Sustainable development

Supplier and Contractor Relationships

In recent years, Rosneft has been a major consumer of goods, works and services in Russia. The annual spend by the Company (Rosneft and Group Subsidiaries) on externally procured goods, works and services amounted to RUB 2.76 trln.

The Company’s ongoing development involves engaging a wealth of products, advanced technologies, new contractors and suppliers.

Therefore, the Company’s procurement activities are focused on building long-term partnerships with suppliers and contractors. Signing long-term contracts and placing long-term orders facilitate stable development of the oil and gas industry, the machine building industry and the maintenance services market, while also helping to create jobs in all industries and drive innovation. Thus, in 2020, 75% of the 2021 centralised requirements were covered by long-term contracts.

The Company keeps implementing the category management in procurement, including by leveraging category/procurement strategy as its key enabler. In 2019–2020, Rosneft developed 26 strategies in the most capital-intensive procurement areas.

As part of its work to implement the category management in procurement and build a framework for long-term counterparty qualificationThe validity period is 18 months., the Company continues to develop standard supplier and contractor requirements for certain groups of materials, equipment, works and services. The information on the applicable standard requirements is available at TEK-Torg’s electronic trading platform. Preliminary review of potential suppliers or contractors for compliance with the approved standard requirements makes it easier for them to prepare for and participate in the Company’s procurement procedures in relevant categories.

To establish long-standing relationships with suppliers, the Company’s internal regulations provide for long-term (up to 18 months) accreditation which helps considerably reduce costs incurred by potential suppliers participating in procurement procedures. Suppliers may obtain accreditation both prior to and in the course of procurement procedures.

As a vertically integrated holding company, Rosneft relies on the consolidated procurement of goods, works and services for the Group Subsidiaries with a view to enhancing its procurement efficiency, all in line with recommendations of the federal executive bodies. Rosneft’s procurement is centralised at 64%, including 50.5% handled by the Head Office and 13.5% sourced regionally.

When choosing suppliers and contractors, the Company adheres to the principles of openness, competitiveness, reasonableness, effectiveness, and non-discrimination, as stipulated in the applicable Russian laws and the Procurement Policy adopted by the Company in 2020. The Policy sets out the key goals, objectives and guiding principles of the Company’s supplier relations, as well as procurement management priorities for Rosneft and the Group Subsidiaries.

These principles are implemented under the Regulations on Procurement of Goods, Works and Services applied in the Company and the Group Subsidiaries.

To ensure procurement transparency, increased competition and equal access for market participants, the Company manages its procurement procedures electronically via TEK-Torg’s electronic trading platform (Rosneft section). The Company conducts virtually all competitive procurement procedures electronically.

In 2020, the Company and the Group Subsidiaries initiated over 137 thousand procurement procedures on TEK-Torg’s electronic trading platform (Rosneft section).

Over 464 thousand suppliers are registered on the trading platformCumulative total since the launch of TEK-Torg’s electronic trading platform..

To enhance transparency and efficiency of minor procurement (worth below RUB 500 thousand), TEK-Torg’s electronic trading platform is expanding its Corporate Internet Shop (CIS).

For reference

The Corporate Internet Shop helps boost, control and streamline the Company’s internal business processes as well as those of the Group Subsidiaries leading to shorter times, lower operating costs and lower procurement prices due to a better competitive environment. As a result, the Company managed to attract new counterparties (mostly SMEs).

electronic trading platform

As at 31 December 2020, over 41 thousand organisations were registered in the CIS, including over 30 thousand small and medium-sized enterprises (SMEs). In 2020, the Company published over 55 thousand procurement procedures with completed procurement worth over RUB 3.6 bln, almost doubling year-on-year. The Company is committed to promoting cooperation with SMEs. The annual value of Rosneft Group’s contracts with SMEs is at least RUB 100 bln. It is worth noting that SMEs account for over 50% of potential suppliers accredited with Rosneft. To better inform suppliers and contractors, including SMEs, on procurement opportunities, Rosneft and SME Corporation held 13 workshops/events on the Company’s procurement activities in 2020. The workshops were held in Ivanovo, Sochi, Khabarovsk, Ulyanovsk, Tuapse, Nizhnevartovsk, the Republics of Bashkortostan and Tatarstan, the Volgograd, Sakhalin and Tomsk regions, and the Krasnoyarsk Territory.

The Company continues with the Import Substitution and Equipment Localisation Programme for Rosneft’s Needs for 2019–2021 with an outlook for 2028. The Regulations on Procurement of Goods, Works and Services provide for the Company’s right to prioritise Russian-made goods, works and services where and as required by the applicable laws. The Company also regularly carries out purchases of Russian-made equipment of its own accord.

The Company continues the roll-out of a Shared Service Centre (SSC) in Samara with a view to centralising and pipelining procurement operations and category management functions. In 2020, the following functions were successfully transferred to the SSC:

  • contractor accreditation, publishing procurement documents, monitoring due delivery time, purchase and supply plans approval;
  • contract management and reference data support for centralised list of items, reporting on procurement processes.

As at 31 December 2020, the SSC had a headcount of 175 employees and had service contracts signed with Rosneft, regional procurement operators and 19 Group Subsidiaries.

To recruit and train young professionals, the Company maintains its cooperation with the Samara State Technical University, Samara’s flagship in higher education, with a plan to train, hire and attract young talent in 2021 in place.

In July 2020, Gubkin Russian State University of Oil and Gas awarded first masters degrees in procurement upon two-year training at the Department of Procurement Chain Management for the Oil and Gas Industry (under the auspices of Rosneft). There were 14 graduates, and 7 of them were awarded honours degrees.

The educational programme involved managers and employees of Rosneft’s procurement function, leading industry and international experts.

In autumn 2020, the second intake of master’s degree students (26 persons) was launched with on-campus and remote learning combined.

In cooperation with the operator of TEK-Torg’s electronic trading platform, the Company implemented a new joint project – Rosneft Procurement mobile application to facilitate the handling of the Company’s procurement procedures.

Rosneft Procurement application enables employees and owners of potential and current suppliers of Rosneft or Group Subsidiaries to choose the relevant procedures swiftly, to be notified of new purchases and to be updated on the news of the trading platform, relevant documents and procedural changes.

For reference
Rosneft relies on automation tools to unlock resources previously engaged in routine and algorithm-driven operations so as to:
  • refocus its employees on more sophisticated tasks,
  • mitigate risks of errors (human factor) while managing big data,
  • exponentially accelerate routine operations supporting a 24/7 continuous workflow.

The Company continues deploying cutting-edge robotic automation in procurement. Robotic scripts are already applied in delivery monitoring, reporting and inventory reallocation. Optical recognition is used in accreditation of potential suppliers and contractors.

To ensure compliance with major international human rights instruments, the Company adopted a Declaration on Respecting Human Rights to be used when interacting with suppliers of goods, works and services. The declaration is available at the Company’s official website, and the requirement to comply with all its guiding principles is part of the procurement documentation.

The Company expects its suppliers and contractors to pay particular attention to health protection, maintaining the right to favourable environment, and creating comfortable and safe labour conditions in line with the applicable labour safety requirements of the Company, the Russian Constitution, Labour Code, health and disease control regulations and standards and/or other legal instruments of their jurisdiction / regions of operation, as well as the international law.

Suppliers and contractors