Lukoil News - 2008

News summaries from LUKOIL press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.

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January

• Upstream news: ­

• Downstream news:

- ÎÎÎ LUKOIL-AERO and LUKOIL Aviation Bulgaria closed a deal to acquire a fuel filling complex at Kurumoch international airport (Samara), the largest and the most promising airport located in the Volga region; it ranks among Russia’s top ten airports. The long-term Transport Strategy elaborated by the Russian Federation Ministry of Transport envisages establishing an air transport hub on the airport premises. Total jet fuel consumption at Kurumoch international airport amounts to approximately 85 thousand tons. Samara filling station fills up aircraft produced in Russia with TS jet fuel and aircraft produced overseas with Jet A-1 jet fuel. The LUKOIL Group Strategic Development Program envisages jet fuel filling business expansion, jet fuel marketing expansion, and establishement of a well-developed network of own fuel filling stations at Russian and overseas airports.

- Mr. Vagit Alekperov, President of OAO LUKOIL, and Vadim Shvetsov, General Director of OAO Severstal-Auto, have signed a strategic cooperation agreement. The Agreement outlines the following cooperation areas between the Parties: delivery of LUKOIL branded oils to ensure fault-free operation of Severstal-Auto production facilities; delivery of LUKOIL branded oils for the first fillup of cars produced by OAO Severstal-Auto and to OAO Severstal-Auto service centers for aftersales maintenance; joint elaboration and introduction of motor oil import substitution programs for LUKOIL branded products certified and approved by foreign car makers; engagement of scientists working with OAO LUKOIL and its subsidiaries to develop modern oils and other oil and gas products for OAO Severstal-Auto; cooperation on marketing programs; delivery of gasoline and diesel fuel, other oil and gas products by OAO LUKOIL subsidiaries to OAO Severstal-Auto production facilities; joint development of infrastructure facilities designed for car maintenance. The Agreement shall remain in force for five years.

- LUKOIL and IFD Kapital have reached an agreement in principle to purchase an 80% interest in OAO UGK TGK-8 (‘TGK-8’) at a price equivalent to $640-660 per kW of rated capacity. The transaction will be closed after all corporate approvals have been obtained and the Federal Antitrust Authority permit has been issued. Under the transaction settlement terms, LUKOIL will transfer approximately 23.5 million treasury shares to IFD Kapital at the price set by the Company’s Board of Directors. These shares have been previously bought out by OAO LUKOIL in the open market. TGK-8 is one of the major gas consumers in the Southern Federal District with the annual consumption reaching 6 billion cubic meters per year. Its power plants are located in Astrakhan, Volgograd and Rostov regions, Krasnodar and Stavropol Districts, and the Republic of Dagestan. Rated capacity of electric and thermal power generation facilities of TGK-8 makes up 3,601 MW and 13,366 Gcal/hour, respectively. On average, the company’s market share in the regions of its presence makes 17% in terms of electric power, and about 60% - in terms of thermal energy. The 2006 consolidated profit of the company came to RUR 14.3 billion, with net profit at RUR 3.4 billion. By purchasing TGK-8 assets, LUKOIL expects significant synergies through natural gas supply to the TGK-8 plants from the Company’s gas fields located in the Northern Caspian and in Astrakhan region.

• Business/Finance news: ­

- OAO LUKOIL Board of Directors held a meeting to summarize preliminary results of LUKOIL Group activities in 2007. Macroeconomics in 2007 was influenced by a number of various factors, which affected the Company’s operating results. 2007 witnessed a favorable pricing environment for oil and petroleum products on the international and domestic markets. For instance, average annual oil prices increased by more than 10%. Russia witnessed a considerable increase in industrial products prices (13.8%), electric power prices (13%) and Transneft tariffs (8.5%). Appreciation of RUR against USD also had a negative influence upon the company’s performance dynamics, as most of its income is denominated in USD, while the major part of its expenses is denominated in RUR. Six oil, gas and condensate fields were discovered in 2007. According to provisional estimates, the increment of hydrocarbon reserves of LUKOIL Group (the Russian classification) exceeded 130 million tons of oil equivalent1. Thus, extraction replacement by reserves increment came to more than 115%. According to provisional estimates, LUKOIL Group hydrocarbon production (production by subsidiaries and share in production by affiliates) in 2007 grew by 1.6%. Oil production of LUKOIL Group came to 96.6 million tons, including 91.1 million tons in Russia and 5.5 million tons abroad. Gas production2 came to 16.4 billion cubic meters. Hydrocarbon production was launched at 13 new fields in 2007. LUKOIL Group decreased its oil exports in 2007 and increased refining throughput at its Russian facilities due to high refining margins. According to provisional estimates, crude processing at the company’s refineries in Russia grew by 7.7% in 2007 and reached 42.5 million tons primarily due to the refinery in the city of Nizhny Novgorod. Another 9.6 million tons of crude were refined at foreign refineries, which is 2% up on the 2006 results, despite a temporary slump in refining throuhput caused by a scheduled overhaul at the Burgas refinery. The volume of retail petroleum product sales (excluding franchising) through LUKOIL Group distribution network came to 13 million tons in 2007, which is more than 15% higher than in 2006. Due to an optimization of the company’s gas station network the average daily petroleum products sales volume per gas station in Russia grew up to 9.3 tons a day. Preliminary data suggest that the total amount of the 2007 taxes and levies paid to all levels of the Russian Federation budget amounted to almost USD 24.5 billion, which is higher than in 2006.

- LUKOIL presents its corporate collection of pre-revolutionary and Soviet postcards in the Central House of Artists in Moscow. The collection is dedicated to the history of Russian oil and gas industry. The visitors will see unique documents connected with the history of Russia’s first oil companies – the Baku Naphtha Company, the Nobel Brothers Partnership for Petroleum Production and others. In addition to the post cards, other exhibits include shares, bonds, advertisements, accounting reports and business letters. The collection comprises about 500 rarities.

- Vagit Alekperov, President of OAO LUKOIL, spoke at the All-Russian Forum of Industrialists and Entrepreneurs in Krasnodar. Among other things, he emphasized in his speech a considerable natural, industrial and transport potential of the Southern Federal District, which is quickly becoming one of the major economic growth centers in Russia.

February

• Upstream news: ­

- The damages caused by an accident at multiple well platform No. 3 of the Yuzhnoye Khylchuyu oil field which is being developed by OOO Naryanmarneftegaz (joint venture of OAO LUKOIL, with a 70% stake, and Conoco Phillips, with a 30% stake) have been eliminated. The emergency well was killed on February 6, 2008 at 2:19 am. By now, the premises of the multiple well platform have almost been cleared of oil waste. No negative impact has been produced upon sensitive environmental elements. Penetration of oil-contaminated liquid into water bodies has been prevented. No injuries have been reported.

- LUKOIL Overseas (OAO LUKOIL’s 100% owned subsidiary) has reached agreement with ZAO MGNK SoyuzNefteGaz to aquire a controlling interest in a group of companies, one of which is SoyuzNefteGaz Vostok Limited, a signatory to the Production Sharing Agreement (PSA) on the South-Western Guissar and Ustyurtsk Region fields in the Republic of Uzbekistan. The contract area includes 8 fields, which contain C1 category gas reserves of 100 billion cubic meters according to the estimates by the State Committee for Reserves of the Republic of Uzbekistan. The planned production is about 3 billion cubic meters of gas per annum. This level is expected to be attained in 4 years. Gas is to be exported via OAO Gazprom trunk pipelines. The PSA, to which SoyuzNefteGaz Vostok Limited is a signatory, was signed on January 23, 2007 for a 36-year period with effective date April 23, 2007. The work in the contract area is being carried out by CIS Guissar Limited as operator, which is also a part of the assets acquired. The investments required for project implementation amount to approximately USD 700 million.

• Downstream news: ­

- LUKOIL Group (subsidiary companies and LUKOIL’s share in output by affiliated companies) total hydrocarbon production available for sale totaled 2.181 mln boe per day in 2007, up 36 th. boe per day y-o-y. Crude oil output of LUKOIL Group totaled 1,956 th. bpd* (up 1.6% y-o-y), or 96.646 mln tons. LUKOIL subsidiary companies produced 94.149 mln tons of crude, up 2.9% y-o-y. Natural and associated gas output of LUKOIL Group available for sale was 13.955 bcm, which is 2.5% more than in 2006. LUKOIL production growth rates were impacted by the sale of a 50% stake in Caspian Investments (former Nelson Resources), engaged in hydrocarbon exploration and production in Kazakhstan, in the end of April as well as by the significant limitations placed by Gazprom on natural gas intake in June–October due to warm winter of 2006–2007. Throughputs at the Company’s own refineries in Russia grew by 7.7% y-o-y, to 42.548 mln tons, due to LUKOIL refining capacity expansion and modernization as well as a high refinery margin in Russia. The Nizhny Novgorod refinery accounted for most of the growth. Throughputs at own foreign refineries grew by 2.5%, to 9.616 mln tons in 2007. Throughputs at LUKOIL own refineries in Russia and abroad totaled 52.164 mln tons, up 6.7% y-o-y.

- OOO LUKOILAERO and ZAO Gazpromneft-Aero have started cooperation on aircraft wing fuelling in Pulkovo international airport (St. Petersburg). This became possible through acquisition of a 50% stake in OOO Severo-Zapad Fuelling Company (100% subsidiary of OAO LUKOIL and OOO LUKOIL-AERO) by ZAO Gazpromneft-Aero. OOO Severo-Zapad fuelling company is reported to have acquired a controlling interest in ZAO SOVEKS, a company involved in sales of aviation kerosene in Pulkovo international airport. Pulkovo Airport is one of the largest ones in Russia. Its passenger traffic exceeded 6 million people in 2007.

- The Board of Directors of OAO LUKOIL (the Company) held a meeting in Moscow to approve acquisition of a controlling interest in OAO UGK TGK-8 (TGK-8), which makes up 82.3% of the latter’s authorized capital, by one of LUKOIL Group companies. The transaction is to be paid with OAO LUKOIL treasury shares and cash. The Board of Directors also approved allocating 23,550,000 registered ordinary shares of OAO LUKOIL at the price* of USD 70.15, which is 6.5% higher than the close price on the MICEX on February 08, 2008. These shares had previously been bought out by the Company on the open market. TGK-8 is one of the major gas consumers in the Southern Federal District with the annual consumption reaching 6 billion cubic meters per year. Its power plants are located in Astrakhan, Volgograd and Rostov regions, Krasnodar and Stavropol Districts, and the Republic of Dagestan.

- LUKOIL Group completed the acquisition of 100% of ZAO Association of Social, Economic, Scientific and Business Cooperation GRAND and 100% of OOO Mega-Oil M whose assets comprise 122 retail outlets located in Moscow and Moscow Region as well as 26 retail outlets in the regions of Pskov, Kaluga, Novgorod and Rostov. Thus, LUKOIL (the Company) has considerably increased its retail network in Moscow and Moscow Region, which enables the Company to increase its sales volumes of high quality motor fuel of Euro-3 and Euro-4 standards.

- The Management Committee of OAO LUKOIL (the Company) held a meeting in Moscow to approve the procedure of acquisition of a 82.3% interest in OAO UGK TGK-8 (TGK-8), which represents 1,696,675,068 701 shares worth RUR 67.5 billion. The acquisition will be paid for with 23,550,000 registered ordinary shares of OAO LUKOIL and with cash. The acquisition is expected to be completed before June 01, 2008. The acquired power industry assets will be operated by a specially created entity, LUKOIL Power Generation Ltd (a 100% subsidiary of OAO LUKOIL).

• Business/Finance news: ­

- The Board of Directors of OAO LUKOIL approved the list of candidates for election of the Board of Directors and Audit Commission at the Annual General Shareholders Meeting. The list of candidates was based on the nominees put forward by shareholders that own at least two percent of the voting shares.

- Vagit Alekperov, President and CEO of OAO LUKOIL, met with the Iraqi Foreign Minister Hoshiyar Zibari on February 12, 2008 at LUKOIL’s Head Office in Moscow. The Iraqi Minister highly appraised LUKOIL’s efforts to ensure observance of the provisions of the Memorandum of Understanding and Cooperation signed by the Oil Ministry of Iraq and OAO LUKOIL on March 10, 2004. Within the framework of this Memorandum, LUKOIL delivers construction equipment and ambulance vehicles to the Oil Ministry of Iraq, organizes secondments for Iraqi specialists at the Company’s enterprises and scholarships for Iraqi students at Russia’s Oil and Gas Higher Education Institutions. LUKOIL experts also participate in research work, including seismic data processing, assessment of oil and gas content in formations and elaboration of process flow diagrams and geological models for a number of fields located in Iraq. The parties also discussed the outlook for LUKOIL activities in Iraq, including the project “Western Kurna-II”.

