According to the company's product sales for end consumers will total 40 mn t, both in Russia and abroad. This includes 12 mnt from filling stations, 18 mnt from aviation fuel, bunkering, lubricants etc, and 10 mn t from individual wholesale retail to large end consumers.

In 2010, Gazprom Neft focused its resources on priority development areas and strengthened its positions in the oil product retail market. The company sells oil products in Russia and CIS countries, mainly through 20 subsidiaries (Gazprom Neft-Aero, Gazprom Neft Marine Bunker, Gazprom Neft-Lubricants, Sibir Energy, NIS, and oil product supply companies). Of these, 16 are retail companies, effecting wholesale sales of oil products and retail trade via filling stations.

In 2010, the volume of oil product sales in the domestic market grew by 17 % compared to 2009, totalling 20.54 mnt. In 2010, small wholesale grew by 15 % compared to 2009 and totalled 5,275 0001. Wholesale (transit) due to redistribution to the more premium small wholesale segment grew insignificantly by 1% and totalled 4,536,0001.

The number of active filling stations, operated by sales subsidiaries grew by 50 units to 1,596, while the average sales volume per filling station grew by 11 %, totalling 10.11 per day.

During 2010, the company built 27 filling stations, renovated 42 and purchased 60.

Within the framework of retail network optimisation, the company decommissioned 28 filling stations and reduced the number of leased filling stations by one.

The filling station chain re-branding project entered its final phase. Re-branding has been completed for 950 filling stations in Russia, Tajikistan, Kyrgyzstan and Belarus, including all filling stations in the Sibneft chain. From 1 November 2010, Gazprom Neft began the next phase of a large-scale advertising campaign, promoting a retail brand for the Gazprom Neft network of filling stations. Within the framework of this phase, the company introduced a new advertising clip entitled 'Winter Tale', which was broadcast on Russian federal television.

The Regions of Location of Oil Refining and Licensed Offices of Company
(Including Subsidiaries and Subordinate Companies)

Operations of Gazprom Neft Marine Bunker LLC (ports) Operations of Gazprom Neft-Aero Sales Territories

Number of active filling stations and average daily sales per filling sation in Russia

Developing the retail segment for selling oil products is a priority activity for Gazprom Neft. The appearance of a highly recognizable and trusted national brand will enable the company to achieve a strategic aim: to be among the top leaders in oil product sales in Russia.

In 2010, sales through filling stations in Russia increased by 18 % and totalled 3,047,0001 of oil products.

Sales of petrol grew by 10 % and totalled 2,161,000 t. Diesel fuel sales grew by 44 % and totalled 824,0001. The company has four foreign distribution enterprises in customs union countries: Gazprom Neft-Kazakhstan LLP, Gazprom Neft-Tajikistan LLC, Gazprom Neft Asia LLC in Kyrgyzstan, and Gazprom Neft-Belnefteprodukt FLLC in Belarus. During 2010, they sold 1,062,0001 of petroleum products.

The motor fuel market in Kazakhstan is key for JSC Gazprom Neft's sales development in Central Asia. In 2010, Gazprom Neft acquired a network of 20 filling stations and 9 sites from ARNA Petroleum to construct filling stations in Kazakhstan. The company's attraction to this region is explained by the market capacity of the republic and the proximity to its Omsk refinery.

Electronic trading floor and exchange trade

For Gazprom Neft, the stock exchange trade with oil products is a form of wholesale trade allowing the company to form a universally recognized price market indicator (index).

Since 2008, the company has been actively developing a sales mechanism for oil products via the electronic trading floor (ETF). This allows buyers themselves to form market prices with open competition.

Since its launch, more than 1,100 companies have registered at the floor, and more than 250 companies have obtained trading access. Large and small traders and end consumers participate in trading. From summer 2010, products are traded on the ETF from three bases (free bases): Kemerovo base (Kuzbass), Turinsky base (Tyumen) and Volodarskaya Linear Operator Dispatcher System (LODS). At Volodarskaya LODS, oil-product trading began using a resource from OJSC NK Magma. The trading algorithm has been updated, reflecting experience accumulated and the requirements of the state bodies.

