Lukoil News - 2010

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

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January

• Upstream news:

- LUKOIL has established a new research center which is named ÎÎÎ LUKOIL-Engineering. This center's goal will be to arrange a uniform management procedure for the research and engineering complex of the Exploration and Production Business Segment. Nikolay Karnaukhov, the former president of Tyumen State Oil and Gas University, has been appointed General Director of OOO LUKOIL-Engineering. Reorganization of the research and engineering complex will take place gradually in stages. During the first stage, the analytical functions of the OAO LUKOIL Main Division of Geology and Development will be transferred over to ÎÎÎ LUKOIL-Engineering. During the subsequent stages, a company’s uniform research and engineering institution will be established as part of OOO LUKOIL-Engineering by linking together the following regional institutions: ÎÎÎ KogalymNIPIneft, OÎÎ PermNIPIneft, ÎÎÎ LUKOIL-VolgogradNIPImorneft and ÎÎÎ PechorNIPIneft.

- Vagit Alekperov, OAO LUKOIL President, signed a development and production agreement at the Iraqi West Qurna-2 field in Baghdad. As was reported earlier, OAO LUKOIL and Norway’s Statoil, acting together as a consortium, emerged victorious in the bidding for the development of this field held in December 2009. The winning bids of LUKOIL and Statoil were: a remuneration fee of USD 1.15 per barrel of oil at the production level of 1.8 million barrels per day. The agreement was ratified by the Iraqi Cabinet of Ministers. The agreement will last 20 years with the possibility of a five-year extension. The parties to the agreement are: Iraq’s state-owned South Oil Company and the contracting consortium formed by the Iraqi state-owned North Oil Company (25%), OAO LUKOIL (56.25%) and Norway’s Statoil ASA (18.75%). Drilling operations will start at the West Qurna-2 field in 2011, with production beginning before the end of 2012. The target production level of over 90 million tons of oil per year is expected to be reached in 2017. The development plan of the West Qurna-2 field calls for additional seismic work, drilling of more than five hundred wells.

• Downstream news:

• Business/Finance news:

- OAO LUKOIL Board of Directors held a meeting in Moscow to summarize the Company’s preliminary performance results in 2009 and set priority tasks for 2010. According to preliminary estimates, hydrocarbon reserves increment under the Russian classification reached 105.8 million tons of reference fuel in 2009. One oil field and 17 deposits in previously explored fields were discovered. One of the 2009 most important achievements was successful joint bidding together with Norway’s Statoil in the tender to develop West Qurna-2 oil field in Iraq. According to preliminary estimates, oil production volume by LUKOIL Group (including share in production in affiliated companies and foreign projects) exceeded the 2008 level and surpassed 97 million tons. Oil production rate growth in the Russian Federation primarily reflects oil production growth in Yuzhno-Khylchuyuskoye field. After the implementation of the geological and engineering programs for carry-over assets and due to extensive commissioning of new production wells in the reporting period not only did the Company succeed in stopping the decline in average daily oil production in the Russian Federation, but it also managed to increase it by 5 thousand tons per day as against 2008. The average oil flow rate of the operating wells in Russia has been kept at the level of 10.5 tons per day for two years running. The oil and gas producing companies of LUKOIL Group launched hydrocarbons production at 7 new fields in 2009. Incremental oil production due to the application of enhanced oil recovery methods by LUKOIL Group came in 2009 to 23 million tons (25 % of the overall production). According to preliminary estimates, gas production (including internal use, gas injection and transportation losses) by LUKOIL Group reached almost 17.5 billion cubic meters in 2009. The decreased production rate is due to limitations imposed by OAO Gazprom on the volumes of gas accepted. Crude oil refining volume by the Company’s refineries (including the refining share by ISAB and TRN complexes) is expected to come to 63 million tons in 2009, including more than 44 million tons at the Company’s domestic refineries. The total refining volume rose by 11% compared with that of 2008.

- At its session of 23 January 2010, the Executive Committee of Russia’s Cross-Country Ski Federation approved the Provisions on the Federation’s Sponsorship Board, now chaired by Vagit Alekperov, OAO LUKOIL President.

February

• Upstream news:

- Vagit Alekperov, OAO LUKOIL President, and Vyacheslav Gaiser, Head of the Komi Republic, have signed Protocol Number Four to the Cooperation Agreement between the Government of the Republic and the Company originally dated November 13, 2006. The document, signed in Syktyvkar on February 10, outlines the main activities of the cooperation for 2010. Under the Protocol, the LUKOIL Group enterprises intend to extract up to 9.3 million tons of oil and up to 550 million cubic meters of gas in the Komi Republic this year. The Ukhta refinery is expected to refine up to 3.9 million tons of oil and manufacture up to 3.8 million tons of petroleum products within the reporting period. Provided that there are no gas intake limitations on the part of the Pechora Hydraulic Power Station, ÎÎÎ LUKOIL-Komi will satisfy the station’s needs by supplying up to 190.23 million cubic meters of petroleum gas and another 18.09 million cubic meters for the housing and municipal needs. Up to 748,000 cubic meters of gas will be supplied from the Dzhebolskoye field for the public services of the municipalities.

- OAO LUKOIL finished an evaluation and independent audit of its oil and gas reserves, as they stand on January 1, 2010. The audit results by Miller and Lents, a US firm, suggest that the Company’s proved hydrocarbon reserves as of January 1, 2010 came to 17.5 billion barrels of oil equivalent, including 13.7 billion barrels of oil and 22.9 trillion cubic feet of gas. The evaluation was performed in accordance with the US Securities and Exchange Commission (SEC) standards until the economic limit of commercial production is reached. The Company resolved to undergo reserves evaluation according to the SEC standards to provide better transparency and compatibility of its reserves data compared with that of its competitors. The evaluation was performed with consideration of the changes in the field development plans approved by the Company’s Board of Directors on November 19, 2009 as part of the Company’s Strategic Development Program for 2010-2019.

- A consortium of three companies, LUKOIL Overseas (56.66%), US Vanco (28.34%) and Ghana National Petroleum Corporation, GNPC (15%), has discovered a significant hydrocarbon accumulation in the Dzata structure of the Cape Three Points Deep Water Block in the Gulf of Guinea offshore the Republic of Ghana. The discovery was announced at a meeting in Accra between Vagit Alekperov, President of OAO LUKOIL, and John Mills, President of the Republic of Ghana. The total area of the block is about 5,200 square kilometers, while the water depth within the block ranges from 200 meters to 3,000 meters. The Dzata-1 structure lies at a depth of almost 2 kilometers. The Dzata-1 well, drilled to a depth of some 4.5 kilometers from the sea level, tapped a 94-meter-thick hydrocarbon column containing a 25-meter multilayer oil and gas pay. The primary reservoir sandstone contains gas and light oil. The well was drilled by a semi-submersible drilling unit for deepwater drilling, equipped with a dynamic positioning system. At present, the drilling is completed, the well is plugged and temporarily abandoned. The newly discovered hydrocarbon reserves are assumed to be quite significant. A program of detailed field appraisal will help assess and commercialize the discovery.

• Downstream news:

- LUKOIL’s gas stations have been rated the best in Russia by Reader’s Digest. It is the fifth time running that this international publishing house names the Russian oil company victorious in the Filling Station nomination of its annual Trusted Brand survey. LUKOIL ranked first in similar ratings of Reader’s Digest in 2006, 2007, 2008 and 2009.

• Business/Finance news:

- The OAO LUKOIL Press Service announces that the judgment and order by the Federal Antimonopoly Service (FAS) Division for the Perm Region handed down on September 9, 2009, which had originally found OOO LUKOIL-Permnefteprodukt guilty of violating antitrust legislation, was officially ruled illegal and invalidated by the Arbitration Court of the Perm Region on February 1, 2010.

- The Board of Directors of OAO LUKOIL approved lists of candidates for election of the Board of Directors and the Audit Commission at the 2010 Annual General Shareholders Meeting. The lists of candidates were based on the nominees put forward by shareholders that own at least two percent of the voting shares.

- The OAO LUKOIL Press Service announces that the judgment by the Federal Antimonopoly Service (FAS) handed down on September 24, 2009 in relation to OOO LUKOIL-Nizhegorodnefteorgsintez and a regulation imposing a penalty in the amount of RUR 2,409,298,055.78 were officially ruled illegal and invalidated by the Arbitration Court of the Nizhny Novgorod Region.

- The OAO LUKOIL Press Service announces that Sergei Chaplygin, currently holding the position of First Deputy Head of OAO LUKOIL Main Division of Supplies and Sales, has been appointed General Director of LITASCO (a wholly owned OAO LUKOIL subsidiary). Sergei Chaplygin has been employed by OAO LUKOIL since 2005 and is Chairman of the LITASCO Board of Directors.

- The USD1.5 billion bonds issued by LUKOIL International Finance (a 100% subsidiary of OAO LUKOIL) in November 2009 received a high appraisal from the business community. Based on the inquiry of the leading banks, the London newspaper Euroweek called this bond issue the Best emerging market corporate deal of the year.

- LUKOIL has started construction of additional premises to expand its headquarters in Moscow. The property will be located at a site with an area of 7,300 square meters, between Kostyansky and Ulansky lanes in the immediate vicinity of the current LUKOIL corporate headquarters on Sretensky Boulevard.