- The exhibition “Magical Landscapes”, initiated by the State Tretyakov Gallery with LUKOIL support, opened at Helsinki City Museum of Art on February 19. Masterpieces of Russian fine art from the Tretyakov Gallery collection are on exhibition. The exhibition consists mostly of landscapes by Russian painters of the late 19th and early 20th century: Repin, Savrasov, Shishkin, Levitan, Aivazovsky and Serov.

- Vladimir Nekrasov, ÎÀÎ “LUKOIL” First Vice-President, and Vladimir Isakov, Commander of Support and RF Deputy Minister of Defense were among the presenters of a multi-author book “Russia’s Oil and National Security” in Moscow. The book, published by the Arms and Technologies Publishing House, was sponsored by OAO “LUKOIL”.

March

• Upstream news: ­

- OAO LUKOIL (the Company) has completed an evaluation and independent audit of its oil and gas reserves as at January 1, 2008. According to the data audited by Miller and Lents (USA), LUKOIL’s proved reserves as at January 1, 2008 are estimated at 20.4 billion barrels of oil equivalent (boe), including 15.7 billion barrels of oil and 27.9 trillion cubic feet of gas. In 2007 the Company had a 4% growth in proved reserves taking into account production. Thus, for eight years on end the Company has completely compensated the hydrocarbons production with the reserves additions. The evaluation of oil and gas reserves of LUKOIL Group was performed in compliance with the SPE-PRMS requirements prepared by US Society of Petroleum Engineers (SPE), reviewed and approved by the World Petroleum Congress (WPC), American Association of Petroleum Geologists (AAPG) and Society of Petroleum Evaluation Engineers (SPEE). The reserves included those volumes which are recoverable up to and past license expiry dates. The Company’s total reserves in all categories constitute 100% net reserves owned by the consolidated subsidiaries and net share in appropriate reserves of affiliates.

- LUKOIL Overseas (OAO LUKOIL’s 100% subsidiary) has completed a transaction with ZAO MGNK-SoyuzNefteGaz to acquire 100% of SNG Holdings Ltd. group, one of which is SoyuzNefteGaz Vostok Limited, a signatory to the Production Sharing Agreement (PSA) on the South-Western Gissar and Ustyurt Region fields in the Republic of Uzbekistan. The transaction amount came to approximately USD 580 million. The National Holding Company Uzbekneftegaz is the second signatory to the PSA as a state authorized body. The PSA was signed on January 23, 2007 for a 36-year period; it came into effect on April 23, 2007. There are 7 fields in the contract area of the South-Western Gissar (Kashkadarinsky Region), i.e., the gas condensate fields Dzharkuduk-Yangi Kyzylcha, Gumbulak, Amanata, Pachkamar and Adamtash, the oil and gas condensate field Southern Kyzylbayrak, and the oil field Koshkuduk. Southern Kyzylbayrak and Koshkuduk produce a small amount of oil and gas condensate. The State Committee for Reserves of the Republic of Uzbekistan approved the oil- and gas-in-place (reserves of the C1 category by the Russian classification) of the field group in the amount of 100 billion cubic meters of gas and about 6 million tons of liquid hydrocarbons (oil and gas condensate). Thus, the cost of acquiring the C1 category reserves slightly exceeded USD 0.9 per barrel of oil equivalent. The design output in the contract territory is about 3 billion cubic meters of gas and over 300 thousand tons of liquid hydrocarbons per annum. This level is expected to be attained in 4 years.

• Downstream news: ­

- Vagit Alekperov, President of OAO LUKOIL has visited Krasnopolyanskaya hydro power plant, an affiliate of TGK-8 South Generation Company. Vladimir Lebedev, General Director of TGK-8, advised Mr. Alekperov on the plans to upgrade Krasnopolyanskaya hydro power plant and construct an eponymous Hydro Power Station-2, six kilometers downstream the Mzymta River. As was reported earlier, the Board of Directors of ОАО LUKOIL approved the acquisition of a controlling interest in TGK-8.

- Vagit Alekperov, President of OAO LUKOIL, made a presentation of LUKOIL’s activities in Southern Federal District. Grigoriy Rapota, RF President Plenipotentiary in the Southern Federal District, heads of the regions of Krasnodar, Stavropol, Volgograd, and Astrakhan, North Caucasus republics also attended the event. Vladimir Nekrasov, First Vice-President of OAO “LUKOIL”, presented the Company’s plans to launch a new Olympic standard fuel station project. As the Company plans, around 100 upgraded or newly built retail spots with Olympic style design featuring symbols of the 2014 Winter Olympic Games will be dispersed along international transport corridors and RF federal routes to Sochi. Depending on certain locations, new LUKOIL fuel stations will be equipped with parking lots, cars and trucks washes, hotels and convenience stores.

- OAO LUKOIL Press Service announces that pursuant to the previously reached agreement LUKOIL Group acquired from an IFD Kapital Group company an interest in OAO UGK TGK-8 (TGK-8) which represents 29.99% of its charter capital. The transaction amount reached RUR 24,607 million. As reported earlier, on February 28, 2008 the Management Committee of OAO LUKOIL approved the procedure of acquisition of a 82.3% interest in TGK-8, which represents 1,696,675,068,701 shares worth RUR 67.5 billion. The acquisition will be paid for with 23,550,000 registered ordinary shares of OAO LUKOIL and with cash. The acquired power industry assets will be operated by a specially created entity, LUKOIL Power Generation Ltd (a 100% subsidiary of LUKOIL Group). TGK-8 is one of the major gas consumers in the Southern Federal District with the annual consumption reaching 6 billion cubic meters per year. Its power plants are located in Astrakhan, Volgograd and Rostov regions, Krasnodar and Stavropol Districts, and the Republic of Dagestan. By purchasing TGK-8 shares, LUKOIL expects significant synergies through natural gas supply to the TGK-8 plants from the Company’s gas fields located in the Northern Caspian and in Astrakhan region, which will allow the Company to reach efficient gas price. In future LUKOIL intends to develop its electric power business. The Strategic Development Program of LUKOIL Group for 2008-2017 envisages establishment of a separate Power Engineering Business Segment in the Company. Development in this area is considered one of the major factors contributing to the Company’s capitalization growth.

• Business/Finance news: ­

- OAO LUKOIL President Vagit Alekperov has paid a working visit to Iraq. During his visit Vagit Alekperov held meetings with Iraqi President Jalal Talabani, Prime Minister Nouri al-Maliki, Minister of Foreign Affairs Hoshyar Zebari, Oil Minister Hussein al-Shahristani and other officials. The parties discussed prospects of LUKOIL’s involvement in oil and gas projects in Iraq such as participation in the development of West Qurna-2 oil field. The Iraqi representatives highly appreciated the activities of the Company within the framework of the Memorandum of Understanding and Cooperation signed between the Ministry of Oil of Iraq and LUKOIL on March 10, 2004. Among other things, LUKOIL has delivered construction equipment and ambulance vehicles to the Oil Ministry of Iraq, organizes secondments for Iraqi specialists at the Company’s enterprises and also scholarships for Iraqi students at Russia’s oil and gas higher education institutions. LUKOIL experts are also involved in research work, including seismic data processing, assessment of oil and gas content in formations and elaboration of process flow diagrams and geological models for a number of fields located in Iraq.

April

• Upstream news:

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- Vagit Alekperov, President of ОАО LUKOIL, Ravil Maganov, First Executive Vice President of ОАО LUKOIL and Vladimir Nekrasov, First Vice President of ОАО LUKOIL, along with other executives of the Company took part in a meeting with Ilya Klebanov, Plenipotentiary Representative of the President of Russia in North-West Federal District, and regional governors. The meeting was held in St. Petersburg. The Company representatives reported on the results of LUKOIL Group’s activities in North-West Federal District and its development plans. As a result of exploration in the District over a period of the past seven years, the Company discovered 21 new fields (9 in Komi Republic, 2 in Nenets Autonomous District, 10 in Kaliningrad Region). In the same period the Group extracted 94 million tons of crude oil and over 6 billion cubic meters of gas in the District. In general LUKOIL plans to bring into production 60 new fields in the North-West Federal District until 2020.

- Oil prices rose above $116 a barrel, setting another record for the world’s most indispensable energy commodity. What was striking about this latest milestone was what didn’t happen: there was no shortage of oil, no sudden embargo, no exporter turning off its spigot. The weak dollar, worries about terrorism and speculation on commodity markets certainly played a role. But, of course, so did demand. Producers are struggling to pump as much as they can to quench the thirst not only of the developed world, but fast-growing developing nations like China and India, the two most populous countries. To many experts, the steadily rising price underscored longer-term fears about the future of a system that has supplied cheap oil for more than a century. Today’s tensions are only likely to get worse in coming years. Consider a few numbers: The planet’s population is expected to grow by 50 percent to nine billion by sometime in the middle of the century. The number of cars and trucks is projected to double in 30 years— to more than two billion — as developing nations rapidly modernize. And twice as many passenger jetliners, more than 36,000, will in all likelihood be crisscrossing the skies in 20 years. All of that will require a lot more oil — enough that global oil consumption will jump by some 35 percent by the year 2030, according to the International Energy Agency, a leading global energy forecaster for the United States and other developed nations. For producers it will mean somehow finding and pumping an additional 11 billion barrels of oil every year. And that’s only 22 years away, a heartbeat for the petroleum industry, where the pace of finding and tapping new supplies is measured in decades. The pursuit of oil will be just part of the energy challenge. The world’s total energy demand — including oil, coal, natural gas, nuclear power, as well as renewable energy sources like wind, solar and hydro power — is set to rise by 65 percent over the next two decades, according to the I.E.A. But petroleum, the dominant fuel of the 20th century, will remain the top energy source. It accounts for more than a third of the world’s total energy needs, ahead of coal and natural gas. Refined into gasoline, kerosene or diesel fuel, oil has no viable substitute as a transportation fuel, and that is not likely to change much in the next 30 years. The problem is that no one can say for sure where all this oil is going to come from. That might not sound like such a bad thing for those concerned about carbon emissions and climate change. High prices might end up forcing people to conserve and encourage the development of alternatives. But the energy crunch might also result in a global scramble for resources, energy wars, and much higher energy prices. Some oil executives are sounding the alarm bell. At a recent energy conference, John Hess, the chief executive of Hess Corporation, the international oil company, warned that an oil crisis was looming if the world didn’t deal with runaway demand and strained supplies. The chief executive of Royal Dutch Shell, Jeroen van der Veer, said recently, with some understatement, that, “the energy outlook does not look rosy.” For one thing, the world’s oil supplies are already stretched. Countries outside of the OPEC cartel — which have been the main source of new oil discoveries and production since the 1970s — have said they expect little to no growth this year in oil production. The North Sea and Alaska are slowly running out of oil and producers there are struggling to keep production from falling. Russia’s phenomenal oil surge is coming to an end; a top executive of Lukoil, the country’s second-largest oil group, said last week that the country’s production was unlikely to grow much. Nigeria is battling a violent militancy. And Mexico, the third-most-important supplier of crude to the United States, has been stuck in a crippling political debate over keeping out foreign investors while witnessing a dramatic drop in production that some analysts say may be irreversible. What about OPEC? The 13 members of the Organization of the Petroleum Exporting Countries account for three-quarters of the world’s proven oil reserves. But for various reasons, most of those countries are making it harder, if not impossible, for foreign oil companies to invest within their borders. With energy prices rising, OPEC producers are seeing record revenues, which have reduced the incentive to dip into their supplies by boosting production. At the same time, major oil companies like Exxon Mobil, BP and Chevron are finding it harder to compete worldwide, as national oil companies erode their once-dominant positions. Fourteen of the world’s Top 20 oil companies are state-owned giants, like Saudi Aramco and Russia’s Gazprom. That leaves Western oil companies in control of less than 10 percent of the world’s oil and gas reserves.

• Downstream news:

- Vagit Alekperov, President of ОАО LUKOIL and Oleg Chirkunov, Governor of the Perm Region, took part in the official opening of the second stage of oil packaging terminal at OOO LUKOIL-Permnefteorgsintez (the Perm Refinery) in Perm. The design capacity of the terminal is up to 140 thousand tons of motor oils a year. Three process lines of the packaging area ensure production and filling of newly designed 1.4 and 5 liter oil cans. The new oil complex also includes an automated storage facility for over 4 thousand pallets, shelter for five freight wagons and five dockage facilities for loading of trucks.

- Press Service of OAO LUKOIL reports that fire, which outbroke at OOO Stavrolen was promptly brought under control. OOO Stavrolen is part of LUKOIL-Neftekhim Group, which is a member of LUKOIL Group. The fire accident took place near the polymerization reactor. Unfortunately, three factory workers perished in the fire and three more suffered burns.

