Oil Company LUKOIL

Leonid Fedun Vice President

2001 Oil and Gas Conference New Horizons

London June 7-8, 2001

II. Launching Pad for Future Growth

Strong Reserve Growth

Proven Oil & Gas Reserves

• Proven reserves up by 70% since 1995

20.0

14.9

14.2

• Reserve growth has come from

15.0

10.0

8.2

11.6

10.6

11.0

– Continued exploration

5.0

0.0

– Targeted acquisitions

1995 1996 1997 1998 1999 2000 Oil Gas

• Reserve base continues to shift out of the higher cost Western Siberia – Accounts for only 53% of proven reserves today – International reserves account for nearly 20% of total proven reserves* * This includes estimated proven reserves in West Qurna

Proven Oil & Gas Reserves Shift MM BOE 15,000 10,000 5,000 0 370 1,776 8,580 360 2,412 8,412 548 4,513 8,437 1998 W. S iberia 1999 E. Russia Int'l 2000

Consistent Production Growth

Crude production up every year since 1995 33% increase over 5 year period Annualized CAGR of 7.9% International production currently accounts for only 3% of total production But growth rate is very high Production outside of Russia has more than tripled from 1997 - 2000

LUKOIL’s Production ‘000 BBL/day 1,800 1,500 1,200 1,147 1,169 1,247 1,284 Int’l production as a % of LUKOIL’s total production 3.0% 1,513 1,555 2.0% 900 600 1.0% 300 0 0.0% 1995 1996 1997 1998 1999 2000 Russia International

Improving Upstream Efficiencies

• Marked improvement in operational efficiencies over the last 5 years • Average flow rates up by 15% in West Siberia • Efficiencies achieved through - Shut in of marginal wells - Continuing shift to higher quality reservoirs - Increased application of new technologies

Average Daily Flow Rate (W. Siberia) BBL/day 75 70 65 61 60 55 1996 1997 1998 70 1999 Oil Production MM BBL 500 400 300 New Technologies 200 100 0 1995 Traditional Technologies 1996 1997 1998 1999 2000

Strong Growth in Refining

• Refining output is up sharply 70% increase since 1995 • International expansion has been key driver of our refining growth - Accounts for 2/3 of our growth over the last five years - Today accounts for nearly 40% of our refining throughput

Refining runs ‘000 BBL/day Int’l refining as a % of LUKOIL’s total production 30.0% 1,000 800 600 400 200 0 380 386 380 359 581 647 1995 1996 1997 1998 Russia International 1999 2000 20.0% 10.0% 0.0%

International Downstream Assets

LUKOIL has built a leading position in R&M in South Eastern Europe LUKOIL’s Primary Refining Assets

Operating Data

Refinery

Petrotel (Romania) Neftochim (Bulgaria) Odessa Refinery Plant (Ukraine)

Capacity MMTY

4.7

10.5

3.8

Production MMTY

1.2

5.3

0.9

Utilization %

25.53% 50.48% 23.68%

Ownership %

51.00% 58.00% 51.90%

LUKOIL’s Primary European Refining Assets Arkhangelsk Ukhta Moscow Ventspils Perm Petrotel Neftokhim Odessa Volgograd Novorossiysk Baku

Advantaged International Assets

• Strategically advantaged refineries • low-cost crude supply • able to sell product to export markets – Strong regional refining margins projected through 2002 • Cost savings being achieved through refinery optimization • Upgrading underway to meet new EU specifications

$7 Mediterranean Refining Margins 1995 - 2002E $6 $5 $4 $3 $2 $1 $0 Jan-95 Jul-96 Jan-98 Jul-99 Margin Urals Crack US$/BBL Jan-01 Jul-02 $35 Urals Price 1995 - 2002E $30 $25 $20 $15 $10 $5 $0 Jan-95 Jul-96 Jan-98 Urals Med US$/bbl Morgan Stanley estimates Jul-99 Jan-01 Jul-02

Management of International Operations

• • •

Upstream - LUKOIL Overseas Holding

: Moscow based Headed by Andrei Kuzyaev Manages upstream projects outside of Russia

LUKOIL Overseas Holding (London - Moscow) OAO LUKOIL LUKOIL Europe Holding (London - Moscow) Safin

Caspian Iraq European R&M USA R&M • • •

Downstream - LUKOIL Europe Holding

London based Headed by Ralif Safin Manages European downstream assets Kazakhstan

World Class Reserves and Production

• LUKOIL ranks as a world-class company in terms of reserves and production • Our expansion strategy will deliver greater international diversification on par with other oil majors

