LUKOIL

LUKOIL (LSE: LKOD; NASDAQ: LUKOY; RTS: LKOH) is a Russian leader and significant global player in exploration and production of oil and natural gas. In 2007 the company accounted for 18.6 percent of Russian oil production and 18.1 percent of Russian oil refining. Globally, the company reported having 1.3 percent of the world s oil reserves and 2.3 percent of the worlds oil production. LUKOILs proven hydrocarbon reserves make up 20.4 billion barrels of oil equivalent (BOE). This makes the company the second in the world (after ExxonMobil) among publicly owned oil and gas companies in terms of reserves. LUKOILs daily production of hydrocarbons reaches 2.2 million BOE. In 2007 net profit was $15,388 million (an increase of 25.1 percent compared to 2006).

The ambition of LUKOIL is to become and remain a global energy company. The company declares that it aims to support long-term economic growth, social stability, prosperity, and progress in the regions where it operates, as well as to care for the environment and to ensure sustainable use of natural resources.

Although the major oil exploration region for LUKOIL is western Siberia, the company is also involved in exploration and production projects in Central Asia, Africa, the Middle East, and South America. In addition, LUKOIL owns four refineries in Russia, as well as refineries in Ukraine, Bulgaria, and Romania. The company also has an extended retail network in 19 countries. It controls about 200 tank-farm facilities and close to 6,000 gas filling stations in Russia, the Baltic States, eastern Europe, Cyprus, Turkey, and the United States. In 2005 LUKOIL put in operation the Nakhod-kinskoye gas field that started its gas program targeting rapid growth of gas production. The key regions for development of LUKOIL gas production are the Bolshekhetskaya Depression, the northern Caspian, and Tsentralno-Astrakhanskoye field in Russia as well as the Kandym-Khauzak-Shady project in Uzbekistan and the Shakh Deniz project in Azerbaijan.

The company was established in 1991 as a state concern named LangepasUraiKogalymneft (hence the current name LUKOIL). At the time of writing, over 50 percent of LUKOILs stock were free-floated shares both in the Russian stock market and in the London Stock Exchange. LUKOIL proudly declares itself to be the only public Russian oil company whose share capital is dominated by minority stakeholders. LUKOILs strategic partner is ConocoPhillips, an American oil and gas company that owns 20 percent of LUKOILs stock. LUKOIL has a number of partnership agreements and joint projects in upstream, gas processing, and downstream projects with Gazprom.

Since 1993, LUKOIL has been headed by its president Vagit Alekperov. In the last years of the Soviet Union's existence, Alekperov held the positions of deputy and first deputy of the Ministry of Oil and Gas. Long-term experience in the oil and gas field as well as a powerful network of relationships in the industry maintained since Soviet times contributed to Alekperovs success in turning LUKOIL into an industry leader in Russia.

In 2008 the company employed about 150,000 people in 60 regions of Russia and 30 countries on four continents. LUKOIL, like most other Russian oil and gas companies, is one of the most attractive employers in the country. However, like many Russian companies in the natural extraction field, LUKOIL has an image as a secretive and tightly controlled organization. Visitors to the impressive LUKOIL headquarters in Moscow [Page 1038]meet uniformed bodyguards, and both employees and visitors are subject to security checks and their belongings are x-rayed.

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