LUKOIL_Oil_Company

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Oil Company LUKOIL

Leonid FedunVice President

2001 Oil and Gas Conference

New Horizons

London June 7-8, 2001



II. Launching Pad for Future Growth



0.0

5.0

10.0

15.0

20.0

1995 1996 1997 1998 1999 2000Oil Gas

8.211.6 10.6 11.0

14.2 14.9

S trong Reserve Growth

Proven Oil & Gas ReservesBN BOE

8,580 8,412 8,437

370 360548

4,5132,4121,776

0

5,000

10,000

15,000

1998 1999 2000

W. Siberia E. Russia Int'l

Proven Oil & Gas Reserves S hiftMM BOE

Proven reserves up by 70% since 1995

Reserve growth has come from

± Continued exploration

± Targeted acquisitions

Reserve base continues to shift out of the higher cost Western Siberia

± Accounts for only 53% of provenreserves today

± International reserves account for nearly 20% of total proven reserves*

*This includes estimated proven reserves in West Qurna



1,147 1,169 1,247 1,2841,513 1,555

0

300

600

900

1,200

1,500

1,800

1995 1996 1997 1998 1999 2000

Russia International

Consistent Production Growth

Crude production up every year since1995

33% increase over 5 year period

Annualized CAGR of 7.9%

International production currentlyaccounts for only 3% of total

production

But growth rate is very high

Production outside of Russia has morethan tripled from 1997 - 2000

3 .0%

2 .0%

1 .0%

0 .0%

Int¶l production as a %of LUKOIL¶s total production

LUKOIL¶s Productionµ000 BBL/day



Improving Upstream Efficiencies

Marked improvement inoperational efficiencies over thelast 5 years

Average flow rates up by 15% inWest Siberia

Efficiencies achieved through

- Shut in of marginal wells

- Continuing shift to higher

quality reservoirs- Increased application of new

technologies

MM BBLOil Production

¡

¢

3

4

5

¡ 995 ¡ 996 ¡ 99 £ ¡ 99 ¤ ¡ 999¢

Traditional Technologies

New Technologies

Average Daily Flow Rate(W. S iberia)

6

55

6

65

5

996 99 99 999

BBL/day



S trong Growth in Refining

Russia International

0

200

400

600

800

1 ,000

1995 1996 1997 1998 1999 2000

380 386 380359

581647

Refining output is up sharply70% increase since 1995

International expansion has beenkey driver of our refining growth

- Accounts for 2/3 of our growthover the last five years

- Today accounts for nearly 40%of our refining throughput

Refining runs

µ000 BBL/day

30 .0%

20 .0%

10 .0%

0 .0%

Int¶l refining as a %of LUKOIL¶s total production



International Downstream Assets

LUKOIL has built a leadingposition in R&M in S outhEastern Europe

M o s c o w

N o v o r o s s i y s k

O d e s s a

V e n t s p i l s

B a k u

P e r m

A r k h a n g e l s k

V o l g o g r a d

N e f t o k h i m

P e t r o t e l

U k h t aLUKOIL¶s Primary EuropeanRefining Assets

Refinery Capacity Production Utilization OwnershipMMTY MMTY % %

Petrotel (Romania) 4.7 1.2 25.53% 51.00%Neftochim (Bulgaria) 10.5 5.3 50.48% 58.00%Odessa Refinery Plant (Ukraine) 3.8 0.9 23.68% 51.90%

LUKOIL¶s Primary Refining AssetsOperating Data



Advantaged International Assets

$0

$1

$2

$3

$4

$5

$6

$7

Jan-95 Jul-96 Jan-98 Jul-99 Jan-01 Jul-02

Margin Ural s Crack US$/BBL

Strategically advantagedrefineries

low-cost crude supplyable to sell product to export

markets ± Strong regional refining

margins projected through2002

Cost savings being achieved throughrefinery optimization

Upgrading underway to meet new EUspecifications

$0

$5

$10

$15

$20

$25

$30

$35

Jan-95 Ju l-96 Jan-98 Ju l-99 Jan-01 Ju l-02

Ura ls ed US$ /bbl

Mediterranean Refining Margins

1 - 2002E

Urals Price1 - 2002E

MorganS

tanley estimates



Management of International Operations

Upstream - LUKOIL Overseas Holding :