- When coordinated bomb blasts killed more than 120 people in Baghdad in December, days before a scheduled auction of Iraqi oil field development rights, the carnage raised fears that major oil companies might be deterred from showing up for the bidding. An earlier auction attempt, in June, the first since Iraq nationalized its oil production in 1972, had already fizzled when the majors balked at Iraq’s tough bargaining stance. Yet, amid extraordinarily tight security, they did show up: and more important, they were in a mood to gamble. The two-day event turned into the biggest oil field auction in history. After three decades of decline, sanctions and war, Iraq’s oil industry now appears poised to recover its place among the world’s leading producers — and perhaps even to challenge Saudi Arabia for the top spot by the end of the decade. If all the companies participating in the industry’s revival “are reasonably successful in delivering on the commitments we’ve made, it is quite likely we will see Iraq increase its production to around 10 million barrels per day within about 10 years,” Tony Hayward, chief executive of BP, told the World Economic Forum at Davos, Switzerland, last month. Iraq now produces about 2.4 million barrels a day and ranks below the top dozen producers. Saudi Arabia produced about 10.7 million barrels a day in 2008, but reduced output slightly in 2009. It has a capacity of about 12.5 million barrels a day, but could increase that to 15 million. The Saudis, with 266 billion barrels in proven reserves, have far more oil than anyone. Iraq ranks fourth, behind Canada and Iran, with 115 billion proven barrels: but that figure dates from the 1970s. Most oil experts believe that, with new technology, it has a lot more oil to be found and that these reserves will not be particularly difficult to develop. Absent unforeseen political events, “the resources there are relatively easy to bring on-stream,” Mr. Hayward said. That, industry analysts say, is the main reason that oil companies decided to take their chances and meet Iraq’s asking price. Royal Dutch Shell and the state-run company Petronas in Malaysia were among the biggest apparent winners. They will jointly develop the giant Majnoon field, with proven reserves of 12.5 billion barrels and are expected to increase daily output to 1.8 million barrels, from 46,000 barrels now. Lukoil, of Russia, and Statoil, of Norway, will develop the similarly sized West Qurna 2, with reserves of 13 billion barrels. Other companies that came away with major prizes included Gazprom, of Russia, China National Petroleum, Sonangol, of Angola, and Total, of France. The successful bidders will sign service contracts that will pay them a fee ranging from $5.00 to $1.15 a barrel for each barrel they produce above an agreed minimum. U.S. companies went home from the December auction empty-handed, although they were somewhat more successful in the June bidding, when Exxon Mobil, after protracted negotiations, eventually won the right to develop the West Qurna 1 field in a partnership with Shell. The only other U.S. company that will be producing oil in Iraq is Occidental Petroleum, as junior partner in a deal with Eni, of Italy, and Korea Gas, of South Korea, to develop the Zubair field. Still, in the oil-services sector, U.S companies are likely to do better. The success of the auction in December “implies a huge amount of service activity over the next two or three years,” Andrew Gould, chief executive of Schlumberger, the oil field services giant, said during a conference call from Houston. Halliburton, Schlumberger and Bechtel are among U.S. companies in line to win contracts worth billions of dollars to repair pipelines, rebuild terminals and upgrade other infrastructure so that Iraq will be able to bring its crude oil to market, industry analysts say. A revitalized Iraqi oil sector would challenge the pecking order in OPEC and weaken Saudi dominance as the world’s “swing producer” — the single mega-producer that in the past has been able to tweak the global price of oil by adjusting the spigot of its own production. It would also put Iraq on course to pass its perennial rival Iran as the Gulf’s second-largest producer — a development that would imply a significant realignment of power in the region. While Iran would remain the dominant power in the Gulf, even if its oil production slipped behind Iraq’s, Tehran could feel an even greater urgency to develop its nuclear capability in order to maintain that dominance. One big concern for the oil companies is the lack of a comprehensive national law to guarantee that contracts will be honored by future governments. Already, some opposition lawmakers have challenged the legality of those signed by Mr. Shahristani. Another problem is the dispute over control of reserves in the semiautonomous Kurdish region. Baghdad says contracts signed by more than two dozen foreign oil companies with the Kurdistan Regional Government are illegal. The national elections due to be held in March will be watched carefully by the oil industry. Handing over so much control of the nation’s oil wealth to foreign companies is something that “runs against the grain” of many Iraqis, warned Tariq Shafiq, a founding director in the 1960s of the Iraqi National Oil Co. Mr. Shafiq, writing in January in The Iraq Oil Report, questioned whether the next government would be so eager to court foreign oil companies.

March

• Upstream news:

- Vagit Alekperov, OAO LUKOIL President, and Anatoly Chubais, General Director of Rosnano, met in Moscow to discuss joint projects designed to introduce promising innovative technologies to the oil and gas industry. During the meeting the companies’ experts discussed the technologies developed by LUKOIL specialists, which focus on the energy efficiency enhancement of the oil and gas production, particularly, the methods of reservoir recovery enhancement, and the development of fields with difficult-to-recover oil reserves, as well as high-viscosity oil fields. As a result of the meeting, a decision was made to prepare applications for ROSNANO to finance co-developments and to introduce respective projects, particularly those aimed at the establishment of large-scale production of the unique nanoreagent RITIN that allows to considerably enhance reservoir recovery, and the development and production of AC electric motors with application of highly efficient nanostructured magnets.

- ÎÎÎ LUKOIL-Nizhnevolzhskneft (an OAO LUKOIL wholly-owned subsidiary) obtained the results of satellite monitoring for the North Caspian Sea conducted by the Research and Development Center ScanX on the request of the Company. The monitoring was aimed at tracing pollution and identifying its sources during the assembly of an offshore ice-resistant stationary platform at Yu. Korchagin field. After quasi-real processing, the satellite data were sent to specialists of OOO LUKOIL-Nizhnevolzhskneft via the web-service LUKOIL-Kosmosnimki. No oil spills have been traced during the monitoring period within the boundaries of the license areas of OOO LUKOIL-Nizhnevolzhskneft. To trace pollutants and their sources, a multi-satellite monitoring technique was used, which ensured a high frequency of observation and direct satellite image acquisition. These observations efficiently control license areas and the neighboring sites, ensuring a high probability of pollution tracking.

- Russia’s first ERMAK drilling unit was unveiled in Kaliningrad, at a metalworks of OOO LUKOIL-Kaliningradmorneft, a wholly-owned OAO LUKOIL subsidiary. The ERMAK drilling unit was created by order of Eurasia Drilling Company. The unit is equipped with a unique hydraulic mobility system, by means of which the unit can move stepwise in all directions and around its axis to achieve a 360 degree rotation. The unit can be used both for production and exploration drilling and this is one of its unique features. The loading capacity of the drilling unit is 450 tons and its drilling depth is 6,500 meters; it is also equipped with a drill winch of 2,000 horsepower, three drill pumps of 1,600 horsepower each, an upper power drive with a loading capacity of 500 tons, and a rotary table of 1,150 horsepower. The ERMAK drilling unit can be operated in different climatic zones, particularly, in the Far North and in elevated temperatures.

• Downstream news:

- Heads of the Power Generation business segment of LUKOIL Group convened recently in Krasnodar. At the meeting, the executives noted that the primary objective of the LUKOIL investment program in Power Generation was to enhance the efficiency of enterprises in this business segment, particularly, in generation of electric and thermal power. According to the investment program, one of the key factors in improving energy efficiency is to increase the share of modern combined-cycle plants (CCP) in the cumulative rated capacity of generating companies up to 24% by 2019, which is expected to reach 4.7 gigawatt as compared with the current 3.9 gigawatt. Reaching that goal would cut consumption of the reference fuel per unit of generated power by over 20% (down to 280 grams per 1 kilowatt hour).

• Business/Finance news:

- On March 1, LUKOIL launched its new Regional Accounting Centre in Perm as part of the development concept of the LUKOIL Group accounting organizations. It comprises all accounting departments of the Сompany’s main enterprises located in the Perm region: ООО LUKOIL-Perm, ООО LUKOIL-Permnefteorgsintez, ООО LUKOIL-Permnefteprodukt, ООО Permneftegazpererabotka and the accounting department of OOO LLC-International. The development concept of the LUKOIL Group accounting services, formulated to enhance the performance efficiency of the respective subdivisions, calls for the establishment of a uniform service entity in the main regions of the Company’s presence based on the existing services of the enterprises located in this region.

- Vagit Alekperov, OAO LUKOIL President, and Oleg Chirkunov, Governor of the Perm Region, signed a Cooperation Protocol between the Company and the Perm Region for 2010 in Moscow. According to the document, this year LUKOIL intends to invest RUR 650 million of the Company’s funds, obtained due to reduced profit tax rate, in the construction of social facilities within the territory of the Perm Region. In addition, extra financing of the Company’s investment projects will come to RUR 650 million, which will also be obtained due to reduced profit tax rate. Based on the results of the first nine months of 2010, the amount of LUKOIL investments may be increased, provided that the future financial and economic situation allows for it.

- Ivan Masliaev, Head of the Main Division of Legal Support of OAO LUKOIL, became winner in the category General Counsel of the Year during the European Counsel Awards 2010 ceremony hosted by the International Law Office in conjunction with the Association of Corporate Counsel Europe. This was the first time in its history that the European Counsel Award's General Counsel of the Year was given to a representative of a Russian company. In 2010, the General Counsel of the Year was chosen from among 54 candidates nominated by 18 law firms.

- President Dmitri A. Medvedev was forced to intervene in another case that has prompted outrage here, ordering the interior minister to look into a car crash involving an executive from the energy company Lukoil that killed two women, after the police initially declined to investigate. More than violent crimes, though, it is the daily harassment by the police through document checks and solicitation of bribes for any real or contrived offense that seems to rankle Russians most, along with the sense that without money or connections there is no protection. Officials’ failure to open an investigation last month after the car crash involving the Lukoil executive, Anatoly Barkov, prompted outrage among the victims’ family members, journalists and Russia’s influential automobile activists, who suspected a police cover-up to protect Mr. Barkov. In the accident, Mr. Barkov’s Mercedes slammed head-on into a small Citröen hatchback driven by Olga Aleksandrina. Ms. Aleksandrina, 35, and her mother-in-law, Vera Sidelnikova, 72, were killed. Mr. Barkov sustained light injuries. Investigators immediately blamed Ms. Aleksandrina for pulling into oncoming traffic. The chief of Moscow’s traffic police told Parliament that the decision to blame Ms. Aleksandrina suggested incompetence on the part of his officers. But it took an open letter to Mr. Medvedev by prominent cultural and civic figures after weeks of outcry before the president ordered the investigation.

- LUKOIL publishes consolidated US GAAP financial accounts for 2009. The Company’s net income before one-off impairment losses (including impairment loss for Anaran project in Iran, which was abandoned due to international sanctions) reached $7,352 million. The Company’s net income in 2009 was $7,011 million, 23.3% lower than in 2008. EBITDA in 2009 was $13,475 million, which is only 14.7% lower than in 2008. Revenues from sales were $81,083 million. Free cash flow was $2,360 million in 2009. The change in Company’s financial results is significantly better than the change in Urals price, which decreased by 35.5% y-o-y.

