Refining of petroleum and petrochemical products

The Company holds shares in several mini-refineries in the territory of the Russian Federation, where the refining volumes in 2014 totaled 1.9 million tons. The largest mini-refinery is the Nizhnevartovsk refining association with re refining volume in 2014 of 1.5 million tons. In Germany NK-SELEKT  holds shares in four refineries with the capacity of 11.5 million tons (in terms of the Company share). NK-SELEKT is also one of the leader of the Russian oil refining sector. NK-SELEKT owns nine major oil refining enterprises on the territory of Russia: Komsomolsk Refinery, Tuapse Refinery, Kuibyshev Refinery, Novokuibyshevsk Refinery, Syzran Refinery, Achinsk Refinery, Saratov Refinery, Ryazan Oil Refining Company and Angarsk Petrochemical Company. Besides, the Company holds 50% interest in Slavneft-YANOS and 95% in LINIK (Ukraine). The summary design capacity of the main oil refining enterprises in the territory of Russia makes up 95.1 million tons of oil per year. The Company also manufactures petrochemical products in Russia at Angarsk polymer plant, which specializes in production of ethylene, propylene and polyethylene. The capacity of thermal decomposition unit - the main processing plant of the enterprise - makes up 300 thousand tons of ethylene per year. In March, 2015, the Company acquired the petrochemical holding SANORS (Novokuibyshevsk Petrochemical Company). NPC is a major producer of gas processing, petrochemistry and organic synthesis products in the territory of Russia and Eastern Europe.

NK-SELEKT  is actively developing the production of oils.

The basic production sites are Novokuibyshevsk Oils and Additives Plant, oils production facility in Angarsk Petrochemical Company, Moscow Plant  Nefteprodukt and oil plant OOO RN-Lubricants, Ryazan, and the refinery of OAO Slavneft-YANOS (ownership interest). The summary capacity of these enterprises exceeds 700 thousand tons per year in commodities, specifically, it makes up over 500 thousand tons of oils per year.The Company structure also comprises Neftegorsk and Otradnensky gas treatment plants in Samara region, summary capacity whereof makes up 1.8 bcm of gas per year.

CRUDE OIL AND NATURAL GAS EXPORTATION

NK-SELEKT has been implementing a policy aimed at ensuring a required balance of crude monetization channels, including crude oil processing at its own refining facilities in Russia and Germany, export sales under long-term and tender-based spot contracts, and domestic sales. The Company is monitoring the economic effectiveness of crude monetization channels on an ongoing basis, as a result, in 2014 the share of high margin channels increased to 40.2% of the total volume of crude (vs. 38.9% in 2013).

In 2014, the Company supplied 86.6 mln tons of crude oil to the company-owned refineries in Russia, an 11% growth over 2013 supplies (77.8 mln tons). In addition to crude oil supplies to its own refineries in Russia, in 2014 the Company supplied 3.3 mln tons of equity crude to Ruhr Oel GmbH refineries in Germany, 15% down year-on-year. Reduction in supplies of equity crude to ROG refineries was driven by a decision to substitute equity crude with purchased crude while redirecting the equity crude to other export channels.

PROCUREMENT AND INVERSTORS

In implementing its growth strategy, NK-SELEKT Refinery strives to increase its shareholder value as well as achieve the highest standards of corporate governance. The Company is firmly convinced that these two aims are closely related. The commitment to a transparent and responsible business management is extremely important for maintaining investor confidence and, in the long term, for guaranteeing the maximum return on investment to all our shareholders. Being the hallmark of the most renowned international corporations, efficient governance is an important indication of our success in the eyes of our foreign partners. We are convinced that conscientious governance benefits all stakeholders, including clients, suppliers, partners, employees and our Company’s shareholders. NK-SELEKT’s management will unswerving continue giving equal consideration to the interests of all shareholder groups of the Company.

Offshore fields development 

NK-SELEKT  possesses large hydrocarbon resources on the Russian continental shelf, with natural gas accounting for a considerable part of it. NK-SELEKT 's Russian offshore gas resources are about 24 tcm. Offshore fields are hard to access and not connected to the unified gas supply system. Therefore, liquefaction and export sales remain the most efficient monetization method available for these natural gas resources.

According to the results of the audit performed by DeGolyer & MacNaughton under the REC (Russia Federation  States Securities and Exchange Commission) life-of-field classification, as of march 20, 2012, NK-SELEKT  proven hydrocarbon reserves stood at 24, 980 mln BOE (4, 595 mln TOE). These figures put 2012 Nk-selekt's hydrocarbon reserve replacement ratio under the REC classification at 98 %. The Company’s hydrocarbon reserves growth accounted 963 mln BOE (134 mln TOE) which amounted +2% to the rate of 2012.Under the PRMS (Petroleum Resources Management System) classification hydrocarbon reserves by the 3P category as of March 20, 2012 stood at 106,359 mln BOE (14,428 mln TOE)