Lukoil News - 2009

News summaries from LUKOIL company 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:

- ÎÀÎ “Arkhangelskoye Geologodobychnoye Predpriyatiye” (AGD), a subsidiary of ÎÀÎ “LUKOIL”, and the French company FORACO signed a contract for large-hole drilling at the V. Grib diamond field, in Arkhangelsk Region. The contract envisages the drilling of eleven 24-inch straight holes down to 600 meters by FORACO in the period from April to October 2009. The drilling is to be performed at pilot wells, drilled earlier for core sampling. The drilling operations are intended to revise the quality and volumes of the reserves. The total value of the contract is around EUR 10.5 million. AGD holds the license for exploration and extraction of diamonds at the V. Grib field, 115 km North-East of Arkhangelsk.

• Downstream news:

• Business/Finance news:

- A meeting of the OAO LUKOIL Board of Directors was held in Moscow to summarize preliminary results of LUKOIL Group operation in 2008 and set objectives for 2009 and the near future. 2008 witnessed the discovery of eight fields in Perm region, Volgograd region, Komi Republic, Yamalo-Nenets Autonomous District, Tatarstan, and the Caspian offshore area. Besides, 15 deposits were discovered at the previously discovered fields. The total recoverable reserves in the Ñ1+Ñ2 categories at the newly discovered fields and deposits came to 107 million tons of reference fuel. In 2008 the hydrocarbons production volume of LUKOIL Group (production by subsidiaries and share in production by affiliates) amounted to 114.6 million tons of reference fuel, which exceeds the figure of 2007 by 1.5 million tons of reference fuel. In order to make up for the decrease in oil production in the traditional regions efficient opening-up was conducted in 2008 at the new fields in Timan-Pechora Oil and Gas Province and at the Caspian shelf. In August, 2008, industrial production started at the first stage of Yuzhno-Khylchuyu field located in Yamalo-Nenets Autonomous District. December of 2008 witnessed completion of the second stage of the field. Refining of oil stock by the Company’s refineries in 2008, basing on preliminary data, is expected at the level of 55.8 million tons. The total refining volume rose by 7% as compared with 2007. Production of high-octane automobile gasolines rose by 13%, jet fuel – by 6% and diesel fuel – by 9% as compared with 2007. The share of the automobile gasoline compliant with the EURO-3 and EURO-4 standards is expected at the level of 82% of the total gasoline production volume. In 2008, the total sales volume of LUKOIL branded oils is expected at the level of 147.6 thousand tons, thus exceeding the figure of 2007 by 30%. In 2008, the total volume of petroleum product retail sales via the sales network is expected at the level of 15 million tons, thus exceeding the figure of 2007 by 11%. Preliminary data suggest that in 2008 the amount of the taxes and customs duties paid by LUKOIL Group to the organizations at all levels of the RF budget system, exceeded RUR 800 billion, or USD 33 billion, which makes LUKOIL Group Russia’s biggest tax-payer.

February

• Upstream news:

• Downstream news:

- The ceremony of consecration of the “Varandey” multi-purpose ice-breaker took place in Murmansk. The vessel was built by Keppel Singmarine (Singapore) under the contract with LUKOIL. The ship is to operate at the Varandey Oil Export Terminal in the Barents Sea. The vessel is to be on continuous watch at the Stationary Ice-Resistant Sea Export Moor (SIRSEM), the Varandey Terminal, to ensure safe ice conditions during the loading of tankers. The vessel is 100 meters long and about 22 meters wide. Its draught is 10.6 meters; the deadweight of the ship is 4,643 tons. The vessel speed is 15 knots. The ice-breaker can move as fast as 3 knots in level ice as thick as 1.7 meters. There are 22 members of the crew onboard. The value of the ice-breaker building contract is USD 102 million. The home port of the vessel is Kaliningrad.

- At a press conference in Istanbul OAO LUKOIL President Vagit Alekperov summed up the results of his company’s activities in Turkey in 2008 and also dwelt on what LUKOIL plans to achieve there this year, in the medium and longer terms. As was reported last July, LUKOIL Group signed an agreement on the acquisition of a 100% interest in the Turkish company AKPET whose assets include almost 700 gas-filling stations, several product terminals with a total capacity of more than 300 thousand cubic meters and a factory producing and packaging motor oil. Together with the newly-acquired gas-station network of AKPET, the company LUKOIL EURASIA PETROL now possesses over 770 outlets. LUKOIL plans to supply petroleum products to the Turkish market from its own refineries in Burgas, Bulgaria, and Odessa, Ukraine, and also from the ISAB refinery in Sicily and from Turkey’s TUPRAS refineries.

- LUKOIL paid EUR 852.47 million to Italian ERG as a final settlement of the amount due for acquiring a 49% stake in the joint venture that will operate the ISAB refinery complex in Sicily. The total transaction amount was EUR 1.45 billion including inventory (valued at average November 2008 prices). According to previous reports, the Agreement was signed in Rome on June 23, 2008. The transaction structure provides LUKOIL with a possibility to increase its stake in future. The parties signed a supplementary agreement on November 06, 2008, which envisaged the transaction closing on December 01, 2008. By that time, LUKOIL had paid an upfront amount of EUR 600 million. It was decided that the remaining amount would be deferred and paid in three instalments before the end of September 2009. Thus, LUKOIL paid the amount due to ERG in full and ahead of schedule saving EUR 15 million for paying in advance. In addition to that, within 4 years ERG will have the right to exercise a put option for its 51% stake in the joint venture with a EUR 15 million reduction on the exercise price.

- Stavrolen, a LUKOIL Group petrochemical facility, has resumed commercial output following a complete overhaul of its polypropylene-production unit. Production at Stavrolen was halted in April 2008 after a fire in the propylene-polymerization reactor. The accident had caused neither a toxic leak, nor any harm to human health or the environment. It is planned to produce 67,300 tons of general-purpose polypropylene before the end of 2009.

• 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.

- OAO LUKOIL raised a EUR 1 billion unsecured loan facility (the ‘Facility’). The Facility was extended by Gazprombank (Open Join-stock Company). The Facility has a fixed interest rate of 8% p.a. The length of the Facility is 3 years. The proceeds under the Facility will be used for general corporate purposes, including the granting of loans to the borrower’s subsidiaries and affiliates and also for the repayment of other banks’ loans.

- The OAO LUKOIL Press Service would like to call the attention of all those concerned to the activities of certain companies disseminating offers for the sale of crude oil and petroleum products. These companies call themselves “OAO “ËÓÊÎÈË” and “ËÓÑÎÈË” in Russian, and also “LUCOIL” and “OAO LUC OIL” in English. These companies use confusingly identical names which may mislead their potential partners.

- The Press Service of OAO LUKOIL reports that on the16th of February 2009 the Federal Arbitration Court of the Moscow Region affirmed an amicable agreement between OOO LUKOIL-Permnefteorgsintez and OAO Incorporated Company RUSAL – Trade House, thus dismissing the matter in the action of the latter concerning the delivery of the balance of coke for the year 2008. Specifically, the agreement stipulates that OOO LUKOIL-Permnefteorgsintez will additionally supply RUSAL’s plants with 20 thousand tones of anode-quality petroleum coke until October 2009. As previously reported, in 2006 the parties signed agreements on the supply of coke until 2011. Meanwhile, due to a significant increase in oil prices in 2008 the cost of petroleum coke increased many times and, as a result, sales of coke at 2006 prices became unprofitable for the LUKOIL Group. In this respect, LUKOIL suggested that RUSAL should adjust prices in accordance with the market conditions but got a refusal and halted the supplies of coke in April of 2008. The amicable agreement ceased all court proceedings concerning the volumes of coke to be supplied and confirmed that the old prices would be used within the effective period of the agreements signed in 2006.

- OAO LUKOIL raised two loan facilities from Sberbank (Savings Bank of the Russian Federation) for USD 500 million and for RUR 17 billion. The loans were granted for 1 year. The proceeds under the loans will be used to increase working capital of the Company.

March

• Upstream news:

- OAO LUKOIL (the Company) has completed an evaluation and independent audit of its oil and gas reserves as of January 1, 2009. According to the data audited by Miller and Lents (USA), LUKOIL’s proved reserves as of January 1, 2009 are estimated at 19.3 billion barrels of oil equivalent (BOE), including 14.5 billion barrels of oil and 29.3 trillion cubic feet of gas. The evaluation was done under conditions characterized by a sharply deteriorating situation on the global commodities and raw materials markets. According to the estimation standards, the Company’s reserves were estimated based on the prices as of December 31, 2008. The Urals oil price was 34.8 USD/barrel as of the estimation date, as opposed to 93.7 USD/barrel in 2007. This 2.7 times drop in the oil price affected the economic feasibility of a portion of the Company’s reserves development and resulted in a transfer of 1.1 billion BOE from the proved reserves category into the other categories. These reserves are not planned for development in the near future, and their transfer to a lower reserves category will not affect the Company's present plans.

• Downstream news:

- Vagit Alekperov, OAO LUKOIL President, and Vladimir Lisin, Chairman of the Board of Directors of OAO Novolipetsk Metallurgical Complex (NLMC), signed a cooperation and technical-partnership agreement between the two companies in Moscow. The agreement envisages a uniform engineering policy in the development of lubricants and special-purpose liquids to ensure their full compliance with the up-to-date international requirements in terms of performance properties and environmental safety. One of the priorities in this cooperation is joint elaboration and introduction of a program of replacing the lubricants and special-purpose liquids imported by the NLMC with LUKOIL products which have permits and approval certificates of the leading global manufacturers of industrial and mobile equipment. Under the agreement, LUKOIL shall provide NLMC and its subdivisions with lubricants and special-purpose liquids in the amount and within the terms required for trouble-free operation of the engineering equipment. LUKOIL also guarantees adequate or superior quality of its lubricants and special-purpose liquids as compared with those utilized by the complex at present.

• Business/Finance news:

- The Management Committee of OAO LUKOIL has approved three programs for LUKOIL Group: an Annual Coordination Research-and-Technology Program for 2009, a Mid-Term Target Program for Research-and-Technical Development for 2010-2011 and a Standardization Program for 2009-2011. The Annual Coordination Research-and-Technology Program embraces over 800 topics: research and development, engineering; research and technology for field development; research and technology for geologic exploration; technical and scientific services. The amount of resources allocated to implement the program comes to approximately RUR 3 billion. The ОАО LUKOIL Press Service would like to inform all parties concerned of the activities of a certain Oleg Shokhin, who posts job advertisements in the Internet. Moreover, in his contact information, the person naming himself Oleg Shokhin, indicates Moscow telephone numbers belonging to OAO LUKOIL and the English-language web-site of the Company: www.lukoil.com. For this reason, a number of applicants have appealed to the Company asking to confirm or refute Oleg Shokhin’s involvement in OAO LUKOIL business. In this connection, the OAO LUKOIL Press Service would like to state that the Company has nothing to do with the said job advertisements placed in the Internet on behalf of the said person and shall not bear any responsibility for possible negative consequences of his actions. Among other things, the person calling himself Oleg Shokhin seeks to obtain personal information from the applicants, including their banking details, and suggests dubious financial transactions to cash checks.

- The OAO LUKOIL Management Committee approved a new version of the Company’s Health, Safety and Environment Policy in the XXI century. This document was elaborated in accordance with the requirements of the ISO 14001 international standard and the OHSAS 18001 specification and approved by the Company’s Management Committee in 2002.

- OAO LUKOIL President Vagit Alekperov OAO LUKOIL made a speech at the European Business Summit in Brussels. In his speech Mr. Alekperov, among other things, pointed out that the current energy market is not efficient enough. Over the recent years due to a tremendous growth of financial instruments trade, the oil price dynamics no longer reflects the actual supply/demand balance. The crisis is a good time to develop new pricing mechanisms, since it helps shrink the “financial bubble” and increase the role of commodity markets. The key factor of setting a “fair price” may be in limiting the use of oil quotes in speculative financial transactions, reducing spot market trade volumes, and making direct long-term contracts between feedstock producers and consumers. This is ever so true for the relations between Russia and the European Union. The issue of energy cooperation between Russia and the EU is especially of utmost importance for LUKOIL. Europe is our key sales market. Three out of eight Company’s refineries and almost one third of the Company’s filling stations are located in the EU. LUKOIL’s total investments into Eurozone economies currently exceed 5 billion dollars.

- LUKOIL will officially release financial results for the fourth quarter and full year 2008. Due to the crisis and extreme volatility in currency and commodities markets during the period, the results will include some impairments and non-routine charges. 1. Currency translation loss. The decline of the value of the Russian Rouble and EURO against the US Dollar has had a positive effect on our operating costs, capital expenditures and overall cash flow. However, the overall change in the net monetary position of the Group in the forth quarter will result in a currency translation loss preliminarily estimated at $950 million for the quarter. The main drivers behind this figure are decrease of US Dollar value of rouble nominated accounts receivable, VAT refunds and other taxes receivable, and negative effect of the quarter movement of the Euro versus the US Dollar on some of our international operations. 2. Dry hole write-offs. As no commercial reserves were discovered at some projects the Company expects to write-off approximately $170 million in Exploration Expenses. 3. Crude oil and products inventory write-offs at refineries and retail networks of LUKOIL due to the sharp decline in realized prices in the forth quarter of 2008. The amount of the write-offs and asset impairments is preliminarily estimated at $850 million. All of these impairments and write-downs are connected with a series of simultaneous unfavourable financial and price factors which do not have an analog in the contemporary history of the oil industry. In fact, the preliminary operating and financial indicators from the first months of 2009 demonstrate stabilization and a strengthening trend in the operations of the Company and its cash flow.

