams and individual workers
activating the search for internal reserves and
improving labor productivity: competitions
of professional skills for the title “Best-in-
Profession” and a contest for the Alexander
usoltsev Award among drilling crews are held.
the experience of holding such competitions
ensures a stable growth of labor productivity,
contributes both to the realization of the
professional potential of the competing teams
and to the development of each employee’s
initiative. in addition, the competitions
give impetus to solving many issues, raise
interesting subjects aimed at increasing the
eiciency of individual sites and production
shops, innovative projects and development
of participants are introduced into production
process and bring a considerable economic
efect. the winners of competitions are
awarded certiicates, prizes and money.
63

Social activity, charity
and sponsorship
The strategy of OJSC “Surgutneftegas” is guided by the principles
of socially responsible business and takes into account the interests
of its employees and society. The Company provides comfortable
working and living conditions for the staf, implements social and
charitable programs, builds partnership relations with the state
and authorities in the regions where it operates.
OJSC “Surgutneftegas” invests signiicant
means in solving social problems as well as
takes part in implementing projects in national
culture development, education, healthcare and
social support.
the active social programs in
the Company – the main directions of which are
the creation of comfortable working and living
conditions, recreation, health improvement
of employees on the basis of a corporate
wellness complex, sports development,
support for pensioners and veterans, charity
and sponsorship activities – are recognized
and awarded at the regional and federal
levels. in 2017, following the contest for the
best socially-oriented oil and gas company,
organized by the Ministry of energy of the
Russian federation, OJSC “Surgutneftegas” was
awarded the certiicate “for the creation of
working conditions preserving the employees’
health during a working process”.
OJSC “Surgutneftegas” collective
agreements are the basic documents that
determine the system of beneits and
guarantees for employees, members of their
families and retirees of the Company.
HEALTH CARE
health care program is a priority
of the Company’s social protection and
includes health resort treatment, voluntary
medical insurance and regular preventive
medical examinations.
every year the Company carries out
a set of preventive measures to maintain
health and ability to work of its staf through
periodic and preliminary medical examinations.
in 2017, the Company arranged examination
64
and recreation center “Mechta” located in organization of health improvement and
leningradskaya Oblast. the Company’s wellness recreation, constant development of the
facilities have all the necessary infrastructure services provided.
for comfortable rest and efective treatment,
the latest equipment and highly qualiied
the multi-service health resort “Kedrovy
log” functions all year round and ofers
medical personnel. health and recreation a comprehensive approach to treatment.
programs, developed and implemented there, every year specialists of the resort develop
provide preventive treatment, rehabilitation 25 programs ofering numerous opportunities
and therapy for patients with various diseases. for health improvement. Before having
the most advanced wellness programs are treatment procedures, a targeted diagnosis is
regularly developed and implemented, new conducted for each proile of the disease, and
opportunities for diagnosing various diseases an individual program is drawn up after that.
emerge, the living conditions, the meal in 2017, the resort rendered services of health
provision system and the level of services maintenance, recovery and rehabilitation to
provided are improving. over 7.2 thousand patients.
in the reporting year, health resorts the employees of the Company’s reinery
of 78.2 thousand employees, including of the Company on the Black Sea coast in have an opportunity to relax at their own
11.4 thousand medical on-site check-ups Krasnodarski Krai – “neftyanik Sibiri” and recreation complex represented by health
at mobile medical units. in the oil and gas “lermontovo” – received 14.3 thousand resort “Priozyerny” and recreation center
producing sector of the Company, primary employees, members of their families and “Mechta”. in the reporting year, the recreation
health care for employees is arranged at Company’s retirees for rest and treatment. complex accepted over 10.2 thousand people
24 health posts located in Khanty-Mansiysky health resorts hold licenses for 79 types of for rest and treatment. in summer time, the
Autonomous Okrug – yugra, tyumenskaya healthcare services. About 3.9 thousand recreation center functions as a health camp
Oblast and the Republic of Sakha (yakutia), children stayed at the modern children’s for children – 896 children of llC “Kinef”
one of which (at the yuzhno-nyurymskoye ield) health resort “yuny neftyanik” in 2017 where employees relaxed here in the summer
was licensed in 2017. every year the Company they combined treatment and active rest. of 2017.
arranges vaccination for about 15 thousand the Company’s health resorts have received About 2.5 thousand employees and their
people, conducts about 7 million pre-trip and numerous letters of thanks, certiicates of families used spa treatment services in the best
post-trip medical examinations of drivers. health merit and certiicates for the high level of health resorts of Russia and abroad.
posts at the remote ields provide medical care
for the staf working on a rotational basis and
contribute to reducing the period of inability
to work.
the priority in the implementation of
the health program is health resort treatment,
which is carried out on the basis of a corporate
wellness complex, health centers in Russia and
abroad. health resort treatment is annually
arranged at the resorts of Belokurikha,
in tyumenskaya Oblast, the Republic of
Bashkortostan, novgorodskaya, Pskovskaya,
Kaliningradskaya Oblasts, the Caucasian
Mineral Waters, the Black Sea coast. in 2017,
over 39 thousand Company’s employees, the
members of their families and pensioners
received treatment at the Company health
centers, resorts in Russia and abroad located in
various climatic zones and having a diferent
focus of treatment programs.
the major part of the holiday-makers
(93.7%) received comprehensive treatment at
recreation facilities run by the Company: health
center “Kedrovy log” in Surgut, a group of health
resorts located on the shores of the Black Sea
in Krasnodarsky Krai, health resort “Priozyerny”
Annual Report 2017 OJSC “Surgutneftegas”
65
 WORK SAFETY AND PRODUCTION
STANDARDS
the Company gives much consideration
to ensuring safe working conditions and
occupational health safety. to increase the level
of occupational, industrial and ire safety, as well
as prevent accidents and industrial injuries is
our top priority.
the Company implements measures
to enhance process equipment reliability,
ensure its trouble-free operation and
introduces new technologies and automated
eSD systems. the multilevel system that
manages occupational health and industrial
safety is constantly being improved; it is aimed
at implementing a complex of legal, socio-
economic, organizational, sanitary and hygienic,
therapeutic and preventive, rehabilitation and
other measures, ensuring health protection
of employees and community from ire and
accidents at production facilities.
in order to attract the Company’s
specialists to work on issues related to ensuring
occupational health, industrial, ire and
electrical safety, the section “technospheric
Security” of the XXXvii Scientiic and technical
conference for young professionals and
scientists of the Company was arranged in 2017.
in the reporting year, for the irst time,
a professional skills competition for the title
“Best crew for safe gas hazardous and hot
works” was organized among the employees of
the Company’s divisions in order to improve the
eiciency and quality of work, create conditions
for developing professional skills to prevent
occupational injuries, ires, accidents and
incidents at hazardous production facilities as
well as to share positive experience in the safe
performance of these types of work.
the Company regularly conducts
expert examinations of technical devices
and structures that have fulilled the rated
service lifetime in order to establish the
possibility of their further use. in 2017,
the operation of the equipment beyond the
established service lifetime was not allowed.
to determine the possibility of further safe
operation, the Company made an industrial
safety inspection of 13,819 items of technical
equipment, 78 structures, 1,265 kilometers of
linear structures and 11 buildings.
the Company constantly seeks to
improve working conditions for the employees.
the upgrade of equipment and production
66
processes at workplaces in order to reduce the socially signiicant facilities, infrastructure and Beloyarsky Districts and provided inancial
harmful factors of the working environment and development, supported educational support to the Demyanskoye settlement
the labor process to acceptable levels made it institutions, culture and healthcare. and the village of numto. Over ive years,
possible in 2017 to maintain a positive trend in for many years, the Company has been the Company has built a warming center
improving the working conditions for workers. interacting with representatives of the small- for the Khanty people, residential buildings,
the Company pays much attention numbered indigenous peoples of the north a club, a visit-center of the park and a chapel
to creating comfortable work and leisure who live in the territory where Surgutneftegas in Beloyarsky District, the targeted help to
environment for its employees: ensures the operates. they receive inancial assistance in the population is continuously provided,
functioning of social amenities, reimburses educating children in higher and secondary the problem of drinking water is being solved.
employees for the cost of meals in vocational education institutions, material using the latest environmental technologies,
the Company’s canteens. support aimed at improving living and housing the Company continues to develop numto
At the end of 2017, there were conditions, treatment in health resorts and nature park that has a conservation status due
210 recreation facilities for 13,427 shift workers specialized institutions. to its unique natural and cultural signiicance.
with necessary sanitary premises and amenities in order to preserve cultural in the reporting year, with the assistance of
located in the residential areas and at the traditions and integrate local communities the Company, an interregional conference
oilields and industrial sites of the Company. OJSC “Surgutneftegas” helps arrange was organized on the 20th anniversary of
the Company’s catering network has celebrations of national holidays, meetings of the park, an agreement on the interaction
429 canteens: 212 are stationary and 217 are herders, ishermen, hunters; provides gifts for of the Company with the State hydrological
