KMG International Annual Report 2013

www.rompetrol.com

5Annual Report 2013 • www.rompetrol.com

CEO’s message

Important events in 2013

Refining and Petrochemicals Rompetrol Rafinare

TradingKazMunayGas Trading AGMidia Marine TerminalByron Shipping Rompetrol UkraineCommercial activities in RomaniaRompetrol Gas

RetailRompetrol Downstream Rompetrol Gas Dyneff France & SpainRompetrol GeorgiaRompetrol MoldovaRompetrol Bulgaria

Industrial Services and UpstreamRominservRominserv Valves IaifoRompetrol Quality ControlPalplast Rompetrol Well Services Drilling DivisionExploration & Production

MarketingCorporate Social ResponsibilityCorporate GovernanceFinancial ResultsAuditor’s letter

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7Annual Report 2013 • www.rompetrol.com

CEO’s message

We have come to achievesignificant results in 2013,even if it has been another

hard and challenging year for thegroup. Organizational greatness hasbeen attained by the companyleaders, effective and focusedindividuals that work in the company.Our people help us to gain and buildcompetitive advantage through theirenergy, creativity and local insights.With over 7.500 employees in 12countries, the Rompetrol Group is one

of the well-established oil companiesin Europe and an important player inthe Black Sea region.

The Rompetrol brand with a longhistory of development introduced toits customers, business clients andpartners the new concept of fillingstations that meats the higheststandards of service and quality ofproducts. All the Rompetrol fueldistribution stations in Romania are tobe rebranded in the following years,

as well as many new stations to bebuilt in accordance with the newconcept of Rompetrol filling stations.

We managed to have Petromidiarefinery – the heart of all group'soperations – to reach its highestperformance indicators during theyear. White products amounted to85.6 %, also reaching production of14,000 tons per day. The last part ofthe improvement package has beencompleted at the Petromidia in 2013,enabling the refinery to become oneof the safest entities of its kind inEurope, with production of Euro-5 fuelreaching 5 mln. tons per year.

It should be noted that the completionof modernization project would be anunattainable task without the directparticipation of a team ofprofessionals from Rominserv company– the group’s core engineering entityand the main contractor of thePetromidia refinery modernizationproject. Moreover, a professionalismdemonstrated by the company in thepast enabled Rominserv to becomethe general contractor of themodernization project of PavlodarPetrochemical Plant in Kazakhstan,work on which has been launchedduring the year. The amount of theproject is estimated for about 1 billionU.S. dollars, which makes it the largestservice contract of the companyoutside Romania so far.

I would like to note that the company'ssuccess is largely made possible by thecompetent government policy ingeneral and Kazakhstan in particularwith a support of the shareholder – theKazMunayGas group. In difficult times

of the global financial crisis that hasengulfed the whole world and Europein particular, our company hasmanaged to maintain its position andovercome adversity.

One of the turning points during theyear for the group was a resolution ofthe issue with the Government relatedto the dispute with regards of theRompetrol Rafinare convertible bonds.Today we can say with confidencethat the longstanding dispute with thestate is settled. Series of negotiationswith the support of the soleshareholder enabled the parties tocome to a mutually beneficialagreement, both for the group andthe Romanian Government. In thefollowing years, the group and theGovernment will enter into series ofinvestment projects in the energysector within the framework of newlycreated investment fund whichshareholders are the group (80%) andthe Government (20%) with thepurpose to invest in Romanian energysector of an investment value up to 1billion USD.

Our company will continue a selectiveexpansion on core markets and willfurther optimize its current activity inorder to enhance the Rompetrolbrand on the European market andcontinue to be a Kazakh flagman onthe foreign markets in the years tocome.

Zhanat Tussupbekov, CEO Rompetrol Group

6 Annual Report 2013 • www.rompetrol.com

Major performances 2013

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Major performances in 2013

January

Rompetrol continuespartnership with SMURD

FEBRUARY

Rompetrol Group concludes amemorandum ofunderstanding with theRomanian government toadopt a mutually beneficialsolution and settle the disputeregarding the conversion of theRompetrol Rafinare bonds tothe favour of the Romaniangovernment.

The Group supports theimplementation of socialresponsibility projects in twohospitals in Bucharest - Sf.Pantelimon and Marie S. Curie.

MARCH

Rompetrol Rafinare andRompetrolPetrochemicals executethe technological worksscheduled in the period 1March – 8 April 2013(investment value – overUSD 55 million)

The Upstream Divisionstarts drilling anexploration well locatedin the Zegujani perimeter,as part of the programmeof relevant activitiesenhancement inRomania.

APRIL

The Group centralises its oiland oil product trading/commercialisationoperations; the trading houseVector Energy becomesKazMunayGas Trading AGRompetrol Rafinarecompletes and commissionsthe carbon-producinginstallation at the PetromidiaRefinery (investmentamounting to USD 53 million).

Rompetrol launches the 5thedition of the socialresponsibility programme„Împreună pentru fiecare”(Together for each andeveryone). In the period 2009-2012, theGroup extended USD 1 millionin grants and supported theimplementation of 71projects in the fields ofhealthcare andenvironmental protection;approximately 250,000people were the direct andindirect beneficiaries.

MAY

Rompetrol Rafinare becomesthe first refinery in Romaniaattested according to theEuropean standards onenvironmental protection.The Petromidia Refineryreaches the daily maximumproduction capacity (14,000tons/day)

JUNE

Given the investments made bythe Rompetrol Group and itssole shareholder –KazMunayGas, the PetromidiaRefinery has the lowest cost ofcrude oil processing(approximately USD 21/ton).

Petromidia represents 43% ofRomania’s capacity of crude oilprocessing.

JULY AUGUST

Rominserv concludes anagreement of aprox. 1,072 billionUSD) regarding the modernisationand increase of the processingcapacity of the Pavlodar Refineryof Kazakhstan. The programmeaims at extending the processingcapacity to 7 million tons a year,increasing the refiningproductiveness, improving theproduct quality as well as reducingthe impact on the environmentalprotection.

SEPTEMBER

The Group launches a newconcept in Romania for theRompetrol filling stations, which isa combination between thecustomers’ needs andexpectations and the besttechnical solutions. With apremium design, this is the resultof an intense research activity,thus defining the new qualitystandard of the Rompetrolnetwork.

Rompetrol supports the GeorgeEnescu International Festival, themost important event thatpromotes Romania’s culturalidentity.The Petromidia Refinery breaksa new record as to the energyefficiency (Energy EfficiencyIndex) - 95 points.

OCTOBER

Rominserv is selected toprovide consultancy servicesfor the modernisation of theShymkent Kazakhstan Refinery.Until the end of 2015, thecompany will provide mixedconsultancy services forproject management,engineering, procurement andworks execution supervision.

The Petromidia Refinery breaksa new record in terms of gasoil productiveness – 48.9%

NOVEMBER

The Group extends with twonew filling stations in theRepublic of Moldova, whichnow counts 59 filling stations.The new filling stations are inalignment with the newRompetrol filling stationsconcept.

DECEMBER

Rompetrol Rafinare is thelargest oil product exporter ofRomania for the second yearin a row, with a total of USD1.7 billion. At the same time,the company’s contributionto the state budget amountsto USD 1.4 billion.

Rompetrol Downstreamregistered a record in monthlyfuel sales with 170.000 tons, dueto its 744 points of fuel distribution(owned stations, Partner stations,Rompetrol Express, internal basesof 9 and 20 cubic metres) and 7warehouses (Arad, Craiova,Mogoşoaia, Şimleul Silvaniei,Vatra Dornei, Năvodari andZărneşti)

The Rompetrol Group extends itsnetwork of fuel distribution inMoldova and Bulgaria to 114filling stations, with 12 new fillingstations opened in the first half of2013.

At the same time, Dyneff – thesubsidiary in France and Spaincommissioned two new fillingstations (branded Rompetrol andDyneff) and completed,together with the Total Group,the construction of an oil terminalin the Nouvelle harbour(Mediterranean Sea), totalinvestments exceeding USD 50million.

Rominserv concludes aconsultancy service agreementfor project management andconstruction of a largepetrochemical facility inKazakhstan. Located in Atyrau,near the KazMunayGas Refinery(installed refining capacity – 5.5million tons) and oilfields - Tengiz,Karachaganak and Kashagan,the project envisages theestablishment of an importantpetrochemical centre in westernKazakhstan.

The Rompetrol Group selected16 projects for its socialresponsibility programme„Împreună pentru fiecare”(Together for each andeveryone), and the total budgetallocated for the support andimplementation thereof was USD225,000.

Refining andPetrochemicals

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Rompetrol Rafinare operatesthe Petromidia Năvodari andVega Ploieşti refineries, alongwith the Petrochemical Divisionof the Group. Petromidiaaccounts for more than 40% ofthe actual refining capacity ofRomania, as it is the largestinternal industry unit and theonly one located by the BlackSea shore. Rompetrol Group,alongside its sole shareholder -KazMunayGas, the national oiland gas company ofKazakhstan - has successfullycompleted a program aimed atmodernizing and increasing theprocessing capacity of thePetromidia Refinery. The newcapacity of the refinery, of 5million tons of rawmaterials/year, and a raiseddegree of complexity (NelsonIndex 10.5) provide the Groupwith the necessary foundationto consolidate and develop itsretail and trading activities inthe Black Sea region, both incountries where Rompetrol fillingstations are operated (Romania,Bulgaria, The Republic ofMoldova, Ukraine and Georgia),and in other countries, such asTurkey, Serbia or Greece.

With its Petrochemical Division,Rompetrol Rafinare is the onlyproducer of petrochemicalproducts in the country -polypropylene, low and highdensity polyethylene. The VegaRefinery has evolved from aclassic refinery to a producerand supplier of special products

and solutions (ecologic solvents,special purpose bitumen,ecologic heating fuels or otherdedicated products). The VegaRefinery is the sole producer ofbitumen in Romania. Being usedin an integrated systemalongside the PetromidiaRefinery, the refinery located bythe Black Sea shore, enablesspecial products with a highadded value to be obtained.

Against the backdrop of adifficult economic situation inEurope, and also in the refiningsector (decommissioned/underpreservation refineries), the mainobjectives of the company forthis period, vital for continuingthe refining activity, have beenthose of reaching the ratedrefining capacity, aligning theproduction costs to the marketdemand, optimizing andautomating production flowsand improving energyefficiency. All these have turnedPetromidia Refinery into areference and performanceindicator for the industry units inCentral and Eastern Europe.

ROMPETROL RAFINARE -MAJOR PERFORMANCESIN 2013

Investments made inmodernizing PetromidiaRefinery and in increasing itsproduction capacity consistedallowed the construction offive new production facilities

and the extension of fourexisting facilities, projectswhich have helped thePetromidia Refinery achievemajor performances in 2013. Ofthem, the mild hydrocrackingunit (MHC) ensures increaseddiesel yield and output andthe hydrogen factory ensuresfull compliance of productionwith the Euro 5 standard. Also,the sulphur recovery andexhaust gas treatment unit(New SRU) and the vacuumdistillate hydrofining unitturned into a diesel hydrofiningunit contribute to theprocessing of raw materialsinto products whose qualitymeets the demands of theRomanian and Europeanmarkets. Besides thetechnological investmentsmade in the Petromidia site,Rompetrol Rafinare hascontinued to invest in newautomation systems with aview to enhancing safety andimproving facility operation. Allits investments have led tomajor performances in 2013.

• Rompetrol Rafinare is the firstcompany in Romania to holdan Integrated EnvironmentalAuthorization;

• Petromidia is the first refineryin Romania to operate a mildhydrocracking unit;

• The Energy Efficiency Indexof the Petromidia Refinery hasreached the lowest level of 95,

Rompetrol Rafinare during September-November2013.

• The quality of the fuelsproduced by the PetromidiaRefinery has been the mostimportant factor inconsolidating the market shareat a domestic and regionallevel;

• It aligned the refinery to thenational and Europeanenvironmental requirementswith respect to sulphur andnitrogen oxide emissions, andhazardous waste storage -continuing the .Lite' program forsafety awareness and achievinglevel 3 for health and worksecurity on the Du Pont model.

From an operational point ofview, Petromidia Refineryreached its maximum capacityof 14,000 tons per day,recording very highperformances in 2013. Dieseloutputs reached, in average,46% in 2013, while fuel outputs(gasoline, diesel, Jet) reached85.6% in 2013, being the highestin the history of the refinery.

MOST IMPORTANTINVESTMENT PROJECTSCOMPLETED IN 2013

PETROMIDIA REFINERY

Modernising the coker unitWith a total investment of 53million USD, the modernization

project enables the facility tooperate at high performancestandards in compliance withthe commitments made toobserving the environmentalprotection law.The modernization process ledto a 90% decrease intechnological consumption, toan annual decrease of 3 millionUSD in technological losses, aswell as to a significant reductionof energy consumption. At thesame time, modernization helpsincrease the degree of reliabilityand safety of the facility, as wellas the level of protection for theemployees working on thePetromidia site. With a capacityof 1.17 million tons per year, thecoker ensures high conversiongenerated by the vacuumdistillation unit with the purposeof obtaining valuable products,such as gas, petrol, light-dutydiesel, heavy - duty diesel andcoke.

Mounting "Low NOx" burners inthe refinery furnacesBesides the technologicalinvestments made in thePetromidia site, RompetrolRafinare continued to invest innew automation systems with aview to enhancing safety andimproving facility operation. In2013, it finished the projectwhereby existing burners of thefurnaces were replaced, inaccordance with the actionplan set in the IntegratedEnvironmental Authorization heldby the company. With a total

investment of almost 5 millionUSD, the project was finished inMay 2013, and performancetests showed that the equipmentcomplied with environmentalregulations. At the same time,the new burners maximizedcombustion efficiency in allfurnaces through increasedpermissiveness to control theair/fuel mixture, which led to alower overall fuel gasconsumption.

Segregating fuel oil loading onautomatic rackWith a view to maintaining thequality of products loaded withthe automatic rack, wherebyEuro 5 diesel fuel and fuel oil aredelivered, Rompetrol Rafinarehas implemented a project tosegregate the facilities thatdeliver the two products.Initially, the products wereloaded by means of the samecollector and loader. With atotal value of 370,000 USD, theproject enables the transfer ofproducts under optimalconditions in order to keep themcompliant with the Europeanquality standards.

Overhauling the Refinery in 2013and obtaining ISCIR 2013authorizations for equipmentand pipelinesIn the March-April 2013 period,Petromidia Refinery successfullyperformed the technologicalworks aimed at modernizing theequipment of the industrial sitein accordance with the new

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processing capacity of therefinery (5 million tons/year). Thepurpose of the works was toincrease the operating safety ofthe facilities, to achievecompliance with ISCIR (StateInspection for the Control ofBoilers, Pressurized Recipientsand Lifting Equipment) legalprovisions in the field, and alsoto conduct environmentalprotection projects, incompliance with the nationaland European legislation.The total value of thetechno¬logical worksamounted to more than 55million USD; after the overhaul,re-authorization was issued for1,211 pipelines, 371 pieces ofequipment and 545 safetyvalves at the Petromidia site.

The works performed during theoverhaul enabled the Refineryto operate according to projectparameters, thus ensuring amechanic availability higherthan 96%, obtained in 2013.

VEGA REFINERY

The 2013 investments ofRompetrol Rafinare in the VegaRefinery focused on improvingenergy efficiency, increasingoperating safety, reducingmaintenance costs andincreasing facility reliability.These objectives aimed atincreasing outputs and

obtaining high quality productsthrough fuel oil fractionaldistillation. By commissioningthe new facilities, and usingmodernized items, RompetrolRafinare produces exclusivelyEuro 5 fuel, processing only sourcrude oil against the backdropof an increased capacity toprocess up to 5 million tons peryear raw material confirmingthe completion of theinvestment package.

ROMPETROL RAFINARE – PETROMIDIA REFINERY

The quantity of raw materialsprocessed in 2013 was of 4.18million tons, of which 3.78 milliontons of oil and 400,350 tons ofother raw materials.The same strategy of ensuringan optimal continuousoperation with an optimal loadof units also included the actionof using additional raw materialsin the processing flow, in orderto diversify and improve finalproducts, petrol and diesel fuel,in accordance with thedemands of the external market(Euro 5 products) and of theinternal market (Bio products).

From an operational point ofview, the Petromidia Refineryreached and operated at itsmaximum capacity of 14,000tons/day, in 2013, recording

very high performances, such as46% output for diesel fuel, and75.2% fuel output (petrol, diesel,Jet, vehicle LPG), these beingthe highest in the history of therefinery.Petromidia produced almost 2million tons of diesel fuel in 2013,the highest level reached bythe refinery since itscommissioning in 1979. Thedecreased operating costs andthe increased mechanic andoperational availabilitydetermined a raise in theenergy efficiency index to 95points, the highest level,reached during September-November 2013.

Its improved operational resultsand the achievement ofhistorical records in 2013 wereenabled by the completion, in2012, of the program aimed atmodernizing and increasing theprocessing capacity of therefinery to 5 million tons peryear. As a result of themodernization packageimplemented by Petromidiarefinery, the processing costdecreased in 2013 below 26USD/ton from over 28 in 2012and almost 30 in 2011.

The facilities of the unit areoperated to the highestperformance standards, whileobserving the commitmentsmade to environmentalprotection.

RAW MATERIAL SUPPLY

In 2013, crude oil acquisitionswere made exclusively bymeans of the trading companyof the group, KazMunayGasTrading AG.

Compared to the previousyear, the volume of rawmaterials coming from externalsources increased (4,016 milliontons in 2013 compared to 3,985million tons in 2012). However,the value of acquisitions hasseen a 3% decrease in 2013compared to 2012, providedthat crude oil prices decreasedby the same percentage (in2012, the Brent average pricewas of about 111.67 USD/bblcompared to about 108.82USD/bbl in 2013).

The structure of the products isfocused on producing gasolineand diesel types that meet thequality demands of theexternal market (100% Euro 5products) and of the internalmarket (Bio products).In 2013, the crude oil price wasbudgeted at 765.53 USD/ton,finally setting an average price

of 796.48 USD/ton.

The average value of finishedproducts was budgeted for2013 at 865.35 USD/ton, and anaverage price of 882.90USD/ton was set.As shown, the evolution of thecrude oil market, compared tothe one estimated in thebudget, recorded an increaseof 4.04%, and the prices of oilproducts followed the sameascendant trend compared tothe budget, however slower,the increase being of 2.03%.The quantity of vehicle fuelincreased in 2013 by approx.8% compared to 2012, with ahigher increase in the dieselsegment (17%). The petrolweight in the vehicle fuel wasof 42% in 2012 and 36% in 2013.The difference of 58% in 2012,and 64% in 2013 was recordedby diesel sales.

During 2013, the crack(difference between the pricethroughoutof the crude oil andthe price of oil products) forpetrol was approx. 50 USD/ton,higher than that of diesel fuel;the greatest excess value wasrecorded in February: 99USD/ton. However, throighoutSeptember- December, thedifference between the cracksof the two products recordedlow values, of approximately 7USD/ton.