- ConocoPhillips, seeking to bolster its balance sheet, is planning to unload some assets, including half of its equity stake in Lukoil of Russia, Reuters reported. As part of a two-year plan to reduce debt through, among things, the sale $10 billion worth of assets, ConocoPhillips said it intended to halve its 20 percent stake in Lukoil in a sale on the open market, as well as divesting itself of other assets, according to the news service. The Houston Chronicle said that the 10 percent stake in Lukoil was worth an estimated $5 billion.

- Russia disclosed that Russian and Chinese envoys had pressed Iran’s government to accept a United Nations plan on uranium enrichment during meetings in Tehran early this month but that Iran had refused, leaving “less and less room for diplomatic maneuvering.” “The clouds are piling up,” said a top Russian Foreign Ministry official, briefing reporters on condition of anonymity, following diplomatic protocol. He said Russia would consider supporting sanctions tailored to prevent the spread of nuclear weapons, though it “is certainly against any paralyzing sanctions that are aimed not at nonproliferation but at punishing Iran or, God forbid, regime change.” At the United Nations, Mark Lyall Grant, the British ambassador, confirmed that political directors from the six countries that could approve sanctions against Tehran had consulted by telephone on Wednesday and that China had finally “agreed to engage substantively on the issue.” Li Baodong, the new Chinese ambassador, emphasized that China is committed to the Nuclear Nonproliferation Treaty. “We think it’s very important to maintain stability and peace in the Middle East,” he told reporters, but he left ambiguous exactly what China is committing to. The Russian official’s comments came after Secretary of State Hillary Rodham Clinton chided Russia for announcing the start-up of a new nuclear power plant it had built at Bushehr, in Iran, which she said muddied the international effort to press Tehran on weapons development. The remarks suggested that China and Russia — the two holdouts among the six countries — are themselves feeling the pressure as demands for sanctions mount. Locking in Russian support for sanctions was a central goal of the Washington’s “reset” with Moscow. But Russia has long resisted measures that would strain its ties with Tehran — a point underscored last week when, during a visit to Moscow by Mrs. Clinton, Prime Minister Vladimir V. Putin said that the Bushehr’s first reactor would begin operating this summer. At the briefing, the Foreign Ministry official said that sanctions would have no effect on the Russian-built plant. He also said Iran had such a limited ability to enrich uranium that he doubted it could build a nuclear weapon soon. But he said Russia had a clear security interest in monitoring the nuclear programs of all countries near its borders. Also, Lukoil, Russia’s largest private oil company, said it was pulling out of a mid-size oil field development in Iran called Anaran because of “international sanctions” against the country. Lukoil made the announcement in a briefing on its results for 2009, saying restrictions on investment had cost the company $63 million last year. Grigory Volchek, a Lukoil spokesman, would not say which sanctions had compelled the pullout from the Anaran project, which includes several oil fields. Oil analysts in Moscow said Lukoil might have decided to adhere to American sanctions because the company owned a chain of gas stations in the United States. A concurrent announcement on by Gazprom, a Russian state-owned energy giant, suggested that the authorities are trying to avoid the impression of bending to United States law when doing business with third parties. Gazprom said it would invest in two development blocks within the Anaran project, Interfax reported.

April

• Upstream news:

- LUKOIL Overseas (a 100% subsidiary of OAO LUKOIL) has completed the drilling of the first exploration well in the Orca structure of the block CI-401 in the Gulf of Guinea offshore the Republic of Cote d'Ivoire. The size of the block CI-401 is 929 square km. The Orca-1X-bis well has penetrated the targeted objectives and discovered thin sandstone reservoirs. The well more then 4,000 m deep from the sea level was drilled at the water depth of about 1,900 m to the south of the Bassama port. Deepwater Pathfinder, a dynamically positioned 5th generation deepwater drillship, drilled the well. During the course of the well construction, oil samples were taken from the Campanian and Turonian sandstones. The data obtained in the course of drilling significantly expanded the available information about the structure of the western part of the Tano Basin and confirmed the availability of an active petroleum system in this area, which is highly promising from the point of view of discovering hydrocarbon fields.

- Vagit Alekperov, OAO LUKOIL President, and Alexander Zhilkin, Governor of the Astrakhan region, signed a cooperation agreement between the Сompany and the government of the region in Astrakhan. Specifically, the document details cooperation projects aimed at hydrocarbons exploration and extraction in the region and in the Caspian offshore, oil and gas production, processing, and transportation and marketing of hydrocarbons and petroleum derivatives on the domestic and foreign markets. The agreement also details plans for cooperation in manufacturing, repairing and supplying oil field equipment, research and engineering support of new developments and technologies for oil and gas production, hydrocarbon processing, and oil and gas pipeline construction.

- First oil was extracted at the Yu. Korchagin field in the Russian offshore of the Caspian Sea. Vladimir Putin, Chairman of the Government of the Russian Federation, participated in the ceremony dedicated to the commissioning of this field. The Yu. Korchagin field was discovered by LUKOIL in 2000. Its 3Р category hydrocarbon reserves exceed 270 million BOE. The maximum expected output is 2.5 million tons of oil and 1 billion cubic meters of gas annually. Between 2004 and 2009, LUKOIL invested a total of RUR 34.4 billion into field development. The Company expects to extract 343 thousand tons of oil till the end of the year.

• Downstream news:

- LUKOIL has introduced the first overseas loyalty program for customers of its filling stations. The program has been presented in Antalya at the conference by LUKOIL EURASIA PETROL (a wholly-owned OAO LUKOIL subsidiary) and attended by about 450 of the Сompany’s dealers in Turkey. The program will distribute cards to filling station customers. A scoring system shall be introduced for professional drivers with fuel rewards, while individual car owners will be able to enjoy a discount system. In March of 2010 LUKOIL EURASIA PETROL implemented a pilot program, which led to the distribution of about five thousand loyalty cards through which more than 100 thousand liters of fuel were awarded. It is expected that over 70 thousand car owners will take part in the loyalty program from now until the end of the year.

- LUKOIL has received the The best filling station of 2009 award. The contest was sponsored by the monthly magazine Modern filling station. The Matrosovo dual-purpose filling station located at the Kantemirovsky bridge on Vyborgskaya Embankment at the Neva River, St. Petersburg, was recognized the best filling station of 2009. The filling station services both cars and small-size vessels during the navigation period at the Neva River. It can handle about 500 fillings per day, including 60 fillings of small size vessels. The onshore section of the station comprises four fuel-dispensing units with three types of gasoline and diesel fuel operating 24 hours a day in the automatic mode. At the quay a sailor-operator fills the water transport with AI-95 gasoline or diesel fuel via one fuel-dispensing unit. In accordance with the safety requirements, the vessels are filled only one at a time and only in daylight. The filling station complies with all environmental requirements applicable to regular filling stations, as well as with the construction standards for offshore petroleum transshipment terminals.

• Business/Finance news:

- The OAO LUKOIL central offices in Moscow hosted celebrations of the 80th anniversary of Gubkin Russian State University of Oil and Gas (the ‘University’). Dubbed University Day, the celebrations included an exhibition dedicated to the history of the University and its cooperation with LUKOIL. Speaking before the lecturers and students of the University, Ravil Maganov, First Executive Vice President of OAO LUKOIL and class of 1977 of the University, said that LUKOIL regarded its business contacts with universities as a foundation for the establishment of a strategic educational alliance that would embrace all trends in the Company’s personnel training.

- Vagit Alekperov, OAO LUKOIL President, met with Ms. Paula Lehtomäki, the Minister for Environment of Finland, in Moscow at the Company's corporate headquarters. The meeting was also attended by Mr. Matti Anttonen, Ambassador Extraordinary and Plenipotentiary of the Republic of Finland to the Russian Federation, and Mr. Juha Nurminen, Chairman of the Board of Directors of the John Nurminen Foundation. The issues of safe oil transportation across the Gulf of Finland and the Baltic Sea were discussed during the meeting. The Company’s president told the Finnish guests that LUKOIL operates two oil terminals located in the Baltic Sea (the Kaliningrad and Leningrad regions), which accept only double-boarded tankers equipped with cutting-edge ballast water treatment systems. The local navigation vessel motion control system of the terminal located in the Leningrad region is also integral part of the vessel motion control system of the whole Gulf of Finland. During recent years the Company has been exercising strict vetting control of the tankers charted for its cargo transportation.

- LUKOIL won the All-Russian award "The best Russian enterprises: dynamics, efficiency, responsibility – 2009” in the category “consistency in non-financial reporting.” The contest was sponsored by the Russian Union of Industrialists and Entrepreneurs for the purpose of selecting the most dynamically developing organizations in the industry as well as contributing to the sustainable development of independent and responsible companies serving long-standing economic interests of the business community.

- An OAO LUKOIL group of specialists received the Russian government’s science and technology award for elaboration and implementation of innovative organizational and methodological solutions and technologies ensuring integrated extraction of the Russian “non-demanded” oil and gas reserves in the development process. The innovation solutions were successfully implemented by a number of LUKOIL Group companies. For instance, introduction of innovation technologies for sidetrack drilling at marginal wells and application of fracturing techniques in Western Siberia enabled the Company to increase oil production from the Achimov deposits within a seven-year period from 100,000 tons yearly to almost 1 million tons and to increment the reserves twofold. In Perm region, extraction of oil reserves has begun from beneath the deposits of potassium and magnesium salts of the unique Verkhnekamskoye field. This came as a result of implementing a special program combining cutting-edge drilling technologies and safe maintenance techniques for horizontal wells with a significant horizontal displacement. Due to this program, over 110 million tons of previously out-of-reach reserves have become recoverable. Industrial application of steam-assisted gravity drainage for development of high-viscosity oil fields in Timano-Pechora oil and gas province allowed to increase the oil production base by 300 million tons and considerably enhance industrial and environmental safety. Application of the environmentally friendly “zero-discharge” principle and techniques for a multi-stage transportation of the field’s products in the Baltic Sea provided for a full development of the highly productive Kravtsovskoye field.