318,000 t of oil products costing more than 5.4 bn RUB have been sold via ETF since it began operations.

JSC Gazprom Neft is a cofounder of CJSC Saint Petersburg International Mercantile Exchange. Since November 2009, it has been regularly submitting products for tender. In 2010, at the Saint Petersburg International Mercantile Exchange, Gazprom Neft sold 1,033,000 t of oil products totalling more than 17.4 bn RUB. At the end of 2010, test trading was conducted on the NP Interregional Exchange of Oil and Gas Industry exchange, and the Saint Petersburg Exchange (16,0001 of oil products sold).

Since the second half of 2010, JSC Gazprom Neft sold no less than 10 % of oil product of the company's volume of sales in the domestic market on a monthly basis. For the year ended, the percentage of stock exchange sales of JSC Gazprom Neft totaled 8.2 % of sales on the domestic market.

Share of exchange trading

In 2011, the company envisages starting trade according to the common unified exchange specification on the Saint Petersburg International Mercantile Exchange. This will allow the company to take an essential step towards fully anonymous trading with exchange products. The company continues to play an active part in its discussion and introduction.

In 2011, the company will consider the possibility of participating in trading with derivative securities (futures). Additionally, trading via the electronic trading floor of the company will be developed in future.

Exports of crude and petroleum products

Gazprom Neft Group is a high-volume exporter of crude oil and oil products.

The main routes of oil export shipments were the Black Sea ports of Novorossiysk and Tuapse, the Baltic Sea port of Primorsk, and the Czech Republic and Germany, via the Druzhba Pipeline.

According to 2010 results, Gazprom Neft Group supplied 15.8 mn t of oil to the world market, in absolute terms. This is 1 mnt more than in 2010. Of this amount, 8.95 mn t was exported by sea, and 6.85 mnt via the Druzhba trunk pipeline. 3,019 mn t of crude oil was exported to the markets of CIS countries, which is less than the level of 2009.

In 2010, Gazprom Neft's export of oil products to non-CIS countries (accounting for NIS) increased by 9 % and totalled 14.9 mn t compared to 2009. Export to CIS countries fell by 10 % and totalled 1.7 mnt.

Structure of crude oil export from Russia by transport types (including CIS countries) in 2010

Structure of oil product export from Russia (including CIS countries) in 2010

Trends of export of crude oil and oil products

Trend of marine fuel retail sales in the Russian domestic market in 2009-2010

Currently, Gazprom Neft Marine Bunker LLC has the largest business area in Russia, compared to other Russian bunkering companies. It also offers marine fuel to ship owners in all sea and river ports within Russia:

• Northwest region:

  St. Petersburg, Kaliningrad, Murmansk, Arkhangelsk.

• South region:

  Novorossiysk, Tuapse, Port Caucasus.

• Far-east region:

  Nakhodka, Vladivostok, Vostochny.

• Inland waterways:

  Yaroslavl, Kazan, Volgograd, Rostov-on-Don, Astrakhan, Ust-Kut.

The main share of sales volume was in the North-West region. The 17 % increase of own on board bunkering compared to 2009, was achieved by increasing market share in the ports of St. Petersburg, Murmansk, Kaliningrad and entering the prospective markets of the ports of Ust Luga and Archangel. In 2010, the company increased the geographical area of river ships bunkering activity, thanks to the ports of Volgograd, Astrakhan and Ust Kut. The bunkering volume for Russian inland waterways has increased significantly, by 23 %.

New objectives of the renewed strategy for further development have been established. One of these is developing international bunkering activities in the markets of Europe, the Middle East and Asia.

Gazprom Neft Marine Bunker LLC meets all conditions for entering foreign markets. These include having practical experience and a skilled and effective management crew. The sales activity in high-quality fuels produced by Gazprom Neft Oil Refinery Plant allows the company to create a positive image as a reliable partner.

In 2010, partner agreements were signed with Turkish company, Petrol Ofici, for bunkering activities with our clients in the port of Istanbul. In autumn, an agreement was signed with a large Italian Mediterranean shipping company for bunkering activity in Turkey. Within the framework of these agreements, the first bunkering was performed in the port of Istanbul (Turkey).