mobile, they daily serve meals for more than the participants. institute for Scientiic Research in the careful
26 thousand people. in 2017, one canteen for exploiting new oil and gas producing approach to marsh ecosystems in the park
50 persons was commissioned. clusters, the Company builds all necessary was signed.
in the reporting year, a new high-tech infrastructure: roads, energy facilities, pipelines in the reporting year, for the twelfth time
factory building of 7 thousand square meters and many other things. the development a valuable role of OJSC “Surgutneftegas” in
for tailoring of the Company’s working clothes of oilields has a positive efect on the well- the social and economic development of the
was commissioned; it will increase productivity being and improvement of the nearest region was noted at regional contest “Black
and improve the quality of products. the factory municipalities: the manufacturers of the region gold of yugra” – the Company won the awards:
annually manufactures around 75 thousand are provided with orders, jobs are created, “the most dynamic vertically integrated
working clothes for the Company’s personnel. additional taxes are gained by the local company”, “eicient use of mineral resources”,
At tailoring the newest fabrics of the Russian budget. in the reporting year, the Company “Cooperation with indigenous population” and
manufacture and foreign technologies are used, continued the ield development in uvatsky won the title of “Company of the year”.
all products pass obligatory certiication and
the inspection.
REGIONAL DEVELOPMENT
PROMOTION
OJSC “Surgutneftegas” is a reliable
partner of the government and society, it
signiicantly contributes to the social and
economic development of the regions
where it operates being a large employer
and taxpayer. Within the framework of the
agreements on cooperation concluded
with the regional authorities, the Company
invests in the development of Beloyarsky,
Surgutsky, Khanty-Mansiysky, nefteyugansky,
Oktyabrsky Districts in Khanty-Mansiysky
Autonomous Okrug – yugra, nadymsky
and Purovsky Districts in yamalo-nenetsky
Autonomous Okrug, nenetsky Autonomous
Okrug, Mirninsky and lensky Districts in
the Republic of Sakha (yakutia), uvatsky
District in tyumenskaya Oblast.
in the reporting year, the Company
allocated funds for the construction of
Annual Report 2017 OJSC “Surgutneftegas”
67
 SPORTS FOR ALL
for years, promotion of a healthy lifestyle,
assistance in the development of mass
sports have been part of the social policy for
OJSC “Surgutneftegas”. the Company arranges
a variety of sports competitions, tournaments,
gatherings, provides children and adults with
ample opportunities to go in for sports.
the Company has 22 sports facilities
which include 15 sports halls and seven sports
centers. the established sport facilities provide
conditions for more than 20 kinds of athletic
disciplines. Over 23 thousand employees visit
gyms, sports centers and swimming pools
on a regular basis. every year more than
13 thousand employees actively participate in
sports life of OJSC “Surgutneftegas”.
in 2017, the Company conducted the
35th sports festival. the main goal of holding
such events is to promote a healthy lifestyle
of the Company’s employees. in the reporting
year, four sport competitions were held
among the Company’s oil and gas production
divisions; that included 29 inal contests in
14 kinds of athletic disciplines, of which the
main are the following: basketball, cross-
country skiing, volleyball, swimming, track
and ield athletics, chess, table tennis, mini
football and kettlebell lifting. Over 6 thousand
employees from 52 Company’s business units
took part in the inal contests. At the end of
the sport contest the competition “Sporting
elite – 2017” was held followed by the award
ceremony in 55 categories.
employees of the Company successfully
take part as athletes in competitions of
various levels representing Surgut and
Khanty-Mansiysky Autonomous Okrug –
yugra. the Company pays special attention
to children’s sports. With an active assistance
of the Company, 748 young athletes go in
for indoor soccer, swimming, skiing in Surgut
Specialized Children and youth Sports School
of the Olympic Reserve “neftyanik”.
in the reporting year, the Company’s
reinery organized the 30th sports festival
for the employees and their family members
which included contests in 15 kinds of athletic
disciplines for 1,267 contestants. A sports
festival was also held for the managers, which
has become a tradition.
employees of the reinery take part
in various competitions and show good
results. for years, llC “Kinef” has taken pride
in achievements in water polo. there are
68
seven teams playing this sport successfully.
Kinef-Surgutneftegas women’s water polo
team is one of the most distinguished
and well-known in Russia. in 2017,
the sportswomen defended their title:
the team had become Russia’s champion
for the 15th time, a ten-time winner of
the Cup of Russia, won the euroleague gold
for the irst time in history. As the winner
of the main continental club tournament –
the euroleague – the team got the right to
play for the len Super Cup and conidently
won it. nine players of Kinef-Surgutneftegas
team in the Russian national team won bronze
at the World Championship 2017. Sports
complex “neftyanik” in Kirishi has become
one of the most important domestic centers
for the development of water polo, a place
for training the backup players and members
of the Russian national team, for conducting
oicial sports competitions on the national
and international levels.
SUPPORT OF RETIRED EMPLOYEES
OJSC “Surgutneftegas” gives much
consideration to the pioneers and veterans of
the oil industry who worked in the Company’s
business units. Support of retired employees
is part of the social policy, at the end of the
reporting period their number amounted to
34.7 thousand people, including 224 veterans
of the great Patriotic War.
the Association of Retired employees
of OJSC “Surgutneftegas”, with more than
5.6 thousand people, strives to protect
the rights and interests of elderly people,
improve their social status, provide practical,
psychological and social support. it runs clubs
and talent groups cooperating the retired
persons according to their interests and itness
groups, holds exhibitions, art contests and
meetings, workshops, trips and excursions.
the Company’s collective
agreement provides retired employees of
OJSC “Surgutneftegas”, veterans of the great
Patriotic War, combat veterans and physically
challenged people with targeted aid as well
as beneits and guarantees, including the
inancial aid on special occasions and vouchers
to health centers. in the reporting period,
the Company’s business units organized
cultural events for retired employees. they
included honoring participants, presenting
them with gifts, grateful letters and badges
of honor on remarkable occasions: the victory
Day in the great Patriotic War, the 40th
anniversary of OJSC “Surgutneftegas”,
the international Day of Older Persons. in 2017,
the Company spent more than RuB 27 million
on support of its retired employees.
the non-state pension scheme being in
efect for many years adds to the social security
coverage of the Company’s employees. At the
end of the reporting period, the Company
opened over 35 thousand retirement savings
accounts with payouts amounted to about
RuB 797.3 million.
CHARITY AND SPONSORSHIP
Charity and sponsorship are among
priorities in the Company’s social policy.
OJSC “Surgutneftegas” makes a worthy
contribution to the social welfare of citizens
of all regions of its presence, from Kaliningrad
to eastern Siberia, fulilling a wide range of
charitable and sponsorship programs. Priority
is given to programs aimed at preserving and
reviving the objects of the national heritage
and spiritual values of the country, supporting
children, developing culture and sports,
assisting socially unprotected strata of the
population. efective performance in this area
is based on targeted assistance and long-
term cooperation between the Company and
dedicated funds and organizations.
traditionally the Company provides social
help to those who need it most: veterans,
physically challenged people, low-income
families and children without parental care.
OJSC “Surgutneftegas” provides inancing
for medical treatment, new special medical
equipment, presents and social projects.
the Company provides targeted aid to public
organizations and funds, social institutions
that are aimed at supporting poorly protected
categories of citizens.
every year OJSC “Surgutneftegas” gives
extensive support to veterans and participants
of the great Patriotic War, inancially helps to
public organizations of veterans.
the Company’s aid is received by public
initiatives and projects aiming at preservation
and transmission of the history of Western
Siberia oil and gas province, cultivating respect
in the younger generation for the pioneers, key
igures and oil and gas industry professionals,
who have made a signiicant contribution to the
development of the fuel and energy complex.
Annual Report 2017 OJSC “Surgutneftegas”
OJSC “Surgutneftegas” is concerned about
the younger generation and lends support to
educational initiative programs. the Company
provides special support to gifted children
through helping educational institutions
in the Russian federation, participating
in the creation of favorable conditions for
the development of children’s abilities, in
the extension of research and cognitive
activities. the Company’s social partnership
is focused on the promotion of industry
research institutions.
the continuing priority of the Company’s
charitable activity is the development of
sports and promotion of a healthy lifestyle.
OJSC “Surgutneftegas”, in addition to the
corporate program for the development
of physical culture and sports, traditionally
supports events held in municipalities aimed
at promoting sports and healthy lifestyles,
and also strives to develop and support
national sports.
the Company provides inancial assistance
for the national public organizations
committed to revival and preservation of
the cultural heritage of the local people
of the territories where we operate. Much
attention is paid to the support of small-
numbered indigenous peoples of the north,
careful and rational subsoil use, preservation
of the cultural traditions of the Khanty and
Mansi. financial support is also provided to
organizations whose activities are focused
on preservation of ethnic heritage and the
determination of national identity.
An integral part of the Company’s charity
work is to help strengthen the spiritual
foundations of society through interaction
with national and religious associations
and organizations.
As part of its charitable activity,
the Company collaborates with institutions of
culture and art and organizations engaged in
the sphere of mass communications. financial
assistance provided by OJSC “Surgutneftegas”
is intended to support and promote cultural
and educational projects aimed at preserving
spiritual heritage.
the Company takes an active part in
the work of public organizations, charitable
foundations, support of healthcare, education,
science and social welfare institutions.
the Company is aimed at further development
of charity, sponsorship and participation in
social programs.
69
 05
Corporate
governance
and securities
The Board of Directors