- Vagit Alekperov, OAO LUKOIL President, met with trainees of the Higher Diplomatic Courses of the Diplomatic Academy under the RF Foreign Ministry. The meeting was held at the Company’s headquarters in Moscow. The meeting was attended by the First Vice-Rector of the Diplomatic Academy, the Dean of the Advanced Training Department of the Diplomatic Academy, two ambassadors, and heads of a number of departments of the RF Foreign Ministry.

- A session of the OAO LUKOIL Board of Directors took place in Moscow. Details were finalized regarding the Annual General Shareholders Meeting (the ‘Meeting’). In particular, the Board of Directors decided to hold the Meeting on June 24, 2010, at 11:00 a.m. at the corporate headquarters located in Moscow, at 11 Sretensky Boulevard. The Board of Directors resolved to prepare the list of shareholders eligible to participate in the Meeting as of May 7, 2010.

- Vagit Alekperov, President of OAO LUKOIL, was named one of the top three European oil and gas companies’ CEOs by portfolio managers (buy-side), as a result of the survey carried out by Institutional Investor magazine among investment society. Furthermore, LUKOIL was named the best Russian company in investor relations by analysts (sell-side). The analysts highlighted the fact that nowadays companies’ investor relations policy plays a key role in winning the competition for financial resources. Data products and marketing activities in investor relations prepared and performed by LUKOIL help us to compete successfully and cope with this task.

- Sometime this spring, but still months later than President Obama predicted, Iran may finally face new United Nations sanctions for its illicit nuclear program. Mr. Obama has done a lot to prepare the ground. He has bolstered American credibility with his — since rebuffed — offer to engage with Iran. He signed a new arms reduction treaty with Russia, improved relations with China and is personally lobbying other United Nations Security Council members to support stronger sanctions. We are skeptical that even that will be enough to get Moscow and Beijing to sign on to anything with real bite. In the last four years, the Security Council has passed three far-too-modest sanctions resolutions. Tehran has shrugged them all off and kept churning out nuclear fuel. The good news is that Mr. Obama is also hedging his bets, with an effort — first begun under President George W. Bush — to persuade an ever-widening circle of international corporate interests to eschew business in economically strapped Iran. Total, the French energy company, and Eni of Italy claim they are planning to end new investments in Iran. Major international banks like Deutsche Bank and HSBC have said that they are withdrawing from Iran. Several oil companies have said they would no longer supply gasoline to Iran, including Royal Dutch Shell, Vitol, Russia’s Lukoil and India’s Reliance. Last week, Malaysia’s state oil firm, Petronas, said it was cutting off shipments. Its prime minister then denied it. Promises are clearly cheap. The administration will have to keep pressing these companies to live up to their commitments. And it is time for Mr. Obama’s European partners to think about more formal ways to tighten their own sanctions on Iran. None of this should let the Security Council off the hook. A new resolution would provide important cover for these parallel tracks. Iran is especially vulnerable now, both economically and politically. Its leaders will be watching carefully, especially to see what its longtime trading partners and enablers in Russia and China do. There, the news is not good. While Russian and Chinese leaders told Mr. Obama that they will work seriously on new sanctions, diplomats say their representatives are already seeking ways to dilute any resolution. Brazil and Turkey, which currently sit on the Security Council and have a lot of international sway, also are resisting. Mr. Obama needs to keep pressing Moscow and Beijing hard. He and his European partners need to make clear that Brazil (which seeks permanent Security Council membership) and Turkey (a NATO member) must step up. We don’t know if there is any mixture of pressure — or inducements — that will force Iran to abandon its nuclear ambitions. That’s what makes a memo written earlier this year by Defense Secretary Robert Gates so important. Looking beyond the current maneuvering, he raises some very disturbing and difficult questions that need to be addressed. How will the world contain Iran if it actually produces a weapon? What will Washington and its allies do if Iran acquires all of the parts but decides to stop just short of that? The United States and its allies need to quietly discuss and prepare for those possibilities — without giving Russia, China and others any more excuses not to act. As for the military options under review, we are sure that an attack would be a disaster. We urge anyone who has doubts to listen closely to Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff. He told reporters that while military “options would cause delay” to Iran’s nuclear program, “that doesn’t mean the problem is going to go away.”

May

• Upstream news:

• Downstream news:

• Business/Finance news:

- Vagit Alekperov, OAO LUKOIL President, Manfred Warda, General Secretary of the International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), Lev Mironov, Chairman of the Russian Oil, Gas and Construction Workers’ Union (ROGWU), and Georgy Kiradiev, Chairman of the Council for the International Association of LUKOIL Trade Union Organizations (OAO LUKOIL IATUO), signed a supplement agreement to the Global Cooperation Agreement in Moscow. According to the signed document, the Global cooperation agreement between the parties will be extended for a one-year period.

- OAO LUKOIL Board of Directors granted preliminary approval to OAO LUKOIL's 2009 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 General Shareholders Meeting to be held on June 24, 2010 in Moscow.

- The OAO LUKOIL Management Committee reviewed the annual report titled “Health, Safety and Environment in OAO LUKOIL in 2009”. The report is an approved method to study the performance of the HSE management system by the Company's management. The report contains basic indicators of the effectiveness of HSE within the LUKOIL Group organizations, and also environmental impact parameters and environmental protection measures.

June

• Upstream news:

- LUKOIL participated in an international exercise in the Caspian Sea aimed at the offshore emergency response and containment of possible oil spills in the northern Caspian Sea. The purpose of one of the training stages was to test the emergency response operations at the Yuri Korchagin floating storage unit and related oil spill containment operations at the regional level and also the joint operations of the governmental structures and oil companies in accordance with the regional plan for oil and petroleum-product-spill prevention and containment in the Caspian Sea. The exercise allowed to assess the sufficiency and efficiency of the forces and means of oil spill containment (OSC), the technical capabilities of the relevant equipment located at the Yu. Korchagin field, and the preparation level of the emergency rescue teams. The exercise was necessitated by increased volumes of oil prospecting, production and transportation in the northern Caspian Sea, implementation of the plan for oil and petroleum product spill prevention and containment at the Yu. Korchagin field, and also implementation of the provisions of the Framework Convention for the Protection of the Marine Environment of the Caspian Sea signed in 2003. Inspectors from Azerbaijan and Kazakhstan observed the exercise.

- Vagit Alekperov, OAO LUKOIL President, and Rustam Minnikhanov, President of the Republic of Tatarstan, signed a cooperation agreement between the Company and the government of the Republic of Tatarstan as part of the St. Petersburg International Economic Forum. Under the agreement, the parties will work cooperatively on subsoil exploration, on production and processing of hydrocarbon materials, and also on development of a petroleum-product-supply system and of the production and social infrastructures. Specifically, the agreement calls for supplies of petroleum products by LUKOIL enterprises to the wholesale and retail markets of the Republic of Tatarstan; it also provides for construction of new filling stations and reconstruction of the existing ones. Under the agreement, OAO Tatneft will act on behalf of the government of the Republic of Tatarstan, while OAO RITEK will act on behalf of LUKOIL.

• Downstream news:

- Vagit Alekperov, OAO LUKOIL President, and Vladimir Artyakov, Governor of the Samara region, signed a cooperation agreement between the company and the region. Under the Agreement, LUKOIL will launch a number of construction projects of new petroleum-product-supply facilities in the Samara region, ensure an uninterrupted supply of petroleum, oil and lubricants to the local agro-industrial complex during harvest time, as well as the wholesale and retail marketing of petroleum products. LUKOIL will also conduct continuous quality monitoring of the petroleum products distributed in the Samara region by its subsidiaries and maintain control over their compliance with the technical standards of the Russian Federation.

• Business/Finance news:

- LUKOIL publishes consolidated US GAAP financial accounts for the first quarter of 2010. The Company’s net income was $2,053 million in the first quarter of 2010, which is 126.9% higher y-o-y. EBITDA was $3,729 million, which is 54.5% higher y-o-y. Revenues from sales were $23,902 million. Capital expenditures including non-cash transactions in the first quarter of 2010 remained flat y-o-y and amounted to $1.5 billion. The Company’s policy of capital expenditures control helps to generate high free cash flow which reached $1,399 million in the first quarter of 2010 compared to $229 million in the first quarter of 2009.

- Vagit Alekperov, OAO LUKOIL President, met with Rustam Minnikhanov, President of the Republic of Tatarstan, in Kazan to discuss implementation of the cooperation agreement signed by the Company and the Republic in 2007 and valid till December 31, 2011. During the meeting with the President of the Republic, Vagit Alekperov highlighted successful implementation of all of the Company’s projects in Tatarstan. Later the same day, Mr. Alekperov had a working meeting with Ildar Khalikov, Head of the Republic’s Government. During the Kazan visit, a Memorandum of Intentions was also signed, in which the Company expressed its willingness to participate in the implementation of socially important projects aimed at the restoration of historical and cultural monuments in the ancient city of Bulgar and the island city of Sviyazhsk in the Republic of Tatarstan. The Company also pledged its readiness to assume obligations to sponsor restoration works in the amount of RUR 45 million from 2010 to 2012.

- LUKOIL won “The Formula of the Future" contest arranged as part of the 2nd Annual All-Russia Festival of Social Programs. An Integrated social adaptation program for children with difficult life circumstances and a support program of children’s and youth sports and a healthy way of life were submitted to the Contest.

- An exhibition titled “The Familiar Unknown” was opened today in Moscow at the Pushkin State Museum of Fine Arts, supported by OAO LUKOIL. The exhibition is dedicated to publishing the complete academic catalog “Painting Collection. Germany, Austria and Switzerland of the 15th through the 20th Centuries. Denmark, Iceland, Norway, Sweden and Finland of the 18th through the 20th Centuries”.

- The Pushkin State Museum of Fine Arts presented two OAO LUKOIL-supported projects to the general public in Moscow, namely a restored ancient bath-tub and a numismatic site of the museum. Studies and restoration work on the unique archeological relic of ancient culture, the ceramic bath-tub, have been underway for nearly two years. Fragments of the bath-tub were discovered in the course of excavation of one of the major ancient centers of the Northern Black Sea Region, namely Panticapaeum, located on the hill named the Mountain of Mitridat in the center of Kerch (Autonomous Republic of Crimea, Ukraine). The discovery was made by the museum's archeological expedition in 1985-1986 in the building which was part of a single architectural complex constructed in the central part of Panticapaeum between the late sixth and early fifth centuries BC.