Moscow based

Headed by Andrei Kuzyaev

Manages upstream projects

outside of Russia

Downstream - LUKOIL Europe Holding

London based

Headed by Ralif Safin

Manages European downstreamassets

LUKOIL OverseasHolding

(London - Moscow)

LUKOIL Europe Holding(London - Moscow)

S afin

OAO LUKOIL

Kazakhstan

IraqEuropean

R&MUSAR&MCaspian



World Class Reserves and Production

¥

¦ §

¨

©

¦

¦ ©

¥

¦ §

¦

¥

¦

© ¦ ©

¥

¦

¨

¨ ¨

¦

Reserves (Billion BOE)

.

.

.

.!

"

.

"

.!

#

.#

#

.

!

.

!

Production (M BOE/d)

Source : Company data

LUKOIL ranks as a world-class company in terms of reserves andproduction

Our expansion strategy will deliver greater international diversification onpar with other oil majors



S trong Financial Growth

1 8months, ended June 0

US$ MM

1 1 2000

Total revenues

Income before taxation

Net income

Cash and marketable securities

Financial debt

Total assets

Net cash providedby operating activities(before changes in the working capital)

Operating profit

(as of December 31/June 30)



, 1 7, 7 ,22,8 0

( 10) 1, 2 2 1,887

877 1,2 108

72

1,7

1,0 2 1, 22

71 8 1,02

2,07 2, 7 2,1

, 12, 0

2,70

7 2

10,102 1 ,

1, 2 1, 882



Monitoring Key Ratios to Maximize Efficiency

1 8 1

Return on sales

Return on equity

S ales on assets

ROACE

Net debt to net debt plus equity

Return on assets

11.0 1 . 2 .2.2

7. 8. 0. .

1 .1 1 .0 1.

8.

1 .8

.0 2.728.

11.0 1 . 2. 1.2

1 .2 .81 .

All data shown as % , unless otherwise noted

2 .

months, ended June 0

1 2000

Earnings per share, in U S dollars 1.1 1. 2.20.1



Rational Deployment of Capital

High rates of reinvestment areensuring continued growth

Special emphasis placed on

R&M investments over lastthree years

up by 35%

targeted at balancingproduction and refiningcapacity

Annual Capital ExpendituresUS$ MM

$

% $ $

&

$ $

' $ $

(

$ $

) $ $

0 $ $

1 $ $

2 $ $

E 3 4 R 3 M 5 t 6 er

%

7 7

2 %

7 7 7 &

$ $ $



Proposed Dividend Payout and S hare S wap

LUKOIL¶s dividend payouthas grown steadily over the last four years

The proposed share swap

will benefit allshareholders

Strong recentperformance in the pref shares

Simplify share structure

More equitabledistribution of futuredividends

$4

$8

$12

$16

$20

1 1 - p r - 2 0 0 0

0 1 - u n - 2 0 0 0

2 4 - u - 2 0 0 0

1 3 - S e p - 2 0 0 0

0 3 - o v - 2 0 0 0

2 6 - D e - 2 0 0 0

1 5 - e - 2 0 0 1

0 9 - p r - 2 0 0 1

Lu 8 oi 9 @ rd . Lu 8 oi 9 Pref .

LUK IL S hare Pri e Performan eLast Twelve Months, US$ per share

0.04 0.02 0.120.29

0.16 0.19

0.7

2.11

0.00

0.50

1.00

1.50

2.00

2.50

Ord A B

ividend C ref A B

ividend

LUK IL Histori a Dividend PaymentsUS$ per share



II. Growth and EfficiencyS trategic Overview



Upstream S trategy - Potential and Efficiency Growth

Continue steady production growth

± Selective development of existing reserves

± Opportunistic acquisitions

Lower production costs ± Improve efficiencies in existing operations

± Production expansion in lower cost regions (TimanPechora, Caspian and Middle East)

Strengthen netbacks : Shifting production will...

