The success of companies like Rosneft is first and foremost

Transcription

1

2 Employees at the focus of our social programmes The success of companies like Rosneft is first and foremost due to the achievements of many thousands of hardworking people every day. As an oil worker with a lot of experience, I can truly say that this means very hard work! And I also know from my own experience that if you want people to look forward to their work every day and give more than 100%, you have to create the right environment for them. Oil workers, like everyone else, need healthy working conditions, as well as clear and sure prospects for their own professional growth and improvement in living standards. After work, they need warm and comfortable homes to return to. They and their families also need quality medical care and opportunities to take relaxing vacations. Furthermore, worries about their children s future or their own retirement years should never burden them. It also goes without saying that our employees would like to live in decent towns with good infrastructure. Everything that improves people s living standards and helps them achieve their dreams is the focus of our social programmes at Rosneft. We closely follow the achievements of our colleagues at the largest companies in Russia and abroad, which includes their efforts in the social sphere. I want to let you know that we have ambitious plans and intend to meet the very highest global standards. Regarding our social programmes, we have a policy of complete openness and transparency that will hopefully serve as a guide for other companies. Sergey Bogdanchikov President of Rosneft

3 Rosneft Today Rosneft is one of the largest energy companies in Russia, with approximately 50 subsidiaries operating as jointstock companies in 22 regions across the country. Rosneft s reserves are comparable with those of the world s largest oil and gas companies. At the moment, Rosneft subsidiaries are developing over 200 fields. In 2005, production totalled 74.6 million tonnes of oil and gas condensate and 13.1 billion cubic metres of gas. Production in 2006 could reach 81.3 million tonnes of oil and 13.9 billion cubic metres of gas. In terms of daily oil production, Rosneft now ranks second among Russian companies. Rosneft and its subsidiaries currently employ around 70,000 people.

4

5 Not by oil alone Social policy an integral part of our corporate strategy Like any joint-stock company, Rosneft works first and foremost in the interests of its shareholders. We therefore strive to increase the volume and efficiency of our production, expand and diversify our assets, increase our exports and improve our management all of which increases the Company s value. But the value that the market puts on a major public company is not simply a function of its production figures and financial performance. A wide range of other factors also has a major influence on a company s value - its reputation, the motivation and loyalty among its staff and its contribution to the development and prosperity of the country as a whole. Rosneft s commitment to delivering benefits to its shareholders also means a policy of social responsibility to our own staff and to the thousands of people in all the regions where we operate. The result of that policy is our wide range of social programmes, which in terms of both general thrust and scale are comparable with those of the world s largest oil and gas companies. In 2006, Rosneft plans to spend over USD 180 million implementing social programmes.

6 Rosneft s social commitments are centred first of all on the Company s own employees. We try to ensure maximum levels of comfortable and, above all, safe working conditions for our staff. We also endeavour to create for them and their families a healthy environment outside the workplace. In order to improve our employees standard of living, we have begun implementing a corporate mortgage programme, as well as a programme aimed at building new housing. We have allocated large resources to health programmes and the promotion of healthy lifestyles, and we ensure that our employees have the chance to periodically take much-needed vacations. Equally important in Rosneft s social policy is the range of cooperation agreements in the area of social and economic development that we have concluded with local authorities in the regions where we operate. These agreements envision the development of local infrastructure, including constructing roads and building schools, as well as medical, cultural and sport facilities. The Company also supports charitable activities and assists educational institutions, cultural groups and athletic teams. Company retirees and other senior citizens, including war veterans, also benefit from Rosneft s charitable activities. Finally, Rosneft is actively involved in the protection of Russia s cultural heritage and takes part in the building and reconstruction of churches across the country.

7

8 Main social programmes - Provision of accommodation for employees - Creation of an optimal work environment and excellent recreational facilities for the Company s rotation teams - Implementation of health and safety measures and promotion of healthy lifestyles - Private pension coverage - Social infrastructure development - Participation in regional social and economic development - Charity activities

9 Social policy and external factors In developing its social programmes, the Company is mindful of the following realities: - falling numbers of Russia s working-age population; - increasing competition on the labour market in finding and attracting qualified staff; - shift of oil production to remote, inaccessible and inhospitable regions; - aging and obsolete social infrastructure in many regions - poorly developed social services (medicine, sports, pension funds) in a number of regions where the Company currently operates; - shortage or even complete absence of social infrastructure in the areas where the Company plans to operate; - significant differences in income levels among various regions.

