MESSAGE FROM THE PRESIDENT OF PJSC LUKOIL

Vagit Alekperov

Dear readers!

Our Company continues to evolve in accordance with the UN Sustainable Development Goals, which we do not see as being distant prospects, but they rather form the basis of our daily work.

The 2019 reporting year was successful for the Company in terms of operational and financial results. And no less significant was that we also took specific steps to overhaul our system for managing climate change issues. The Board of Directors of PJSC LUKOIL made important decisions to facilitate mitigation of climate change, including setting quantitative targets to reduce greenhouse gas emissions and conducting inventories of sources of direct and indirect emissions. Assessment of the impact of climate change on production facilities and infrastructure in the Arctic and permafrost zones is planned.

The sustainable development management system changed significantly in the reporting year, with the leading role for enhancement of LUKOIL Group activities in this area given to the Strategy, Investment and Sustainability Committee of the Board of Directors of PJSC LUKOIL. All issues on sustainability reviewed at the Board of Directors undergo preliminary preparation and discussion in that Committee.

Last year’s results demonstrated a 3.3% decrease in direct GHG emissions and almost a twofold decrease in methane emissions in Russia compared to the baseline of 2016, when the first target for reducing greenhouse gas emissions for Russian entities was set. Importantly, we managed to achieve this goal while at the same time increasing hydrocarbon production and refining volumes. The Company also implemented measures to reduce the impact of climate change in its foreign entities. For example, in 2019 the largest LUKOIL gas projects in Uzbekistan saw a drop in greenhouse gas emissions of 10.9% compared to 2018.

These results were achieved due to investments in the modernization and construction of production facilities and infrastructure, as well as the implementation of targeted corporate programs. Consequently, the efficient use of associated petroleum gas (APG) reached 97.6% across all LUKOIL Group production entities, which is close to the technological maximum. As a result of modernization projects and energy efficiency measures, the Energy Intensity Index of our refineries is steadily improving. Oil and gas production entities are implementing a program for transitioning to energy efficient pumping equipment. Hence, energy consumption for production needs is being reduced annually.

We participate in global industry-specific initiatives aimed at mitigating the impact of oil and gas companies on the climate. Since 2018 LUKOIL has participated in the “Zero Routine Flaring by 2030” World Bank initiative, and currently we are implementing two infrastructure building projects at our fields for APG collection and utilization.

We continue to enhance production safety standards in all the countries where LUKOIL operates. This covers the occupational safety of our employees and contractors, improving the reliability of technological systems and equipment, and environmental protection. In 2019 we continued preparation for transitioning to the new international standard ISO 45001:2018, which expanded the requirements for elaborating safety management systems. We are also stepping up work with contractors in this area.

All LUKOIL Group entities continually analyze occupational safety indicators, and make maximum efforts to strengthen measures aimed at preventing injuries. Also, state-of-theart technologies are being introduced to boost the level of industrial safety.

The decrease in basic injury rates among LUKOIL employees and among our contractors in the last five years demonstrates the effectiveness of our efforts.

Another achievement of the Company has been a continuous reduction in oil and petroleum product spills in Russia in the past three years and in 2019 this figure fell by half compared to the previous year.

Furthermore, as a result of the implementation of the Environmental Safety Program we reduced pollutant emissions, ensured the disposal of all waste generated, and reduced the amount of waste accumulated in entities prior to their joining LUKOIL Group. The Company is expanding its participation in biodiversity conservation projects: together with the Ministry of Natural Resources of the Russian Federation and the WWF-Russia Environmental Fund, we have launched a joint saiga antelope conservation project in Southern Russia.

We are increasing the scope of education programs for our employees through the use of modern distancelearning tools, which have become especially important during the coronavirus pandemic. In 2019 LUKOIL employees spent about two million hours using distance training in corporate programs.

We continue long-term programs to support the territories where we operate and the indigenous minorities of the North. The most successful programs, such as the Social and Cultural Projects Competition, include not only Russia but also the foreign countries where LUKOIL has a presence.

Our 10th Sustainability Report is being released at a time when the global community is taking its first steps to recover from the COVID-19 virus pandemic. At LUKOIL, we took prompt measures to protect the health of employees, while our plants and filling stations continued working to support the economy of regions and countries where we operate. The pandemic has proved how important it is to address a wide range of global problems, including issues relating to sustainable development, and thereby to increase society’s “immunity” to all challenges that may arise.

Vagit Alekperov
President, Chairman of the Management Committee of PJSC LUKOIL