- The OAO LUKOIL Management Committee reviewed the work progress stipulated by the Integrated Action Plan for 2007-2008 aimed at implementation of the Corporate Production Planning Concept based on the provisions of the Kyoto Protocol. The Corporate Production Planning Concept based on the provisions of the Kyoto Protocol and the Integrated Action Plan for 2007-2008 aimed at implementation of the Concept were approved by the Company’s Management Committee in February, 2007. As part of the Integrated Action Plan, specialists of the Department of Industrial and Environmental Safety under the OAO LUKOIL Main Technical Division elaborated local regulatory acts which establish the inventory procedure for greenhouse gas emissions and preparation of carbon projects. The emission inventory for greenhouse gases was carried out by LUKOIL Group in accordance with the methodology and standards elaborated by the Intergovernmental Panel on Climate Change. The emission inventory for greenhouse gases served as the foundation to establish a system for greenhouse gas emissions management and accounting in OAO LUKOIL. The inventory results will be taken into consideration to determine high-priority tasks and objectives, i.e., reduction of greenhouse gas emissions, efficient use of energy resources, control over gas, oil and petroleum-product leakages, and reduction of petroleum gas flaring. By now, a primary list of potential projects for reduction of greenhouse gas emissions has been compiled. Specialized carbon related design documentation for three high-priority projects has been submitted to the independent auditing company "Bureau Veritas Certification" for assessment. Creation and realization of a carbon projects portfolio for respective markets, elaboration of a corporate selection procedure for projects aimed at reducing greenhouse gas emissions, preparation of design documentation for high-priority projects in accordance with the international standards approved by the Parties to the Kyoto Protocol are considered OAO LUKOIL’s major tasks in terms of production activity planning based on the provisions of the Kyoto Protocol.

- OAO LUKOIL Press Service announces that Nikolay Nikolaev, General Director of OOO “LUKOIL-Nizhnevolzhskneft”, has been appointed General Director of OOO “LUKOIL-Volgogradneftegaz”, whose duties he previously combined. ООО "LUKOIL-Volgogradneftegaz” specializes in the search, exploration and development of oil, gas and gas-condensate fields, and is engaged in oil and gas production in Volgograd region, Astrakhan region, Krasnodar territory and the Republic of Kalmykia. The press service also announces that Yuri Kadzhoyan, General Director of OOO “LUKOIL-Kaliningradmorneft”, has been appointed General Director of OOO “LUKOIL-Nizhnevolzhskneft” (with the office in Astrakhan) to combine the duties. ООО “LUKOIL-Nizhnevolzhskneft” is LUKOIL’s head organization specializing in the development of oil and gas fields located in the Caspian Sea.

April

• Upstream news:

- OOO LUKOIL-Zapadnaya Sibir (a 100% subsidiary of OAO LUKOIL) started drilling the first production well at Pyakyakhinskoye gas condensate field in Yamalo-Nenets Autonomous District (YNAD). Fifty-five production wells are to be drilled in this license area in the mid-term. Proven reserves of Pyakyakhinskoye field came to 70 million barrels of oil and 1.9 trillion cubic feet of gas as of the end of 2008. The field is to be commissioned in the fourth quarter of 2011. The extracted gas will be transferred via Nakhodkinskoye field to Yamburgskaya gas compressor station and further on to OAO Gazprom gas transmission system. Liquid hydrocarbons (oil and condensate) will be pumped to the oil pipeline of Vankorskoye field owned by OAO NK Rosneft with subsequent delivery to the main system of AK Transneft. A 126-km gas pipeline to Nakhodkinskoye field and a 160-km pipeline to Vankorskoye field will be constructed to transport the hydrocarbons produced at Pyakyakhinskoye field.

- LUKOIL specialists were awarded a diploma by the Federal Service for Intellectual Property, Patents and Trademarks (Rospatent) in the nomination “Russia's 100 Best Inventions". The diploma was awarded for RF patent No. 2335628 on invention of the technique for "local directional hydraulic reservoir fracturing at oil or gas fields". The team of inventors includes: Dzhevan Cheloyants, OAO LUKOIL Vice President, Head of the Main Technical Division, Mikhail Vyatchinin, Deputy Head of the Main Division of Oil and Gas Production, Vladimir Titievsky, Head of the Division of Oil Production, Yuri Ikonnikov, Head of the Oil Production Section, and Robert Ramazanov, Head of the Oil Production Servicing Section. The technique is aimed at production enhancement of oil, gas and gas-condensate fields and, particularly, of mature fields characterized by high water production and occurrence of lost-circulation and blind zones which are insusceptible to application of common production techniques.

- Towing of the jacket of an Ice Resistant Platform (IRP-2), to be assembled at Yuri Korchagin field in the Caspian Sea, began in Astrakhan. The jacket weighing 1,340 tons was put afloat at the beginning of April and will be towed to the assembly point, then filled with water and fixed to the seabed with piles. It is expected that by May the IRP-2 jacket will be ready for the mounting on it of a topside comprising living quarters and a helideck. The IRP-2 for personnel accommodation was constructed by the hardware factory ООО “LUKOIL-Kaliningradmorneft” and transported in parts by river barges to Astrakhan for complete equipment and coarse assembly at the Astrakhan Shipyard. The IRP-2 comprises living quarters, public and medical premises, a galley and store rooms. The living quarters can accomodate 105 people. The platform length is 41.5 m, its width is 40.2 m. The platform is raised 38 m above sea level. The duration of autonomous operating mode is 15 days. Yu. Korchagin Field is expected to be commissioned in December, 2009. The field is located 180 km away from Astrakhan and 240 km away from Makhachkala . Sea depth at the field location is 11-13 meters. The 3P (proved, probable and possible) reserve categories at the field are estimated at 570 million barrels of oil equivalent. The maximum annual production is 2.3 million tons of oil and gas condensate, and 1.2 billion cubic meters of gas.

• Downstream news:

• Business/Finance news:

- LUKOIL publishes consolidated US GAAP financial accounts for 2008. The Company’s operating cash flow increased by 31.5% to $14,312 million in 2008, despite global economic crisis and oil price fall. At the same time LUKOIL free cash flow* increased the record of $3,775 million which is more than twice as much as in 2007. EBITDA reached $15,552 million, which is 1.1% higher y-o-y. LUKOIL net income was $9,144 million in 2008, which is a decrease of 3.9% y-o-y. However net income adjusted for exploration expenses, loss on disposals and impairments of assets and for currency translation (loss) gain rose by 13.9%, to $11,219 million in 2008.

- The Italian energy company Eni sold a 20 percent stake in the Russian oil giant Gazprom Neft for $4.1 billion in the largest of a dozen or so deals announced during a Russian-Italian business forum. The two countries have warm business ties, even as Russia’s trade relations with other European countries have soured. Silvio Berlusconi, the Italian prime minister, was scheduled to attend the forum in Moscow but canceled to remain in Italy in the aftermath of an earthquake in the Abruzzo region. In other agreements signed, Finmeccanica, the Italian aerospace company, bought a 25 percent stake in the civilian aircraft division of the Russian aircraft manufacturer Sukhoi, which is better known for its fighter jets. With Boeing in an advisory role, Sukhoi is now developing a regional passenger jet, the Superjet. The price of the sale to Finmeccanica was not disclosed. Finmeccanica also signed an agreement with the state-owned holding company Russian Technology to develop security systems for guarding airports, oil depots and other large installations, the Interfax news agency reported. Eni also signed deals with the Russian state oil company Rosneft and with two pipeline-building companies, Transneft and Stroytransgaz. Eni’s sale of the stake in Gazprom Neft was expected. The Italians sold the shares to Gazprom, which had an option to buy them. The deal deepens a long-running partnership between the Italian company and the Russian natural gas monopoly, including an agreement to jointly build the South Stream pipeline under the Black Sea. The sale also was the final step in a long unwinding of a planned merger between Yukos and Sibneft, the company that was renamed Gazprom Neft when Gazprom bought it from the billionaire Roman A. Abramovich in 2005. Yukos had purchased the shares in Sibneft in anticipation of that merger; when Yukos was forced into bankruptcy, it was still holding the shares in what had become the oil arm of Gazprom. Eni bought the Gazprom Neft stake at a bankruptcy auction of Yukos assets in April 2007 with the understanding they would be resold to Gazprom. Gazprom now has 95.68 percent of Gazprom Neft. The deal furthers the companies’ many joint businesses. Eni and Gazprom signed a sweeping partnership deal in 2006 that broadly promises the Italian company access to Russian gas assets in exchange for investment opportunities for Gazprom in the retail side of the natural gas business in Europe. The Italian and Russian leaders have supported these close business ties. Mr. Berlusconi, as he has come in and out of the Italian government, has remained close to Russia’s former president and now prime minister, Vladimir V. Putin. Mr. Putin attended the signing ceremony between Eni and Gazprom. Lukoil, the largest nongovernment oil producer in Russia, posted its first loss since at least 2001, Bloomberg News reported from Moscow. Lukoil said it had a net loss of $1.62 billion in the fourth quarter, compared with net income of $3.21 billion a year earlier. The final three months of 2008 marked the “worst ever quarter in the whole history of Lukoil,” said Leonid Fedun, the deputy chief executive.

- The Management Committee of OAO LUKOIL approved the Environmental Safety Program for 2009-2013. The Program is aimed at improving the environmental monitoring system and minimizing the negative environmental impact caused by the Company`s operations. The Program implies measures aimed at minimizing and utilizing production waste, utilization of oil gas, implementation of projects within the framework of the Kyoto Protocol mechanisms , ensuring compliance of the environmental impact level with the requirements of the national and international legislation. The Draft Program was initially submitted to 199 federal, regional and local authorities, research and public organizations for consideration and expert review.

- LUKOIL was awarded the Grand Prix of an All-Russia contest titled Best Russian enterprises: Dynamics, Efficiency, Responsibility in the nomination Social Responsibility. Besides, one of the Company’s refining subsidiaries, i.e., LUKOIL-Permnefteorgsintez became winner in the nomination Dynamics and Efficiency. The contest was initiated by the Russian Union of Industrialists and Entrepreneurs to pinpoint the most dynamically developing organizations in the industry and to foster sustainable development of independent and responsible companies which meet long-term economic business interests. The awarding ceremony was held as part of the Russian Business Week and the Second All-Russia Forum of Industrialists and Entrepreneurs.

- LUKOIL Finance Limited (a subsidiary of OAO LUKOIL) repaid on April 16, 2009 the EUR 400 million loan facility (the ‘Facility’) in full and ahead of schedule. The Facility was raised in November 2008 and was secured by OAO LUKOIL’s guarantee. The proceeds under the Facility were used to provide partial financing of an acquisition of a 49% interest in the ISAB refinery complex in Priolo, Italy.

- Vagit Alekperov, President of OAO LUKOIL, and Boris Aleshin, President of OAO AVTOVAZ, signed a Cooperation and Technical Partnership Agreement for 2009-2012 between the companies in Moscow. Under the agreement, among other things, OAO AVTOVAZ shall purchase petroleum products, oils and liquids by OAO LUKOIL at prices calculated according to a formula in relation to market markers. AVTOVAZ shall also place slogans reading “AVTOVAZ Recommends LUKOIL Oils”, and “EKTO Fuel” logos in the service manuals for all cars manufactured by AVTOVAZ. Besides, AVTOVAZ shall recommend the service stations incorporated in its network to use LUKOIL fuels and lubricants when servicing cars within the warranty and post-warranty period. On its part, LUKOIL shall supply high-quality gasolines, diesel fuel and lubricants, including first filling engine and gear oils to ensure undisturbed operation of the conveyor unit and process equipment. To enhance competitiveness, LUKOIL and AVTOVAZ shall study joint possibilities of manufacturing and testing of promising fuels and lubricants with their subsequent certification and obtainment of use permits. At present, within the partnership framework with AVTOVAZ, a specialized company, LLK-International (OAO LUKOIL wholly owned subsidiary), has already developed a range of special engine oils and successfully completed the testing of “LUKOIL TM-4” and “LUKOIL TM-5” gear oils. The parties have also reached an agreement on pursuing a uniform engineering policy in the sphere of quality enhancement of fuels and lubricants to ensure their compliance with the current international requirements in terms of performance properties and environmental safety standards.

- A visiting session of OAO LUKOIL Board of Directors took place in Prague (the Czech Republic). The issues concerning the Annual General Shareholders’ Meeting (the ‘Meeting’) and the Company’s overseas activities in the Upstream and Downstream business segments were reviewed. Among other things, it was resolved to hold the Meeting on June 25, 2009, in Moscow, at 11.00 a.m. at the Company’s headquarters located in Moscow at the following address: 11 Sretensky Boulevard. It was also resolved that the record date for the list of shareholders entitled to participate in the Meeting shall be May 8, 2009. The Board of Directors shall recommend the shareholders to approve dividends for the 2008 financial year in the amount of RUR 50 per ordinary share (as opposed to RUR 42 in 2007). The dividend rate is established based on the sum allocated to dividend payment amounting to RUR 42,528,163 thousand, which is 15.8% of the net consolidated profit calculated in accordance with US GAAP. The shareholders shall also elect the Board of Directors consisting of 11 members from the list of candidates approved by the Board of Directors on February 4, 2009.