10

11

12 The square metres of the good life Housing and mortgage programmes Housing remains an acute issue throughout Russia. High real estate prices in recent years mean that acquiring property is out of reach for many Russians. Young families and specialists starting out in their careers are hit particularly hard because of all the other financial pressures placed upon them. Programmes to help Company employees buy their own housing are therefore a top priority at Rosneft. The Company sees these programmes as an investment in its own future. In 2005, Rosneft provided 12,600 square metres of housing to its employees and plans to provide nearly twice that amount this year, some 23,600 square metres. This translates into the equivalent of approximately 440 average-sized apartments, enough to house approximately 1,500 employees and their families. Many of the Company s current housing projects take place in remote regions of Siberia and the Far East, where the lack of quality accommodation is particularly acute. In the north of Sakhalin Island, construction is being undertaken within the framework of the Russian government s federal housing programme, which is aimed at relocating people from old and dangerous accommodation to new houses and apartments. Financing these programmes is done on a fifty-fifty basis, with Rosneft covering half of the cost and the rest paid for out of the federal and local budgets. Under this scheme, Rosneft plans to build 129 apartments totalling 7,000 square metres with modern facilities in Okha and the settlement of Nogliki every year up to Half of the apartments built will be allocated to Rosneft employees.

13 Mortgages to the rescue While the market economy makes it unfeasible and even unwise for Rosneft to provide its employees with free accommodation, it can and should do everything possible to help them acquire adequate housing on their own. In 2005, the Company began implementing corporate programmes for long-term mortgages, which are divided into two stages. During the first stage, young specialists will be able to make use of the new mortgages, but during the second stage, the programmes will be extended to cover all other Rosneft employees. In 2005, 224 young specialists received mortgages to buy accommodation during the first stage, while in 2006, 539 people (325 young employees and 214 older employees) can expect to be awarded low-rate mortgages. Rosneft plans to spend approximately USD 155 million (over RUR 4.3 billion) between 2006 and 2010 on these programmes, which will allow over 2,700 of our employees to acquire 151,900 square metres of accommodation. If one includes the members of their families, the result is the population of a small town. Rosneft has also introduced interest-free loans to enable our employees to make initial down payments on apartments (from 25% to 35% of the total cost of the property). After five years, the Company can write off employees outstanding debt. This benefit is intended primarily for the most promising employees in terms of the Company s long-term plans. In addition, Rosneft guarantees its young employees competitive loans from the Russian Regional Development Bank, which provides 12-year loans in roubles at just 8% per annum, a very low rate by current Russian standards. Accommodation for the most mobile workers Working as a top manager or expert for Rosneft requires a high degree of flexibility, which occasionally means a willingness to move to other regions for extended periods if needed by the Company. Rosneft has a large number of company apartments in reserve for such situations and allocates considerable sums every year to purchase accommodation for highly qualified staff who are asked to work in other parts of the country. The Company acquired 4,200 square metres of housing in 2005 for these purposes, and in 2006, we plan to buy apartments totalling 4,700 square metres.

14

15 Flying to work by helicopter Creating optimal conditions for the rotation teams A major part of Rosneft s oil and gas production takes place in remote areas of Northern Russia and the Far East. Many major fields are tens or even hundreds of kilometres from the nearest accommodation and can be reached only after travelling for hours by road. Sometimes the only means of transport is by helicopter. The Company is developing these remote fields by using socalled rotation work teams. Members of these teams leave their homes and families and move to the settlements near the production sites to complete their shifts. Approximately 12,000 people at Rosneft live and work like that today one in every six employees at the Company. Rosneft plans to reduce the total number of rotation work teams and rotation settlements in the future. This is already happening at the Company s developed fields. By 2010, only 46 rotation settlements will remain, instead of the current 55. But the Company still has to carry out the active development phase of the major Vankor field in Eastern Siberia, so the total number of rotation employees will remain unchanged for the time being. In fact, the costs of maintaining the rotation settlements will actually increase significantly from USD 18.4 million (RUR million) in 2005 to USD 21.9 million (RUR million) in These increases will come as Rosneft improves the working and recreational conditions for the rotation teams, raises the level of medical provision, gives people a greater range of domestic services and provides greater facilities for exercise and relaxation. In addition, new and more comfortable accommodation will be built to replace the hostels that are currently common in many places. The Company has developed unified corporate standards that specify the facilities to be available at the rotation settlements and their required levels of maintenance. By 2010, these standards should be implemented in all subsidiaries where there are rotation work teams. As a result, Rosneft s competitiveness on the labour market should increase and make it easier to attract highlyqualified workers. Rosneft will spend USD 20.4 million (RUR million) on maintaining rotation settlements in 2006.

