Supplier and Contractor Relationships

Rosneft is the largest consumer of goods, works, and services among Russian private and state-owned companies. Annual procurement of goods, works, and services by the Company (Rosneft and Group Subsidiaries) from external counterparties totaled RUB 6.4 trln – up 137% year-on-year.

The procurement process is designed to meet the demand of Rosneft business units for goods, works, and services on time and in full, while ensuring maximum efficiency and a high standard of quality.

Key Procurement Achievements in 2017

  1. As a vertically integrated holding company, Rosneft performs the consolidated procurement of goods, works, and services for Group Subsidiaries, an approach consistent with the recommendations of federal executive bodies. Rosneft’s procurement is centralized at 72%, including 59% of procurement handled by the Head Office, and 13% sourced regionally.
  2. In an initiative to improve procurement efficiency, the Company transitioned to signing long-term contracts, which provide discounts on bulk purchases.

    In 2017, the Company finalized its procedures covering the following types of goods, works, and services procured under domestic and international long-term contracts: tubular products, submersible cable, chemicals, substations, pumping equipment, buildings, shut-off and control valves, pumps, well logging, geophysical surveys and operations in wells, perforating operations, hydro-mechanical slotting perforation, hydraulic fracturing, sidetracking, seismic surveys, well servicing and workovers, transportation, production drilling, and drilling services.

  3. The Company is committed to establishing long-standing relationships with suppliers, its local regulations stipulate long-term (18-month) accreditation, thereby considerably reducing costs incurred by potential suppliers participating in procurement procedures. In 2017, a total 7,214 suppliers of goods, works, and services had valid accreditation to participate in procurement procedures, with small- and medium-sized enterprises accounting for over 72% of the total number of accredited suppliers.
  4. Rosneft and Group Subsidiaries apply the Company’s uniform Regulations on the Procurement of Goods, Works, and Services to standardize procurement principles and approaches, and ensure maximum transparency through publishing its procurement plans, information on procurement procedures and their outcomes, and on the signing and execution of contracts. Information on over 99% of the Company’s procurement is made publicly available on the Internet.
  5. To increase procurement transparency via the electronic trading platform, CJSC TEK-Torg (in Rosneft’s section), the Company and Group Subsidiaries initiated 25,861 procurement procedures with a total initial (maximum) value of RUB 1.931 trln and registered 26,621 suppliers in 2017.
  6. The Company pursues its import substitution program approved in 2015 and updated in 2016.

    The Company’s Regulations on the Procurement of Goods, Works, and Services enable the Company to prioritize domestically produced goods, works performed, and services provided by Russian entities in the cases and manner stipulated by applicable legislation.

  7. The Company is committed to promoting cooperation with small- and medium-sized enterprises (SMEs). To provide SMEs with wider access to procurement procedures, the Company implements measures stipulated by the regulations of the Russian Government on an ongoing basis. In line with the Resolution of the Russian Government No. 1352 dated 11 December 2014, targets for the share of procurement from small- and medium-sized enterprises were met. The total value of contracts signed by Rosneft with SMEs (including those signed by Group Companies on behalf of Rosneft) amounted to RUB 97.9 bln, with RUB 25.2 bln worth of contracts signed as a result of direct procurement from SMEs. SMEs account for over 72% of the total number of suppliers with valid accreditation in Rosneft.
  8. The Company is implementing a comprehensive program to automate its procurement processes. In 2017, core tasks were completed across key IT projects and business areas:
    • The frequency of supplier contract refusals post their award was minimized through the introduction of new procedures requiring bidders to provide a cash performance bond
    • An IT solution to enable the signing of contracts using a qualified electronic signature was implemented, thereby shortening the time required to sign contracts
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