- Vagit Alekperov, President of OAO LUKOIL and Mr.Vladimir Yakunin, President of OAO Russian Railways (RZhD) signed minutes of the meeting held in Moscow to define major bullet points of cooperation for 2008 aimed at developing both companies’ transport infrastructure to ensure guaranteed petroleum products deliveries from LUKOIL facilities.

- LUKOIL EKTO branded automobile fuel has won the second prize of the Brand of the Year/EFFIE 2007 contest, Auto-moto category. LUKOIL introduced its premium EKTO branded fuel to the Russian market in 2006. Consumers can purchase EKTO branded automobile gasolines and diesel fuel with cleansing properties which improve engine performance. According to its technical properties EKTO complies with Euro-3 and Euro-4 standards. EKTO branded fuel allows the engine to work at maximum capacity and reduce harmful emissions.

- LUKOIL has become winner in the Filling Station of the Year rating for the third time running, based on Trusted Brand 2008 survey held in Russia by Reader’s Digest, an international publishing house. LUKOIL ranked first in similar ratings of Reader’s Digest in 2006 and 2007.

- OAO LUKOIL President Vagit Alekperov and President Victor Yushchenko ofUkraine attended the official ceremony of commissioning the Odessa refinery today as the reconstruction of the refinery, started in 2005, has been completed. In the course of the three-year effort, one of the AVT distillation units has been modernized, increasing its annual capacity from 2.4 million tons to 2.8 million tons, while the second such unit was put out of operation. The modernization also included the upgrading of the hydrotreatment unit and of several blocks of general equipment. Also, a visbreaking unit was installed.

- “LLK-International” (100% subsidiary of OAO “LUKOIL”) started production of motor oils in accordance with a new formula in April 2008. These motor oils will be packed in the newly designed containers. Oils are produced from the best own base oils with a set of additives of the leading Western producers. That secures “smart protection” of engines. Motor oils produced in compliance with the new formula create an elastic and reliable film, which protects engines in all operational conditions. Tests on engines of foreign manufacturers demonstrated that tenacity of oil resist in minimum clearance zones has increased twofold. Moreover, tests also showed that motor oil “LUKOIL Luxe” decreases engine friction coefficient by 20-25% thus fuel consumption is at least 2.5% less.

- LUKOIL Europe Holdings B.V., 100% subsidiary of ОАО LUKOIL closed a deal on purchase of EUROPA-MIL (Croatia). LUKOIL acquired 9 retail outlets in Zagreb and Split, 5 land plots for construction of filling stations as well as an oil products railway hub with the capacity of 8,000 cubic meters on the Danube river, the city of Vukovar at the Croatian-Serbian border.

- Lukoil, the Russian oil company, has decided to sell 162 of the more than 1,800 gas stations it owns in the United States because the sites, in Pennsylvania and New Jersey, are less profitable than other Lukoil investments, the company said. Some of the stations, acquired from ConocoPhillips, were still changing their brand names and it was unclear which brand they would carry after the sale, according to Lukoil’s press service in Moscow. Lukoil operates stations under the Lukoil and Getty brands in 13 Northeastern states.

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• Business/Finance news: ­

- OAO LUKOIL Press Service announces that Mr. Azat Shamsuarov has been appointed Vice President of OAO LUKOIL – General Director of OOO LUKOIL-West Siberia. Prior to that appointment Mr. Shamsuarov was Senior Vice President for Operations of LUKOIL Overseas Holding Ltd.

- LUKOIL publishes 2007 consolidated US GAAP financial accounts. LUKOIL net income reached a record of $9,511 million in 2007, which is an increase of 27.1% y-o-y. EBITDA was $15,388 million, which is 25.1% higher y-o-y. Revenue from sales rose by 21.0%, to $81,891 million.

- OAO LUKOIL Management Committee approved Annual Coordination Research and Technology Program of LUKOIL Group for 2008. Total financial input for Program implementation approximates RUR 3.15 billion, 85% of which accounts for the Upstream segment.

- OAO LUKOIL Press Service reports that the statement made regarding Uzbek gas export price in 2009 is solely based on expectations of the Company’s individual employees.

- Vagit Alekperov, President of OAO LUKOIL (“LUKOIL”), Nicky Oppenheimer, Chairman of De Beers Societe Anonyme (“De Beers”), Gareth Penny, Managing Director of De Beers, Bruce Cleaver, Chairman of Archangel Diamond Corporation (“Archangel”) and Tom Beardmore-Gray, Director of Archangel signed definitive agreements today concerning the ownership and development of the Verkhotina diamond project located in the northwest of Arkhangelsk, Russia (“Transaction”). The Transaction involves the acquisition by Archangel of an interest in OAO Arkhangelskoe Geologodobychnoe Predpriyatie (“AGD”), a Russian open joint stock company currently wholly-owned by LUKOIL Group and the holder of the license to explore and mine the Verkhotina license area.

- The Board of Directors of OAO LUKOIL held a meeting in Tashkent (the Republic of Uzbekistan) where resolutions relating to the Annual General Shareholders Meeting were passed. In particular, it was decided that the Annual General Shareholders Meeting will be held on June 26, 2008 at 11:00 at the Company’s headquarters in Moscow. It was also resolved that the record date for the list of shareholders entitled to participate in the Annual General Shareholders Meeting shall be May 08, 2008. The Board of Directors intends to recomend to the shareholders to approve dividends for the 2007 financial year in the amount of RUR 42 per ordinary share (RUR 38 per ordinary share for 2006).

- OAO LUKOIL Press Service reports that the Patent Disputes Chamber Board under the Federal Service for Intellectual Property, Patents and Trademarks (Rospatent) has declared legal protection of LUXOIL trademarks invalid.

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May

• Upstream news:

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- A major oil-and-gas-condensate field has been discovered at Tsentralnaya structure in the Caspian by OOO TsentrKaspneftegas (a joint venture of OAO LUKOIL and OAO Gazprom). The oil-bearing structure where the discovery occurred is situated in the central part of the middle Caspian on the border between Russia and Kazakhstan within Russia’s sector of the sea 150 kilometers to the East of the city of Makhach-Kala. The very first exploration well hit hydrocarbons. During testing, the well produced a commercial open flow of sweet crude. The borehole survey continues. A 3D seismic study is to be conducted to delineate the discovered reservoir. ­

• Downstream news:

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• Business/Finance news:

- At its session the Board of Directors of OAO LUKOIL has granted preliminary approval to OAO LUKOIL 2007 Annual Report in accordance with the Federal Law of the Russian Federation “On Joint-Stock Companies” and the Charter of the Company. The document is recommended for approval at the Annual General Shareholders Meeting which will take place on June 26, 2008 in Moscow. Members of the Board of Directors also discussed performance of the Board of Directors, the Audit Committee, the Strategy and Investment Committee and the HR and Remuneration Committee.

- OAO LUKOIL Management Committee approved management concept of LUKOIL Group electric power assets. Among other things, the document implies establishment of OAO LUKOIL Main Division for Energy, which is set up to ensure efficient operation in such business segments as Generation, Power Distribution and Power Supply Networks, implement the power engineering investment program, pursue uniform engineering policy of electric and thermal power generation and transmission, represent the Group’s interests in federal executive bodies and infrastructural organizations on the electric power market.

- A children’s painting exhibition titled I am Drawing the Kremlin displaying works of contest winners was held in the grand hall of the Armory Chamber, the Moscow Kremlin Museums. The contest was organized as part of a joint regional educational program of LUKOIL and the Moscow Kremlin Museums; it was dedicated to the international Child Protection Day.

- OAO LUKOIL Management Committee has reviewed the annual report titled ‘Health, Safety and Environment in OAO LUKOIL’. Among other things, the document states that in 2007 the Company’s investments into industrial and health safety, emergency prevention and response came to around RUR 4.9 billion. Over RUR 2.2 billion of this amount were allocated on emergency prevention. Due to such measures in 2007 there were no fires or accidents categorized as emergency situations. In 2007 LUKOIL Group spent RUR 15.3 billion on environmental safety measures. 46.4 % or RUR 7.09 billion of this amount were allocated to open air protection of LUKOIL enterprises.

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June

• Upstream news:

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- OAO LUKOIL First Executive Vice President Ravil Maganov, President of ConocoPhillips Russian/Caspian Region Don Wallette and Head of the Nenets Autonomous District Administration Valery Potapenko participated in a special ceremony on the occasion of the startup of comprehensive testing of the first stage of the Yuzhno Khylchuyu field located in the Nenets Autonomous District. One of the biggest fields in the north of the Timan Pechora oil and gas province, this field is developed by OOO Naryanmarneftegaz, a LUKOIL and ConocoPhillips Joint Venture (70% and 30%, respectively). The field was discovered in 1981. Proved oil reserves in the field exceed 500 million bbl. Oil quality there surpasses the Russian Urals export blend quality: its density is 35.5 API (Urals, 32.0 API), and sulfur content is 0.71% (Urals, 1.3%). The first stage comprises 32 development wells, an oil treatment unit with the annual capacity of 3.8 million tons, an oil desulfurization unit, a tank farm with the total volume of 40000 m3, an export line pump house, a 27.8 km long Yareyu – Yuzhno Khylchuyu high-pressure gas pipeline (273 mm in diameter), a gas treatment station with the annual capacity of 370 million m3, a power supply complex with the rated capacity of 125 MW, and 287 kms of high-voltage transmission lines rated at 220 kV. Startup of the second stage of the Yuzhno Khylchuyu field is scheduled for December 2008. The oil treatment unit annual capacity will be increased by 3.8 million tons, and 32 new wells will be put into operation. A high-pressure compressor station and sulfur disposal and storage facilities will be built. The design oil production level in the field is expected to reach 7.5 million tons a year (over 150,000 bbl/d) in 2009.

- From the first days that American-led forces took control of Iraq, the conquering army took pains to broadcast that it was there to liberate the country, not occupy it, and certainly not to cart off its riches. Nowhere were such words more carefully dispensed than on the subject of Iraq’s oil. As they surveyed facilities in the weeks after Saddam Hussein’s government fell, American officials said they were merely advising Iraqis on how to increase production to finance the democratic nation being erected across desert sands that, conveniently, held the third-largest oil reserves on earth. Many critics of the invasion derided that characterization. In Arab countries and among some people in America, there was suspicion that the war was a naked grab for oil that would open Iraq to multinational energy giants. President Bush had roots in the Texas oil industry. Vice President Cheney had overseen Halliburton, the oil services company. Whatever else happened, such critics said, energy players with links to the White House would surely wind up with a nice piece of the spoils. Behind those competing conceptions was a fundamental reality that forms the wallpaper for American engagement in the Middle East: oil, and its critical importance to the American economy, has for decades been a paramount interest of the United States in the region. Almost everything the United States has tried to do there — propping up autocrats or seeking democracy, fighting terrorism or withstanding Soviet influence, or, in this case, toppling the dictator Saddam Hussein — could affect the availability of oil for American markets and therefore entailed some calculation about it. Today, the question hanging over Iraq is whether its natural endowment will be used to help create a sustainable new state, or will instead be managed in ways that reward the cronies and allies of the country whose army toppled Mr. Hussein. Or perhaps both at the same time. That basic question was yanked back to the fore recently when word emerged from Baghdad, in a report in The New York Times, that the Iraqi oil ministry was close to awarding contracts to service its oil fields to some of the largest Western oil companies. While relatively small, these contracts could serve as a foot in the door for much more lucrative licenses to explore widely for Iraqi oil. Some 40 companies from around the world had jockeyed for the contracts, but they were being awarded without competitive bids, the report said. Those about to land the deals — Exxon Mobil, Shell, BP and Total — had held oil rights in Iraq before Mr. Hussein nationalized the fields and kicked them out more than three decades ago. They all came from countries that had either been stalwart allies of the Bush administration or — in the case of France, which is home to Total — had lately increased their support for the American-led campaign to isolate Iran. Just as striking were the companies that failed to capture a foothold: the Russian oil giant Lukoil, which had signed a deal to exploit a huge field in southern Iraq while Mr. Hussein was still in power, only to see it revoked just before he fell, and Chinese firms with their own claims. Before the 2003 invasion, the Russian and Chinese governments had lent muscle on the United Nations Security Council toward fending off American-led sanctions aimed at the Hussein government. Iraqi officials said the no-bid deals reflected nothing more than pragmatic stewardship. Iraq needs to get more oil out of the ground to finance reconstruction, they said, and the oil giants getting the contracts have the skill to make that happen. But those most suspicious of the Bush administration’s motives fixed on the contracts as validation. They accused the administration of pulling strings and shelving concerns about preserving Iraqi sovereignty, in favor of expedient deal-making in a time of exploding oil prices. In the days after word of the deals leaked out, three senators, including Charles E. Schumer, the New York Democrat, demanded that the Bush administration somehow cancel the contracts, arguing that they would damage American credibility. The White House disowned any role and said the senators were being hypocritical. Here they were, in effect, accusing the administration of orchestrating the deals, while calling for orchestration to make them disappear. Sovereignty has been a subject wrapped in thorns ever since American-led forces drove Mr. Hussein from his palace. Arguments over who really makes decisions in Iraq, and for whose benefit, cut to the heart of the very point of the war.