16

17

18 Entire settlements under one roof What should our typical rotation village look like? Above all, it should be as comfortable as possible, regardless of whether it is designed to accommodate 60 people or 600. And of course it should be ideally suited to the harsh climate of the North. Inside the village, warm clothing is not even necessary when people go shopping or out to eat because all the buildings are linked by warm passages and tunnels. Showers and changing rooms are right at the entrance and after their shift, workers can have their clothes immediately sent to the dry cleaners. Rooms in the living quarters are designed for two people, and each one is fitted with a shower. The recreation areas are equipped with libraries, Internet access, video rooms, exercise equipment, saunas and covered athletic facilities. And in the largest villages there are even entire indoor football fields. While some rotation settlements like this already exist at Rosneft, by 2010, the remainder will have been converted to this form as well.

19 Look after your health! Health and safety measures to support a healthy lifestyle Modern industry places significant demands on specialists at every level. They need to be healthy, strong and capable of handling a heavy workload, often in stressful situations. Rosneft s programmes aimed at keeping employees healthy are distinguished by our comprehensive approach. In accordance with our corporate standards, the Company s social package includes financing medical insurance, vaccinations and other preventative measures and treatment, as well providing employees with stays in sanatoria and health clinics. An excellent example can be found at Sakhalinmorneftegaz, a Rosneft subsidiary, where a series of programmes to reduce illness among employees is in full swing. These programmes include regular preventative treatments, constant monitoring of working conditions and timely vaccinations against influenza and other illnesses. Sakhalinmorneftegaz also devotes considerable time and energy to improving the health of its employees children, who can spend their vacations at local sanatoria, such as Sakhalin, Araliya and Chaika. All Rosneft subsidiaries spend considerable sums on healthcare and treatments for their employees at sanatoria and clinics. Purneftegaz plans to provide 3,400 people with stays in 2006 and Yuganskneftegaz will be sending over 2,205 employees. Severnaya Neft pays part of the expenses of employees going on vacation. As part of their cooperation agreements with local administrations, Rosneft subsidiaries are also constantly increasing the amount they allocate to group sports and activities, as well as to the construction and maintenance of sports facilities.

20 Rosneft competes across the country Once a year, employees line up to take part in Rosneft s athletics tournament, which attracts teams from the Company s subsidiaries across Russia. At the main annual competition, matches take place in football, volleyball, basketball, table tennis, chess and other sports. In 2006, regional competitions were held in Khabarovsk, Usinsk and Nalchik, and over 1,000 participated, with the winners going through to the finals in Krasnodar. Rosneft spent around USD 1.1 million (RUR 30 million) on organising and conducting these athletics events.

21 Complying with international safety standards Rosneft strives to create a safe and healthy work environment for its employees and minimise the risk of accidents. Throughout its operations, the Company adheres to the highest international safety standards. Its safety policy requires: - adherence to Russian legislation and international standards on environmental protection and labour safety; - planning of all production in accordance with relevant health, safety and environmental protection requirements; - developing essential procedures for emergency situations in order to reduce the number of accidents and minimize their consequences; - working with local communities and consultation with shareholders. Pure Water Programmes The settlements in the Nefteyugansk region, home to Rosneft s largest subsidiary, Yuganskneftegaz, have experienced problems with pure drinking water from the very beginning. The Company has therefore begun implementing a special programme called Pure Water. In 2006, Rosneft will spend approximately USD 293,000 (RUR 8 million) on expanding and upgrading the region s water supply system.

22

23 Learning never ends Educational programmes to attract talented young people Employees at all levels, from top managers to technical personnel, undergo corporate training programmes. In 2006, together with leading Russian and international business schools, Rosneft began implementing development programmes for managers at three different levels. Top managers undergo individual training whose purpose is to develop managerial skills and leadership qualities, while upper level managers are taught through a modular programme in strategic management. Middle managers undergo several different modules simultaneously, including courses in organisation, personnel and human resources, financial management, project management and quality management. Our corporate MBA programme - International Business in the Oil and Gas Sector - has been operating successfully since its inception in The programme is organised jointly by the Norwegian Bodoe Graduate School of Business and the Moscow State Institute of International Relations (MGIMO-University). A group of managers is also enrolled in an MBA programme at the Stockholm School of Economics (SSE). Rosneft is now considering similar study programmes as an important part of its corporate social package. Programmes like these help Rosneft to educate, motivate and retain our most promising employees.