- The OAO LUKOIL Board of Directors approved, by absentee ballot, issue documents for registration of a Program for Non-Convertible Interest-Bearing Documentary Ruble Bonds (‘the Program’) of the following series: 05, 06, 07, 08, 09, 10, 11, 12, 13, 14, and 15, with a total nominal value of RUR 100 billion, placed through public subscription. The placement timing for each of the registered issues under the Program will be determined by the Company based on the market situation and the need for debt financing.

- OAO LUKOIL held its Annual General Shareholders Meeting http://www.lukoil.com/static_6_5id_2108_.html in Moscow to approve the 2009 Annual Report and financial statements based on the fiscal year results. The Annual Report of OAO LUKOIL for 2009 prepared in accordance with the requirements of the Federal Financial Markets Service of the Russian Federation is available at http://www.lukoil.com/static_6_5id_2108_.html and the 2009 Annual Report is available at http://www.lukoil.com/static_6_5id_218_.html.

- A meeting between OAO LUKOIL President Vagit Alekperov and BP Chief Executive Tony Hayward was held at LUKOIL headquarters in Moscow. The parties discussed issues related to cooperation between LUKOIL and BP in the Russian Federation and beyond. Special attention was given to the Gulf of Mexico oil spill. Mr. Alekperov said in particular that BP’s experience obtained in the course of the oil spill containment should serve as the international oil community’s know-how to prevent similar accidents in future.

- Lukoil, Russia’s second-largest oil producer, said that it was not interested in acquiring anything from the $10 billion asset sale with which BP hopes to help pay for its oil spill in the Gulf of Mexico. “We are not wolves, we do not eat the weak,” Vagit Alekperov, the head of Lukoil, told Reuters, when asked whether Russia’s largest nonstate oil firm was interested in BP’s assets.

July

• Upstream news:

- A consortium, including LUKOIL Overseas (a 100% subsidiary of OAO LUKOIL) and Vanco International of USA, has won a tender for exploration and development of two blocks, Est Rapsodia and Trident, in the Romanian sector of the Black Sea. The respective stakes of LUKOIL Overseas and Vanco in the consortium are 80% and 20%. The Est Rapsodia and Trident blocks are located in the Black Sea at water depths ranging from 90 to 1,000 meters. The distance to the coastline is 60-100 kilometers, the nearest town on the coast is Sulina. The total area of the two license blocks is about 2,000 square kilometers. A 3D seismic study is required to assess the geological structure of the blocks.

• Downstream news:

- LUKOIL and the Italian company ERG Renew signed a Memorandum of Understanding to set basic terms and conditions for cooperation in the market of renewable energy sources, with a key focus on the wind-energy sector. In particular, the two companies will evaluate joint business opportunities in some Eastern European countries and Russia.

• 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. The candidates for the Management Committee had been recommended by the President of OAO LUKOIL and approved by the HR and Compensation Committee of the Board of Directors of LUKOIL. The Board of Directors also approved the principal terms of agreements concluded with the members of the Management Committee. The Board of Directors of LUKOIL has also approved its working plan for 2010-2011.

- LUKOIL Finance Ltd. (a 100% subsidiary of OAO LUKOIL) signed a stock purchuse agreement with Springtime Holdings Ltd. (an affiliate of ConocoPhillips) to purchase 64,638,729 OAO LUKOIL ordinary shares (7.6%) at USD 53.25 per share for the total amount of USD 3,442,012,319.25. The transaction completion is scheduled for August 16, 2010. The stock purchuse agreement also envisages an option to purchase up to 98,728,900 OAO LUKOIL ordinary shares (11.61%) in the form of depositary receipts prior to September 26, 2010.

- ConocoPhillips said that it would sell its entire holdings in the Russian oil company Lukoil by the end of next year, The Associated Press reported. The announcement came as Conoco reported that its second-quarter income more than doubled as oil prices increased and refining margins jumped. The chief executive, James J. Mulva, said that Conoco planned to sell its stake in Lukoil, Russia’s largest private oil company, either to Lukoil itself or on the open market by the end of 2011. Conoco had previously announced a $3.44 billion deal to sell 40 percent of its stake to Lukoil this quarter. Mr. Mulva said proceeds of the sale of the remaining 60 percent would be used primarily to repurchase Conoco shares. Over all, Conoco has said it intends to shed $10 billion in assets. In June, the company completed a $4.65 billion deal with Sinopec to sell its stake in a Canadian oil sands project, The A.P. said. Conoco’s earnings in the second quarter were $4.16 billion, or $2.77 a share, compared with $859 million, or 57 cents a share, in the same period a year ago. Revenue rose to $45.69 billion from $35.45 billion. The rebound in energy prices has lifted oil companies’ sales this quarter. Conoco pumped 8 percent less oil in the second quarter, but the average price it received for each barrel increased 37 percent, to $71.09. Natural gas prices also increased 22 percent to $4.50 per million cubic feet.

- The Russian government, which just a few years ago was salting away billions of dollars in oil revenue, is now confronting such a gaping budget deficit that ministers approved a wide-ranging plan Wednesday to sell off state property, senior officials said, according to The New York Times’s Andrew E. Kramer. It would be, by some estimates, the largest privatization program in Russia since the post-Communist sell off of the 1990s. Still, the government plans to sell only minority stakes in the companies, retaining control while letting private investors share a larger part of the risks and profits. Privatizations of some type been expected since the onset of the financial crisis, but the scale of the plan suggested that the crisis in public finance elsewhere in Europe is catching up with Russia, too. Until recently, the Russian government under the former president and now prime minister, Vladimir V. Putin, had been bulking up its share in the economy through nationalizations. The program involves 11 companies, including the national oil company, the national railroad, a fleet of merchant marine vessels, two state banks and a company managing hydroelectric dams, said Aleksei Uvarov, the director of the property department in the ministry of economy. Some of the companies, in fact, grew or were created out of the nationalizations. But officials, and independent economists, say now is a good a time to let the pendulum swing the other way, and sell to private investors willing to buy, The Times said. There will be marked differences compared with the privatizations of the 1990s, he said. The prices will be higher because Russia now has an infrastructure of investment banks and stock exchanges to manage sales on market terms. The plan was considered at a meeting in Moscow, led by Mr. Putin, who afterward remarked that Russia would work to eliminate budget deficits by 2015. But he did not delve into the details of the privatization program that will include the state oil company, Rosneft. After years of oil-driven surpluses, the Russian government had been squeaking by over the last two years by borrowing and by drawing down its savings. The deficit this year, for example, is expected to reach 5.9 percent of gross domestic product, according to the International Monetary Fund. While manageable by the standards of other governments during the recession, it is a woeful reversal for Russia, and apparently led to the decision to sell the stakes. Oil money transformed Russia over the last decade, creating a boom town out of Moscow, lifting millions from poverty and establishing what had looked like rock-solid public finances. Russia still holds $467 billion in gold and foreign currency reserves, saved during the oil boom. Spending this money on the budget, however, could cause the ruble to appreciate, hurting local industry — and would leave the cupboards bare for Russia if oil prices dip again. A main culprit of the deficit is rising military spending, according to the Russian business newspaper Vedomosti. Military outlays are expected to rise 13 percent in 2011, suggesting Russian officials had to chose between two sacred cows, the military and the government’s petroleum and industrial assets. Education and debt service are also expanding items in the Russian budget. Russia’s finance minister, Aleksei L. Kudrin, told reporters Wednesday that the sale of shares in state companies would raise $29 billion over three years. While the largest plan for privatizations since the 1990s, a far smaller portion of the industrial base will be handed over this time, at far higher prices, and only in the form of minority stakes. Many of the valuable oil fields in Rosneft have already been privatized and nationalized once before. That alone might seem a good reason to give investors pause. But the companies are profitable enough to generate interest all the same. Also, Mr. Putin’s successor, Dmitri A. Medvedev, has said he would like to see a lesser role for the government in the economy. In recent years, a practice of raising the price on Russian initial public offerings has meant that half of newly issued shares in Russia lose value after they are floated, Mr. Westin said, another consideration for potential buyers. About 10 percent of Rosneft is now traded on the London Stock Exchange, after an initial public offering that went ahead although Rosneft’s core assets had belonged to Yukos until that company was bankrupted in a contentious tax dispute. Another 24.1 percent of Rosneft could be made available to investors in the new round of privatizations, according to Russian media reports. The shares in the state companies might be sold in initial or secondary offerings or to strategic investors. From about 2003 until the onset of the economic crisis in 2008, more and more of the economy fell under state control. First oil and gas companies, then arms factories, airplane manufacturing plants, cars companies and other enterprises were seized by the state, under various pretexts. State control is particularly prevalent among the larger companies that tend to be traded on stock exchanges. For example, about 60 percent of the market capitalization, or total value of the stocks, of companies traded in Moscow are controlled by the state.

August

• Upstream news:

- LUKOIL Group total hydrocarbon production available for sale reached 2,261 th. boe per day in the first half of 2010, which is a 1.8% increase y-o-y. Crude oil production by LUKOIL Group in the first half of 2010 totalled 48.14 mln tons. Natural and petroleum gas output of LUKOIL Group available for sale was 9.24 bcm (grew by 25.6% y-o-y): output as part of international projects totalled 2.48 bcm, output in Russia was 6.76 bcm. Throughputs at the Company’s refineries (including its share in throughput at ISAB and TRN refining complexes) increased by 8.2% y-o-y in the first half of 2010 and reached 32.41 mln tons. Throughputs at the Company’s refineries in Russia increased by 1.5% y-o-y, throughputs at the Company’s international refineries grew by 26.1% y-o-y.

• Downstream news:

• Business/Finance news:

- Lukoil Finance Ltd. (a wholly owned subsidiary of OAO LUKOIL) raised a USD 1.5 billion loan facility (the ‘Facility’). The Facility was guaranteed by OAO LUKOIL. The loan is an unsecured club facility with a one year maturity. The Facility was arranged by The Bank of Tokyo-Mitsubishi UfJ, Ltd., Citibank, N.A., London branch, ING Bank N.V., London branch, NATIXIS, The Royal Bank of Scotland N.V., WESTLB AG, London branch. Citibank International PLC acted as an agent for the transaction. The proceeds under the Facility will be used for general corporate purposes.