Production Evolutionsince 1979 (year

when the first unit inPetromidia Refinerywas commissioned -atmospheric and

vacuum distillation)until 2013

Total processed rawmaterials 1979-2013,

tons/year

2013 tonsTotal production 4.181.620Processed crude oil 3.781.270Other raw materials 400.350

20132012

3,712,7273,523,820

39% 42%

Volumes of finishedgoods sold [mt]

Sales structure by distribution channel

20132012

Domesticmarket

Exportmarket

61% 58%

Quantities of gasolineand diesel sold [mt]

20132012

Gasoline Diesel

1,588,7001,905,620

2013 tonsFinished goods 4.063.277 Petrol 1.190.470 Diesel 1.915.345 Fuel oil 86.990 Propylene 105.885 Coke 209.035 Sulphur 38.352 Other products 517.201

White oil products obtained %Compared to total processed quantity

85,58

Compared to finished goods 88,08The quantity of finished goods increased by approx. 5% in 2013compared to 2012

1,146,548 1,050,398

1979

5,000,000

1980

1981

1982

4,000,000

3,000,000

2,000,000

1,000,000

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014*

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18 Annual Report 2013 • www.rompetrol.com

ROMPETROL RAFINARE –VEGA REFINERY

Operated by Rompetrol Rafinare,the Vega Ploiești Refinery isfocused on producing specialproducts: ecologic solvents,heating fuels, special purposebitumen etc.

The investments made in the pastyears have mainly targeted toincrease energy efficiency,improve operating safety andalign to the compliance program.

The Vega Refinery turned profitable

in 2013, when it recorded a netpositive result of 2.7 million USD dueto margin improvement andoperating costs reduction.

In 2013, the Vega Refinery recordedan upward trend of the hexaneoutputs against the backgroundof an enhanced quality of rawmaterials transferred from thePetromidia Refinery. Thus, Vegaobtained the refinery's highestyield for this product, namely 43%.

Also, the Vega Refinery producedmore bitumen in 2013, accordingto the market demands. Thebitumen production amounted to

more than 46,000 tons, higherthan the previous one, which hadbeen of almost 45,000 tons.

Due to the raw materials comingfrom the Petromidia Refinery, thequality of the bitumen producedby Vega has been improvedthroughout 2013.

OUTLET

The total sales of 2013amounted to approximately254,600 tons out of which 55%to external markets, and therest through distributionchannels in Romania. 135,000

Monthly evolution of Brent prices and cracks for gasoline and diesel in 2013

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19Raport anual 2013 • www.rompetrol.com

Brend Dtd $/bbl

210

Gasoline crack 10 ppm to Brent, $/mt Diesel crack 10 ppm to Brent (Dtd), $/mt

170

130

90100

150

200

$/bbl

$/bbl

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$/mt

$/mt

$/mt

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Structure of sales [%]

Export Domestic

Structure of finished productssales on markets [%]

Structure of oil products deliveries in 2013 [tons]

20,000

Other

gasoline

Bitumen

Heating oil

Hexane Tar

Petrol and

White spirit

Organic

solvents

30,000

50,000

60,000

10,000

40,000

n-hexan

Naphta

Petrol & white spirit

Ecological Solvents

80,000

88.859

46.261

9.384

53.344

24.787

6.155

25.783

Other gasolines

Bitum

Heating fuels

n

The structure of the physical production of the Vega Refinery

for 2013:

2013 tons

Finished goods 244.223

Petrol + Solvents 108.659

n-hexane 51.021

White spirit 4.773

Diesel fuel 2.998

Light-duty fuel type III 5.407

Fuel oil 25.230

Bitumen 46.135

tons were sold through theexternal distribution channel,and 119,000 tons on theinternal market.

The sales of white oil products(naphta petrol, ecologicsolvents, hexane and whitespirit) account forapproximately 68% of the totalsales of 2013.

The main external markets are:•Turkey, Russia, Belgium,United Arab Emirates, Moldovafor naphta petrol;•India, Hungary, Turkey, Russia,Ukraine, Bulgaria for hexane;

•Germany, Bulgaria, Poland,Moldova, Czech Republic forecologic solvents;•Bulgaria and Moldova forwhite spirit;•Bulgaria for fuel oil.

THE MARkET

Total sales in 2013 were of254.573 tons. 135.000 tons weresold on the foreign markets and119.000 tons on the internalmarket. White product sales(gasoline, naphtha, organicsolvents, hexane and whitespirit) represented 68% of thetotal volume of sales in 2013.

53%

34,90%

18,17%

3,69%

20,95%

9,74% 2,42%10,13%

47%

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Main markets 2013[%]

Domestic Export

20,000

Domestic versus export sales (2012 and 2013)[tons]

PP

LDPE

HDPE

Tota

l

PP

LDPE

HDPE

Tota

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40,000

60,000

80,000

ROMPETROL RAFINARE -PETROCHEMICALDIVISION

In 2013, the petrochemicaldivision of the Petromidiarefinery has processed 107,000tons of propylene, 10% morethan in 2012, and 55,000 tons ofethylene, 5% more than in theprevious year. The total sales ofpetrochemical productsamounted to 168,000 tons in2013, trading activities included.

The 2013 turnover ofRompetrol Petrochemicals isof 251 million USD, 2% higherthan the 2012 indicator.Compared to 2012, financialresults were positivelyinfluenced by the margins ofpetrochemical products, inparticular in January andJune, as well as in Q3, theEBITDA operational resultbeing positive, of 1.8 millionUSD compared to a negativeresult of 8.1 million USD in2012.

The integration of RompetrolChemicals operation withinRompetrol Rafinare started inthe second part of 2013.The reason of integratingpetrochemistry withinRompetrol Rafinare was theoptimization of the entiretechnological process and theconcentration of all operationin a single company, simplifyingthe organizational structure.

In Q4 2013, the integration ofpetrochemical activities

The sales of petrochemicals (PP, LDPE and HDPE) registered a slightdecrease by 1.25% to 135.352 tons in 2013 caused by the generalmarket conditions. . Also, there was a slight increase in the share ofexported products compared to the previous year.

2012 2013

(previously carried out byRompetrol Chemicals) intoRompetrol Rafinare had apositive impact on the financialresults of the company,however without influencingthe net result.

Thus, Rompetrol Rafinare,through its PetrochemicalDivision, has been the onlyproducer of polypropylene inRomania, since 2010, being alsothe only producer ofpolyethylene. The company has

an annual production capacityof more than 200,000 tons ofpolymers (polypropilene, lowand high density polyethylene).

The petrochemical division isthe only producer ofpolypropylene (80 kt/y), LDPE(60 kt/y) and HDPE (60 kt/y) inRomania.

The quality and diversity of thepetrochemicals products, thestrategic positioning on thedistribution/delivery routes,

the technical assistance makeour company a trustful partnerin Romania, Central andEastern Europe, Black Sea andthe Mediterranean Searegion.

ADVANTAGES•Location on the Black Seacoast; with road, railway andsea access. •The first Ethylene andpropylene marine terminal onthe Black Sea coast. •Storage facilities

Operational quantity 2013 2012Processed propylene kt 107 119Processed ethylene kt 55 58Total sales* kt 168 177

Ukraine

Greece

Poland

Spain

I Rep. of Serbia

o

Romania

Turkey

Bulgaria

Austria

U

Italy

21%

33%3%

3%4%

5%

5%

6%

7%13%

*including trading

22 Annual Report 2013 • www.rompetrol.com 23Annual Report 2013 • www.rompetrol.com

QUALITY, HEALTH, SAFETY ANDENVIRONMENT (QHSE)

QHSE activities were carried outby maintaining the integratedquality- environment-occupational safety and healthmanagement system,acknowledged by the re-certification audit conductedby representatives ofGermanischer Lloyd IndustrialService, June 2013.

n System documents(procedures, workinstructions/regulations etc.)were maintained/prepared/revised/checked;

n Internal audit controls, safetyaudit controls and plannedinspections were conductedwith a view to identifying bothweaknesses and improvementopportunities;

n Specific statistics and reportswere prepared, with differentfrequencies(weekly/monthly/quarterly/bi-annualy/annualy/on demand)with a view to meeting bothinternal requirements, andlegal provisions andstakeholders' requests;

n The satisfaction of internalclients was monitored and theassessment showed that theobjective related to"maintaining client satisfactionindicators to at least 90%" wasachieved;

n The RAR certification wasextended for vehicle fuelsproduced by RompetrolRafinare - operating unitPetromidia Refinery(Năvodari) and additives

produced by RompetrolRafinare - operating unit VegaRefinery;

n Both programs included inthe environmental strategy,and the safety awarenessraising project for theemployees of the Petromidiaand Vega sites werecontinued.

n Personnel recognition andmotivational actions weretaken:

•The safety "Drager" Caravan -presentation of safetyequipment;

•Fire prevention and firefighting contest, for thefacilities, aimed at testing skillsand the use of the FPFequipment;

•The most active member ofthe safety sub-committees;

•Recognition of achievementsof sub-committee leaders;

•Awarding the most activeinternal trainers;

•Award for "Be Pro-Active" -«Employee of the year».

n CSR projects were organized:

•Open Day for employees'children;

•Environment Day - cleaningthe Corbu beach and "TheCleanest Facility" contest;

•Participation in the nationalenvironmental campaign "Let'sdo it Romania!" with a team ofvolunteers.

ROMPETROL RAFINARE - MAJOROBJECTIVES FOR 2014

In 2014, Rompetrol Rafinare willcontinue to deliver to theinternal market only Euro 5 fuelswith a biofuel content ofminimum 4.5% by volume forpetrol and minimum 6% byvolume for diesel.The assortments of Euro 5 fuelare the following:

•Efix S 98 Gasoline, •Efix 95 Gasoline•RON 98 Gasoline•Euro Plus Gasoline•Efix S 55 Diesel•Efix 51 Diesel•55 Diesel•Euro 5 Diesel

Processing objective:

Petromidia Refinery: 5,477,496 tons/year rawmaterials (crude oil: 4,835,284 tons/year;auto gasoline: 1,275,888tons/year; jet + auto diesel: 2,808,461tons/year)

Vega Refinery:304,066 tons/year

Petrochemical Division: 234,495 tons/year

After 2013, the best year forRompetrol Rafinare, in terms ofoperating performances of thePetromidia Refinery, followingthe implementation of theproject aimed at modernizingand increasing its productioncapacity to 5 million tons peryear, 2014 will bring aconsolidation of the resultsobtained until now and animproved operating efficiency.

The current organization of thePetromidia industrial site enablesthe refinery to be competitive,in an unfavorable globaleconomic environment, due toits operational flexibility(processing capacity, diversityof raw materials, availability toproduce the products atEuropean highest qualitystandards).

Petromidia Refinery productionbasket is aligned to the marketevolution, which ischaracterized by an increase indemand for Jet and diesel, andby a decrease in demand forpetrol and fuel oil. QHSE OBJECTIVES (QUALITY,HEALTH, SAFETY, ENVIRONMENT)

n "Zero" accidents on thePetromidia and Vega sites;

n To continue the "1 .Life"program aimed at increasingsafety awareness in order tomaintain level 3 foroccupational safety and health,according to the DuPont matrix;

n To maintain the integratedquality- environment-occupational safety and healthmanagement system,acknowledged by the re-certification audit conductedby representatives ofGermanischer Lloyd IndustrialService;

n To continue the programsincluded in the environmentalstrategy, and the safetyawareness raising project for theemployees of the Petromidiaand Vega sitesOperational Objectives - VegaRefinery

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s

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Trading & Supply Chain

04

27Annual Report 2013 • www.rompetrol.com26 Annual Report 2013 • www.rompetrol.com

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MAIN ACHIEVEMENTS IN 2013:• Record Traded Volumes (11,2mln tons vs. 10.4 mln tons in2012)

• Net Profit of $14.8mln vs.$12.4mln in 2012

• Successful entry on the AsianMarket, expected to continue in2014.

KazMunayGas Trading (KMGT)continued to manage thetrading operations of TheRompetrol Group ensuringcontinuity of optimumfeedstock supply and of oilproduct delivery to/fromPetromidia Refinery, while alsoexpanding its 3rd partybusiness. In 2013, KMGT fullysupplied the feedstock forPetromidia refinery, mainlycrude from Kazakhstan andalso alternative feedstock.

Additionally, 1,3 mln tons of oilproducts have been tradedfrom Petromidia, of which 0.9mln tons to non groupcustomers, and the rest goingto other group entities(Rompetrol Bulgaria,Rompetrol Georgia, RompetrolUkraine, Rompetrol Moldova).

KMGT continued to build upthe non group trading flows,driven mainly by additionalcrude from KMG traded in themarket (volumes doubled from2.4mln tons to 4.8 mln tons),but also driven by additionalcrude dealstream.Also, in 2013, KMGT started thetrading transactions on theAsian market. Such trades are

expected to further develop in2014.

Brent crude quotation wasvolatile in 2013, with averageat $108.7/bbl vs. 111,6/bbl in2012. Brent was lower in thefirst months of 2013 due todifficult economic outlook anda safer geopolitical situation,but went higher in the lastmonths due to bettereconomic outlook in US andlow production of crude inLibya. However, onmedium/long term theaverage is more stable.Ural differential reached thehighest recorded level at+l/bbl, averaging -0.36/bbl vs. -0.91 in 2012. Ural differentialsstrengthened due to Russian oilflows redirected to Asia,tensions in Egypt, Libya andIran (all with impact in heavycrude supply to Europe).

In this volatile environment,KMGT managed to securecompetitive prices forPetromidia refinery for bothfeedstock and oil products, bytight management on allsupply chain components,including price riskmanagement, optimuminventory levels andcompetitive logistics.KMGT continued the costoptimization programmeresulting in further $0.5 mlnlocal cost savings vs previousyear, through optimization onall OPEX categories.The very good performance ofKMGT in 2013 is expected tocontinue in 2014, mainly drivenby increased throughput in

Petromidia refinery (from 4 to 5mln tons) and furtherdevelopment on non grouptrading volumes.

KazMunayGas Trading AG

12000

6.307

2011 2012 2013

8000

4000

KMG Trading – total volumes* [kt]

10.443

11.153

15

2012 2013

Net profit (2013 vs 2012)[mln USD]

12.4

14.8

10

5

o

The local commercial department is part of the trading activity, ensuring the sales of products fromPetromidia refinery, Vega refinery, Petrochemical division and also Rompetrol Gas.

Commercial activities in Romania

*crude oil and products

The quantity of finished productsproduced by Petromidia refineryincreased by 5% in 2013compared to 2012, up to3.712.727 tons, of which gasolineand diesel accounted for2.956.000 tons.

The internal market absorbed 58%of the total volume of soldproducts in 2013. Of the totalvolume of auto fuels sold on the

Romanian market, 82% werediesel fuel sales.The external sales were orientedto the European Community aswell as the non EU countries. TheEU deliveries accounted for 21% ofthe total volume of sold products,while the difference representedexports on the non EU markets.

The sales were oriented to thefollowing destinations:

Gasoline - Georgia, Ukraine,Israel, Bulgaria, Turkey,Slovenia, Moldova

Diesel - Turkey, Bulgaria,Moldova, Greece, Georgia,Ukraine, Lebanon.

Coke - Turkey, Greece,Ukraine

Sulphur - Egypt


company has managed torecover the investment of 30million USD in 3 years. Theeconomies for the givenperiod reachedapproximately 60 million USD.Thanks to the use of modernterminals of berth 9, endowedwith efficient meteringequipment (metering skids)directly linked to the refinerytanks, the commercial lossesare within the limits of the bestindustry practices, theprocesses being closelymonitored.

The MMT operated terminalsdidn't register any laborrelated incidents, fires orpollution incidents in 2013.

Midia Marine Terminaloperates the refinery's oil tankfarm with a storage capacity

of 400.000 cubic meters,receiving oil mainly from themarine terminal.

The total volume of handled oilin 2013 reached 7.53 mln tons.Taking into account the specificsof the terminal's activity,respecting all of theenvironment related legalprovisions is a priority. Accordingto the maintenance plan, theentire system was checked andcertified (LLOYD'S annualinspection certificate).

THE MAIN PERFORMANCEINDICATORS OF THE PILOTING,TOWING, TYING / UNTYINGSERVICES IN THE MIDIA PORT ANDMIDIA SPM IN 2013, NON-GROUPREVENUES

Midia Marine Terminal madeuse of its own resources and

tow boats to assistmaneuvering the ships handledby Midia SPM. The totalrevenues from this activityaccounted for 2.12 million USD.

PLANS FOR 2014:•One of the main areas wherethe SPM operational cost can beimproved is using its own tugfleet fully equipped for offshorejobs and also usefull forupgrading the SPM operationand maintenance performancelevel, aligned with benchmarksin offshore industry.

•Improve the company financialperformance by using berths 1-4in Midia Port for commercial use.

•Increase the profit andoptimization of SPM cost may beachieved by handling 3rd partyshipments via SPM terminal.

Total quantity of imported oil through Midia SPM 3,587 mill tonsTotal number of unloaded ships in Midia SPM 35Total number of unloading days 59 days

Total quantity of handled products 1,500 ktTotal number of handled ships 362Total number of loading/unloading days 272 days

The main performance indicators reached by the berths 1-4 in 2013:

Total quantity of handled products 180 ktTotal number of handled ships 9Total number of loading/unloading days 11.76 days

The main performance indicators reached by Midia Marine Terminal (Midia SPM) in 2013

The main performance indicators reached by the berths 9 A, 9B and 9C in 2013 (export and import)

MAJOR ACHIEVEMENTS IN 2013:Midia Marine Terminal is partof the trading division andoperates the terminalslocated on berths l-4(oil) andberths 9A, 9B and 9C (oilproducts) of the Midia port, aswell as the offshore Midia SPMterminal (oil).

The investment of 100 millionUSD necessary for theconstruction andcommissioning of the terminalwas recovered 5 years afterthe commissioning due tooptimization of oil transfer,reducing time for unloadingtime and significant decreaseof technological losses.

The cost of raw materials forthe refinery decreased by7USD/ton compared to theprevious period when using

different routes.

Thus, by using the marineterminal, the routes wereshortened by 33km, while theoil flow was strictly monitored,leading to an improvement ofthe refinery tank farmmanagement.

Unloading the Altai tank with acapacity of 94.000 tons by theend of 2013, allowed reachinga level of 15.4 million tons of oilfor Petromidia refinery. This wasthe 31st tanker to be unloadedthis year in Midia MarineTerminal and the 182nd fromits commissioning in February2009. The Altai tanker, with acapacity of 115.000 TDW,property of the national marinetransport companyKazmortransflot Kazakhstan

made the link between Midiaport and Novorossiysk Russia.The company is part of theKazMunayGas Group - the soleshareholder of the RompetrolGroup. The companyextended its oil and oilproducts operations in theBlack Sea and MediterraneanSea regions through theacquisition of two Aframaxtype oil tankers - aninvestment of over 100 millionUSD.

Between 2009 - 2013, a totalquantity of approx 6.8 milliontons of products wastransferred through the threeterminals of berth 9 in 2009 -2013. As a result of the refinerycapacity increase, theterminals were built with thepurpose of increasing thetransfer efficiency. The

Midia Marine Terminal

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DYNEFF FRANCEThe French market is one ofthe largest fuel consumermarkets in Europe, of about75 million tons in 2013, 1.5%less than in the previousyear.

The main products sold onthe French market in 2013:• 34 million tons of Diesel, anincrease by 0.5% comparedto previous year results• 7 million tons of Gasoline, adecrease by 2.5% comparedto previous year results• 7.8 million tons of HeatingOil, +0.1% compared toprevious year results

Major achievements in 2013• The total sales of DyneffFrance were of 1,662 kt,sustained by a betterperformance on the wholesalechannel where the salesincreased by 19 kt and on thetrading channel with 46 kt morethan in 2012.