Individual executive body

Remuneration paid to the

members of the Company’s
Board of Directors

Report on the Company’s
compliance with the principles
and recommendations
of the Corporate Governance
Code

Report on declared (accrued)

dividends on shares
of OJSC “Surgutneftegas”
 The Board of Directors

Vladimir P. EROKHIN Vladimir L. BOGDANOV Alexander N. BULANOV Ivan K. DINICHENKO Viktor M. KRIVOSHEEV Nikolai I. MATVEEV

Chairperson of the Board of Directors Deputy Chairperson Member of the Board of Directors Independent member Member of the Board of Directors Member of the Board of Directors
of OJSC “Surgutneftegas” of the Board of Directors of OJSC “Surgutneftegas” of the Board of Directors of OJSC “Surgutneftegas” of OJSC “Surgutneftegas”
of OJSC “Surgutneftegas” of OJSC “Surgutneftegas”

Born in 1949. Born in 1951. Born in 1959. Born in 1946. Born in 1953. Born in 1942.
higher education. higher education; higher education. higher education. higher education. higher education.
Doctor of economics. Chief engineer – first Deputy
Director general of OJSC “Surgutneftegas”. Director general of OJSC “Surgutneftegas”.

Share in the charter capital Share in the charter capital Share in the charter capital Share in the charter capital Share in the charter capital Share in the charter capital
as of 31.12.2017 0.0104% as of 31.12.2017 0.3028% as of 31.12.2017 0.0005% as of 31.12.2017 0.0003% as of 31.12.2017 0.0064% as of 31.12.2017 0%
Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares
as of 31.12.2017 0.0126% as of 31.12.2017 0.3673% as of 31.12.2017 0.0002% as of 31.12.2017 0% as of 31.12.2017 0.0072% as of 31.12.2017 0%

Annual Report 2017 OJSC “Surgutneftegas”

72 73
 The Board of Directors Individual executive body
vladimir l. BOgDAnOv
Director general of OJSC “Surgutneftegas”.
Born in 1951, higher education; Doctor of economics.
Share in the charter capital as of 31.12.2017: 0.3028%.
Ordinary shares as of 31.12.2017: 0.3673%.
in 2017, there were no changes in the share of the person holding the position of an individual
executive body in the Charter capital of the Company as well as in his fraction of the ordinary
shares of the Company.

Remuneration paid to the members

of the Company’s Board of Directors
Vladimir I. RARITSKY Ildus S. USMANOV Vladimir A. SHASHKOV
the procedure of remuneration and of Directors has the right to recommend to
compensation for the members of the Board the general shareholders’ meeting to reduce the
Member of the Board of Directors Member of the Board of Directors Independent member of Directors (policy of remuneration) is deined amount of remuneration to individual members
of OJSC “Surgutneftegas” of OJSC “Surgutneftegas” of the Board of Directors by the Charter and the Regulations on the of the Board of Directors in relation to the basic
of OJSC “Surgutneftegas”
Board of Directors of OJSC “Surgutneftegas” remuneration, if they participated in less than
and applies to the members of the Company’s half meetings of the Board of Directors during
Board of Directors who are not employed the period when they performed their duties.
Born in 1940. Born in 1954. Born in 1946.
by the Company. in the reporting year, there During the period of performance of
higher education. higher education. higher education.
were no changes in the Company’ policy his/her duties, the Chairperson of the Board of
of remuneration. Directors shall be paid remuneration according
it was resolved that the members of to the Regulations on the Board of Directors of
Share in the charter capital Share in the charter capital Share in the charter capital the Company’s Board of Directors who do not OJSC “Surgutneftegas”.
as of 31.12.2017 0.0079% as of 31.12.2017 0.0018% as of 31.12.2017 0.0094% act as Chairperson of the Board of Directors or According to the Regulation on the
Ordinary shares Ordinary shares Ordinary shares Board of Directors of OJSC “Surgutneftegas”,
Director general of OJSC “Surgutneftegas” and
as of 31.12.2017 0.0089% as of 31.12.2017 0.0022% as of 31.12.2017 0.0115%
who are not employees of OJSC “Surgutneftegas” the Company reimburses the expenses of
shall be paid remuneration, the amount of the members of the Board of Directors of
which is determined in accordance with the OJSC “Surgutneftegas” in full provided that
resolution of the general shareholders’ meeting they are duly documented and incurred in
of OJSC “Surgutneftegas”, during the period performance of their duties.
when they perform their duties. Remuneration and expenses
the basic remuneration for each reimbursement paid to the members of the
member of the Board of Directors speciied Board of Directors of OJSC “Surgutneftegas”
in the previous paragraph is RuB 4,000,000 in 2017 totaled RuB 52,673.2 thousand,
(four million). the members of the Board of including:
Directors who acted as chairperson of the remuneration: RuB 48,040 thousand
Data on changes in the membership of the Board of Directors in the reporting year: no changes. committees of the Board of Directors shall be
in 2017, there were no changes in the share of the members of the Board of Directors in the paid additional remuneration in the amount compensations for expenses:
charter capital of the Company as well as their fraction of the ordinary shares of the Company. of RuB 1,000,000 (one million). the Board RuB 4,633.2 thousand

Annual Report 2017 OJSC “Surgutneftegas”