- This August OAO LUKOIL has introduced the Company’s Code of Business Ethics. The Code is a set of the most important business rules of the Company and its employees, ethical corporate business practices, social responsibility and other top priority issues of business ethics. Among other things, the document governs the relations of the Company’s employees with OAO LUKOIL shareholders and investors. The Code specifically focuses on disclosure of information, which could potentially affect the price of LUKOIL securities (inside information). The Company has a very clear procedure set to identify the notion of an insider. It is constantly updating the list of insiders who are to follow special guidelines when dealing with LUKOIL securities. A separate section of the Code is devoted to the corporate relations of the employees. Specifically, the Code eliminates all sexual, age, racial, national, religious and political discrimination of employees.

- Russian newspaper RBC Daily has published an article about OAO LUKOIL’s alleged plans to reshuffle its Management Committee. In this connection, the Company’s Press Service is making an official statement that this information has nothing to do with the facts. Under the Law on mass media, the Company will demand that the newspaper publish retractions of the article.

- LUKOIL publishes consolidated US GAAP financial accounts for the second quarter and first half of 2010. The Company’s net income was $4,002 million in the first half of 2010, including $1,949 million in the second quarter. The Company’s free cash flow in the first half of 2010 amounted to $3,127 million, compared to $145 million in the first half of 2009. EBITDA in the first half of 2010 was $7,433 million. Revenues from sales were $49,755 million. The Company’s tax expenses totalled $14.8 billion in the first half of 2010, including income tax expense of $1.1 billion.

- An extended meeting of OAO LUKOIL Board of Directors took place in Moscow. It was dedicated to the production and financial performance of the Company in the first half of 2010. Specifically, it was noted that the oil stock processing at the Company’s refineries* totaled 32.41 million tons within the reporting period, which is a 8.2% increase compared to the same period of 2009. The Company's share in the processing volume at the ISAB (Sicily) and TRN (the Netherlands) complexes during the first half of 2010 came to 5.4 million tons.

September

• Upstream news:

- LUKOIL Mid-East Ltd. (an operating company of ОАО LUKOIL overseeing the Western Qurna-2 project) started work aimed at deactivating mines and unexploded ordinance within the territory intended for the production and infrastructure facilities of the Western Qurna-2 field in the Republic of Iraq. This territory had not been deliberately mined; however, mines and other munitions here are a result of the military operations during the Iran-Iraq War, the intrusion of Iraq into Kuwait, and the Desert Storm operation. The mine removal operations are conducted by the G4S Ordnance Management Iraq, a subdivision of the G4S Risk Management Company which was appointed contractor based on open bidding results. The mine removal results will be approved, accompanied by the issue of a special certificate, by an authorized body, namely, the RMAC (Regional Mine Action Committee), a structural subdivision of the Environment Ministry of the Republic of Iraq.

- LUKOIL Mid-East Ltd. (an operating company of ОАО LUKOIL under the Western Qurna-2 project) issued four tenders for contract work aimed at the construction of major production facilities. Companies with a minimum of five years’ experience in the implementation of similar projects and a permit for conducting related work in the Republic of Iraq are qualified to participate in the bidding. The average annual turnover of the applicant companies should total between USD 250 million and USD 1 billion for the last 3 years depending on the specific tender.

- Vagit Alekperov, OAO LUKOIL President, and Jiang Jiemin, President of China National Petroleum Corporation (CNPC), signed a Strategic Partnership Promotion Agreement in Beijing within the framework of RF President Dmitry Medvedev’s visit to China. The document fleshes out the Strategic Partnership Agreement signed by the companies on September 8, 2007. Under the new Agreement, the parties intend to promote cooperation through the existing projects, Kumkol, Severnye Buzachi (Kazakhstan) and Aral (Uzbekistan), and also through promising upstream projects in Russia, China and third countries, including via possible asset swaps. The parties have also agreed to consider possible cooperation in the area of hydrocarbon supplies to China.

• Downstream news:

- Vladimir Putin, Head of the RF Government, visited the ООО “LUKOIL-Nizhegorodnefteorgsintez” refinery in the city of Nizhny Novgorod. Vagit Alekperov, OAO LUKOIL President, explained the enterprise modernization process to the Head of Government, specifically, functioning of the catalytic cracking unit, which is in the closing stage. The commissioning of the complex, scheduled for the end of this year, will enable the Nizhny Novgorod refinery to produce annually an additional 1.4 million tons of EURO 4 and EURO 5 automobile gasoline, over 400,000 tons of diesel fuel and 150,000 tons of propylene. The propylene will be transported to OOO “Saratovorgsintez”, a LUKOIL petrochemical facility, for further processing. The total volume of investments in the catalytic cracking complex exceeded RUR 30 billion. The new catalytic cracking complex will create 300 new workplaces and ensure RUR 1.5 billion of additional fiscal charges. At present, more than 3,400 specialists from more than 100 contracting organizations are involved in construction at the site.

- Vagit Alekperov, OAO LUKOIL President, and Leonid Polezhaev, Governor of the Omsk Region, signed a cooperation agreement between the Company and the Region. Specifically, the agreement will enable the company to become more competitive within the petroleum-product market of the Omsk Region and enhance the efficiency of its fuel-and-energy complex, resulting in further development of its mineral-resource base and efficient utilization of the natural resources of the region. Under the applicable legislation, both parties will cooperate in the development of the fuel-distribution industry in the Omsk Region, including through better marketing of petroleum products and extension of the filling-station network. Specifically, LUKOIL will supply all kinds of petroleum products produced by the LUKOIL Group organizations to the consumers in the region.

• Business/Finance news:

- The OAO LUKOIL Press Service brings to the attention of all concerned parties the fact that the Company President, Vagit Alekperov, in his interview to Reuters news agency on the 31st of August declared that LUKOIL “has no relations with Iran and will not be working with Iran until international sanctions in relation to that country are lifted.”

- OAO LUKOIL Press Service announces that Mr. Vagit Sharifov, former Vice President of the Сompany, Head of the Main Division of Control and Internal Audit, has retired from his post. Sergey Malyukov, previously holding the position of Head of the Securities Operations Department, has been appointed Head of the Main Division of Control and Internal Audit.

- OAO LUKOIL has made partial advance payment for a loan of USD 1.2 billion attracted in August 2009, with the maturity of 3 years. Advance payment of USD 500 million was made on account of the Company’s internal funds generated during the first half of 2010, which proves a strong financial position and sufficient liquidity level of the LUKOIL Group.

- Vagit Alekperov, OAO LUKOIL President, inserted a time capsule into the foundation of new buildings under construction at the corporate headquarters in Moscow. As previously reported, the initial construction work at the new facility started at the end of February of 2010. The buildings will be located at a site with an area of 0.73 hectares, between Kostyansky and Ulansky lanes, in the immediate vicinity of the current LUKOIL corporate headquarters on Sretensky Boulevard.

- Dmitry Medvedev, President of the Russian Federation, bestowed the order ‘For Services to Russia’ (third grade) on Vagit Alekperov, President of OAO LUKOIL, in the Kremlin. The awarding decree says, in particular, that the order has been conferred on the company’s senior executive for his great contribution to the development of the oil and gas industry and for a long and faithful service.

- In response to the fact that two U.S. congressmen have sent a letter to the U.S. President accusing LUKOIL of violating sanctions against Iran, the Company’s press service would like to announce the following: LUKOIL has sent an open letter to the said U.S. congressmen to stress once again that the information published by several mass media claiming that LUKOIL engaged in sales of petroleum products to Iran in violation of the United States sanctions subsequent to enactment and implementation of the Comprehensive Iran Sanctions Accountability and Divestment Act of July 1, 2010 (CISADA) is erroneous. Specifically, the letter mentions the fact that LUKOIL has not invested in Iran for many years and the Company’s commercial involvement with Iran has steadily and substantially diminished in recent years in all respects. In the internal review of the international activities of its affiliates, LUKOIL has found that none of its companies involved in trading operations has made sales or shipments of gasoline or other refined petroleum products to Iran since April of 2010, some months prior to the implementation of the refined petroleum sanctions restrictions included in CISADA. In April of 2010, a final sale of gasoline to Iran was completed under a preexisting supply contract by LUKOIL’s trading affiliate LITASCO. The absence of LUKOIL sales of refined petroleum products to Iran since April of this year is consistent with the general rules of the international energy market in respect of sanctions on Iran. At this time, none of the LUKOIL companies has a continuing contractual obligation to supply refined petroleum products to Iran. Nor do LUKOIL companies participate in joint ventures with other parties for the supply of such products to Iran. Moreover, terms included in contracts for the sale of refined petroleum products by LUKOIL’s international trading subsidiary, LITASCO, expressly provide that such products supplied by the company are “Not for sale to countries subject to international sanctions,” including Iran. LUKOIL requires its affiliated companies to comply with international law and applicable laws in all of the countries in which they operate and do business, including the United States. Although the international sanctions regime against Iran has presented significant commercial challenges for the company and its business, LUKOIL has been mindful of this regime and conducted its business accordingly. This is reflected in LUKOIL’s termination and withdrawal from the geological exploration of the Anaran field in Iran, the letter says.

- ОАО LUKOIL and a group of investors, with the involvement of UniCredit Bank AG as arranger, have acquired 42.5 million ordinary shares in the form of ADR under the agreement with ConocoPhillips. By pursuing this transaction, the Company is implementing a program, approved by the Board of Directors, to raise shareholder returns by way of buying its shares back from the market.

October

• Upstream news:

- Vagit Alekperov, OAO LUKOIL President, met with Joseph Oteng-Adjei, Minister of Energy of the Republic of Ghana, members of a delegation of the Cabinet of Ministers of the Republic and also with heads of Ghana National Petroleum Corporation at OAO LUKOIL headquarters in Moscow. The parties discussed implementation of a joint project encompassing exploration, appraisal, development and extraction of hydrocarbons at the Cape Three Points Deep Water block (CTPDW). LUKOIL joined this project in July of 2006. In June of 2009, a new framework agreement was signed. The project participants are LUKOIL (56.66%), Vanco (28.34%) and the state-owned Ghana National Petroleum Corporation (15%). Last February, a major hydrocarbon field was discovered through the drilling of the first exploratory well at the CTPDW block, the Dzata structure. At present, the team is actively preparing for the drilling of new wells. At present the team is interpreting the seismic data and preparing an evaluation program providing for the drilling of exploratory and appraisal wells at a number of CTPDW block structures in 2011 - 2012, including the Dzata structure. All the wells will be approximately 1,900 meters deep.

