Oil Company LUKOILLeonid FedunVice President

2001 Oil and Gas ConferenceNew 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 2000

Oil Gas

8.211.6 10.6 11.0

14.2 14.9

Strong 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 ShiftMM 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 proven reserves 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

0300600900

1,2001,5001,800

1995 1996 1997 1998 1999 2000

Russia International

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

3.0%

2.0%

1.0%

0.0%

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

LUKOIL’s Production

‘000 BBL/day

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

MM BBLOil Production

0

100200

300

400500

1995 1996 1997 1998 1999 2000

Traditional Technologies

New Technologies

Average Daily Flow Rate(W. Siberia)

70

61

55

60

65

70

75

1996 1997 1998 1999

BBL/day

Strong Growth in Refining

Russia International

0

200

400

600

800

1,000

1995 1996 1997 1998 1999 2000

380 386 380 359

581647

• 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

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 leading position in R&M in South Eastern Europe

Moscow

Novorossiysk

Odessa

Ventspils

Baku

Perm

Arkhangelsk

Volgograd

Neftokhim

Petrotel

UkhtaLUKOIL’s Primary European Refining 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 Urals Crack US$/BBL

• Strategically advantagedrefineries

• low-cost crude supply• able 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 Jul-96 Jan-98 Jul-99 Jan-01 Jul-02Urals Med US$/bbl

Mediterranean Refining Margins1995 - 2002E

Urals Price1995 - 2002E

Morgan Stanley 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 downstream assets

LUKOIL Overseas Holding

(London - Moscow)

LUKOIL Europe Holding(London - Moscow)

Safin

OAO LUKOIL

Kazakhstan

IraqEuropean

R&MUSAR&MCaspian

World Class Reserves and Production

4,725

6,081

9,504

10,687

11,660

14,900

15,548

19,882

22,060

2000 Reserves (Billion BOE)

0.70

1.19

1.59

1.64

2.11

2.74

3.30

3.75

4.47

2000 Production (M BOE/d)

Source: Company data

• 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

Strong Financial Growth

19986 months, ended June 30

US$ MM

1999 1999 2000

Total revenues

Income before taxation

Net income

Cash and marketable securities

Financial debt

Total assets

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

Operating profit

(as of December 31/June 30)

(as of December 31/June 30)

(as of December 31/June 30)

6,619 7,376 6,2462,890

(510) 1,692 325 1,887

877 1,249 108

729

1,735

1,062 1,45292

674158 1,024393

2,074 2,497 2,156

9,643 12,503

2,705

752

10,102 14,634

1,426 1,688235

Monitoring Key Ratios to Maximize Efficiency

1998 1999

Return on sales

Return on equity

Sales on assets

ROACE

Net debt to net debt plus equity

Return on assets

11.0 14.4 23.23.2

7.6 8.5 0.9 9.9

13.1 15.0 1.6

68.6

16.8

59.0 42.728.6

11.0 13.4 2.4 31.2

15.323.819.5

All data shown as %, unless otherwise noted

25.6

6 months, ended June 30

1999 2000

Earnings per share, in US dollars 1.15 1.69 2.250.14

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 balancingproduction and refiningcapacity

Annual Capital ExpendituresUS$ MM

0

100

200

300

400

500

600

700

800

E&P R&M Other1998 1999 2000

Proposed Dividend Payout and Share Swap

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

The proposed share swap will benefit all shareholders

• Strong recentperformance in the prefshares

• Simplify share structure

• More equitabledistribution of futuredividends

$4

$8

$12

$16

$20

11-Apr-200001-Jun-2000

24-Jul-200013-Sep-2000

03-Nov-200026-Dec-2000

15-Feb-200109-Apr-2001

Lukoil Ord. Lukoil Pref.

LUKOIL Share Price PerformanceLast Twelve Months, US$ per share

0.04 0.02 0.120.290.16 0.19

0.7

2.11

0.00

0.50

1.00

1.50

2.00

2.50

Ord. Dividend Pref. Dividend

LUKOIL Historical Dividend PaymentsUS$ per share

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

European Russia

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

Western Siberia2000 - 50.8 MM tons of oil2010-2015Е - 45-50 MM toe; 30-40 bn cubic m of gas

Caspian region

2000 - 2 MM tons of oil2010Е - 15 MM toe2015Е - 20-25 MM toe

Iraq2010Е - 15 MM tons of oil2015Е - 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

Moscow

Novorossiysk

Odessa

Ventspils

Baku

Perm

Arkhangelsk

Volgograd

Neftokhim

Petrotel

Ukhta

Downstream: Expansion into Central Europe

and Atlantic Basin

Upstream: Expansion

into Caspian

Kazakhstan and Middle

East

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

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

• Secure a market for future Timan Pechora 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

1990

1995

1996

1997

1998

1999

2000

2001E

2002E

2005E

2010E

2MM BBL/day declinein 2010

North Sea Production

MM BBL/day

Corporate Growth: 2001 - 2005

Setting 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 Standards

• 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

Crude Oil Production % of Russia’s total

Crude Oil Export Sales% of Russia’s total

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)

• Sustainable growth of the share in Russian crude exports

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)

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

Focus Regions of LUKOIL Overseas Holding

MAP

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”

Goal: Increase share of international efficient projects in LUKOIL’s production portfolio

Geographic Breakdown of Production, MM tons/year

Expanding Production Outside RussiaExpanding Production Outside Russia

73 79

2

1510

0

20

40

60

80

100

120

1999 2010

Russia Caspian ROW

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

• 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

AGENDA