Introduced: Introduced: 2002

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1 Tax environment in Russia LUKOIL s business is subject to taxation inside and outside Russia. The scale of the Company s business inside Russia means that its situation as a taxpayer is largely defined by taxes, which are payable in that country. Taxes paid in Russia as a share of total taxes paid by the Company were almost unchanged in 204 at 88%. The main taxes paid by the Group in Russia are listed below. Corporate income tax Object of taxation: income received by an organization, reduced by incurred costs, defined in accordance with Russian tax law. Tax payers: Russian and foreign organizations, which carry out business and/or have sources of income in the Russian Federation. Tax rate: The maximum income tax rate effective from January, 2009 is 20%. Impact on Company business: The Company s income tax costs in 204 were $2,033 mln. Total income tax payments during the year were $2,058 mln. The effective income tax rate for the Company in 204 was 30.4% (as per consolidated financial accounts, including the business of foreign subsidiaries), which is higher than the maximum statutory rate of 20%. Corporate property tax Introduced: 2004 Object of taxation: real estate and other property of organizations, which is classed on the organization s balance sheet as fixed assets, excluding movable property booked on the balance after A law passed in 204, which takes effect from , provides tax relief in respect of movable property booked on the balance sheet after The relief does not apply to property, which was booked as a result of the reorganization or liquidation of legal entities, or as a result of transfer, including acquisition between related parties. Tax payers: Russian and foreign organizations, carrying out business and/or owning property in Russia. Tax rate: Rates of the tax are set by regional parliaments but cannot exceed 2.2%. Impact on Company business: Property tax costs of the Company in 204 were $463 mln, compared with $539 mln in 203. Contributions to social funds (unified social tax before ) Introduced: 200 Object of insurance contributions: wages and other disbursements paid to individuals under employment and other civil law contracts, relating to the carrying out of works, provision of services, and commissioning contracts. Payers of contributions: Entities, which make the above payments and disbursements to individuals (employees). Contribution rates: Regressive scale (maximum rate 30%) Contributions are paid to the Pension Fund, the Social Insurance Fund and the Compulsory Medical Insurance Fund. Impact on Company business: Company costs relating to social taxes and contributions in Russia were $465 mln in 204. Mineral extraction tax (oil) Mineral extraction tax (MET) replaced three forms of payment for use of mineral resources, which existed previously sub-soil usage tax, contributions for replacement of mineral resources, and oil and gas condensate excises. Object of taxation: Oil extracted inside Russia and at territories under Russian jurisdiction. Tax payers: Organizations and individual entrepreneurs, who qualify as mineral resource users under Russian law. Average standard rate in 204 5, rubles/tonne (+9.3% to 203) $5.67 per tonne (-9.4% to 203) Impact on Company business: MET, along with export duties, is the most substantial tax for oil companies in Russia. In 204, LUKOIL paid MET in Russia in the amount of $,596 mln. MET (oil) rate, $/tonne: MET = Kc*Base rate*kv*kz*kd*kdv Fact Book 204 6

2 A law passed in 204, which comes into force from 205, establishes a new formula for calculating MET (oil): MET = Kc*(Base rate Base benefit*( Kv*Kz*Kd*Kdv*Kkan)) Kc*Base rate is the standard MET rate, applicable to oil without preferences. The Kv, Kz, Kd, Kdv and Kkan coefficients give reductions of standard MET. Kc = ( Base oil price) / 26 MET on oil is charged in rubles (RUB), and Kc is multiplied by the average dollar-ruble exchange rate set by the Russian Central Bank. The Kkan coefficient is introduced by law into the MET formula from 205 and is equal to 0 for fields that enjoy tax holidays and for fields with heavy oil (except extra heavy oil) as defined by the law in force until the end of 204., $/barrel Base oil price, $/barrel The rate established by law, coming into force from the start of the respective year. The reducing coefficients, Kv, Kd and Kdv depend on the level of reserve depletion Sv at a license area: Sv = accumulated production / initial recoverable reserves Svz is calculated similarly to Sv, but for a specific deposit Kv = 0.3 If Sv > х Sv If 0.8 < Sv < If Sv < 0.8 Basic MET rate, rubles/ tonne Base benefit, rubles/ tonne Average Urals price for the 202 month For calculation of Sv and subsequently Kv, initial recoverable reserves are taken as of The Kv has been in force since 2007 for an indefinite term, and is not applicable to tight reserves, for which Kd <. The calculation is only applicable to small license areas with initial recoverable reserves as of January of the year prior to the tax period less than 5 million tonnes and Sv not greater than 0.05: - on (for mineral areas, usage licenses for which were provided before ); - on 0 January of the year, when a usage license was provided (for mineral areas, usage licenses for which were provided after ). Otherwise Cr =. The Kz coefficient has been in force indefinitely since 202. Кd = 0 For Bazhen, Abalak, Khadum and Domanik formations 0.2 For oil deposits with permeability less than micron² and effective net oil pay no greater than 0 meters 0.4 For oil deposits with permeability less than micron² and effective net oil pay greater than 0 meters 0.8 For Tyumen formations In other instances The Kd coefficient has been in force from September 203, and is applicable for 5 years, starting from January of the year, when the Sv of an oil deposit exceeded 0.0. This tax benefit is more differentiated than Kv and Kz it is not applicable to a whole license area, but individually to oil deposits. The Kdv coefficient is applicable to production at an oil deposit additionally to Kd, where the latter is also applicable. Кdv = Кv If Kd =, but there is at least one other dposit at the license area with Kd < х Svz If Кd < и 0,8 < Svz < 0.3 If Кd < and Svz > In other instances or if the mineral area does not include any deposit with Kd < Kdv coefficient is in force since September 203 and depends on the period of application of Kd. Кz = 0.25 х IRR Svz is calculated similarly to Sv, and is determined as of January of the year prior to the tax period. From 205 the Kd coefficient is not used for Bazhen, Abalak, Khadum and Domanik formations, but a zero MET rate is applied. 62

