Premium Business Segments

Overview

The Company has a number of separate business segments, including the sale of jet fuel, ship bunkering, and the production and sale of lubricants, bitumen materials, and petrochemicals.

Individual strategic development plans have been developed by the Company for each segment. The prime objectives for these business units are increasing sales efficiency, widening the geographical area of business, and increasing premium segment market share.

Sales in the premium segments increased almost by 5% to reach 23.9 million tonnes in 2013. The main growth areas are in bunkering and the sale of jet fuel, motor fuels, and lubricant materials.

Ship bunkering

Sales of light and heavy fuels and oils for marine and inland water transport are handled by LLC Gazpromneft Marine Bunker, a subsidiary of the Company that currently holds a leading position in the Russian bunkering market, with an 18.6% market share.

In 2013, LLC Gazpromneft Marine Bunker expanded considerably the bunkering business following the acquisition of two European companies – Gazpromneft Marine Bunker Balkan S.A. (Romania) and AS Baltic Marine Bunker (Estonia). the Company also started ship bunkering in the ports of Sochi and Nizhnekamsk. A bunker terminal was acquired in the port of Novorossiysk, which includes a tank farm and berthing facilities. The Company’s development strategy envisions active growth in international markets over the next three years: in Europe, the Middle East and Asia. It plans to increase its market share in Russia to 27% by 2025.

In 2013, ‘direct-to-ship’ sales of fuel rose by 28% and the total annual sales grew by 11%.

Aircraft refuelling

Gazpromneft-Aero’s sales network is the largest among Russian-based vertically integrated oil companies and consists of 38 integrated fuelling facilities located in Russia and CIS countries. The company is the uncontested leader in aircraft fuel retailing in Russia. Since 2008, Gazpromneft-Aero has been a strategic partner of the International Aviation Transportation Association (IATA) for the supply of aircraft fuel.

The company is the sole supplier of jet fuel at 27 aerodromes owned by the Russian Defence Ministry. Total sales of jet fuel for the Russian Defence Ministry aircrafts reached 560,000 tonnes in 2013. Gazpromneft-Aero has refuelled Russian Defence Ministry’s aircrafts with over one million tonnes of jet fuel since it began operating at military air bases in May 2011.

In the past year, the company has significantly expanded its geographic scope for sales in both domestic and international markets. The company began to provide refuelling services at its own integrated fuelling facilities at the airports in Kemerovo and Orsk. In 2013, aircraft refuelling services were offered by Gazpromneft-Aero in 49 countries (172 cities), that is 11 countries and 57 cities more than in 2012. The Company has ongoing partnership programmes for aircraft refuelling with 125 airports in Southeast Asia, Europe, Africa, Australia, and North and Latin America.

By 2025, the Company plans to create a network of 58 integrated fuelling facilities located at domestic and international airports and to increase jet fuel sales to 5.3 million tonnes. The Company also intends to expand its sales network to 220 airports.

Gazpromneft-Aero, a subsidiary of Gazprom Neft, is engaged in small wholesale and retail of jet fuel, as well as the provision of services for aircraft fuel, and lubricant supply.

Production and sale of oils and lubricants

VIOC Gazprom Neft – Lubricants sells its products in Russia and abroad through the extensive Gazprom Neft filling station chain, and also supplies retailers and online stores, service stations, and assembly lines for automotive manufacturers. The company owns production assets in Western Siberia, European Russia, Moscow Region, Western Europe, and Serbia.

In 2013, Gazprom Neft – Lubricants achieved a historic sales record of 492,000 tonnes of product (an increase of 12% versus 2012) and increased premium sales by 7% compared to 2012. G-Energy sales showed a 26% increase in a stagnating market with intense competition.

In 2013, automotive engine oils under the Gazpromneft brand were launched in Russia and CIS countries. The corporate brand was used for these new segments as part of a comprehensive marketing programme for a retail chain that now comprises over 6,000 retail outlets.

In the reporting year, the Company continued to expand its motor oils sales channels. The Company began delivering new G-Energy FE DX1 5W30 oil approved by General Motors to the Opel/Chevrolet assembly line at Avtotor. A strategic agreement with the Chinese car manufacturer LIFAN was signed to supply G-Family to assembly lines and to the dealer network in Russia. The Company began delivering Baumaster/Sturm premium-grade products under a co-branding programme to retail and service networks in Russia and Ukraine (300 tonnes).

In 2013, Gazprom Neft – Lubricants supplied 100% of the Gazprom Group’s demand for turbine oils; in addition, 1,200 tonnes of a wide range of premium-grade oils and 7,000 tonnes of turbine oils were supplied. 1,350 tonnes of products were also delivered to the Russian Ministry of Defence enterprises.

The company places great importance on the production and sales of motor oils

The Company started to supply premium-graded products to key Russian industrial enterprises: SDS, SUEK, UGMK, Apatit, Russian Coal, Polyus Gold, as well as to Belarusian enterprises BelAZ, MAZ, MTZ, and Belarusian Metallurgic Plant.

In 2013, Gazprom Neft – Lubricants continued to expand into international markets and now sells products in 42 different countries.

Bitumen materials

In 2013, overall sales of bituminous materials totalled 1.8 million tonnes. Of particular note is the record volume in Russia of 1.1 million tonnes of bitumen produced at the Moscow Refinery in 2013. LLP Gazprom Neft Bitumen Kazakhstan, acquired in 2012, produced over 50,000 tonnes of bitumen in 2013.

All Gazprom Neft refineries are involved in the production and sales of bitumen materials. Gazprom Neft produces road, building and roofing grade bitumen, polymer-bitumen binders (pbb) and bitumen emulsions. at the end of the reporting year, Gazprom Neft maintained its leadership in the russian bitumen market, with a 30% share.

Gazprom Neft is always in search of new markets and state-of-the-art technology. In 2013, Gazprom Neft and Total, one of the leading petroleum product manufacturers in Europe, established LLC Gazprom Neft-Total PMB, a joint venture engaged in production of modern polymer bitumen materials.

At year-end 2013, the Company acquired Russia’s largest Ryazan polymer modified bitumen plant – CJSC Ryazan Pilot-Production Plant for Petrochemicals (ROZNKhP).

As a result, Gazprom Neft increased the sales of polymer-asphalt binders and bitumen emulsions by almost 70%.

Sales of bitumen materials, mn t

Source: Company data

Petrochemical industry

Gazprom Neft’s petrochemical production units are located at the refineries in Russia (Omsk, Yaroslavl, and Moscow) and Serbia. The Company’s share of the overall Russian consumption of aromatic hydrocarbons in 2013 was 17%, while its share of exports was 32%.

Gazprom Neft is Russia’s largest producer of a range of basic petrochemical products: aromatic hydrocarbons (benzene, paraxylene, orthoxylene, toluene) and propane-propylene fraction (propylene liquefied petroleum gas).

Sales of the Company’s aromatics were 304 thousand tonnes in 2013, of which 295 thousand tonnes were sold in Russia. The output of propane-propylene fraction by the Company’s refineries was 317 thousand tonnes in 2013.

LLC NPP Neftekhimia, a joint venture with OJSC SIBUR Holding, expanded its range of titan-magnesium catalysts as part of a programme to improve product quality and unify its branded range of polypropylene.

Gazprom Neft is planning a deeper processing of basic petrochemical products by upgrading existing refinery facilities and by implementing major capital projects for the construction of large-scale production facilities.