• The overall volumesincreased by 55 kt in 2013 vs2012, despite strong pricecompetition and difficultmarket situation throughout theyear.

• Dyneff France sales by mainproducts type in 2013:

n Diesel 1,299 kt (plus 5% vs 2012) ■ Gasoline 158 kt (3% less vs 2012) - the gasoline steady decline was due to tax regulation which promotes diesel engines. ■ Heating Oil 195 kt (2% less vs 2012) - the tax regulation also accelerated heating Oil decline by making non-road use, which showed a 7% increase.

• Increase in market share from3% to 3.1% due to the launch ofinnovative products as SuperEthanol, E85 and own brandedNon-Road Diesel, GNR ZERO.

Dyneff France and Spain Dyneff France Sales byChannel Type (tons)

DYNEFF SPAINDyneff Spain tried to focus onmargins and managed toincrease its volumes on aSpanish market showing signs ofrecovery. The total sales in 2013were of 438.7 ktons, an increaseby 34% vs 2012.

•Dyneff Spain sales by mainproduct type in 2013:

nDiesel 407 kt (+ 38% vs 2012) nGasoline 31 kt (- 4% vs 2012)

Main projects in 2013: •Completion of VillageCatalan flagship highwaystation with a total investmentin amount of 8.2million USD.The premium station is locatedat the border between Franceand Spain, on the most

important traffic route in thearea, traveled by around35,000 vehicles per day. Thestation concept is based onthe sustainable developmentmodel of the company, withenergy- saving andenvironment-protectionfacilities (alternative powersources with solar panels andwind turbines, water recycling).

Wholesale

200,000

400,000

600,000

800,000

Dyneff France Sales by Main Product Type (tons)

20121,608 kt

2013

Dyneff Spain Sales by Channel Type (tons)

Dyneff Spain Sales by Product Type (tons)

1,000,000

1,200,000

Detail Trading Retail Gasoline

200,000

400,000

600,000

800,000

2012 2013

1,000,000

1,200,000

Diesel Heating Oil

1,400,000

Wholesale

100,000

150,000

200,000

250,000

2012 2013

300,000

350,000

Detail Retail

400,000

50,000

Gasoline

100,000

150,000

200,000

250,000

2012 2013

300,000

350,000

Diesel

400,000

50,000

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1,662 kt 1,608 kt 1,662 kt

10,1

%

9,5%

60,6

%

18,2

%

59,8

%

77%

78,1

%

12,3

%

11,7

%

439 kt 327 kt439 kt 327 kt

20,4

%

18%

17%

2,9%

2,8%

90%

92,9

%

10% 7,1%14

,3%

12,3

%

82,8

%

85,1

%

2,7%

2,5%


•Full reconstruction ofMontpellier airport station withtotal investment in amount of1.3 million USD. The Dyneffservice station, with a modernand contemporary design, isthe only gas station close tothe airport. It offers variousservices such as fueldispensers, convenience storeunder the "Boutique du Soleil"brand: vehicle accessories andmaintenance products,souvenirs, drinks; eating areawith outdoor terrace managedby the "Brioche Doree" brand;

parking spaces; vacuumcleaner, car wash and tireinflation.

•Compliance projects: Dyneffcontinued to invest 1.3 millionUSD in maintaining andimproving the technicalstandards in the companydepots and gas stations.

Development of operationsand performances in attunewith the business profile•In the context of theevolving regulatory

environment, Dyneffdeveloped new high-component products, thusthe company became apioneer in the French market.

•Super ethanol E85, a biofuelcomposed of up to 85%ethanol and 15% petrol 95. Atthis stage, the Frenchgovernment supports biofuelproduction and consumptionthrough a variety of policies,including mandatory blendingtargets and excise taxexemptions for biofuels.

•GNR-Zero, a non-road diesel,fully adapted to customers'current needs. Non-roaddiesel replaces domestic fueloil, which fails to conform toEuropean directive2009/30/EC requiring very lowsulphur content.

Tendencies for 2014, strategyfor the upcoming years.

Market tendencies• Due to the VAT increasefrom 19.6% to 20% fromJanuary 1, 2014, it is expected

fuel prices at the pump inFrance to increase; atendency expected tocontinue in 2015 as a plannedcarbon tax and other levieswill take effect.

•An increase of food-basedbiofuels from the current levelof 7% to 7.7%

Strategic directions•Optimization of the rentedstorage facilities to improvestock turnover and save rentalcosts.

•Optimize gas stations portfolio toimprove network performance

• Reinforce existing partnershipsand develop additional oneswith both suppliers and clients

•Increase Dyneff's bio-fuelmarket share and contributionthrough the distribution of theE85 niche product

•Allocation improvements ofexisting medium and smalldistribution trucks and reducein the total number of rentals

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BYRON SHIPPING is animportant support companyfor the Rompetrol Grouptrading activity.

The company operates as alink between the producer(Rompetrol Rafinare,Petrochemicals or RompetrolGas), the trader (KMG TradingAG), the offshore terminal, theclient and the owners of thevessels, providing full - rangeof shipping services.

Besides dedicated activity forThe Rompetrol Group, provides professionalassistanceto all major players in theRomanian oil/chemicalsmarket.

In 2013, the total number ofvessels attended by ByronShipping increased with 12%.,compared to the previous

year: 385 ships and barges,out of which 346 ships in Midiaport and the rest in Constantaport;

The gross revenues amountedover 1,1 million USD, a10%increase compared to 2012.

In 2013, BYRON SHIPPINGranked first in "The NationalTop of private companies inRomania", from almost 600 000companies participating inthe competition. Thecompany also received thefirst place in the category ofmicro enterprises, the rankingbeing established based onthe gross profit obtained bythe company. The top wasdrawn by the National Councilfor Small and Medium PrivateEnterprises in Romania andthe Agency for theImplementation of Projectsand Programs for SMEs.

Byron Shipping

Total 2012 Total 2013

Net profit

Total revenues

Byron ShippingFinancial Results [USD]

1.20

1.53

0

1279

.788

413.

438

400.

308

The Ukrainian market has a greatpotential in the Black Sea regionwith a constant demand forproducts, of approx. 12 milliontons/year in the last 10 years.

key achievements in 2013:Rompetrol Ukraine managed toincrease by 74% the volumessold on the local market, up to242 ktons, despite an unstablemarket during 2013.

ROMPETROL UkRAINE

Rompetrol Ukraine has thehighest market expertise intuning up supply,transshipment, storage anddistribution of fuels and itslogistics created an advantageon the local market in terms offinal prices of the fuelsdelivered.

•specialized mainly inwholesale activities

•one of the largest importers ofpetroleum products, which aresupplied exclusively fromPetromidia refinery.

The trading activity is carriedout by:

•the terminal Kherson, locatedby the Black Sea

•a terminal located nearIsmail, on the Danube

•3 warehouses located inOdessa and Vinnitsa regions.

Main goals for 2014:•Contractual arrangementsand long-term contracts withmajor clients.

•Development and optimizationof transshipment base:

•diversity of throughput points;

•negotiations with terminalowners;

•development of railwaydeliveries from Petromidiarefinery.

Rompetrol Ukraine

250

2011 2012 2013 2013 vs.2012

150

Rompetrol Ukraineretail and wholesaleTotal volumes [kt]

242

50

139

203,7

103,1

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Trends on the Romanianmarket in 2013The fuel consumption inRomania has been relativelystable over the past years, ataround 5,8 million tons eachyear.

Retail represents the mainsegment of the market, with a73% share in 2013 - recovering 2%from the previous year.

The average fuel consumption ofthe Romanian private consumerswas of 55 liters/month, stabilizedfor the last 2 years.In terms of fuel, dieselconsumption followed the sametrend as in the last years,representing 77% of total fuelquantities sold on the localmarket.

In 2013 there was an increase byover 5% in the total number ofvehicles registered in Romania(approx. 5,98 mln) compared tothe previous year, mainly dieselvehicles.

Major achievements ofRompetrol Downstream in2013The total sales of RompetrolDownstream amounted to1,568 ktons, with an increaseby 11% compared to 2012.The wholesale channelcontributed to this recordregistering an increase by 24%based on improvedcommercial terms for theclients.

Given this operationalperformance, the companyestablished a record EBITDA of39 million USD (2012: 20 millionUSD).

The slight decrease of retailand wholesale volumes wastriggered by increasingcompetition, but also due tomigration of customers fromfleets to W2C solutions(improved negotiated pricesand better control overthe costs).

LogisticsThe distribution of fuels on thelocal market is supported by 7depots, strategically spread allover the country: Navodari,Mogosoaia, Zamesti, Arad,Craiova, Simleul Silvaniei andVatra Dornei. Taking intoconsideration the increase involumes to be sold on the localmarket following the capacityincrease of the refinery, thecompany plans to optimize thelogistic activity, increasing thenumber of depots.

Network developmentAt the end of 2013, thecompany developed a newconcept of distribution stationfollowing the completion ofmodernization work in the gasstations located in Otopeniand Mogosoaia - which wasthe pilot station.With a premium design, theRompetrol station sets a newquality standard for thenetwork and provides amodern framework for the

products made in Petromidia.In addition to the facilitiesalready available in theRompetrol network (Efix rangeof fuels, Fill & Go paymentservice at the pump, Heyrestaurant), the new stationsare characterized by newelements of visual identity(logo) of The Rompetrol Group,a distinct ambient, whichincludes a modernarchitecture and a rearrangingof the interior space, using highquality materials. Stations areprovided with pumps of thelatest generation, equippedwith multimedia systems, lowenergy lighting system basedon LED technology and theirrestaurant services bring aunique gastro concept in thelocal market.At the end ofDecember 2013, RompetrolDownstream's operated anetwork of 744 fuel distributionpoints (owned stations,“Partner” stations, “RompetrolExpress” stations and internalbases of 9 and 20 cubicmeters).

Plans for 2014:The company plans to increasethe retail network by 15 newstations and also to re-brand90 stations, by implementingthe key elements of thepremium concept.

The development plans for theretail segment will focus onBucharest and llfov regionsand North- West, South-West,North -East, South -East regionsof Romania.

Also, the new concept will beimplemented in thesubsidiaries of the Rompetrolgroup, thus supporting theobjective of the company toexpand and strengthen theretail activities in the Black Searegion.

Rompetrol Downstream

Rompetrol Downstream sales in 2011-2013

20122011

Retail Wholesale

2013

778746

925

709 680 643

1,486 1,4261,568

Total volume (kt)

Rompetrol Downstream EBITDA (2011-2013) [m$]

20122011 2013

40

30

20

10

20.1

36.3 39.1

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Major achievements in 2013.• Integration of LPG retail assets inRompetrol Downstream, the retailchannel of the Rompetrolcompany. This business decision bringsbenefits both to end and businessconsumers by promoting all theproducts offered by thecompany, by increasing theproximity and optimizing theoperations in term of allocatedresources.

• Increase of Arad terminalefficiency, by upgrading transloading and mixing capacities,allowing Rompetrol Gas toincrease export operations in the

Balkan area, creating premises foradditional margins and for salesoptimizations among channels. The trans loading capacity hasincreased from 15 t/h up to 20 t/hby using higher capacity pumps.Altogether with the optimizationof the mixing capacities, theproduction activity and thedelivery time increased by 20%.

• Acquisition of 60k Rompetrolbranded cylinders, which enablesRompetrol to offer good qualityproducts in safe, new cylindersand also to extend the sales in theMoldova area.

• Due to Petromidia refinery’s

overhaul in March-April, the totalLPG production decreased by 62kt to 200.8 kt in 2013 versus theprevious year. Despite this lowerproduction, the total sales ofRompetrol Gas decreased withonly 28 kt.

Market overviewDuring 2013, the demand for newcylinders increased significantly;there are regions in Romaniawhere the LPG product is soldexclusively in new cylinders and inthe rest of the country the oldcylinders are losing ground day byday.

In this context, Rompetrol

Rompetrol Gas Sales Evolution 2011-2013 [kt]

20122011

53%

2013

274 289 260

EBITDA Evolution 2011-2013 [m$]

20122011 2013

LPG

5,3

7,4

7,8

maintains its market leaderposition in auto gas segment,having more than 25% marketshare and being the first choicesupplier for many skids operatorsdue to the best product qualityand flexible services.

key figures in 2013In 2013, the total sales volume was260 ktons, with a decrease by 11%in volumes compared to 2012,due mainly to the wholesalechannel.

The total sales of LPG in Romaniaregistered a decrease by 7% to169.637 tons in 2013.Approximately half of the quantity

was sold on the local marketthrough the retail channel.

At the end of 2013, the companyhad 3 Filing Plants with a totalcapacity of 60,000 tons in Bacău,Arad and Constanța, 240 skidsand 391 tanks.key directions for 2014-2015a) Business optimization• Render the LPG current assetsmore efficiently• Rebrand 129 auto gas skids withthe new logo of the company• Rebrand POS network (8000POS)• Attract key players to RompetrolGas network• Decrease operational "costs per

ton" by increasing volumes soldthrough imports and optimizationamong sales channels

b) Market share• Increase the existing marketshare on the retail channels• Increase our presence in theLPG market in the Black Searegion by acquiring an LPGmarine terminal

c) Business development• Enter new markets by acquiring skid networks• Install skids in the Rompetrolstations.• Use underground skids across allthe retail network

Romania

Malawi

Serbia

Turkey

Morocco

Egypt

Bulgaria

Main markets 2013 [%]

Total 2012 Total 2013

Domestic Export

LPG Domestic versus export sales in 2012 and 2013

182,127

106,486

Total: 288,613

169,637

90,548

200,000

160,000

120,000

80,000

40,000

Total: 260,184

14%

11%

7%

6%

5%4%

Major achievements in 2013•Record sales in retail, volumesincreased by 25,5 % vs. 2012

•Record sales in wholesale,volumes increased by 124% vs.2012

• Record EBITDA for the last 5years: 3 million USD

In 2013, Rompetrol Moldovaopened 13 new stations, most ofthem located in Chişinău. Atthe end of 2013, the companyoperated 59 stations. Themodernization works consisted inreplacing the visual identityelements with the newRompetrol logo, modernizing theequipment and alignmentwith the safety and

environmental standards.In addition to the new stations,the company increased thenumber of shops within the retailnetwork from 8 to 12.

As a result of the networkexpansion, the total amount offuel sold increased by 68,4%, to128 ktons in 2013.

The total market share increasedfrom 13% in 2012 to 20% in 2013,while the retail market shareincreased from 9% in 2012 to12,5% at the end of 2013.

On wholesale, the companyconcluded commercialagreements with theMoldavian Railways Companyand also with the bunkering

companies on the Danuberiver. Gasoline and diesel soldin the distribution networkcomply with the Euro 5standard and are importedexclusively from Petromidia. TheLPG is imported fromKazakhstan.

Currently, Rompetrol Moldovahas the best coverage amongcompetitors in Chişinău, where34% of the total number of carsin Moldova are located.In 2013 Rompetrol Moldovaoperated 2 Depots:

• Chişinău Depot (5000 MTcapacity) - located in Chişinăuand used for petroleumproducts;


Rompetrol Moldova

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Rompetrol Moldova sales evolutionin 2011- 2013 [ktons]

20122011

Retail Wholesale

2013

34

4354

33

74

58

76

128

24

and used for petroleumproducts;

• Tirnova Depot (1000 CMcapacity) - located in thenorthern part of the countryand used for LPG products.

Besides 55 DOCO* stations, thecompany also owns 4 ownstations situated in the northernpart of Moldova that sell onlyLPG.

These assets together with theDepot in Tirnova were includedin the company's portfolio in2011, by taking over theMoldlnterGaz company'sactivity, part of Rompetrol Gas.In 2013, 8 new DOCO stationsstarted to sell LPG and the totalnumber of stations with LPGfuels reached 20.

Starting with November 2012Rompetrol Moldova began toimport the new range ofproducts instead of Alto 101and Alto 55:

•Gasoline EfixS 98 (November2012)

•Diesel EfixS 55 (January 2013)

Plans for 2014In 2014, Rompetrol Moldovaplans to develop its network in anextensive way, by increasing thenumber of filling stations andshops, and in the same time tokeep the same level in wholesalechannel as in 2013.

Thus, plans are to open 6stations and 5 shops andincrease the retail market shareto 14%. Also RPM plans toincrease the number of stationsselling LPG from 20 to 24.

68,4%

*DOCO Dealer Owned – Company Operated station

Major achievements in 2013•7%market share in 2013

•4 new stations opened in 2013 (2DODO* and 2 CODO**)

•4% growth in overall Retail sales

The main objective of RompetrolBulgaria in 2013 was to improvethe operational model of the retailbusiness, namely in the dealersand franchise stations.

The company focused onimplementing measures toincrease the profitability of thesechannels and also to align thestations to the operationalstandard and marketing strategyof Rompetrol Bulgaria.

Apart of the network optimization,Rompetrol Bulgaria approved thedevelopment strategy until 2018.As a consequence, in 2013 twonew DODO and two new CODOstations were opened, inTargovishte, Durankulak, Burgasand Sofia. Rompetrol Bulgariacontinued focusing on a two-

pronged strategy of profitabilityimprovement and strict costcontrol in order to adequatelyface the challenges of the market. Despite the tough economicconditions, the total volumes soldon the local market was of156ktons. The optimized networkmanagement and marketingcampaigns increased by 4% theoverall retail sales, up to 80 ktons,while a 7% increase was registeredon the highest profitability channel,own stations (CODO).

Regarding the wholesale channel,there was a 12% decrease in thevolumes, up to 76ktons, affectedby the temporary closing of thetrading channel in 2012, but re-established at the end of 2013. A Biodiesel Blending unit will beinstalled at the company depot inRuse, a project to be finalized atthe beginning of 2014. The purposeof this installation is to blend thediesel with the bio componentlocally, instead of receiving thefuel already blended at Petromidiarefinery. This will reduce the cost ofthe fuel for Rompetrol Bulgaria.

These measures improved thefinancial indicators of thecompany, namely EBITDAincreased with 2,3 million USD, upto aprox 3.7 million USD, while themarket share of the companyincreased to 7%.

Plans for 2014The main strategic goal ofRompetrol Bulgaria is to strengthenits position on the market.

In 2014, the company plans toopen 11 new stations and also thestrategy for 2014-2018 includes twomain goals:

• increase of the retail marketshare up to 11% by the end of2018.

• increase of the wholesalemarket share up to 9% by the endof 2018.


Rompetrol Bulgaria

Rompetrol Bulgaria sales evolution in 2011 - 2013

(Ktons)

20122011

Retail Wholesale

2013

71 77 80

135

88 76

206

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Major achievements in 2013:

•9% increase of the total salesvolumes vs. 2012

•Import market shareincreased from 17% to 19%

Rompetrol Georgiapositioned itself on the localmarket as a European Highquality fuels distributor.

2013 was a profitable year forRompetrol Georgia, despiteincreasing pressure on thelocal market.

The total amount of fuel soldincreased by 9%, to 158 ktonsin 2013. The companymanaged to maintain theretail share of 15%, while theimport market shareincreased from 17% to 19% vs.2012.

The company retail saleshave decreased by 8% asoverall market consumptionof RON 92 gasoline hasdecreased due to consumerfurther migration to CNG(compressed natural gas), acheaper fuel.