74 75

Report on the Company’s
compliance with the principles and
recommendations of the Corporate
Governance Code
this report on the Company’s compliance
with the principles and recommendations of the
Corporate governance Code was considered at
the meeting of the Company’s Board of Directors
(Minutes no. 4 dated 18.05.2018).
the Company’s Board of Directors
(hereinafter – the Board of Directors) conirms
that data stated in this report contain complete
and accurate information on the Company’s
compliance with the principles and
recommendations of the Corporate governance
Code in 2017.
the Company continuously improves
the system of corporate governance and
runs its business under the principles of
the Russian Corporate governance Code.
the Company adheres to the principles of the
Corporate governance Code, standards and
requirements of the current legislation of the
Russian federation.
the general shareholders’ meeting is the
supreme management body of the Company.
its terms of reference are determined by
the Company’s Charter and comply with the
requirements of the current legislation of the
Russian federation.
the Board of Directors carries out overall
management of the Company’s activities
and has the right to adopt resolutions on any
matters concerning the Company’s activities
except those which the Company’s Charter
limits to the terms of reference of the general
shareholders’ meeting.
As stipulated by the Company’s Charter, the
members of the Board of Directors are elected
by the annual general shareholders’ meeting
for a term lasting till the next annual general
shareholders’ meeting, and from the number
of candidates nominated by the Company’s
shareholders, and in the absence of such
persons – candidates nominated by the Board of
Directors. the members of the Board of Directors
can be reelected an unlimited number of times.
the Company’s Charter does not
provide for the formation of the collective
executive body.
76
Director general is the individual
executive body of the Company and manages
the Company’s current activity in the order and
within the terms of reference determined by
the Company’s Charter as well as in accordance
with resolutions of the Board of Directors and
the general shareholders’ meeting. the Board
of Directors appoints Director general of
the Company for a ive-year period.
At expiration of Director general’s term
of oice, the Board of Directors can appoint
this person for the same period an unlimited
number of times. Director general reports to the
Board of Directors and the general shareholders’
meeting of the Company.
the powers of the Company’s management
bodies are determined by the Company’s
Charter.
SHAREHOLDERS’ RIGHTS
AND EQUAL CONDITIONS
FOR ALL SHAREHOLDERS
WHEN EXERCISING THEIR RIGHTS
the Company provides equal and fair
treatment of all shareholders when they exercise
their rights to participate in the Company’s
management.
in the reporting year, in accordance
with the current legislation of the Russian
federation, the Company’s Charter and internal
documents, the Company created favorable
conditions for its shareholders for participation
in general shareholders’ meeting, development
of reasonable position on the agenda of the
general meeting and coordination of their
actions as well as the opportunity to express
their views on the considered issues.
the internal document of the Company –
Regulations on the general shareholders’
meeting of OJSC “Surgutneftegas” approved by
the general shareholders’ meeting – regulates
the procedures for conducting the general
shareholders’ meeting and is publicly available
on the Company’s oicial website in the
information and telecommunication network
“internet” (hereinafter – the internet).
the Company provides an opportunity for
shareholders to apply to the Company (orally or
in writing as well as via e-mail to the addresses
listed as contacts for requests from shareholders
and investors), express his/her views and submit
proposals and issues on the agenda while
preparing for the general shareholders’ meeting.
the Company doesn’t use such methods of
communication between shareholders and
the Company as a “hot line” or an internet forum
because an established practice has proved that
the existing means of communication between
shareholders and the Company ensure the
enforcement of the shareholders rights.
the procedure for notifying the general
shareholders’ meeting of the Company and
provision of materials for the general meeting
give to the shareholders an opportunity to
properly prepare for the meeting.
for many years, notices of the general
shareholders’ meetings have been posted on
the Company’s website at least 30 days before
the general shareholders’ meeting is held. Such
notices contain the venue of the meeting and
the documents required for admission to the
premises where the meeting is held.
information about the Company’s
shareholders who nominated candidates to the
Board of Directors and the Auditing Committee
of the Company and proposed issues to be
placed on the agenda is not disclosed due to
the absence of consent of such shareholders to
disclose such information.
in the reporting period, the shareholders
were given an opportunity to readily and timely
receive information about the annual general
shareholders’ meeting of the Company and
the materials for it as well as put questions
to Director general of the Company and the
members of the Board of Directors while
preparing and holding the annual general
meeting. every shareholder of the Company
had the opportunity to apply to the Company,
express his/her opinion and direct questions
(orally or in writing as well as via e-mail to the
addresses listed as contacts for requests from
the Company’s shareholders and investors).
the position of the Board of Directors
on any issue on the agenda of the annual
general shareholders’ meeting of the Company
held in the reporting period was included in
the materials for the general shareholders’
meeting in the form of the approved list of draft
resolutions of the general shareholders’ meeting.
Annual Report 2017 OJSC “Surgutneftegas”
While preparing for the annual general
shareholders’ meeting the Company provided
the shareholders who had the right thereof
with the access to the list of persons entitled to
participate in the general shareholders’ meeting
from the day of its receipt by the Company.
exercising the shareholder’s right to
demand the general shareholders’ meeting
to be convened, nominate candidates to the
management bodies and propose items to be
placed on the agenda of the general meeting
does not involve unjustiied diiculties and is
fully compliant with the current legislation of the
Russian federation and the Company’s Charter.
in accordance with the Company’s
Charter and the internal document – Procedure
for the general shareholders’ meeting of
OJSC “Surgutneftegas” – the shareholders
had the opportunity to propose items to the
agenda of the annual general shareholders’
meeting within 30 days after the end of the
calendar year. given the established practice
of shareholders’ introduction of items to the
agenda of the annual general shareholders’
meetings, the Company considers such a period
as suicient.
in the reporting period, the Company did
not refuse to include proposed items in the
agenda or accept nominees to the Company’s
bodies due to misprints or other non-essential
laws in the shareholders’ proposals.
every shareholder was provided with
an opportunity to freely exercise the right to
vote in the way which is the easiest and the
most convenient for him/her and which is
determined by the current legislation of the
Russian federation and the internal documents
of the Company.
in order to create the most favorable
conditions for shareholders’ participation in
the general meetings, the Company applies a
registration procedure of the participants of the
general meeting which doesn’t create obstacles
to the participation of all shareholders wishing
to attend the meeting in person or by proxy.
though the internal documents of
the Company do not contain provisions
stipulating that any member of the general
meeting may request a copy of his/her
completed ballot papers certiied by the ballot
committee prior to the end of the general
shareholders’ meeting, each member of the
meeting may apply to the Company and receive
the requested copies of the documents.
the Company’s procedure for conducting
the general shareholders’ meeting established
77
 by the internal document of the Company
provides equal opportunities for all persons
present at the meeting to express his/her
opinion, ask questions and get answers.
in the reporting period, while holding
the annual general shareholders’ meeting
suicient time was provided for the reports
on the agenda items as well as discussion of
these items.
the candidates to the management and
control bodies of the Company were ready to
answer the shareholders’ questions at the annual
general shareholders’ meeting at which the
nominees were put to vote.
the Company’s shareholders did not
apply to the Company with a proposal to use
telecommunications for remote access to the
general shareholders’ meetings.
the shareholders have an equal and
fair opportunity to participate in proits of
the Company by way of receiving dividends.
the Company has a transparent and
clear mechanism for determining the amount
of dividends and payment on them which is
deined by the Company’s Charter, Regulations
on Dividend Policy of OJSC “Surgutneftegas” and
resolutions on dividends adopted by the general
shareholders’ meeting of the Company.
While developing recommendations
for the annual general shareholders’ meeting
in respect of the amount of dividends, the
Board of Directors uses accounting (inancial)
statements of the Company as required by the
current legislation of the Russian federation and
the Company’s Charter.
in the reporting year, the Company
adopted no resolution on the payment of
dividends which, not violating formally the
restrictions established by the legislation, was
economically unjustiied and could lead to
misconceptions about the Company’s activity.
Clear indications of inancial/economical
circumstances in which the Company
shall not pay dividends are deined by the
current legislation of the Russian federation,
the Company’s Charter and Regulations on
Dividend Policy of OJSC “Surgutneftegas”.
in the reporting period, the Company
took no actions leading to deterioration of the
dividend rights of the existing shareholders.
the internal documents of the Company
contain no information about special controlling
mechanisms providing for the procedure
of approval by the Board of Directors or the
general shareholders’ meeting for transactions
with persons ailiated (associated) with
78
signiicant shareholders (persons entitled to the
dispose of votes assigned to the voting shares)
in cases when the federal law “On Joint Stock
Companies” does not formally recognize such
transactions as interested party transactions.
Despite this, the Company ensures equal
treatment of all counterparties through various
procedures (tenders, competitions, auctions).
During the reporting period, there were
no conlicts of interests between the Company’s
shareholders. At the same time, the Company
has created conditions for equal treatment of all
shareholders by the Company’s management
bodies and the Company’s oicers.
the Company undertakes no actions which
lead or may lead to artiicial redistribution of
corporate control.
in accordance with the current legislation
of the Russian federation, the Company
ensures equal conditions for voting on shares
for all shareholders who own shares of one
category (type), including minority and
foreign shareholders.
the shareholders of the Company are
provided with reliable and efective methods of
recording stock ownership rights as well as the
possibility of free and easy disposal of shares
held by them.
the registrar of the Company carries out
activities related to keeping the register of
securities holders, and the quality and reliability
of his/her actions comply with the needs of
the Company and its shareholders.
THE COMPANY’S
BOARD OF DIRECTORS
the terms of reference of the Board of
Directors include adoption of resolutions
related to the appointment to the position of an
individual executive body (Director general) of
the Company. the Board of Directors monitors
compliance of Director general’s actions with
the Company’s development strategy and the
key areas of its activity.
While preparing for the annual general
shareholders’ meeting, the Board of Directors
reviews the report of Director general of
the Company on the results achieved by