• Downstream news:

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- LUKOIL effected the first large-tonnage oil shipment to a reinforced ice-breaking tanker (DWT 70,000 tons) through the fixed offshore ice resistant oil terminal (FOIROT) of the Varandey oil export terminal located in the coastal zone of the Barents Sea in the Nenets Autonomous District. Thus, the Company has successfully implemented the large-scale project aimed at construction of an oil export terminal with the capacity of up to 12 million tons of oil per annum (240,000 barrels/per day) . The Varandey oil export terminal is designed for offshore export of the oil extracted by LUKOIL in Timan-Pechora oil and gas province. The tanker ‘Vasily Dinkov’, loaded today at the Varandey oil export terminal (VOET) FOIROT, will deliver the oil to the Canadian port of Come By Chance.

- Vagit Alekperov, President of OAO LUKOIL (‘LUKOIL’), and Alessandro Garrone, CEO of ERG S.p.A. (‘ERG’) in Rome signed an agreement to establish a joint venture. This joint venture will operate the ISAB refinery complex in Priolo, Sicily. As part of the transaction, LUKOIL will acquire a 49% stake in the joint venture for a cash consideration of EUR 1.347 billion excluding inventory. ERG will retain 51%. The transaction structure provides LUKOIL with a possibility to increase its stake in future.

• Business/Finance news:

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- LUKOIL publishes consolidated US GAAP financial accounts for the first quarter of 2008. LUKOIL net income reached $3,163 million in the first quarter of 2008, which is an increase of 143.5% y-o-y. EBITDA was $4,846 million, which is 99.3% higher y-o-y. Revenue from sales rose by 59.4%, to $24,955 million. The increase in net income was due to favorable market conditions, high refinery margin, increase in refinery throughputs as well as due to effective cost control. Growth of the net income was held back by appreciation of the ruble against the dollar, increase in transportation tariffs and growth of the tax burden. The Company’s tax expenses totaled $8.7 billion, up 54.9% y-o-y.

- OAO LUKOIL Press Service is warning all interested parties of the unscrupulous activities of a certain OOO Vitrazh which is distributing commercial proposals on letterheads containing misleading information as to the company’s affiliation to OAO LUKOIL’s subsidiaries. In addition to that, the said company’s website on the Internet (http://www.vitrazh-coll.ru) is illegally using LUKOIL’s trade marks.

- LUKOIL has raised a USD 1 billion syndicated unsecured loan facility (the ‘Facility’). The Facility includes two tranches: Tranche А of USD 300 million. Tranche В of USD 700 million. Tranche A and Tranche B have a 3- and a 5-year maturity periods respectively. Tranche A is priced at LIBOR + 0.85% per annum; Tranche В is priced at LIBOR + 0.95% per annum. The borrower is LUKOIL Finance Ltd. (a 100% subsidiary of OAO LUKOIL).

- OAO LUKOIL held its Annual General Shareholders Meeting in Moscow to approve 2007 annual report and financial statements based on the fiscal year results. The shareholders approved dividend distribution based on the Company’s performance in 2007 in the amount of 42 rubles per ordinary share (38 rubles in 2006). The size of remuneration and compensation of expenses to members of the Board of Directors and the Audit Commission was also approved. ZAO KPMG was approved as LUKOIL’s independent auditor. The Annual General Shareholders Meeting also elected the Board of Directors and the Audit Commission and approved interested-party transactions.

- The Russian oil company Lukoil said its profit more than doubled in the first quarter to $3.16 billion, in line with analysts’ expectations, helped by strong oil prices. Revenue rose to $26.30 billion from $15.74 billion. The company, based in Moscow, said higher prices for crude oil and for refined petroleum products was responsible for the increases.

July

• Upstream news:

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- Vagit Alekperov, President of OAO LUKOIL, and Rafael Ramirez Carreño, President of PDVSA, State Petroleum Company of Venezuela, signed an Agreement on Joint Study of Junin-3 block in the Orinoco heavy oil belt (Guarico state, Venezuela). The Agreement was signed in Moscow in the presence of the leaders of the Russian Federation and Bolivarian Republic of Venezuela Dmitry Medvedev and Hugo Chavez Frias. A joint study will be performed to evaluate the project pertaining to production of extra heavy oil, its further refining on the territory of Venezuela and exporting. Expenses for the study will be shared by the parties on an equal basis. The Agreement will be effective for two years with a possibility of extension.

- President Hugo Chávez of Venezuela and President Dmitri A. Medvedev of Russia declared that their countries would more closely coordinate their actions on global oil and gas markets and that they would work together on foreign policy, a sphere in which both countries have sought to counter American influence. Mr. Chávez, who was also expected to sign contracts to purchase more than $1 billion worth of Russian arms, called for the two nations to become “strategic partners” to defend against what he called an American threat to his country. Mr. Medvedev, who met Mr. Chávez for the first time since succeeding Vladimir V. Putin as president, stopped short of endorsing his guest’s sharp remarks about the United States. So did Russian officials, who stressed the business significance of the new cooperation, including three new deals to expand Russian oil and gas companies’ presence in Latin America, rather than its political import. But Mr. Medvedev noted that the two countries aimed to promote the United Nations as the primary venue for settling international disputes. Mr. Medvedev said it was still possible that Russia could join with Venezuela and other gas-producing nations to form a cartel similar to OPEC, a concept that has been under discussion for several years. He said that such cooperation would help guarantee energy security and was “not directed against any states.” Mr. Chávez’s visit to Moscow presents something of a diplomatic puzzle for Russia. Mr. Chávez, a leading opponent of American global influence, has made clear that he would be happy to join Russia’s efforts to re-establish itself as a counterweight to the United States. But with Russia’s opposition Communist Party loudly embracing Mr. Chávez, and Russian companies eager to expand trade with Latin American countries that are wary of him, like Colombia, the Russian government so far has not publicly embraced his sharper anti-American statements. Dmitri Trenin, a political analyst at the Carnegie Moscow Center said that while Russia sometimes clashed with the West, and was happy to have Mr. Chávez taunt the United States much as Georgia’s pro-American government taunted Russia, it was focused on the interests of the state-controlled arms and oil companies that remained global players. Venezuela is Russia’s largest arms customer in Latin America and a fast-growing trade partner. Trade doubled to $1.1 billion last year, driven by Russian exports. Russia’s gas and oil giants, TNK-BP, Lukoil and Gazprom, each signed agreements in Mr. Chávez’s presence to explore reserves in Venezuela’s Orinoco Valley. Lukoil and TNK-BP signed agreements to conduct joint explorations with the Venezuelan state oil company, Petróleos de Venezuela. Gazprom agreed to conduct a geological study of gas reserves in the area, and reportedly was discussing the possibility of helping to build a pipeline to Brazil. The visit follows a series of events that have highlighted some Russian-American tensions, and comes as Russia is reaching out diplomatically to other countries seeking to limit American influence. Russia announced the end of a long-running border dispute with China, and officials stressed the warming relations between the countries. Earlier this month, Russia and China both vetoed an American-backed United Nations attempt to impose sanctions on Zimbabwe. Russia also objected to a recent agreement between the United States and the Czech Republic for a planned missile defense system based in the former Soviet satellite. Venezuela’s new arms purchases are expected to include as many as 20 S-300 Thor antiaircraft missile systems, and three Varshavyanka diesel submarines, Interfax reported, citing defense industry sources. Venezuela had previously purchased 100,000 late-version Kalashnikov AK-103 assault rifles, 24 Su-30MK2 fighters and 50 MI helicopters, and work is under way for factories in Venezuela to produce the rifles under license. During Mr. Chávez’s previous visits, however, Russian officials have been careful not to express support of his anti-American statements.

• Downstream news:

- President of OAO LUKOIL Vagit Alekperov and owners of the Akpet company signed an agreement on acquiring a 100% interest in Akpet by LUKOIL EURASIA PETROL A.S. (a 100% owned subsidiary of ОАО LUKOIL) in Istanbul. Akpet operates 693 gas filling stations on the basis of dealer agreements, accounting for about 5% of the Turkish retail market.

• Business/Finance news:

- LUKOIL was named the best European oil and gas company in investor relations by buy-side analysts as a result of the survey carried out by Institutional Investor journal among analysts from 500 companies. The analysts highlighted the fact that nowadays in order to win the competition for financial resources companies should be the best in communicating results of their activities and strategic objectives to investors. The survey participants noted that data products and marketing activities in investor relations prepared and performed by LUKOIL help the Company to compete successfully and cope with this task.

- LUKOIL joined the United Nations Global Compact, a voluntary initiative to facilitate sustainable development and encourage businesses to adopt socially responsible policies. Back in 2006, LUKOIL joined the Russian Businesses Social Charter, which is in character with the UN Global Compact. The UN Global Compact requires public reporting and is based on the interest of business circles, trade unions and community in joint actions to support sustainable development.

- LUKOIL Charity Fund published a report on its spendings in 2007. The Fund is a non-profit organization, established on voluntary pecuniary contributions. Its basic commitments are in the field of social, charity, cultural, educational and other initiatives for the benefit of communities.

- The Board of Directors of OAO LUKOIL held a meeting in Moscow to resolve a number of issues related to corporate governance.

- OAO LUKOIL Press Service is pleased to announce that Alexander Tsygankov, Business Development manager of LUKOIL Overseas branch in Libya, was released from custody in Tripoli on July 30, 2008. Presently, Mr. Tsygankov is at his home in Moscow and he is doing well. Alexander Tsygankov was detained by Libyan authorities in November 2007. No official charges were brought against him.

- Venezuelan President Hugo Chavez blew through Russia, cutting business deals, griping about the United States and pumping up the friendship between two oil-rich nations. He pressed Prime Minister Vladimir Putin to pay him a visit in Venezuela. He subtly ribbed President Dmitry Medvedev, who has been widely portrayed as Putin’s handpicked puppet. And he announced that his country would buy Russian weapons “to guarantee the sovereignty of Venezuela, which is being threatened by the United States.” The tone of the visit was the latest stroke of neo-Cold War posturing in Moscow, which has taken on an increasingly anti-American tone as oil revenue piles up in state coffers. A Russian newspaper published anonymous threats from a “highly placed source” to use Cuba as a refueling base for nuclear- capable bombers. The report, which caused consternation in Washington, was dismissed by the Russian Defense Ministry as false. During his visit, Chavez spoke admiringly of Fidel Castro, stirring inevitable memories of bygone Cold War alliances. The visit played out against a backdrop of global tension over high oil prices, inflation and a weakened dollar. But some analysts dismissed the back-slapping and dealing between the rulers as a largely empty display. Still, both countries are riding high on the record-busting oil prices. And Tuesday, the two presidents pledged to form a strategic energy alliance. “Our relations have reached a totally new level,” Medvedev said after he and Chavez watched Russia’s oil and gas companies sign a host of deals with their Venezuelan counterparts. The deals clear the way for Russian firms to develop Venezuelan fields, beginning with Russian giant Gazprom drilling in western Venezuela while Lukoil drills in the Orinoco River basin in the east. Wider exploration as well as joint railroad, infrastructure and banking projects will follow, the presidents said. Chavez echoed Russian calls to make the ruble a major reserve currency in opposition to a weakened dollar. Since becoming president in May, Medvedev has struggled to emerge from the long shadow of Putin. Chavez made a point of telling reporters that his first meeting with Medvedev had slipped his mind. He also said that his meeting with Medvedev had run longer than expected.

August

• Upstream news:

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- OAO LUKOIL President Vagit Alekperov and ConocoPhillips Chairman and CEO Jim Mulva participated in a special ceremony on the occasion of the startup of the Yuzhno Khylchuyu (YK) field located in the Nenets Autonomous District. One of the biggest fields in the north of the Timan Pechora oil and gas province, this field is developed by OOO Naryanmarneftegaz, a LUKOIL and ConocoPhillips Joint Venture (70% and 30%, respectively). The field was discovered in 1981. Oil quality there surpasses the Russian Urals export blend quality: its density is 35.5 API (Urals, 32.0 API), and sulfur content is 0.71% (Urals, 1.3%). The first stage comprises 32 development wells, an oil treatment unit, an oil desulfurization unit, a tank farm with the total volume of 40,000 m3, a power supply complex with the rated capacity of 125 MW, and other units. Startup of the second stage of the YK field is scheduled for December 2008, at which time an additional 32 wells will be put into operation and a high-pressure compressor station and sulfur disposal and storage facilities will be completed. The design oil production level in the field is expected to reach 7.5 million tons a year (more than 150,000 bbl/d) in 2009.

