Key events and year results
Oil and gas exploration and production
Oil and gas exploration and production form the central link in LUKOIL Group operations and are the main creators of value for the Company. We possess a high-quality portfolio of assets that are diversified in terms of both geography and type of reserve.
Proven oil and gas reserves consist primarily of those in the conventional category. In 2018 these stood at 15.9 billion BOEOil equivalent under the SEC (US Securities and Exchange Commission) classification, of which oil made up 76%. In the reporting year, the main increases in proven oil and gas reserves were achieved in West Siberia and Timan-Pechora.
The production of hydrocarbons (excluding the West Qurna-2 project) rose by 3.8% compared to 2017, mainly as a result of the advanced development of gas projects in Uzbekistan. Annual oil production, taking into account external constraints, remained at the 2017 level, while production growth was seen at high-production fields in the Caspian Sea and at mature fields in Western Siberia and Timan-Pechora, as a result of effective production management.
- The gas processing plant at the Kandym group of fields in Uzbekistan was put into operation ahead of schedule.
- The V. Filanovsky field reached planned capacity, and a final investment decision was made on the infrastructure development project at the Rakushechnoye field (both fields are in the Caspian Sea).
- A water steam production plant was put into operation at the Yaregskoye field to further increase the extraction of tight reserves.
Refining, marketing, and distribution
We aim to use the natural resources we extract with maximum efficiency. Our priority is to boost operating efficiency and to ensure that the structure of our output matches the needs of consumers and market demand.
During 2018, the production of petroleum products at the Group’s Russian and foreign refineries remained at the 2017 level, despite repair work being carried out at the ISAB plant For the full names of organizations in accordance with IFRS see Appendix 3. In the reporting year, the depth of processing was further increased through the use of alternative raw materials and the reloading of secondary processes, including by deepening inter-plant integration. The Group’s petroleum product portfolio saw a further reduction in fuel oil production and an increase in light petroleum products and highmargin products.
In order to increase the efficiency of retail network management at gas stations, the business sector of petroleum products supply in Russia was restructured: eight management organizations were combined into four. In the reporting year, the Company retained its position as one of the largest suppliers of bunker fuel, and also expanded direct retail sales of jet fuel.
- The Nizhegorodsky refinery in Kstovo began construction of delayed coking and isomerization units.
- A fueling facility at Sheremetyevo International Airport was commissioned.
- Launch of the program for development of new types of oils that meet promising requirements undertaken, jointly with the world's leading manufacturers of automobiles and industrial equipment.
- Signing of a cooperation agreement to develop green energy projects in the Republic of Kazakhstan.
The operational and financial activities of LUKOIL Group are coordinated by a head office located in Moscow, and are divided into three business segments: Exploration and production; Refining, marketing, and distribution; and Corporate Center and Others.
|EBITDA, RUB billion||731||832||1,115|
|Total debt to EBITDA,%||96||74||48|
|Labor productivity, RUB million/person||50||57||78|
|Capital expenditure, RUB billion||497||511||452|
|Free cash flow, RUB billion||255||247||555|
|Research and technical expenses, RUB billion||6||6||6|
|Number of patents received||23||20||37|
|Production of oil and gas condensate (including the share in affiliates), million barrels||676||645||644|
|Crude oil production (including the share in affiliates), thousand tons||91,992||87,414||87,124|
|Gas production, million cubic meters||24,922||28,861||33,543|
|Output of petroleum products, thousand tons At own, affiliated, and third-party refineries (by Group share).||63,069||69,908||70,188|
|Full cycle lubricant production, thousand tons||917||998||961|
|Output of petrochemicals, thousand tons||1,270||1,171||1,246|
Note. The decline in capital expenditure was due to the completion of the main scope of work to develop the Gissar and Kandym fields.
|Direct economic value generated||5,256,250||6,010,089||8,058,338|
|Income from financial investments||14,756||15,151||19,530|
|Income from the sale of tangible assets||14,449||58,233||2,919|
|Distributed economic value||(4,741,979)||(5,380,245)||(7,277,460)|
|Other employee payments and benefits||(20,370)||(1,135)||(31,300)|
|Payments to providers of capital||(175,435)||(166,125)||(195,669)|
|including dividends paid||(130,728)||(141,499)||(160,365)|
|including interest paid to creditors||(44,707)||(24,626)||(35,304)|
|Payments to the government||(984,821)||(1,168,011)||(1,608,127)|
|Investments in society||(12,060)||(9,009)||(8,785)|
|Undistributed economic value||514,271||629,844||780,878|
Notes. Income from financial investments = Income from interest on deposits + Income from interest on issued loans + Other finance income.
Income from the sale of tangible assets = Profit from the sale and disposal of assets.
Operating expenses = Operating expenses + Cost of acquired oil, gas, and products of their processing + Transportation expenses + Sales, general and administrative expenses – Employee payroll – Other employee payments and benefits + Costs of geological and exploration works.
Employee payroll = remuneration of labor (including remuneration, estimated liabilities, compensation and incentive payments, pension insurance, voluntary medical insurance, accident voluntary insurance).
Other employee payments and benefits = Incentive program accruals.
Dividends paid = Dividends paid on the shares of the Company + Dividends paid to the holders of non-controlling interests.
Interest paid to creditors = Interest expenses + Other finance expenses.
Payments to the government = Taxes (other than income tax) + Excise and export duties + Current income tax.
Investments in society = Charitable expenses.
International sustainability projects, programs, and initiatives in which LUKOIL Group / PJSC LUKOIL participates:
- The European Business Network for Corporate Social Responsibility
- The World Bank and UN initiative, "Zero Routine Flaring by 2030"
- The United Nations Global Compact
- The UN Development Program in Russia "Mainstreaming Biodiversity Conservation into Russia's Energy Sector Policies and Operations"
- The Cooperation Agreement for 2018–2022 between the International Labor Organization and Public Joint-Stock Company “Oil company ‘LUKOIL’”
The Business and Biodiversity Initiative under the Russian federal project entitled “Conserving Biodiversity and Developing Ecotourism”.
Position in ratings and rankings in 2018
ESG Score (Thompson Reuters – Refinitive ESG Score) 84 (A) ESG Score
|Calculated on the basis of corporate information on sustainability. High level: ranked 6th out of 360 global oil and gas and energy companies|
MSCI ВВ Rating
|A high level for Russian companies|
Carbon Disclosure Project (CDP Climate) D Level
|Corresponds to the level of most Russian companies|
Corporate Human Rights Benchmark (CHRB) 48 Ranked (out of 102)
|Corresponds to the average level of international companies and the best level among Russian companies|
ISS-oekom 1 Environment score 1 Social score
|The ratings correspond to the minimum risk level of a 10-point scale|
RSPP indices Responsibility and Transparency and Sustainability Vector High level
|Among Russian companies – Top 10|
ESG RANKING (RAEX-600) 1st Ranked
|Out of 30 finalist companies|
Transparency rating of Russian oil and gas companies in the field of environmental responsibility (WWF – Creon) 1st Ranked
|In the "Transparency regarding accidents and incidents" category|
Innovation Perception Index 4.29 (of 5.0)
|The best result among 18 fuel and energy sector companies|