Address of the President

Tokarev

Dear shareholders!

In 2019, Transneft accomplished the tasks set for the Company, and, despite objective difficulties, the year ended in a good place.

In November 2019, Transneft completed the Eastern Siberia – Pacific Ocean project, one of the main infrastructure projects in its history, which is of strategic importance for the country. The pipeline system has reached its maximum capacity, which is up to 80 MTPA within the Tayshet – Skovorodino section and up to 50 MTPA within the Skovorodino – Kozmino section. I should say that it was initially planned to complete this work by 2030, but, given the importance of this supply route, we were able to accelerate the project.

At the end of 2019, a strategy for Novorossiysk Commercial Sea Port development was approved, providing for effective upgrade of the port facilities, a productive approach to business development and targeted projects for further growth.

Transneft has maintained a high level of financial stability; the credit ratings of the Company are at the level of the ratings of the Russian Federation, and Moody’s has set the rating of Transneft a level higher than the sovereign rating.

Transneft has maintained a high level of financial stability; the credit ratings of the Company are at the level of the ratings of the Russian Federation, and Moody’s has set the rating of Transneft a level higher than the sovereign rating.

In the reporting year, the volume of capital investments of Transneft Group amounted to RUB 282.6 billion, including more than RUB 244 billion to the Technical Upgrading, Revamping and Overhaul Programme. The Company also invested more than RUB 9.7 billion in innovative projects and scientific research. We cannot allow the ageing of the pipeline system to outstrip renewal and upgrade, and in the future, we will continue out vigorous work along this line.

We have come close to full implementation of the import substitution programme. In 2019, the Company launched a plant to manufacture drag-reducing agents in the Republic of Tatarstan. Six years ago, 26 key materials and equipment pieces whose production had to be arranged in Russia were determined. Last year, we started working on the last item on the list, which is manufacture of activated carbon for oil and petroleum products vapour recovery units, and early this year, we successfully tested this product at the Kozmino port, the ESPO endpoint.

2019 was not marked by positive events alone; the strength of the Company’s team was also tested. We have completely settled all the technical and technological consequences of the incident at the Druzhba oil pipeline, when illegal actions of third parties led to oil that did not meet GOST requirements entering the system. We took additional measures to ensure safe oil acceptance into the pipeline system and increased quality control requirements. A set of measures has been submitted for consideration to the Government of the Russian Federation that will help improve legal relations governing the process of delivering oil to the Transneft system. The Company expects to complete the settlement with oil suppliers by the end of this year.

Transneft has been and remains a socially responsible company: in 2019, we allocated more than RUB 9.2 billion for the implementation of charitable and socially significant projects. Transneft comprehensively supports employees and members of their families, creates conditions for recreation and treatment. Such direct help to the Company’s team and concern for the health of employees have always been a priority and are of particular importance right now when the epidemiological situation is aggravated: we carry out all the necessary preventive and sanitary measures at all Company facilities to ensure the health and safety of our employees.

It is people who bring the Company its success and achievements. Each of the 116 thousand employees makes a significant and valuable contribution. Only together we are able to create what can be called the classical mechanics of Transneft. For us, the classic means stability and reliability of the transportation process. With the accuracy of a mechanics textbook, we calculate the flow of oil and petroleum products through the trunk pipeline system; indeed, our task is to fully satisfy the needs of oil producers and refineries for crude and fuel transportation. The people of Transneft work together as a single mechanism, and our movement is navigated by the common goal of development — of personal competences, of our Company and of our country.
Nikolay Tokarev Chairman of the Management Board, President of Transneft
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