the Company in the reporting year as well as
plans for further development of the Company.
the Board of Directors determines major
principles and approaches to the Company’s
risk management and internal control system.
the Board of Directors approved Regulations on
the Audit Committee of the Board of Directors
of OJSC “Surgutneftegas” and Regulations on
internal Audit Service of OJSC “Surgutneftegas”.
the Company established the Auditing
Committee and business units ensuring the
functioning of risk management and internal
control systems. the internal Audit Service of
the Company annually reports to the Board of
Directors on the work done. While preparing this
report, the Board of Directors has assessed risk
management and internal control systems of
the Company and believes that in the reporting
year risk management and internal control
systems served the interests of the Company.
the Company has no special internal
document to determine the policy on
remuneration and expenses reimbursement
(compensation) of the members of the Board
of Directors, Director general and other key
personnel of the Company. Despite this,
the Company has established and operates
an efective system of remuneration of its
employees. the system of remuneration and
compensation for the members of the Board of
Directors is deined by the Company’s Charter
and the Regulations on the Board of Directors of
OJSC “Surgutneftegas”.
in the reporting year, there were
amendments to the Company’s policy on
remuneration and expenses reimbursement
(compensation) of the members of the Board
of Directors.
the Board of Directors plays a key role in
prevention, detection and settlement of internal
conlicts, if any, between the management
bodies, shareholders and employees of
the Company. the Company has established
and operates the system of identiication of
transactions related to conlicts of interest
as well as the system of measures aimed at
resolving such conlicts.
the Company has no regulations on
information policy in the form of a special
document approved by the Board of Directors.
however, in the course of its activity, the Board
of Directors focuses on timely and full provision
or disclosure of information about the Company
in the securities market. the Company has
determined persons responsible for provision or
disclosure of information about the Company’s
activity. the Board of Directors recognizes the
scope and time of information disclosure as
suicient to inform the shareholders about
the Company’s activity.
to assess how the Company complies with
the principles of the Corporate governance
Code the following key measures are taken:
Annual Report 2017 OJSC “Surgutneftegas”
distribution of powers between the
management bodies of the Company;
work low management for the Board
of Directors, including its cooperation
with governing and controlling bodies of
the Company;
control over the implementation of
the Company’s development strategy;
coordination of risk management;
prevention of corporate disputes and
conlicts of interest;
relations with controlled entities;
deinition of rules and procedures ensuring
compliance with the principles of corporate
governance;
coordination of information disclosure
about the Company;
monitoring of the internal control system.
the Company implements measures
to eliminate laws discovered during the
examination of corporate governance status.
the Board of Directors monitors
the practices of corporate governance in
the Company and plays a key role in signiicant
corporate events of the Company. As a result
of such work performed in the reporting year,
the Board of Directors, in particular, resolved to
recognize the members of the Board of Directors
as independent members, despite the fact of
their formal association with the Company.
information about attendance of the
meetings of the Board of Directors and voting
in the meetings is disclosed by the Company in
accordance with the procedure established by
the legislation of the Russian federation in the
form of statements of signiicant facts (about
resolutions adopted by the Board of Directors).
there were ive meetings of the Board of
Directors in the reporting year. three meetings
were attended by all nine members of the Board
of Directors and two – by eight members of the
Board of Directors.
the Board of Directors analyzed the results
of its activities performed in the reporting year
to assess its efectiveness in performing the
duties of the Board of Directors and identify
opportunities for its better work as well as
evaluate professional expertise of the members
of the Board of Directors. Self-assessment of
the Board of Directors was performed during
79
 the preliminary approval of this report at joint
meetings. Based on its results, the Board of
Directors noted that the activity of the Board
of Directors was in compliance with the
current legislation of the Russian federation,
addressed the interests of the Company and
its shareholders and enabled the Company to
minimize economic risks and potential conlicts
of interests. the work of the Board of Directors
for 2017 was recognized as satisfactory.
the Chairperson of the Board of
Directors is available for communication with
the Company’s shareholders. the Company
has a transparent procedure providing the
shareholders with the opportunity to direct
their questions and position (opinion) on
the issues to the Chairperson of the Board
of Directors.
the Board of Directors is an efective and
professional management body of the Company
which can make objective independent
judgments and adopt resolutions that meet the
interests of the Company and its shareholders.
in the reporting year, while discussing
the proposals submitted by the shareholders
for nominating candidates to be elected to
the Board of Directors, the Board of Directors
considered the nominee candidates whether
they had required professional knowledge, skills
and experience to perform as a member of the
Board of Directors as well as their business and
personal reputation. the Board of Directors
concluded that all candidates nominated
to be elected to the Board of Directors had
impeccable business and personal reputation
as well as knowledge, skills and experience
required to adopt resolutions related to the
terms of reference of the Board of Directors and
efective performance of its functions and no
conlict of interest.
there are no signiicant changes in
the personal composition of the Board of
Directors which allows the Company to remain
stable, adhere to progressive and gradual
development as well as mitigate corporate
disputes and conlicts of interest and shape
strategic plans and successfully implement
them. Professionalism and integrity of the Board
of Directors are proved by their longstanding
and excellent work. the Company provides
the shareholders with information about the
availability of the candidates’ written consent
to their election to the Board of Directors.
While preparing for the general shareholders’
meeting and its holding, the shareholders
have the opportunity to address questions to
80
the Chairperson of the Board of Directors or
the candidates to be elected to the Board of
Directors in order to get a view of their personal
and professional qualities.
in 2018, 11 candidates are nominated to
the Board of Directors, nine of them are the
acting members of the Board of Directors.
v. n. egorov and g. R. Mukhamadeev fully
qualify for the criteria of independence
deined in the Corporate governance Code
as they are not associated with the Company,
a signiicant shareholder, contractor or
competitor of the Company and with the state
(the Russian federation, a constituent territory
of the Russian federation) or municipality.
in the reporting year, information
about the eligibility of the candidates to be
elected to the Board of Directors with the
criteria of independence was also presented
to the shareholders within the report of
the Company’s compliance with the principles
and recommendations of the Corporate
governance Code.
the composition of the Board of
Directors is balanced, including its members’
skills, experience, knowledge and business
proiciency, and enjoys conidence of the
shareholders of the Company.
the number of the members of the Board
of Directors makes it possible to arrange its
activity in the most efective manner, including
the possibility to form its committees, as well as
provides the signiicant minority of shareholders
of the Company with the opportunity to elect
the candidate to the Board of Directors they
wish to vote for. As part of the assessment
procedure of the Board of Directors conducted
in preparation of this report, the Board of
Directors recognized its number of members as
satisfying the requirements of the Company and
its shareholders’ interests.
the Board of Directors is formed at the
general shareholders’ meeting from the number
of candidates nominated by the Company’s
shareholders as prescribed by the current
legislation of the Russian federation and
the Company’s Charter.
each member of the Board of Directors
gives due preliminarily assessment of the
signiicant corporate actions, including their
analysis in terms of a potential conlict of
interests. this allows all the members of the
Board of Directors to perform their functions
most efectively.
According to the current requirements
of PJSC “Moscow exchange” to level ii issuers
(the Company is among them), the Board of
Directors includes two independent directors.
in the reporting year, the Board of
Directors considered independence of the
acting members of the Board of Directors.
none of the members of the Board of Directors
met the criteria of independence set by the
listings Rules of PJSC “Moscow exchange”.
in this connection, in the reporting year the
Board of Directors analyzed whether the
members of the Board of Directors met the
deinition of criteria of independence and
resolved to recognize members of the Board
of Directors i. K. Dinichenko and v. A. Shashkov
as independent directors, despite the fact
of their formal criterion of association with
the Company. the Board of Directors thinks
that the existing association of i. K. Dinichenko
and v. A. Shashkov with the Company does not
inluence their ability to make objective and
fair judgments, independent from the inluence
of Director general of the Company, certain
groups of shareholders of the Company or
other stakeholders.
the Chairperson of the Board of Directors
arranges the efective work of the Board of
Directors and its interaction with other bodies of
the Company. the Chairperson of the Board of
Directors has impeccable business and personal
reputation and considerable experience in
management positions and is committed to
the Company’s interests.
the role, rights and responsibilities of
the Chairperson of the Board of Directors are
duly deined in the internal documents of
the Company.
While approving this report, the Board
of Directors assessed the performance of
the Chairperson of the Board of Directors.
the results of assessment proved that the
Chairperson of the Board of Directors provides
constructive environment of the meetings, free
discussion of issues on the agenda and control
over the execution of resolutions adopted by
the Board of Directors.
the Chairperson of the Board of Directors
creates necessary conditions to ensure efective
performance of the Audit Committee of
the Board of Directors (hereinafter – the Audit
Committee) and takes the initiative to nominate
the members of the Board of Directors to the
Audit Committee considering their professional
and personal qualities as well as taking into
account the proposals of the members of
the Board of Directors for the formation of
the Audit Committee.
Annual Report 2017 OJSC “Surgutneftegas”
the Chairperson of the Board of Directors
maintains regular contacts with other bodies
and oicers of the Company in order to timely
obtain the most comprehensive and accurate
information required for the Board of Directors
to consider issues and adopt resolutions
on them.
the Chairperson of the Board of Directors
takes necessary measures to provide the Board
of Directors with information required for
adopting resolutions on the agenda items within
the time limits deined in the Regulations on the
Board of Directors of OJSC “Surgutneftegas”.
the members of the Board of Directors
act in good faith and in a reasonable manner
and in best interests of the Company and its
shareholders with due diligence, adequate
assessment of the risks they assume and
awareness of their personal responsibility for
the decision they make. the Company’s internal
documents do not provide for the obligation
