Stakeholder Engagement

Gazprom Neft believes thatstakeholder engagementThe Company’s stakeholders are the organisations and individuals whose interests are in some way or another affected by the decisions or operations of the Company and who, in turn, can affect the Company’s performance. is essential to the implementation of our sustainable development strategy. The Company engages with its stakeholders based on the principles of transparency and availability of the information that it provides. Gazprom Neft maintains a continuous dialogue with all stakeholders.

Following recommendations of ISO 26000:2010 (‘Guidance on Social Responsibility’), the Company is committed to respecting the interests of its stakeholders – not just those who may be connected to the Company’s own goals and commitments, but also those reflecting the interests of society as a whole.

The Company identifies a number of key stakeholder groups whose interests are most noticeably linked with its activities and who, in turn, can have the most significant impact on the Company’s ability to implement its strategic goals:

  • Shareholders and investors;
  • Public authorities;
  • Personnel;
  • Business partners, suppliers, and customers; and
  • Local communities.

The main priorities of stakeholder engagement are stated in the corporate regulations (the Corporate Code of Conduct, the Corporate Code, and documents governing individual business areas).

In forming its approaches to shareholder engagement, the Company takes into account the level and scale of the relationships (federal, regional or local), as well as the extent of formalisation (informal/fixed in the contracts or other documents). The Company seeks to build a balanced approach to stakeholder engagement that takes into account the interests of all stakeholders and contributes to achievement of the sustainable development goals.

The scope of issues addressed in the dialogue depends on the internal and external social environment continuously analysed by the Company and reflects the Company’s strategic road map and stakeholders’ priorities.

The Company takes steps to involve stakeholders in the implementation of its projects. This allows the Company to adjust the progress of projects according to stakeholders’ expectations and to identify and eliminate existing risks in good time.

Key stakeholder engagement areas and lines
Stakeholders Engagement areas Engagement lines
SHAREHOLDERS AND INVESTORS Increasing the Company’s value and investment attractiveness
  • Improving the quality of corporate governance
  • Strengthening the Company’s brand and reputation
PERSONNEL Labour efficiency, product quality, occupational safety, environmental protection, respect for human rights, and generation and implementation of social programmes targeted at staff and local communities
  • Working to increase occupational safety
  • Creating the necessary conditions for the professional growth and social well-being of employees
  • Improving material and non-material incentive schemes
  • Social support to workers and veterans
  • Staffing of major projects and related opportunities for professional growth
  • Developing a dialogue with trade unions
  • Establishing an effective corporate culture
  • Introducing the new version of the Corporate Code
RUSSIAN GOVERNMENT AUTHORITIES Meeting the challenges of sustainable development in the industry and in the Company’s operating regions
  • Participation in the drafting of legislation
  • Responsible and efficient use of human and natural resources
  • Promoting the socio-economic development of the regions
  • Introducing innovations
REGIONAL AND MUNICIPAL AUTHORITIES The Company’s regional policy, meeting the challenges of regional socio-economic development
  • Support for regional development projects within the Home Towns social investment programme.
BUSINESS PARTNERS, SUPPLIERS, AND CUSTOMERS Compliance with contractual obligations and ensuring regular supply, better product quality and improved occupational and environmental safety
  • Implementing programmes to improve the quality of products and services
  • Developing long-term mutually beneficial relationships
  • Inclusion of contractors in the perimeter of the corporate standards concerning industrial and environmental safety
  • Introduction of anti-corruption procedures
LOCAL COMMUNITIES IN THE OPERATING REGIONS Company’s regional policy, programmes to support local communities
  • Improving the efficiency of the Company’s social programmes
  • Implementing the Home Towns social investment programme
  • Implementing environmental measures
  • Holding public hearings and consultations, volunteering and charitable activities
PUBLIC ORGANIsATIONS The Company’s regional policy and environmental protection
  • Cooperation within the Home Towns social investment programme, including by holding social initiative grants competitions
  • Cooperation in meeting the challenges of environmental protection

KEY MECHANISMS OF STAKEHOLDER ENGAGEMENT:

  • Interaction formalised in business contracts, agreements and cooperation arrangements;
  • System of corporate communication channels;
  • Regular employee and customer surveys;
  • Public opinion studies within the Company and its operating regions;
  • Negotiations and meetings;
  • Public hearings;
  • Joint working groups;
  • "Hot lines" for employees and customers;
  • Investor presentations;
  • Membership of public and expert associations; and
  • Conferencing.

