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Sustainability Principles in International Production Projects

The LUKOIL Group entities operating in foreign countries maintain common corporate standards and follow the same sustainability principles formulated in the Integrated Project Management System in place at the Company. The common approach is adapted to suit the context of a specific country and license obligations of LUKOIL, approved by the management systems of its partners (project operators), local statutory provisions or other regulations, e.g. Directives of the European Parliament and the European Council.

Enforcement of human rights, strict observance of the LUKOIL Code of Business Conduct and Corruption Prevention Policy are the fundamental prerequisites for LUKOIL's engagement in foreign projects. The priorities of the Company in all of its projects are maintaining the safety of personnel and manufacturing facilities, and choice of the best-suited technology to cut back on greenhouse gas emissions, reduce environmental footprint, and prevent interference with the way of life of the local community.

The corporate standards and rules of conduct are followed throughout the project (i.e., during design, implementation, closure, or withdrawal from the project). The responsibility for their enforcement rests with project managers. Regardless of the stakes held by LUKOIL in its projects, it advises its partners on the applicable corporate standards during preliminary negotiations or whilst awarding contracts, and participates in decision-making as part of ongoing projects.

Preparation of feasibility studies in all countries involves a social and environmental assessment of the project footprint, with the findings of such assessments being approved by all parties to the project and governmental authorities. These also involve consultations with the local community. The assessment is normally conducted in line with the international standards (e.g., those of the World Bank). A feasibility study must at all times list energy efficiency, associated petroleum gas utilization, and GHG emissions reduction measures, as well as activities to support the local community and small businesses, whenever a project affects their interests.

If the standards of the project parties and local statutory requirements are at different levels, the rule of thumb is to rely on more stringent standards (those of the host country, LUKOIL, or project operator).

The key technical solutions that are used in designing project activities and the findings of the social and environmental assessment are submitted to LUKOIL's Technical Support Center where they are reviewed against the corporate standards. In carrying out major capital projects, or moving on from one project phase to the next one, the functional units of the Company perform comprehensive reviews of document packages to decide on whether to proceed with the participation in a given project.

While a project is under way, they continuously deal with governmental authorities, partners, and local communities (if LUKOIL is an operator). To make such cooperation more transparent and productive, the Company establishes committees, taskforces, or other joint management bodies, where they discuss environmental, safety, and sustainability issues.

The projects in which LUKOIL acts as an operator are carried out in full accord with the corporate requirements and standards. Whereas it is normally the local communities that provide personnel for such projects, all newly employed personnel must all times acknowledge their understanding of the LUKOIL Code of Business Conduct as part of the orientation briefing. The responsibility for completing this procedure rests with either specific employees or functional units within the Group entities. The document is freely accessible to all personnel (e.g., on the internal website, or information stands at the facilities). The rules of conduct are enforced via internal inspections, verifications, or audits.

The corporate requirements make it mandatory that a project Policy or Plan be in place to manage social and environmental aspects (HSE).

To the host countries LUKOIL is often a supplier of new technology and technical solutions, which, when implemented, help to a good extent mitigate the impact of the Company's operations on local ecosystems and social conditions of the locals.

The approaches to managing the sustainability factors and assessing the outcomes of such effort are common across the LUKOIL Group.