Oil Refining

In 2010, the company maintained its status as a leader among Russian oil companies as per growth rate of oil refinery volumes. For the reported year, the company succeeded in increasing refining by 13.5 %, from 33.4to 37.9 mnt.

The company mainly achieved growth of refining volumes by increasing its share in Sibir Energy, which is a shareholder of the Moscow refinery.

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

Refinery

Refining Volume

The Omsk Refinery

The company's main refining asset is the Omsk Refinery (share in refining is 100 %). The Omsk refinery is one of the most advanced refineries in Russia - and one of the largest refineries in the world. The refinery has an installed capacity of 19.5 mnt of crude oil per year. In 2010, the Omsk refinery maintained a leading position in Russia in terms of volume of light petroleum products and aromatic hydrocarbons manufactured. In 2010, in terms of oil refining - 18.98 mnt (7.6 % of volume of all Russian refineries) - Omsk refinery ranked second among Russian refineries. The first position was taken by PO Kirishneftorgsintez LLC with 21.2 mn t, belonging to OJSC Surgutneftegas. In 2010, the load of the Omsk refinery for primary crude oil processing was 97.4 % of the installed capacity. The extent of oil refining was 83.3 % compared to the industry average rate of 71.8 % in Russia.

The key types of products include automobile petrol, diesel fuel, fuel oil (black oil), and jet propulsion fuel, alongside a range of aromatics, liquefied petroleum gases, various types of lubricants, additives, catalysts and other production. The yield of light oils is 67 %.

On 16 February 2010, at the annual meeting of the board of the Federal Agency for Technical Regulation and Metrology, the Omsk refinery was awarded the honourable status leader of the Quality' in the nomination 'Industrial and technology products'. For eight years, various types of production at Omsk refinery won prizes and diplomas in the all-Russian competition '100 Best Products of Russia'. In 2010, unleaded petrol 'Super Euro 98' and liquefied hydrocarbon gas type of PA for automobile transport were awarded diplomas. Additionally, the competition awarded diplomas for six types of production.

In 2010, commissioning the light naphtha isomerisation plant, lzomalk-2, allowed the company to increase its refining and yield of automobile petrol, while meeting the requirements of Euro 4 and Euro 5.

Crude oil refining and production of oil products by Gazprom Neft Group at Omsk refinery

Moscow Refinery

OJSC Moscow Refinery is a fuel-producing plant with a deep oil refining scheme. The installed capacity is 12.15 mn t per year.

According to the 2010 results, at the Moscow refinery, the volume of oil refining totalled 10.147 mn t, exceeding planned production indicators by 350,0001.

In connection with the start of a two-year repair cycle at the refinery, in terms of calendar time of processing plant operation, 2010 can be compared to 2008. For May-June of the previous year, full cycle repairs were performed at the refinery for large-tonnage processing plants of the 'big ring'.

In 2010, the yield of light oils totalled 57.17 % or 5.801 mn t. In the structure of production of light oils, the share of high-octane petrol increased by 2.1 % compared to 2008. According to the results of previous year, Moscow refinery produced a total of 2.461 mn t petrol, including 2.01 mn t of high-octane petrol AI-95 and AI-92. Production of kerosene and winter diesel fuel increased by 13.5 % compared to 2008. In 2010, production of diesel fuel totalled 2.708 mn t, kerosene -624 0001, bitumen - 805 0001, and marketable black oil-2.574 mnt.

The volume of irrecoverable oil losses totalled 0.73 %. This is 12 % lower than in 2008. At the Moscow refinery, the extent of oil refining increased by 0.2 % and totalled 72.4 %, compared to 2008.

In 2010, the share of Gazprom Neft in total volume of refining totalled 8.91 mn t (accounting for Sibir Energy stock consolidation). In July 2010, at the Moscow refinery on the construction site of the light naphtha isomerisation plant, a time capsule was buried. This was a milestone marking the start of a large-scale modernisation programme for the Moscow refinery, planned up to 2020. The programme entails reconstructing existing assets, constructing new refining capacities, improving safety for operating procedures, and implementing environmental projects at the refinery. In total, more than 56 bn RUB will be invested in the refinery modernisation programme. The light naphtha isomerisation plant will produce the component of automobile petrol with an octane rating up to 90.5. It is planned that the plant will be commissioned in 2012. The installed capacity will total 650,0001 per year.

The main sales markets for the refinery's products are the city of Moscow and Moscow region.

Crude oil refining and production of oil products by Gazprom Neft Group at Moscow refinery

Slavneft-YANOS

OJSC Slavneft-Yaroslav-nefteorgsintez (Slavneft-YANOS) is a fuel and oil-producing plant with a deep oil refining scheme and an installed capacity of 15.2 mln tons a year. By oil-refining volumes, YANOS ranks fifth among Russian refineries. OJSC Slavneft-YANOS produces a wide range of oil products, from high-octane petrol to high quality bitumen. In 2010, the extent of oil refining totalled 65.5 % and the yield of light oils totalled 56.8 %. Consumers include virtually all large enterprises of central and northwest Regions of Russia as well as airports, the administration of the North Railway, and defense industry facilities.