3 In addition to the above-mentioned preferences LUKOIL also benefited from other MET (oil) preferences in 204: A zero rate at the Korchagin field due to a tax holiday (the Kkan coefficient is applicable at the field from 205); A reduced rate equal to 5% of the price of oil produced at the Filanovsky field for a period of 7 years beginning from the month after the month during which industrial production began, but no later than March 3, A zero rate for the Permian-Carbonaceous deposit at the Usinskoe field (Kkan is applicable from 205) and the Yaregskoe field. Mineral extraction tax (gas) Object of taxation: gas produced in Russia and in territories under Russian jurisdiction. Tax payers: organizations and individual entrepreneurs, who qualify as mineral resource users under Russian law. Tax rate for LUKOIL: until July, 204 MET (natural gas) for independent producers in Russia was calculated using a fixed rate. In the first half of 204 the rate was 47 rubles per,000 m 3 (265 and 402 rubles in the first and second halves of 203, respectively). Beginning July, 204 the base rate was set at 35 rubles per,000 m 3 of natural gas, to be adjusted depending on the average wholesale price of natural gas in Russia, the share of natural gas in overall hydrocarbon production by the tax payer and complexity of the gas production. In the second half of 204 the MET (natural gas) rate for gas production at the Group s main gas field (Nakhodka) was rubles per,000 m 3. Amendments dated provide for a zero rate for natural gas produced at areas located partially or completely on the Yamal and/or Gydan Peninsulas in the Yamal-Nenets Autonomous District provided that the gas is used exclusively for the production of liquefied natural gas and until a specified production volume is reached in a defined period. VAT Introduced: 200 Object of taxation: Sale (transfer of ownership rights) of goods, works, services and property rights inside Russia as well as the conduct of construction and assembly work for the Company s own consumption and import of goods to Russian customs territory. Tax payers: organizations, individual entrepreneurs. Tax rate: 8%. A lower rate of 0% is applicable for taxation of basic food goods, medical goods, goods for children, printed periodicals and books related to education, science and culture. A zero rate is applicable to export operations. Excises (petroleum products) Introduced: 200 Object of taxation: sale in Russia of products that are liable to excise taxation. Products liable to excise taxation: Automotive gasoline, diesel fuel, lubricants for diesel and (or) carburettor (injection) engines, naphtha. Tax payers: Organizations and individual entrepreneurs (from January, 2007 excises are paid by oil refineries and not by organizations selling petroleum products, as was the case from 2003). Tax rate: Excise rates for petroleum products are established by the Russian Tax Code. Change of rates are made as amendments to the Code. Petroleum products excise in 204: Automotive gasoline (lower than Euro-3),00 rubles/tonne Automotive gasoline to Euro-3 0,725 rubles/tonne Automotive gasoline to Euro-4 9,96 rubles/tonne Automotive gasoline to Euro-5 6,450 rubles/tonne Naphtha,252 rubles/tonne Engine lubricants 8,260 rubles/tonne Diesel fuel below Euro-3 6,446 rubles/tonne Diesel to Euro-3 6,446 rubles/tonne Diesel fuel to Euro-4 5,427 rubles/tonne Diesel fuel to Euro-5 4,767 rubles/tonne Domestic boiler fuel 6,446 rubles/tonne Impact on Company business: Excises paid by LUKOIL on petroleum products in Russia totaled $.870 bln in 204. The Company also paid $3.598 bln as excises outside Russia. Excise taxation benefits applicable to LUKOIL: Excise rates for petroleum products were differentiated, reducing excise taxation on more expensive and higher quality fuels and increasing taxation on cheaper fuels. Export duties (oil) Introduced: 992 Object of taxation: Oil and gas condensate transported beyond the borders of the Russian Federation. Tax payers: Organizations exporting oil and gas condensate from Russia. Rate: See insert. Average rate in 204: $366.5 per tonne Impact on Company business: Total duties paid in Russia in 204 on exports of oil were $9.4 bln, down by 6.7% compared with 203. Fact Book