- LUKOIL EURASIA PETROL A.S. (a 100% subsidiary of OAO LUKOIL) paid the second tranche which amounted to USD 150 million for the shares of the Turkish company Akpet. The payment was made from LUKOIL Group’s own resources.

May

• Upstream news:

- LUKOIL has assembled the jacket of an ice-resistant stationary platform (IRP-2), which is part of construction facilities of Yuri Korchagin Field located in theCaspian Sea. The jacket, weighing 1,340 tons, was towed to the assembly point, filled with water and fixed to the seabed with fifteen piles. The jacket will be ready soon for the assembly on it of an IRP-2 topside.

- LUKOIL Group total hydrocarbon production available for sale reached 2,225 th. boe per day in the first quarter of 2009, which is a 1.5% increase y-o-y. Crude oil production by LUKOIL Group increased by 3.2% y-o-y to 1,976 th. barrels per day. Crude oil production of LUKOIL Group in the first quarter of 2009 totalled 24.13 mln tons. At the same time, crude oil output from the Yuzhnaya Khylchuya field reached 1.5 mln tons. Natural and petroleum gas output of LUKOIL Group available for sale was 3.81 bcm: output as part of international projects totalled 1.22 bcm (grew by 34.2% y-o-y), output in Russia was down 23.4% y-o-y to 2.59 bcm. The decrease in gas output available for sale in Russia was due to the decrease in purchases of gas by Gazprom. Throughputs at the Company’s refineries (including its share in throughput at ISAB refining complex) increased by 7.3% y-o-y in the first quarter of 2009 and reached 14.28 mln tons. Throughputs at the Company’s refineries in Russia decreased by 1.5% y-o-y, throughputs at the Company’s international refineries grew by 50.6% y-o-y.

- LUKOIL has successfully completed transportation and assembly operations aimed at mounting topside on the jacket of the offshore ice-resistant stationary platform (IRP-2), which is part of the construction facilities at Yu. Korchagin field located in the Caspian Sea. As has already been reported, the jacket weighing 1,340 tons was towed to the field, fixed with 15 piles and prepared for the topside to be assembled on it at the beginning of May. Transportation of the topside to the assembly point started on May, 17, from Astrakhan.

• Downstream news:

- Vagit Alekperov, President of OAO LUKOIL, Zambulat Khatuov, First Vice Governor of Krasnodar Territory, and Mikhail Abyzov, Chairman of the Board of Directors of OJSC “E4 Group”, participated in the working meeting at Krasnodar Heat Power Plant (OAO YuGK TGK-8, incorporated into LUKOIL Group). The expansion project for Krasnodar Heat Power Plant implies commissioning of a steam generating unit with the capacity of 410 megawatt in the first quarter of 2011. The project is based on the regional need to increase both the electric and heating capacity of the station by 22 gigacalories, which will help heat additional 200 thousand square meters of dwelling space.

- In Zagreb (Croatia) Vadim Vorobyev, Vice-President of OAO LUKOIL, participated in the official ceremony of commissioning the first gas filling station constructed by the Company on the land plot acquired under the agreement with EUROPA-MIL. The ceremony was also attended by Branimir Khorachek, Deputy Economy Minister of Croatia, and Milan Bandich, Mayor of the City of Zagreb. As was reported earlier, LUKOIL Europe Holdings B.V. (a 100% subsidiary of OAO LUKOIL) closed a deal in April 2008 to acquire EUROPA-MIL (Croatia).

• Business/Finance news:

- The Art Gallery of the Smithsonian Institution (Washington D.C.) is hosting an exhibition titled: “The Tsars and the East: Gifts from Turkey and Iran in the Moscow Kremlin” supported by LUKOIL.

- The OAO LUKOIL Press Service would like to draw the attention of the Company's shareholders to the fraudulent activities by a certain OOO “Obyedinennye Energosistemy”(OOO Unified Energy Systems). OAO LUKOIL shareholders receive letters, on behalf of the said organization, suggesting that they sell the Company’s shares. Among other things, these letters contain misleading information on the Company’s financial state, i.e., they state that “The Board of Directors of OAO LUKOIL has acknowledged failure to pay dividends”. Meanwhile, the OAO LUKOIL Press Service would like to recall that at the meeting initiated by the Board of Directors on April 23, 2009, it recommended that the Annual General Shareholders’ Meeting, to be held on June 25, 2009, approve payment of dividends at the rate of RUR 50 per one ordinary share, based on the Company’s performance in 2008. In this connection, the Company intends to take urgent legal steps in order to put an end to the fraudulent activities of OOO “Obyedinennye Energosistemy” which not only misleads OAO LUKOIL shareholders, but also violates RF legislation on private information protection, since information on what securities citizens hold is also considered private.

- According to a reliable source, i.e., the Institutional Investor Magazine, LUKOIL rates among the top five European oil and gas companies recognized as leaders in terms of loyalty to their shareholders. The magazine gives an annual assessment of the companies in terms of their relations with shareholders by interviewing over 300 analysts and portfolio investors representing over 200 financial groups with the total investments of more than USD 2.4 trillion in assets in Europe.

- At its session the Board of Directors of OAO LUKOIL granted preliminary approval to OAO LUKOIL 2008 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 25, 2009 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. The acting Board of Directors of OAO LUKOIL numbers 11 members and was elected at the Annual General Shareholders Meeting on June 26, 2008, which is in line with the Charter of OAO LUKOIL. The Board of Directors includes two executive directors; five members of the Board of Directors comply with independent directors criteria set by the Code of Corporate Conduct adopted by the RF Government on November 28, 2001 and recommended by the RF Federal Commission for the Securities Market. Considering the crisis on world financial markets and the recession of the global economy, the Board of Directors in the course of the meetings paid a considerable attention to the effect of the global financial crisis on the operations of OAO LUKOIL and the strategy and techniques for managing the risks.

- Vagit Alekperov, OAO LUKOIL President, participated in the official opening of an exhibition in Moscow. Titled “The Nobel Dynasty for Russia”, it is dedicated to the 130th anniversary since the establishment of “The Nobel Brothers’ Petroleum Company” and the 150th anniversary of Emmanuel Nobel who held the position of head of the Company for 30 years.

June

• Upstream news:

- Vagit Alekperov, President of OAO LUKOIL, and Igor Fyodorov, Head of the Administration of the Nenets Autonomous District signed Protocol No. 3 to the Cooperation Agreement between the Company and the District. The Protocol envisages basic areas of cooperation between the parties in 2009. Thus, LUKOIL committed to ensure no less than 12 million tons of oil recovered in the Nenets District in 2009. Besides, the Company will allocate 154 million rubles for social and economic development of the region. The funds are intended for purchase and assembly of module treatment facilities for remote settlements and equipment for the cinema hall in Naryan-Mar. In its turn, in line with the effective legislation, the Administration will facilitate the implementation of the Company’s projects in the region. The Cooperation Agreement between OAO LUKOIL and the Administration of the Nenets Autonomous District was signed on December 12, 2006.

• Downstream news:

- It is one year since the first tanker has been loaded via the fixed ice-resistant offshore export terminal (FOIROT) of the Varandey oil export terminal (VOET) located in the coastal zone of the Barents Sea (Nenets Autonomous District). The number of tanker loadings over this period came to 73. The terminal’s operations are supported by three 70,000 tons DWT ice-breaking tankers especially built by OAO Sovkomflot to operate in the region. Other vessels used to ensure safe operation of the terminal and tanker loadings under ice conditions include the Toboy auxiliary ice-breaking tug and the Varandey ice-breaker which were built at the Company’s request. The VOET is used to export LUKOIL's crude produced in the Timan-Pechora oil and gas province by sea. The terminal's overall annual throughput is 12 million tons of crude (240,000 barrels/day).

- A work meeting was held between OAO LUKOIL President Vagit Alekperov and OAO AK Transneft President Nikolai Tokarev. The heads of the Companies noted that the active endeavor of the pipeline company resulted in larger volumes of derivative products from Russian refineries, expanding infrastructure potentials to export petroleum products along with better environmental conditions at pipelines and in railway sector. The fruitful interactive history with AK Transneft provides a viable basis for LUKOIL to further hope for successful implementation of challenging projects that could boost oil supplies to major LUKOIL refineries, namely, to OOO LUKOIL-Nizhegorodnefteorgsintez (up to 20 million tons per annum). Besides, AK Transnefteproduct (OAO AK Transneft subsidiary) is planning to go on with the YUG (South) Project incorporating oil and petroleum pipeline Syzran-Volgograd-Novorossiysk to fill up the line with LUKOIL oil and petroleum products (up to 3 million tons per annum).

- OAO LUKOIL agreed to purchase a 45% stake in TRN refinery in the Netherlands from Total. The transaction amount is expected to be approximately USD 725 million, including inventory. The transaction closing is expected to take place before the end of this year upon completion of certain standard conditions precedent.

- Vagit Alekperov, President of OAO LUKOIL, and Valentina Matvienko, Governor of Saint-Petersburg, took part in the official ceremony to commission Russia’s first “water-shore” double-purpose fuelling station. The fuelling station is located on Vyborg Embankment and can fuel both motor vehicles and small vessels during the navigation season on the Neva River. The design capacity of the fuelling station is about 500 fill-ups per day, including 60 fill-ups of small vessels. The onshore part of the station has four automated fuel dispensers offering three gasoline grades and diesel fuel available 24 hours a day. On the berth, a sailor operator fuels the vessels with AI-95 gasoline or a diesel fuel from a single fuel dispenser. According to the safety requirements, only one vessel can be fuelled at a time and only at daylight. The fuelling station complies with all the environmental requirements established for regular gas stations, as well as with the standards for construction of marine terminals used for transhipment of petroleum products.

- OAO LUKOIL’s Press Service informs that Report No. 58-2009/CS GSM produced by GosNII GA (State Research Institute of Civil Aviation) on testing fuel samples taken on May 26, 2009 at OOO LUKOIL-AERO-Perm process facilities expressly sets out that the fuel quality is fully compliant with the existing standards. The physical and chemical properties of the fuel are consistent with the requirements contained in GOST 10227-86 and Technical Regulations “On Requirements for Motor and Aviation Gasolines, Diesel Fuel, Ship Fuel, Jet Fuel and Fuel Oil”. The fuel has not been reported to contain either organic impurities or products of fuel chemical transformation. The aforementioned testing took place in connection with an emergency landing of TU-204 aircraft making the Perm-Antalya (Turkey) flight and operated by Red Wings air lines on May 24, 2009 at the Krasnodar airport. The landing resulted from alarm actuation of the fuel filters clogging system.

• Business/Finance news:

- Vittorio Claudio Surdo, the Italian Ambassador to Moscow, awarded the Order of Merit of the Republic of Italy to Dr. Vagit Alekperov, OAO LUKOIL President. The Order of Merit of the Republic of Italy, which was established in 1946, is awarded to Italian and foreign citizens for their contribution to promotion of Italian foreign relations in politics, economics and culture. At present, LUKOIL is the largest Russian investor in Italy .

- LUKOIL published consolidated US GAAP financial accounts for the first quarter of 2009. The Company’s net income was $905 million in the first quarter of 2009. EBITDA was $2,414 million, which is 49.8% lower y-o-y. It should be noted that EBITDA decreased at a slower rate than the oil price (which fell by 53.1%) thanks to the Company’s business optimization and cost reduction. Revenues from sales were $14,745 million. The Company’s tax expenses totalled $4.1 billion in the first quarter of 2009, including income tax expense of $390 million. The effective income tax rate was 26.0%.

- At the XIII International Economic Forum in Saint-Petersburg, President of OAO LUKOIL Vagit Alekperov participated in the discussion on global energy and Russia’s contribution in energy security. In his speech, the head of the Company outlined the challenges, which have been coming on in the last few years and which the crisis uncovered. The first issue is the depletion of resources and decline in output of oil in non-OPEC countries. According to Vagit Alekperov, this is a long term trend, which will be bridged only as unconventional reserves, including deep sea offshore fields, bituminous oil fields and oil bearing sandstones are developed. However, according to the Company’s experts, the fall of demand for hydrocarbons is for the time being and is likely to cease as the global economy revives. The second issue is the rapid growth of operational and capital expenditures, accounted for the necessity to implement best available techniques of raw materials recovery on the one hand, and deficient production and transport infrastructure in new extraction areas, on the other. The third issue is in high volatility of energy markets. In the past few years, price oscillations have become rather notable, whereas the time span has curtailed drastically. One of the reasons for that is the ever emerging role of financial derivatives in oil trade. As Vagit Alekperov says, to ensure sustainable balance between supply and demand as well as stable pricing, more investments shall be made in the industry. However, price deviations make influx of investments unstable. According to LUKOIL’s President, to release the endless circle, it is required to minimize the role of financial industry in oil trade and to establish favorable environment for public and private investments in new regions, upgrade and construction of refining capacities. Development of new provinces is of current concern for Russia, as the country has vast yet-to-find hydrocarbon reserves in remote areas, first and foremost those of continental shelves. As for the primary tasks, Russian oil and gas industry has to concentrate on: sustainable production and better oil recovery efficiency in West Siberia, Russia’s major oil bearing province; development of new oil and gas bearing provinces, including Timano-Pechora, Caspian region, East Siberia, Yamal; geological exploration on the Arctic shelf; establishment of new systems for transportation of oil and gas both in west and east directions; further upgrade of Russian refining capacities. In its turn, LUKOIL, despite the global economic turmoil, successfully meets the challenges, the Company has to face, thus contributing to the country’s oil and gas industry. The major task for the Company in 2009 is to commence commercial oil production in the North Caspian Region – a global project, which started back in the mid 90-ies of the XX century. For the past 10 years LUKOIL has discovered 8 major oil and gas fields in the region, including those discovered under joint ventures.