SHAREHOLDERS AND INVESTORS

The relationship between the Company and its shareholders and investors is based on the principles of responsible fulfilment of obligations; compliance with business ethics; as well as transparency and availability of information needed to make investment decisions.

The Company abides steadfastly by the applicable laws, aimed primarily at ensuring respect for and protection of shareholder rights. According to Gazprom Neft’s Articles of Association, the Company’s authorised capital consists of 4,741,299,639 ordinary shares. As of the end of 2013, OJSC Gazprom Neft had no preferred shares. The major shareholder of OJSC Gazprom Neft stock is OJSC Gazprom. It holds, directly and indirectly, 95.68% of the Company’s total ordinary shares. The remainder of ordinary shares (4.32%) is distributed between minority shareholders – individuals and corporations. As of 31 December 2013, 8,988 business accounts were registered in the shareholder register, including: 14 corporations, 8,969 individuals, one beneficial owner and four nominees.

The procedures for the preparation and holding of general meetings of shareholders18 ensure that all shareholders can review all necessary information, freely register to take part in a general meeting of shareholders, and vote. The procedure for conducting the general meeting of shareholders promotes equal opportunity for all shareholders, by allowing them to express their opinions and raise questions on the agenda (including questions addressed to the members of the Company’s Management Board).

The Company places great emphasis on proactive engagement with existing and potential shareholders and is always seeking to increase the level of information disclosure.

Gazprom Neft publishes the “Management’s analysis of financial position and operating results”, on a quarterly basis as an attachment to OJSC Gazprom Neft financial statements, prepared in accordance with US GAAP and IFRS standards. For a detailed analysis of the Company’s performance, a Databook and Datafeed are also published.

The Company implements a project to improve the internal control system over reliability of financial reporting. These activities are mainly aimed at minimising the risk of data corruption and enhancing transparency in financial reporting, as well as ensuring compliance with Federal Law No. 402-FZ of December 06, 2011 “On Accounting”. In 2013, the project activities were carried out in OJSC Gazprom Neft-Noyabrskneftegaz, the Gazprom Neft-Muravlenko branch of Gazprom Neft-Noyabrskneftegaz, LLC Gazprom Neft-Khantos, OJSC Gazprom Neft – Omsk Refinery, OJSC Gazprom Neft – Moscow Refinery, and LLC Gazprom Neft Business Service. The activities are planned to be completed by the year-end 2014 in OJSC Gazprom Neft and in the following subsidiaries: LLC Gazprom Neft-East, LLC Gazprom Neft Marine Bunker, CJSC Gazprom Neft Orenburg, LLC Gazprom Neft – Lubricants, CJSC Gazpromneft-Aero, CJSC Gazprom Neft-North-West, and LLC Gazprom Neft Procurement.

The Company regularly organises investor conference calls in which the management team participates, holds meetings with investors and shareholders, and participates in all large conferences for investment and broker organisations.

The Annual General Meeting of Shareholders held on 7 June 2013 adopted a decision to pay RUB 44.1 billion as dividends for 2012, or 23.94% of the 2012 net profit calculated under IFRS; this was 27.4% higher than the dividends paid for 2011. A new Company dividend policy was approved in 2013. The payout will be 25% of net income, as calculated under IFRS. 2013 was the first year when the Board of Directors approved the payment of an interim dividend. The Extraordinary General Meeting of Shareholders held on 30 September 2013 decided to pay RUB 4.09 per share as interim dividends for the first half of 2013.

