President’s Address

Dear Shareholders,

The main priority for Rosneft in 2009 was to minimize impact of the global financial crisis on Company business. We focused on optimizing costs and raising efficiency across the board. Effective planning and a flexible management system carried our business through the particularly difficult first half of 2009, and helped to achieve good operating and financial results in the full year.

The most important achievement in 2009 was undoubtedly launch of industrial production at the Vankor field, which is the largest field discovered in Russia for 25 years. We started commercial production at Vankor strictly to schedule, despite the huge scale of the project and a number of difficulties encountered during implementation. Preparation time for production at Vankor was unprecedentedly short for such a vast project, and the achievement is more remarkable in view of the complete absence of transport infrastructure and severe climate conditions in the region where the field is located. Commercial production at Vankor started in July 2009 and daily output levels exceeded 210,000 barrels per day by the end of December.

Rosneft maintained industry-beating growth of hydrocarbon reserves in 2009. The reserve replacement ratio was 163%, which is among the best indicators for peers and proves high levels of efficiency in our geological exploration work. We discovered two large fields during the reporting year with overall recoverable reserves in excess of 1.5 bln barrels. The largest of them – the Savostiyanov field – is located relatively close to the Eastern Siberia – Pacific Ocean pipeline.

Average daily production in 2009 increased by 2.9% compared with 2008, and total output was 796 mln barrels. The Company remained the standard-bearer of the Russian oil industry, achieving strong production growth despite the difficult environment, thanks to a high-quality resource base and use of the latest technologies in field development. Rosneft has also been able to keep unit production costs at a much lower level than competitors thanks to ongoing cost optimization. We further extended our lead by this indicator in 2009.

Our refineries processed nearly 365 mln barrels of oil in 2009. We kept growth of refining expenses in check thanks to reduction of irretrievable process losses and of fuel use for technical and power generating needs. Work began on the ground as part of Rosneft’s program for refinery modernization to meet Russian government requirements: the first new units for production of engine fuels to European standards were installed at three refineries. Design and preparation for installation of other units was continued.

Despite the emphasis on cost saving, we decided not to abandon realization of strategic projects, such as expansion of capacities at the Tuapse Refinery. Work began at the Refinery on construction of a new crude distillation unit with 88 mln barrels annual capacity.

We exported 412 mln barrels of oil in 2009, which is 4.0% more than in 2008. Dispatch of the first tanker from the Kozmino terminal at the end-point of the Eastern Siberia – Pacific Ocean pipeline was a particularly important event. The tanker carried oil from the Vankor field.

We were the first Russian oil company to begin sales of petroleum products on the St. Petersburg International Commodity Exchange in 2009, using this new outlet to increase volume of petroleum product sales and to raise the efficiency of our large wholesale operations. Rosneft is prioritizing development of exchange trading in Russia as an instrument to improve efficiency and transparency of its marketing business.

We redirected more petroleum products to export in 2009 in response to decline in demand for some products on the domestic market. Product exports grew by 6% to 28 mln tonnes. Ongoing optimization of the Company’s retail chain enabled us to maintain average sales per filling station almost unchanged from 2008.

Reflecting our status as General Partner of the 2014 Olympic Games in Sochi, we began a program for development of a chain of filling stations in Olympic format, incorporating the insignia of the Games. The new stations will be built along main roads to Sochi.

Rosneft showed outstanding financial results for the year, continuing to generate free cash flow and reduce net debt, despite the crisis. We were helped by stabilization of world prices for oil at an acceptable level, by the gradual recovery of demand on the domestic market, and by our own cost optimization decisions. However, strengthening of the rouble put pressure on our financial results, as did growth of natural monopoly tariffs and increase of taxes.

I view growth of the Rosneft share price by almost 130% as the best endorsement of management decisions and Company strategy in 2009. Company shares grew faster in 2009 than shares of main competitors.

In the reporting year our Ñompany confirmed its status as an efficient business structure, capable of withstanding the acute stage of the world financial crisis. We look to the future with confidence. and with the firm intention of bringing our projects and plans to fruition. Increase of shareholder value will remain our number-one priority.

Sergey Bogdanchikov President of Rosneft