of any member of the Board of Directors to
notify the Board of Directors of the conlict of
interest arising in regard to any issue on the
agenda of the meeting of the Board of Directors
or the Audit Committee. nevertheless, the
Board of Directors adopts its resolutions with
due account to all information available and
equal treatment of the Company’s shareholders
and under standard business risk. the Board of
Directors may get professional advice within the
terms of its reference at the Company’s expense
when necessary.
the Company has approved and posted
on the Company’s website the Regulations on
the Board of Directors of OJSC “Surgutneftegas”
which together with the Company’s Charter
clearly deine rights and responsibilities of the
members of the Board of Directors.
Based on assessment of attendance of
the meetings of the Board of Directors and the
Audit Committee performed when approving
this report, the Board of Directors concluded
that each member of the Board of Directors had
suicient time to prepare for the meetings of the
Board of Directors and participate therein.
Pursuant to the requirements of Article 82
of federal law “On Joint Stock Companies”, any
member of the Company’s Board of Directors
shall notify the Board of Directors in writing
of his/her election (nomination) as a member
of the management bodies of other legal
entities. the Company’s internal documents do
not directly provide for the obligation of any
member of the Board of Directors to notify the
Board of Directors of his/her intention to be
81
 elected as a member of the management bodies
of other legal entities. however, the members
of the Board of Directors are aware of having
such obligation.
Any member of the Board of Directors,
including any newly elected members of
the Board of Directors, has equal access to
any Company’s documents and information.
Despite the absence of the formalized program
of introductory activities, any newly elected
member of the Board of Directors is furnished
with suicient information on the Company
and activity of the Board of Directors as soon
as practicable.
the meetings of the Board of Directors
are held when necessary and in regard with
the Company’s scope of business and tasks
the Company faces in a certain period of its
lifetime. the meetings of the Board of Directors
in the Company may be conducted in the form
of joint presence as well as by absentee voting.
it is the practice that the irst meeting of the
newly elected Board of Directors to elect the
Chairperson of the Board of Directors, the Audit
Committee and the Chairperson of the Audit
Committee is held in the form of joint presence
immediately after the election of the new Board
of Directors at the annual general shareholders’
meeting of the Company.
According to the Regulations on the
Board of Directors of OJSC “Surgutneftegas”
approved by the general shareholders’ meeting
of the Company, the notiication of the meeting
of the Board of Directors shall be made not
later than three days before such a meeting is
conducted. in certain circumstances depending
on the scope and signiicance of information to
be prepared for such a meeting, the notiication
of the meeting of the Board of Directors is
delivered to the members of the Board of
Directors prior to the stated minimum period.
the work of the Board of Directors proves that
the established period and procedure used to
notify of the meeting of the Board of Directors
allows the members of the meeting of the
Board of Directors properly prepare for the
forthcoming meeting.
the form of a meeting of the Board
of Directors is deined with due account to
the signiicance of the agenda items. the
most important issues are considered at the
meetings which are held in the form of joint
presence. in particular, these items include:
convening the annual general shareholders’
meeting of the Company and adopting
resolutions on items related to convening
82
and holding such a meeting; the preliminary
approval of the Company’s annual report;
the election of the Chairperson of the Board
of Directors, the appointment of Director
general of the Company; the approval of major
transactions or interested party transactions;
increasing the charter capital of the Company.
the number of votes to be obtained to
adopt resolutions by the Board of Directors
is determined in accordance with the
current legislation of the Russian federation,
the Company’s Charter and Regulations on the
Board of Directors of OJSC “Surgutneftegas”.
Regular practice has shown that over many past
years all resolutions of the Board of Directors
have been approved by a large majority of all
elected members of the Board of Directors.
every year the Board of Directors
establishes the Audit Committee with tasks
determined by the Regulations on the Audit
Committee of the Board of Directors.
in the reporting year, the meetings of
the Audit Committee were held when it was
necessary to consider issues related to its terms
of reference. thus, in the reporting year the
Board of Directors conducted two meetings of
the Audit Committee.
the composition of the Audit Committee
makes it possible to conduct comprehensive
discussion of the preliminarily considered
issues and take into account diferent
opinions. the Audit Committee is headed by
an independent director, and independent
directors constitute its majority. to adopt more
efective resolutions of the Audit Committee,
the meetings of the Audit Committee can
be attended by the invited outside experts
as provided by the Regulations on the Audit
Committee of the Board of Directors.
the Chairperson of the Audit Committee
regularly informs the Board of Directors
and its Chairperson on the performance of
the Audit Committee.
Considering the scope of the Company’s
activities and risk level, in this report the
Board of Directors expresses an opinion
that the number and composition of its
committees entirely serve the Company’s
objectives. At the current stage of its
performance the Company does not require
other committees of the Board of Directors to
be established.
the Board of Directors assesses its
eiciency on its own, without engaging an
external independent qualiied organization
(consultant). the results of the assessment are
considered by the Board of Directors when
preliminarily approving the annual report at
the meetings which are held in the form of
joint presence.
THE CORPORATE SECRETARY
OF THE COMPANY
the Board of Directors has approved
and posted on the Company’s website
the Regulations on the Corporate Secretary of
OJSC “Surgutneftegas” which determine the
status and authorities of the corporate secretary
of the Company in compliance with the listings
Rules of PJSC “Moscow exchange” based on the
recommendations of the Corporate governance
Code. in accordance with the mentioned
Regulations, the Company’s corporate secretary
shall be appointed by order of Director general
of the Company after preliminary approval of
the Board of Directors.
THE SYSTEM OF REMUNERATION
OF THE MEMBERS OF THE BOARD
OF DIRECTORS, DIRECTOR GENERAL
AND OTHER KEY PERSONNEL
OF THE COMPANY
the Company has developed and
operates an efective system of remuneration
of the Company’s employees that provides
the level of remuneration suicient to
attract, motivate and retain persons of high
competence and skills who meet the Company’s
requirements. the system of remuneration and
compensation for the members of the Board
of Directors is deined by the Charter and
the Regulations on the Board of Directors of
OJSC “Surgutneftegas”.
the Company reimburses the expenses
of the members of the Board of Directors in full
provided that they are duly documented and
incurred in the course of their duties.
the annual remuneration for the members
of the Board of Directors was ixed under the
current Regulations on the Board of Directors
of OJSC “Surgutneftegas”. the amount of the
ixed annual remuneration was diferentiated
depending on the scope of duties a member
of the Board of Directors fulills to relect the
additional time spent by the Chairperson of the
Audit Committee in the course of his duties. it
was also resolved that payment of such ixed
annual remuneration in full is determined by the
number of times when a member of the Board
Annual Report 2017 OJSC “Surgutneftegas”
of Directors personally participated in such
meetings, which shall be not less than one half
of all the meetings of the Board of Directors.
the Company applies neither short-
term motivation nor additional inancial
incentives of any kind towards the members of
the Company’s Board of Directors. fixed annual
remuneration was the only form of money
remuneration to the members of the Board of
Directors during the reporting year.
the majority of the members of the
Board of Directors have been the Company’s
shareholders for many years. the members of
the Board of Directors are entitled to dispose of
their shares regardless of certain performance
indicators the Company has reached.
in case of early termination of powers of
any member of the Board of Directors caused
by change in control over the Company or other
circumstances, the Company shall not provide
any additional payments or compensations.
According to the Company’s remuneration
policy, the amount of the remuneration paid
to Director general and other key executives
of the Company correlates with the Company’s
operating results and personal contribution
made to achieve them.
the remuneration of Director general
and other key executives of the Company is
determined to ensure reasonable and justiied
correlation of the ixed and variable parts
thereof depending on the Company’s operating
results and individual contribution of an
employee to the inal result.
the Board of Directors believes that
the Company applies the methods which
provide efective ratio of the ixed and variable
parts of remuneration.
the Company applies no long-term
remuneration program for Director general
and other key executives of the Company
which includes a stock option plan or inancial
instruments based on the Company’s shares.
At present, implementation of such programs
is considered inappropriate and can present
signiicant risks and high expenses for
both the Company and the participants of
such programs.
When more favorable conditions
occur, the Company may reconsider the
implementation of the long-term remuneration
program based on a stock option plan for
Director general and other key executives of
the Company.
the Company’s internal documents
provide no compensation (so called “golden
83
 parachutes”) in case the authority of Director
general or any key executives of the Company
is early terminated by the Company and when
there are no unfair actions on their part.
THE SYSTEM OF RISK MANAGEMENT
AND INTERNAL CONTROL
the Company has developed and
efectively operates the system of risk
management and internal control aimed at
providing reasonable assurance that objectives
set by the Company will be achieved.
the Auditing Committee shall be elected by
the general shareholders’ meeting to supervise
the Company’s inancial and business activity. to
have annual accounting (inancial) statements
audited and conirmed, the Company engages an
independent external auditor. An independent
auditor shall be approved by the general
shareholders’ meeting of the Company.
the Company has established and
operates the internal audit service. Regulations
on the internal audit service are approved
by the Board of Directors and posted on
the Company’s website.
functions of the Company’s business units
within the risk management and internal control
system are clearly deined in the Company’s
internal local documents. there is distribution
of functions and powers relating to risk
management and internal control between
heads of the Company’s business units.
the Company has the Corporate ethics
Regulations approved by the Board of Directors
which together with other internal documents of
the Company suiciently regulate issues related
to informing the Board of Directors and the
Audit Committee on the violation of the current
legislation of the Russian federation, including
anti-corruption laws and internal procedures.
every year the Audit Committee reviews the
report of the internal audit service and informs
the Board of Directors on the eiciency of the risk
management and internal control system.
Based on assessment of the eiciency
of the system of risk management and
internal control system conducted during
the consideration of this report, the Board of
Directors expresses its opinion that the existing
system of risk management and internal control
of the Company facilitates true, fair and clear
presentation of the Company’s current state and