In 2013, the Company held about 250 meetings with investors; the investor relations team took part in 21 conferences for financial and broker organisations and organised two tours for investors (non-deal roadshows). Each year the Company organises an Investor Day which is attended by the top management of OJSC Gazprom Neft. During this event, analysts and investors from investment companies may ask questions and receive answers directly from the Company’s management.

Gazprom Neft also regularly organises roadshows at its industrial and production sites to give investors and analysts an insight into the Company’s operations. In 2013, Gazprom Neft’s shareholders were given the opportunity to see the oil production processes at the Krasnoleninskoye field (production from the Bazhenovskaya suite) in the Khanty-Mansiysk Autonomous District, and oil refining at the Moscow Oil Refinery.

In 2013, the Company was honoured with several investor relations awards.

  • OJSC Gazprom Neft’s corporate website was shortlisted in the Best Corporate Website category, for International Companies.
  • The Company won several prizes at the annual event held by IR Magazine Russia & CIS Awards – the only specialist international magazine to award prizes to the best global IR teams in the last 19 years. In 2013, Alexei Yankevich, OJSC Gazprom Neft’s Deputy CEO for Economics and Finance, came second in the Best CFO category.
  • The Company won the 4th Saint Petersburg corporate websites and annual reports competition, in the “Best IR Section of Corporate Site” category.

Gazprom Neft’s annual report won several awards in the annual reports competitions held among Russian companies. In the 12th Annual International Investment Forum Sochi-2013, OJSC Gazprom Neft’s Annual Report was the Overall Winner in the tenth Competition of Joint Stock Companies’ Annual Reports.

  • According to the results of the 16th Annual Federal Contest for Annual Reports and Websites, organised by the Securities Market Journal and Investor.ru social network (and assisted by the Russian Central Bank’s Financial Markets Service), Gazprom Neft’s Annual Report ranked second in the main category “Best Comprehensive Corporate Presentation” and also won awards for: “Best Annual Report in the category ‘Best Annual Report in the Fuel and Energy Sector’”, and “Best Annual Report of Securities Issuers in the North-West Federal District”.
  • In the traditional Annual Reports competition hosted by the Moscow Exchange, the Company won “Best Report on Corporate Social Responsibility and Sustainable Development”, and also came second in the “Best Interactive Annual Report” category.
  • The Company also was nominated in the special category for High Quality of a Sustainable Development Report within the national contest “Russian Business Leaders. Trends and Responsibility 2013”

The Company took part and was awarded in several prestigious international annual reports contests for the first time.

  • Gazprom Neft’s Annual Report won gold at the ARC Awards (the Academy Awards of Annual Reports). The ARC Awards contest is the most widely known international contest that assesses the quality of annual reports. Gazprom Neft’s Report won the “Non-English Reports” category for the “Oil and Gas Sector”.
  • Gazprom Neft’s Annual Report was also the gold medal winner in an annual report contest hosted by the LAСP (League of American Communications Professionals LLC) in the “Energy-Petroleum/Gas/Fuel” sector. The panel of the contest – globally known as a reputable quality indicator of financial reports – scored Gazprom Neft’s Annual Report 98 points out of 100.

THE COMPANY’S EMPLOYEES

The Company’s relations with its employees are based on principles such as respect for the individual and for employee rights (including non-discrimination), the right to freedom of association and collective bargaining in compliance with the current legislation, transparency of employee policies, economic justification and fairness in performance evaluation, and openness to dialogue.

The Company’s interaction with its employees is governed by the Corporate Code, the Corporate Code of Conduct and mutual obligations stipulated in employment contracts.

Trade unions play an important role in the way the Company deals with its employees. They take part in discussions and problem resolving associated with employees’ professional development and labour rights. Gazprom Neft’s interaction with trade unions is based on the principle of social partnership.

Gazprom Neft places great importance on the building of an efficient and transparent corporate communications system. The Company has a communication channel system enabling employees to make Gazprom Neft’s top management aware of their opinions, and allowing the Company’s management to identify promptly important issues of interaction.