Still, Rompetrol Georgiacontinued to diversify theretail operations, introducingEfix S, Euro 5 premium fuelswhich increased the cashsales by 60% in the Rompetrolstations vs 2012. Also, the Fill& Go billing module has beenimplemented andsuccessfully launched in 2013,being the only solution of thistype on the market.

Apart from the new productsand services, in 2013 thecompany started to

implement the new conceptof distribution station,developed by Rompetrol forits entire network. Thus,rebranding works started for 7new stations planned to becompleted at the beginningof 2014.

Wholesales have increasedduring the second part of2013, due to commercialagreements with other localdistributors.

Also, consolidatedgovernment tenders won byRompetrol Georgia contributedto the company sales.

In December 2013 Complianceto ISO 9001, ISO 14001, OHSAS18001 has been successfullypassed and correspondingcertificates received.

Plans for 2014 and upcomingyears

•Increase retail share byfurther network development:10 DOCO stations and 10rebranded stations areplanned.

•Gain additional l%-4% ofmarket share based on theservices and productsimplemented in thedistribution network.

•Fulfill obligations andrequirements to supplyGeorgian Government withdiesel on retail channel in2014.

Rompetrol Georgia

Sales Evolution 2011-2013 [tons]

20122011

Retail Wholesale

2013

105,657 109,331100,503

45,161 35,697 57,517

Evolution of the number of stations

20122011 2013

65

7169

EBITDA [k USD]

6,494

11,149 11,272

20122011 2013

*DODO: Dealer Owned – Dealer Operated station**CODO: Company Owned – Dealer Operated

Industrial Services and Upstream

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49Raport anual 2013 • www.rompetrol.com48

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Raport anual 2013 • www.rompetrol.com

MAIN ACHIEVEMENTS IN2013

ExPANDING ACTIVITIES INkAzAkHSTAN

After attaining Rominserv'smain objective of the pastyears - successfully upgradingPetromidia Refinery, started in2006 - the company focusedon the Kazakhstan marketwhich has a great potential forthe development of Rominservspecific business, consideringthe country's strategicinvestment in nationalprograms for Oil & Gas.

Capitalizing on theexperience gained as generalcontractor of the RompetrolGroup, as well as on thecompany's skills and expertisein design and projectmanagement, Rominservmanaged to sign 3 contractswith Kazakh companies, themost important being"Upgrading and increasingthe processing capacity of

Pavlodar Refinery" inKazakhstan.

Projects in kazakhstan1. Rominserv signed in July 2013a USD 1.072 billion contract toupgrade Pavlodar Refinery,aiming to increase crude oilprocessing yields, producingfuels as per Euro 4 and 5standards, increasingoperational safety as well ascomplying with most recentenvironmental requirements.Throughout the implementationof this project, several refineryunits shall be upgraded: Crudeatmospheric distillation, Heavyresidue vacuum distillation,Naphtha hydrotreating, VGOhydrotreating, FCC, Semiregenreformer, Naphtha hydrotreating(conversion of existing DHT) andother utilities and facilities. Inaddition, several new units willbe built: Isomerization, Naphthasplitter, Isomerization producttanks, Automatic gasolineblending station, Sulfur recovery,Sour water stripping, Amineregeneration, Kerosenehydrotreating, Merox primary

distillation LPG treatment andDiesel hydrotreating anddewaxing.2. Rominserv signed in 2013 aconsultancy services contractfor project managementin theKazakhstan Shymkent Refineryupgrade in, project amountingto approx. USD 1.6 billion. TheShymkent Refinery upgrade is astrategic project, to be carriedout in two phases, which aims toproduce high quality fuels as perEuro 4 and 5 standards as well asto increase the processingcapacity to 6 million crude oiltons/year. Rominserv shallprovide by the end of 2015combined consultancy servicesfor project management,engineering, procurement andwork supervision within acontract amounting to USD 8million.

3. According to a third contractsigned by Rominserv in 2013, thecompany will provideconsultancy services for projectmanagement and training forbuilding a large integratedpetrochemical platform in the

Karabatau - Kazakhstan region,investment amounting to overUSD 6 billion. The value of the contract for2013 alone was USD 5 million,and the consultancy servicesprovided in the first phase of theproject referred to building thepropane gas dehydrogenationand polypropylene productionplant, the general contractor forconstruction being Chinesecompany Sinopec Engineering.

PROJECTS IN ROMANIA

Along with expanding theactivity in Kazakhstan,Rominserv continued to carryout a number of significantinvestment projects inPetromidia and VegaRefineries as generalcontractor of the RompetrolGroup.

Petromidia Refinery1. Delayed cooker unitupgrade aimed to set up aclosed blowdown system, inorder to align with today'senvironmental requirements(water, air, soil) and a fullyautomated top unheadingvalve for coke drum.The project also has a businesscomponent, reducing refinerylosses, from 1.67% to 1.46%.

2. Replacing Current Burnerswith LOW Nox in Furnacesaimed to comply with theaction programs provided inthe Integrated EnvironmentalPermit for Rompetrol Rafinare,setting the emissions limit.Apart from compliance withthe environmentalparameters, the specific fuelconsumption decreased as aresult of the possibility tobetter adjust the air-fuel ratiowith the new burners.

3. Setting up a Flue GasEmissions Control System forthe Catalytic Cracking Unitnecessary for complying withthe Romanian environmentallegislation. The solutionchosen by Rominservspecialists in this case was toset up an electrostaticprecipitator.

4. Another project that startedin 2013 aims to authorize andre-authorize a significantnumber of static equipmentand pressurized pipes withinPetromidia Refinery units asper the national ISCIR (StateInspection for Control andApproval of Boilers, PressureVessels and Hoisting

Equipment) norms alignedwith EU PED standards (a totalof 307 pieces of equipmentand 340 pipes in 2013).

Vega RefineryThe most important projectcarried out by Rominserv inVega Refinery was to set up anew vacuum column as apart of upgrading theVacuum Distillation Unit,completed in 2013. Thepurpose of the project was tocreate a reengineeredvacuum system, toreintegrate the distributedcontrol system, to reengineerAMC equipment and toimprove the operationalsafety in the refinery.

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Rominserv actions on theenvironment, by strictlyobserving legal requirementsand promoting a proactiveattitude towards saving powerand running efficient wastemanagement processes, thecompany kept waste level to aminimum. As a direct result, in2013 Rominserv's EnvironmentManagement System was re-certified as meeting therequirements of standard DINEN ISO 14001:2009 consequentto the audit carried out byGermanischer Lloyd. The QHSEactivity of Rominserv for 2013consisted in the participation ofthe department in ensuringcompliance with legalrequirements on Labor Healthand Safety, Quality Controland Environmental Protectionin international projects carriedout by Rominserv inKazakhstan.

Financial PerformanceRomniserv's operational andtechnical performance is

noticeable in the financialresults of 2013.The USD 95 million turnover for2013 places the companyamong the top companies ofits kind in Romania.In 2013, Rominserv reachedUSD 3 million EBITDA and a netprofit of USD 1 million.

2014 OBJECTIVES

In 2014, Rominserv's activityshall focus on upgradingPavlodar Refinery as per theworks schedule agreed uponby providing design works,service supply and delivery ofequipment requiring longsupply periods. In addition, thecompany's objective is toincrease the business volume,to provide consultancyservices on projectmanagement and technicalservices to clients -Kazakhstan PetrochemicalIndustries, developer of theUSD 6 billion Kazakh

petrochemical complex, andPetroKazakhstan Oil Products -Shymkent Refinery operator.Ensuring a high level ofmaintenance services forrefineries owned by RompetrolGroup continues to be amongits top priorities for 2014.

Complete projects thatimpact directly the group'soperations:• upgrade main software forproject management, assetsmaintenance and contractmanagement: Primavera,Maximo and Proplan;• successfully complete theprojects aiming to makePetromidia Refinery complywith legal requirements,especially commissioning theelectrostatic precipitator toreduce flue gas emissions fromthe Fluid Catalytic CrackingUnit and to test and inspectpressure equipment as perISCIR regulations;• plan activities for PetromidiaRefinery overhaul.

In 2013, during its operations inRomania, Rominservcompleted on time and onbudget 29 projects amountingto USD 88.50 million.

Professional MaintenanceServicesRominserv performsmaintenance works in the 2Romanian refineries of theRompetrol Group, succeedingin 2013 in providing a highermechanical availability forPetromidia Refinery: 96.18%compared to a target of 96%.The reached level exceededthe West-European average -as per the Solomon benchmark- and allowed optimization ofoperational costs for RompetrolRafinare.

Business development outsideRompetrol GroupRominserv activity followed anupward trend in 2013 in terms ofprojects and achievementsand also managed toconclude new infrastructure

contracts on drinking waterand waste water systemmanagement.

In October 2013, Rominserv, asleader of a local joint-venture,signed a USD 17.5 millioncontract with HidroPrahova SA,one of the largest regionaloperators of drinking watersupply and waste watertreatment systems in Romania.

The project - completiondeadline July 2015 - aims torevamp and expand sewagenetworks in Baicoi, Urlati andPlopeni in Prahova County.

In April 2013 Rominserv, asgeneral contractor, completeda project aiming to upgradethe Fluid Catalytic CrackingUnit of Petrotel Lukoil, theoperator of the refinery locatedin Ploiesti, owned by Lukoil inRomania. Works, consisting inreplacing the cyclones andplenum chamber in theregenerator of the Fluid

Catalytic Cracking Unit, werecarried out in a record periodof 39 days, within the targetedbudget of USD 2 million.

QHSE PerformanceRominserv continued topreserve an IntegratedManagement System in 2013.This was possible by means of aconstant concern regarding:Quality Control - in 2013, theRominserv QualityManagement System wasaudited and re-certified byGermanischer Lloyd as meetingthe requirements of standardISO 9001:2008. Moreover, theLabor Health and Safetyguarantee was embodied in2013 by almost 1 millionaccident-free work hours. Asconfirmation of this success, in2013 Germanischer Lloydaudited and re-certified theRomniserv Labor Health andSafety Management System asmeeting the requirements ofstandard BS PHSAS 18001:2007.With respect to the impact of

being one of the biggest producers inthe area, with a total contribution tostate budget of over 1,9 milion USD.

2014 OBJECTIVES

The turnover of Rominserv Valveslaifo is targeted to increase by 11%in 2014, achieving 9,9 million USD,compared to the 2013 turnover ,with the support of sales on castparts, and also increasing number ofpartners on external market.

The main objectives of Valves laifo in2014 is to participate in the projects of

Rominserv in Kazakhstan, for themodernization of refineries, bysupplying cast iron and steel industrialvalves.

Also, the objectives for 2014 includepromotion and sale of new productsassimilated in 2013, homologationand sale of new products, along withthe development of new markets inRussia, Lithuania and Ukraine.

Increase the capacity of the foundryin the area of manual forming by15%.

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Sales per countries USD 2013 2012Romania (non group sales) 5.004.713 5.582.093Germany 1.775.550 1.858.361Czech Republic 741.056Other 136.225 121.068France 10.487 94.326Bulgaria 9.378 18.170

In 2013, Rominserv Valves laifo was oneof the biggest producers of cast ironand steel fittings and safety valvespring in Romania. Part of TheRompetrol Group, the companyexports annually around 35% of itsproduction to Germany (80%), Italy,France, Austria and Bulgaria.

Starting 2014, Rominserv Valves laifoproducts will enter the Czech market,thus it is expected the export market toincrease by 15%.

The company's products address theneeds of• The oil & gas industry, transportationand storage;• Refinery and petrochemicals;• Energy industry;• Water, steam and heat industries.

During 2013, RIS Valves laifohomologated a series of new products,such as:1. Assimilation of gate valves class 150DIM 10"; 16" and ball valves class 150DN4", electrical operated withROTORK actuator;

2. Assimilation of gate valves class150;300;600 DIM 1/2"; %";!"; 1 y2" cuwith RF flanges, in variant of forgedbody and welded flanges;

3. Over 40 types of cast parts,assimilated for the companies GEARefrigeration Germany, Sysmec SRL,Imatex SRL, Caromet SRL, LufkinIndustries Romania.

Rominserv Valves laifo achieved in2013 a turnover of 8,15 mln USD,

Rominserv Valves Iaifo

55Raport anual 2013 • www.rompetrol.com54 Raport anual 2013 • www.rompetrol.com

The Laboratory Division of TheRompetrol Group, RompetrolQuality Control - RQC, is one ofthe top companies on thenational market of laboratoryanalysis. Since its establishmentin 2004, RQC granted anongoing support to itscustomers (both TRGcompanies and externalcustomers) in their efforts toidentify and implement thesafest and effective ways inorder to protect theenvironment and provide thehigh product quality.One of the main objectives ofRQC for 2014 is the expansionof its petrochemicals divisioncurrently conditioned by takingover the laboratory operatedby Rompetrol

Petrochemicals, which wouldprovide a widened servicerange and new laboratoryanalyses.Starting with September 2013,following the acquisition ofspecialized laboratoryequipment, RQC becameeligible to perform the MTBEanalyses necessary for the LightNafta product delivered byVega Refinery. These analyseswere previously done by alaboratory in Bulgaria.Despite the still unfavorableeconomic situation, in 2013 thecompany continued todevelop and improve itsperformance, managing toretain current customers andattract new partners.By maintaining business

activities at the same highquality standards, RQCattained a major objective in2013: maintain the mainaccreditation certificatesawarded by RENAR andGERMANISCHER LLOYD. Thesecertificates provide technicalcompetence guarantee, theimpartiality and integrity ofRQC laboratories andprotection of consumerinterests. Certificates ofaccreditation represent animportant tool used forstrengthening relationships withexisting customers andattracting new customers, aswell.

Security and health protection have always been and remain

the main priorities of TRG andRQC. The company operates itsactivity in compliance with theregulations on security andhealth protection of employees,by implementing the ongoingtraining program for thepersonnel in the field and byproviding optimal conditions forcarrying out activities. Anotheraccomplishment of 2013 is theachievement of the "zeroaccidents" objective in the RQClaboratories.

The quality of services providedby RQC was acknowledgedyear by year by its major clients:

•The Ministry of Economy andFinance - project monitoringprocesses funded by the EU onobserving common rules of

introducing diesel and gasolineon the Romanian market,started in 2005.

•ArcelorMittal Galati byparticipating in theenvironment monitoring of thelargest steel plant in Romaniasince 2008.

The two relationships thatcontributed to theconsolidation of the company’sposition on the Romanianmarket continued in 2013.

Attracting new customersoutside TRG was and remainsone of the main objectives ofthe company. Thedevelopment of the clientportfolio outside TRG resulted in2013 in the commencement of

necessary procedures forconcluding new contracts onproviding gas analysis requiredby EU Regulation no.601/2012 inaccordance with the Directive2003/87/CE on monitoring andreporting greenhouse gasemissions.

RQC meets customers demandwith a wide analysis range inorder to satisfy all their needsaccording to the Romanianand European applicable lawin this field:

•complete analysis ofpetroleum products (crude-oil,gasoline, diesel, GPL, kerosene,petroleum fractions, cocks andpetroleum sulfur, ecologicalfuels - biodiesel and bio-ethanol, bitumen etc.)

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• complete water analysis(chemically impure water,process water, drinking water,drainage water, cooling water,softened water, desalinatedwater, boiler water, poolwater, steam, condensate,phreatic water etc.) •complete soil analysis(industrial soils, agriculturalsoils, industrial sludge) •complete air analysis (physicaland chemical pollutants in theworkplaces and protectedareas air by determiningappropriate concentrations)•Explosimetric analysis (bydetermining explosiondangerous potential whenworking with open fire in theindustrial environment andclosed vessels)• analysis of physical andchemical pollutants in theworkplace (by observingeffective labor protectionprovisions)•Weather factors, environmentand specific microclimates.

Accuracy of carried outprocesses and analyses areconfirmed by the certificatesobtained and maintained byRQC, which create thenecessary tools for expandingcustomer portfolio andconsolidating company'sposition in the industrialanalysis market: •RENAR -Accreditation Association ofRomania. All three laboratoriesRQC are accredited inaccordance with the standardSR EN ISO 17025:2005,certification issued by theAccreditation Association ofRomania (RENAR), the only

national institution thatcertifies standards oflaboratory activities. Therefore,RQC analyses are recognizedin over 70 countries around theworld that signed theinternational recognitionagreements (I.L.A.C, M.L.A.,E.A.) concluded by RENAR.• Germanischer Lloyd (2008)certified RQC for theManagement IntegratedSystem: Quality (ISO 9001),Environment (ISO 14001) LaborProtection (QHSAS 18001);• The Romanian RailwayAuthority (AFER) - licenses fortesting products used inrailway transport (environmentparameters);• State Inspection for Boilers,Recipients under Pressure andHoisting Units (ISCIR) - licensesfor testing boiler water;• Ministry of Health (PublicHealth Department) -authorization to performprofessional measurements oftoxic emissions.Efforts exerted in order toimprove the company'sservices are confirmed bycertificates of excellenceobtained by constantparticipation in internationalprograms of proficiencytesting (proficiency tests - PT)and collaboration withinternational research centers(Spain, Netherlands).Participation in PT assessmentsprovides a better guaranteefor the company's customersensuring that test results areaccurate and retain theirintegrity when the sample isretested in other laboratories.Testing at an international

level iinspires trust andconfidence that RQClaboratories constantly provideand accurate results, which isof fundamental importance forthe laboratory itself, for theorganization the laboratoriesare part of and for thebeneficiaries andaccreditation and regulatorybodies.

RQC managed to retain itsmajor customer's loyalty, beinga competent partner for themajor companies ofindependent inspectorsoperating on Constanta portplatform for its specific

analyses of petroleumproducts imported /exported through the port ofConstanta and byperforming monitoring of thespecific factors forcompanies in most areas ofthe country through itsenvironmental laboratories

Company indicators havebeen influenced by theeconomic crisis impactingthe business environment inRomania since 2008..However, due to theefficiency of its operations,as of end of the financialyear 2013, RQC recorded a

value of 6,5 million USD, anincrease by 20% over theprevious year.

2014 OBJECTIVESOne of the main objectives isto maintain market share andrevenue by providing gasmonitoring services startingJanuary 1, 2014 and byattracting new customersoutside the Group on thepetrochemicals analysismarket. Achieving this goalwill ensure company's incomegrowth from TRG externalcustomers with minimum 9% in2014, thus the estimation of

the total turnover being 11%.The company also aims tomaintain the accreditationsfrom RENAR andGERMANISCHER LLOYD and toextend them for the newanalysis types to be carriedout in 2014. Being animportant marketinginstrument, thesecertifications play a majorrole both in consolidatingrelationships with availablecustomers and in attractingnew business partners.

Reach "zero accidents"objective in RQC

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kUSD 2012 2013Net revenues 5,398 6,475OPEX (4,134) (5,248)Gross Profit 799 618EBITDA 1,265 1,226Net result 500 307

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59Raport anual 2013 • www.rompetrol.com58 Raport anual 2013 • www.rompetrol.comRaport anual 2013 • www.rompetrol.com

Palplast Sibiu is one of the mostimportant producers on theRomanian HDPE pipes andfittings market, with an annuallyincreasing market share. Thecompany managed to achievethis market status by adjustingthe business strategy accordingto the evolution of the marketdemand, focusing oninfrastructure and agricultureprojects and resizing theproduction costs and the pipeprices.

In Romania, projects forrehabilitation and expansion ofwater and sewerage during2013-2017 are estimated at 3.4billion Euro. The interest shownby the Romanian authoritiesand by the EU in therehabilitation and extension ofirrigation networks iscontinuously increasing,therefore Palplast is focused ondeveloping new businesspartnerships with agriculturalproducers.

