No. 1, 2008

This year marks the 15^th anniversary of LUKOIL-INFORM

With the advent of the IT epoch, quality, speed and safety of data transmission have acquired extraordinary importance for each major vertically integrated oil and gas company as factors in ensuring their efficient operation. The awareness by LUKOIL’s management of these trends of corporate governance prompted it to set up a specialized subsidiary company, LUKOIL-INFORM, which will mark its 15th anniversary on March 25, 2008.

Forming LUKOIL’s information space

Alexander Kislitsyn, Director of LUKOIL-INFORM, pointed out that when the company was still in its formative stage the LUKOIL Group’s management had assigned it the tasks of designing, implementing and supporting an integrated corporate governance system, production and process management systems, ensuring information security, developing and maintaining a telecommunication infrastructure embracing the Company’s territorial divisions located in various parts of the Russian Federation and abroad.

Notably, LUKOIL-INFORM is operating within the framework of the LUKOIL Group strategic development program and under the guidance of the Information Committee headed by Vagit Alekperov, President of LUKOIL.

In 1995, LUKOIL-INFORM’s specialists got down – jointly with their colleagues in the government-owned Space Communications enterprise, the National Specialized Radio and Television Design Institute, the Central Design Institute of Communications of the RF Defense Ministry, the Military School of Communications, Academician A.L. Minz Radio Engineering Institute, the SVIT Certification Laboratory and a number of foreign companies – to work out guidelines for the creation and development of the LUKNET communication network.

LUKOIL-INFORM obtained a license to provide basic telecommunications services – local, inter-city and international telephone communication, data transmission, telematic services, communication channel leasing; and a license from the RF Ministry of Construction to design and build communication facilities.

In 1997, the first stations of the automated C-range trunk satellite communication network based on Global Macs stations were put into pilot operation in 13 Russian cities. The LUKNET network’s management and round-the-clock monitoring center was located in Moscow. Regional communication systems were deployed in satellite communication terminal location areas, high-quality Internet access facilities were provided for all of LUKOIL’s divisions and subsidiaries, including those located in places where Internet connection cannot be established in any other way. The LUKNET network covers 35 regions: republics, territories, regions and autonomies in Western Siberia, in the Urals, in the Volga area and in the South of European Russia.

In 2003, a Ku-range satellite network employing LinkStar and LinkWay technologies was put into service. Today, it has about 200 satellite communication subscriber miniterminals linking together the LUKOIL Group companies and organizations.

The corporate communication network is being expanded in cooperation with major Russian and foreign service providers – Transtelecom, Rostelecom, Golden Telecom, Intelsat, Equant, Vympelcom, etc. The network offers a full range of modern telecomservices, video conferencing included. LUKOIL-INFORM maintains backup links with key traffic exchange sites for the purpose of providing Internet access.

In 2004, as a result of a merger of all the LUKOIL Group’s IT divisions the subsidiary underwent cardinal transformation emerging as an entirely new company geared toward new objectives and employing new business processes. Today, LUKOIL-INFORM is the headquarters organization in charge of the Company’s information technology support.

Business process informatization: top priority

The LUKOIL Integrated Management System (IMS) project was launched in 1997 the idea being to create a system combining book-keeping and management accounting principles. The LUKOIL Group’s oil and gas producing and refining facilities in the Perm Region – LUKOIL-Perm and LUKOIL-Permnefteorgsintez – were selected for carrying out pilot projects to introduce SAP solutions on a regional scale. The IMS was developed and put in place at those companies in 2002-2004. Later, the Oil and Gas Production Division and the Processing integrated management systems (OGPD IMS and Processing IMS) were put into practice by other companies of the Group.

The program reached the main stage of its implementation in 2006 when the IMS were deployed at seven production and processing facilities simultaneously. Today, the integrated OGPD IMS employs over 6,000 staff members of the subsidiaries LUKOIL-Perm, LUKOIL-Komi, LUKOIL-Western Siberia, LUKOIL-Nizhnevolzhskneft, LUKOIL-Kaliningradmorneft, and the Processing IMS – about 3,000 staff members of LUKOIL-Permnefteorgsintez, LUKOIL Neftochim Burgas AD, LUKOIL-Nizhegorodnefteorgsintez, LUKOIL-Volgogradneftepe-rerabotka, LUKOIL-Ukhtaneftepererabotka and Petrotel LUKOIL SA.