- The Press Service of OAO LUKOIL reports that state corporation “The Bank for Development and Foreign Economic Affairs” (Vnesheconombank) became a major shareholder of OAO LUKOIL.

- Lukoil of Russia bought a stake in a Dutch refinery from Total of France, gaining a foothold in northwest Europe and blocking a bid by the largest United States refiner, Valero, to enter the region, Reuters reported. Friday’s deal, which expanded Russia’s No. 2 oil company’s refining presence in western Europe, coincided with a state visit to the Netherlands by the Russian president, Dmitri Medvedev, the news service said. Total, which has staked out positions in some of the most prized oil projects on former Soviet territory, hailed a new era in its relationship with Lukoil, which is 20 percent owned by ConocoPhillips, Reuters said.

- General Director of LITASCO (LUKOIL global trader) Gati Al-Jebouri and President of Unipec Asia Company Ltd. (Sinopec Trader) Dai Zhaoming have signed a frame agreement on oil supplies. The document has also been initialed by First Executive Vice-President of OAO LUKOIL Ravil Maganov and Chairman of Sinopec’s Board of Directors – President of Sinopec Group Su Shulin. The agreement calls for Russian export of 3 million tons of oil blend and/or YK blend of oil produced from Yuzhnoye Khylchiyu Field, Nenets Autonomous Okrug. This being the case, the actual export volumes will be dependent on public arbitration and price rates. The oil will be delivered by tankers with displacement of 80,000 to 140,000 tons. The contract will be valid from July 1, 2009 through June 30, 2010 or up to the time the full contract value has been paid under the agreement. Over the last few years LITASCO have sold under spot contracts 1 million tons of oil and 250 thousand tons of fuel oil. In 2008 LITASCO total sales to China amounted to 470 thousand tons of oil and 662 thousand tons of virgin fuel oil, and from January to June 2009 the oil delivery rose as high as 700 thousand tons.

- Vagit Alekperov, President of OAO LUKOIL, and Valentina Matvienko, Governor of Saint-Petersburg, signed a Protocol to the Cooperation Agreement between the City Administration and the Company. The Protocol outlines major cooperation areas for 2009. In particular, LUKOIL shall ensure that in compliance with the applicable tax law, RUR 3 billion worth of taxes and dues will be paid to the Saint-Petersburg budget in 2009. In return, subject to the applicable law, the Administration of Saint-Petersburg intends to allocate two land plots with the area of 2-2.5 hectares each for construction of the Company’s gas stations on federal roads within the framework of preparation for Sochi-2014 Olympics. The Cooperation Agreement between OAO LUKOIL and the Administration of Saint-Petersburg was signed on November 7, 2008.

- OAO LUKOIL has completed the stock exchange bond offering of the BO-18, BO-19, BO-20 series, each worth RUR 5 billion. The bonds, placed at MICEX, will mature in 364 days. During bookbuilding 129 investors’ offers with the coupon rate ranging from 12.95% to 14.00% p.a. were received. The total demand reached RUR 35,544.1 million. After considering the offers the coupon rate for each of the issues was set at 13.50% p.a.

- OAO LUKOIL held its Annual General Shareholders Meeting in Moscow to approve the 2008 Annual Report and financial statements based on the fiscal year results. The shareholders approved dividend distribution based on the Company’s performance in 2008 in the amount of 50 rubles per ordinary share (42 rubles in 2007). 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 an interested-party transaction.

- The exhibition Great Russian Victories Imprinted in Medals and Engravings. 300th Anniversary of theBattle of Poltava was opened today at the Pushkin State Museum of Fine Arts supported by OAO LUKOIL. The medals of the 18 th and 19 th centuries dedicated to the Great Northern War of 1700-1721 will be exhibited for the first time.

July

• Upstream news:

- LUKOIL launched the next stage of offshore construction operations at Yuri Korchagin field located in the Caspian Sea. This stage includes loading on barges, transportation and assembly of the single-buoy mooring (SBM) elements, i.e., jacket and topside, at a distance of 58 km from the offshore ice-resistant fixed platform. SBM and the offshore ice-resistant fixed platform shall be joined with a 300-mm diameter subsea pipeline, which has already been laid on the seafloor and is ready to be connected to these facilities. Yu. Korchagin Field is expected to be commissioned in December, 2009. The field is located 180 km from Astrakhan and 240 km from Makhachkala. The sea depth in the area of the field is 11-13 meters. The estimated 3P reserves of the field are 570 million barrels of oil equivalent. The maximum production rate of oil and gas condensate reaches 2.3 million tons per annum and 1.2 billion cubic meters of gas per annum.

- It has been five years since Russian oil was recovered for the first time in the Baltic Sea. On July 20, 2004 LUKOIL recovered its first tons of oil at Kravtsovskoye (D-6) field. The field was discovered in 1983. It is located 22.5 km off the coast of Kaliningrad region. The С1+С2 reserves at Kravtsovskoye field is estimated at 21.5 million tons, recoverable reserves at 9.1 million tons. Drilling and oil production are performed by means of an offshore ice-resistance fixed platform, which was constructed at the steelwork plant of OOO LUKOIL-Kaliningradmorneft. It is the first Russian offshore production platform designed and constructed by Russian design and construction organizations. All industrial processes at the platform are based on a zero-discharge principle according to which all industrial and household waste is transported to the shore for further utilization.

- LUKOIL has started the next development stage of Yu. Korchagin field in theCaspian Sea. The fixed offshore ice-resistant platform, the main production facility to be used for production drilling and hydrocarbon production, is being towed from Astrakhan. A drilling complex with the load capacity of 560 tons for drilling of wells with the maximum bore hole length reaching 7,400 m has been installed at the platform. The number of wells is 30, including 26 production wells, 3 water injection wells, and 1 gas injection well. The platform is also equipped with two cranes with the load capacity of 70 tons. The platform length is 95.5 m, its width is 72.2 m. The platform weight is 25,655 tons when it is stationed at the seafloor with liquid ballast. The platform elevation from the sea level is 86.6 m.

• Downstream news:

• Business/Finance news:

- 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 announces that a MI-8 helicopter crashed in Volgograd Region. Five OOO LUKOIL-Volgogradneftegaz employees were killed. The helicopter operated by Gazpromavia was making a flight from Volgograd to Kotovo. OAO LUKOIL management and the Company's employees extend their deepest condolences to the families and relatives of those killed in the accident. All the necessary material assistance shall be rendered to their families.

- The OAO LUKOIL Press Service would like to draw the attention of all concerned parties to the reoccurring cases of Internet fraud regarding the information available on the Company's official web-sites: www.lukoil.ru and www.lukoil.com. For instance, using the website www.lukoil.org.uk certain parties having neither an affiliation with LUKOIL nor with its subsidiaries have mislead Internet users regarding employment with the Company. The OAO LUKOIL Press Service would like to inform the public that the said website is a poor compilation of the official websites which are affiliated with the Company. We call on Internet users not to use the false contact information specified on this site as a means of avoiding unwanted consequences. In addition, we do not advise contacting the company YUGOSTEKOIL, which has illegally copied information from OAO LUKOIL's official web estate and carelessly placed it onto their own site, www.yugostekoil.ru. The OAO LUKOIL Press Service would also like to announce that the Company shall bear no responsibility for possible and/or unwanted consequences which may arise as a result of using the erroneous information placed on such sites. The Company also intends to take all available measures in preventing further distribution of misleading information through the named web resources.

August

• Upstream news:

- A fire was brought under control at gas well No. 320 located at the Kudinovskoye field, which is being developed by OOO “LUKOIL-Volgogradneftegaz”. The fire outbreak was liquidated by the joint efforts of EMERCOM forces of the Volgograd and Krasnodar regions, LUKOIL-Volgogradneftegaz and the paramilitary rescue squad of Yuzhno-Rossiysky well control unit. In total, there were 120 men involved in extinguishing the fire as well as 37 various equipment units. By now the first stage of well killing has been completed. There is no gas leakage from the well. The fire was traced on August 7, at 11:10 pm. A burnt vehicle, GAZ-66, with a tank was discovered at the accident site. An illegal attempt to withdraw oil at the wellhead is deemed to be the reason for the accident. Investigation is underway. A person suspected of illegal tie-in has been detained and is giving evidence to the representatives of law-enforcement agencies. The yield of well No. 320 was estimated to be 44 thousand cubic meters of gas and 3.2 tons of oil per day prior to the fire outbreak.

- LUKOIL Group total hydrocarbon production available for sale reached 2,220 th. boe per day in the first half of 2009, which is a 2.0% increase y-o-y. Crude oil production by LUKOIL Group increased by 4.0% y-o-y to 1,981 th. barrels per day. Crude oil production of LUKOIL Group in the first half of 2009 totalled 48.63 mln tons. At the same time, crude oil output from the Yuzhnaya Khylchuya field in Timan-Pechora, brought into production in 2008, reached almost 3.2 mln tons. Natural and petroleum gas output of LUKOIL Group available for sale was 7.36 bcm: output as part of international projects totalled 2.35 bcm (grew by 26.2% y-o-y), output in Russia was down 23.4% y-o-y to 5.01 bcm. The decrease in gas output available for sale in Russia was due to the decrease in purchases of gas by Gazprom. Throughputs at the Company’s refineries (including its share in throughput at the ISAB refining complex) increased by 10.4% y-o-y in the first half of 2009 and reached 29.97 mln tons. Throughputs at the Company’s refineries in Russia increased by 0.3% y-o-y, throughputs at the Company’s international refineries grew by 51.2% y-o-y.

- A 74.2-m bridge uniting two offshore ice-resistant fixed platforms into one complex has been assembled today at Yu. Korchagin field located in the Caspian Sea. On August 16, the basic production facility – offshore platform for drilling, oil and gas treatment and transportation – was assembled at the fixed location. The facility's azimuth shift came to plus 0.2 degrees, horizontal shift – plus 0.2 meters, while the inclination is 0 degrees. This is very high accuracy for an offshore facility weighing about 25 ths. tons. As was reported earlier, the first offshore platform with living quarters, public and medical premises, a helideck and rescue equipment was assembled at Yu. Korchagin field on May 25, 2009.

• Downstream news:

- Langepas, a multipurpose ice reinforcement ship constructed at Keppel Singmarine Shipyard (Singapore) on order by LUKOIL to operate in the Caspian Sea, was handed over to the Company. Langepas is expected to leave Singapore on August 6, and arrive at the Caspian Sea on September 3-4. It will be performing some standby and rescue operations as part of LUKOIL’s offshore oil and gas projects.

- LUKOIL has completed assembly of the single point mooring (SBM), which is part of the site structures and facilities for Yu. Korchagin field located in the Caspian Sea. The SBM is intended for oil transshipment from the subsea pipeline to the floating storage unit and shuttle tankers. The maximum oil transshipment volume reaches 2.3 million tons annually.

- Vagit Alekperov, OAO LUKOIL President, and Viktor Khoroshavtsev, General Director of OAO Sistema-Invest (which manages the assets of ANK Bashneft and other companies of the Bashkir Fuel and Energy Complex) signed a basic cooperation agreement in Moscow. Under the agreement, LUKOIL will supply oil to be refined at a group of Ufa-based refineries, while the resulting petroleum products and petrochemicals will be supplied for exports and also to the Russian Federation domestic market. The Agreement went into effect upon signing and shall be valid until August 1, 2010, with a possibility of prolongation.

• Business/Finance news:

- OAO LUKOIL closed the book on an offering of the stock exchange bonds of the BO-01, BO-02, BO-03, BO-04 and BO-05 series with a total volume of RUR 25 billion. The bonds will mature after 1092 days and have a coupon period of 182 days. The coupon rate for all five series is set at 13.35% p.a. The offering was arranged by ZAO Troika Dialog Investment Company.

- ОАО LUKOIL attracted a syndicated loan amounting to USD 1,200,000,000. The interest rate is LIBOR plus 4% per annum. The loan term is 3 years. The loan is secured by proceeds from oil export contracts.

