No. 2, 2008

LUKOIL-INFORM, the LUKOIL Group's lead IT agency, is marking its 15th anniversary with flying colors

LUKOIL-INFORM started out in 1993 with establishing corporate communication systems. Today, the company is the LUKOIL Group’s lead subsidiary in charge of IT support. Since its inception, the enterprise has come a long way and created a far-flung network of regional branches; nevertheless, the issue of developing telecommunications for the LUKOIL Group remains high on its agenda today.

Systems approach to business management

LUKOIL-INFORM is acting within the framework of LUKOIL’s strategic development program and attaching great importance to IT implementation. The Holding Company’s management has set up a special agency given over to elaborating a strategy of this effort on the corporate scale. The agency, called the Information Committee, is headed by LUKOIL President Vagit Alekperov in person.

At this junction, LUKOIL-INFORM focuses on creating and building up the LUKOIL Group’s integrated management system (IMS). Conceptually, the effort boils down to taking a process-based approach to business management. Software products for the system have been provided by SAP AG.

LUKOIL-INFORM seeks to build up a management system that would embrace all the lines of LUKOIL’s business, all of its numerous companies and organizations in and outside Russia. This will allow the Company to unify business processes in each segment of its productive and economic activity, to make them transparent to managers and investors, to facilitate the gathering and analysis of information necessary for managing a huge organism like LUKOIL. The IMS will help set a uniform standard and to properly organize enormous information flows circulating between the corporate center and its affiliates. Upon processing that data, the system will submit it, in the most convenient form and whenever necessary, to company managers thus enhancing the quality of the executive decisions they make.

Implementation of this project will ensure business management efficiency at various levels – corporate, sectoral, and at the level of the Holding Company’s individual business units. Besides, thanks to modern information technologies, LUKOIL will be able to make business processes themselves more efficient, to organize a more flexible system of interrelations between business units and to improve the efficacy of corporate resources utilization.

Automation of various accounting and data exchange systems will relieve employees from monotonous manual work which takes up from 30 to 70% of their time and help organize document workflow to a unified standard. The systems adopted at filling stations minimize errors and prevent theft in fuel accounting, storage and sale. Moreover, they will supply all the necessary data to the LUKOIL-wide integrated management system automatically, without human interference.

Such systems find rewarding uses in commodity-money flow management and in the administration of the Company’s assets. Experience shows that they practically rule out damages resulting from loss of documents and enhance work efficiency of the employees who exercise control over the fulfillment of contractual obligations. These systems reduce expenses connected with delays in payment and recovery of fines, IT support storage and processing of digital information and raise budget execution efficiency.

Each of the local systems has its own function to perform. Some centralize management processes; others, gear economic activity to uniform scenarios; still others, intensify the use of material and human resources. Together, they raise the Company’s liquidity, reduce financial, managerial and other risks.

Toward intellectual leadership

The use of IT-solutions in the management sphere is paralleled by automatization of production. Within the framework of this effort, LUKOIL-INFORM’s specialists will continue to install production process automation systems and automatic measuring complexes at the Company’s facilities. This applies to all the basic lines of business – prospecting for, recovery, processing, transportation and sale of hydrocarbons. Realization of these plans will help raise production process efficiency, enhance product quality and push production up to 2.5%. Large-scale automation adds to the smoothness of production flow, increases assets utilization efficiency and brings operating expenses down.

LUKOIL-INFORM’s effort in this direction does not end at that, far from it. It is up to our specialists to provide information support for the Company’s divisions and subsidiaries all along the line and give them access to various applied systems and databases. We help the Holding Company’s employees to use various computer applications, offer them Internet access and respond to all requests for the services using our Help Desk workplaces support software.

Our company will keep expanding the network of data processing centers in Russia’s regions so that the IT-solutions used in LUKOIL should give trouble-free service.

LUKOIL-INFORM continues to improve the LUKNET multiservice telecoms network. Today, its nodes provide communication services in more than 35 regions in and outside Russia. What is of special importance for LUKOIL’s large-scale transnational business is that they have helped establish communication and information exchange even with the hardest-to-reach production facilities. LUKNET users are offered a full range of modern communication and telematic services, one of them being videoconferencing which permits the corporate center’s managers to communicate on-line with the remotest regional divisions and facilities. For purposes of presentation (whenever necessary) a videoconference may be Internet-broadcast.

Another important line business is assuring information security. In 2006, LUKOIL-INFORM was the first company of its kind in Russia and the CIS to pass with flying colors a certification audit for conformity to the international standard ISO/IEC 27001:2005 conducted by the BSI Management Systems international certification agency. The company was awarded a Certificate of Conformance for its System assuring information security of the LUKOIL human resources management system support and maintenance process. The document confirms the high quality of the services rendered to assure confidentiality, integrity and accessibility of client information.

LUKOIL-INFORM has another important function to perform connected with keeping the public, the authorities, the scientific and business communities informed about LUKOIL’s activities: the company runs a printed-matter and video-products publishing business complete with an administrative office and a high-capacity integrated letterpress plant of its own. We publish a number of magazines covering problems connected with the development of Russia’s oil and gas complex and various aspects of LUKOIL’s activities. These are the Neft Rossii, Oil of Russia and Sotsialnoye partnerstvo magazines and their online versions. A recent newcomer to this family, the ITime, has become a connecting link between oil business community representatives and IT-specialists. It encourages all-round discussions of current problems and invites suggestions for optimum solutions.

LUKOIL-INFORM’s team of specialists deserves special mention here. In July 2004, after all the IT-divisions had been integrated into one company by decision of the Company’s President and Management Board, LUKOIL-INFORM became one of Russia’s largest IT-companies employing about 7,000. It is precisely its personnel that a company depends on for its efficiency, competitiveness and survivability, and if that company promotes its employees’ professional advancement and career development it will be rewarded by the personnel’s sincere dedication to corporate values and, as a result, by sustainable progress in today’s dynamic and competitive world. Therefore, we are making every effort so that the efficient and well-coordinated teamwork of LUKOIL-INFORM’s personnel should uphold the Company’s status as the intellectual leader of the industry.