Message from the Chairman of the Management Board

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Alexander Dyukov Chairman of the Management Board,CEO of Gazprom Neft PJSC

Dear Shareholders and Investors,

Efficiency, technological effectiveness and safety are the key principles of Gazprom Neft, which serve as the foundation of the Company’s business. As 2016 showed, adhering to this corporate philosophy enables Gazprom Neft to meet its most complex operational challenges while simultaneously adapting to the changing market conditions.

In 2016, Gazprom Neft was the leader in the Russian oil industry in terms of hydrocarbon production growth with a more than 8% increase in output to 86.2 million tonnes of oil equivalent. The development of the Prirazlomnoye field – the sole oil production project on Russia’s Arctic shelf; the opening of the Gates of the Arctic terminal – a key link in the integrated logistics chain to transport oil from the Novoportovskoye field, which commenced full-scale production; and the launch of the East Messoyakha field – the country’s northernmost mainland field which could not be effectively developed without utilising high-tech drilling methods – these were the projects that drove growth in the Company’s production.

The continued optimal utilisation of the Company’s oil refineries ensured the maximum possible profitability of oil refining in the current conditions. Gazprom Neft continued implementing the second stage of a programme to modernise its oil refining assets and projects for new technological facilities such as Euro+ in Moscow and the crude and vacuum distillation unit in Omsk shifted from design organisations straight to construction sites.

The petroleum products market is experiencing difficult times, however the Gazprom Neft retail sales network once again managed to strengthen its positions in 2016. While expanding the sales of motor fuel, the Company’s filling station network is also improving efficiency through the active development of the cross-selling segment. The Russian regions continue to successfully implement a programme to replace imported lubricants with Gazpromneft and G-Energy brand products. We have maintained our leading positions on the jet fuel market. The Company is expanding the range of its high-tech bitumen materials for which demand is increasing with each passing year from the national road construction industry.

One of the most convincing results of our effective work in 2016 was the unprecedented growth in the Company’s net profit. After becoming the industry leader in the growth of key financial indicators at the end of the year and achieving the best specific net profit and return on capital indicators in the industry, Gazprom Neft also had the lowest rate of growth in costs for the year.

The increase in the Company’s share value serves as unconditional evidence of Gazprom Neft’s effectiveness in which rouble-denominated bonds reached their highest levels in the history of Gazprom Neft in 2016. I am confident that the Company will keep up this pace in 2017 and continue to confidently march towards achieving its strategic goals.