prospects as well as integrity and accuracy of
the Company’s statements and soundness and
acceptability of its risks.
84
the Company’s internal audit service –
a separate business unit to perform internal
audit (internal audit service) – functionally
reports to the Board of Directors and performs
internal auditing of the Company.
the Company adheres to generally
accepted standards of the internal control and
risk management which are implemented taking
into account the speciics of the Company’s
activity. During the reporting period, the
internal audit service assessed the eiciency of
the internal control system as positive.
DISCLOSURE OF INFORMATION
ABOUT THE COMPANY
AND INFORMATION POLICY
OF THE COMPANY
the Company’s information policy was not
approved by the Board of Directors as a separate
document. nevertheless, in terms of disclosure
and provision of its information the Company’s
activity is committed to observance of legal
rights and interests of stakeholders as well as
strict compliance with the current legislation
of the Russian federation and principal
recommendations of the Corporate governance
Code. the Company applies various means of
communication with its shareholders and other
stakeholders. Contact information, including
email addresses and telephone numbers, of
the persons responsible for relations with
investors and shareholders can be found on
the Company’s website. in addition, shareholders
and investors can timely receive current
information during presentations and meetings
with the members of management bodies and
other key executives of the Company, including
those related to major investment projects,
the Company’s strategic development plans and
signiicant corporate events.
in 2017, the Company disclosed
information on the system and practice of
the Company’s corporate governance, including
detailed information on compliance with
the principles and recommendations of the
Corporate governance Code under the current
legislation of the Russian federation, and also
information on the members of the Company’s
management bodies as well as information on
independence of the members of the Board of
Directors and their membership in the Audit
Committee in the statements of signiicant facts,
quarterly reports of the issuer and the annual
report of the Company for 2016 posted on
the Company’s website.
the Company’s policy on disclosure
and provision of information is based on
the principles of regularity, continuity and
promptness as well as availability, reliability,
completeness and comparability of disclosed
information through implementation of the
following guidelines:
continuous information disclosure;
the possible shortening of information
disclosure which may signiicantly afect
valuation of the Company and (or) market
price of its securities;
simultaneous and equivalent disclosure
of signiicant information in the Russian
federation and abroad;
prompt provision of the Company’s
position on rumors or false information
which can distort the Company’s value and
(or) market price of its securities;
various channels and means of information
disclosure, including electronic, available
for the majority of stakeholders;
information distribution through the
channels providing the stakeholders
with free and easy access to information
disclosed by the Company;
free-of-charge access to disclosed
information requiring no special
procedures (obtaining passwords,
registration or other technical constraints);
disclosure of clear and coherent
information;
provision of objective and balanced
information;
impartiality when disclosing inancial and
other information (independence from the
interests of any persons or their groups
when disclosing such information).
the Company furnishes all required
information in compliance with the rules of
stock exchanges on which its securities are
traded and in connection with the existing
programs of the depository receipts issued for
the Company’s shares.
the Company discloses information
on the Company’s website both in Russian
and english.
in the reporting period, the Company
strictly adhered to the current legislation of the
Annual Report 2017 OJSC “Surgutneftegas”
Russian federation on disclosure of the annual
and interim consolidated inancial statements
prepared according to the international
financial Reporting Standards (ifRS), published
on the Company’s website in the internet and
included in the quarterly reports. the annual
general shareholders’ meeting held in 2017
approved the Company’s annual accounting
(inancial) statements prepared according to
the Russian Accounting Standards (RSBu) as well
as the auditor’s report.
the Company discloses information on
the Company’s capital structure in the quarterly
reports of the issuer available on the Company’s
website in compliance with the current
legislation of the Russian federation.
the Company’s annual report is one of the
most important information tools of interaction
between the Company, shareholders and other
stakeholders. it contains information which
enables to assess the Company’s operating
results for the relevant reporting year, including
the key aspects of the Company’s operation, its
inancial performance and environmental and
socially signiicant activities.
the Company’s information policy (deined
as a range of measures allowing the Company
to achieve its goals stipulated by the Corporate
governance Code) is to ensure easy access
to information (documents) upon request
of the shareholders, including information
on the Company’s subsidiaries, within the
limits of and under the current legislation of
the Russian federation.
During the reporting period, the Company
complies with the shareholders’ requests for
information except when such requests were
reasonably refused.
to ensure the sound balance of
interests of the Company’s shareholders and
the Company itself, when providing information
which can signiicantly afect the Company’s
competitiveness, the Company notiies the
shareholders of the conidential character of
such information and the shareholders agree
to accept responsibility not to disclose it in
compliance with the current legislation of
the Russian federation.
SIGNIFICANT CORPORATE ACTIONS
the actions which signiicantly afect or
may afect the equity holding structure and
(or) inancial standing of the Company and,
as the result, the interests of its shareholders
(signiicant corporate actions) are performed
85
 by the Company under equitable conditions
promoting strict adherence to the rights
and interest of all shareholders and other
stakeholders under the current legislation of the
Russian federation and the Company’s Charter.
the Company recognizes the following as
the signiicant corporate actions: the Company’s
reorganization, acquisition of 30 and more
percent of the voting shares of the Company
(takeover), major transactions conducted
by the Company, increase or decrease in the
charter capital of the Company, listing and
delisting of the Company’s shares as well as
other actions which may substantially modify
the shareholders’ rights or violate their interests.
When performing signiicant corporate actions,
the Company will ensure compliance with the
current legislation of the Russian federation and
be striving to protect its shareholders’ rights and
vested interests.
According to the current legislation of the
Russian federation, resolution issues related to
the signiicant corporate actions fall within the
terms of reference of the Board of Directors or
general shareholders’ meeting. At the same time,
the Company has deined criteria for identifying
transactions and other actions recognized as
the signiicant corporate actions and referred
such actions to the terms of reference of the
Board of Directors as speciied by the Company’s
Charter and the current legislation of the
Russian federation.
When performing the corporate actions
directly referred to the terms of reference of
the general shareholders’ meeting under the
current legislation of the Russian federation,
the Board of Directors provides the Company’s
shareholders with relevant recommendations in
the form of draft resolutions on the items of the
agenda approved by the general shareholders’
meeting unless there are the issues and draft
resolution thereon which are placed on the
agenda of the general shareholders’ meeting on
the proposal of the persons entitled to do this
under the Company’s Charter and the current
legislation of the Russian federation.
When considering the issues related to
the signiicant corporate actions, independent
directors are free to express his/her position, and
in doing this the Board of Directors takes into
consideration the opinion of the independent
directors when adopting resolutions and (or)
recommendations related to the signiicant
corporate actions.
86
the Company provides its shareholders
with equal conditions when performing
signiicant corporate actions which can afect
Report on declared (accrued)
their rights and vested interests. the Board of
Directors believes that the existing approaches
dividends on shares
provided for by the current legislation of the
Russian federation are suicient to protect
of OJSC “Surgutneftegas”
rights and vested interests of the Company’s
shareholders.
the Company’s management body which adopted a resolution (declared) to pay dividends on
in the reporting year, all signiicant
corporate actions were performed after being shares of OJSC “Surgutneftegas”: the annual general shareholders’ meeting.
approved by the Company’s management Date of the meeting (session) of the Company’s management body when the resolution to pay
bodies according to their terms of reference (declare) dividends was adopted: 29.06.2017.
provided for by the current legislation of the
Date and number of the minutes of the meeting of the Company’s management body:
Russian federation.
29.06.2017, no. 28.
the Company’s procedures related to
the signiicant corporate actions enable the the date as of which the persons entitled to dividends were determined: 19.07.2017
shareholders to obtain timely and complete
Dividend rates for 2016:
information on such actions.
the Company disclosed information on the dividends declared (accrued) for an ordinary share (RuB): 0.6;
signiicant corporate actions of the reporting
period in a timely manner and in the scope dividends declared (accrued) for a preference share (RuB): 0.6;
not less than it is provided for by the current
legislation of the Russian federation. dividends declared (accrued) for all ordinary shares (RuB): 21,435,596,823.00;
the Company’s rules and procedures dividends declared (accrued) for all preference shares (RuB): 4,621,198,941.00;
related to the Company’s signiicant corporate
actions are recognized in the Company’s Charter total dividends paid on all ordinary shares of the Company as of 31.12.2017 (RuB):
and internal documents of the Company 21,420,571,510.14;
under the current legislation of the Russian
federation. the Company’s internal documents total dividends paid on all preference shares of the Company as of 31.12.2017 (RuB):
do not provide for an independent valuator 4,570,222,771.17.
to be invited to appraise the property to the due period for declared dividend payment: not later than on 23 August 2017.
be alienated or acquired under a major
transaction or interested party transaction, or form and other payment terms for declared dividends: electronic money transfer.
evaluate acquisition and redemption value of Obligations to pay dividends on the Company’s shares were fulilled except when
the Company’s shares. however, the Company OJSC “Surgutneftegas” does not bear responsibility in accordance with Clause16, Article 8.2
shall engage an independent valuator when of federal law no. 39-fZ “On Securities Market” dated 22.04.1996.
it is required by the current legislation of the
Russian federation. in other cases the Board
of Directors can invite such a valuator if it
deems appropriate.
the Company assesses the practical
value of recommendations of the Corporate
governance Code taking into consideration
strategic goals of the Company’s development
as well as speciics of the current economic
situation and present trends of the legal
regulation of the corporate relations. time
limits of activities and measures to improve
the Company’s existing models and practice
of the corporate governance shall be ixed
by taking into account objective constraints
which determine the current practicality of
performance of such actions and measures.
Annual Report 2017 OJSC “Surgutneftegas”
87
 06
Additional
information
List of the Company’s
transactions carried out
in the reporting year

