Message from the Chairman of Rosneft’s Board of Directors

Gerhard Schroeder

Gerhard Schroeder

Chairman of the Board of Directors

As the Chairman of the Board of Directors, I place a significant emphasis on the Company’s strategic priorities and their achievement. In 2017, we approved Rosneft’s business strategy for the next five years – it is one of the most ambitious in the industry and fully meets the challenges currently faced by oil and gas corporations. This carefully elaborated plan provides a robust strategic basis for the Company’s breakthrough development and takes into account the production capabilities of all its business segments. The strategy details organic growth in liquid hydrocarbons production to 250 mmtoe by 2022, and includes Rosneft’s plans for its gas business to become one of the Top 3 global gas companies within the next few years. This is also an increase in the share of products with high added value, such as petrochemical products. Another focus area is transformation of the Company into one of the technological leaders through digitalization. The strategy covers investments, including such areas as refinery modernization, energy efficiency, emission reduction which allow Rosneft to increase the profitability of refining and petroleum products sales of own production.

As a former Chancellor of Germany, I am particularly interested in bolstering Rosneft’s partnerships with European companies and I'm convinced that the Company’s recent steps have been crucial in building productive and effective business relations with its European partners. Rosneft’s integrated approach to major oil and gas projects plays a key role in its overall efficiency, attracting consuming countries interested in guaranteed feedstock volumes, and the production, transportation, and delivery of those volumes to the end consumer. Rosneft maintained its focus on diversifying feedstock supplies between western and eastern destinations throughout 2017, resulting in a 10.7% rise to 47.7 mmt in shipments on the eastern route, while distribution via the high-margin Rosneft retail channel increased by 7% during 2017.

Based on the drilling results from the first offshore appraisal well in the Laptev Sea, a new field was discovered in 2017 with oil reserves exceeding 80 mmt, while a unique start-up complex was commissioned at the Erginsky cluster containing a total of 256 mmt in oil reserves.

Having monitored the activities of Rosneft’s management throughout the year, as a Chairman of the Board of Directors, I value their efforts highly. Rosneft’s portfolio was expanded throughout 2017 with several strategic, high-potential asset acquisitions that have already increased in value alongside the current trend in oil prices. The Company expanded its international refining business through swapping shares in German refineries and acquiring a share in India’s Vadinar refinery, both of which have already generated substantial synergies.

Rosneft is the world’s largest public oil and gas company both in terms of production volume and reserves. Rosneft continues its journey ahead, expanding upon production following an increase from 4 mmtoe 18 years ago to 281.7 mtoe in the reporting year, developing its refining, petrochemicals, and retail businesses, and transforming into an experienced international trader.

In Germany, Russia, and other countries, people often ask me why I accepted the offer to take up an executive position in the Company. In my opinion, Rosneft strives to make the best use of the resources of the global industry, as well as its geographic and technological potential through international cooperation. The Company has dozens of joint ventures across Europe and Asia and invests millions of dollars in their operation, while about 40% of Rosneft shares are owned by foreign shareholders.

Energy security issues are of great concern to us, and their resolution primarily depends on mutual cooperation through openness and common interests. Distrust and political differences can be overcome through closer cooperation. We need to move in this direction starting today.