Annual Report of PJSC "LUKOIL" for 2024

Annual Report

of PJSC "LUKOIL"

for 2024

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1. Board of Directors report on the results of the priority business directions development

1.1. Financial Performance

LUKOIL Group's IFRS consolidated financial results for the reporting period are presented in PJSC LUKOIL's Disclosed Consolidated Financial Statements for 2024.

1.1. Exploration and production Macro Environment

The annual average price for Brent crude oil decreased by 2 percent year-on-year to USD 81 per barrel in 2024, with Brent trading in a wide range of USD 70 to USD 94 per barrel during the year. Brent's performance was negatively impacted by China's slowing oil consumption and increased supply from non-OPEC+ countries. At the same time, OPEC+ countries maintained their commitment to oil production cuts throughout the year, keeping supply and demand in balance in the global market. Oil prices were supported by the start of a monetary easing cycle in developed economies, steady growth in global consumption of liquid hydrocarbons, and continued geopolitical tensions in the world.

Despite Brent's weakness, the annual average Urals crude price grew in the reporting year mainly due to its lower oil price differentials as global logistics continued to adapt to trade restrictions against crude supplies from Russia.

Annual average oil price, USD per barrel

Reserves

LUKOIL Group has proved hydrocarbon reserves in nine countries. Most of the proved reserves are conventional, providing the Company with a significant competitive advantage that ensures low unit development and production costs. Moreover, LUKOIL is one of the leading international and Russian companies in terms of proved liquid hydrocarbon reserves life and volume.

As at the end of 2024, the Group's SEC proved hydrocarbon reserves totaled 14.7 billion boe, including 75 percent of liquid hydrocarbons and 25 percent of gas. The Company's proved hydrocarbon reserves life is 18 years. The Company has 60 percent of its proved hydrocarbon reserves classified as developed. These reserves can be extracted from existing wells using currently available technologies and equipment.

Concentrated mainly in West Siberia, 91 percent of the Group's proved hydrocarbon reserves are located in Russia. The proved hydrocarbon reserves life at the Company's Russian projects is 20 years. Outside Russia, 28 percent of LUKOIL's proved reserves are located in Uzbekistan, where the Group is developing major gas projects.

In 2024, LUKOIL added 362 million boe to its proved reserves through geological exploration works and production drilling. The largest contribution was from the assets in West Siberia, the Caspian Sea, Timan-Pechora, and the Urals. The conversion of contingent resources to reserves added 17 million boe to proved reserves.

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Hydrocarbon reserves as at December 31, million boe

Licenses

Pursuant to the Russian legislation, hydrocarbon exploration and production operations require a subsoil license. LUKOIL continuously works to build its resource potential and drive its oil and gas asset portfolio performance by participating in auctions, acquiring equity in third-party entities, optimizing its license portfolio, amending existing license agreements, obtaining new licenses, and securing license renewals in reorganizations of its subsidiaries.

At the end of 2024, LUKOIL Group held 592 licenses in Russia, with 92 percent of them granting hydrocarbon exploration and production rights. The average remaining lifespan of these licenses was 31 years. The remaining 8 percent of the Company's licenses grant the right to prospect, explore, and appraise hydrocarbon deposits, with an average remaining lifespan of about two and a half years.

In the reporting year, eight new licenses covering mostly the Group's core producing regions were added to its portfolio. The Company expanded its license portfolio through the acquisition of license areas in West Siberia, the Perm Territory, and the Volga region. New licenses in the regions with a well-developed infrastructure enable maximum synergies with existing assets, reduce exploration and development costs, and speed up production launch.

In the reporting period, the Group's license portfolio evolved as follows: 40 license amendments were registered to extend the underlying licenses, 90 licenses were reregistered due to the reorganization of LUKOIL Group's oil and gas producing entities, and 6 licenses were returned upon their expiry. In addition, 257 license amendments were secured to update subsoil use terms, change license fees, and adjust the timelines and scopes of activities.

Number of LUKOIL Group's licenses in Russia as at December 31

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Exploration

LUKOIL Group carries out exploration in 13 countries, with a focus mostly on Russia.

Our exploration activities have consistently delivered good results. In 2024, LUKOIL completed 58 prospecting wells with a success rate of 83 percent, up from 80 percent in 2023. In Russia, this figure was 81 percent. By this metric, LUKOIL is one of top performers among Russian oil and gas companies. In the reporting year, 65 deposits and 10 new fields were discovered, including 8 fields in Russia. Our high efficiency levels are driven by advanced exploration techniques and selection of the most promising areas based on research results.