In accordance with the share in OJSC NG К Slavneft authorised capital, Gazprom Neft has access to the refining facilities of OJSC Slavneft-YANOS. In 2010, at OJSC NGK Slavneft, the primary crude oil processing volume totalled 14.3 mnt, of which Gazprom Neft's share of totalled 7.15 mnt.

Along with Gazprom Neft's other refineries, a refining facilities modernisation programme began at YANOS,. The programme aims to improve oil product quality to meet Euro 4 and Euro 5, and increase the extent of refining. At the refinery, 21 investment projects are being implemented. In March 2010, a new crude unit was commissioned. In 2011, commissioning of isomerisation of light naphtha and hydrotreatment of cat-cracked petrol plants is planned.

In 2010, two products by Slavneft-YANOS were pronounced winners of the '100 Best Products of Russia' competition in the nomination 'Industrial and technology products'. Diesel fuel Euro, sort C, type III was pronounced the winner of the competition and awarded the leader of Quality' prize. Viscous construction bitumen Euro BV 50/70, type II was awarded a diploma and the status 'Innovation of the Year'.

Crude oil refining and production of oil products by Gazprom Neft Group at Slavneft-YANOS refinery

Naftna Industrija Srbije (NIS)

The NIS refining facility comprises two refineries in the towns of Pancevo and Novi Sad. The facility produces an entire range of petroleum products, from motor petrol and diesel fuel to machine oil and raw materials for the petrochemical industry.

The maximum annual crude oil capacity of the production lines of the two enterprises is 7.3 mnt of crude oil per year: Pancevo- up to 4.8 mnt and Novi Sad - up to 2.5 mln t of crude oil per year. The average annual refining volume is more than 4 mint, of crude oil.

NIS refinery produces a wide range of oil products which meet international standards of quality and the specifications of the refinery. The range includes automobile fuel, liquefied hydrocarbon gas as motor fuel for automobile transport, unleaded motor fuel BMB 95 'Premium', BMB 92 'Regular', motor fuel MB 95 'Premium', Euro diesel, diesel fuel D2, associated gas, aviation fuel, oils, lubricants, and more.

Apart from sales to the Serbian market, NIS exports motor fuels, benzene, toluene, road and construction bitumen to EU countries, Ukraine, Croatia, Montenegro, and Bosnia-Herzegovina.

In 2010, within the framework of modernising refining facilities at NIS in Pancevo (Serbia), construction of a facility for hydrocracking and hydro finishing has begun. This will enable increasing refining volumes to a maximum refinery load of 4.8 mn t per year. This will not only meet Serbian market demand, but provide conditions to ensure export of fuel supply to Balkan states.

Up to 2012, Gazprom Neft's investments in projects for refinery modernisation in Pancevo will total 540 mn EUR. This mainly accounts for constructing a hydrogen plant at the refinery site, modernizing and constructing facilities for the refinery's industrial infrastructure, and implementing various environmental projects. The company will assign 396 mn EUR of the total volume of financing to constructing the hydrocracking plant alone. In line with the modernisation programme, the plant's commissioning is planned for Q3 2012.

Financing arrangements of Gazprom Neft for the NIS modernisation programme are formalised in an agreement with Serbian government. The arrangements total 540 mn EUR. In 2010, investments totalled approximately 140 mn EUR.

In 2010, in total, NIS refinery processed 2.85 mnt (excluding customer-owned refining). Successfully implementing the oil refining and sales strategy will allow JSC Gazprom Neft to increase the refining volume to 70 mn t of crude oil - and therefore maintain its existing production-processing ratio. The target balance of oil reserve distribution will be: 40 % - processing in Russia, 25-30 % - processing abroad, 20-25 % - direct oil sales.

The company intends to focus its resources on priority areas of refining development, including:

• improving Russian refinery efficiency
• increasing refinery capacities in Russia and in Europe.

The target result of development in the areas mentioned should be:

• increasing processing capacities on a pro rata basis to planned production growth
• improving the extent of raw material processing
• improving motor fuel quality
• meeting oil product market demands
• technical and processing efficiency of facilities
• process control system at a level that meets the highest global standards.

Structure of output production of Gazprom Neft Group at the NIS refinery

Production of Petroleum Products

In 2010, Gazprom Neft increased its volume of petroleum product production by 13 % to 35.6 mn t.

The increase is connected with the expansion of the company's retail network, reducing the turnaround time at the Omsk refinery, and consolidating the Moscow and NIS refineries.

Both the oil supplied to these refineries and refined petroleum products are owned by Gazprom Neft, which pays the cost of refining services to each refinery.

Due to implementing the modernisation programme at the company's refinery and optimizing the production range, according to the 2010 results, petrol production volume increased by 9.4 %, high quality kerosene by 15.2 % and diesel fuel by 15.4%.

JSC Gazprom Neft became one of the top-three leaders in bitumen production and sales, with growth totalling 33.8 %. The company began large-scale modernisation of bitumen facilities at its refineries.

In October 2010 at Omsk refinery, a plant was commissioned for producing modern high-quality components for pavements based on paving bitumen. These included polymer-bitumen binders (PBB) and bitumen emulsions (BE) with a capacity up to 10,0001 of PBB and up to 3,0001 of BE per year. This will allow the company to make a profit through selling a new, more advanced product, compared with conventional paving bitumen.

Structure of petroleum product production by Gazprom Neft Group