Supply chain

Each year LUKOIL purchases a large volume of goods, work and services, and does business with a large number of companies. The Company’s procurements help maintain and increase the number of jobs in various economic sectors, and ensure the mobility of financial capital, thus stimulating economic activity.

As a rule, goods, work and services are purchased through open tenders, with mandatory competitive public bidding for the subject of the tender. Suppliers of goods, work, and services are chosen in accordance with the Regulations on Holding Tenders to Select Suppliers and Contractors of LUKOIL Group Subsidiaries (“Regulations”). A contract is concluded with the organization that wins the tender, which together with applicable legislation serves as the basis for the further regulation of relations between both parties.

If the subject of the tender stipulates the need to review the health, safety, and environment management system of applicants, the experts of PJSC LUKOIL and its subsidiaries perform a comprehensive assessment, on the basis of the corporate document “Procedure for Assessing the Health, Safety, and Environment Management of Entities Wishing to Participate in a Tender”. This procedure reviews the availability of required licenses, employees with the necessary qualifications, and the technical capabilities and technologies of potential contractors. For certain types of purchasing, applicants undergo technical audits.

As part of tender procedures, applicants also provide information of a social nature, specifically on compliance with the working time standards of their employees, and on provision of housing and social services to employees.

If a comprehensive assessment determines any non-compliance with corporate requirements, suppliers are not admitted to the tender.

In 2017, reviews of the conditions of the health, safety, and environment system were performed on 2,227 tender participants (38% of the total number).

Under the terms of signed contracts, all suppliers and contractors accept an obligation to comply with the Regulations, confirming their consent with a signature, and also to abide by the legislative and corporate standards set forth in the HSE policy of PJSC LUKOIL in the 21st Century and other corporate standards.

The Company continuously monitors the activity of contracting organizations for compliance with these requirements.