LUKOIL conducts 3D seismic surveys to prepare an inventory of prospects in its exploration areas and to better understand the geology of previously discovered deposits. The volume of 3D seismic surveys reached 4,428 square kilometers in 2024. Exploration drilling totaled 247 thousand meters, almost flat year-on-year.

Exploration

Development and Production

LUKOIL Group produces oil and gas in eight countries. Our core operations are concentrated in four federal districts of the Russian Federation, specifically in the North-Western Federal District (the Nenets Autonomous Area, the Komi Republic, and the Kaliningrad Region), the Volga Federal District (the Perm Territory and the Republic of Tatarstan), the Urals Federal District (the Yamal-Nenets Autonomous Area and the Khanty-Mansi Autonomous Area - Yugra), and the Southern Federal District (the Volgograd and Astrakhan Regions and the Republic of Kalmykia).

Hydrocarbon production in 2024 totaled 2.2 million boe per day, with liquid hydrocarbons accounting for 75 percent of the total, and natural and associated petroleum gas (APG) making up 25 percent. Excluding the West Qurna-2 project, production declined by 2.8 percent year-on-year driven by the dynamics of external oil production limitations arising from the OPEC+ agreement.

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Hydrocarbon production, thousand boe per day

Excluding the West Qurna-2 project, our 2024 oil and gas condensate production totaled 80.4 million tonnes, down by 2.6 percent year-on-year. The dynamics of the Company's oil production in Russia and from certain international projects was driven by the parameters of the OPEC+ agreement and additional oil production cut commitments taken by certain OPEC+ countries in 2023 and 2024.

In 2024, LUKOIL produced 76.5 million tonnes of crude oil and gas condensate in Russia, down by

2.6 percent year-on-year, which accounted for around 15 percent of Russia's total production, based on the Russian Government data.

2024 saw a ramp-up in production at priority projects as planned. In particular, we continued to increase oil production at fields with low-permeability reservoirs in West Siberia and at license areas subject to the tax on additional income (TAI). In 2024, oil production was launched at a new field in West Siberia.

Our international oil and gas condensate production, excluding the West Qurna-2 project, totaled

3.9 million tonnes, down by 2.7 percent year-on-year, primarily due to repairs at projects in Kazakhstan and Azerbaijan.

Production drilling in 2024

In 2024, the Group completed 3,505 thousand meters of production drilling, down by 10.6 percent year-on-year. The decrease was due to lower oil production volumes driven by changes in external

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limitations under the OPEC+ agreement. We commissioned 964 new oil production wells, including 933 in Russia, where 37 percent were horizontal and multilateral wells. Operating oil production well stock in use totaled 30 thousand wells as at the end of the reporting year.

Gas

Gas production structure in 2024

In 2024, gas production came in at 34.3 billion cubic meters, down by 2.3 percent year-on-year.

Overall 2024 gas production in Russia was flat year-on-year at 18.1 billion cubic meters. Gas production from our international projects fell by 4.5 percent to 16.2 billion cubic meters.

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1.2. Refining, Marketing and Distribution Macro Environment

In the reporting year, the oil refining market environment deteriorated significantly from the previous year. After rising to extremely elevated levels in 2022 and 2023, European refining margins retreated to historical norms by the end of 2024, driven by lower gasoline and diesel crack spreads in Europe amid an economic slowdown in the region, the reshuffling of oil and product supplies in global markets caused by trade restrictions on hydrocarbons from Russia, and the growing supply from new refining facilities launched across the globe. However, the weakening of refining economics was softened by narrower fuel oil price discounts driven by higher demand for bunker fuel as logistics routes lengthened as a result of geopolitical tensions in the Red Sea. As a consequence, in 2024, the Brent benchmark refining margin in Europe dropped one third to USD 9 per barrel from 2023.

In the reporting year, the benchmark refining margin in the European part of Russia was also down by almost a third year-on-year to approximately USD 13 per barrel, mainly due to a lower Urals differential to Brent and a weaker ruble. The margin was supported by rising domestic prices for key petroleum products and increased damper mechanism compensations for motor gasoline.

Oil Refining

LUKOIL Group owns four refineries in Russia (in Perm, Volgograd, Nizhny Novgorod, and Ukhta) and two refineries in Europe (in Romania and Bulgaria) and has a 45-percent interest in a refinery in the Netherlands. The aggregate capacity of these refineries is 65.0 million tonnes per year (excluding mini-refineries).