Major performance andaccomplishments in 2013Palplast's market shareincreased due to highervolumes sold (2.265 tons sold in2013 vs. 1920 tons in 2012).In 2013, Palplast had a turnoverof 5.9 million USD with aproduction of over 2.300 tons ofpipe, higher by 20% than last

year, while volume of sold pipewas 2.265 tons, higher by 18%.The company productsbecame competitive on themarket as a result of priceoptimization, due to reductionof energy consumption,reduction of technologicalwaste during the productionprocess and to a lower raw

material price.Palplast expanded its clientportfolio with 153 newcustomers.

Given the focus of theEuropean Union and of theRomanian Government onrehabilitation of irrigationsystems in agriculture,

the company paid specialattention to this segment,representing 25% of its totalsales. In this regard, Palplastreopened production of fittingsthat are necessary in this sector.

Tendencies for 2014, strategyfor the upcoming yearsFor 2014, the companyestimates an increasedturnover by 17% vs. the previousyear.

Due to the interest shown bythe European Union and by theRomanian Government indeveloping & rehabilitating ofwater, gas and seweragenetworks, and also the focuson agriculture, Palplast willcontinue the ascending trend,by exceeding the financialindicators of 2013.

The main directions include• developing pipes and fittingsfor pieces necessary inirrigation systems

• starting production of newtypes of pipes & fittings• developing trading throughdirect imports from China,Turkey, etc.• starting pipe exports inmarkets like: Bulgaria, Republicof Moldova, Ukraine, etc.

Developing trading activity• Palplast intends to sign newcontracts with suppliers inorder to increase turnover fromtrading.

Reopening fittings section• After reducing productioncosts in this section, Palplastfittings became competitive onthe market.

Optimizing energyconsumption & reducingtechnological waste inproduction process• Utilities of production costreduction by 20%• Technological wastereduction from 1% to 0.85%.

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2009 2010 2011 2012 2013 2014

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0.20

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OMV Petrom 52%

Others (int’l) 1%

Kazahstan 3%

O

Weatherford 3%

Amromco 7%

Rompetrol 15%

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The company trained itsemployees mainly by means ofin-house training programs inorder to get maximum benefitsfrom operating state of the artequipment commissionedduring 2013.

Annually, the companycements in average 400casings and liners, deepbetween 500 and 4,500 meters,and carries out consolidationand packing operations forover 200 oil and gas wells.

RWS supervises all ongoingprojects from the office inPloiesti, Romania, providingtechnical support for 13locations in Romania andKazakhstan. For best leveloperations, the company alsoleases drilling tools.

2014 Main Objectives • Continuing to upgradeservices, focusing on

cementing and stimulating wellproduction.

•Strengthening market share inRomania for all types of servicesprovided.

•Implementing theDevelopment Program focusingon increasing business in highdemand areas. In order tostrengthen its position on theRomanian market, RompetrolWell Services shall continue its

program to upgrade currentservices, with investments in thisrespect exceeding USD 2.37million. Thus, high performanceequipment shall be purchasedto carry out cementing,stimulation, casing and variouswell workover activities, as wellas a cementing set with twopumping lines, a mixer forpreparing and mixing bulkcement paste set up on asemi¬trailer, drilling equipmentand tools/grab irons.

61Raport anual 2013 • www.rompetrol.com60 Raport anual 2013 • www.rompetrol.com

Rompetrol Well Services (RWS) isone of the most importantspecial well service companiesin Romania. The companyprovides a wide range ofservices for oil and natural gaswells on the domestic marketand in several countries inEastern Europe and CentralAsia.

Main Achievements in 2013:•EBITDA increased by 20%, andthe net result by 45% comparedto 2012.•The company signed, entirelyor partially, 4 new multiannualcontracts for the servicesprovided by RWS in Romania.•Investments amounting to USD1.4 million, financed from ownresources of the company,targeting better quality acidtreatment, cementing andcasing services.

In 2013, Rompetrol Well Servicesregistered positive results, given

the increasing demand for thecompany's services and highperformance, leading to arecord EBIT for the company, ofUSD 11.3 million, and a netresult exceeding USD 8.7 million.Moreover, the increasing trendin well services provided inRomania led to a growingfinancial performance of thecompany.

Despite the ever growingcompetition, RWS managed toincrease the market share forsome of the services providedin Romania while increasing thecomplexity of the providedservices.

The foreign activity, constituting4% of the company's revenuesin 2013, focused on areas inKazakhstan, Hungary, Bulgaria,Kurdistan and Israel. Theequipment upgrading programfocused on updatingtechnologies for well

cementing and stimulation andcasing services.

RWS focused in 2013 onimplementing a new datamonitoring and recordingsystem and simulation softwarefor acid treatment services.

Rompetrol Well Services

OMV Petrom 52%

Others (int’l) 1%

Kazahstan 3%

Others (Romania) 5%

Petrofac 6%

Weatherford 3%

Amromco 7%

Rompetrol 15%

Drilling contractors 3%

Romgaz 5%

Customer Structure

Evolution of main financial figures

2012 2013Gross Revenues EBITDA Net Result

30,261 36,369

52%

5%3%

15%

7%

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Over 30 years of experience indrilling and workover operationsin 15 countries stroke a balancebetween highly qualified staffand efficiency of employedequipment. The division coversa comprehen-sive list ofoperations, ranging fromexploration drilling, productionwell drilling, well cementing,well-fitting and testing, and upto rehabilitation and stimulationof production.

The skills of adapting to variouscultures and environments haveturned this department into avaluable partner both ontraditional and new markets.The overall experience countsover 550 wells drilled in Syria,Algeria, Egypt, Iraq, Jordan,Sudan, Greece and over 250workover wells in Libya.

Thanks to continuousinvestments in technology,market studies, and a flexiblebusiness vision, the DrillingDivision managed to win therespect of a market involvingtough competition and thehighest demands as tocompetency standards. Thehigh quality service standardsare supported by amanagement system, whoseprocedures are certified withISO 9001, ISO 14001 andISOl8001, by GermanischerLloyd.

A medium and long-termdevelopment plan is followed,which includes development ofdrilling andmaintenance/workoveroperations thanks to theacquisition of new equipment,maintaining and developing

business relations with presentand future clients.

Rompetrol Drilling Division is amember of:•International Association ofDrilling Contractors (IADC) since1985•Romanian Association ofDrilling Contractors (RADC) •It isISO 9001, ISO 14001 and BSOHSAS 18001 certifiedServices Portfolio• Drilling oil, gas and water wells• Well completion andworkover• Running casing and tubingstrings• Consultancy for drilling andworkover operations• Refurbishing andmaintenance of rigs• Equipment and tools rental

• Pumping, testing operationsand water wells sand cleaning• Rig management• Manpower provider• Mudlogging services

Major performance andaccomplishments in 2013

Activity in Romania

1.DrillingThe drilling activity relied on thedrilling program launched byOMV PETROM in 2011, whichaims at increasing the numberof development wells on theRomanian territory.The activity was carried out inaccordance with the provisionsof the Onshore Drilling ServicesContract concluded with OMVPETROM.

Out of total year:• 226 days – drillingoperations – correspondingto 7 wells;• 114 days - related activities(moving, rig up, mobilization,demobilization).

2. Mudlogging (measurementof the geological parametersand well drilling).

The activity was performed inaccordance with:• provisions of the MudloggingServices Contract concludedwith OMV PETROM up toFebruary 2013: Jan-Feb 2013 -21 operating days on 4 wells;• for Rompetrol concessions(E&P projects):• One unit workingcontinuously on KAZ1 entireperiod Jan - September 23rd2013• One unit workingcontinuously on KAZ1 the entireJan - September 23rd 2013period • other concessions:• One unit worked for 11Urziceni Nord well –DAFLOGS.R.L. – November – December2013 – 17 operating days

Development of Operations andPerformances in 2013Activity in Romania

1. Drilling• The activity carried out inaccordance with the provisionsof the Contract concluded withOMV PETROM

• The contract with OMVPetrom was not extended dueto financial performance,termination starting end ofNovember 2013; the rig isprepared for further contracts• Mudlogging (measurement ofthe geological parameters andwell drilling)• The activity was performed inaccordance with theprovisions of the Contractconcluded with OMV PETROMup to February 2013

• Continued work for RompetrolConcessions (E&P projects)untilthe end of September 2013.

Activity in Libya• Stable operations for all 3workover rigs.• API re-certification for allthree rigs and maintaining the

Integrated ManagementSystem certifications (ISO9001:2008, ISO 14001:2009,OHSAS 18001:2007) granted byGermanischer Lloyd.

Tendencies for 2014, strategy forthe upcoming years

Activity in Romania1. Drilling• Development plan to beimplemented, meaning usingthe Rig outside Romania: Iraq,Kurdistan.2. Mudlogging (measurement ofthe geological parameters andwell drilling)

• Searching for opportunities todevelop the business outsideRomania, focusing mainly onKurdistan where the company isregistered with the Ministry ofNatural Resources in order to beable to perform any operationsin this country.

Activity in Libya• Maintain all the rigs in workingconditions according to theexisting and negotiatedcommercial contract with ourclients.

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key Business Drivers 2013 2012 2013 vs. 2012Gross Revenues out of which: 14,3 14,7 97%Drilling and Mudlogging Activity - Romania and other location 4,2 4,1 103%Workover Activity - Libya Area 10,0 10,7 94%

EBITDA 2,7 3,6 74%

Key Business Drivers Dynamics 2013-2014 [m$]

Drilling Division

64 Raport anual 2013 • www.rompetrol.com

The Exploration andProduction Division intensifiedits activities focusing onexploration of the five blocksleased by The RompetrolGroup in Romania.

Therefore, E&P upgraded theleads and prospects portfoliobased on seismic processingand interpretation.

KazMunayGas, the soleshareholder of The Groupcontinued drilling the first welloutside its borders, in Focsaniblock, leased by TheRompetrol Group starting 2005.Rompetrol Exploration andProduction

The total investment made forRompetrol exploration blocksin 2013 reached USD 27 million,consisting of finalizing drillingone deep well (5.000 meters)

in Focsani Block as well asdrilling a new deep well (4.200meters) in Zegujani Block.

2013 key Achievements• The Rompetrol Groupcontinued explorationactivities in the five blocks:Focsani, Zegujani, SatuMare,Gresu and Nereju.

• Rompetrol has fulfilled theminimum work program on thephases expiring on December2013 for all the blocks.

• Continued drilling programof one deep exploration well(5.000 meters) - Kazl - NW wellon Focsani Block. NAMRapproved entering anadditional exploration phasewhich ends the mandatorysub-phase on 30.06.2016.

• A new deep well (4200m)

was drilled in Zegujani Blockwhere Rompetrol has 100%working interest

• In Satu Mare, in 2013interpretation of 80 km2 3Dseismic data. The process ofobtaining permits andconstruction authorizationfrom local authorities wasstarted

• In Gresu and Nereju Blocksdrilling started in December inorder to comply with the finalterm granted by NAMR, fordrilling one exploration well oneach block.

2014 key Objectives• continue explorationactivities in the five blocks:Focsani, Zegujani, SatuMare,Gresu and Nereju.

• Complete drilling 2 wells and

Rompetrol Exploration and ProductionUp

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180 km2 - 3 D seismic dataacquisition in the Satu MareBlock, together with WinstarSatu Mare.

• Find a partner and/orcontinue exploration activity inZegujani Block.

• Start 300 km2 - 3D seismicdata acquisition in FocsaniBlock according to theminimum work programapproved by NAMR.

• finalize drilling of 2exploration wells together withAmromco Energy Sri in Gresuand Nereju Blocks.

• Identify new productionopportunities in the Romanianmature oil fields and developproduction projects in theCaspian Region, Middle Eastand North Africa.

Marketing

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In the upcoming period Rompetrolwill focus on the retail activities. Thechange in image is a natural step,succeeding the major infrastructureand refining investmentsimplemented by the majorityshareholder KazMunayGas starting2007. The aim of the efforts is toimprove the quality of Rompetrolproducts and its refining capacity. Anew filling station concept wasdeveloped to support the retailsegment. The new image confirmsthe authenticity of the brand -Rompetrol continues to offer highquality "energy" in all of its shapes.

The revival/revitalization of theRompetrol image began with its bestrecognizable element - the logo. Theblue wordmark was changed to red,an energetic color which symbolizespower, passion and success;attributes Rompetrol identifies itselfwith. The font makes the logo lookmore airy, young, urban and modern.

The new filling station conceptcomprises a modern design thatcombines 3D elements with colorschemes to create a minimalistic,aerial and warm concept. The heistore with the c-store concept canbe found inside. It creates an invitingand relaxing café bar atmospherewith a premium aura.

Marketing2013 was an importantyear for Rompetrol,marked by therevitalization of theRompetrol brandidentity.


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The summer and winterpromotions were the mostimportant communicationcampaigns of 2013; aimed toincrease the brand loyalty ofresidential clients and attractnew clients.

The campaigns werecommunicated on the mostimportant TV and radiochannels, as well as online. Theidea of the campaigns wasthat clients would accumulatepoints and would be rewardedwith guaranteed prizes.Generous prizes wereawarded by random draw.

Another highlight was the re-launchof the personal Fill andGo card in a more attractiveform. The card was launchedin Romania and was mainlypromoted on the highest ratedTV channels.The results of the campaign bythe end of December 2013were impressive showing thatRompetrol knew the needs of

its clients and offered solutionsto match.

EventsDuring 2013 Rompetrolparticipated in severalbusiness to business events asexhibitor. The most ampleinternational oil and gasdedicated event took place inKazakhstan, KAZENERGYEURASIAN FORUM &EXHIBITION. In 2013 the VIIIedition took place in Astana. Itis the main annualinternational event in theenergy sector of Kazakhstan,where the heads of states ofdifferent countries andrespected experts of theindustry exchange views andexperiences on currentquestions on Eurasian andglobal scale.

The Rompetrol objective wasto strengthen the importanceof Rompetrol's strategic role inKazMunayGas, as Rompetrol isthe first step in the Group's

European expansion strategy.The strategic move of buildingthe energy bridge betweenKazakhstan and Europe ispossible only through the long-term commitment and reliablerelationships with Europeanpartners.

The company alsoparticipated at Kioge, one ofthe most significant oil and gasevents in Kazakhstan, whereRompetrol was promotedwithin KazMunayGas stand, asindustrial expert through itsRominserv and Well Servicescompanies.

Corporate Social Responsibility

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We are aware of the fact thatwe conduct our business in asector which involves a higherlevel of risk to health, safety andsecurity and that is why thesafety of our employees andcontractors represents a matterof the utmost importance.

2013 Main Achievements• 1.5 LTIF (lost time injury frequen -cy) target was met in 2013• 1.5 MVCR (motor vehicle crashrate) target was met in 2013• 0 fatalities target was met in2013• Several contractor safetyprograms resulted in improvedcontractor safety indicatorvalues

2014 Challenges• Maintaining and improving theQHS performance indicators -highest target: 1.5%;• Implementing a single QHSEsoftware at the level ofPetromidia Platform andDownstream for the monitoring ofnon-conformities, correctiveactions, and action plans; • Implementing a program forfurther limiting the low accidentrate within the Rompetrol entities:online training platforms,dedicated trainings for specificQHSE requirements, preventiveworkshops which are organized incooperation with the medical

service provider (for specificprophylaxis based on the predo -minant medical diagnoses of 2013)• Implementing an action planfor eliminating or decreasing themajor risks of:a. Work at height, at Vega/Petromidia refineries and withinRPD warehouses, b. Implementing the LOTO system(log out tag out) in RPD and RPGwarehouses.

Workforce SafetyObjective: implementing aprogram with the goal of 0fatalities and accidents resultingin work incapacity andoccupational illnesses, as well aseliminating the workplaces thatpose a high risk of occupationaldisease.

All the occupational health andsafety activity performanceindicators registered at grouplevel showed a positive evolution. We have achieved good resultsdue to applying a uniformoccupa tional health and safetypolicy, both within the groupentities and to our subcontractors.

Over the past four years wehave registered no eventsresulting in loss of human life.

An analysis of the indicatorsshows that the incidents thatoccurred in the past werecaused by: sliding, falls fromheight, accidentally hittingobstacles while walking, roadaccidents, and exposure todangerous substances.

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Health & Safety

FIR – fatality incident rate TRIR – total recordable incident rate

2010 2011 2012 2013• The Rompetrol Group 2.05 0.51 0.13 0.34• Upstream 0,7 0 0 0• Refining 0.61 0.31 0 1.37• Trading 0 0 0 0• Retail 3.51 0.47 0.14 0.13• Non-Core 0.780 0.81 0.21 0.26

TRIR

3.5

2.8

2.1

1.4

0.7

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The Rompetrol Group (TRG)considers social responsibility asvoluntary contribution todevelopment in the society,connected with the basicactivity of the company, incompliance with theinternational laws and takinginto consideration the resourcesof the group.

CSR is a strategic developmentdirection, ensuring businesssuccess through active andcontinuous responsible actionstaken within the workplace,market place, community andtowards the environment.

Mission and ValuesAs a leading Corporate Citizen,The Rompetrol Group seeks toact responsibly in all activities. Asa global company whosesuccess has been built oninnovation, passion throughquality and individualleadership, we require highCorporate and PersonalResponsibility standardswherever we operate – with theultimate aim of improving ourbusiness and the quality of life ofthose we impact.

We are committed to:1. Sustainable, responsibledevelopment which extendsthrough and beyond the life of

our operations;2. Operating ethically andresponsibly with respect for thesafety, health and welfare of ouremployees and partners in thecommunity;3. Best practices in corporategovernance as it affects all ofour communities of stakeholders,including our employees, localand regional communities,suppliers, investors and partners;4. Investing time and energy inpromoting the spirit of leadershipthrough entrepreneurial andeducational pursuits.

Rompetrol defines the followingguiding principles of its CSRPolicy:

1. Respect Employees: Torespect employees and helpenhance their life throughdevelopment opportunities andemployment practicesgrounded on equalopportunities and Occupationaland Safety Best Practices; 2. Ongoing Involvement: Toinvolve at an appropriate levelthe authorities, community, andother concerned stakeholders inall decisions that affect them;3. Health and Safety: To ensurethe health and safety of ouremployees, suppliers and thecommunities in which weoperate;

4. Risk management: To identify,assess, manage and mitigaterisks to our host communities,employees, contractors, theenvironment and our business;5. Education and Leadership: Topromote the spirit of leadership,especially among youngpeople, through civicinvolvement and educationalactivities that encouragesocially responsible pursuits andentrepreneurship;6. Respect local communities: Torespect, protect and promotethe human rights, culture,customs and values of thecommunities in which weoperate;7. Best practice: We are guidedby the United Nations GlobalCompact’s ten principles in theareas of human rights, labor, theenvironment and anti-corruption.