- LUKOIL publishes consolidated US GAAP financial accounts for the second quarter and first half of 2009. The Company’s net income was $3,229 million in the first half of 2009, including $2,324 million in the second quarter. EBITDA was $6,534 million. Revenues from sales were $34,861 million. The Company’s tax expenses totalled $9.0 billion in the first half of 2009, including income tax expense of $1.0 billion. Lifting costs per boe of production in the first half of 2009 decreased by more than 20% y-o-y, to $3.25 from $4.09 in the first half of 2008. Capital expenditures including non-cash transactions in the first half of 2009 were $3.0 billion which is 40.1% lower y-o-y. Reduction of capital expenditures was in line with the anti-crisis program developed by the Company in the beginning of the year. LUKOIL Group total hydrocarbon production available for sale reached 2,220 th. boe per day in the first half of 2009, which is a 2.0% increase y-o-y. Crude oil production by LUKOIL Group increased by 4.0% y-o-y to 1,981 th. barrels per day.

- An extended meeting of OAO LUKOIL's Board of Directors was held in Moscow to review operations and financial performance in the first six months of 2009. The Board also discussed training and education of the personnel and noted that improvement of professional competence of the Company’s managers and specialists was a priority goal. Days of professional training, visiting seminars of Russia's best higher educational institutions held at the Company's subsidiaries and also corporate programs of advanced training for the executive and managerial staff have become a regular fixture.

September

• Upstream news:

• Downstream news:

- OAO LUKOIL completed the purchase of a 45% share in Holland-based Total Raffinaderij Nederland (TRN) from Total. The value of the stake, excluding crude oil and products inventory, was USD 600 million, in line with an agreement reached between LUKOIL and Total last June. As a result of the transaction, LUKOIL will replace Dow Chemical as Total’s partner in TRN. The shareholders will continue to operate the refinery on a processing basis by providing crude oil and other feedstocks and receiving back refined products on the basis of their ownership in the refinery. TRN is located in the Vlissingen Oost harbour area in the southwestern part of the Netherlands in one of world’s largest oil and oil-product trading hubs (Amsterdam-Rotterdam-Antwerp) and benefits from access to the well-established infrastructure, including Maasvlakte Olie Terminal, in which TRN owns a 22% share. These advantages enable LUKOIL to strengthen its positions in North Western Europe and increase efficiency of its trading operations.

- OAO President Vagit Alekperov and Vladimir Torlopov, Head of the Komi Republic, participated in the ceremony of commissioning of a new isomerization unit at ООО LUKOIL-Ukhtaneftepererabotka production site. The unit is designed for manufacturing high-octane gasoline components free from sulfur compounds, benzene and aromatic substances, which enables Ukhta refinery to launch production of automobile gasoline compliant with the EURO-3 and EURO-4 standards. The rated capacity of the unit in terms of raw materials is 120 thousand tons per annum; its construction cost came to RUR 1.27 billion. The basic design was elaborated by the US company UOP; the contractor design was developed by OAO Rostovneftekhimproekt.

- LUKOIL has assembled a floating storage unit (FSU) for the loading of shuttle tankers and transportation of oil from Yuri Korchagin field in the Caspian Sea. The FSU is an oil tanker with a double bottom and double sides, a boiler room, living quarters and a helipad. The ship has a deadweight of 28 thousand tons and is 132 meters in length, 32 meters in width and 15.7 meters in depth. The crew is 25. The vessel hull was constructed at Keppel Singmarine Shipyard in Singapore on commission from LUKOIL. After setting the vessel afloat, the hull was divided into two sections to enable its passage through the Volga-Don Canal and further along the Volga River to the Caspian Sea. The final fitting-out of the FSU was done at Keppel Singmarine Shipyard in Baku. The floating storage unit is tied up to the single-buoy mooring (SBM) assembled offshore last August. The SBM is connected to the offshore production platform with a sub-sea pipeline which is 58 kilometers in length and 300 millimeters in diameter. Thus, LUKOIL has completed construction of the offshore loading unit intended for oil storage and transshipment from Yuri Korchagin field.

- LUKOIL has become winner in the Filling Station of the Year rating for the fourth time running, based on Trusted Brand 2009 survey held in Russia by Reader’s Digest, an international publishing house. LUKOIL ranked first in similar ratings of Reader’s Digest in 2006, 2007 and 2008. Moreover, LUKOIL has been awarded Trusted Brand. Green Planet certificate, based on the survey on brands with best reputation in environmental protection.

- Vladimir Nekrasov, First Vice President of OAO LUKOIL, and Bui Ngoc Bao, General Director of the Vietnamese State Petroleum Corporation PETROLIMEX, have signed a Memorandum of Understanding inMoscow. Vu Huy Hoang, Minister of Industry and Trade of the Republic of Vietnam, attended the ceremony. The Memorandum, among other things, implies negotiations aimed at entering a long-term agreement under which LUKOIL will supply fuel oil starting from 2010. The proposed supply volume may reach 500 thousand tons per annum. The companies also intend to discuss a long-term agreement under which LUKOIL would supply diesel fuel with the sulfur content of 0.25 and 0.05 percent, up to 1 million tons per annum. The parties will discuss a feasibility of using the Aframax tankers owned by PETROLIMEX for supplies. Another item to be discussed at the negotiations is LUKOIL's long-term lease of a PETROLIMEX oil storage located at the customs warehouse in Van Phong Bay. The storage construction completion and commissioning are expected to take place in 2011.

- Vagit Alekperov, OAO LUKOIL President, and Igor Levitin, Minister of Transport of the Russian Federation, participated in an official ceremony of commissioning a filling station equipped with an autonomous energy supply system based on a photovoltaic power plant (PPP) in Krasnaya Polyana (Krasnodar region). The PPP capacity is 9.6 kW. The energy generated by PPP will be mainly used for external and internal illumination of the filling station and will ensure uninterrupted operation of the facility in case of an emergency shutdown of the external electrical power units. LUKOIL's filling station located in Krasnaya Polyana is the first Russian filling station equipped with the PPP designed in Russia to use the photovoltaic modules produced domestically.

- Vagit Alekperov, President of OAO LUKOIL, and Valery Gayevsky, Governor of Stavropol region, signed a cooperation agreement between the Company and the Region within the framework of the International Investment Forum inSochi. The document provides, among other things, for active cooperation between the parties aimed at implementing the construction of a gas and chemical complex to produce ethylene and its derivatives at a site of OOO Stavrolen in Budennovsk. The hydrocarbon materials will be delivered to the complex from LUKOIL’s fields located in the Northern Caspian. Under the agreement and in accordance with the effective legislation, the Regional Government will assist LUKOIL in mobilizing capital of the RF Investment Fund for construction of government-owned and municipal facilities within the framework of the gas and chemical project, in utilizing polymer pipelines for the building of new houses and for the upgrading of existing utilities and gas networks, and also in establishing small enterprises for advanced processing of polyethylene and polypropylene in Stavropol region.

• Business/Finance news:

- The 2007-2008 Sustainability Report has been released by LUKOIL. The document contains exhaustive information on basic trends and figures concerning industrial, social and environmental activities by the Company in the regions of its presence, i.e., Kaliningrad region, Western Siberia, Perm region, Volgograd, Astrakhan and Nizhny Novgorod regions, the Komi Republiс and the Nenets Autonomous District. International documents, including AA 1000 (1999) Standard and the Sustainability Reporting Guidelines within the framework of the Global Reporting Initiative (GRI), version 3.0, the Global Compact and the Social Charter of Russian Business were used for the report compilation.

- Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse as Prime Minister Vladimir V. Putin exploits OPEC production cuts to gain market share. Exports of crude oil and refined products from Russia rose to 7.4 million barrels a day in the second quarter, from 7.25 million in the first quarter, according to Energy Ministry data. Saudi shipments fell to about 7 million barrels a day, from 7.39 million, according to International Energy Agency estimates of output and domestic demand. Investors had expected Russian supplies to decline this year after Mr. Putin’s deputy, Igor Sechin, told the Organization of the Petroleum Exporting Countries in December that his government was ready to limit production to support prices. Instead, Russia is providing tax breaks for new fields in Siberia. Rosneft, Lukoil and BP’s Russian venture, TNK-BP, all pumped more as prices rose 54 percent, to near $69 a barrel. The extra barrels may undermine OPEC efforts to reduce inventories and keep members from exceeding their quotas after the group’s meeting, which is scheduled for Wednesday in Vienna. According to the median of 34 analysts’ estimates compiled by Bloomberg, the price of oil is predicted to fall 4.7 percent in the third quarter, from the average so far this quarter, to $64.50 a barrel. It rose to a 10-month high of $75 on Aug. 25, and was at $69.50 in early morning trading in New York. OPEC agreed during three meetings last year to reduce supply by 4.2 million barrels a day, the biggest cutback in the group’s history, after the price plunged to a low in December 2008 of $32.40 from a peak of $147.27 in July 2008. Russia’s crude oil production climbed 1.3 percent in August from the same month in 2008, to 9.97 million barrels a day, and exports expanded 5.9 percent, according to the Energy Ministry’s data service, CDU-TEK. The increase came after the largest producer, Rosneft, began pumping from its new Vankor field in Siberia. In March, while Russian politicians hinted at possible supply cuts, the Lukoil chief executive officer, Vagit Alekperov, said his company aimed to raise output 1.5 percent this year. Russia already exported more energy than any other country, with shipments from the state-run Gazprom natural gas company, the world’s largest producer, included. The Moscow-based company’s gas production last year was equivalent to 9.9 million barrels of oil a day, compared with Saudi Arabia’s 9.2 million barrels of crude, according to Gazprom and Bloomberg estimates. Russian gas sales to Europe would also benefit from OPEC’s effort to raise the value of crude because some gas contracts are linked to oil prices. Saudi Arabia had long been the top oil supplier. Only last year, Saudi Arabia was pumping about 10 million barrels a day, but it has now chosen to reduce its output. Soviet central planners pushed Russian output to 11.48 million barrels a day in 1987. Following the collapse of the Soviet Union in 1991 and Russia’s 1998 financial crisis, production tumbled to about half that amount by 1999. Oil Minister Ali al-Naimi of Saudi Arabia, who arrived in Vienna, said his country was currently producing about eight million barrels a day. He said Saudi Arabia was complying with OPEC’s cuts “as best we can.” Russia’s official export data include some Kazakh and Azeri oil that travels through the country to international markets. Even when that transit oil is excluded, Russian exports surpassed those of Saudi Arabia starting in February, according to crude and products data collected by the Riyadh-based Joint Oil Data Initiative. The OPEC president, José Maria Botelho de Vasconcelos, who is the Angolan oil minister, said in a Sept. 2 interview that he expected that the group would not make additional production cuts this week, echoing comments by officials from Algeria, Iran, Iraq, Kuwait, Libya and Qatar. All 26 analysts in a Sept. 3 Bloomberg survey also expected no quota changes, even though stockpiles were high. U.S. crude inventories are 13 percent above year-earlier levels, at 343.4 million barrels, according to the Energy Department. In December, with oil at $40 and the world economy sagging, Mr. Putin, the Russian prime minister, sent Mr. Sechin, his deputy, to an OPEC meeting in Oran, Algeria. Mr. Sechin said Russia had reduced exports by 350,000 barrels a day the previous month and was prepared to cut an additional 320,000 if prices failed to rise. The reductions never took place, and two months later, the OPEC secretary general, Abdalla El-Badri, said he was “very disappointed.” Mr. Sechin, who is also chairman of Rosneft, based in Moscow, said in March that Russia was playing “an active role in decreasing supplies.” The same month, Rosneft’s vice president for finance and investment, Peter O’Brien, said the company was keeping to its target of raising production by 2 percent a year. Lukoil’s deputy chief executive, Leonid Fedun, said in Moscow on Aug. 28 that he credited OPEC for this year’s price rally after the group “very effectively reduced output.”

- LUKOIL rates first among 75 major Russian companies in the business social responsibility rating released by the Trud newspaper, the Agency for Political and Economic Communications and the Russian Anti-Crisis Forum. Social responsibility implies creation and preservation of jobs, tax compliance, fulfillment of obligations before employees, active support of regional social infrastructure. The expert assessment list includes the companies which have been holding leading positions in sales volume in 2008. The expert poll was conducted via close questioning. Twenty six experts, including representatives of trade unions, entrepreneur associations, economists, sociologists, political analysts, publicists participated in the polling in August 2009.

- OAO LUKOIL Press Service would like to inform all concerned parties of the fact that the number of inquiries to the Company in regard to certain Russian commercial entities which supply petroleum products to foreign markets has been on the rise recently. These inquiries which come from potential customers mainly account for the fact that the names of the supplying companies, as well as the content and the design of their websites, suggest they are part of LUKOIL Group. For instance, certain individuals sign contracts to supply large quantities of petroleum products to foreign markets by using the name of an existing company which is part of LUKOIL Group, OAO Komineft. OAO LUKOIL Press Service would like to draw the attention of all interested parties to the fact that LUKOIL Group petroleum products are distributed on foreign markets solely by LITASCO (a wholly owned subsidiary of OAO LUKOIL): http://www.litasco.com/. Therefore, OAO LUKOIL Press Service urges all potential customers to scrutinize the identity of potential partners before entering into any transactions and to abstain from commercial contacts in the sphere of petroleum products supply to foreign markets with any Russian companies claiming to be subsidiaries of LUKOIL Group. OAO LUKOIL Press Service would like to declare that the Company shall bear no responsibility whatsoever for possible undesirable consequences, which may arise as a result of dealing with the said companies.