Energy resources utilized

by the Company
 List of the Company’s transactions Energy resources utilized
carried out in the reporting year by the Company
in 2017, the Company did not carry out in 2017, the Company concluded the in 2017, OJSC “Surgutneftegas” utilized the following energy resources:
any transactions recognized in accordance contract on insurance of liability of the
with federal law no. 208-fZ “On Joint Stock directors of the Company. the management Consumption
Companies” dated 26.12.1995 as major body of the Company which adopted a Name of the utilized energy resources,
unit of measure Cost,
transactions as well as other transactions resolution to approve the stated transaction: Volume in kind
thousand RUB
which require approval procedures to be the general shareholders’ meeting of
applied thereto. the Company. thermal energy, thousand gcal 1,664 4,450,388
electric energy, thousand kWh 11,887,080 28,497,451
Motor gasoline, tonnes 14,382 487,229
Diesel fuel, tonnes 257,477 8,407,664
Kerosene, tonnes 47 1,420
fuel oil, tonnes 644 6,609
Oil, tonnes 29,077 353,753
Associated gas, thousand cub m 1,899,026 4,799,218
natural gas, thousand cub m 44,524 59,178

Annual Report 2017 OJSC “Surgutneftegas”

90 91
 07
Background
information
Information about
the Company in the Internet

Full corporate name

Representative oices
Background information
INFORMATION ABOUT THE COMPANY IN THE INTERNET
the Company’s website: www.surgutneftegas.ru

FULL CORPORATE NAME

Open Joint Stock Company “Surgutneftegas”
Address: ul.grigoriya Kukuyevitskogo, 1, bld. 1, Surgut,
Khanty-Mansiysky Autonomous Okrug – yugra,
tyumenskaya Oblast, Russian federation, 628415.

REPRESENTATIVE OFFICES
Moscow representative oice of Open Joint Stock Company “Surgutneftegas”
Address: ul. Myasnitskaya, 34, Moscow, Russian federation.

Saint Petersburg representative oice of Open Joint Stock Company “Surgutneftegas”

Address: ul. Podkovyrova, 37, Saint Petersburg, Russian federation.

yakutsk representative oice of Open Joint Stock Company “Surgutneftegas”

Address: ul. Ordzhonikidze, 36, yakutsk, Republic of Sakha (yakutia),
Russian federation.

the annual report of the Company is approved by the annual general shareholders’ meeting of OJSC “Surgutneftegas” on 29.06.2018,
Minutes no. 29 dated 29.06.2018.

this Brochure includes the parts of the annual report.

Brent and urals quotations are calculated by the Company on the basis of data provided by thOMSOn ReuteRS.
industry igures: source – periodicals “teK Rossii” and “Oil & gas vertical”.