The Rompetrol Group, as asocially responsible company, iscommitted to the ongoingimplementation andimprovement of the quality ofsocial activities in the followingmain directions:

• Health & Safety of employeesand suppliers• Environment• Human Resources• Community

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ISO Certification

Road SafetyObjective: Continuing toimplement the preventivedriving policy and to maintainan acceptable motor vehiclecrash rate. As of 2011, apreventing driving policy wasimplemented within RompetrolGroup. This led to a drop in thenumber of motor vehicle crashesprovoked by our employees;thus, while in 2010 the crash rateamounted to 2.93% for a no. of19 million km, in 2013, the level ofthe crash rate was 0.38 %, for ano. of 18,3 million km.No crashes involving loss ofhuman life have been registered;thus, the good results encourageus to develop the good practiceswhich have been adopted byimplementing the preventivedriving policy, but they alsooblige us to permanently reviewthe vehicle fleet and to care

about the people and theirsafety on the public roads. Saving human lives is clearly thepriority of any road transportoperation. We would like tocontinue this line of action and,within the next two years, weplan to initiate a trainingplatform for preventive conductat the wheel, which wouldinclude theoretical and practicalaspects of the process.

Contractor SafetyObjective: Improving workconditions, implementing goodpractices and decreasing thenumber of contractor accidents.

As of 2012, our work safety andprocurement teams have co-operated in order to integrate amanagement standard forcontractors. This standardincludes updated contract

requirements, as well as newcontractor selection andpermanent evaluationinstruments. We redefined andstandardized the contractualQHSE requirements; we drafted aContractor ManagementStandard, as well as 8 minimumspecific QHSE requirements forthe high risk activities (such asdrilling, constructions, and roadtransport); we transmitted ourmeasures to contractors throughthe documents that weadopted, periodical meetings, aswell as during inspections/visits inthe field.

The Rompetrol Group is in acontinuous process ofimplementation and verificationof the work conditions forcontractors. Thus, workprocedures, verificationprocedures, and a penaltyprocedure for OHS non-conformities have beenintroduced for contractors andsubcontractors. All thesemeasures have led to adecrease in the number ofaccidents and in the number ofnon-conformities related tocontractor and subcontractoractivity, as well as to theirimproved performance.

Our goal is to improvecontractors' and subcontractors'QHSE performance by closemonitoring and to implement keyperformance indicators (KPI) andobjectives for all new high andmedium risk contracts.


• ROMPETROL MOLDOVA - Integrated management system certification based on ISO 9001, ISO14001, OHSAS 18001 by Germanischer Lloyd • ROMPETROL GEORGIA - Integrated management system certification based on ISO 9001, ISO14001, OHSAS 18001 by Germanischer Lloyd • TRG Corporate Center Integrated management system certification based on ISO 9001, ISO 14001,OHSAS 18001 confirmed/maintained by Germanischer Lloyd (through Surveillance Third party audit )

MVCR - motor vehicle crash rate - 2013

2010 2011 2012 2013• The Rompetrol Group 2.93 1.01 0.38 0.38• Upstream 0.9 0 0 0.27• Refining 7.07 2.45 0 0• Trading 4.64 0 1.44 0• Retail 1.92 0.93 0.11 0.57• Non-Core 4.8 1.6 1.08 0.23

MVCR 00,91,8

2,73,64,5

5,4

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As of 2010, there has been apermanent preoccupation atgroup level for employees’awareness in order to create asafe work environment and tobecome aware of the fact thatpeople are the main and themost important resource. It is ofthe utmost importance that theGroup implements and developsa solid culture of prevention ofoccupational accidents. Suchactions led to a decrease in thenumber of accidents / incidentsand implicitly in the number oflost working days caused byaccidents (LTIF).

The permanent preoccupationand involvement at the highestlevel of management has beencontinuous and visible, resultingin a 50% improvement of theseindicators in 2013 as comparedto 2010.

In this context, the QHS statisticsshow the following:• At the level of 2013, 33,962training hours have been held; • A number of 4,948 inspectionshave been carried out; • The checks made by the stateauthorities numbered 600.

Implementing safety audits,increasing the number ofwarning, training, inspectionand soft communicationcampaigns enabled us to reacha DU PONT 3 occupationalsafety level within RompetrolRafinare and Vega Platforms.

Such level shows that the safetysystems are very good, that theywere fully implemented and areefficient: any deviation iscorrected in the system and isused for improving the system;the activity of safetycommittees and subcommitteesis showing results; safety prioritiesare established. Theorganization has safetydevelopment projects and itssafety performances show aconstant improvement.

Safe work and risk assessmentObjective: Continuing theoccupational health and safetymanagement programs,assessing and monitoring therisks involved in all activities,monitoring the health state ofthe workers, minimizing or,where possible, eliminating themajor risks in order to maintain asafe work environment both forour employees and contractors,and for the interested partiesand the environment.

There is a continuouspreoccupation at group levelfor raising awareness amongemployees, for training theemployees, creating andmaintaining a safe workenvironment. In view of thisaspect, we make considerableefforts to always guarantee thesafety of our operations and toimplement a series of processeswhich comply with thestandards required by the

Group with regard to theidentification of threats and riskmanagement, in order to assessand obtain an acceptable risklevel in the activities that wecarry out. The Groupunderstands that a majoraccident may represent animportant threat for the Group'sreputation and even for thebusiness development.

The implementation of theaction plans and the increase ininvestments for upgradingprojects resulted in theelimination of certainoccupational risks and inreducing the risk level to "as lowas reasonably practicable"(ALARP).

In 2013, the Group continued toidentify and assess the major risksresulting from normal operationand accidental situations, as wellas to assess their likelihood andseverity by carrying out HAZOPrisk analysis for 2 technologicalinstallations at RompetrolRafinare-Vega (Dearomatizationand Bitumen).

3 "new" Process SafetyManagement elements havealso been assessed. The resultswere positive: level 2 for theManagement of theTechnological Changes (MoC)and HAZOP, and level 2.5 forPre-start up safety review.

LTIF – LOST TIME INJURY FREQUENCYThe average incident frequencyinvolving one or more lost workingdays as compared to the workingtime /1 million worked hours

3 Raport anual 2013 • www.rompetrol.com

2010 2011 2012 2013• The Rompetrol Group 2.93 1.01 0.38 0.38• Upstream 0.9 0 0 0.27• Refining 7.07 2.45 0 0• Trading 4.64 0 1.44 0• Retail 1.92 0.93 0.11 0.57• Non-Core 4.8 1.6 1.08 0.23• Yearly Target 4.8 1.6 1.08 0.23

LTIF 0

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The main objective of TheRompetrol Group in theenvironmental field is to developits activities in total conformitywith the environmental legislationapplicable for each countrywhere TRG has companies,applying the general principles ofenvironmental protection,through conservation andsustainable practices. The Rompetrol Groupenvironmental strategy has thefollowing areas of interest:

• Compliance of activities andfacilities at national andinternational legal requirements inthe environmental field;• Minimization of theenvironmental incidents;• Minimization of the naturalresources consumption and thequantities of the generatedwastes, especially hazardousones;• Optimization of the operationsand technologies for energyefficiency improvement and

reduction of different pollutantsemissions, especially greenhousegases;• Improvement of the certifiedenvironmental managementsystem (ISO 14001) implementedin all our entities;• Permanent training ofspecialized personnel in the field;• Insurance of excellentcommunication within the Groupand with the interested public,state authorities, NGOs etc.

Environment

A. Framing of CO2 allowances in EUTL (2012 - 2014)For each of the 3 entities of BU Refining, the greenhouse gas permit had the period of validity 2013-2020phase III related to the EU-ETS scheme.

In February 2013, the evaluation of the CO2 emissions for the year 2012 and their validation by certifiedverifiers took place (in order to report to the National Environmental Protection Agency).

Installations No CO2

certificates allocated in

2013

No CO2

certificatesconsumed in

2013

No CO2

certificates tobe returned to

EUTL

Excess of CO2

allowances in2012

Excess of CO2

allowances in2013

Excess of CO2

certificates in2014

Petromidia 648,768 756,755 107,987

261,357 146,976 174,119Petrochemicals 71,833 44,690 -Vega 33,771 40,165 6,394

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Occupational healthObjective: In our QHSE strategy,we include health, as well as highmedical standards for ourmedical service suppliers.

The medical service supplier isresponsible for ensuring medicalservices, including theoccupational health legalrequirements. The objectives setby our QHSE strategy includehigher standards for allsupplier's clinics and regularevaluation of health condition.

In order to encourage health andwell-being, we got involved inhealth promoting activities, suchas the Ergonomics and HealthyWork Conditions Campaign.

Moreover, we have preparedour employees for medicalemergencies, by carrying outfirst aid training programs andsimulation exercises. In 2012and 2013 - over 2000 personshave completed first aidcourses at group level.

Emergency situations -Emergency preparation andresponseObjective: Creating andoperating an emergency

response framework foremergency intervention. The Rompetrol Group hasimplemented an integratedemergency managementsystem, in order to decrease thenumber of incidents related tooccupational risks, such as therisk of fire or explosion. Thepreparation for emergencysituations is based on a systeminvolving regularly performedexercise and training.

At the warehouses and withinMMT - these exercises take placeannually with the participation oflocal and state emergencyforces.

In 2013, 1527 emergency actionsimulation exercises wereperformed at group level.

Rompetrol Rafinare, a membercompany of the RompetrolGroup, in partnership with'Dobrogea' EmergencySituations Inspectorate ofConstanta County, hasperformed a tactical exerciseat Petromidia Năvodarirefinery, in order to verify theintervention mechanisms incase of serious incidents.Such exercises are performed

periodically and they arenecessary in improving thepreparedness level ofspecialized teams' and inupgrading the major accidentmanagement knowledge. Thepurpose of the simulation wasto check and evaluate theemergency notificationprocedures in case of anaccident and also how theintervention forces cooperatein case of incidents whichhave effects within the limits ofthe site.

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B. ENVIRONMENTAL INDICATORS

C. Environmental Achievements• In 2013 a new IntegratedEnvironmental Permit forPetromidia Refinery was issued.In December 2013, EPAConstanta enclosed theEnvironmental Integrated Permitof Rompetrol Petrochemicalswithin Petromidia EnvironmentalIntegrated Permit due to themerging of these 2 entities.

• In November 2013 was issueda new revised Environmental In-tegrated Permit for Vega Refin-ery. The procedure for obtainingthe Environmental Agreementfor remedial project is ongoing.

• In 2013 all Rompetrol Groupactivities/installations with a sig-nificant impact on environment(IPPC activities/installations)have been in accordance withEuropean legislation, nationallegislation respectively: SC.Rompetrol Rafinare SA – Petro-midia Rafinery; SC RompetrolRafinare – Vega Refinery; Petro-chemicals; SC Ecomaster; IaIFOZalau.

BiodiversityThe company recognizes theimportance of preserving theBlack Sea biodiversity ( in theareal Petromidia refinery islocated) within the context ofenergy demand increase,sustainable development andimproved quality of life in thesurrounding areas of itsinstallations.

The Waste Water Treatment Unit(WWTP) is located at the borderof the Danube Delta Biospherewith its no. 1 &2 ponds, whichrepresent the tertiary biologicalstage of the waste waterstreatment (before watersevacuation into Black Sea).These ponds are populatedwith numerous birds species, animportant characteristic of theBiosphere. In order to preservebiodiversity in the area andmaintain the efficiency of thebiological treatment stage,Rompetrol performs cleaning

activities annually: pondsunsettling, waste (PET's)collection, rush-bed cut-off.

Waste managementRompetrol Refinery hascompleted the project toremediate a historicallypetroleum contaminated sitelocated on Petromidiaplatform, in compliance withthe environmental legislation,The company's investment inthe implementation of theproject involving remediation ofthe area amounted to 1 millionUSD.

Remediation works werecarried out by specializedcompanies and wereperformed over two years in anarea of 5,000 m2, treating wastecontaining heavy oil productsat concentrations below theaccepted threshold, inaccordance withenvironmental legislation. The

decontamination proceduresconsisted in the enzymetreatment of the contaminatedarea, and were performed inparallel with the recovery of oiland pumping of clean waterfor our own treatment plant.Project phases implied initialinvestigations (test performing,choosing the appropriatetreatment option), properexecution, corrections ofenzyme dosages according tothe different degrees ofcontamination of land andenvironment reconstruction.After the remediation, theperimeter was grassed over,surrounded by trees andhanded back for industrial use.The project was accomplishedin respect with theEnvironmental Agreementowned by Rompetrol Refineryfor the remediation execution,reaching the targets set by thecompetent authority in thefield.

No Indicators Measurementunits

Total 2011 Total 2012 Total 2013

1 Discharge of sewage waters m3 7,490,432.2 8,469,836 6,755,1642 Total waste tons 27,530.7 41,655.88 18,367.773 Total water input m3 5,801,273.65 7,022,460.58 7,296,044.784 Environmental charges* $ 24,104,130.72 23,553,658.94 21,834,022.725 The costs of environmental compliance $ 13,517,189 54,807,032.68 19,068,420.306 The number of accidental pollutions (spills) units 1 1 17 Number of inspections by environmentalstate authorities units 187 193 169

8 Charged environmental penalties by environmental state authorities $ 35,302 22,203 8,274

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Human Resources

Temporary 234 (3%)

Permanent 7,240 (97%)

Gender distribution for TRG companies (2013)

Type of Labor workingcontract distribution:

Age distribution

Employees trained 2013

TRG

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187

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Continuously developing ourpeople and improving theirknowledge and skills are amongstour pivotal objectives.

In order to ensure that ouremployees enjoy a healthybalance between work and theirsocial life, a program of socialbenefits covering health issues,lifestyle and wellness, carassistance and benefits programs,financial support.

DemographicsIn 2013 the companies of theRompetrol Group employed anaverage of 7,474 employees.From the demographical point ofview, the group populationincludes 5,016 (67%) males and2458 (33%) females and theaverage age is 40 years, themajority of the employeesconcentrating in the 36-60 yearsrange.

Training & DevelopmentIn 2013, the Rompetrol Groupcontinued to sustain its humancapital development and growthby equipping its employees withskills and abilities relevant for thebusiness context and objectives.

When looking at developmentwithin Rompetrol Group we’relooking at all Group companies:Dyneff France, Dyneff Spain, KMGTrading, Rompetrol Bulgaria,Rompetrol Georgia, RompetrolMoldovia, Rompetrol Ukraine andRompetrol Romania (in Romaniathe operation is developed by 15companies).In 2013 there were a total of4751 employees whoparticipated in at least onetraining activity.

Due to the very technicalcompanies’ profile, it can beobserved that the technical

courses addressed are in ahigher proportion (82%)compared to the behavioralones (18%): 4220 employeeswere trained in technical courses(specific required by lawcertification, CFA, PMP, ACCA,and 908 employees on soft skills(Leadership and ManagementSkills, Communication Skills, TimeManagement, etc.).

This is a good indicator of howskilled and thoroughly preparedRompetrol employees are on jobspecifics.

On Petromidia and Vegaplatforms the Dupontoccupational health and safetyinternal sessions continued and1897 employees were trained (thegoal of Dupont courses is toincrease awareness of workrelated potential hazards andprevent work accidents).

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Employees trained 2013 on behavioral vs technical skills

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1. Business Development – RominservRominserv business development isrepresented by the projects that weregained in Romania and abroad, thathave a timeframe of several years. Theseprojects are reflected, from HR point ofview, in needs of recruitment andtraining for the new personnel that willjoin Rominserv. The recruitment projectsare mainly focused on Engineering andProject Management areas - DesignEngineers, Project Managers, Planners,Supervisors, Translators etc. The outcomeof these projects is as follows:consultancy services, maintenanceservices, EPCM services (PavlodarRefinery modernization, revamping andnew investment projects).

2. Performance Management Program inRompetrol Performance Management is the activityof planning and objectively evaluatingthe individual contribution of eachemployee to team, company andGroup results, by using tools as KeyPerformance Indicators (KPIs). These areselected indicators considered key inmonitoring the performance of astrategic objective, outcome, or keyresult area, important to measure thesuccess of an activity and growth of theorganization overall. KPIs makeobjectives quantifiable, providingvisibility into the performance ofindividuals, teams, departments andorganizations and enabling decisionmakers to take action in achieving thedesired outcomes.

As a result, the PerformanceManagement Process aligns employeesto company culture, motivates them tofocus on results and promotes behaviorsand attitudes associated withperformance.

In order to have superior performanceevery employee should know exactlywhat is expected of him/her, in terms ofresults and behaviors, what are thepriorities, needs to be continuouslyinformed on current performance andhow his/her performance will beevaluated. Beginning 2014, Performance evaluationapplies to all Rompetrol Groupemployees’ regardless of company,location, hierarchical level, seniority orother criteria.

3. Internship Program in Rompetrol The Rompetrol Group is committed tobring on board the most talentedpeople. One of the objectivessupporting this direction relates to theRompetrol internship programs. Bachelorand master students can apply for aninternship program within the companyin order to practice the theoreticalaspects obtained during their studies.

Rompetrol targets talented students withvery good academic performance andreferences; therefor the companyinitiated partnerships with Academy ofEconomic Studies, Ovidius University ofConstanta and Petroleum – GasUniversity of Ploiesti, three internationallycompetitive universities which guaranteequality education in accordance withEuropean standards and full recognitionof studies in any European country.

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Perspectives for 2014

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In 2013, the Group’s investments in CSRinitiatives in Romania and abroad,amounted to $ 1.5 mln. In the immediatefuture, we aim to focus our attention onareas where there is greater socialdemand and improve our performanceand our contribution to CSR issues. This willin turn contribute to sustainabledevelopment, improve relationships withhuman resources, strengthen socialsolidarity and ensure trustfult relationshipswith the local community and society atlarge.

Programs and Projects in RomaniaIn 2013, within the 5th edition of thenational program "Together for each andeveryone" 16 healthcare andenvironment projects were financed. Allprojects had two overlapping parts: onewhich consisted in the restoration ofmedical care units in rural and urbanareas, or the construction of watercollectors, eco plants for water recycling,

solar panels for schools, and a secondcomponent which consisted ineducational and cultural activities for themembers of the communities.

Several other projects on healthcare andenvironment protection were developedor continued as part of the platform“Energy comes from the heart”.

In the healthcare field, The RompetrolGroup, Fundatia pentru SMURD and theGeneral Inspectorate of Aviation (IGAV)continued the partnership for supporting airemergency interventions, the movement ofmedical personnel and the transportationof victims. In this cooperation, theRompetrol Group, through RompetrolRafinare, has been providing a monthlyamount of Jet A 1 fuel, the quantityestimated for the operation of the medicalhelicopters.since 2010.

The Rompetrol Group is also involved in

Community

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social partnerships, implementing jointprojects and programs or arranging socialevents. Much attention is paid to support thenational campaign “Fiecare Copil înŞcoală” (Each Child in School) initiatedby Ovidiu Ro Association. This partnershipwhich became effective in 2004advocate: school preparation programs,free school materials, uniforms and hotlunches for children from low-incomefamilies; incentives in the form of foodcoupons; enforcement of education andchildren’s rights legislation etc.

As of 2003, Rompetrol is a partner andmain sponsor for ”Gala Societăţii Civile”(Civil Society Gala) – the annualcompetition that awards the bestprojects of the year, projects initiated byNGOs, unions, individuals etc. George Enescu Festival - In 2013, theGroup continued the partnership tosupport the 21st edition of the prestigious

George Enescu International Festival,held in several cities, from September 1through September 29. This association ofRompetrol with such a large scale eventwas meant to strengthen theinternational vocation of the two brandsand their products - fuels and qualitymusic. Within the partnership created tosupport the prestigious cultural event, thecompany provided the total quantity offuel required to operate official cars usedin the festival. The company alsoprovided financial support for the"George Enescu Festival".The company also offered to theRomanian public the exceptionalconcerts of the Royal PhilharmonicOrchestra at the Palace Hall in Bucharest.