- Vagit Alelperov, President of OAO LUKOIL, and Elvira Nabiullina, RF Minister of Economic Development and Trade, signed a cooperation agreement between the Company and the Ministry within the framework of the International Investment Forum in Sochi. The document, among other things, provides for cooperation with international energy organizations and foreign oil and gas companies, participation in energy related conferences, forums and other international public events. The parties will also cooperate in disseminating the information on foreign economic activities carried out by Russia’s energy enterprises abroad, including posting of such information online at the Ministry’s web resources. Under the agreement, the Ministry for Economic Development and Trade intends to assist LUKOIL in protecting the Company’s legal interests when performing its foreign economic operations. The Ministry will also provide the Company with the information on activities of the Russian parties to intergovernmental committees for cooperation between the RF and foreign countries, as well as assign LUKOIL’s specialists to expert positions in intergovernmental committees.

- LUKOIL has been named a company with the largest free-float in the RTS Index (1995-2009). Free-float constitutes a portion of a public company’s shares owned by a wide range of investors. A significant amount of the Company’s shares held in public hands implies a high liquidity of its securities, ensures a positive market evaluation and popularity among investors.

- Vagit Alekperov, President of OAO LUKOIL, was named among twenty most efficient leaders of the Russian business community for outstanding achievements and a significant contribution to the Russian economy. Such were the conclusions of the tenth rating titled 1,000 Most Efficient Managers in Russia, a joint project of the Russian Managers Association and Kommersant Publishing House.

October

• Upstream news:

- Vagit Alekperov, President of OAO LUKOIL, and Anatoly Chubais, General Director of ROSNANO, signed a strategic partnership agreement (the Agreement) in Moscow. Under the Agreement, the parties will promote cooperation in commercializing nanotechnologies and introducing them into the oil and gas industry, including at LUKOIL Group companies. For this purpose, ROSNANO will provide LUKOIL Group companies with the information on respective projects in the oil and gas sector. The parties will identify high-priority projects and the regions to pilot-test promising nanotechnologies at the production sites of LUKOIL Group companies. Under the Agreement, the parties shall establish a working group no later than one month after signing the Agreement. The working group shall be responsible for coordination of activities aimed at elaboration and implementation of top-priority projects. Regional working groups can be established as well.

- Innovation developments by LUKOIL engineers have been nominated for the RF Government’s Science and Technology Award. These developments are aimed at the extraction of the so called “non-demanded” hydrocarbon reserves located in Russia’s major oil and gas regions. The non-demanded reserves are those whose studies and development are technically, geographically and environmentally difficult and economically unfeasible given the current market environment and the level of scientific and technical development of the oil and gas industry. To conduct integrated geological studies and develop these reserves, OAO LUKOIL specialists have developed and implemented innovative organizational, methodological and engineering solutions at all stages of the geological survey and development of hydrocarbon fields. This brought practical results with a significant economic effect.

• Downstream news:

- The LUKOIL management decided to suspend operations at Odessa Refinery ( Ukraine ) incorporated in LUKOIL Group. This forced decision was prompted by the activities of the Ukrainian company OAO Ukrtransnafta which ceased to pump oil via the route Lisichansk - Kremenchug - Odessa Refinery on October 1, 2009. The other oil delivery routes to Odessa Refinery suggested by OAO Ukrtransnafta would considerably increase oilstock prices and cause losses, LUKOIL specialists believe. For instance, an alternative route, Belarussian border - Brody - Odessa, would increase transportation costs by USD 5.7 per ton. Besides, ОАО АК Transneft is technically incapable of ensuring uninterrupted oil deliveries to Odessa Refinery via other routes in October, 2009.

- LUKOIL expands volumes of petroleum product trading at the Saint-Petersburg International Commodity Exchange. It is planned to sell up to 10 thousand tons of various petroleum products there in October 2009 and by the end of the year this volume is likely to be increased up to 60 thousand tons. LUKOIL Group refineries will show basic petroleum products they produce and present four new delivery bases. OOO LUKOIL-Reservnefteprodukt (a 100% subsidiary of OAO LUKOIL) will act as the deliveries operator at the exchange. LUKOIL believes that sales of petroleum products at the exchange encourage a better transparency of the market of the Russian Federation.

- Due to a considerable number of inquiries from the mass media concerning the Company’s response to the letter released by the RF Federal Antimonopoly Service (FAS) on October 2, 2009, the OAO LUKOIL Press Service would like to announce the following. Guided by the consumers’ interests and aiming to prevent shortages on the domestic petroleum market, the Company decided to postpone preventive maintenance overhaul of its refineries previously scheduled for September until November 2009. Besides, marketing prices for automobile gasoline manufactured by LUKOIL Group refineries were cut by RUR 400-500 per ton in the Russian Federation starting on October 1, 2009. The current surcharge level for the retail sales comes to RUR 3,500-4,000 per ton and does not imply any retail price increase. As suggested by the Company’s experts, the domestic pricing principle compliant with that applied in the RF for export pricing will result in bankruptcy of the majority of the refineries and a reduction of petroleum product output in Russia. Guided by the commitment to fully comply with the antitrust law and in view of the fact that the definition of a “monopolistic high price” in the RF legislation leaves space for subjective judgment, ОАО LUKOIL is taking an active part in the activities of the FAS working group and has submitted to it a number of proposals concerning the procedure for wholesale pricing for core petroleum products. Therefore, the Company expresses hope that the work aimed at elaborating the domestic market pricing methodology for petroleum products will soon be completed.

- LUKOIL has introduced new premium class motor gasolines, i.e., EKTO Plus 95 and EKTO Sport 98, to the market. A multi-purpose set of additives contained in the new gasoline ensures increased engine capacity and reduced gasoline consumption. Besides, it provides for reduced engine wear and СО2 emissions. The friction modifying agent contained in the fuel reduces mechanical friction in the cylinder area. Application of EKTO Plus and EKTO Sport also provides for injector cleanliness, reduces scaling intensity on inlet valves, protects the engine from corrosion, and emulsification.

- Anatoly Barkov, Vice President of OAO LUKOIL, and Nikolay Reshetov, General Director of the Russian Maritime Register of Shipping, signed a cooperation agreement between the Company and the Register in St. Petersburg. The document provides for further cooperation promotion in design and construction of LUKOIL fleet and transportation equipment. The sphere of mutual interests also comprises safety issues in offshore oil and gas field construction. The offshore ice-resistant stationary platform at Kravtsovskoye field (D-6) located in the Baltic Sea, the stationary offshore ice-resistant shipping terminal as part of the Varandey oil shipping terminal located in the Barents Sea, construction facilities for Yu.Korchagin field located in the Caspian Sea (LSP-1, LSP-2, subsea pipeline, floating storage unit and a single-buoy mooring) are among major joint projects.

- Vagit Alekperov, President of OAO LUKOIL, and Eduard Rossel, Governor of Sverdlovsk region, have participated in the ceremony dedicated to commissioning of the Company’s new petroleum tank farm in Yekaterinburg. The new tank farm will enable ООО LUKOIL-Permnefteprodukt to launch marketing of gasolines and EKTO-brand diesel fuel with improved environmental and performance characteristics in Sverdlovsk region. The petroleum products will be delivered to the tank farm from OOO LUKOIL-Permnefteorgsintez via rail road. The annual turnover of the tank farm comes to 500,000 tons of light and dark (oils and petroleum bitumen in containers) petroleum products per annum. The total tank capacity comes to 12,800 cubic meters. The tank farm is equipped with the facilities for simultaneous storage of 2,000 cubic meters of AI-80 gasoline, 4,000 cubic meters of AI-92 gasoline, 3,000 cubic meters of AI-95 gasoline, 800 cubic meters of AI-98 gasoline, as well as 3,000 cubic meters of diesel fuel.

- All of LUKOIL’s electric power facilities have been granted preparedness certificates for the autumn and winter period (AWP). The AWP preparation program envisaged over 700 activities with the total cost of RUR 1.2 billion. The plans also included more than 650 engineering certifications and industrial safety due diligence procedures. In the course of AWP preparation 26 total overhauls and 159 routine overhauls of the power-generating equipment at the power stations have been conducted. During the summer season,60 kilometers of heat networks of different diameters were re-laid, over 90 kilometers of 6-kilovolt overhead transmission lines were repaired, 87 substations were subjected to capital overhaul and a great number of oil-break switches were replaced with modern vacuum-operated switches, which greatly contributes to the safety of electric power supply and environmental protection.

- LUKOIL became winner in the nomination “High-quality petroleum products for Russian consumers” based on the results of the RF retail market research in 2008 conducted by InfoTEK-Consult, a consulting company.

- The LUKOIL Press Service would like to announce that ОАО “АК Transneft” found a technical opportunity to resume oil supplies through the Druzhba pipeline via the route Belarussian border – Ukrainian border –Brody – Odessa from November 1, 2009. Thus, the Odessa Refinery will receive 195,000 tons of oil in November and will be able to resume production of petroleum products as before the hiatus. In its turn, LUKOIL will continue negotiations with all interested parties regarding a possibility to improve the economic efficiency of oil supplies to the Odessa Refinery. As was reported earlier, at the beginning of October 2009 LUKOIL had to suspend operations at the Odessa Refinery due to the activities of the Ukrainian company OAO “Ukrtransnafta” which ceased to pump oil via the route Lisichansk – Kremenchug – Odessa Refinery on October 1, 2009. The other oil delivery routes to the Odessa Refinery suggested by OAO “Ukrtransnafta” considerably worsened the economics of oilstock deliveries to the refinery. Besides, ОАО “АК Transneft” was technically incapable of ensuring uninterrupted oil deliveries to the Odessa Refinery via alternative routes in October, 2009.

- LUKOIL EURASIA PETROL A.S. (a 100% subsidiary of OAO LUKOIL) paid the final tranche for the shares of the Turkish company Akpet. The payment was made from LUKOIL Group’s own resources. According to previous reports, LUKOIL EURASIA PETROL A.S. acquired 100% of Akpet's shares in November 2008 for USD 555 million. The parties of the transaction reached agreement on progress payment in interest-free installments. Payment of the first tranche in the amount of USD 250 million and of the second tranche in the amount of USD 150 million was made on November 24, 2008 and on April 30, 2009, respectively. The assets of the Turkish company include about 700 filling stations, an extensive terminal infrastructure with the capacity of over 300 thousand cubic meters and a factory to manufacture and pack motor oils. At present, the total number of filling stations owned by LUKOIL EURASIA PETROL A.S. in Turkey is about 750.

• Business/Finance news:

- Vagit Alekperov, President of OAO LUKOIL, was awarded the Vladimir Shukhov Gold Medal. The medal was presented for his outstanding contribution to elaboration of comprehensive engineering and technical solutions in the field of oil and gas production. This award was also granted in recognition of Mr. Alekperov’s excellence in offshore hydrocarbon field development projects. The medal named after Vladimir G. Shukhov, an outstanding Russian scientist and engineer, was established in 1990 by the International Union of Scientific and Engineering Public Associations by virtue of Decree No.547 of the Council of Ministers of the USSR dated July 10, 1989, and is awarded for remarkable achievements in science and technology.

- A conference for young scientists and specialists of LUKOIL Group companies was held in Moscow. The Conference comprised three sections: Upstream, Downstream, and Information Technologies, Automation and Communications. The Conference was attended by about 300 delegates from around 60 LUKOIL subsidiaries, including 9 overseas subsidiaries. The winners of the Scientific and Technical Contest and the Best Young Specialist of the Year Contest were awarded at the Conference. Based on the Contest results, 50 nominees were recognized as best young specialists of the year in 17 nominations. The Contest winners are entitled to a material reward of RUR 40,000 and a 20% increment to their monthly salaries for the period of one year.

- LUKOIL’s performance in the area of insurance and risk management received a high recognition of the Federation of European Risk Management Associations (FERMA) at a forum held in Prague. In 2009, OAO LUKOIL’s activities received the highest recognition and Andrei Elokhin, Head of Insurance, was named Best Risk Manager of the Year. The most outstanding insurance and risk management achievements are annually highlighted by a competent international edition Business Insurance with estimates of Europe’s leading risk managers taken into account.

- Nikolay Vinnichenko, Plenipotentiary of the President of the Russian Federation in the Urals Federal District, visited production and social facilities of OOO LUKOIL-Western Siberia (a wholly-owned subsidiary of OAO LUKOIL) in the cities of Kogalym and Langepas (Khanti-Mansi Autonomous District-Yugra). Nikolay Vinnichenko inspected a 72 MW gas-turbine power station commissioned in 2008 at Vat-Yeganskoye field. It is LUKOIL’s first self-generating facility of the two located in Western Siberia. The Plenipotentiary also visited new residential buildings located in left-bank Kogalym and a number of other social facilities of the city.

- Sergei Kukura, First Vice-President of OAO LUKOIL, received the ARISTOS, one of the most prestigious Russian business awards, in the Financial Director nomination. The ARISTOS award nominees are top managers who have occupied leading positions in the corresponding sections of the TOP 1,000 Russian Managers rating and who meet the highest criteria of professional efficiency. The joint survey was conducted by the Russian Managers Association and the Kommersant Publishing House.

