No. 1, 2008

Russia proclaims 2008 the Year of the Family to implement sweeping social programs

In his 2007 Address to the Federal Assembly Russian President Vladimir Putin emphasized the fundamental role of the family in the development of healthy society in Russia. Strengthening the prestige of and supporting the institution of the family and its fundamental values became priority objectives of government policies and, in this connection, the year 2008 was proclaimed the Year of the Family in the Russian Federation. LUKOIL, as a socially responsible business entity, has always seen consistent and all-round improvement of the living and working conditions of its employees and their families as one of the main lines of the Company’s development.

Following the vector of social development

The outstanding Russian philosopher Ivan Ilyin wrote: “The family is the foundation of the Motherland.” The human being is born into and takes shape as a personality in the family. The spiritual and moral atmosphere, way of life and system of values prevailing in the family combine to shape human personality.

Last October, the Government of Russia approved the plan of basic measures for conducting the Year of the Family in Russia along the following lines: “Family and Society,” “Family and Sustainable Development,” “Family and Culture,” “Family and Health,” “Family Sports and Recreation,” and “Family and Socially Responsible Business.”

The government intends quarterly to monitor the implementation status of the plan. It has recommended the executive agencies of the subjects of the Russian Federation to work out and implement, with the participation of civic, charitable and other organizations, measures for conducting the Year of the Family in the Russian Federation in 2008 using the budget funds of the subjects of the Russian Federation and attracting off-budget sources of financing.

LUKOIL has always been aware of the paramount importance and value of its personnel’s work largely determining the Company’s further growth and its innovative potential. Striving to be a better social partner, LUKOIL pursues a social policy aimed both at increasing the efficiency of its operations and at ensuring the social security of its employees. LUKOIL President Vagit Alekperov has more than once stressed: “Throughout its history, LUKOIL has invariably confirmed its commitment to the principles of socially responsible business practices. We regard sustainable development as a simultaneous and interconnected increase in our resource and production potential, improvement of our financial results, and ensuring of social and ecological safety. The Company is determined above all to take active part in the life of society.”

It has already become a good tradition for the Company not only to carry on vigorous activity aimed at improving the living and working conditions of its own employees but also at providing tangible assistance to the local population in all the regions of its presence. As a result, examples of unique programs are to be found in the regions. Today, LUKOIL’s social programs cover Western Siberia, the Perm Region, the Volga Area, the Northwestern Region, and a number of other regions.

A three-level system of social partnership based on the Company’s Social Code, the Agreement between the Employer and the Trade Union Association, and collective bargaining agreements of LUKOIL’s organizations has been created and is successfully functioning in the Company.

Family: a cell of democratic society

Substantial attention in the Company is given to comprehensive support of the families of its employees. LUKOIL’s trade union association, constantly monitoring the implementation of the provisions of LUKOIL’s Social Code, is playing a considerable role in this. In addition, the trade union association supervises quite a number of mass cultural events aimed at consolidating the Company’s work collectives and the development of corporate principles and conducts numerous events among which sports competitions are particularly popular with the Company’s employees. Thus, the Third International Contest “Mum, Daddy and I Are a Sports Family” was held during the celebrations of the Company’s 15th anniversary in Volgograd, taking part in which were 19 teams from Russia, Ukraine, Bulgaria, Moldova, Romania, and Belarus. “In the LUKOIL family,” Yury Pikhtovikov, Deputy Head of the Main Division for Personnel of LUKOIL, noted, “just as in every family, peace and mutual understanding are the main values. This is precisely what we achieve by conducting such competitions.”

A great amount of work aimed at improving the living and working conditions of all the categories of the Company’s employees, not only those whose efforts ensure LUKOIL’s present-day successes but also its veterans, is being done. Veterans, those who developed the oil industry, discovered new fields, created the country’s glorious labor history, are treated with respect at the Company. A special Council for the Affairs of Veterans of the LUKOIL Group has been set up to take care of the retirees and to cultivate the best traditions of the oil industry workers of the past in young employees.

It is becoming a good tradition with LUKOIL to employ the dynasties of workers. Setting an example for young workers and exerting a great educational influence on them is Grigory Petrov, Hero of the Soviet Union, who stood at the sources of the development of oil fields in the Republic of Bashkortostan, Western Siberia and the middle reaches of the Ob River. Following in his footsteps are his children and grandchildren, who are today working at LUKOIL’s facilities. No less heroic were the lives of Afanasy Karanin and Mikhail Ivanov, oil industry workers who fought at the frontline during WWII and having passed through all the horrors of war, then, in peacetime, produced Perm oil for the country. Their children, too, are working for LUKOIL, continuing the traditions of their fathers. Dynasties of oil industry workers are working in all the regions where LUKOIL is producing oil.

At the head offices of the LUKOIL Group, meetings of members of youth associations and merited veterans, at which essential production-related questions are discussed and the “older generation” of oilmen impart their invaluable experience, are held on a regular basis. Veterans are invited to take part in corporate events held by the Company.

Care for future generations

LUKOIL’s social and charitable programs, which are a component part of its corporate strategy, cover a broad range of employee interests. A substantial role in implementing the Company’s social programs is played by the LUKOIL Charitable Fund.

Aware of its responsibility before future generations, the Company has developed a balanced approach: it renders support to children who, because of adverse family conditions or health problems, have found themselves in a tight situation. More than 50 orphanages and boarding schools receive assistance from the LUKOIL Group under its children’s aid programs. The Company helps their leavers receive an education, build up their health, acquire a profession and find a place in life. Quite a few of the orphanage leavers find jobs with LUKOIL.

Every year, daughters, sons and even grandchildren of those who created the history of the country’s oil industry with their own hands replenish the ranks of oil industry workers. In 2007, more than 30 persons joined the ranks of continuators of family traditions. The Company seeks to encourage young people in every way in choosing a professional career. In 2000, by way of rendering support for the most gifted students, LUKOIL established a number of scholarships to be paid out to students of petroleum engineering colleges and higher technical educational institutions. Today, young specialists intending to throw in their lots with the Company receive education at Russia’s leading higher education institutions in the area – Gubkin Russian State University of Oil and Gas, St. Petersburg State Mining Institute, Perm State Technical University, Tyumen State Oil and Gas University, and others.

A major component part of the Company’s social policy is its occupational nonstate pension scheme. The long-term objective of the occupational pension scheme within the framework of the corporate pension system is to compensate employees for their lost earnings.

In 2005, the Model Statute of the Primary Health Care System of the LUKOIL Group was approved whereby the Company’s employees are entitled to receive qualified medical aid at the Company’s health centers.

The current social protection system is being further developed to help attract skilled specialists to the Company,

reduce the personnel turnover, strengthen the corporate spirit and form the basis for production activity. The main components of this system at LUKOIL include regulation of labor remuneration, health protection; promotion of health building, sports, physical culture and recreation activities; housing policy; provision of nonstate pensions to employees – the entire range of social services promoting the creation of modern salutary living conditions for the Company’s employees and their families. It is precisely for this reason that LUKOIL President Vagit Alekperov particularly stressed in one of his speeches: “There is a growing tendency in the world to demand that major corporations strengthen the principles of social responsibility in their day-to-day operations. LUKOIL shares the standpoint in favor of raising the corporate operation standards influencing people’s social and economic wellbeing.”