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LUKOIL: ONE OF THE WORLDS MAJOR INTEGRATED OIL & GAS COMPANIES
* Includes all marketable hydrocarbons produced crude oil, condensate, NGL, gas **at closing 05/09/08
Crude produced at 361 fields 12 new oil fields under development: Tsentralno-Stanovoye field (Volga region) Chekaldinskoye Vladimirskoye fields (Tatarstan), Mokhovskoye, Dozortsevskoye, Sypovskoye and Lesnoye fields (Urals) Verkhnee-Volminskoye, Oshskoye, Osvanyurskoye fields (Timan-Pechora) Domnovskoye field (Kaliningrad Region) Kumkol (Kazakhstan) Khauzak gas field (Uzbekistan). 28,470 production wells, 24,100 operated.
LUKOIL crude oil production in 2007 totaled 96.645 mln MT (1.953 mln bpd)
LUKOIL REFINING
LUKOIL has currently 15 oil refining operations*, 10 of which are fully or partly owned, in 5 countries: Bulgaria, Italy, Romania, Russia and Ukraine Overall capacity of LUKOIL Group refineries at the end of 2007 was 59.4 mln tons of crude oil per year (1.1706 mln bpd) or 1.4% of global capacities Oil refineries of LUKOIL Group refined at the end of 2007 52.2 mln tons (1.04 mln bpd) of crude oil in 2007, representing 1.3% of total world refining Refining at LUKOIL Group refineries at the end of 2007 rose by 56.7% from 2001 to 2007, and the Company's share in total world refining rose by nearly 1.4 times. Capacity utilization rate at Russian refineries of LUKOIL Group in 2007 was 87.8% compared with the Russian average of 83.1% Depth of refining at refineries of LUKOIL Group is higher than the Russian average
* Including two mini refineries and major processing operations at Ufa, Mozyr and Polotsk
Refinery
157
Isab
Legend
In July 2008 LUKOIL took over the Turkish network Akpet, 6th largest in Turkey, operating 693 stations The acquisition brings its market share of Turkish retail market to 5%
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LITASCO Corporate structure 100% subsidiary of OAO LUKOIL (Moscow) Headquarters and company registration in Geneva Over 300 staff in 14 countries (~ 180 in Geneva) 2007 Results Total sales of USD 53.4 billion (about 60% of OAO LUKOIL turnover) Operating profit of USD 315 mln Crude oil sales of 44.8 million mt Product sales of 55.8 million mt
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Source: LITASCO SA, LUKOIL
Singapore
LUKOIL Pan Americas Focus of operations Crude oil and all products
LUKOIL Asia Pacific Marine fuels in Singapore Trading all products in Singapore and the Middle East Persian Gulf IndiaSE Asia
Transatlantic Caribbean US
Africa-Western Europe
IntraScandinavian (GothenburgCopenhagen)
112.5
112.9
90.46 101.5
7 4 8.2 24.3
90.46 103.0
9.7 14.9
84.3
84.6
12.3 17
7.2 10.4 30.8 31.1 25.4 7.7 12.5 5.5 0.7 26.7 15.2 17.4
Demand Production Demand Production
6.3 9 16 8.4
25.1
OECD North America Demand
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Production
2007
2020
2030
World overall oil consumption is forecast to grow at 1.2% per year over the next 25 years OECD world oil demand is forecast to grow at 0.3% per year over the same period while non-OECD world oil demand is forecast to grow at 2.2% per year The fastest growing market will be China (+3.4% per year over the next 5 years) World oil production capacity is forecast to grow at 1.4% per year over the next 25 years Large oil producers are forecast to meet the increase in demand over the same period: OPEC: +1.3% per year Caspian area: +3.6% per year Large oil consumers will see their local production lag behind: North America: +0.7% per year over the next 25 years
Source: History: Energy Information Administration (EIA),Office of Energy Markets and End Use, 2008. Projections: EIA, Generate World Oil Balance Model (2008), International oil outlook 2008, Litasco SA analysis
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Buy and sell physical and paper barrels Match supplier and consumer requirements through: flexible pricing / financing customized delivery patterns price risk management
Trading companies take advantage of location or quality imbalances, shipping optimization and price structure. They rely on financial instruments to hedge or manage their price risk exposure By doing so, they ensure that customers demand requirements are met while sourcing from prevailing, most commercially attractive supply region
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Privately owned international majors are large vertically integrated companies that are present in all the activities along the supply chain (upstream exploration and production, refining, trading, downstream distribution and marketing through fuel distribution networks) Majors do not trade all of their production, because an important part of it is devoted to the needs of their own supply chain system Majors have a risk aversion corporate profile that discourages high levels of exposure to price risks and the resulting speculation Trade energy and other commodities while holding few or no production assets Actively trade in spot physical and derivatives markets Trade a wide spectrum of commodities while offering other financial products and services Have a controlled speculative exposure in oil derivatives markets, similar to other financial markets
Vitol, Glencore, Sempra, Trafigura, etc Morgan Stanley, J. Aron, hedge funds, etc
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Oil traders
Oil companies
Hedge funds
The market today features a radically different set of players with varied agendas and targets as well as the capability of playing various commodity markets against each other and against stock market or money market
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Evolution of oil trading - Physical commodity markets, derivatives markets and price determination
Volumes Traded Annually
3% 5%
Crude oil and all major refined petroleum products trade on international markets Liquid and transparent futures markets allow participants to hedge their spot and term supply contracts prices in the forward months
92%
Appropriate financial instruments enable industry participants to manage their price risk exposure and offer additional profit opportunities The main price indexes known to the general public today are futures
WTI: traded on the NYMEX Brent: traded on the ICE in London
OPEC production Rest of the world production Total volume (physical+paper) traded
In the modern oil markets, far greater volumes are traded on the derivatives (paper) markets than on physical markets Because of the vast liquidity and transparency of the futures contracts, physical oil prices are driven by the paper market Financial players and speculators such as hedge funds trade on these markets in addition to traditional industry participants (producers, refiners, end users)
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20,000
USD billion
15,000
Since the start of crude price rise in 1999 NYMEX paper market grew 30+fold from $700 billion to $23 trillion
9275.9
10,000
1120.0
731.2
973.2
5,000
1195.1
1411.7
2194.0
3506.0
4691.1
AY
AR M AY
JA
AR
JU
JA
19 99
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
20 08
SE
JU
NO
0 .0 14 1 120.00
100.00
150.00 140.00 130.00
200.00
Million lots
USD/bbl
150.00
100.00
128.5
71.1
50.00
31 9. 1
37.9
7 .3 30
93 5. 2
37.5
6 .1 26
45.7
07 1. 3
198.4
41
9 .4
USD/bbl
59 6. 5
2 .0 66
0 .2 72
80.00
0.00
99 19 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20
15
36.9
45.4
52.9
62.0
SE
16
Before Price Participants Market Forces Trade Stable Limited Fundamentals Regional
Today Volatile Numerous Fundamentals and Sentiments Global Paper (Derivatives = 10/15x Physical Volumes)
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economic and oil demand growth Less non-OPEC supply growth Less OPEC spare capacity Refining capacity near maximum utilisation
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Same risks
Same risks
THANK YOU!
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