- Improbably, Russia’s oil sector has emerged as one of this country’s few growth industries. While the 12 nations of OPEC have limped through the last year, painfully cutting production as the global economy slumped, Russian oil companies have had an extraordinary run. Profits and share prices at companies like Lukoil and Rosneft are up and the Russian budget deficit is coming down, in part because of oil revenue. The divergent fortunes of Russia and the Organization of the Petroleum Exporting Countries suggest that the Kremlin will never revive the proposal it floated a year ago, then withdrew, that Russia and OPEC coordinate production limits. Russia has benefited handsomely from opening the taps full throttle. Already the world’s largest oil-producing nation, Russia has become the biggest exporter too, surpassing Saudi Arabia as the Saudis reduced production to stay within OPEC’s limits. The jump in oil prices to $82 a barrel only added to Russia’s good fortunes; unlike the members of OPEC, it is banking the full benefits of this price increase because it is pumping at full volume. While OPEC countries shut their wells and idled their pipelines, new tax incentives encouraged companies in Russia to, in effect, drill, baby, drill. A devaluation of the ruble helped exporters, and now new policy changes may lure foreign companies back. (BP, the British oil titan, has also benefited from Russia policy, through its joint venture in Russia, TNK-BP.) It may not be until December that OPEC lifts quotas last set in January, and then only if prices remain elevated, the cartel’s secretary general, Abdullah al-Badri said, Agence France-Presse reported from London. Yet not too long ago, Russian officials seemed ready to revise a long-held axiom that Russia’s national interests were not served by cooperating with OPEC. In 2008, prices had fallen so sharply that Russian oil companies, in just a few months, went from money-minting machines to loss makers. Far from propping up Russia’s government, which relies on oil exports for about 40 percent of the budget, the oil companies were in need of help themselves. In the fourth quarter of 2008, the state oil company, Rosneft, had an unheard-of loss on its pumping assets, though currency gains and refining and gas station margins brought the overall profit to about zero, a close shave for the company. In that quarter, taxes and transportation tariffs equaled 99 percent of the current oil price, the company reported. That left almost nothing for operations: Rosneft was losing money for every barrel pumped out of Siberia. The choice was to throw some of Russia’s daily production of about 10 million barrels a day behind OPEC cuts to force, somehow, a global price recovery, or to liberalize the domestic industry to save teetering companies. Nowhere was the choice more stark than at Rosneft’s showcase project, the Vankor field that is the largest Russian oil development since the collapse of the Soviet Union. The field’s derricks, pipelines and tanks were rising out of a featureless northern waste, though at a great expense. It was the type of new investment needed to sustain the industry. But embarrassingly, after the oil price collapse, it was set to begin operating at a loss if old tax and oil transportation tariff policies were left in place, and capital costs taken into consideration. Last fall, even as Russia’s deputy prime minister, Igor I. Sechin, attended OPEC summits in Vienna and hinted at a possible production cut, solving the immediate problem of keeping projects like Vankor alive at home set the course of Russian oil policy. The mineral extraction tax was lowered and the export tariffs recalculated to the benefit of companies. Oil companies pressed for the indexing of extraction and export taxes to inflation, but did not win. Then, in July, Prime Minister Vladimir V. Putin signed a decree waiving the export tax entirely for east Siberian crude, creating a significant incentive to invest in these new fields, even as world demand for oil had yet to recover and excess capacity was idled elsewhere. The tax exemption has not yet taken effect, but is expected to be retroactive to Sept. 1. At an oil price of $70, the tax is $33.30 a barrel. The Vankor field opened commercial production in August, accounting for much of the Russian increase in production this year. Relatively close to China, by Siberian standards, it will become a source for exports to that country and reach half a million barrels a day. In an investor note, Troika, the investment bank, said the tax holiday was a game-changer for Rosneft in east Siberia, remaking what was at best a break-even project, at current oil prices, into a profitable one. Mr. O’Brien, the Rosneft chief financial officer, said most financing for Vankor had been committed before last autumn’s tax breaks; instead, the tax breaks freed up funds to maintain output at other fields so that new oil coming online from Vankor came in addition to, rather than replacing, existing output. Last year, production dropped by 0.7 percent; Russian officials had suggested they would let it slip to help OPEC support prices. Last autumn, Mr. Sechin, the deputy minister, in meetings with OPEC, had made assurances that Russia would “coordinate” its production policies with the cartel. Rosneft braced for a mandatory cut of 300,000 barrels a day. Instead, this year’s output in Russia is projected to grow by 0.3 percent, and Russia brought Vankor online with fanfare as Mr. Putin pressed a ceremonial button and industry officials stood by and cheered. OPEC officials have hardly disguised their outrage. Abdullah al-Badri, secretary general of OPEC, said he was “not encouraged” by Russia’s policies, Reuters reported from Vienna last month. Mr. Badri said he did not intend to accept an invitation by Russian authorities for another meeting later this year. Sergei Shmatko, Russia’s minister of energy, said Russia had never pledged adherence to quotas — only “cooperation.”

- Anatoly Moskalenko, Head of OAO LUKOIL Main Division of Human Resources, and Hans Jensen, Vice President of the Norwegian Company Falck Nutec, signed a Cooperation Agreement establishing a Corporate Training Center to train personnel for work at offshore oil and gas facilities. Under the Agreement, the Parties will establish a Training and Methodological Council (Scientific Committee) primarily aimed at information exchange in innovation technologies for personnel training, new trends and developments in the oil and gas industry. In addition to representatives of LUKOIL and Falck Nutec, members of the Training and Methodological Council will also include, it is expected, consultants and experts from the world’s leading universities and research centers.

November

• Upstream news:

- OAO LUKOIL Board of Directors held a meeting in Moscow to approve the LUKOIL Group Strategic Development Program for 2010-2019. The program is a revised version of the LUKOIL Group Strategic Development Program for 2008 – 2017 approved by the Board of Directors in 2007. The Program was amended to reflect the updated macroeconomic and marketing forecasts in the RF and foreign countries for 2010 – 2019 in view of the global financial and economic crisis. Considering the economic recession, the ensuing decline in feedstock demand and the instability of the financial and consumer markets, the Company resolved to focus on the growth of free cash flow rather than production growth. The Program's ultimate objective is to ensure competitive profitability through the selection of the most efficient projects.

- LUKOIL conducted an oil spill response exercise in the Caspian Sea aimed at the rectification of the consequences of uncontrolled blowouts in the course of construction of appraisal wells. The exercise was held on the Astra jack-up drilling rig in the vicinity of the Rakushechnaya area and Iskusstvenny Island. Workers from the units and engineering facilities of OOO LUKOIL-Nizhnevolzhskneft, OOO LUKOIL-Avia, EMERCOM of the Russian Federation, the Federal State Unitary Enterprise North-Caspian De partment for Emergency and Subsea Engineering Operations, and also of OAO Center for Emergency and Environmental Operations took part in the drill. According to the simulated scenario of the exercise, on November 23, at 10:00 am, in the course of drilling a well an uncontrolled oil discharge occurred at the Astra jack-up rig. No oil caught fire, nor were there any fatalities or injuries among the platform personnel. As a result of the emergency operations at the jack-up rig, the blowout was halted. However, about 700 tons of oil had leaked into the sea. In order to contain the oil spill, offshore floating booms were assembled around the jack-up rig. However, the “zero” barrier of the floating booms failed to capture the spilled oil. A certain amount of oil detached from the main oil spill and drifted in the direction of Iskusstvenny Island. Based on this scenario, steps were taken to protect the coastline and adjacent land, while a coastal area five kilometers wide and five kilometers long was decontaminated. Specialized vessels collected 450 tons of oil-contaminated water. According to the exercise scenario, three thousand tons of oil-contaminated soil and waste were also collected and transported to the landfill for utilization during the five subsequent days. The contaminated area of the island coast was fully cleaned. The exercise showed that LUKOIL has sufficient capacities and means to prevent and respond to oil spills occurring during the construction of appraisal wells in the Caspian Sea.

- LUKOIL Group total hydrocarbon production available for sale reached 2,214 th. boe per day in nine months of 2009, which is a 1.1% increase y-o-y. Crude oil production by LUKOIL Group increased by 3.3% y-o-y to 1,978 th. barrels per day. Crude oil production of LUKOIL Group in nine months of 2009 totalled 73.28 mln tons. At the same time, crude oil output from the Yuzhnaya Khylchuya field in Timan-Pechora, brought into production in the third quarter of 2008, reached 5.1 mln tons. Natural and petroleum gas output of LUKOIL Group available for sale was 10.94 bcm: output as part of international projects totalled 3.40 bcm (grew by 15.1% y-o-y), output in Russia was down 23.3% y-o-y to 7.54 bcm. Throughputs at the Company’s refineries (including its share in throughput at the ISAB and TRN refining complexes) increased by 10.9% y-o-y in nine months of 2009 and reached 46.55 mln tons. Throughputs at the Company’s refineries in Russia increased by 0.9% y-o-y, throughputs at the Company’s international refineries grew by 49.1% y-o-y.

• Downstream news:

- LUKOIL has commissioned a new sulfuric acid alkylation (SAA) unit with an annual throughput capacity of 300,000 tons at the LUKOIL Neftochim Burgas AD Refinery (Bulgaria). The new SAA unit will make it possible to decommission a technologically outdated SAA unit with an annual capacity of 215,000 tons. Investments in the new production facility came to USD 92.5 million. New cutting-edge technologies by the US company DuPont™ STRATCO® and the Danish company HALDOR TOPSOE were used in the construction of the new SAA unit, which considerably raises the octane number of alkylate output and improves the quality of manufactured automobile gasoline.

- Vagit Alekperov, OAO LUKOIL President, and Alexei Gordeev, Governor of Voronezh region, signed a cooperation agreement between the Company and the Government of the Region in Voronezh. Under the agreement, LUKOIL will supply oil, gas by-products and petrochemicals to enterprises, organizations and the population of Voronezh region consistent with the capacities of its oil-supplying subsidiaries. The Government of the Region, in its turn, will help the Company to implement such long-term projects as construction in Voronezh region of new facilities for the transportation, storage and sales of petroleum products and also reconstruction of the existing ones. Plans also include extending LUKOIL’s network of filling stations with non-cash settlement systems like fuel cards.

• Business/Finance news:

- LUKOIL completed the issuance of an aggregate principal amount of US$1.5 billion in a dual-tranche Rule 144A / Regulation S offering consisting of US$900 million of 6.375% notes due 2014 and US$600 million of 7.250% notes due 2019. The 2014 notes were issued at a price of 99.474% of their face value, resulting in a yield to maturity of 6.500%, and the 2019 notes were issued at a price of 99.127% of their face value, resulting in a yield to maturity of 7.375%. LUKOIL intends to use the net proceeds of the offering for general corporate purposes, including the repayment of existing indebtedness.

- The Press Service of OAO LUKOIL brings to the attention of all concerned parties the fact that on May 5,2009 a company named OAO Southern Generating Company TGK-8 (tax payer ID 484047501, primary state registration number 1094823004847) was registered at the following address: building 5A, Zhukovskogo St., Lipetsk, 398006, using a name confusingly similar to that of OOO Southern Generating Company TGK-8, a LUKOIL Group company. According to the System of Professional Analysis of Markets and Companies (SPARK) the activities declared by OAO Southern Generating Company TGK-8 are as follows: generation, transportation and distribution of electric power, steam and hot water, capital investments in securities and property, consulting on issues related to business operations and management. These activities are similar to those of OOO Southern Generating Company TGK-8, thus posing a threat to impair the economic interests and goodwill of LUKOIL Group. According to Part 3 Article 1474 of the RF Civil Code legal entities are prohibited from using a company name identical to that of another legal entity or similar to it to the extent that it may be confused, provided that the stated legal entities are engaged in similar economic activities and the company name of the latter legal entity was registered in the State Register of Legal Entities earlier than the company name of the former legal entity. ОАО Southern Generating Company TGK-8 (at present ООО Southern Generating Company TGK-8), a LUKOIL Group company, was established on March 22, 2005 under State Registration Certificate No. 000855962. In this connection LUKOIL reserves the right to resort to all measures provided by the RF legislation in order to terminate the activities of the entities illegally using the company name “Southern Generating Company TGK-8”.

- LUKOIL ranked 8th among European, Middle East and African companies and 12th among global companies in the American energy agency Platts 2009 ‘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 2008 ‘Top 250 Energy Companies’ rankings LUKOIL held 8 th and 11 th places, in 2007 – the 6th and 11th places, in 2006 – the 6th and 15th places and in 2005 – the 9th and 16th places respectively.

- LUKOIL has provided financial support to the State Tretyakov Gallery to professionally restore the painting “A Fair by the Quay in Archangel” by the famous Russian painter Konstantin Korovin. The restored painting was unveiled today to the general public as part of preliminary work on the exhibition by Konstantin Korovin, dedicated to the painter’s 150th birthday.

- The OAO LUKOIL Press Service announces that the Company has elaborated and submitted to the Federal Anti-Monopoly Service of the Russian Federation (FAS) application proposals for the Pricing Methodology for petroleum products sold at wholesale markets in the territory of the Russian Federation. The Methodology determines the pricing procedure for the Russian petroleum market, which is based on the public information on wholesale prices in major world trade centers (WTC). Application of the Methodology implies that the prices set by the Russian manufactures on its basis, are considered market prices and are compliant with the requirements of the Russian legislation. The Methodology can also be used for calculating reserve prices for petroleum products during their realization in the stock exchange.