4 Export duty benefits applicable to LUKOIL: reduced export duties rate for old fields and zero export duties for new fields in the North Caspian; reduced export duty rates for heavy oil in reservoir conditions with at least 0,000 cps. Crude oil export duties, $/barrel barrel Until From From P < < P < 20 (P-5) 35% 20 < P < 25 (P-5) 35%.75 + (P-5) 45% P > (P-25) 40% 4 + (P-25) 65% 4 + (P-25) 60% barrel P < < P < 20 (P-5) 35% 20 < P < 25 (P-5) 45%.75 + (P-5) 45% P > (P-25) 59% 4 + (P-25) 42% 4 + (P-25) 36% barrel 207 P < < P < 20 (P-5) 35% 20 < P < 25 (P-5) 45% P > (P-25) 30% Rate established by law in 204, coming into force from the start of the respective year. Tax payers: Organizations exporting gas to export from the Russian Federation. Tax rate: Natural gas in gaseous state is liable to export duty at 30% of its value for customs purposes. Export duties (petroleum products) Introduced: 992 Object of taxation: Petroleum products transported beyond the borders of the Russian Federation. Tax payers: Organizations exporting petroleum products beyond the borders of the Russian Federation. Tax rate: Export duty per tonne of petroleum products as % of duty per tonne of crude oil Naphtha Automotive gasoline Fuel oil, tar Coke Lubricants Diesel Other light and medium distillates Other dark products Rate established by law in 204, coming into force from the start of the respective year. Share of taxes, excise and export duties in revenues, less the cost of oil and petroleum product purchases, % The export tariff rate on crude oil is revised each month with a.5 month delay. For example, the export tariff rate for April is calculated in March based on the average price of Urals oil on the international market from February 5 to March 4, inclusive. Average export duty on crude oil, $/tonne Share of taxes, excise and export duties in income before their payment, % Export duties (gas) Introduced: 992 Object of taxation: Gas transported beyond the borders of the Russian Federation. 64

5 ABOUT THE COMPANY Open Joint Stock Company LUKOIL Oil Company (short name, OAO LUKOIL ) was established under the Russian Presidential Decree 403, On specific aspects of the privatization and conversion into joint-stock companies of state-owned enterprises, industrial and scientific-production associations in the petroleum, oil refining and petroleum product marketing industries and under Resolution 299 of the Council of Ministers Government of the Russian Federation, On the establishment of Open Joint Stock Company LUKOIL Oil Company, dated April 5, 993. Mentions of OAO LUKOIL, LUKOIL Group, the Group, LUKOIL, the Company, we and our are equivalent for the purposes of this Fact Book and refer to LUKOIL Group of companies, to LUKOIL and/or its subsidiary enterprises, depending upon the context in which the terms are used. LEGAL ADDRESS AND CENTRAL OFFICE, Sretensky Boulevard, Moscow, 0 000, Russia CENTRAL INFORMATION SERVICE Tel: +7 (495) , Fax: +7 (495) SHAREHOLDER RELATIONS Tel: +7 (495) , (800) Fax: +7 (495) shareholder@lukoil.com INVESTOR RELATIONS Tel: + 7 (495) Fax: + 7 (495) ir@lukoil.com PRESS SERVICE Tel: +7 (495) Fax: +7 (495) media@lukoil.com LUKOIL STOCK CONSULTING CENTER OAO LUKOIL, Sretensky Boulevard, Moscow, 0 000, Russia Tel: + 7 (495) Fax: + 7 (495) shareholder@lukoil.com REGISTRAR Computershare Registrar (successor of NIKOIL registrar) 8 Ivan Franko street, Moscow, 208, Russia Tel: + 7 (495) , (800) Fax: + 7 (495) info@computershare-reg.ru ADDITIONAL INFORMATION The most complete and up-to-date information about LUKOIL can always be found on the Company s website (Russian) or (English). The Investor and Shareholder Center on the site includes Company presentations, financial and industrial results, dividend history, share prices, an investor calculator, shareholder s private office and Company reports. OTHER COMPANY REPORTS Annual Report of OAO LUKOIL (main results of Company and Group business by segments, development strategy and corporate governance) Analyst Databook (digital information by segments, financial indicators, also available in Excel version) Sustainability Report (information on Company activities in the field of the environment and social responsibility in regions of presence) Corporate Governance Report (issued in accordance with requirements of the UK regulator) Global Trends in Oil and Gas Markets to 2025 (the Company s strategic vision for development of the oil and gas industry in the world and in Russia) UNITS AND CONVERSION COEFFICIENTS Percentage changes in operating results for 204 in mln tonnes are calculated using the respective indicators in th. tonnes. Where numbers are expressed in units of thousands, th. indicates that the number is rounded to the nearest thousand. Figures for oil reserves and production include crude oil, gas condensate and natural gas liquids. The average ruble/dollar exchange rate for 204 (38.4 rubles/dollar) is used in conversion of ruble figures for expression in dollars, unless otherwise indicated. barrel of oil equivalent = 6,000 feet 3 of gas Breakdown by segments used in the Fact Book corresponds to information in LUKOIL s IFRS consolidated financial accounts. The largest privately owned oil & gas companies in the world are: Shell, Eni, Total, ConocoPhillips, Chevron, BP and ExxonMobil. Fact Book