24 Careers start at school A company of Rosneft s size and potential cannot simply focus on current needs. In planning our development decades into the future, we have to think about tomorrow and constantly bear in mind the kind of people who will work for us in the next five or ten years and beyond. At Rosneft, our training programme for specialists begins in schools, especially in the Company s priority regions of Siberia, the Northern Caucasus and central Russia. In the secondary schools of Nefteyugansk and Pyt-Yakh, as well as the village of Poikovsky, Rosneft has organised pre-university classes that are designed to encourage talented young people to eventually join the Company. Rosneft has developed a system of corporate and social scholarships to help train future specialists. The most promising students and graduates are first invited to complete an internship in production to learn the ropes, after which they may be offered permanent positions.

25

26 Studying made easy Famous partners Rosneft supports close and mutually beneficial cooperation with Russian higher educational institutions specialising in the energy sector, such as the Gubkin State University of Oil and Gas, the Ufa State Oil Technical University, the Tyumen State Oil and Gas University, the St. Petersburg Mining University, the Kuban State Technical University, Moscow State University, the Moscow Physical and Technical Institute and the Moscow State Institute of International Relations (MGIMO-University). As in other parts of the world, obtaining a good education for children is becoming more and more expensive in Russia, especially for people living in the country s remote regions and hundreds or even thousands kilometres from the nearest university. Rosneft therefore awards interest-free loans to its employees to pay for their children s education. The Company sees these awards as a major social benefit for its staff. Select employees with the requisite expertise and skills are eligible for these educational loans. They must have worked for at least three years at Rosneft or one of its subsidiaries and need to display strong employment records. In 2006, 661 Rosneft employees received interest-free loans to help their children pursue degrees at institutions of higher education. The Company allocates over USD 1.3 million (RUR 36.5 million) to pay for these educational loans, and by the end of 2010, this figure will likely increase to approximately USD 7 million (RUR million).

27

28 Confidence in the future Private pension coverage Rosneft tries to ensure that its employees can look forward to a financially secure retirement. The Company has developed a private pension programme that makes it possible for Rosneft retirees to receive a corporate pension in addition to their state pension. Like the state pension, Rosneft s supplementary pension coverage is indexed in line with inflation. Implementing corporate pension reform from 2006 to 2010 will allow Rosneft to become one of the leading companies in the energy sector in terms of the size of its pensions. The goal of the pension reform is to ensure that each employee receives an adequate and dignified pension following his or her service at the Company. In the near future, the coverage will consist of three main components: - state pensions; - corporate pensions to which the Company contributes; - pensions from voluntary contributions by each employee to the private pension fund Neftegarant. The Company hopes to convince as many employees as possible to participate in jointly financing their pensions, which will help facilitate increases in their future pension payments. Extra help for Rosneft retirees Rosneft is committed to making life as comfortable as possible for those who have already given their best years to the Company. This support includes payment of private pensions and targeted material assistance. As a result of this policy, Rosneft intends to spend over USD 2.5 million (RUR 72.2 million) on healthcare and vacations for retirees in 2006.

29 Local concerns on a national scale Promoting the social and economic development of Russia s regions Rosneft takes steps to ensure that the employees of all its subsidiaries live in well maintained towns and settlements with a wide range of facilities and social services. This is especially important for those of our staff who work in remote regions or in harsh climates. Rosneft is also concerned with maintaining good relations with local authorities and communities where it operates and therefore views its cooperation agreements as a vital part of its corporate social policy. The funds required to implement these programmes make up a significant proportion of Rosneft s expenditures in the social sphere. In the Khanty-Mansiysk Autonomous District in Western Siberia, where Rosneft s largest production unit, Yuganskneftegaz, is located, the Company has built medical facilities in the town of Pyt-Yakh, a swimming pool in the town of Nefteyugansk and a library and pharmacy in the village of Salym. On Sakhalin Island, where Rosneft s subsidiary Sakhalinmorneftegaz is located, numerous reconstruction projects have led to great improvements, including the construction of sports and healthcare facilities in the town of Okha and the village of Nogliki, as well as road construction in various settlements. In the Yamalo-Nenets Autonomous District of Western Siberia, Purneftegaz, one of Rosneft s main production subsidiaries, has financed the construction of the Oil Worker Palace of Culture in the town of Gubkinsky. It has also spent nearly USD 7 million (RUR million) on a modern hospital in the same town. As part of the cooperation agreement between the Company and the administration of the Krasnoyarsk Territory, Rosneft is taking part in a programme which will run in to develop the social infrastructure in the Tyrykhansk district where the enormous Vankor oilfield is located. The cost of these programmes is over USD 6.7 million (RUR 185 million). In 2006, Rosneft will allocate over USD 43.9 million (nearly RUR 1.2 billion) for programmes to promote the social and economic development in other regions where the Company operates.