• Downstream news:

- This August LUKOIL Group's Russia-based refineries reduced their selling prices for diesel fuel, fuel oil and jet fuel. Particularly, in the first half of August the reduction in the diesel fuel selling prices of the Company's refineries averaged 7%, the average decrease in fuel oil prices came to 8% and that in jet fuel prices was 4%. According to LUKOIL, a further reduction in diesel fuel and motor gasoline prices may be expected in August and September. Such pricing will soon result in a reduction of 30-40 kopecks per liter of motor gasoline and 50 kopecks per liter of diesel fuel when retailed in the regions of the Company's presence.

- LUKOIL Group refineries in Russia reduced factory prices for motor gasoline, diesel and jet fuel in August 2008. Among other things, in the second half of August the Company’s plants reduced their factory prices for AI-92 by 12%, AI-80 by 5%, diesel fuel by 5% and jet fuel by 5 % on average. As reported earlier, in the first half of August LUKOIL’s refineries reduced factory prices for diesel fuel by 7%, for fuel oil by 8% and for jet fuel by 4% on average. LUKOIL expects such pricing in the future will lead to considerable retail prices decrease at the Company’s filling stations in a number of regions in Russia.

• Business/Finance news:

- LUKOIL publishes consolidated US GAAP financial accounts for the first half of 2008. LUKOIL net income excluding hedging and impairment loss reached $8,168 in the first half of 2008, which is an increase of 103.5% y-o-y. Reported net income amounted to $7,293 million in the first half of 2008, which is an increase of 91.1% y-o-y. EBITDA was $11,082 million, which is 74.5% higher y-o-y. Revenue from sales rose by 59.0%, to $56,890 million. The increase in net income was due to favorable market conditions, high refinery margin, increase in refinery throughputs as well as due to effective cost control. Exports of petroleum products reached 12.9 mln tons representing an increase of 6.3% y-o-y thanks to the increase in refinery throughputs. Crude oil exports in the corresponding period amounted to 19.20 mln tons, which is a decrease of 11.9% y-o-y. Growth of the net income was held back by appreciation of the ruble against the dollar, increase in transportation tariffs and growth of the tax burden. The Company’s tax expenses totaled $18.9 billion, up 57.0% y-o-y.

- OAO LUKOIL held a meeting of the Board of Directors in Moscow to summarize preliminary results of LUKOIL Group for the first six months of 2008, and to discuss budget and investment program implementation progress in the current year. LUKOIL Group oil production came to 47.01 million tons, including 44.36 million tons in the Russian Federation and 2.65 million tons globally. Compared to the first six months of 2007, oil production dropped by 3.1%, of which 2.7 % account for the Russian companies. Decrease in oil production output in Western Siberia due to natural deterioration of mining and geological conditions became the main reason of oil production reduction in the Russian Federation.

September

• Upstream news:

• Downstream news:

- The main stage of Volgograd-Antiterror-2008 International Exercises was held at the premises of LUKOIL-Volgogradneftepererabotka. At the river port of the refinery, an armed hijacking of an oil tanker and its crew was simulated, with an ensuing hostage rescue operation, neutralization of the “terrorists” and relief measures at the seized vessel. The exercises were held within the Shanghai Cooperation Organization’s program to fight terrorism, separatism and extremism. As part of the exercises, interaction between special forces of theRussian Federation, Kazakhstan, Tadzhikistan and Uzbekistan was tested. The total area of the Volgograd refinery is 1,500 ha with a perimeter of 25 km. The refinery is equipped with systems of engineering protection, security lighting and alarm, video surveillance, tanker relocation control, registration of state license plates, as well as systems of control and management of access. Sabotage and terrorist attacks at fuel and energy facilities significantly threaten the population and the infrastructure of whole regions. The energy equivalent of oil production organizations, refineries, oil terminals, tank farms and offshore drilling rigs is comparable to the yield of modern tactic nuclear weapons.

- A presentation on OAO LUKOIL’s activities in the Volga Federal District of theRussian Federation was held in the city of Nizhny Novgorod on 9 September. All business segments of the Company are well presented in the Volga Federal District, including hydrocarbon exploration and production, refining, petrochemistry and marketing of petroleum products. LUKOIL’s facilities play an important role in the development of the fuel and energy complex of the region: they account for 12% of the oil production and 31% of the refining. The Company’s share in the petroleum products wholesale market of the Volga Federal District comes to 25%, and in the retail market to 21%. Results of the first six months of 2008 suggest that tax payments of the Company’s subsidiaries into regional budgets (excluding excise tax and unified social tax) were estimated at RUR 9.3 billion. From January to June of 2008 the Company’s investments into the Volga Federal District came to RUR 12.3 billion, while commissioning of investment facilities reached RUR 6.9 billion.

- In Sochi Mr. Vagit Alekperov, OAO LUKOIL President, and Alexander Tkachov, Governor of Krasnodar Region, signed a Cooperation Agreement between the Company and the Region. Reference to the Agreement, LUKOIL intends to invest at least RUR 600 million into construction of 60 new filling stations in Krasnodar Region by 2012. The parties will also cooperate on the projects aimed at prospecting and exploration of oil and gas fields in the region, oil and gas transportation and refining and also the supply of basic petroleum products to support the regional economy. The Company also intends to assist in technical upgrading of the regional fuel and energy sector by applying Russian equipment and bringing in new technologies developed by regional enterprises and institutes.

- OAO LUKOIL Management Committee approved OAO LUKOIL-Inter-Card development program for 2008-2017. It is a 100%-owned subsidiary of the Company, which acts as an operator for development and maintenance of the settlements system at LUKOIL filling stations by applying plastic cards (LICARD). Among other things, according to the program, the number of LUKOIL filling stations equipped with LICARD terminals is to increase from almost 3 thousand in the beginning of 2008 up to 5.2 thousand by 2017. Within the same period the number of LUKOIL cards in circulation will increase from 1.75 million up to over 7 million pieces.

- The terminal ‘LUKOIL-II’ located in Vysotsk (Leningrad Region) hosted anti-terror maneuvers called ‘Technology-2008’. The maneuvers were held to exercise joint actions of the Federal Security Service, the Ministry of Defense, the Federal Protective Service, EMERCOM and LUKOM-A Agency which provides security of OAO LUKOIL facilities. In accordance with the agenda, an alleged raiding and terrorist squad penetrated the terminal premises, took hostages, mined the central office and a freight train loaded with petroleum products. Afterwards, the terrorists put forward their claims and threatened to explode the train and start shooting their captives if their demands were not met. The headquarters resolved to free the hostages by means of force and neutralize the terrorists. As a result of a successful operation all the hostages were rescued, several terrorists were killed, while the rest were captured by special services. The planted explosive devices were deactivated. Besides, in the immediate vicinity of the terminal special agents arrested a car with the suspected accomplices equipped with a portable radio and materials to create an explosive device. A team of dog specialists also detected a self-made explosive device planted at the railroad bridge leading to the terminal. A border patrol ship, which was guarding the terminal offshore area, also participated in the maneuvers. The marine border guards had to open fire at the speedboat which was moving in the direction of the terminal and ignored repeated orders to stop. The maneuvers were also attended by observers from the special services and law-enforcement authorities of the G-8 countries and the Baltic nations and also UN and OSCE representatives.

- OOO LUKOIL-Volgogradneftepeprerabotka acquired 31.3% of the charter capital of OAO YuGK TGK-8 (TGK-8) as a result of mandatory offer. Thus, LUKOIL Group interest in the charter capital of TGK-8 has reached 95.4%. As reported earlier, purchase price of TGK-8 shares under the mandatory offer was RUR 0.0398 per ordinary share. TGK-8 is one of the major gas consumers in the Southern Federal District of the Russian Federation with the annual consumption of about 6 billion cubic meters per year. Its power plants are located in Astrakhan, Volgograd and Rostov regions, Krasnodar and Stavropol Districts, and the Republic of Dagestan. Rated capacity of electric and thermal power generation facilities of TGK-8 makes up 3,601 MW and 13,366 Gcal/hour, respectively. The acquired power industry assets will be operated by a specially created entity, LUKOIL Power Generation Ltd. (a 100% subsidiary of OAO LUKOIL). LUKOIL expects that the acquisitions will result in significant synergies through natural gas supplies from the Company’s gas fields located in the Northern Caspian and in Astrakhan region.

• Business/Finance news:

- OAO LUKOIL Press Service announces that persons discharging managerial responsibilities in the Company acquired ordinary shares of OAO LUKOIL through a related party on September 10, 2008. Vagit Yu. Alekperov, President of OAO LUKOIL, acquired 1,200,000 shares of OAO LUKOIL at RUR 1,600 per share. Leonid A. Fedun, Vice President of OAO LUKOIL, acquired 800,000 shares of OAO LUKOIL at RUR 1,600 per share. As a result of these transactions Mr. Alekperov’s and Mr. Fedun’s direct and indirect holdings amount to 20.54% and 9.21% respectively of the issued ordinary shares of OAO LUKOIL.

- LUKOIL and Falck Nutec, a Norwegian Company, reached a cooperation agreement on the establishment of a corporate offshore training center for oil and gas facilities and also on coordination of the learning process there. Technical and psychological training of employees for work at offshore oil and gas facilities, emergency survival skill training and training of administrative personnel, including for international projects, will be among top-priority focus areas at the corporate training center. The training center will comprise an educational and administrative building, a testing ground fitted with simulators, production and special facilities, a swimming pool, a hotel and facilities designed for social, cultural and utility purposes. The training program comprises practical classes implying exercises with different training devices which simulate real offshore conditions in usual, extraordinary and emergency situations. To train sea rescue skills, special equipment located at the Volga river at sufficient depth or in a specially constructed swimming-pool will be used. The sea rescue training module can also be used to train divers. The cranes designed for simulating helicopter evacuation will also be used to train crane operators. The training center will be located in Ilyinka settlement, Astrakhan region, in the immediate vicinity of the transport and industrial complex intended for material and technical supplies servicing of offshore oil and gas facilities located in the North Caspian Sea.

- LUKOIL commissioned a twenty-four hour automated cash management system to ensure cash management between the accounts of the Group’s overseas trading subsidiaries and the Company’s overseas treasury and finance center. Thus, an efficient liquidity management tool was established, which would contribute to cash concentration, labor savings due to automation of debit and credit cash transactions and also reduce financing expenses. Besides, LUKOIL Group’s interest income will increase as a result of efficient placement of the consolidated cash balance.

- OAO LUKOIL Press Service announces that persons discharging managerial responsibilities in the Company acquired ordinary shares of OAO LUKOIL through a related party on September 11, 2008. Vagit Yu. Alekperov, President of OAO LUKOIL, acquired 298,069 shares of OAO LUKOIL at RUR 1,586 per share. Leonid A. Fedun, Vice President of OAO LUKOIL, acquired 276,245 shares of OAO LUKOIL at RUR 1,586 per share. As a result of these transactions Mr. Alekperov’s and Mr. Fedun’s direct and indirect holdings amount to 20.58% and 9.25% respectively of the issued ordinary shares of OAO LUKOIL.

- Vagit Alekperov, President of OAO LUKOIL, and Georgy Kiradiev, Chairman of the Council for International Association of Trade Union Organizations of OAO LUKOIL (IATUO), signed an Agreement between the Employer and the Trade Union Association for 2009-2011 in Moscow. The underpinning documents for the Agreement are the RF Labor Code, the RF Law “On Trade Unions, their Rights and Commitment Guarantees”, the Master Agreement of All-Russia Association of Trade Unions, All-Russia Association of Employers and the RF Government for 2008-2010, the Industrial Agreement between Oil and Gas Producers and Oil and Gas Construction Companies in RF for 2008-2010 and the OAO LUKOIL Social Code. The Agreement is aimed at establishing solid mutual obligations between the Company and its employees in terms of their social and labor activities, formulating uniform salary principles, labor guarantees and benefits for the employees, ensuring the Company’s operations excellence, protecting labor, social, economic, professional rights and legal interests of the employees and also maintaining decent living standards for them.

- OAO LUKOIL Press Service announces that Vagit Yu. Alekperov, President of OAO LUKOIL, acquired 100,000 ordinary shares of OAO LUKOIL on September 15, 2008 and 100,000 ordinary shares of OAO LUKOIL on September 16, 2008. The transactions are worth of RUR 162,373,742 and RUR 142,733,814 respectively. As a result of these transactions Mr. Alekperov’s direct and indirect holdings amount to 20.60% of the issued ordinary shares of OAO LUKOIL. In addition to that, OAO LUKOIL Press Service announces that LUKOIL Group companies also acquire LUKOIL shares in the open market. As of today they purchased about 1.4 million ordinary shares of OAO LUKOIL.