The important channels of the internal communication system include regular surveys that monitor the corporate social and psychological climate to identify any existing problems in the workforce and to develop measures to solve them. The Company also views employee training programmes as a means of communicating with its employees. During training sessions, employees can develop their professional and managerial potential.

During corporate events, Gazprom Neft’s employees are given extensive information about the Company’s development plans, its priorities, opportunities for their professional growth and career development. The Company’s enterprises have a tradition to host regular meetings with employees and managers where important issues of interaction between the Company and its employees are resolved. The Company’s informal internal communication channels include various cultural and sports events.

Current information about the Company’s activities is published regularly in the corporate mass media. The Company’s website, corporate Internet portal, and publications such as Neftegazeta and Siberian Oi cover, in addition to business information, social and cultural projects, the professional achievements of individual employees, and interviews with the Company’s executives.

GOVERNMENT AUTHORITIES

The Company’s representatives are actively engaged in different Working Groups in the key regions where Gazprom Neft operates. In 2013, the Company initiated a working group in the Tomsk Region to discuss issues and elaborate suggestions concerning the development and improvement of the regional legislation related to the creation of favourable conditions for the implementation of investment projects by oil and gas companies of the region. Through cooperation between the Company and the Yamalo-Nenets Autonomous District government, amendments to the regional tax laws were developed and adopted to specify the regional tax benefit procedure for strategic innovation and social investment projects. In the reporting period, the working group of the Khanty-Mansiysk Autonomous District – Yugra Government and Fuel and Energy Sector entities discussed the state support available in the Khanty-Mansiysk Autonomous District – Yugra.

As one of Russia’s largest companies, Gazprom Neft engages with both federal and regional government authorities. Gazprom Neft’s cooperation with public authorities is based on the principles of compliance with law, responsible payment of taxes and use of human and natural resources, and partnership in meeting sectoral and regional competition goals.

The Company works with the authorities of the regions in which the Company operates to improve social, economic and legislative conditions for conducting and developing its business and to promote cooperation in resolving issues of regional social and economic development.

Gazprom Neft is developing and implementing a set of principles and mechanisms of its corporate regional policy to build a long-term partnership with authorities and local communities in the regions where the Company has a presence. The Company’s regional policy takes into account the regional development issues and aims to:

  • Create favourable financial, economic and legal environment for Gazprom Neft’s activities in the regions;
  • Improve quality of life and create comfortable social environment for local residents, including the Company’s employees and their families;
  • Create a system of measures to ensure environmental safety, and take actions to reduce the industrial footprint on the environment and people;
  • Develop stakeholder engagement in the regions; and
  • Ensure information transparency of the Company’s operations for all stakeholders.

The Company strengthens its dialogue with federal and regional government agencies to improve legislation in the oil and gas sector and establish a favourable investment climate in Russia.

In 2013, the Company was involved in the modification of a number of environmental draft laws. In particular, suggestions were made to amend Federal Laws On Production and Consumption Waste and On Environmental Expert Examination.

Gazprom Neft has a broad sector-specific expertise and is actively involved in the development and improvement of regional laws and regulations aimed at promoting the investment attractiveness of regions and improving the social and economic environment. The Company’s experts take part in the work of regional legislature establishments, such as the Legislative Assembly of the Yamalo-Nenets Autonomous District, and Tyumen Regional Duma.

The Company’s experts regularly monitor current legislative activities and carry out draft appraisals. Together with regional parliaments, the Company participates in appraisals of federal sector legislation.

The Company strictly complies with all the laws regarding political activities and does not participate in political movements or organisations. The Company cooperates with the authorities in the development of legislation that may affect its interests, and reserves the right to state its position concerning any issues that affect its activities, such as, without limitation, the interests of its employees, customers, shareholders and local communities. In compliance with its Corporate Code, the Company does not interfere with the political activities of its employees.

SUPPLIERS

The Company builds relations with its suppliers based on the principles of business ethics, mutual responsibility, transparency and competitiveness in partner selection, and a common approach to achieving production objectives and the required product quality.