± lower transportation costs

± increase proportion of sales in international market

± improve quality of crude



S ustainable Growth S trategies

Prospective Growth of Oil Production

Timan Pechora2000 - 10.7 MM tons of oil2010-2015 - 20-25 MM toe

European Russia

2000 - 14.2 MM tons of oil2010-2015 - 13-15 MM toe

Western S iberia2000 - 50.8 MM tons of oil2010-2015 - 45-50 MM toe;

30-40 bn cubic m of gas

Caspian region

2000 - 2 MM tons of oil2010 - 15 MM toe2015 - 20-25 MM toe

Iraq2010 - 15 MM tons of oil2015 - 20-25 MM toe



Downstream S trategy - Open New Markets

Expansion into Central and South Eastern EuropeR&M

Exploit advantage as the low-cost crude supplier toregion

Capture strong Mediterranean refining margins

Benefit from projected demand growth in region

Improve efficiencies through optimising operationsamong our regional refining assets



Global S trategies: LUKOIL International Operations

LUKOIL is active today inmore than 20 countries

Our main strategic assetsare situated in

Western Siberia

Timan PechoraThe Caspian BasinS.E. EuropeN.E. United States

LUKOIL¶s most recentdiscovery in the Yamalregion of Siberia will positionus to become a major gasexporter

LUKOIL¶s PrincipalAreas of Operation



Global S trategies: LUKOIL¶s Regional Expansion

LUKOIL is rapidlyexpanding its downstreamand upstream operationsinto neighboring regions

Upstream :

CaspianKazakhstanMiddle East

Downstream : Central EuropeAtlantic Basin

LUKOIL is poised tobecome Russia¶s firsttruly international oilmajor

Moscow

Novorossiysk

Odessa

Ventspils

Baku

Perm

Arkhangelsk

Volgograd

Neftokhim

Petrotel

Ukhta

Downstream : Expansion intoCentral Europe

and Atlantic Basin

Upstream : Expansion

intoCaspian

Kazakhstanand Middle

East



Global S trategies: Why Expand Beyond Russia?

Reduce our exposure to ³single market risk´

Exploit competitive advantages

± Low cost crude supplier

± Superior knowledge of markets and geology

Shift production to lower cost reserves

Expand R&M business in markets with higher product prices

Capture margins further down value chain inmarkets supplied by our crude



Global S trategies: New Markets

Expansion into Atlantic BasinMarketing

Region will increasingly become netproduct importer

Upgrade our export-oriented refiningassets to deliver to this market

Secure a market for future TimanPechora production

Take market share from declining,higher-cost North Sea production

± 2 MM BBL/day decline by 2010

6.24 6.6 6.62 6.37

4.72

6.716.526.456.155.98

4.22

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

1 9 9 0

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

E 2 0

0 2 E

2 0 0 5

E 2 0

1 0 E

2MM BBL/day declinein 2010

North S ea ProductionMM BBL/day



Corporate Growth: 2001 - 200

S etting and Achieving Targets

Not less than 15%

To 600,000 - 700,000 BBL/day

To 300,000 BBL/day

Lower than global average

US$20 - 25 bn @ $20/BBL

US$3.5 BN

US$2.5-3 BN p.a.

15-20% of net income

Crude Oil Production

Domestic Refining

International Refining

Cost Control

Sales

Net Income

Capital Investment

Dividends



Creating Relative Value Among Peers

Leading the Way in Corporate S tandards

Commitment to upholding international corporate governance andtransparency standards

Progressive dividend policy

Upholding minority shareholder rights

± Shareholder rights charter

High-caliber international management team and ethical standards

Participation in educational and philanthropic programs

International sponsorship and brand-building



Predictability and Accountability

Delivering for the Investment Community

LUKOIL has embarked on a regular process of reporting financialand operating results to the international financial community,which will include :

± Interim publishing of US GAAP financial statements

± By press release and over the web

± Quarterly analyst conference calls for discussion of results

± Semi-annual roadshows for discussions with investment community

± Improved investor relations web site



LUKOIL¶s Competitive Advantages

Russia¶s most balanced integrated oil company

± Growing downstream presence provides cushion fromdownward oil price movements

Superior asset base

± Growing geographical diversificationInternational experience unique among peers

± International mergers and acquisitions expertise

± Shares are legitimate acquisition currency

Strategic foothold in the North American downstreammarket

Financial discipline and reporting standards to judgeopportunities according to strict strategic and financialreturn standards