- Vagit Alekperov, OAO LUKOIL President, was named among the most efficient leaders of the Russian business community for outstanding achievements and a significant contribution to the Russian economy. Such were the conclusions of a research team of 400 experts who participated in preparing the ninth rating titled “1,000 Most Efficient Managers inRussia”, a joint project of the Russian Managers Association and Kommersant Publishing House.

October

• Upstream news:

­- LUKOIL Group (subsidiary companies and LUKOIL’s share in output by equity affiliates) total hydrocarbon production available for sale reached 2.21 mln boe per day in the third quarter of 2008, up 4.1% y-o-y. Hydrocarbon production available for sale increased by 0.4% y-o-y to 2.19 mln boe per day in 9M 2008. Launch of commercial production at the Yuzhnaya Khylchuya field in Timan Pechora region in August 2008 offset the Company’s production decrease in traditional regions. Successful development of Uzbek project Kandym ­– Khauzak ­– Shady provided the most of the gas production growth. Throughputs at LUKOIL own refineries totaled 41.98 mln tons, up 8.7% y-o-y, due to LUKOIL refining capacity expansion and modernization as well as a high refinery margin in Russia. Increase in refinery throughputs at the Company refineries inRussia was 5.6%, at foreign refineries – 22.0%. Volgograd and Odessa refineries (the latter was put back into operation in April 2008 after modernization) accounted for most of the growth.

• Downstream news:

- The Varandey oil export terminal located in the Barents Sea hosted international integrated training exercises aimed at tanker accident and oil spill management. The training exercises were organized under the interagency RF EMERCOM program and All-Russia Political Party “United Russia” project titled “Development of Security Systems to Implement Economic and Infrastructure Projects”. The training exercises were aimed at improving interaction between the state structures and relevant LUKOIL services in the course of tanker accident and oil spill management at the regional level, the assessment of the personnel’s qualification and also the efficiency and technical capabilities of the available equipment.

- Vagit Alekperov, President of OAO LUKOIL, and Grigory Rapota, Plenipotentiary of the RF President in the Volga Federal District, participated in the festive ceremony held in Perm to honor the 50th anniversary of OOO “LUKOIL-Permnefteorgsintez”. As part of the ceremony held at the refinery, newly constructed and renovated facilities of the environmental complex, which incorporates facilities for mechanical, chemical and biochemical treatment, mechanical and sorption filters, ultraviolet disinfection units and a surplus sludge dehydration unit, were presented. The complex is designed for deep purificaiton of the industrial sewage generated by “LUKOIL-Permnefteorgsintez” and dozens of other plants and enterprises which form the Osentsovsk industrial hub located in Perm. The complex capacity is 68 thousand cu.m. of purified industrial sewage per day. Cutting-edge technologies and equipment allow to remove hydrocarbons, nitrogen- and phosphorus-containing pollutants, thus making the quality of the purified industrial sewage compliant with fishery requirements. Application of filters with coal sorbents prevents discharge of over 40 tons of petroleum products per annum into surface water bodies. Application of the ultraviolet disinfection method instead of classic chemical treating methods to purify the sewage from pathogenic microorganisms is a characteristic feature of the complex. Application of new technologies for industrial sewage purification also allows to cut river water consumption of the enterprise by 10 %. Since 2006, over RUR 500 million has been invested into construction of new facilities and reconstruction of the existing ones at OOO “LUKOIL-Permnefteorgsintez” environmental complex.

• Business/Finance news:

- LUKOIL rates first among oil and gas companies in terms of the amount of funds allocated for charity based on the results of the third annual Contest “Russia’s Corporate Donor”. The amount of charity funds appropriated by LUKOIL Group came to RUR 4.3 billion in 2007. The Company’s Charity Programs were singled out as best practices in the sphere of corporate charity. LUKOIL became prizewinner in the nomination “Best Program of Trilateral Cooperation Among the Business, Non-Profit Organization and Regional (Local) Authorities”.

- LUKOIL ranked 8th among European,Middle East and African companies and 11th among global companies in the American energy agency Platts 2008 ‘Top 250 Energy Companies’ List. All companies were ranked by four main criteria, including asset value, revenues, profits and return on capital employed. Valuation was performed based on Standard & Poor’s database which is, like Platts, a McGraw-Hill Company. In the 2007 ‘Top 250 Energy Companies’ rankings, LUKOIL held 6th and 11th places, in 2006 – the 6th and 15th places and in 2005 – the 9th and 16th places respectively.

- LUKOIL Press Service reports that the Company continues scheduled petroleum products price reduction, which began in August/September, 2008. In the near future the prices will be gradually reduced by 3-8% in all Russian regions of the Company’s presence. The markdown in petroleum products retail prices is conditioned by changes on the global market due to global oil price reduction and, consequently, in Russia, and due to seasonal demand diminution.

- LUKOIL elaborated draft of the “Environmental Safety Program for 2009-2013 and a Forecast until 2017”. The document is developed in accordance with LUKOIL Group Strategic Development Program for 2008-2017. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4- and Euro 5-compliant fuels, and also ensuring that the environmental impact is within the requirements of the national and international legislations.

- OAO LUKOIL Board of Directors approved the basic indicators of LUKOIL Group’s Mid-Term Plan for 2009-2011, as well as the Budget and Investment Program for 2009. In view of the crisis witnessed on the global financial markets and the trend for global economic downturn, the Company has taken measures to optimize the plans aimed at ensuring the Company’s own surplus funding in 2009-2011, sufficient financing of key development projects, dividend payments in accordance with the Company’s dividend policy. To ensure strict implementation of the targets set by the Board of Directors of OAO LUKOIL it is envisaged in particular to constrain operating and investment costs and reduce the working capital. The capital expenditures are planned in the range from USD 7.5 billion to USD 9 billion. Lower operating, general and administrative costs and better production efficiency may bring an additional positive effect of almost USD 900 million in 2009 by means of optimization measures in all business segments of the Company.

- Oil prices dropped below $70 a barrel for the first time in 14 months, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months. While prices revived slightly early on Friday, oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel. Crude oil for November delivery traded at around $73 a barrel on the New York Mercantile Exchange, according to news reports. The decline in oil prices could provide a form of stimulus to the economy as consumers pay less to fill up their tanks. If oil prices stay at current levels, consumers would have $250 billion more, over a year, to save or spend elsewhere, according to Lawrence Goldstein, an energy economist. Some analysts expect oil prices to keep declining, perhaps to as low as $50 a barrel in coming months. Americans will probably see lower energy bills this winter, as gasoline and heating oil futures also dropped sharply on Thursday. Gasoline prices now average $3.08 a gallon, down from a summer peak of $4.11 a gallon, according to AAA. The decline in oil prices came after a government report showed domestic crude oil stockpiles rose more than expected as Americans use less oil, in part because they are driving less. In the last month, domestic oil demand has fallen to its lowest level since June 1999, at 18.6 million barrels a day, according to the Energy Department. Oil settled down $4.69 a barrel, at $69.85. The drop, along with other promising signs on the inflation front, was among the reasons investors bid stocks higher, with the Dow Jones industrial average closing up 401.35 points at 8,979.26. Natural gas prices have also tumbled since their summer peak of $13.58 per thousand cubic feet. On Thursday, natural gas futures rose 19 cents, to $6.81, after a report showed that stockpiles rose less than expected. While consumers may have reason to cheer the falling oil prices after such a sharp run-up, the wild roller coaster of volatility is a nightmare for oil producers and petroleum executives who say they need more stability to plan long-term projects to develop new sources of oil. If they cannot be confident that they will get a stable return on their investment, they may hold back. That in turn could set the stage for possible shortages of oil and higher prices when global demand picks up again. The sharp drop-off has forced OPEC’s hand. The cartel said just last week that it would meet in mid-November, after the United States elections. But it rescheduled its emergency session. The cartel’s producers, which control 40 percent of global exports, could curb their output by about a million barrels a day to try to stem the drop in prices, according to analysts. It is unclear what price range for oil the cartel wants to establish. But the meeting “sends a clear signal that OPEC is concerned about the speed with which oil prices are slipping away from a preferred price of around $80 a barrel,” said Lawrence Eagles, an oil analyst at JPMorgan. Iran’s oil minister, Gholamhossein Nozari, told reporters in Tehran on Tuesday, “I think the low price is a real damage to the future of production.” From its inception, the oil industry has gone through countless cycles, with oil companies cutting investments when prices fell. The price collapse of the 1980s forced companies to slash investments and prompted a wave of large mergers through the industry. But this retrenchment left the world scrambling for oil when demand from Asian and Latin American economies soared. Concerns that this pattern might be repeated were mentioned frequently during an industry conference in Venice last weekend, where oil executives said they worried that a prolonged recession, tighter credit and lower energy consumption would mean slower growth in energy supplies in coming years. The credit freeze has already forced some projects to be scaled back, some energy analysts and executives said. “This is a real test,” said Jeroen van der Veer, the chief executive of Royal Dutch Shell, in an interview at the conference. “Some people will be overstretched, and there will be some delays in some projects.” Over the last decade, growth in oil consumption has outpaced the ability of producers to meet that demand with more production. Many experts have predicted a new squeeze within the next five years that could once again propel oil prices over $100 a barrel. The drop in prices has already created problems for oil producers. Iran and Venezuela both need oil prices at $95 a barrel to balance their national budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. Algeria’s oil minister, Chakib Khelil, said that the “ideal” price for crude oil was $70 to $90 a barrel. In Russia, which is not part of OPEC, the drop in prices is threatening the country’s ability to increase production. The Russian government has reportedly agreed to allocate $9 billion to its four major producers — Lukoil, Gazprom, Rosneft and TNK-BP — to help them cope with investment needs amid the credit crisis. In the United States, Chesapeake Energy, a gas producer, has recently indicated it will reduce its capital investments over the next few years in response to falling prices. Global oil demand is undeniably slowing down, particularly in developed nations. Japanese oil consumption tumbled by 12 percent in August over the same month a year ago, while in the United States, demand fell by 8 percent in September. Consumption is still growing in developing nations, but at a slower pace than in recent years. The International Energy Agency expects global oil demand to grow by just 400,000 barrels a day this year, to 86.5 million barrels a day. The agency, which had been revising downward its predictions all year, forecast growth of 2 million barrels a day for 2008 when the year started. The two-day energy meetings last week were held in private in the baroque setting of the island of San Giorgio Maggiore, home to a 10th-century Benedictine monastery. In many conversations with senior executives outside of the conference meetings, they voiced concerns about their industry becoming increasingly vulnerable to a slowing economy. “We pretty much know where supplies are going to come from in future years, but today the biggest uncertainty is demand,” said Christophe de Margerie, chief executive of Total, the French oil company. Some executives, though, are still holding out hope that Asian economies may weather the economic storm and help the global economy recover faster. Lower oil prices could also make it harder for some companies to survive on their own, leading to a new wave of mergers and acquisitions. “This new environment is not all doom and gloom,” said Mr. van der Veer, of Shell. “It can also provide some opportunities. Certain assets may become available.”

November

• Upstream news:

- A meeting to discuss liquid hydrocarbon reserves replenishment measures and industrial safety was held by OAO LUKOIL Board of Directors in Moscow. In his speech at the meeting, Ravil Maganov, First Executive Vice President of OAO LUKOIL, stated that full compensation of liquid hydrocarbon extraction by reserves increment is one of the most important strategic objectives of the Company. It can be achieved by implementation of the current RF projects on the sites with С2 category reserves and on promising sites with С3 category resources; implementation of new projects in the Russian Federation and abroad. In general, the Company’s raw material base has a favorable structure of hydrocarbon reserves. The prevailing share of liquid hydrocarbons in the total proved reserves, i.e., over 66%, comparatively low production of initial recoverable reserves, rather high proved reserves to hydrocarbon production ratio are its main features. Meanwhile, over the recent years Russian major oil companies were facing a downward tendency in the share of liquid hydrocarbon reserves resulting from both a high exploration maturity of traditional production regions and legislative restrictions for the admission to green fields. Gross increment of industrial reserves due to exploration has come to 1,435 million tons of reference fuel since 1995. 130 hydrocarbon fields have been discovered since then. The average cost of reserves increment is one of the lowest figures across the industry and came to about USD 2.8 per one ton of reference fuel for the period from 2001 to 2007, while the average efficiency of exploratory drilling within the period came to 1,200 tons of reference fuel per meter of drilling, which by far exceeds the average across the industry. In addition to that, over the recent years the efficiency of exploratory drilling came to 75-80%, while the average efficiency from 1995 to 2007 came to 64%, which considerably exceeds the industry average. At present, LUKOIL is engaged in hydrocarbon discovery, exploration and production in 13 constituent entities of the Russian Federation, in the Caspian Sea and abroad. In Russia the Company has subsoil use rights to 413 license areas; over 25 projects aimed at hydrocarbon discovery, exploration and production are being implemented in the CIS countries and abroad.