- LUKOIL loaded the first tanker with the oil produced from Yuri Korchagin field, located in the Russian sector of the Northern Caspian Sea. The Caspian Stream tanker with a deadweight of about 8,000 tons will transport the oil to Makhachkala. Then the first oil batch will be pumped to the port of Novorossiysk via the ОАО Transneft pipeline system. The tankers are expected to be loaded once every ten days.

- Vagit Alekperov, OAO LUKOIL President, and Anatoly Brovko, Head of the Administration of the Volgograd Region, signed a cooperation agreement between the Company and the Region in Volgograd. Specifically, the document sets forth a plan of cooperation between the parties in the areas of exploration, production, refining, transportation and marketing of oil, gas and petroleum products, as well as in the generation, transportation and marketing of electric power. Under the Agreement, LUKOIL will work to modernize the Volgograd refinery, including the construction of a diesel-fuel hydro-treating unit with an annual capacity of three million tons in 2011, reconstruction of a coke-production unit accompanied by the commissioning of a new unit with an annual capacity of one million tons of stock in 2011 and construction of an advanced oil-processing complex by 2014. Implementation of a program designed to enhance production and environmental safety is also part of the modernization process.

- LUKOIL and Vanco, together with the state-owned partners Ghana National Petroleum Corporation (GNPC) and PETROCHI, have developed a program of extensive exploration and appraisal drilling at two licensed areas on the continental slope of Western Africa’s Gulf of Guinea: the Cape Three Point Deep Water (CTPDW – the waters of the Republic of Ghana) and CI-401 (the Republic of Cote d’Ivoire). The company Ocean Rig, a subsidiary of Dryships Inc., has been appointed the drilling contractor for two exploratory wells at the new structures of CTPDW and two appraisal wells at the Dzata productive structure which has proved oil and gas occurrence. Then another exploratory well is to be drilled at the new structure of the CI-401 block. The two contracts, already in place, also provide for another, optional, well to be drilled, with the possibility of extending the contract for another year.

- LUKOIL has concluded the trial of its corporate knowledge-management system and compiled the results. The project is aimed at the identification and efficient use of all the information, experience and skills the Company possesses to achieve higher production efficiency, better management and faster innovative processes, as well as to reduce the time for decision-making in conditions of the rapidly changing market environment. Currently, more than 4,000 specialists from the Company’s headquarters and subsidiaries, including those overseas, are involved in the project. Networking groups (work groups) have been established and are actively engaged in the business segments of Refining & Marketing, Exploration & Production, as well as in a number of other corporate business areas. The tools placed on the in-house corporate Intranet portal enable LUKOIL Group organizations, divided geographically and structurally, to exchange information online. Thus, elaboration of best practices is rapidly improved, success stories are published to embrace the positive experience and to apply it in other divisions of the Company. Despite the fact that this project is still in its trial phase, the cumulative economic effect of its implementation in the Refining & Petrochemicals segment alone exceeded USD 200 million.

- Under the corporate plan, LUKOIL held a command and staff training on oil-and-gas blowout response during the drilling and operation of wells at the fixed offshore ice-resistant platform (FOIRP) at Yuri Korchagin field in Astrakhan. As part of the training, particular tactics were practiced, namely, evacuation of the platform personnel and maneuvers of the Company’s special firefighting fleet in order to better assemble floating booms, contain oil spills and skim the oil. The exercise also included assembly of new check valves, sealing in of wells and techniques of blowout control.

- LUKOIL Mid-East Ltd. (a wholly owned subsidiary of OAO LUKOIL) arranged bidding for 3D seismic exploration at the contract area of the Western Qurna-2 field in Iraq. Terraseis Trading Ltd. (TSTL) submitted the winning bid and signed a respective contract. TSTL has been conducting seismic exploration in Iraq since 2005 and possesses vast operational economic and legal experience, and is well aware of the country’s natural and climatic conditions. The contract is set to run 9 months with a 3D seismic exploration scope of 540 square kilometers.

• Downstream news:

- LUKOIL has launched retail trade in Euro-5 compliant diesel fuel in Russia. The fuel is produced by the Company’s refineries in the cities of Nizhny Novgorod, Perm and Ukhta and is sold under the “EKTO Diesel” brand at LUKOIL filling stations within the regions of Russia where the company has subsidiaries dealing in petroleum-product supplies. The addresses of the gas stations selling this fuel can be found at the website http://www.lukoil.ru/back/azs/azs.asp.

- The OAO LUKOIL Press Service would like to announce that due to the current untoward conditions in the Ukrainian market of petroleum products and the resulting low efficiency of the Odessa refinery, the Company management has decided to move the scheduled maintenance at the refinery from the first quarter of 2011 to the fourth quarter of 2010. According to this plan, shutdown operations at the processing facilities will begin in the fourth week of October this year.

- A meeting of OAO LUKOIL Board of Directors dedicated to summarizing the Company’s performance in the sphere of refining and marketing and approval of key development areas in this business segment for 2011-2012 took place in Istanbul. Under the approved plans, the Company’s oil refining complex will focus on lower costs and power consumption, higher efficiency of capital expenses and maximum use of oil-refining capacities in Russia.

• Business/Finance news:

- OAO LUKOIL Press Service announces that LUKOIL España SL, registered in Madrid in September, 2010, has nothing to do with LUKOIL Group of companies. OAO LUKOIL and companies of LUKOIL Group did not give any approval for the incorporation of LUKOIL brand into the corporate name of the above company.

- Vagit Alekperov, OAO LUKOIL President, and Joseph Oteng-Adjei, the Minister of Energy of the Republic of Ghana, signed a Memorandum of Understanding in Moscow. According to the document, LUKOIL will organize studies for students at Russian oil and gas educational institutions at the request of Ghana's Ministry of Energy. The first stage of the program will last for 5 years, starting in 2011. During this period 50 students will complete their training, and then will be engaged in LUKOIL projects in Ghana. Upon completion of the first stage of the program, the parties will consider the possibility of a 5-year extension of the program that would follow the same terms. LUKOIL will be responsible for all organizational and financial issues related to the students’ studies during the entire training period (visa and transport support, accommodation costs, scholarships, etc.).

- LUKOIL held an informational meeting with the Company’s shareholders who are residents of the city of Volgograd and the Volgograd region. The meeting, which took place in Volgograd, was also attended by representatives of ОАО ‘Registrator NIKOil’, the registrar for the Company’s securities. Specifically, the meeting was dedicated to the discussion of issues related to the rights and responsibilities of shareholders, the dividend policy of OAO LUKOIL, the dividend payment procedure, inherited stock ownership and also to specifics of inherited dividends acceptance. Recommendations were also provided to shareholders as to the protection of their rights when selling the Company’s shares. About 400 shareholders participated in the meeting.

- An exhibition titled “Masterpieces of the European Graphics from the Collection of V.N. and N.V. Basnin” opened in Moscow at the Pushkin State Museum of Fine Arts. The exhibition, organized with the support of LUKOIL, continues the series “Collections and Collectors” dedicated to the history of artwork collection in Russia. It is part of a range of large-scale projects by the Pushkin Museum of Fine Arts dedicated to studies of private collections.

- A jubilee exhibition dedicated to the 150th anniversary of Isaak Ilyich Levitan, a distinguished landscape-painter, opened today with LUKOIL’s support at the State Tretyakov Gallery. The exposition comprises about 300 paintings, sketches, pastels, water-colors and drawings from 17 Russian museums and Moscow's private collections, as well as from two foreign collections. The gem of the exposition is the famous canvas “Golden Autumn”, restored with the Company’s financial support.

November

• Upstream news:

- Vagit Alekperov, OAO LUKOIL President, and Vyacheslav Gaizer, Head of the Komi Republic, signed a Cooperation Agreement between the Company and the Government of the Republic in Syktyvkar. According to the agreement, the parties will cooperate in the area of subsoil geological exploration, production and processing of hydrocarbon materials, development of the oil supply system, production and social infrastructure, as well as in other areas of mutual interest. Specifically, the Government of the Republic of Komi will ensure an equal standing of LUKOIL and its subsidiaries among the companies operating in the Republic, including implementation of projects aimed at the development of heavy high-viscosity oil fields or those in the closing production stage.

- LUKOIL summed up the environmental monitoring results of the Kravtsovskoye (D-6) offshore oil field located in the Baltic Sea. The work was conducted at the Company’s request in 2009. Due to the fact that no new wells had been drilled at the field over the recent years, the scope of the environmental monitoring was somewhat reduced, mainly as far as regional monitoring is concerned, while local monitoring in the vicinity of the offshore ice-resistant fixed platform and the subsea pipeline was conducted practically on the same scale. Intact monitoring was performed in the vicinity of the Kurshskaya Kosa, the Russian and Lithuanian natural and cultural UNESCO World Heritage site. Satellite monitoring of the oil contaminated sea surface based on radar images analysis was carried out as well. Monthly ship observations were performed from motor boats in the immediate vicinity of the offshore ice-resistant fixed platform and at the coastal monitoring points.

• Downstream news:

- Vagit Alekperov, OAO LUKOIL President, and Aleksandr Misharin, Governor of the Sverdlovsk Region, signed a Cooperation Agreement between the Company and the Region in Yekaterinburg. The key goals of the Agreement are: to supply high-quality petroleum products and natural gas, and also ensure related services, to customers of the Region; to expand deliveries and broaden the range of products manufactured in the Region for the Company’s needs; to assist in formulating and implementing a program of development of roadside service facilities for the Region’s public roads in 2010-2012.

- Vagit Alekperov, OAO LUKOIL President, and Viktor Yanukovich, President of Ukraine, participated in a festive ceremony dedicated to the commissioning of a chlorine and caustic soda production unit at Karpatneftekhim, a LUKOIL Group enterprise, in Kalush, Ukraine. The new unit will allow the Сompany to produce 200,000 tons of commercial caustic soda and about 180,000 tons of gaseous chlorine annually through the course of the electromembrane process introduced by UHDE, a German engineering company. Production of gaseous chlorine will fully satisfy Karpatneftekhim’s demand for this kind of raw material used to produce suspended polyvinyl chloride, whose production is scheduled for December, 2010.