6.8%9.5%

14.0%

20.1%22.0% 23.0%

25.0%

0.0%

10.0%

20.0%

30.0%

1993 1995 1997 1999 2000E 2005E 2010E

13.8%18.7% 20.2% 22.0% 24.0%

27.0% 30.0%

0.0%

10.0%

20.0%

30.0%

40.0%

1993 1995 1997 1999 2000E 2005E 2010E

Crude Oil Production% of Russia¶s total

Crude Oil E xport S ales% of Russia¶s total

S ustainable Production Growth

Production growthwell above the Russianaverage

± Nearly a quarter of Russia¶s 2000 production

± Sustainable growth sincethe beginning of privatization (1995)

Sustainable growth of theshare in Russian crudeexports



Macroconditions for Growth

± Economic growth. GDP growth tendency is not less than 3-4% p.a.Budget surplus. Growth of gold and currency reserves. Improvedsolvency and tax collection

± Favorable market environment. Long-term supply and demandforecast under a regulating OPEC role shows that Russian crude

oil price will be maintained at the level not lower than $18-20/barrels. Convergence of domestic and international oil andpetroleum product prices

± Improvement of legislation. Stabilization of the PSA regime is in itsfinal stage. Enhancement of taxation regime, including taxationregime for oil companies. Nondiscriminative access of oilcompanies to gas transportation facilities

± Complications. Inflation growth. Low pace of structural reforms inRussia



LUKOIL¶s International Operations.Case S tudy: Bulgaria

Operations launched in 1999. Largest refinery in the Balkans. Retail chain.2001 revenues amounted to $1.5bn, an equivalent to 7% of GDP and 25%of tax revenues of the country

Active development of the Mediterranean markets (Turkey, Greece,

Serbia, Macedonia and other countries) in the sphere of oil, petrochemicalproducts and polymers. Annual sales growth by 3-15%

Over 2 years Neftochem became profitable. $120m of old debt was paid.Production of petroleum products in accordance with European standards.Output growth by 20%. Environmental safety

Attractive perspectives in terms of supplies of various types of products,including liquefied gas, in the Balkans and on the Black Sea. Raising of product quality to international standards. Joint integrated efficientdevelopment with Petrotel (Romania) and Odessa refinery (Ukraine)



LUKOIL Overseas Holdingparticipates in major projectsin highly prospectivehydrocarbon basins

Russia

± JV mature production

Caspian & Kazakhstan

± exploration

± early production

Middle East

± new venturesNorth Africa

± JV production

Focus Regions of LUKOIL Overseas Holding

MAP



Efficiency

Diversify E&P portfolio

Find and develop new, lower costreserves

Exploit LUKOIL¶s competitiveadvantages

± regional expertise

± advantaged logistics

Mitigate ³single market risk´

Goal: I ncrease share of international efficient projects in LUKO I L¶s

production portfolio

Geo graphic Br ea own of P r odu cti on, MM ton s/year

Expanding Production Outside RussiaExpanding Production Outside Russia

73 79

2

15

10

0

20

40

60

80

100

120

1999 2010

Russia Caspian ROW



S trategic Interest in Getty Petroleum Marketing

Upon completion of Timan-Pechora and its associated refinery, LUKOIL plans todeliver gasoline to the United States East Coast

² The sale of gasoline directly through controlled sites could enhance profitmargins by 18 to 20%

Getty Petroleum Marketing ("GPM") key strategic strengths :

² Over 1 billion gallons of annual gasoline sales

² 1,300 retail sites in the northeastern United States

² Strong brand recognition

² Significant market share in core urban areas

The acquisition of GPM is expected to be the beginning of a significantexpansion inthe eastern U.S. retail market



GPM: Growth S trategy

Ancillary Business Expansion

² Formalize, modernize and revitalize ³other uses´² New revenue streams² Mitigate earnings volatility² Support volume growth

Discretionary Spending

² Internal growth² Image upgrade² Improve customer experience² Attractive return characteristics

Acquisitions² Ample opportunities² Increase utilization of distribution capacity more quickly

Capitalize on Parent Company Resources



LUKOIL Going Global

Introduction

Update on Company Strategy

Focus on International Growth

± Upstream : Former Soviet Union and Middle East

± Downstream : Eastern Europe and Atlantic Basin

Growth Targets

Update on Other Recent Developments

US GAAP Financials

Dividend and Proposed Preference Share ConversionCorporate Governance Initiatives

AGENDA

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