• Downstream news:

- Vagit Alekperov, President of OAO LUKOIL (‘LUKOIL’), and Alessandro Garrone, CEO of ERG S.p.A. (‘ERG’), signed a supplementary agreement to the agreement (the ‘Agreement’) to establish a joint venture. This joint venture will operate the ISAB refinery complex in Priolo, Sicily. The signing ceremony was held in the presence of President of the Russian Federation Dmitry Medvedev and Prime Minister of Italy Silvio Berlusconi, during the fifth Russian-Italian intergovernmental summit. As reported earlier, the Agreement was signed in Rome on June 23, 2008. As part of the transaction, LUKOIL will acquire a 49% stake in the joint venture for a cash consideration of Euro 1.347 billion excluding inventory. ERG will retain 51%. The transaction structure provides LUKOIL with a possibility to increase its stake in future. According to the supplementary agreement, the transaction will be closed on December 01, 2008. By that time LUKOIL will pay ERG an upfront amount of 600 million Euro. The remaining sum, including the share of the minimum operating inventory (valued at average November 2008 prices), will be deferred and paid in three instalments before the end of September 2009.

- Vagit Alekperov, President of OAO LUKOIL, and Valentina Matvienko, Governor of Saint Petersburg, signed a Cooperation Agreement for 2008-2012 in Saint Petersburg. This Agreement in particular stipulates supplies and sales by LUKOIL of various high quality oil products, including EURO-3 and EURO-4 gasoline and diesel fuel. Moreover, it covers construction of brand-new environmentally safe gas stations within the city, implementation of joint social and economic programs, specifically concerning promotion of employment and development of Saint Petersburg infrastructure. The Agreement also calls for assistance of the city authorities pertaining to paper work required for construction and commissioning of new facilities, environmental and industrial safety control.

- Vagit Alekperov, OAO LUKOIL CEO and President, and Eduard Rossel, Sverdlovsk Region Governor, signed a cooperation agreement between the Company and the region in Moscow. Under the agreement LUKOIL will provide consumers of Sverdlovsk Region with gasoline, diesel fuel and engine oil compliant with the modern quality and environmental requirements. The Company will welcome participation of regional industrial, research, engineering and contracting organizations in implementation of investment projects in the region on a competitive basis.

- The global financial crisis has buffeted the balance sheets of Russia’s legion of billionaires. But suitcases of cash and Russian-owned luxury yachts keep arriving in this idyllic town on the Adriatic, helping Montenegro earn the nickname Moscow-on-the-Sea. Thanks largely to Russia, Montenegro receives more foreign investment per capita than any other country on the Continent. Russians are building a $310 million hotel and condominium complex on a rocky peninsula at Budva. Among the biggest investors is the Russian developer Vyentseslav Leibman, a young millionaire who is pressing ahead with investments of $310 million, including plans for a 27-floor modernist hotel, luxury seaside villas, docks for the pleasure boats of the Russian superrich and a water park for their children. The investment might seem daring given the way the economic downturn has hit several of his fellow wealthy Russians. But Mr. Leibman, a Muscovite who is managing partner at Mirax Group, the company owned by the Russian billionaire developer Sergei Polonsky, insists he can barely keep up with demand. He said more than half of the sprawling condominiums in Mirax’s new complex — which sell for more than $10,400 per square foot and come with outdoor marble Jacuzzis — had been sold to executives of giant Russian companies like Gazprom, Lukoil and VTB. They paid, he said, upfront and in cash. Despite the financial crisis, “the money keeps coming,” said Mr. Leibman, who recently helped bring Madonna to perform in Budva to promote his development. “And hopefully the global financial crisis will help sober up the cost of land here, which is now more expensive than in Monaco.” Thanks in large part to wealthy Russians, Montenegro has received more foreign investment per capita than any other country on the Continent. In recent years, Russian investors have gobbled up land on the Montenegrin coast, a fashionable alternative to the South of France and coastal Turkey. Russians, including the heavily leveraged Russian billionaire Oleg Deripaska, have also made huge investments in the country’s industrial sector. In neighboring Serbia, Gazprom, the Russian state energy monopoly, recently bought a majority stake in the national energy company, Petroleum Industry of Serbia, for $520 million and agreed to invest another $650 million by 2012. The deal will give Gazprom a dominant position in Serbia’s energy market while transforming Serbia into a gateway for the transportation of Russian gas into western Europe. As governments across the western Balkans have turned toward the United States and Europe — and actively seek European Union and NATO membership — the influx of Russian capital is seen by some in Brussels and Washington as a retaliatory move by Moscow to assert influence in a formerly Communist region with which it has long had close ties. Gen. Blagoje Grahovac, a senior adviser to the speaker of Montenegro’s Parliament, warned in a recent interview with the Serbian newspaper Nedeljni Telegraf that the United States, the European Union and NATO were being “outmaneuvered” in the western Balkans. “Whoever holds the upper hand economically will also do so politically,” he said. The European Parliament late last year commissioned a study of Russian investment; among its concerns is that a burgeoning property market provides an ideal front for illegal transactions. The European Commission has repeatedly warned of money laundering in Montenegro. But Dmitri S. Peskov, spokesman for Prime Minister Vladimir V. Putin of Russia, dismissed the notion that Russian investment was geopolitically motivated as “utter nonsense.” “When British people 30 years ago were investing in Spanish coastal areas, it would never come to anyone’s mind to speak about enhancing political influence,” Mr. Peskov said. “When tens or hundreds of thousands of British or American people are investing in the Gulf countries, this is not a political pressure. But every time when it comes to Russia or Russians, it is immediately treated as flexing political muscle.” But the Russianization here is unmistakable. Russians can be seen and heard everywhere: on the beaches, in clubs, in upscale restaurants and in a recently opened Russian-language elementary school. Until recently, a billboard at the airport in Podgorica, the capital, greeted visitors in Russian: “Come where they like you!” Lazar Radenovic, Budva’s young deputy mayor, said Russians started to invest here eight years ago, after the Balkan wars of the 1990s, when real estate prices were severely depressed. Russian investment has since grown to more than $13 billion, he said. In Budva, he noted, the influx had created a new class of millionaires — 500 at last count — who had improved the town’s tax base and development. Mr. Leibman said Russians were attracted to the Balkans by a cultural connection stretching back to the 18th century. Serbia and Montenegro, he noted, share a Slavic Orthodox identity with Russia. “When Russians come here,” he said, “we don’t feel like we have crossed over the border.” Zarko Radulovic, co-owner of Hotel Splendid — luxury penthouse suites, swimming pools and boutiques backed by a Russian investment fund — insisted the threat of economic colonization was exaggerated. “The perception that the Russians have bought everything is wrong,” he said. “Only 1 percent of Montenegro is owned by foreigners.” But the European Parliament report countered that official statistics had minimized the scale of Russian investment because many Russians invested through third countries or by teaming up with Montenegrins. Mr. Radulovic insisted that most businesspeople support Montenegro’s entry into the European Union, since being outside the bloc hampers business. When he recently decided to invest $12 million for new air conditioning to make the hotel’s kitchen comply with European Union regulations, he waited two days for a visa to travel to Belgium to buy it, an annoyance, he said, that “makes me want to buy Russian technology instead.” Many here argue that Russian investment, paradoxically, will help Westernize Balkan countries by aiding economic development, thereby accelerating readiness to join the European Union and NATO. Branimir Gvozdenovic, minister for economic development and a close ally of Prime Minister Milo Djukanovic, said that Russia was Montenegro’s second-biggest foreign investor after Hungary, and that Russians accounted for 12 percent of tourists last year. “We welcome investments from more than 80 countries, so why not Russia?” he said. Yet the relationship does appear to have a political dimension. Russia’s emergencies minister, Sergei K. Shoigu, has warned that relations between Russia and Montenegro could be damaged if Montenegro pursued NATO membership. Two years ago, when Mr. Putin received Mr. Djukanovic in his residence at Sochi, Mr. Putin praised Montenegro for promoting business with Russia and urged closer ties. In July, Mr. Putin moved to permit visa-free travel between the two countries. Meanwhile, in neighboring Serbia, where the pro-Western government of President Boris Tadic has been pressing for European Union membership, some critics argue that Russia is using pipeline politics to keep Belgrade in Russia’s sphere of influence. In a recently announced energy deal, Gazprom agreed to make Serbia a transit country for its South Stream pipeline, a $14 billion project that will stretch 560 miles undersea from Russia to Europe. The project — which Gazprom insists will forge ahead despite the global financial crisis — is a direct challenge to Nabucco, a pipeline championed by the United States and the European Union to bring natural gas to Europe via Central Asia, offsetting energy dependence on Russia. Danica Popovic, chief economist at the Center for Liberal-Democratic Studies in Belgrade, an economic research institute, argued that economic relations shifted fundamentally in Russia’s favor after Moscow repeatedly invoked its veto in the United Nations Security Council to prevent it from recognizing Kosovo, which declared independence from Serbia last February. “By Moscow controlling our energy sector, we can become vassals of Russia just like South Ossetia and Abkhazia in Georgia,” she said, noting that attitudes toward the European Union were hardening in Serbia, even among members of the pro-Western government, who are increasingly frustrated with the union’s conditions for membership. Milutin Nikolic, director of Citadel, a Belgrade-based mergers and acquisitions firm that has advised on the biggest Russian deals in Serbia, said he did not believe the recent influx of Russian investments reflected a coordinated Kremlin strategy. If Moscow had influence, Mr. Nikolic contended, it was because Serbs were still smarting over recent history, including the NATO bombing of Serbia in 1999 and the West’s backing of Kosovo’s independence. “Russia doesn’t need to economically colonize Serbia,” he said, “because Moscow already has serious political influence here.”

- LUKOIL EURASIA PETROL A.S. signed a Protocol to close the transaction for acquiring a 100% interest of the Turkish company Akpet in Istanbul. The total transaction amount reached USD 555 million. The parties agreed that the payment will be implemented in a few interest-free installments. The first payment of USD 250 million was effected. The second and third tranches will be paid not later than April 30, 2009 and October 30, 2009 respectively.

- Igor Levitin, Russian Transport Minister, visited LUKOIL’s new filling complex situated at the 150th km of “Moscow-St. Petersburg” highway. The Minister's visit was part of his business trip to Tver to discuss transport system development in Tver Oblast. The filling complex was constructed under the Corporate Program for Filling Complex Construction along North-South, West-East international transportation corridors, federal highways, business and tourist routes; it presents a new format of roadside services.

• Business/Finance news:

- LUKOIL presented a draft of “Environmental Safety Program for 2009-2013 and Forecast until 2017”. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4 and Euro 5 compliant fuel, ensuring the environmental impact is within the requirements of the national and international legislation.

- OAO LUKOIL Moscow headquarters hosted Strategic Partnership Day. As part of the event, a round table with participants from LUKOIL and ConocoPhillips was held to discuss joint strategic partnership program implementation. Eric Schultz, Minister-Counselor for Economic Affairs at the U.S. Embassy inRussia, was also present at the event. In his speech, Ravil Maganov, First Executive Vice President of OAO LUKOIL, pointed out that acquisition of the equity interest in LUKOIL Group by ConocoPhillips can be considered strategically important for both companies. This partnership is supported by the Russian and the U.S. governments and contributes to promotion of energy-related dialogue between Russia and the USA. The alliance also enables the companies to consolidate their status of leading players on the global energy market. A personnel exchange program is underway betewen LUKOIL and ConocoPhillips pursuant to the agreement signed on November 30, 2004. At present, six ConocoPhillips experts are employed in LUKOIL as advisors. The Company’s corporate portal contains a special resource which provides access to information materials elaborated by the advisors. Over 40 LUKOIL employees have completed their practical training in ConocoPhillips since 2005. Another 16 specialists from LUKOIL are on secondment in ConocoPhillips since July, 2008. LUKOIL and ConocoPhillips also hold joint seminars on a regular basis. The topics already covered include economic model assessment, project coordination and assessment, risk management, assessment of human resources, career management and interaction with mobile personnel, labor and industrial safety, and knowledge management. Seminars for geologists of both companies are expected to take place soon.

