PJSC Tatneft. Annual report 2017
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PJSC Tatneft. Annual report 2017

Growth Strategy

STRATEGY 2025 — STRATEGY 2030

CORPORATE STRATEGY IS AIMED AT LONGTERM SUSTAINABLE DEVELOPMENT OF THE COMPANY: ensuring the optimal balance of oil and gas production, refining and petrochemicals, sale of oil and petroleum products on the domestic market and for export, achieving the maximum operating profitability of all business segments based on rational use of natural resources, social and environmental responsibility.
  • Defines the goals and objectives for each business segment.
  • Allows effective planning of operational and financial activities.
  • Provides for the calculation of investments required to maintain and increase production, develop human capital, improve management efficiency, create sustainable development factors, and implement all social commitments adopted by the Company.

The STRATEGY INTEGRATES ALL BUSINESS UNITS OF The COMPANY TO ACHIEVE DOUBLING OF MARKET CAPITALIZATION IN DOLLAR TERMS BY 2025.

STRATEGY-2025 WAS APPROVED BY THE BOARD OF DIRECTORS IN 2016. The strategy maintains continuity with the previous stages of development, strengthening the Company's potential to create high added value on the capital invested by shareholders.

Corporate goals

1 Growth of the Company's capitalization with the focus on doubling the value in dollar terms. "Capitalization"
2 Financial stability and risk management. "Financial efficiency" , "Integrated corporate risk management system and internal control"
3 High level of dividend yield. "Dividend policy"
4 Creation of long-term advantages of the business model and key success factors for business segments. "Business model" , "Key fundamentals of the growth strategy"
5 Sustainable development factors ensured considering environmental and social aspects. "Financial efficiency" , "Environmental responsibility"

IMPLEMENTATION OF THE STRATEGY IN 2017

The launch of Strategy 2025 has demonstrated its timeliness and relevance for a confident move forward and avoidance of critical risks for the Company in the current period of market volatility.

In the difficult economic conditions of the reporting year, the Company, keeping in view its strategic goals, took successful steps to strengthen the resource base, increase profitable oil and gas production, develop its own refining facilities and petrochemical enterprises, while maintaining high financial stability.

Company priorities of the 2017 reporting year:

  • Maintenance of a stable level of oil production in accordance with the restrictions imposed by the OPEC+ agreement, at the same time ensuring maximum production efficiency.
  •  Increased production of HVO.
  •  Increase in oil refining and finished production at our own oil refining facilities.
  •  Optimization of the filling station network and development of the retail business brand.
  •  Development of brands and growth in the sale of the tire production complex.
  •  Increase of operational and procurement efficiency.

In 2017, on the implementation of the Strategy initiatives were directed about

90billion rubles

In 2018, the Board of Directors approved the objectives of the Development Strategy of the TATNEFT Group until 2030.

Key parameters of the Strategy:

  • Exploration and production. Increase of production up to 38.4 mln tonnes by 2030. 100% reserves replacement.
  • Refining. Refining capacity up to 15.3 mln tonnes of crude oil. 89% light products output. Development of petrochemicals production.
  • Retail chain. Efficiency improvements, focus on the customer, increase in sales margin, incl. by providing ancillary products and services.
  • Tire business. Increase of market share to 22% by 2030 (sales up to 18.1 mln tires per year) as a result of development in prospective segments.
  • Power production. Improving operational efficiency, program for diversification of raw materials sources.

Successful achievement of business objectives in the aggregate under the baseline scenario, based on the economic forecasts of the Government of the Republic of Tatarstan and the Ministry of Economic Development of Russia, will increase the Group’s capitalization to $ 36 billion. The United States will provide annual dividend payments to shareholders in accordance with the Company's dividend policy, environmental protection, and human capital development.

RESOURCES REQUIRED FOR IMPLEMENTATION OF STRATEGY2025

Strategy-2025 significantly changes and complicates the nature of the Group’s business; its successful implementation will require, in addition to material investments, creation of a number of organizational prerequisites.
Among the tools for implementing the Strategy, detailed «road maps» have been developed that divide the way for accomplishing each task into real steps.
Issues of adapting the organizational structure of the Corporate Center for both business management (using the block principle) and key corporate functions are being explored.
In the active phase, there is a project on development and implementation of a KPI system— measuring strategic goals — for key executives; projects have been launched to improve management business processes: annual and medium-term planning, adjustment of the management accounting and monitoring system; managers are faced with the task of developing business and functional strategies.