Moreover, in 2013, the companycompleted various social partnerships,charity activities with the support ofemployees, or sponsored initiatives ofUNICEF, Hospice, among others.

CorporateGovernance

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General dataCorporate Governance provides coherent information concerning the framework inwhich The Rompetrol Group (TRG) activates at operational and managing level, thusensuring the transparency of all activities.

At the end of 2013 The Rompetrol Group comprised 49 companies (44 legal entitiesand 5 branches and representative offices) – joint stock or limited liability companies– having their headquarters in 15 countries.

Regulations of Articles of Association applicable to these commercial companies arethe local ones. In Romania the main applicable regulations are the Law 31/1990about commercial companies and the Law 297/2004 concerning the capital market(in case of companies listed on the stock-exchange).

The companies within The Rompetrol Group are administrated in accordance withthe provisions of their own Articles of Association and provisions of any other relevantdocuments.

The Rompetrol Group NV Shareholders The sole shareholder of The Rompetrol Group N.V. headquartered in The Netherlands,Amsterdam, Strawinskylaan 807, Tower A-8, 1077XX, is KMG Investments B.V. (KMG).

Administration and decisional regulationsThe major shareholder of the Group has a unified management system. The TRG Board of Directors has 5 (five) members out of which one executive (theChief Executive Officer – CEO) and four non-executive members.

As of 31.12.2013, the Company’s Board of Directors is as follows:

Mr. Daniyar BerlibayevChairman, non-executive director

Mr. zhanat Tussupbekov chief executive officer

Saduokhas Meraliyevnon-executive director

Azamat zhangulovnon-executive director

Johan Frederik Lodewijk Froweinnon-executive director, independent

The CEO is responsible, in accordance with the Articles of Association, with theeveryday management of the company and its subsidiaries. According to thestatutory provisions, CEO shall be the solely authorized person to represent thecompany. The CEO may delegate his managing function for certainoperations/groups of operations to certain third parties. So, at the TRG level there areDeputy Executive Managers specialized in different types of activities of the Group.

General Duties and Powers of the Board Board members are together responsible for the company's management, thegeneral affairs of the company's enterprise, including for setting and achieving thecompany's objectives, strategy and policies. The non-executive members of theBoard of Directors are responsible for the general policy of the company and forsupervising the management position. In order to support its activities, the Board ofDirectors is in charge with founding specialized committees like Audit Committee orRemuneration Committee.

Subsidiary The majority of commercial companies have implemented the unified managementsystem.

Corporate Governance

• Incorporation ofKazMunayGasEngineering B.V. in July2013 (owned 100% byTRG NV) headquarteredin Strawinskylaan 807,Tower A-8, 1077XX,Amsterdam, TheNetherlands, having asmain object of activity -financial holding activities

• Incorporation ofRompetrol Exploration &Production, a limitedliability company,organized under the

Romania law provisions,headquartered inBucharest, 1st District,Piața Presei Libere no. 3-5,1st floor having as mainactivity object theextraction of crude oil.

• Rom Oil S.A. – RominservS.R.L. and Ecomaster-Servicii Ecologice S.R.L.sold their interests (1 shareeach) held within Rom OilS.A. to Rompetrol RafinareS.A. which currently holds99,9998505% of the sharecapital of Rom Oil S.A.

• Regarding the non-core activity - it wasdecided to resume theactivity of RominservKazakhstan (theliquidation process wasstopped) and also theBranch of RominservKazakhstan in Pavlodarwas registered, as a resultof developing theindustrial services in thiscountry.

• Acquisition of 100%shares in RompetrolMoldova.

The decisional right upon internal operations of every company is divided intodifferent decisional levels:

Shareholders’ General Meeting

Board ofDirectors

General Manager and Financial Manager

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10

These financial statements have been preparedin accordance with International FinancialReporting Standards (“IFRS”) effective as ofDecember 31, 2013, as endorsed by the EU.

The consolidated financial statements areprepared under the historical cost convention.

The financial statements of the Group areprepared on an ongoing concern basis

The group’s consolidated financial statementsare presented in United States Dollar (“US Dollar”or “USD”), which is the Group’s functionalcurrency.

The consolidated financial statements comprisethe financial statements of the parent companyand its subsidiaries as of 31 December 2013.

Control is considered to be achieved where theGroup (either directly or indirectly), owns morethan 50% of the voting rights of the share capitalof another enterprise and is able to govern thefinancial and operating policies of an enterpriseso as to obtain benefits from its activities. Non-controlling interests represent the portion of theprofit or loss and net assets that is not held by theGroup and are presented separately in theconsolidated income statement and withinequity in the consolidated balance sheet,separately from the parent shareholders’ equity.

Business combinations are accounted for usingthe acquisition method. The cost of anacquisition is measured as the aggregate of theconsideration transferred, measured atacquisition date fair value and the amount ofany non-controlling interest in the acquiree. Foreach business combination, the acquirermeasures the non-controlling interest in theacquiree either at fair value or at theproportionate share of the acquiree’sidentifiable net assets. Acquisition costs incurred

are expensed and included in administrativeexpenses.

The interest of non-controlling shareholders in theacquiree is initially measured at the non-controlling’s proportion of the net fair value ofthe assets, liabilities and contingent liabilitiesrecognized. Businesses acquired or disposedduring the year are included in the consolidatedfinancial statements from the date of acquisitionor to date of disposal.

The Group's investments in associates and jointventures are accounted for using the equitymethod of accounting. Under the equitymethod, the investment in an associate/jointventure is carried in the balance sheet at costplus post acquisition changes in the Group'sshare of net assets of the associate/joint venture.After application of the equity method, theGroup determines whether it is necessary torecognize an additional impairment loss on theGroup's investment in its associates/joint venture.

All intra-group balances, income and expensesand unrealized gains and losses resulting fromintra-group transactions are eliminated in full.

Goodwill is initially measured at cost being theexcess of the aggregate of the considerationtransferred and the amount recognized for non-controlling interest over the net identifiable assetsacquired and liabilities assumed. Goodwill istested for impairment annually (as of 31December) and when circumstances indicatethat the carrying value may be impaired.

Property, plant and equipment are stated atcost. Starting 1 January 2012, the Groupchanged its accounting policy for RompetrolRafinare S.A. and Rompetrol PetrochemicalsS.R.L. from the revaluation model to the costmodel. As of 31 December 2011 for RompetrolRafinare S.A. and Rompetrol Petrochemicals

Summary of Significant Accounting Policies

S.R.L. the property, plant and equipment thatwas stated at re-valued amounts, being the fairvalue less any accumulated depreciation andimpairment loss have been restated to the costmodel for comparative disclosure.

When assets are sold or retired, their cost andaccumulated depreciation are eliminated fromthe accounts and any gain or loss resulting fromtheir disposal is included in the incomestatement.

Depreciation for property, plant and equipmentexcept land and construction in progress iscomputed using the straight-line method overthe following estimated useful lives, between 3 to60 years.In 2012 the Group reassessed the useful lives forthe refinery assets held in Rompetrol Rafinare(Petromidia and Vega) and for the gas stationassets and intangible assets held by RompetrolDownstream. The new useful lives were appliedstarting January 1, 2012.

At each balance sheet date, the Group reviewsthe carrying amounts of its property, plant andequipment and intangible assets to determinewhether there is any indication that those assetshave suffered impairment. If such indicationexists, the recoverable amount of the asset isestimated in order to determine the extent of theimpairment loss (if any). Where it is not possible toestimate the recoverable amount of anindividual asset, the Group estimates therecoverable amount of the cash-generating unitto which the asset belongs.

Inventories, including work-in-process are statedat the lower of cost and net realizable value. Netrealizable value is the selling price in the ordinarycourse of business, less the costs of completion,marketing and distribution. "Cost" comprisesdirect materials and, where applicable, directlabor costs and those overheads that have been

incurred in bringing the inventories to theirpresent location and condition. The followingcost formulas were used to determine the costapplicable to different types of inventories:

• the weighted average method for purchasedcrude oil and petroleum products • the first-in-first-out (FIFO) for supplies andmaterials.

Trade receivables are recognized initially at fairvalue and subsequently measured at amortizedcost using the effective interest method, lessprovision for impairment.

Cash includes cash on hand, cash with banksand checks in course of being cashed. Cashequivalents are short-term, highly liquidinvestments that are readily convertible to knownamounts of cash within remaining three monthsor less to maturity from the date of acquisitionand that are subject to an insignificant risk ofchange in value.

Revenue is recognized to the extent that it isprobable that the economic benefits will flow tothe Group and the revenue can be reliablymeasured.

Sales of goods are recognized when delivery hastaken place and transfer of significant risks andrewards has been completed. Revenuecomprises the fair value of the sale of goods andservices, net of value-added tax and any exciseduties and other sales taxes, rebates anddiscounts.

Revenue from rendering transportation servicesand other services is recognized when servicesare rendered.

Payments to defined contribution retirementbenefit plans are charged as an expense as theyfall due. Payments made to state - managed

94

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retirement benefit schemes are dealt with asdefined contribution plans where the Group’sobligations under the scheme are equivalent tothose arising in a defined contribution retirementbenefit plan.

Income tax charge consists of current anddeferred taxes. The charge for the current tax isbased on the results for the period as adjustedfor non-deductible and non-taxable items. Thetax rates and tax laws used to compute theamount are those that are enacted orsubstantively enacted, by the reporting date, inthe countries where the Group operates andgenerates taxable income.

Deferred tax is provided using the liabilitymethod on temporary differences at thereporting date between the tax bases of assetsand liabilities and their carrying amounts forfinancial reporting purposes.

The Group determinates the classification of itsfinancial assets and liabilities at initial recognition.Financial assets are recognized andderecognized on a trade date where apurchase or sale of an investment is under acontract whose terms require delivery of theinvestment within the timeframe established bythe market concerned and are initially measuredat cost, including transaction costs.

Group’s financial assets include cash and cashequivalents, trade and other receivables,unquoted financial instruments, and derivativefinancial instruments. Financial liabilities includefinance lease obligations, interest-bearing bankloans and overdrafts and trade and otherpayables and derivative financial instruments.For each item the accounting policies onrecognition and measurement are disclosed inthis note. Management believe that theestimated fair values of these instrumentsapproximate their carrying amounts.

Financial assets within the scope of IAS 39 areclassified as financial assets at fair value throughprofit or loss, loans and receivables, held tomaturity investments, available-for-sale financialassets, or as derivatives designated as hedginginstruments in an effective hedge, asappropriate. Financial liabilities within the scopeof IAS 39 are classified as financial liabilities at fairvalue through profit and loss, loans andborrowings, or as derivatives designated ashedging instruments in an effective hedge, asappropriate.

key 2013 PPM activities:• Annual Coordination of the 5 years budget,continuing the trend of shifting the set-up fromtraditional incremental planning process towardsan activity-based one; the Internal Plan versionwas also developed with assumptions of veryambitious operating margins and sales;

• Active budget control procedure aiming tooptimize the budget execution process byensuring a proper approval flow for validatingany updates on budgeted assumptions eitherfrom timing perspective or from any newassumptions perspective.

• Optimized performance management processby two means: 1. aligning operational & financialset of KPIs with the new five year-budgetobjectives for all eligible people ; 2. implementinga quarterly routine process of KPIs achievementsrevision, to allow for corrective actions on allpotential negative gaps.

• Integrated planning model representing aGroup results planning tool being able to receiveinputs on key business drivers from all across thevalue-chain and to deliver what-if businessscenarios, Group financial results for a real-timeassessment of best economical solutions toundertake.

• Working capital management detailedreporting aiming at having a more robustperformance review package, not only limited toProfit & Loss, Capex underlined performance, butalso performance indicators of cashmanagement.

• Benchmark analysis reporting implementation,to assess TRG key performance ratios andperformance dynamics against regionalrelevant set of peers in refining & marketingoperations.

• Optimized Group Performance Monthly reviewspackage (Flash and GFO reports) on planning &budgeting execution reports by increased focuson actionable business drivers analysis to allowthe optimum data and analysis package, supportfor operational decisions; the variance analysisboth versus budget and versus previous year werecontinuously optimized, offering a detailedunderstanding of current month and year-to-dateresults evolution actions on all potential negativegaps.

Main 2014 PPM initiatives for implementationalong the year on both supply chain &controlling areas:• Business Intelligence implementation processwith the aims of offering a close to real-timedecision making tool and creating a singleGroup master operational and financialperformance database repository, to collect allrelevant business key drivers on both past andfuture period, on daily, monthly, annual, timeframes, single access point covering most ofthe quantitative side of entities & Groupmanagement teams reports.

• Group Performance Monthly reviewspackage (Flash and GFO reports) execution inalignment with the revised accountabilityperformance parameters drawn by the „Newoperational model” project.

• Rolling forecast process, a monthly rollingplanning process for the next twelve months. Itsgoal is to both create a structured routine ofworking out solutions for meeting the annualbudget targets and also improve forecastaccuracy on a larger time frame, highlyneeded in current economic crisis period.

Enhanced margins & OPEX analysis byactionable drivers (client level profitability,costs drivers), as support for any managementbusiness decisions

Planning and PerformanceManagement (PPM)

96 Raport anual 2013 • www.rompetrol.com 97Raport anual 2013 • www.rompetrol.com

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Abbreviated financial statementsDerived from the consolidated financial statements as of 31 December 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Non-current assetsIntangible assetsGoodwillProperty, plant and equipmentFinancial investmentsInvestment in associatesInterest in Joint ventureDeferred tax assetLong-term receivableTotal non-current assets

Current assetsInventories, netTrade and other receivablesDerivative Financial InstrumentsCash and cash equivalentsTotal current assets

TOTAL ASSETS

Equity and liabilities

Capital and reservesIssued capitalShare premiumAdditional paid-in capitalEffect of transfers with equity holdersRetained earningsCurrent year resultTranslation reserve

Equity attributable to equity holders of the parentNon-controlling interestTotal equity

Non-current liabilitiesLong-term borrowings from banksNet obligations under finance leaseDeferred tax liabilitiesProvisionsOther non-current liabilitiesTotal non-current liabilities

Current liabilitiesTrade and other payablesDerivative Financial InstrumentsNet obligations under finance leaseShort-term borrowings banksProvisions - current portionTotal current liabilities

Total liabilities

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

December 31,2013

73,752,77555,241,231

1,293,167,998979,738

21,450,63515,081,7101,242,8976,681,373

1,467,598,357

643,052,1911,009,666,026

-226,315,267

1,879,033,484

3,346,631,841

137,7752,631,512

2,020,199,790115,029,358(833,603,654)(78,423,460)11,352,947

1,237,324,268(288,121,988)

949,202,280

257,315,5444,863,76819,827,60487,106,6951,723,075

370,836,686

1,341,160,4871,901,1761,694,843

681,522,952313,417

2,026,592,875

2,397,429,561

3,346,631,841

December 31,2012

70,078,59255,241,231

1,290,272,204956,671

20,136,56516,677,257

-12,736,649

1,466,099,169

696,696,558962,484,4452,672,639

308,395,3721,970,249,014

3,436,348,183

122,7042,631,512

2,017,699,790115,029,358(754,616,268)(76,781,549)9,791,282

1,313,876,829(246,084,879)1,067,791,950

253,566,9055,346,52221,816,34094,341,3312,496,925

377,568,023

1,314,542,1782,468,9261,267,954

670,960,5021,748,650

1,990,988,210

2,368,556,233

3,436,348,183

CONSOLIDATED INCOME STATEMENT

RevenueCost of sales

Gross profit

Selling and distribution expensesGeneral and administrative expensesOther operating expenses, net

Operating loss

Finance costFinance incomeNet foreign exchange (losses)/gains

Share in profits of associatesShare of profit/(losses) of joint ventures

Loss before income tax

Income tax

Net loss for the year

Attributable to:Equity holders of the parentNon-controlling interests

2013

11,179,332,171(10,801,787,089)

377,545,082

(264,074,160)(134,227,529)(15,824,475)

(36,581,082)

(77,744,318)5,426,462(6,102,847)

781,603(2,288,230)

(116,508,412)

(2,727,215)

(119,235,627)

(78,423,460)(40,812,167)

2012

9,259,018,700(8,818,041,722)

440,976,978

(337,056,519)(130,564,207)(68,741,738)

(95,385,486)

(59,312,365)7,688,841(7,339,346)

898,493(3,246,714)

(156,696,577)

750,883

(155,945,694)

(76,781,550)(79,164,145)

CONSOLIDATED INCOME STATEMENT

Net loss for the year Other comprehensive income

Exchange differences on translation of foreign operations Actuarial losses related to defined benefit plan

Other comprehensive income/(loss) for the year, net of tax

Total comprehensive income/(loss) for the year, net of tax

Attributable to: Equity holders of the parent Non-controlling interests

Total comprehensive loss for the year, net of tax

2013

(119,235,627)

1,576,736(1,228,785)

347,951

(118,887,676)

(78,075,509)(40,812,167)

(118,887,676)

2012

(155,945,694)

8,378,620(1,104,354)

7,274,266

(148,671,428)

(69,507,283)(79,164,145)

(148,671,428)

The abbreviated financial information is derived from the Consolidated Financial Statements as of and for the yearended 31 December 2013 and should be read in conjunction with these audited Consolidated Financial Statements.On the full consolidated financial statements an unqualified audit opinion was issued.


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CONSOLIDATED STATEMENT OF CASH FLOW

Loss before tax

Adjustments for:Depreciation and amortizationReserves for receivables and inventories and write-offsImpairment and provisions for property plant and equipmentOther provisionsRetirement benefit charged to equityLate payment interestInterest expense, commission and bank charges and collec-tion discountsInterest expense shareholdersFinance incomeNet loss from non-current assets disposals and write-offNet result from sale of investments Unrealised losses/(gains) from derivatives on petroleum prod-uctsRealized losses/(gains) from derivatives on petroleum prod-uctsShare in profits of associatesShare in profits of joint ventureUnrealised foreign exchange (gain)/loss on monetary itemsOperating profit before working capital changes

Net working capital changes in:Receivables and prepaymentsInventoriesTrade and other payablesChange in working capital

Income tax paidCash payments for derivatives, net

Net cash provided by operating activities

Cash flows from investing activitiesPurchase of property, plant and equipmentPurchase of intangible assetsChanges in payables for capital expendituresDividends received from associated companies Proceeds from sale of property, plant and equipmentConsideration received from non - controllingConsideration paid for acquisition of non-controlling interests

Net cash used in investing activities

Cash flows from financing activitiesConsideration received from hybrid loanInterest and bank charges paidInterest and other financial incomeMovement in long term loans from banksMovement in short-term borrowings Repayments of finance leasesNet cash from financing activities

(Decrease)/Increase in cash and cash equivalents

Cash and cash equivalents at the end of the period

2013

(116,508,412)

114,238,0052,021,0773,698,276

(10,512,073)196,848

22,411,78355,332,535

-(5,426,462)(395,866)

-6,287,791

(14,366,128)(781,603)2,288,230(5,088,356)53,395,645

(43,389,712)50,560,43418,841,64926,012,371

(9,069,827)10,110,930

80,449,119

(81,268,493)(29,958,934)(14,910,220)

170,116880,744

2,010,000(3,150,000)

(126,226,787)

2,500,000(55,332,535)5,426,4623,748,6397,856,102(501,105)

(36,302,437)

(82,080,105)

308,395,372

226,315,267

2012

(156,696,577)

104,950,40162,604,587604,103

59,865,893623,575

5,503,53845,413,9638,394,864(7,688,841)(178,881)(80,357)8,949,18316,627,624(898,493)3,246,7141,045,499

152,286,795

(342,940,846)(156,104,071)269,790,711

(229,254,206)

(1,740,211)(21,180,573)

(99,888,195)

(132,678,060)(18,688,994)(38,761,105)

196,160589,139

-=

(189,342,860)

-(45,413,964)7,688,841

250,743,640188,807,323(2,897,417)

398,928,423

109,777,725

198,617,647

308,395,372C

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2,63

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949,

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966

The abbreviated financial information is derived from the Consolidated Financial Statements as of and for the yearended 31 December 2013 and should be read in conjunction with these audited Consolidated Financial Statements.On the full consolidated financial statements an unqualified audit opinion was issued.