- A meeting of the Supervisory Board of LUKOIL’s Charity Fund was held in Moscow to mark the 15th anniversary since the establishment of the Fund. The meeting was also held to summarize the results of the Fund’s operations for the first 10 months of 2008. More than RUR 150 million was allocated to charity projects over this period. At present, the Fund runs five major programs, including Healthcare, Education, Preservation of Cultural Heritage, Social Support and Protection of Citizens, and Promotion of Physical Culture and Sports. In his speech at the meeting, Vagit Alekperov, President of OAO LUKOIL, Head of the Supervisory Board of the Fund, said that in spite of the unfavorable global economic situation LUKOIL intended to pursue active socially oriented policy.

- LUKOIL presented a draft of “Environmental Safety Program for 2009-2013 and Forecast until 2017” in Syktyvkar. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4 and Euro 5 compliant fuel, ensuring the environmental impact is within the requirements of the national and international legislation. LUKOIL Group Environmental Safety Program for 2009-2013 includes 494 activities totaling RUR 57.5 billion.

- LUKOIL presented a draft of “Environmental Safety Program for 2009-2013 and Forecast until 2017” in Khanty-Mansiysk. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4 and Euro 5 compliant fuel, ensuring the environmental impact is within the requirements of the national and international legislation. LUKOIL Group Environmental Safety Program for 2009-2013 includes 494 activities totaling RUR 57.5 billion.

December

• Upstream news:

­- OOO Naryanmarneftegaz, a LUKOIL and ConocoPhillips Joint Venture (70% and 30%, respectively) completed construction of the second stage of the Yuzhno Khylchuyu (YK) field. In process of construction of the second stage the capacity of the oil treatment unit was increased by 3.8 million tons a year, a high-pressure compressor station and sulfur disposal and storage facilities were built. Construction of the first stage was completed in June 2008. The first stage comprised 32 development wells, an oil treatment unit with the annual capacity of 3.8 million tons a year, an oil desulfurization unit, a tank farm with the total volume of 40,000 m3, an export line pump house, a 27.8 km long Yareyu – Yuzhno Khylchuyu high-pressure gas pipeline (273 mm in diameter), a gas treatment station with the annual capacity of 370 million m3, a power supply complex with the rated capacity of 125 MW, and 287 km of high-voltage transmission lines rated at 220 kV. The design oil production level in the field is expected to reach 7.5 million tons a year (over 150,000 bbl/d) in 2009. Oil produced at the field is transported by a 158 km long oil pipeline (530 mm in diameter) to the Varandey Oil Export Terminal located on the Barents Sea coast, from where it is delivered, also through a floating storage facility in Kola Bay, by 70,000 ton deadweight tankers, for eventual sale to European and North American markets. The field was discovered in 1981. Proved oil reserves in the field exceed 500 million bbl. Oil quality there surpasses the Russian Urals export blend quality: its density is 35.5 API (Urals, 32.0 API), and sulfur content is 0.71% (Urals, 1.3%).

• Downstream news:

- LUKOIL has successfully completed pre-registration of chemicals in accordance with the requirements of the Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) adopted by the European Parliament and the Council. Under the Regulation, producers and importers of goods to the EU countries were required to complete pre-registration of chemicals before December 1, 2008. As part of the procedure, a unique reference number was assigned to each chemical coming from a particular manufacturer or importer. Manufacturers outside of the European Union had to appoint a special representative authorized to act as the importer of the goods produced by the given manufacturer.

- Vladimir Nekrasov, First Vice President of OAO LUKOIL, Exequiel O. Espinosa, President of the Company ENERGÍA ARGENTINA S.A. (‘ENARSA’), and Horacio Gabriel Sambucetti, President of the Company POBATER S.A., signed a Memorandum of Understanding between the Companies in Moscow. The Memorandum of Understanding was also signed off by Julio DeVido, Minister for Planning of Argentina. In accordance with the document, petroleum products (fuel oil and/or diesel fuel) shall be delivered to ENARSA, and the infrastructure of POBATER can be used for fuel storage.

• Business/Finance news:

- Vagit Alekperov, President of OAO LUKOIL, took part in a festive ceremony which marked the opening of a memorial to Vladimir Shukhov, an outstanding Russian engineer, in Moscow. The memorial, placed on Sretensky Boulevard opposite the Company's headquarters, was created at LUKOIL’s expense and donated to the city. The author of the monument is sculptor Salavat Shcherbakov. In his speech at the opening ceremony, Mr. Alekperov said, ‘Having learned about the idea to create a memorial to Vladimir Grigoryevich Shukhov, an outstanding Russian engineer and scientist, we immediately welcomed the opportunity to support this initiative. I couldn’t name anyone else who contributed to the modern oil industry as much as Shukhov did. In fact, he pioneered most of the technical solutions used today by petroleum experts all over the world for oil production, transportation, storage and refining’. Vladimir Grigoryevich Shukhov was born on August 28, 1853 in Grayvoron, Kursk province. He was the author and chief engineer of the project to construct the first Russian pipeline and the world’s first heated pipeline for fuel oil. Shukhov designed the first cylindrical metal tank to store oil. Не also obtained a patent for a nozzle to burn fuel oil, after which fuel oil started to be used as fuel. He constructed different pumps for oil lifting, was the inventor of air lift (gas lift), and the designer and builder of tanker ships. Shukhov was the author of the first industrial unit for continuous thermal cracking of oil and also the chief engineer of projects to construct Russia ’s first trunk pipelines from Baku to Batumi and from Grozny to Tuapse.

- The Management Committee of OAO LUKOIL approved Insurance Coverage Program for 2009 for LUKOIL Group organizations. The Program is aimed at providing LUKOIL Group organizations with efficient insurance coverage against various risks which might pose threat to the Company’s operations, the welfare and wellbeing of the employees, as well as to the property interests of the Company's shareholders and investors. The Program incorporates acquisition of new major assets, including OAO YuGK TGK-8. Liability limits under the insurance coverage program were calculated with due regard to the recommendations released by the international insurance brokers. Thus, if property of refineries and petrochemical enterprises is insured against all kinds of risks, the liability limit shall come to not less than the equivalent of USD 400 million per one insurance event.

- LUKOIL presented a draft of “Environmental Safety Program for 2009-2013 and Forecast until 2017” in Volgograd. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4 and Euro 5 compliant fuel, ensuring the environmental impact is within the requirements of the national and international legislation. LUKOIL Group Environmental Safety Program for 2009-2013 includes 494 activities totaling RUR 57.5 billion.

- OAO LUKOIL management and all employees of the Company would like to extend their heartfelt condolences to the family of Oleg Emelyanovich Kutafin, who passed away on December 4, 2008. Mr. Kutafin who was President of the Moscow State Law Academy, a PhD in Law, and a Professor, became member of the OAO LUKOIL Board of Directors in 2001 and of the Audit Committee in 2003. ‘As an independent member of the Board of Directors Oleg Kutafin made a significant contribution to a better corporate governance system; his profound legal experience and extensive knowledge provided invaluable support to our Company’s development. His participation in the law-making process and improvement of the law system deserved high appraisal – he was awarded the orders ‘For Service to Russia’ of all four grades. The memory about this distinguished man, patriot of his country and advocate of justice will forever remain in the hearts of those who were lucky to have met him’, Vagit Alekperov, President of OAO LUKOIL, said.

- Vagit Alekperov, President of OAO LUKOIL, and Alexander Filipenko, Governor and Chairman of the Government of the Khanty-Mansi Autonomous District-Yugra, signed a supplement to the cooperation agreement between the Company and the Autonomous District in Khanty-Mansiysk. In accordance with the agreement, LUKOIL shall finance construction and repair of various social facilities in the municipal entities of Khanty-Mansi Autonomous District-Yugra amounting to RUR 334 million in 2009. Besides, LUKOIL Group enterprises shall allocate RUR 10 million to host regional sports events and implement cultural projects. The basic cooperation agreement between the Company and Khanty-Mansi Autonomous District-Yugra was signed on September 8, 2005.

- LUKOIL publishes consolidated US GAAP financial accounts for the first nine months of 2008. LUKOIL net income reached $10,765 million in the first nine months of 2008, which is an increase of 70.9% y-o-y. EBITDA was $16,652 million, which is 60.6% higher y-o-y. Revenue from sales rose by 56.3%, to $89,265 million. The increase in net income was due to favorable market conditions, high refinery margin, increase in refinery throughputs as well as due to effective cost control. Growth of the net income was held back by appreciation of the ruble against the dollar, increase in transportation tariffs and growth of the tax burden. The Company’s tax expenses totaled $31.1 billion, up 60.4% y-o-y. Lifting costs per boe of production in the third quarter of 2008 decreased to $4.29 compared to $4.31 in the second quarter of 2008. Lifting costs per boe of production in the first nine months of 2008 amounted to $4.16. Capital expenditures including non-cash transactions in the third quarter of 2008 were $2.7 billion, which represents almost no increase from the level of the second quarter of 2008. Capital expenditures in the first nine months of 2008 amounted to $7.8 billion. Production of marketable hydrocarbons (including share in production by affiliates) increased by 0.4% y-o-y, to 2,189 th. boe per day. Launch of commercial production at the Yuzhnaya Khylchuya field in August 2008 offset the Company’s oil production decrease in traditional regions. Successful development of Uzbek project Kandym ­– Khauzak ­– Shady provided the most of the gas production growth.

- LUKOIL won the annual contest “For Active Information Disclosure Corporate Policy” held by Interfax and AK&M, authorized agencies of the Federal Financial Markets Service. When selecting the winner of the prize entitled “For Active Information Disclosure Corporate Policy”, the experts considered comprehensiveness and timeliness of reporting in accordance with the international standards, disclosure of information on beneficiary owners, and simultaneous disclosure to Russian and foreign investors.

- LUKOIL’s environmental protection activities were highly praised by the RF Ministry of Natural Resources and Ecology. The Company’s projects won in two nominations of the contest entitled Best Environmental Project of the Year held by the Ministry. The project entitled Environmental Activities in Oil and Gas Companies. Reclamation of Oil Contaminated Areas in Usinsk Region of Komi Republic by OOO LUKOIL-Komi won in the nomination Environmental Protection Techniques.

- An International Round Table entitled Corporate Social Responsibility at the Present Stage of the Society Development” held by OAO LUKOIL, the International Association of Trade Union Organizations of OAO LUKOIL, Neftegazstroyprofsoyuz of the Russian Federation, the Russian Academy of State Service under the RF President and the Academy ‘Civil Society’ took place in Moscow. In his speech at the conference, Vagit Alekperov, President of OAO LUKOIL, noted that corporate social responsibility had been an integral part of the Company’s policy for 17 years of its existence. Above all, it was a matter of adequate remuneration of employees, social security, including health insurance and pension coverage, environmental protection, as well as implementation of the programs aimed at promotion of culture, education and healthcare in the regions of the Company's presence.

- Vagit Alekperov, President of OAO LUKOIL, delivered a speech at the reporting conference of the International Association of Trade Union Organizations of OAO LUKOIL held in Moscow. ‘In the early 90-s LUKOIL became the first company in the industry to have established a trade union association based on the principle ‘one employer – one trade union’. Thus, we succeeded in retaining stability in the work collectives and initiating a constructive dialogue with the Company’s employees. Over the 15 years since its establishment, the Association has acquired profound experience in cooperation between the trade union organization and the employer. The features of the well-balanced social package were elaborated during this period jointly with the employees and the trade union association. It allows both the employees and the Company to be confident about the future’, Mr. Alekperov said. In the meantime, the global economic growth rate is slowing down, thus leading to a lower demand for energy carriers. The oil prices dropped 3.5 times within the last six months. LUKOIL experts suggest that the low oil prices will last for at least one and a half or two years. It means that the Company will have to adjust its plan, budget and the investment program to the present situation. Under these conditions, the Company has to cut its operating costs. Starting from the fourth quarter of 2008, all LUKOIL Group organizations introduced a rigid economy mode. Financing under the investment program has been reduced.

- LUKOIL presented a draft of “Environmental Safety Program for 2009-2013 and Forecast until 2017” in Moscow. The Program is aimed at improving the environmental management system and minimizing the negative environmental impact caused by the Company’s operations. The Program includes activities aimed at utilization of oil and associated gas, realization of the Kyoto Protocol mechanisms, production enhancement of environmentally friendly Euro 4 and Euro 5 compliant fuel, ensuring the environmental impact is within the requirements of the national and international legislation. Within the program framework, the project will cover the following areas: clear air, clean water, waste, recultivation of land plots and liquidation of slurry ponds, research in environmental protection, environmental management and ensuring compliance with the international standards ISO 14001, industrial environmental monitoring.

- LUKOIL provided financial support to the State Tretyakov Gallery to perform restoration of the painting The Judgment of Sanhedrin: He is Guilty! by Nikolay Ge, a famous Russian painter. The restored painting was presented today to the general public as part of preparatory work for an exhibition of paintings by Nikolay Ge dedicated to the painter’s 180th birthday.




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