No. 2, 2008

In its activity the company LUKOIL-Severo-Zapadnefteprodukt successfully tackles social problems

ОбычныйThe leading Russian oil-and-gas companies have long realized that investments in human capital are profitable and beneficial for their main production activity. For LUKOIL-Severo-Zapadnefteprodukt social policy is an important element of its corporate strategy.

A social aspect of activity

To bridge gaps in the socio-economic policy of the state, oil industrialists today constantly increase their investments into the social sphere, thereby laying a solid foundation not only for their own production activity in the regions where they operate but also for the further development of the entire Russian economy. The continued expansion of the social activity of the oil and gas business community, of its social responsibility, is inseparably linked with the strategic aims of building up the institutes of civil society in Russia.

LUKOIL, the leader of the Russian oil industry, has always been aware of its social responsibility to the state and to society. The social responsibility principles are set forth in the company’s Social Code. Formulated in it are social obligations over and above those laid down by the law. These principles and norms are mandatory for all of the subsidiaries of the LUKOIL Group. The company assumes voluntary obligations concerning socially responsible participation in the life of the local communities in the regions where the LUKOIL Group is active and in the life of society as a whole.

The human resources have always been the company’s main asset. Oilmen’ social protection system includes both the state mechanisms of realizing their social, legal and economic guarantees stipulated by law and corporative social programs ensuring adequate living standards to people – standards that are quite sufficient to motivate high labor productivity and the effective functioning of all of the company’s elements. The oilmen’ social protection system comprises also social insurance, voluntary medical insurance, social aid, and occupational pension schemes. Very important to ensuring workers’ social protection are: improvement of their labor conditions and protection, the planning of workers’ professional training and career building, and assistance in bettering their living conditions.

Targeted and concrete charity

Recognizing the importance of charitable activity in any kind of society and a special need for it on the part of some organizations and persons, LUKOIL uses its resources to render charitable assistance.

LUKOIL-Severo-Zapadnefteprodukt conducts extensive work in the sphere of social policy and charity in the region where it operates. Today, social and charitable programs are an important part of the company’s corporate strategy, helping it to cooperate constructively with the government, business circles and society. Based on the experience and human potential in the regions, the corporate programs are concrete and targeted. The matter of allocating funds for major projects is considered by the parent company’s council for the coordination of its charitable activity – as a rule, on the basis of an appropriate request by the Governor or the Vice Governor.

Agreements on cooperation between LUKOIL and constituent entities of the Russian Federation always include articles on charitable activity. Two such agreements are effective today on the territory of the company’s operation: one with the administration of St. Petersburg, and the other with the administration of the Leningrad Region. The first document of this kind was signed with the administration of the Leningrad Region even before the company started its production activity there. Late in June 2002 a memorial stone was installed at the point of the future petroleum products distribution and transshipment complex called LUKOIL-II (150 km north of St. Petersburg). Previously, in April of that year, Vagit Alekperov, LUKOIL President, and Valery Serdyukov, the Governor of the Kaliningrad Region, signed an agreement on cooperation. Thus the year 2002 marked a new stage in the company’s social policy and charitable activity.

In late 2002 the company paid $200,000 to purchase the necessary equipment for a local hospital. Two months later it bought ten school buses for a sum of four million rubles.

To do good to people

In late 1990s a group of enthusiasts, teachers in St. Petersburg, devised the concept of a new type of socio-pedagogical establishment called “a social hotel.” It is a hotel for 17 to 23 year-of-age former inmates of children’s homes (correctional institutions, as a rule). These young people have nowhere to live and they do not know how to manage on their own. The social hotel Mechta, which is patronized by LUKOIL-Severo-Zapadnefteprodukt, functions as a family boarding house. Five educators and 30 inmates form one large family, as it were. The young people may work or study, fully taking care of themselves. The educators conduct courses according to a special program, including lessons in family upbringing, the basics of housekeeping and cookery, the country’s legislation, and business communication. The educators uphold the interests of their charges with social welfare bodies. For more than seven years LUKOIL-Severo-Zapadnefte-produkt has footed monthly bills for the young people’s board and gave them presents on holidays.

Rendering assistance on a long-term basis is another principle of the company. An example of that, besides the hotel Mechta, is Children’s Home No. 31. The company assumed patronage over it in 2004 under an agreement with St. Petersburg. Initially, the agreement provided for an annual charity payment of 800-900 thousand rubles for the repair of the building. In addition to that, LUKOIL has provided an annual grant for organizing the summer vacation of the residents of the home at the health resort of Anapa. Also, the company has been making presents for the New Year and for September 1 (to junior-class pupils). Until recently, LUKOIL-Severo-Zapadnefteprodukt merely coordinated the project (the money for it came from the LUKOIL charity fund). Starting with the year 2007, the company has been making direct payments for the maintenance of the children’s home.

Since May 2003, the Novgorod branch of LUKOIL-Severo-Zapadnefte­produkt has taken patronage over the children’s carting club called Motorsport-Novgorod. The club is attended by up to 100 children from 5 to 18 years of age. Supported by the Novgorod branch, the young sportsmen take part in 10 to 15 different competitions every year. They won the championships of Pskov and Petrozavodsk in 2005, were among the prizewinners of the national championship in motorcycle racing and of the Latvia Cup in 2007, and individual winners of the Novgorod Cup in 2006-2007.

In the summer of 2007, when LUKOIL-Severo-Zapadnefteprodukt announced its plans to expand the network of gas stations in Karelia, the administration of Petrozavodsk asked the company to render material assistance to the city’s medical institutions. As a result, in November the company provided the first-aid hospital in Petrozavodsk with two lung ventilators worth 1,275,000 rubles.

This year LUKOIL-Severo-Zapad­nefteprodukt, together with the LUKOIL charity fund, started a new project – assistance to the children’s home in the town of Staraya Ladoga. Prior to the appearance of Kievan Rus, this town (then called simply Ladoga) was the first capital of the Russian state. This year it will mark its 1,255th anniversary.

The fruitful activity of LUKOIL-Severo-Zapadnefteprodukt shows that the company has managed to instill in the region the principles of socially responsible business. This fact has been confirmed by the LUKOIL president, Vagit Alekperov, who said: “Being a large oil company today implies, above all, responsibility of the highest degree. Throughout its history LUKOIL has repeatedly demonstrated its dedication to the principles of socially responsible business. Our company intends to continue taking an active part in the life of society.”