The LUKOIL IMS project is the main project of LUKOIL’s corporate center. At present, this system embraces the Core Operations segment (oil, petroleum products, gas and gas product turnover and treasury operations management) and the Auxiliary Operations segment. Thousands of employees of all the services of the holding company are now using the LUKOIL IMS.

As Anatoly Barkov, LUKOIL Vice-President, pointed out, this system has shed light on all the economic and financial operations of the Group, rendered them transparent, simplified paperwork considerably, and brought corporate accounting in line with international standards.

Apart from those systems, we have completed the deployment of the principal solutions on the basis of SAP ERP LLC-International IMS, LITASCO IMS, Personnel IMS, INFORM IMS. Various corporate scenarios – payment scheduling, budget planning, management accounting analysis, drawing up the LUKOIL Group’s investment program – have been worked out and put to practical use within the framework of corporate governance functions on the basis of SAP SEM/BW solutions.

The LUKOIL Group’s global IMS development program provides that by the year 2008, the system will embrace over 80% of the entire LUKOIL business and that the number of users will amount to 16,000. Such growth rates presuppose unification of all business processes in each production segment and each line of the Company’s economic activity, and introduction of regulations and tools for gathering and analyzing information necessary for managing a huge organism like today’s LUKOIL.

Says Alexander Kislitsyn, Director of LUKOIL-INFORM: “We have already implemented, introduced and adjusted the OGPD IMS and Processing IMS projects related to our core activities. The Personnel IMS project is in the final stage of implementation. Today, we are working to extend the systems to all the divisions of the Company engaged in oil production and refining and petroleum products marketing, to all the business processes now under way. I am confident that this difficult mission vital not only for our Company but for Russia’s oil and gas industry as a whole will be accomplished.”

Managing information flows

The LUKOIL Group traditionally uses a multitude of information systems supporting core and auxiliary business processes. Specialists of the subsidiary IT company provide full information support for LUKOIL’s divisions and companies, provide access to various applied systems and databases, help the holding company’s employees use various computer applications.

Within the framework of the Local Information Systems program, LUKOIL-INFORM’s specialists are working to create, support and promote information systems in such segments as: business applications, financial and accounting systems, planning systems, regulatory and reference information, corporate portals and internal automation, electronic document handling systems and electronic archives.

The creation and promotion of universal corporate information security systems and standards make for an adequate protection of LUKOIL’s information and network resources, confidentiality of important intracorporate negotiations, prevent information leakage through technical channels.

LUKOIL-INFORM was the first company in Russia and the CIS to pass a certification audit for compliance with the international standard ISO/IEC 27001:2005 conducted by the BSI Management Systems international certification agency. The company received a certificate for the LUKOIL Group’s information security and personnel management and monitoring system. This document testifies to a high quality of the services rendered to ensure confidentiality, integrity and availability of client-targeted information. Besides, the issue of this certificate is yet another confirmation of the fact that LUKOIL-INFORM is a nationally and internationally recognized leader in ensuring information security.

Information support for the LUKOIL Group organizations means reference data provision, access to databases and supply of printed publications.

Another important function performed by LUKOIL-INFORM is keeping the public, government authorities, scientists and businessmen informed about LUKOIL through the medium of graphic and video products.

LUKOIL-INFORM comprises a publishing office and high-capacity printing works which issue a series of corporate magazines covering problems involved in the development of Russia’s oil and gas complex and various aspects of the LUKOIL Group’s activities, such as the Oil of Russia, Neft Rossii and Social Partnership. Recently, it has started another publication – the corporate magazine ITime devoted to information technologies and their business uses. The magazine is a connecting link between oil business representatives and IT specialists, a forum for all-round discussions of current problems and new ideas.

The record of LUKOIL-INFORM’s vigorous activities over the past 15 years furnish evidence of the LUKOIL Group’s using state-of-the-art Russian and foreign information technologies in drawing up its development strategies. Strong emphasis on innovations, including those generated by its own high-tech R&D effort, is largely responsible for LUKOIL’s outstanding performance in the world oil market.