President’s Address

Dear Shareholders,

Rosneft’s operating and financial results in 2008 were excellent once again. Concerted and productive work by all our divisions helped us to overcome the extremely difficult fourth quarter and pursue implementation of our growth strategy, with special attention to further increasing flexibility and general business efficiency.

Extension of hydrocarbon reserves was among the Company’s main achievements in 2008. Despite the relatively low oil price at the end of the year, our hydrocarbon replacement ratio by international standards exceeded 170%, which is one of the best in the industry. We also confirmed our leadership among public oil companies by volume of proved reserves of liquid hydrocarbons, partly through large-scale and highly efficient geological exploration work. Focusing on sustainable growth of the resource base, we continued to implement strategically important exploration projects in Eastern Siberia, on the sea shelf in the Russian Far East and in Russia’s southern seas.

Growth of oil production by an impressive 5% was an equally important Company achievement in 2008. We produced 776 million barrels of oil, further reinforcing our leading positions in the Russian oil industry and approaching the level of the world’s leading oil companies. Key factors were Rosneft’s high-quality reserve base and use of the latest field development technologies, thanks to which the Company achieves the highest flow rates per well in Russia. This, together with tight cost control, has enabled the Company to keep its unit production costs at the lowest level in the industry, and to obtain maximum return on investments.

We continued work in 2008 to further increase Rosneft’s production. Development of the oil & gas riches of Eastern Siberia stands out among our priority tasks. Last year saw the start of commercial production at the huge Verkhnechonskoye field, and the first oil from the field was fed into the Eastern Siberia – Pacific Ocean pipeline system in October. We nearly completed preparatory work for the launch of the enormous Vankor field in Krasnoyarsk region, which has strategic importance for Rosneft.

We continued to develop our Refining & Marketing segment in 2008. Rosneft refineries processed 360 million barrels of oil, representing 46% of total crude production by the Company and exceeding the 2007 figure by 23%. The structure of refinery products was improved, most notably by the increase of light-product yield to nearly 58%. Main efforts in modernization of refining capacities were focused on the launch of production of engine fuels that meet European standards. Much progress was made in 2008 and several Company refineries began production of fuels to Euro-3 and Euro-4 standards.

Work also continued in 2008 on implementation of strategic projects, such as capacity expansion at the Tuapse refinery and engineering of a completely new refinery in the Far East. We have decided not to abandon these projects, and will pursue them in 2009 despite the unfavorable macroeconomic conditions.

Rosneft worked hard to develop a promising bunkering business in 2008 as part of its efforts to maximize sales volumes to the end-user. We have already taken a large share of the Russian bunkering market even though we only entered this market at the end of 2007. We also continued to optimize and expand our network of service stations and tank farms. The retail network was extended to cover 38 Russian regions, and retail sales of petroleum products rose by 1.8 times compared with the previous year. The start of sales of the Company’s branded lubricants through its service station network represented an important breakthrough in the retail sector.

Record operating results helped to ensure excellent financial indicators. Other important factors were the favorable price environment in the first half of 2008 and Company efforts toward cost control and business optimization. Main negative factors in 2008 were the real strengthening of the rouble in the first half of the year, followed by the dramatic decline in oil prices and increase in tax burden in the second half of the year. Swift activation of an anti-crisis program in the fourth quarter minimized the negative effects of instability in the international financial system.

Rosneft generated record EBITDA of USD 17.1 billion in 2008, which is 18% higher compared with the previous year. Net income amounted to USD 11.1 billion, and return on average equity was 30.6%. A key financial achievement was the significant reduction of net debt and lowering of the gearing ratio. We successfully repaid and refinanced debts of more than USD 16 billion, including settlement of the last tranche of a bridge loan worth USD 22 billion.

Rosneft’s results show that the Company has been transformed in recent years into a strong and well-balanced business structure, with systematic improvements to its efficiency. I think that this last factor will be decisive in ensuring Rosneft’s stability through the world financial crisis. We will maintain this course and pursue it resolutely in order to attain all of our long-term plans and increase shareholder value.

Sergey Bogdanchikov President of Rosneft