The Company is pursuing cooperation with its suppliers to enhance the operating efficiency, environmental safety and occupational health, and seeks to ensure that its suppliers and contractors comply with the rules of industrial, environmental and occupational safety, and social protection adopted by the Company.

According to the “Procedure for managing contractors and cooperative arrangements in the field of industrial, environmental and occupational safety, and social protection”, contractor compliance with HSE and social protection requirements is an important pre-qualification criterion. All contractors who provide services to the Company sign an HSE and social protection agreement that stipulates mandatory compliance with Company HSE standards.

In 2013, Gazprom Neft held its first annual conference of service companies with an interest in the Yamal cluster projects. The conference, which was supposed to be a single open communication platform for the customer and potential contractors, was attended by about 200 participants from 130 companies. Conference participants highlighted the production objectives faced by the Company in the Yamal cluster, as well as special quality requirements for operations, with a focus on the Company’s HSE requirements and standards. The meeting resulted in a decision to hold another conference in 1H2014, which would comprise many more participants, as well as to organise special events for service companies to focus on different field development aspects: drilling, environment, safety, and geology.

CUSTOMERS

The Company seeks to maintain its status of a stable and reliable supplier and to increase levels of service in its interaction with customers. To this end, the Company implements programmes aimed at improving product quality and environmental safety in accordance with international standards, provides responsible marketing information, and regularly reviews customer requirements and satisfaction levels.

Gazprom Neft produces goods under its own two brands – the Gazprom Neft filling station chain and G-Drive premium-grade fuel. According to a study by Nielsen, a global information and measurement company, one-fourth of Russian motorists preferred Gazprom Neft filling stations in 2013. The Gazprom Neft filling station chain and G-Drive enhanced performance fuel rank within the top three best-known retail brand names on the Russian fuel market in their respective categories.

The high level of brand loyalty among customers contributes to the Company’s retail sales dynamic growth, both in Russia and abroad. GAZPROM filling stations, which were launched in Southeastern Europe at the end of 2012, expanded in 2013 into Bulgaria, Bosnia and Herzegovina, and their number is growing in Romania and Serbia. By the end of 2015, there will be at least 250 GAZPROM filling stations in the Balkans. In 2013, GAZPROM was recognised as the best retail brand in Serbia and also in Bosnia and Herzegovina.

Six types of product from the Omsk Refinery obtained Russia’s 100 Best Products awards in the Industrial and Technical Products category. Golden diplomas were awarded to the Premium ­Euro-95 Unleaded Gasoline (Euro 5) and Diesel Fuel intended for the moderate climate, with an ultra-low sulphur content and low level of combustion emissions. “Silver” diplomas were given to aviation jet fuel TC 1 used to fuel military and civil aircrafts, and oil paraxylene of the maximum purity used in the petrochemical industry. The paraxylene purity from the Omsk Refinery is 99.9% while the required level is 99.5%. Silver awards were also given to fuel for ship units (RMG 380) with a low sulphur content and polymer-viscosity graded bitumen PBV-90 which is used in paving construction and repair. The use of PBV-90 in road construction enhances the thermal shock resistance of paving, thus extending the road lifetime. PBV-90 was classified as a specialty product.

At the beginning of 2014, there were 1,339 Gazprom Neft filling stations in Russia and the CIS. At the end of the reporting year, the average daily sales at filling stations grew by more than 7% to 19 tonnes, a record for the Russian industry.

One of the most effective tools used to increase sales volumes and brand confidence is a nationwide loyalty programme for individuals known as Going the Same Way, which was launched by the Company in 2010. The program is currently run in all the regions of Russia and CIS (Republic of Belarus) where Gazprom Neft filling stations operate. Since the loyalty programme was launched, over 4.3 million customers have joined it. The share of Going the Same Way sales account for over 70% (almost 90% in a number of regions).