30 Starting from scratch in Chechnya In recent years, Chechnya has also been an important part of Rosneft s social investment programmes. The Company had to rebuild the republic s oil and gas sector virtually from scratch after it was destroyed during the wars, ensuring that it would operate again with no further production stops. But there is still an acute shortage of essentials in Chechnya, including schools, housing, jobs and basic infrastructure. Rosneft and its subsidiary Grozneftegaz are implementing numerous projects to restore Chechnya s economy and social infrastructure. From , the Company allocated approximately USD 38.8 million (RUR 1.1 billion) to these efforts. The list of successful projects built with financial help from Grozneftegaz is extensive and includes a new school in the village of Alleroi and the renovation of a school building in the village of Tsentoroi. Both schools received modern computer rooms as a present from the Company, as well as new furniture and other equipment. In Grozny, the capital of Chechnya, the Oil Worker s Palace of Culture was renovated, as was the town square. In addition, a road has been built from the village of Alleroi to the Novogrozny-Kurchala road, while the road from the village of Tolstoi-Yurt to the main highway has been restored. Grozneftegaz has also financed the installation of new systems that provide drinking water, natural gas and electricity in several villages and settlements in Chechnya. Grozneftegaz is helping to solve Chechnya s acute housing problem by financing the construction of new apartment blocks. In January 2006 alone, a block of 70 apartments financed by the Company was rented out, and in 2005 construction began on two other blocks. One of the most important results of Rosneft s rebuilding of the oil and gas sector and its social engagement in Chechnya has been the creation of some 10,000 new jobs. Grozneftegaz has far-reaching plans for the future, including construction of a water pipe to Grozny and reconstructing the theatre in Grozny in The continued construction of gas lines in Chechnya will also allow Grozneftegaz to supply natural gas to villages across the republic. In 2006, Grozneftegaz will spend approximately USD 3.9 million (RUR million) on constructing and renovating Chechnya s degraded social infrastructure.

31 Big Oil and the peoples of the tundra A large part of Rosneft s production is in the regions of the Russian North and Far East environments which historically have provided a home to numerous indigenous peoples. While developing new oil and gas fields leads to the development and construction of modern infrastructure, it also interferes with the traditional way of life of local peoples a way of life that has evolved over centuries. Rosneft programmes to assist local indigenous peoples therefore try to find the right balance when developing large-scale oil fields in the tundra and taiga. The Company and its subsidiaries provide material support to these communities, finance higher education of local families, help them preserve their customs and traditional hunting way of life and assist them in improving their settlements infrastructure.

32

33 A Chum with all the home comforts In the Yamalo-Nenets Autonomous District, there is a village called Kharampur, which just a few years ago was threatened with extinction as more and more people continued to leave. Kharampur would have disappeared from the map altogether if Rosneft had not taken it under its wing. Since 2002, the Company has spent approximately USD 5 million (RUR 150 million) on reconstructing the village. As a result, Kharampur has become a model settlement by the standards of the Far North and now has a population of 500 people. As part of the plans to improve services and infrastructure there, electric cables have been installed and the village now has workshops to process fish, a new boiler house, a spacious club with a library, a boarding school, an asphalted road and housing with modern facilities. The first 16 comfortable cottages have already been completed in a style reminiscent of the chum, the traditional tented housing of the Nenets and the North s other indigenous peoples. But instead of the usual deerskin, the walls of new houses were made from bricks, and modern roofing materials were used. There is one other crucial difference: the houses are fitted with the latest modern facilities so that the families moving in can enjoy all the comforts of home. In 2006, the Company plans to build new cottages and blocks of apartments for teachers in Kharampur. Work on a similar scale is being done in the village of Seleyarovo in the Khanty-Mansiysk Autonomous District in Western Siberia, where centralised heating and water supplies have been installed. The Company s social and economic development plans also envision the construction of new housing and a school.

34

35 Delivering assistance to the right address Charitable works Rosneft s involvement in social and economic development programmes in the regions is closely connected with its charitable activities. The Company provides targeted material support to many projects and initiatives, directing funds primarily to those areas where the need is greatest. The list of organisations that will benefit from Rosneft s financial assistance in 2006 is extensive. Municipalities will receive approximately USD 820,000 (RUR 22.4 million) for the development of their social infrastructure, while medical facilities will get over USD 300,000 (RUR 8.4 million) and pre-school facilities over USD 260,000 (RUR 7.1 million). Rosneft also plans to spend approximately USD 2 million (RUR 52.4 million) on supporting education, culture and sports. The Company intends to spend approximately USD 4.8 million (RUR million) on other charitable goals. In 2006, Rosneft will donate a total of USD 9.3 million (RUR million) to charity.