No. 2, 2008

LUKOIL implements an integrated target program to build up a strong strategic personnel reserve

Today, LUKOIL’s logo is already well known in many countries of the world, and the Company plans to further step up its operations on the global energy market. Hence the need for skilled labor specialized in the high-tech oil business as well as economics, management and marketing. Advanced training of LUKOIL’s young specialists in the United States plays an important part in the Company’s program for building up a reliable HR reserve to address its strategic tasks.

Staking on young people

LUKOIL President Vagit Alekperov said in one of his statements: “We should remember that in the present-day world, the main competitive advantage is intellectual, scientific and technological capacity rather than possession of cheap resources. Its preservation and buildup is the key to attaining prosperity in the 21st century.” A steady rise in the number of young employees has been achieved by the LUKOIL Group and all of its affiliates. LUKOIL currently employs over 1,700 young specialists, and their number is growing every year. Whereas in 1999 the Company hired only 313 graduates, the figure went up to 800 and 2,500 in 2002 and 2007, respectively. In the past three years, over 500 young specialists got promoted, and 400 others were put on the list of candidates for promotion.

Secondment of young specialists to leading facilities in key oil-producing regions is a priority item on today’s HRD agenda. In this way, more than 500 engineers have raised their skills over the past three years. Thus, LUKOIL-Komi young employees have come off their training at the facilities of the LUKOIL-Western Siberia with flying colors.

Councils of young specialists play an important role in promoting scientific and technological progress at LUKOIL’s facilities. Enthusiastic participation in the work of such councils by both experienced old timers and recent graduates helps foster real professionals who would take charge of various lines of business in the near future.

The Company holds biannual forums of young employees of the LUKOIL Group. This corporate event includes a scientific and technical conference in the course of which young specialists meet in breakout sessions to discuss best practices and projects in the key areas of the oil and gas business. The number of competitive projects is steadily growing and, most importantly, their quality is improving apace.

On the basis of an integrated program

An integrated target program for youth and young employee development in the period of 2005-2010 was adopted in late 2005. This sweeping strategic document provides for LUKOIL’s dynamic development in the future and incorporates a large section on the Company’s interaction with general education schools and specialized higher educational establishments.

The Company is providing targeted career guidance for students of the general education schools in the main regions of its operation. There also are special preparatory departments for would-be enrollees of oil and gas and other technical institutes and universities. Particular mention here should be made of the positive experience of career guidance work being done by JSC LUKOIL-Komi.

It should also be mentioned that LUKOIL was the first Russian company to start long-term target-oriented interaction with secondary schools. In the foreseeable future, this strategy should be able to provide the Company with top-notch specialists.

LUKOIL also devotes particular attention to promoting ties with higher educational establishments. For this purpose, the Company has set up a Coordinating Council, headed by Anatoly Moskalenko, chief of the personnel department and member of the LUKOIL management board. A number of cooperation agreements have been concluded between the Company’s subsidiaries and leading Russian oil universities in Moscow, Tyumen, Perm, Ukhta, Ufa, Samara, Volgograd and Arkhangelsk, as well as with the National Oil Academy of Azerbaijan. Signed in 2006 was an agreement on cooperation between LUKOIL Neftochim Burgas AD (Burgas), the Bulgarian Technical University (Sofia) and the Russian State University of Oil and Gas named after I.M. Gubkin (Moscow).

Under the agreements on cooperation substantial assistance is rendered to higher education establishments in improving and developing their material and study facilities. The best and most promising students get personal scholarships from LUKOIL. In all, over 700 young people are receiving a higher education under the Company’s target-oriented and commercial contracts.

The Company is gradually compiling a databank of the more promising students of higher educational establishments selected for further training in specialized advanced programs. Later on, many of them do practicals at the Company’s facilities and take part in the scientific and technical conferences of young researchers and other employees of LUKOIL. The Company’s leading specialists help students in writing their course and graduation papers.

Drawing on the American experience

The LUKOIL Group is successfully implementing a program for training specialists and managers listed as the mobile personnel reserve. The program provides for different methods and forms of work with the “reservists”: individual development plans, special thematic consultations, interviews, tests, business games and, of course, advanced training at the best companies abroad.

Russian government-run establishments of higher education are also engaged in this work. Last year, a special agreement was concluded by LUKOIL and the Diplomatic Academy of the Ministry of Foreign Affairs of the Russian Federation on the training for the Company of mobile personnel for working abroad. The LUKOIL “reservists” will attend courses on country studies, labor legislation and taxation systems of different countries; they will also study international business standards and improve their command of foreign languages.

Every year the Company’s specialists and managers undergo advanced training in the United States. Starting with the year 2004, specialists from LUKOIL have been doing practicals at the facilities of its strategic partner, ConocoPhillips. Critical reviews of projects developed by young specialists are held upon their return to Russia after a period of advanced training in the United States. All the projects are aimed at solving specific problems, enhancing production efficiency, improving product quality and increasing the Company’s competitiveness on the domestic and foreign markets of petroleum products. In the opinion of the leading specialists of LUKOIL, ConocoPhillips and UOP, many projects of the trainees are innovatory. For instance, the project of Sergey Andronov, chief engineer for fuel agent production at JSC LUKOIL-Permnefteorgsintez, entitled “Refinery Hydrogen Management,” and the project of Alexey Zharov, head of the production and technology department of LUKOIL-Nizhegorodnefteorgsintez, entitled “Gasoline Production Optimization,” have already been in production.

Appraising his period of advanced training in the United States, Alexey Afanasyev, deputy head of the catalytic reforming department of JSC LUKOIL-Volgogradneftepererabotka, noted: “The American refining experience is interesting in itself, and it gives one much food for thought. My advanced training has changed my understanding of all the processes going on at our plant – production, technological, economic and marketing processes. It has taught me to see them all as a single complex.”

Drawing on the American experience helps LUKOIL specialists improve their skills, and it is not surprising that the number of trainees going to the United States is growing from year to year. In 2005, only nine of the Company’s specialists underwent a lengthy period of advanced training in America. Today, the UOP company hosts the fifth group of LUKOIL trainees who very soon will go to Houston to continue their training – this time at the facilities of ConocoPhillips.

As early as the first quarter of 2008, 37 people, who had completed training under the mobile personnel system in the oil and gas production business segment, were sent to the United States. Furthermore, 70 “reservists” specializing in refining and petroleum products selling are ready to go for advanced training to other countries where LUKOIL is active.

On many occasions CEOs of LUKOIL subsidiaries have stressed the importance of such projects, some of which are already bringing an appreciable economic effect. Referring to the need for such projects, Anatoly Moskalenko, head of LUKOIL’s main personnel department, said in one of his speeches: “This need is prompted by the strategic tasks facing LUKOIL, tasks which are directly connected with broadening the Company’s sphere of activity both in Russia and abroad. Therefore, it is necessary to train highly qualified personnel well in advance.”