In 2024, throughput at the Group's own refineries totaled 54.3 million tonnes compared to

60.7 million tonnes in 2023. Lower refining volumes were mainly due to repairs at the Group's Russian refineries.

Throughput in 2024 totaled 66 percent of LUKOIL's total oil production. Refineries in Russia accounted for 75 percent of total throughput volumes.

In 2024, we maintained our consistent efforts to explore and implement operational excellence initiatives focused on increasing capacity and converting secondary processes, enhancing production rates, streamlining cross-refinery engagements, driving energy efficiency gains, improving equipment availability rates, and debottlenecking logistics constraints.

Refineries in Russia

In 2024, throughput at the Group's refineries in Russia was 40.8 million tonnes. Light product yield at Russian refineries (excluding mini-refineries) was 71.3 percent in 2024 as compared to 73.0 percent in 2023. The change was driven by repairs at the Volgograd and Nizhny Novgorod refineries. The refining depth (excluding mini-refineries) grew to 91.1 percent from 90.6 percent in 2023 amid lower fuel oil output volumes.

Refineries in Europe

In 2024, throughput at LUKOIL's refineries in Europe totaled 13.5 million tonnes, down 18 percent year-on-year due to the sale of ISAB refinery in Italy in May 2023. On a comparable basis (i.e.,

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excluding ISAB), their refining throughput grew 4.7 percent, driven by the effect from 2023 repairs and higher refinery utilization rates amid changes in the feedstock mix.

During the year, the refining depth at the Group's European refineries grew to 97.1 percent from 95.7 percent in 2023, while the light product yield came in at 82.9 percent, up from 78.5 percent in 2023. The change was driven by the sale of ISAB refinery.

In 2024, we implemented a number of projects to improve efficiency at our European refineries, mainly by reducing energy consumption and non-energy operating costs as well as by optimizing the feedstock mix and utilization to reflect the market environment and trading and logistics constraints.

Refinery throughput and output of petroleum products at LUKOIL Group refineries

Lubricant Production and Marketing

LUKOIL Group produces lubricants at nine of its own sites, two joint ventures, and twenty third-party plants.

The Group's production of base lubricants and components increased by 11 percent year-on-year to 776 thousand tonnes in 2024. Our 2024 output of finished lubricants stayed essentially flat year-on- year at 527 thousand tonnes. Sales of premium lubricants for motor engines and industrial uses continued to grow (up 28 percent year-on-year) thanks to efforts to expand the share of LUKOIL premium products in the sales mix and boost Teboil sales.

During the year, we completed the modernization program at our lubricants plant in Torzhok, almost doubling its capacity to 240 thousand tonnes to make it one of the largest lubricants producers in Russia and Europe. A Lubricants Research Center, Russia's only facility offering a full range of tests to all specifications and requirements of OEM manufacturers, has been established at the plant.

In 2024, the Company commenced the construction of a lubricants and lubricating coolants plant in the Volgograd Region. The project will contribute to meeting market demand for high-quality grease lubricants, lubricating coolants, and specialty products.

In the reporting year, LUKOIL Group continued to expand relations with Chinese and Russian machinery manufacturers by developing products to match their requirements. In particular, our supplies to some of the manufacturers tripled from 2023. We worked to broaden the customer base among OEM manufacturers: the Group won a tender to supply original lubricants for the Chinese premium brand and expanded its supplies to heavy-duty machinery manufacturers. We also enhanced collaboration with manufacturers from the road construction and agricultural industries.

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Production of base lubricants, components, and finished lubricants, thousand tonnes

Gas Processing

LUKOIL Group processes gas and natural gas liquids (NGLs) at two gas processing plants (GPPs) in West Siberia and the Timan-Pechora region, as well as at its Perm and Volgograd refineries and the Stavrolen petrochemical complex in the Stavropol Territory. The Group's GPPs process the associated petroleum gas (APG) produced by Group entities into liquid hydrocarbons and marketable gas, and treat natural gas coming from the Group's fields.

In 2024, our gas processing and treatment volume totaled about 4.0 billion cubic meters, virtually flat year-on-year. Increased gas supplies from the Group's Caspian fields to the Stavrolen gas processing complex fully offset the decline in APG supplies from West Siberia fields to the Lokosovsky GPP due to the effect of external limitations on oil production.

Our 2024 output of liquefied petroleum gases and liquid hydrocarbons at the Group's GPPs rose

4.1 percent to 1.5 million tonnes, while marketable gas production grew 2.5 percent to 2.4 billion cubic meters.

Gas processing and treatment in Russia, million cubic meters

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