In 2013, the Company also extended its line of G-Drive premium fuels and G-Energy and G-Profi premium motor oils, with improved environmental characteristics. The brand, previously used for industrial equipment oils only, was expanded to include synthetics, synthetic blends, and conventional oils for gasoline and diesel engines in cars and trucks, as well as transmission oils, lubricants, and technical fluids. Gazprom Neft is actively developing new premium products, particularly high-quality bitumen materials.

The Company promotes international quality standards in the Russian market not only for fuel, but also for services. The International Association of Air Transport (IATA) rated seven Gazprom Neft-Aero integrated fuelling facilities as the best service providers of quality jet fuel supply, thus allowing them to fuel aircrafts without any restrictions. IATA experts note the high level of both the operational and environmental safety of the Company’s integrated fuelling facilities.

An important part of customer engagement is the system for responding to customer dissatisfaction with the quality of products or services. The Company has a claims settlement mechanism based on the corporate-wide document “Methodical guidelines for handling nonconformities when selling OP, LHG and AG&S at filling stations.”

Gazprom Neft takes part in the trading of petroleum products on the Russian commodity markets as a mechanism to ensure fair and transparent pricing and sales of petroleum products. In 2013, the Company sold over 2.29 million tonnes of exchange-traded petroleum products, a year-on-year increase of 10%. The total exchange-traded sales of the Company in 2013 were 10.2% of the petroleum product output (in 2012 – 7.5%).

Since summer 2013, all of the Company’s facilities have switched to the production of Euro 5 motor fuels – a full 2.5 years ahead of the deadline set by the Russian Technical Regulations. The Moscow Refinery was honoured by the Moscow Government for its switchover to this fuel and was ranked second in an environmental contest.

Local communities

Gazprom Neft cooperates constructively with local authorities and communities to address pressing social, economic and environmental issues. This cooperation is an important factor in developing the social potential of the regions and creating a favourable social environment for the implementation of the Company’s strategy.

The Company carries out its regional activities based on its regional policy priorities. When implementing its social programmes, Gazprom Neft strives to be a partner and initiator of social and economic changes by stimulating the active participation of stakeholders in the social development of territories.

The Company chooses where to invest social funds based on the dialogue with all stakeholders and the monitoring of social well-being, which includes the Company’s own and independent studies.

In 2013, the Company conducted two social studies: “Opinion and position survey of targeted audiences in the operating locations” and “Perception analysis of social policy and social projects implemented by the Company from 2007 to 2013.”

Gazprom Neft enterprises operate in areas inhabited by the indigenous peoples of Northern Russia. The Company places special emphasis on steering a middle course between the implementation of its strategic plans and the safeguard of the interests of indigenous peoples. When planning its activities, the Company enables discussions to take place with representatives of the indigenous peoples on ways to minimize the effects of industrial activities on their traditional way of life. Gazprom Neft is implementing programmes to support the traditional lifestyles of native minorities of Northern Russia and preserve the unique Yamal culture, whilst ensuring their adaptation to the modern economic and social environment.

Based on the results of the latter study, the Company introduced a social initiative grants competition in the key regions of its operation. The pilot project was implemented in 2013 in the Orenburg Region. The Company supported 12 submissions to meet current social challenges in the areas where Gazprom Neft has presence. Starting in 2014, similar competitions will be held in other key regions of the Company’s operations.

The participation of non-profit organisations in the development and implementation of social projects is highly valued by the Company. The Company holds regular meetings for social project managers, which are also attended by leading experts in this area and heads of public organisations.

The Company implements all social and charity projects as part of the Home Towns social For details, see the Regional Policy and Local Community Section of this Report.investment programme adopted by the Company in 2012.

Stakeholders of the Company in the operating locations:

  • Local authorities;
  • Public organisations;
  • Educational, medical and cultural institutions;
  • Company employees;
  • Local residents; and
  • Indigenous peoples of Northern Russia.

The Company maintains an active dialogue with its stakeholders. The main topics discussed include the Company’s environmental footprint, the development of social infrastructure and the preservation of cultural traditions. Gazprom Neft arranges for the regular and wide circulation of information about the Company’s activities among its stakeholders to ensure transparency of its decision-making process.