2000 Reserves (Billion BOE) 2000 Production (M BOE/d) 22,060 19,882 15,548 14,900 11,660 10,687 9,504 6,081 4,725 1.19

0.70

2.11

1.64

1.59

2.74

3.75

3.30

4.47

Source: Company data

Strong Financial Growth

US$ MM Total revenues Operating profit Income before taxation Net income Cash and marketable securities

(as of December 31/June 30)

Financial debt

(as of December 31/June 30)

Total assets

(as of December 31/June 30)

Net cash provided by operating activities

(before changes in the working capital)

1998 6,619 (510) 877 729 158 2,074 9,643 752 1999 7,376 1,692 1,249 1,062 674 2,497 12,503 1,426 6 months, ended June 30 1999 2000 2,890 325 108 92 393 2,156 10,102 6,246 1,887 1,735 1,452 1,024 2,705 14,634 235 1,688

Monitoring Key Ratios to Maximize Efficiency

All data shown as %, unless otherwise noted Earnings per share, in US dollars 1998 1.15

Return on sales 11.0

Return on assets 7.6

Return on equity 13.1

Sales on assets ROACE 68.6

11.0

Net debt to net debt plus equity 25.6

1999 1.69

14.4

8.5

15.0

59.0

13.4

19.5

6 months, ended June 30 1999 2000 0.14

3.2

0.9

2.25

23.2

9.9

1.6

16.8

28.6

2.4

42.7

31.2

23.8

15.3

Rational Deployment of Capital

• High rates of reinvestment are ensuring continued growth • Special emphasis placed on R&M investments over last three years • up by 35% • targeted at balancing production and refining capacity

Annual Capital Expenditures US$ MM 800 700 600 500 400 300 200 100 0 1998 E&P 1999 2000 R&M Other

Proposed Dividend Payout and Share Swap

LUKOIL’s dividend payout has grown steadily over the last four years

LUKOIL Share Price Performance

Last Twelve Months, US$ per share

$20 $16 $12

The proposed share swap will benefit all shareholders • Strong recent performance in the pref shares • Simplify share structure • More equitable distribution of future dividends

$8 $4 11-A pr-2 000 01-J un-2 000 24-J ul-20 00 13-S ep-2 000 03-N ov-2 000 26-D ec-2 000 15-F eb-2 001 09-A pr-2 001 Lukoil Ord.

Lukoil Pref.

LUKOIL Historical Dividend Payments

US$ per share

2.50

2.00

1.50

1.00

0.50

0.00

0.04

0.16

0.02

0.19

0.12

0.7

Ord. Dividend Pref. Dividend

0.29

2.11

II. Growth and Efficiency Strategic Overview

Upstream Strategy - 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 (Timan Pechora, Caspian and Middle East) • Strengthen netbacks: Shifting production will...

– lower transportation costs – increase proportion of sales in international market – improve quality of crude

Sustainable Growth Strategies Prospective Growth of Oil Production

Timan Pechora

2000 - 10.7 MM tons of oil 2010 2015Е - 20-25 MM toe

European Russia

2000 - 14.2 MM tons of oil 2010 2015Е - 13-15 MM toe

Western Siberia

2000 - 50.8 MM tons of oil 2010 2015Е - 45-50 MM toe; 30-40 bn cubic m of gas

Caspian region

2000 - 2 MM tons of oil 2010Е - 15 MM toe 2015Е - 20-25 MM toe

Iraq

2010Е - 15 MM tons of oil 2015Е - 20-25 MM toe

Downstream Strategy - Open New Markets

Expansion into Central and South Eastern Europe R&M • Exploit advantage as the low-cost crude supplier to region • Capture strong Mediterranean refining margins • Benefit from projected demand growth in region • Improve efficiencies through optimising operations among our regional refining assets

Global Strategies: LUKOIL International Operations

LUKOIL is active today in more than 20 countries

Our main strategic assets are situated in • Western Siberia • Timan Pechora • The Caspian Basin • S.E. Europe • N.E. United States LUKOIL’s most recent discovery in the Yamal region of Siberia will position us to become a major gas exporter

LUKOIL’s Principal Areas of Operation

Global Strategies: LUKOIL’s Regional Expansion

LUKOIL is rapidly expanding its downstream and upstream operations into neighboring regions

• Upstream: • Caspian • Kazakhstan • Middle East • Downstream: • Central Europe • Atlantic Basin

LUKOIL is poised to become Russia’s first truly international oil major Ventspils Arkhangelsk Downstream

: Expansion into Central Europe and Atlantic Basin

Moscow Ukhta Perm Upstream

: Expansion into Caspian Kazakhstan and Middle East

Petrotel Neftokhim Odessa Volgograd Novorossiysk Baku

Global Strategies: Why Expand Beyond Russia?