- LUKOIL conducted an anti-terror exercise aimed at the disposal of an explosive device and response to a terrorist attack at the petroleum tank farm facility in Sofrino (the Moscow region). According to the scenario, the security service of the tank farm facility discovered a suspicious article attached to a railway tank containing petroleum products. All technological operations at the facility were immediately suspended, the employees and transportation vehicles were evacuated to a safe distance, and the area of the hypothetical explosion was closed off by the security services of the tank farm. All respective law-enforcement, rescue and emergency services and organizations were immediately informed of the assumed incident.

- Vagit Alekperov, OAO LUKOIL President, and Valery Shantsev, Governor of the Nizhny Novgorod Region, signed a Social and Economic Cooperation Agreement between the Company and the Government of the Region in Moscow. According to the Agreement, the parties will work together in the areas of hydrocarbon material processing, transportation and marketing of refined and petrochemical products, manufacturing of oil field equipment, machine engineering and shipbuilding equipment for the Company’s needs, scientific and technological support of new engineering developments and technologies, as well as training of personnel and settlement of employment related issues.

• Business/Finance news:

- OAO LUKOIL repaid in full and ahead of schedule the remaining debt (USD 567 million) under the 3-year USD 1.2 billion loan facility (the 'Facility') raised in August 2009. The Facility was secured by revenues from oil export contracts. The repayment of the Facility was effected from the Company's own funds generated during the three quarters of 2010 and is evidence of the Group's stable financial position and a sufficient level of liquidity.

- LUKOIL ranked 5th among European, Middle East and African companies and 10th among global companies in the American energy agency Platts 2010 ‘Top 250 Energy Companies’ List. All companies were ranked by four main criteria, including asset value, revenues, profits and return on invested capital. Valuation was performed based on Standard & Poor’s database which is, like Platts, a unit of The McGraw-Hill Companies.

- The OAO LUKOIL Press Service would like to announce that Petr Oboronkov, the former First Deputy General Director and Chief Engineer of OOO LUKOIL-Zapadnaya Sibir, has been appointed General Director of OOO LUKOIL-Komi.

- OAO LUKOIL announced the completion of the issuance of an aggregate principal amount of US$1.0 billion of a dual-tranche Rule 144A / Regulation S offering of 6.125% notes due 2020. The notes were issued in two tranches at the same time and form part of the same series. $800 million of the notes were issued at a price of 99.081% of their face value, resulting in a yield to maturity of 6.25%, and $200m of the notes were issued at a price of 102.44% of their face value, resulting in a yield to maturity of 5.80%. The notes have been issued by LUKOIL International Finance B.V. and guaranteed by OAO LUKOIL. OAO LUKOIL intends to use the net proceeds of the offering for general corporate purposes, including the repayment of existing indebtedness.

- LUKOIL Finance Ltd. (a wholly owned subsidiary of OAO LUKOIL) has made a partial advance payment under the 1.5 billion unsecured club facility (the “Facility”) arranged in August 2010, with the maturity of 1 year. The Facility was guaranteed by OAO LUKOIL. The advance payment of USD 1 billion was made with the proceeds obtained from the eurobonds issue in November, 2010.

- LUKOIL conducted an informational meeting in Kaliningrad with the Company’s shareholders residing in this city and the Kaliningrad Region. The meeting was attended by approximately 200 shareholders and representatives of ОАО Registrator NIKoil, the registrar for the Company’s securities. The meeting discussed issues which included the rights and responsibilities of the shareholders, the dividend policy of OAO LUKOIL, changes in the shareholders’ data in the register of the security holders, and also the obtaining of information from the shareholder register.

- LUKOIL Group total hydrocarbon production available for sale reached 2,249 th. boe per day in nine months of 2010, which is a 1.6% increase y-o-y. Crude oil production by LUKOIL Group in nine months of 2010 totalled 72.27 mln tons. Natural and petroleum gas output of LUKOIL Group available for sale was 13.80 bcm (grew by 26.1% y-o-y) of which output as part of international projects totalled 3.65 bcm and output in Russia was 10.15 bcm. Increase in Group hydrocarbon production was due to a larger amount of gas sales to Gazprom and hydrocarbon production growth in international projects. Throughputs at the Company’s refineries (including its share in throughput at ISAB and TRN refining complexes) increased by 6.7% y-o-y in nine months of 2010 and reached 49.70 mln tons. Throughputs at the Company’s refineries in Russia increased by 1.1% y-o-y, throughputs at the Company’s international refineries grew by 21.4% y-o-y.

- The OАО LUKOIL Press Service would like to draw the attention of the business community to the fact that the information found at the web-site: http://www.zaotursunt.ru/index.html that a certain Zao Tursunt is a subsidiary of OAO LUKOIL has nothing in common with the reality. In this connection, the OAO LUKOIL Press Service appeals to the business community to refrain from commercial contacts with Zao Tursunt which passes itself off as a subsidiary incorporated into LUKOIL Group.

- LUKOIL published consolidated US GAAP financial accounts for the third quarter and nine months of 2010. The Company’s net income was $6,820 million in the nine months of 2010 (including $2,818 million in the third quarter), which is 29.0% higher y-o-y. EBITDA increased by 17.1% in the nine months of 2010 and amounted to $11,985 million. Revenues from sales were $76,272 million.

- The OAO LUKOIL Board of Directors, at its meeting in Moscow, approved the key indicators of the LUKOIL Group 2011-2013 Mid-term Plan and also the budget and investment program for 2011. The basic scenario of the Mid-term Plan was developed in accordance with the scenario options of the Russian Federation Budget. The draft plan provides for a step-by-step alignment of the petroleum product duties and the expected rise of the petroleum-product excise tax. The draft is also based on lower duties granted to LUKOIL in the fourth quarter 2010 for the oil produced at the Yu.Korchagin and V.Filanovsky fields in the North Caspian. At the same time, the plan does not take into account the draft law that establishes a higher Mineral Extraction Tax for gas starting from 2011, and for oil – starting from 2012. The 2011 plan was drafted by way of consolidation of the draft budgets of the LUKOIL Group subsidiaries, given the measures aimed at higher revenues, lower costs and better operational performance.

December

• Upstream news:

- Vagit Alekperov, OAO LUKOIL President, and Oleg Chirkunov, Governor of the Perm Region, signed a cooperation agreement between the Company and the Perm Region in Perm. According to the agreement, the parties will work together to create favorable conditions for the development of the raw-material base, for geological exploration works and for the application of new technologies to enhance oil recovery. The cooperation schemes will also include exploration of hydrocarbons, production, treatment and transportation of oil and gas, and also processing of hydrocarbon materials and transportation of the end product. Specifically, the agreement provides for the development and implementation of a program to provide gas supply for the regional settlements. The program provides for construction of inter-settlement gas pipelines at the expense of the Company and its subsidiaries, whereas construction of gas-distribution pipelines and the transfer of the municipal boiler rooms to gas will be financed by the regional and local budgets.

- Vagit Alekperov, OAO LUKOIL President, and Natalya Komarova, Governor of the Khanty-Mansi Autonomous District-Yugra, signed a cooperation agreement between the Company and the District in Kogalym. According to the document, the parties will team up to create favorable conditions for geological exploration of subsoil areas located within the territory of the autonomous district, including enhanced exploration capabilities of oil and gas fields, for increased investments into replenishment of the hydrocarbon material base, for oil recovery enhancement and also for introduction of innovations and cutting-edge technologies into subsoil geological exploration, oil and gas production, transportation and refining.

• Downstream news:

- Vagit Alekperov, OAO LUKOIL President, and John Erik Fyrwald, Chairman and CEO of the Nalco Holding Company, signed an agreement in Kogalym to establish a joint venture on the basis of the Kogalym Chemical Reagent Plant, which is part of OOO LUKOIL-Zapadnaya Sibir property complex. ООО LUKOIL-Zapadnya Sibir will own 34% of the enterprise, while Nalco will have a 66% stake. The estimated chemical reagent production volumes will increase from 5,900 tons in 2011 to 27,830 tons in 2015.

- LUKOIL has been awarded a 2010 Certificate by the World Refining Association (WRA) for best refinery management among Russian and CIS companies.

• Business/Finance news:

- A blood donation day was held at the LUKOIL headquarters in Moscow on December 1 and 2, 2010. Medical technicians drew off blood from 226 employees of the Company headquarters and some subsidiaries. In total, about 100 liters of blood were drawn, which can be used as early as the next day to treat the patients of the Scientific Center for Hematology of the Russian Academy of Medical Sciences.

- An exhibition titled “From GOELRO Plan to Innovations of the 21st Century” (GOELRO is the State Commission for Electrification of Russia) opened with LUKOIL’s support at the State Central Museum of Contemporary History. The exposition visualizes the role played by the GOELRO plan in scientific and technological progress, as well as the process of creating new strategic milestones during the transition period of the economy of the Russian Federation to the innovative development pathway.

- LUKOIL came in second in the 2010 rating of social responsibility for Russian companies. The rating is prepared by the “Trud” newspaper in conjunction with the Agency for Political and Economic Communications and presents a consolidated assessment of social responsibility of Russia’s 75 largest companies.

- LUKOIL held an informational meeting in Perm with the Company’s shareholders residing in this city and the Perm Region. The meeting was attended by approximately 500 shareholders and representatives of ОАО Registrator NIKoil, the registrar for the Company’s securities. Specifically, the meeting discussed issues which included the rights and responsibilities of shareholders, the dividend policy of OAO LUKOIL, the dividend payment procedure, inherited stock ownership, specifics of inherited dividends acceptance, changes in the shareholders’ data in the register of the security holders, and also the obtaining of information from the shareholder register.

- OAO LUKOIL announced the completion of the issuance of U.S.$1.5 billion 2.625 per cent senior unsecured convertible bonds due June 2015. The bonds are convertible into American Depositary Receipts ("ADRs") listed on the London Stock Exchange each representing one ordinary share of OAO LUKOIL.