December

• Upstream news:

- LUKOIL bought out a 46 per cent stake in the LUKARCO B.V. joint venture from British Petroleum. Thus, LUKOIL has become owner of a 100 per cent stake in LUKARCO B.V. The transaction amount came to USD 1.6 billion, which will be paid in cash in three installments over the next two years. LUKARCO B.V. owns a 5 per cent share in TengizChevroil (TCO), a joint venture which develops the Tengiz and Korolevskoye fields in Kazakhstan. As a result of the transaction LUKOIL proved reserves increased by 102.0 million barrels of oil and 129.8 billion cubic feet of gas, the oil production increment amounted to more than 13,000 barrels a day.

- The Minister of Oil of the Republic of Iraq Hussein al-Shahristani announced in Bagdad that a consortium consisting of LUKOIL and Norway’s Statoil won the tender to develop the major West Qurna-2 oilfield. The recoverable reserves of the field are estimated at 12.9 billion barrels. LUKOIL and Statoil shares in the consortium are 85% and 15% respectively. LUKOIL and Statoil submitted most competitive bids with a remuneration fee of USD 1.15 per barrel for each barrel extracted over the production level of 1.8 million barrels per day. According to the tender terms, the consortium will be joined by Iraqi state company with a 25% interest, bringing LUKOIL and Statoil shares to 63.75% and 11.25% respectively.

- The OAO LUKOIL Board of Directors approved basic performance indicators for the LUKOIL Group Mid-term Plan for 2010-2012. The document contains both a base case scenario of the plan, elaborated in accordance with the Company’s Strategic Development Program for 2010-2019, and a more conservative development scenario. The Board of Directors also decided that the target values of the Mid-term Plan, as well as the budget and investment program of LUKOIL Group for 2010 would be approved in the first quarter of 2010 in view of the existing macroeconomic trends and an updated net cash flow forecast. The OAO LUKOIL Board of Directors judged the application practice of investment project certificate for assessing the outlooks for hydrocarbon production and investments in the Exploration and Production business segment to be the most efficient one. This method is used for target selection of certain types of pilot work and innovative techniques aimed at the efficiency enhancement of a particular project.

- During an auction of Iraq’s best undeveloped oil fields, Baghdad awarded international companies development rights to seven fields that within a few years could nearly double the country’s oil production. The revenues from production would be critical to helping this oil-dependent country rebuild from the war, but significant obstacles remain to the development of the fields, including continuing violence. While ExxonMobil and other American-based oil companies registered for the auction, none came away with a development deal. But both ExxonMobil and California-based Occidental Petroleum are part of groups that have recently won oil field deals in Iraq. After a week during which bombings killed more than 100 people in a single day in Baghdad, the government seized on the auction — conducted under intense security — as an unmitigated success that would be felt for generations. Though oil companies have shied away from Iraq because of violence, corruption and the lack of a national oil law guaranteeing that deals would survive changes in government, many of the world’s largest oil firms competed aggressively in the two-day public auction. The corporations that won represented a diverse group of nations, including Angola, Malaysia, Turkey and China. They were vying for 20-year service contracts that will pay them a fee for each barrel they produce above a government-set baseline. Despite what are expected to be slim profit margins for the companies, the auction’s biggest winners appeared to be Petronas, a state-owned Malaysian company that was part of three separate consortiums that won the rights to three fields; Sonangol, an Angolan company that will develop two fields; and Lukoil, the Russian oil company, which won the rights to part of the West Qurna field in southern Iraq, the most sought prize of the auction. In the years since the invasion, Lukoil officials lobbied first the Americans and then the Iraqi government for permission to develop West Qurna, given that the company had signed a contract for the field in 1997 with Saddam Hussein, who later annulled the deal. Mr. Shahristani said the deals reached at the auction, combined with other recent oil field development deals, put the country on track to increase its oil output from its current level of 2.5 million barrels a day to 12 million barrels a day by 2016, which would surpass Saudi Arabia’s current production. But that does not account for major hitches in development that could be brought on by technical troubles with the fields, violence and political instability. The auction, the second since the 2003 United States-led invasion, is likely to be the last for some time, with national elections scheduled for March and political wrangling expected to follow them. Also, Jawad al-Bolani, the minister of the interior, told Parliament during a closed session that his ministry — which includes the Iraqi national police — had received information about terrorism operations planned, when more than 120 people were killed during a series of coordinated bombings in Baghdad, according to two members of Parliament who attended the session. Mr. Bolani could not be reached for comment. The lawmakers, Adel Beck Barwari and Hassan Uthman, said Mr. Bolani told the members that as his officers tried to intercept three vehicles believed to be driven by suicide bombers, the drivers detonated their explosives. Mr. Barwari said Mr. Bolani reported that the drivers apparently did not reach their intended targets but killed the officers in the explosion.

- Vagit Alekperov, OAO LUKOIL President, and Igor Sechin, Deputy Chairman of the RF Government, visited the fixed offshore ice-resistant platform (FOIRP) at Yu. Korchagin field, located in the Russian sector of theCaspian Sea. The two officials witnessed the signing of a deed transferring the platform’s drilling unit to the contracting organization, OOO “BKE Shelf”, whose specialists will be drilling technical and production wells. The offshore platform was assembled at the field in the third quarter of 2009. A drilling unit with the capacity of 560 tons for drilling wells up to 7,400 meters deep was assembled on the platform. In total, 26 production wells, three water injection wells and one gas injection well are scheduled to be drilled at the field. The living quarters designed to accommodate 105 people were constructed on a separate jacket. It also comprises a helideck and rescue equipment. The living quarters and the production platform are connected by a 74.2-meter crossover bridge. Commercial oil production is scheduled to begin in March of 2010.

- An agreement on field development and production at Western Qurna-2 was initialed in Baghdad. The parties to the agreement, on the one hand, are LUKOIL (56,25%), Norway’s Statoil (18,75%) and the Iraqi state-owned North Oil Company (25%), all acting as contractors, and, on the other hand, the Iraqi state-owned South Oil Company. The agreement shall last 20 years with the possibility of extension for another 5 years. After having been initialed, the agreement was submitted to the Iraqi Cabinet of Ministers for ratification.

- A scheduled meeting of the Working Group consisting of LUKOIL and ROSNANO state corporation specialists was held in Elektrogorsk (Moscow Region) within the implementation framework of the General Strategic Partnership Agreement signed between the companies on October 8, 2009. The Working group is set up to coordinate preparation and implementation of top priority projects and activities to commercialize nanotechnologies and introduce them to the oil and gas sector, including LUKOIL Group enterprises. The industrial base of OAO RITEK (a wholly owned OAO LUKOIL subsidiary) for oil recovery enhancement reagents production served as the meeting venue.

- Lukoil of Russia and Statoil of Norway formally signed a contract with Iraqi authorities to develop the vast West Qurna 2 oil field. The untapped reserves are seen as critical to Iraqi reconstruction efforts. Lukoil and Statoil had secured the winning bid on the field in Basra Province, in the south of the country, during a second licensing round held a few weeks ago. The deal still requires final approval from Iraqi authorities, likely to be the country’s council of ministers, analysts said. Companies like Lukoil and Statoil are eager to snap up fields in Iraq — even on terms that may offer little immediate reward — to deepen their involvement in a country that appears poised to become a top-tier producer. Iraq has reserves of 115 billion barrels and possibly more. But fields like West Qurna 2, discovered in the early 1970s, have been neglected for decades. Violence in the aftermath of the invasion led by the United States to oust the Iraqi dictator Saddam Hussein has kept the country from recovering its prewar output levels. Lukoil was originally granted rights to develop West Qurna 2 in 1997 by Mr. Hussein, but he rescinded the contract early this decade. Iraq currently produces 2.5 million barrels a day, of which about 1.9 million are exported. But analysts said the country could more than triple that level of production over the coming decade. The consortium led by Lukoil offered to develop the West Qurna field in exchange for $1.15 for each barrel of oil it extracted. That offer beat out bids from companies including BP of Britain and Total of France. The consortium foresees producing up to 1.8 million barrels a day at the field, which Lukoil has estimated contains total recoverable reserves of 12.9 billion barrels. Some analysts said there were dangers for Iraq in signing deals that were so favorable to its own interests. Oil revenues make up as much as 90 percent of the Iraqi national budget, underlining the importance of the deal for the country. Statoil said that it had renegotiated the terms of the deal to give it a somewhat larger stake than was originally foreseen. Under the new terms, Statoil will eventually hold 18.75 percent of the consortium, with Lukoil holding 56.25 percent and a partner from the Iraqi state holding the remainder, said Ola Aanestad, a spokesman for Statoil.

• Downstream news:

- Vagit Alekperov, OAO LUKOIL President, and Igor Rusu, General Director of FSUE Rosmorport, signed a cooperation agreement in Moscow. The document provides for joint activities between LUKOIL and Rosmorport aimed at elaborating a feasibility study of the development, reconstruction, modernization and maintenance of trans-shipment complexes at RF seaports, as well as of other port infrastructure facilities. The companies will cooperate and coordinate their activities to provide towing and refueling services and to ensure oil spill response. The pilots of Rosmorport will make piloting of the LUKOIL Group vessels a top priority. LUKOIL and Rosmorport will jointly construct and maintain specialized vessels that will be used for emergency response while transporting hydrocarbons and petroleum derivatives outside of seaports and oil and gas terminals. Under separate agreements, OOO LUKOIL-BUNKER, the Company’s subsidiary, will provide Rosmorport vessels with bunker fuel both within the Russian Federation and abroad.

• Business/Finance news:

- Nursultan Nazarbaev, President of the Republic of Kazakhstan, met with Company officials during his visit to the new office of the Caspian Administration of LUKOIL Overseas (a fully owned subsidiary of OAO LUKOIL) in Astana. During the meeting, Vagit Alekperov, President of OAO LUKOIL, and Andrey Kuzyaev, President of LUKOIL Overseas, updated President Nazarbayev on LUKOIL's current projects in the country. The Kazakhstani leader appreciated LUKOIL’s work in his nation and wished that the Company would extend the scope of its activities there.

- LUKOIL publishes consolidated US GAAP financial accounts for the third quarter and nine months of 2009. The Company’s net income was $5,285 million in the nine months of 2009, including $2,056 million in the third quarter. EBITDA was $10,237 million. Revenues from sales were $56,802 million. Free cash flow was $1,442 million in the nine months of 2009, including $1,297 million in the third quarter compared to -$84 million in the second quarter. The Company’s tax expenses totalled $15.3 billion in the nine months of 2009, including income tax expense of $1.6 billion. Lifting costs per boe of production in the nine months of 2009 decreased by 19% y-o-y, to $3.39 from $4.16 in the nine months of 2008. Capital expenditures including non-cash transactions in the nine months of 2009 were $4.7 billion which is 40% lower y-o-y. Reduction of capital expenditures was in line with the anti-crisis program developed by the Company in the beginning of the year.

- Vagit Alekperov, OAO LUKOIL President, and Alexander Filipenko, Governor and Chairman of the Khanty-Mansi Autonomous District-Yugra, signed a Supplement Cooperation Agreement between the Company and the Khanty-Mansi Autonomous District in Khanty-Mansisk. According to the agreement, LUKOIL will finance the construction and repair of various social facilities, sporting events and charitable projects throughout 11 municipal entities of the Khanty-Mansi Autonomous District – Yugra, totaling RUR 1.4 billion in 2010.

- Vagit Alekperov, OAO LUKOIL President, and Yury Neyelov, Governor of the Yamalo-Nenets Autonomous District, signed a Supplement Cooperation Agreement in Salekhard between the Company and the Autonomous District. According to the Agreement, LUKOIL will finance a number of projects aimed at constructing and repairing the housing and utilities infrastructure in the Tazovsky and Purovsky regions of the Yamalo-Nenets Autonomous District, totaling RUR 33 million in 2010. The funds will go towards the construction of a 4-flat residential building in Nakhodka, purchase and assembly of houses for the native population, and construction of an administrative-and-utilities center at the Purovsky farm.

- OAO LUKOIL closed the book on an offering of the stock exchange bonds of the BO-06 and BO-07 series with a total volume of RUR 10 billion. The bonds will mature after 1092 days and have a coupon period of 182 days. The coupon rate for each of the series is set at 9.20% p.a. During book building 52 investors’ requests with the coupon rate ranging from 9% to 9.7% p.a. were received. The total demand reached RUR 17.08 billion.

- The Management Committee of OAO LUKOIL approved the Insurance Coverage Program for 2010 for LUKOIL Group organizations. The Program is aimed at providing LUKOIL Group organizations with efficient insurance coverage in 2010 against various risks which might pose a threat to the Company’s operations, the welfare and well-being of the employees, and/or the property interests of the Company's shareholders and investors. The new Program provides for increased property insurance coverage. For instance, the liability limit for a single claim is increased to the equivalent of USD 700 million for property-related interests, insurance of refineries, petrochemical and gas enterprises against all risks.