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In 2013 The Rompetrol Group (the “Group”,“TRG”) and its subsidiaries engaged in all aspectsof the petroleum industry. Its core operations arein the downstream segment, through itscompetitive Petromidia refinery and strong retailoperations in Romania, around the Black Seaand in South of France. The Group continued topursue its strategy of developing its core refiningand distribution operations, despite a worseningeconomic environment and very low refiningmargin.

1. StrategyTo assure competitiveness of the Kazakh crudebased products in the Black Sea market, anambitious upgrade program has been executedto bring the Petromidia refinery in Romania toworld-class standards, by increasing the capacityfrom 3.8 million tons per year to 5 million tons peryear. As a result, in 2013 Petromidia reachedhighest level of refinery run rate of 12.74 k tons/day. In addition white products yield (valuableproducts) reported to total feedstock achieved in2013 highest level reached in history of 85.6%,quantity of diesel produced of 1.915 k tons and46% Diesel yield reported to total throughput,higher with 6% compared with 2012. Fromprocessing cost perspective, during 2013Petromidia refinery reached the lowest processingcost per ton of USD 26/ ton.

This upgrade makes Petromidia the largest refineryin Romania and one of the largest in the Region.The refinery is strategically located on the BlackSea shore, with easy access to several markets forwhich forecasted demand is expected to growover the next years, at the same time offeringcertain advantages in each, such as: goodcontribution margins or room for additionalmarket share growth.

The 2014-2018 strategy is a mixture of costoptimization projects for production, networkexpansion for retail; and rationalization of non-core businesses. The main objective for the

2014-2018 strategy is to expand distributionoperations in countries around the Black Sea, tobenefit from increased vertical integration withrefining operation for improved financialperformance through the followings:

• Strengthen the Retail network presencefollowing the upgrading of the PetromidiaRefinery.• Develop in the rapidly maturing Black Sea Retailmarket. The Group is planning to expand in themarkets where it is presently active (Romania,Bulgaria, Ukraine, Moldova and Georgia) and tostart-up operations in Turkey.• Initiatives to reduce cost in refining with thepurpose to improve Solomon indicators:o The material technological improvementsbrought by the Refinery Upgrade Package toincrease refinery savings by an additional USD 2million/year in net profit and USD 4 /ton savings inprocessing costs;o Further to the technological improvements,Petromidia refinery management will continue tofocus on cost competitiveness (further costreduction initiatives) and energy efficiency foroptimum refinery performance;

The management believes that thedevelopments mentioned above will result in anenhancement of the Group's ability to support itscontinuing operations.

Throughout 2013 the Group took/took to termadditional bank loans and facilities that haveprovided additional funding for investments andoperations. The Group also received confirmationof KMG Group's continuing support for the nexttwelve months should the need arise foradditional funding to what is or will be availablefrom its own operations and/or third party sources.

Based on the Group's plans for 2014 and othermatters mentioned above, it is considered thatthe preparation of the financial statements on a ongoing concern basis is appropriate.

Analysis of Financial Results

2. EnvironmentBrent was volatile in 2013. However, long termaverage was stable, average price in 2013 beingof USD 108.7 compared to USD 111.6 in 2012.Brent was lower in first months of 2013 due todepressed economic outlook and safergeopolitical situation. It went higher in the lastmonths of 2013 due to better economic outlookin US and low production of crude in Libya.

Urals differential reached the highest level inhistory +USD1.0/bbl and an average level ofUSD0.36/bbl in 2013 compared to USD 0.91/bbl in2012. Urals differential strengthened due toRussian oil flows redirected to Asia, tensions inLibya, Egypt and Iran, all with impact in heavycrude supply to Europe.

Refinery margins in Europe dropped in thesecond part of 2013 to record low levels, evenlower than 2009 having as the main features ofthe market:• Increased competition from US who benefitsfrom cheaper crude and utilities;• Increased competition from Russian refinerieswho enjoy significant fiscal benefits• Increased competition from Asian newly built

refinery extremely efficient due to latesttechnologies and size;• Refinery overcapacity, inefficient capacitiesare not closed due to political and socialreasons.

From exchange rate perspective, The RON had avery good start in 2013, slightly appreciating invalue in report with the euro, supported bypositive investors feeling (EUR/RON 4.3072reached in March). However, the month ofDecember was not favorable to the nationalcurrency, as it dropped almost 0.9% in front ofthe euro: the dissensions on the domesticpolitical scene affected the economicenvironment and sent negative signals toinvestors concerning a certain instability(EUR/RON reached 4.4847 in December).EUR/USD showed strong movement over thecourse of 2013. January and February were themonths which showed the most volatility due tothe high tensions in the Eurozone. During thistime, the EUR/USD exchange rate hit a high of1.37 and a low just below the 1.30 level. From thesecond part of the year, due to ECB decision tofurther ease the monetary policy, the EUR/USDgradually increased ending 2013 at 1.38.

2013 2012Brent Dated USD/bbl 108.7 111.6Ural Med USD/bbl 108.3 110.6Brent-Ural Differential USD/bbl 0.4 1.0Premium Unleaded 50 ppm FOB Med USD/t 822.2 844.3Diesel ULSD 50 ppm FOB Med USD/t 930.8 968.5Gasoline Platts USD/t 981.8 1,022.1RON/USD Average exchange rate 3.33 3.47RON/USD Closing exchange rate 3.26 3.36RON/EURO Average exchange rate 4.42 4.46RON/EURO Closing exchange rate 4.48 4.43USD/EURO Closing rate 1.38 1.29Inflation in Romania 1.55% 3.33%


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3. Consolidated AccountsThe consolidated accounts are fully disclosed inthe next chapter of this report and further analyzedin the following sections for each business unit(figures in USD million).

4. Operations ReviewThe consolidated accounts are fully disclosed inthe next chapter of this report and further analyzedin the following sections for each business unit(figures in USD million).

Petromidia RefineryThe Petromidia Upgrade program was finalizedat the beginning of Q3 2012, when the refiningcapacity was incremented from 3.8 million ton ofcrude oil per year to 5 million ton per year. As theresult of the Upgrade program implementationwhite products basket yields achieved during2013 was of 85.6% - highest ever reached inhistory; 46% Diesel yield reported to totalthroughput, highest ever reached in thecompany history and higher with 6% comparedto the previous year.

For the year 2013 the refining average monthlythroughput was higher by 4% compared to2012.During 2013, turnaround activity took place for 35days. Highest level of refinery run rate everreached by Petromidia refinery was of - 12.74kt/day of operation in 2013

Vega RefineryAlthough the total feedstock processed by VegaRefinery throughout 2013 was lower by 21%compared with 2012 (correlated with theoperation of Petromidia refinery and low WhiteSpirit market demand), almost the same financialresults in terms of EBITDA were obtained due to

continuous improvement of the refinery unitsoperation and due to maximization of valuableproducts: 2013 Hexane yield of 43% was thehighest achieved in refinery history.

PetrochemicalsRompetrol Petrochemicals is the solepolypropylene producer in Romania; startingwith 2010 the company was also the soleproducer of polyethylene, , constantly increasingits market share given the economiccircumstances on the market. Its dynamicdevelopment strategy has secured the companya competitive position on the domestic andregional markets - in the Balkans Region. One ofthe company advantages is determined by itsproximity to its customers, providing the productsrequired Just - In - Time, as well as offeringtechnical consulting and monitoring of theirproduction cycle.

The company recorded improved results,especially in the second and third quarter of2013, sustained mainly from the polyethylenebusiness. In 2013 Rompetrol Petrochemicalsmaintained the quality of its products, thus theweight of high quality rated polymers productsremained 98%.

In 2013, the Trading Business Unit strengthened itsrole of the supply chain optimizer within theGroup, continuing to ensure optimumfunctioning conditions for Petromidia refinery byplacing to profitable third parties the sparepetroleum products quantities obtained byPetromidia Refinery after supplying theRomanian market and the near-abroadsubsidiaries. Although volume has more thandoubled since 2010, local costs increased onlyby 20%, following significant reduction vs. 2012.In 2013, KMG Trading AG (former Vector EnergyLtd) successfully entered Asian Marketscontributing with USD 0.5 million profit.Midia Marine Terminal through the Crude OilTank Farm registered, since opening in January2009, cost reductions in relation to oil supply of

USD 6/ton, by eliminating the third partyhandling/storage/transfer costs andcommercial/technological losses. This hasresulted in OPEX saving incomes generated fromnon -group services: piloting, towing,mooring/unmooring.

In 2013 the Retail Business Unit managed toslightly increase volumes compared to 2012,reaching a total of 4.37 million tons (2012 4.03million tons) of products sold.

Rompetrol Downstream reached record sales in2013 of 1.57 million tons, 142 k tons highercompared with last year. Also, RompetrolDownstream continued the cost cutting actionsin 2013, allowing it to obtain better resultscompared with previous years.

Consequently, in 2013 the Rompetrol Group hadthe best economic results in recent years,despite the decrease in refinery margins toUSD25/Mt in 2013 compared to USD39/MT in2012. During 2013, Rompetrol Moldova opened13 New DOCO Stations and rebranded 13 otherstations. The overall volumes sold increased by70% in 2013 compared with 2012: record sales inRetail (volumes increased by 25.5 % vs. 2012)record sales in Wholesale (volumes increased by124% vs. 2012). Estimated Market Share increasedup to 20% from 13% in 2012 and registered arecord EBITDA for the last 5 years, of USD 3 million.

The good net result of Rompetrol Georgia during2013, of USD 5.6 million, was reached throughconsistent commercial and OPEX control actions.Compared to 2012, annual total sales volumeshave increased by 13 K tons. Contribution wasless by USD 5 million due to general marginsreduction on the market, after the liberalizationprocess. Despite decreased margins, EBITDA wasin line with prior year.

For Rompetrol Bulgaria main objective in 2013was improvement of the model of operation ofthe retail business. Therefore improvements weredeveloped and implemented in the dealers andfranchise models. Retail sales showed steadygrowth. EBITDA increased with USD 2.3 million in2013 vs. 2012, reaching the amount of USD 3.68million.

Dyneff France incurred positive net result (USD0.7 million) and far better than last year (USD +7.7million vs. 2012). The company increasedvolumes by 3.2% in 2013, while French marketwas slightly positive (+ 0.3%). Dyneff Market Share

increased thanks to innovative products (E85,Non-Road Diesel).

All Non- Core activities, not directly related totrading in crude and oil products, refining, andsales of oil products are grouped together in theBusiness Unit Non-Core.

Rominserv, the Group's engineering company,completed 29 projects in 2013. A contract signedin 2013 will bring significant businessdevelopment in Kazakhstan, in the refinery andpetrochemical sectors (EPC "turn-key"Modernization of Pavlodar Refinery, ProjectManagement and Technical ConsultancyServices for Kazakhstan Petrochemical IndustriesInc. and Shymkent Refinery)Rominserv Valves laifo became a new companywithin The Rompetrol Group, through the spin-offprocess from Rominserv, in November 2011. It isspecialized in the design, manufacture andtrading of a wide range of steel and ironindustrial valves. In 2013, Rompetrol Valves laifodeveloped the cooperation with severalcompanies such as GEA Germany, IBC Prague,and extended the contract with OMV Petrom,valid until 2014.

In 2013, Palplast's products became competitiveon the market in term of price. That was possibledue to reduction of energy consumption andtechnological waste during production processand due to acquisition of raw material atfavorable prices. In 2013 Palplast enriched itsclient portfolio with a number of 153 newcustomers. Volume of produced & sold pipe in2013 was of 2,203 tons, higher by 20% comparedwith 2012.Given the focus of European Union andof the Romanian Government on rehabilitationof irrigation systems from agricultural areas,Palplast paid special attention to this segmentand it represented 25% from total sales.

Rompetrol Quality Control is one of the topcompanies on the domestic market of laboratoryanalyses. In 2013 it increased the percentage ofnon-group revenues in total turnover (12.19%versus 9.32% in 2012). In March 2013, RQC tookover the petrochemicals lab from RompetrolPetrochemicals, optimizing the costs at Grouplevel and adding to its range of services newtype of analyses. Starting with September 2013,following the acquisition of specialized laboratoryequipment, RQC became able to perform theMTBE analyses necessary for the Light Naftaproduct delivered by Rompetrol Refinery Vega.

2013 2012Net revenues 11,179.33 9,259.02Gross profit 377.55 440.98Capex 1,879.03 151.37

Petromidia Refining 2013 2012Feedstock processed Kt 4,182 4,047Gasoline produced Kt 1,055 1,135Diesel & jet fuel produced Kt 2,030 1,728Motor fuels sales – domestic Kt 1,533 1,428Motor fuels sales – export Kt 1,422 1,307Export % 48% 48%Domestic % 52% 52%Gross cash refinery margin USD/bbl 5.0 4.4

Petrochemicals 2013 2012Propylene processed Kt 107 119Propylene processed Kt 55 58Sold from own production Kt 160 167Sold from trading Kt 9 11Total sold Kt 168 177Export % 59% 56%Domestic % 52% 44%


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laboratory in Bulgaria. Thus another optimizationof costs was achieved at Group level.

UpstreamRompetrol Well Services continued the upwardtrend recorded in the last four years. In 2013EBITDA increased by 20% compared with the year2012, (USD 11.3 million vs. USD 9.4 million) and NetResult increased by 45% (USD 8.8 million vs. 6.0million). Three important multiannual contractswere awarded by OMV Petrom to Well Servicesfollowing the bidding rounds for Cementing,Pumping and Acidizing services. Internationally,besides its ongoing operations in Kazakhstan andSouth-East Europe, Well Services started toprovide well services in Kurdistan region.

Drilling & Workover and Mudlogging Divisions Drilling & Workover and Mudlogging Divisionscontinued providing services in Romania andabroad. Drilling services continued to beprovided with RP11RO rig, under OMV Petromonshore drilling contract started in November2011, with a total of 6 wells drilled in 2013.Mudlogging services were provided onshore forRomanian contractors (OMV Petrom andDaflog) and for the Exploration & ProductionDivision (Feteasca KAZ1 and Lupsa SAT1 wells).Workover operations continued in Libya with thethree rigs, on a 12 hours daily program, undernormal conditions. The rigs underwentrecertification processes, according to thecontracts stipulations and international goodpractice, with successful results.

5. Financial Instruments and Risk ManagementFinancial instruments in the balance sheetinclude investments, trade receivables andother receivables, cash and cash equivalents,short-term and long-term debts, trade and otherpayables. The estimated fair values of theseinstruments approximate their carrying amounts.

The Group’s activities expose it to a variety ofrisks including the effects of: changes in theinternational quotations for crude oil andpetroleum products, foreign currency exchangerates and interest rates. The Group’s overall riskmanagement main objective is to minimize thepotential adverse effects on the financialperformance of the Group companies.

Commodity Price RiskThe Group is affected by the volatility of crudeoil, oil product and refinery margin prices. Itsoperations require ongoing purchase of crude oil

to be used in its production as well as supplies toits clients. Due to significantly increased volatilityof crude oil, the management developed ahedge policy which was presented to the Group'sBoard of Directors and was approved in its mostsignificant aspects in 2010 and with some furtheramendments in February 2011. Following thisapproval, the Group started in January 2011 tohedge commodities held by Rompetrol Rafinare.Previously, until January 2011, KMG Trading A.G.and Dyneff Group were the only two companieshaving in place commodities hedge process.

According to the hedge policy, on thecommodity side, the flat price risk for pricedinventories above a certain threshold (calledbase operating stock) is hedged using futurecontracts traded on ICE Exchange and some OTCinstruments for the basis risks. The base operatingstock is the equivalent of priced stocks that areheld at any moment in time in the Group, henceprice fluctuations will not affect the cash-flow. TheGroup started a few transactions of refinerymargin hedge during 2012 and the intention is toextend refinery margin hedge transactions in2014. In 2013 there was no refinery margin hedgedue to the lack of opportunities.

Trading activities are separated into physical(purchase from third parties other than KMG, andsales to third parties or Intercompany) and papertrades (for economic hedging purposes). Eachphysical transaction is covered through a relatedfutures position according to the exposureparameters set by management (i.e. based onphysical quantities sold or purchased). The Groupsells or buys the equivalent number of futurecontracts. This paper trade is done only to hedgethe risk of the Physical Trade and not to gain fromthe trading of these instruments. As of 2013, thenet trading position taking into consideration therealized and unrealized gains and losses onderivatives and physical trades was a net gain ofUSD 1.2 million (2012: net loss of USD 4.7 million).

Interest Rate RiskInterest rate price risk is the risk that the value of afinancial instrument will fluctuate due to changesin market interest rates relative to the interest ratethat applies to the financial instrument. Interestrate cash flow risk is the risk that the interest costwill fluctuate over time. The Group has long-termdebt and short-term debt that incur interest atfixed and variable interest rates that exposes theGroup to both fair value and cash flow risk.

Foreign Currency Risk ManagementThe Group 's functional currency is UnitedStates Dollar (“US Dollars”) and crude oilimports and a significant part of petroleumproducts are all denominated principally inUS Dollars, therefore limited foreign currencyexposure arises in this context. In additioncertain assets and liabilities are denominatedin foreign currencies, which are retranslatedat the prevailing exchange rate at eachbalance sheet date. The resulting differencesare charged or credited to the incomestatement but do not affect cash flows.Group Treasury is responsible for handling theGroup foreign currency transactions.

Capital Risk ManagementThe Group manages its capital to ensure thatentities in the Group will be able to continueas a going concern while maximizing thereturn to stakeholders through theoptimization of the debt and equity balance.The capital structure of the Group consists ofshareholders loans, bank debt, cash andcash equivalents and equity attributable toequity holders of the parent, comprisingissued capital, reserves and retainedearnings.

6. OutlookTo offset prolonged negative impact ofdepressed downstream market, Managementof the Group is committed to further reducecosts, complete modernization of thePetromidia Refinery, restructure the businessand concentrate on core business, close non-profitable businesses.

We will fund our plans through a mix of equityand debt, with a support from ourshareholders.

The average headcount across Groupentities during 2013 was 7,474 as compared to7,448 during 2012. We employ best practicesfor attracting, retaining and motivating ouremployees, who are the principal contributorsto the development of our Group. We are fullycommitted to our responsibilities for theirdevelopment and for the communities inwhich we operate.As of the date of these financial statements,all members of the TRG Board are men. Themanagement members have been electedbased on their experience and professionalexpertise, rather than their gender.

Board of DirectorsZhanat TussupbekovDaniyar BerlibayevSaduokhas MeraliyevJohan Frederik Lodewijk FroweinAzamat Zhangulov


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KMG International Annual Report 2013

Business

Transcript of KMG International Annual Report 2013