In 2011, a continued increase of volume in bunkering is planned in Istanbul, alongside starting activities in Constanta (Rumania) and in ports of the Danube River. The first bunkering activity is expected to be performed in ports of Baltic states.

To execute large-scaled strategic plans, Gazprom Neft Marine Bunker LLC must strengthen its competitive advantages by increasing its base of own ships and terminals. At the beginning of 2011, a subsidiary of Gazprom Neft Marine Bunker, Gazprom Neft Shipping, put two new ships into service - Gazprom Neft South and Gazprom Neft North-to perform bunkering activities in the ports of St. Petersburg and Murmansk.

By 2015, the company plans that sales volumes will increase to 1.9 mn tin Russia. It is planned that the significant growth of volumes in bunkering will be fulfilled by increasing the share in the bunkering market in Russia and actively developing key bunkering activities in the regions of Europe and Asia (Mediterranean, South-East Asia, and Middle East).

By 2020, the company plans to gain a significant share of the world market and be among the 20 largest international bunkering companies. The company aims to do this by increasing marine fuel sales volume four-fold, compared to 2010. The network effect will increase the client base and ensure long-term cooperation with large international shipping companies.

Aircraft fueling

CJSC Gazprom Neft-Aero performs business activities in jet fuel sales through its associated enterprises in Moscow, St. Petersburg, Novosibirsk, Murmansk, Tomsk, Bryansk, etc, as well as in countries of Central Asia: Kazakhstan (Astana), and Tajikistan (Dushanbe). Additionally, the aircraft fuelling activities for Russian air companies are performed in the airports of South-East Asia, Europe, Africa, and Latin America.

In 2010, CJSC Gazprom Neft-Aero made great advances in the international market. CJSC Gazprom Neft-Aero subsidiaries began aircraft-fuelling activities at airports in Turkey, China, Jordan, Norway, India and Cyprus. Novosibirsk Aircraft Fuelling Complex became the main site for seminars on aircraft fuelling activities for IATA. At Sheremetyevo, construction of an aircraft fuelling complex has begun.

In 2010, leading positions were maintained in retail trade of aviation fuel, compared to other distribution networks. The company kept second position in jet fuel supply for Russia's domestic market.

Trend of Aircraft fueling retail sales in the Russian domestic market in 2009-2010

CJSC Gazprom Neft-Aero has increased its retail sales volume of aviation fuel to 19 % in 2010, compared to 2009. Further plans include business development, both in increasing the business geography in Russian and foreign airports, and growing its own aircraft fuelling network.

Production and sales of engine oils

Gazprom Neft-Lubricants LLC is a vertically integrated engine-oils company with productive assets in Western Siberia (Omsk), European Russia (Yaroslavl), and Western Europe (Bari, Italy). In 2010, the company produced and sold more than 434,0001 of engine-oil type production.

The production range includes 200 lines of oil produced in Russia and Western Europe. In 2010, the new G-Family brand for engine oils was marketed in Russian and abroad. It includes more than 40 types of international-level modern engine oil for the consumer and commercial markets. Oils of the G-Family brand are produced at Gazprom Neft Lubricants Italia S.p.A. in the city of Bari. This advanced complex can produce 30,000 t of oils and 6,0001 of lubricants per year. The operating procedures applied at the Bari plant will be introduced into production at Russian plants step by step. In 2010-2012, Gazprom Neft will invest 2 bn RUB in constructing a plant at Omsk refinery for low-tonnage blending, packing and offloading of oils with a capacity of 120,0001.

In 2010, the company increased its market share of oils in Russia from 11 % to 13 %.

In 2010, the sales structure changed significantly. Sales of pre-packaged oils increased by 29 %, and premium production, meeting international specifications, by 31 %. This is a result of the company's strategic transformation from raw-material producer to a customer-centric marketing company: a producer of high-marginal commercial oils.

Trend of pre-packaged oil retail sales in Russian domestic market in 2009-2010

The company set itself the goal to implement a long-term investment programme, expand the modern production range, increase the Russian market share, and further expand into foreign markets.