• Reduce our exposure to “single 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 in markets supplied by our crude

Global Strategies: New Markets

Expansion into Atlantic Basin Marketing

• Region will increasingly become net product importer

North Sea Production

MM BBL/day

8.00

7.00

5.98

6.00

6.15

6.45

6.52

6.24

6.71

5.00

•

4.00

Upgrade our export-oriented refining assets to deliver to this market

3.00

2.00

1.00

0.00

• Secure a market for future Timan Pechora production

19 90 4.22

19 95 19 96 19 97 19 98 19 99 6.6

6.62

6.37

20 00 20 01 E 20 02 E 20 05 E 20 10 E 4.72

2MM BBL/ day decline in 2010

• Take market share from declining, higher-cost North Sea production – 2 MM BBL/day decline by 2010

Setting and Achieving Targets Corporate Growth: 2001 - 2005

Crude Oil Production Not less than 15% Domestic Refining To 600,000 - 700,000 BBL/day International Refining Cost Control Sales Net Income Capital Investment Dividends 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

Leading the Way in Corporate Standards Creating Relative Value Among Peers

• Commitment to upholding international corporate governance and transparency 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 financial and 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 from downward oil price movements • Superior asset base – Growing geographical diversification • International experience unique among peers – – International mergers and acquisitions expertise Shares are legitimate acquisition currency • Strategic foothold in the North American downstream market Financial discipline and reporting standards to judge opportunities according to strict strategic and financial return standards

Sustainable Production Growth

• Production growth well above the Russian average – Nearly a quarter of Russia’s 2000 production – Sustainable growth since the beginning of privatization (1995)

Crude Oil Production

% of Russia’s total

40.0% 30.0% 20.0% 18.7% 20.2% 22.0% 24.0% 27.0% 30.0% 13.8% 10.0% 0.0% 1993 1995 1997 1999 2000E 2005E 2010E

• Sustainable growth of the share in Russian crude exports

Crude Oil Export Sales

% of Russia’s total

30.0% 20.1% 22.0% 20.0% 14.0% 9.5% 10.0% 6.8% 23.0% 25.0% 0.0% 1993 1995 1997 1999 2000E 2005E 2010E

Macroconditions for Growth

– Economic growth. GDP growth tendency is not less than 3-4% p.a.

Budget surplus. Growth of gold and currency reserves. Improved solvency and tax collection – Favorable market environment. Long-term supply and demand forecast 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 and petroleum product prices – Improvement of legislation. Stabilization of the PSA regime is in its final stage. Enhancement of taxation regime, including taxation regime for oil companies.

Nondiscriminative access of oil companies to gas transportation facilities – Complications. Inflation growth. Low pace of structural reforms in Russia

LUKOIL’s International Operations. Case Study: 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, petrochemical products 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 efficient development with Petrotel (Romania) and Odessa refinery (Ukraine)

Focus Regions of LUKOIL Overseas Holding

LUKOIL Overseas Holding participates in major projects in highly prospective hydrocarbon basins • Russia – JV mature production • Caspian & Kazakhstan – exploration – early production • Middle East – new ventures • North Africa – JV production MAP

Expanding Production Outside Russia

Efficiency

• Diversify E&P portfolio • Find and develop new, lower cost reserves • Exploit LUKOIL’s competitive advantages – regional expertise – advantaged logistics • Mitigate “single market risk”

Geographic Breakdown of Production, MM tons/year 120 100 80 60 40 20 0 2 73 15 10 79 Russia 1999 Caspian ROW 2010 Goal: Increase share of international

efficient projects in LUKOIL’s production portfolio

Strategic Interest in Getty Petroleum Marketing

 Upon completion of Timan-Pechora and its associated refinery, LUKOIL plans to deliver gasoline to the United States East Coast — The sale of gasoline directly through controlled sites could enhance profit margins by 18 to 20%  Getty Petroleum Marketing ("GPM") key strategic strengths: — Over 1 billion gallons of annual gasoline sales — 1,300 retail sites in the northeastern United States — Strong brand recognition — Significant market share in core urban areas  The acquisition of GPM is expected to be the beginning of a significant expansion in the eastern U.S. retail market

GPM: Growth Strategy

 Ancillary Business Expansion — Formalize, modernize and revitalize “other uses” — New revenue streams — Mitigate earnings volatility — Support volume growth  Discretionary Spending — Internal growth — Image upgrade — Improve customer experience — Attractive return characteristics  Acquisitions — Ample opportunities — Increase utilization of distribution capacity more quickly  Capitalize on Parent Company Resources

LUKOIL Going Global AGENDA

• • • • • • • • 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 Conversion Corporate Governance Initiatives