Avtodor and Gazprom Neft sign cooperation agreement on use of advanced bituminous materials

9 April 2014, press release

The State Company Russian Highways (Avtodor) and Gazprom Neft have signed anagreement towork together inthe fields ofroad construction and the production and application ofadvanced bituminous materials.

The agreement provides for the development and production ofbitumen and polymer-modified bitumen binders which meet Avtodor’s requirements and standards, and for their use inthe construction and repair ofroads managed bythe state-owned company.

Gazprom Neft and Avtodor will continue tocooperate toimprove the quality ofbituminous materials, and toincrease the efficiency ofthe technical processes involved inthe production, delivery, and application ofbitumen. The companies will also carry out research and development work toupgrade existing industry standards.

“The signing ofthis agreement isalandmark moment for Avtodor, which isnot simply amajor consumer ofbitumen, but isalso working actively onthe standardization ofmaterials used inroad construction. This process was initiated with the development ofthe AVTODOR 2.1-2011 Standard for improved road bitumen. These new standards are the result ofour joint efforts, thanks towhich special-purpose conditioned bitumen that complies with the stringent demands ofthe road sector will beproduced inRussia. The key challenge facing Avtodor istocreate acomprehensive high-speed road network inRussia. Itisencouraging that weare now able toprovide high quality road surfacing without turning toforeign partners”, said Avtodor Chairman ofthe Board Sergei Kelbakh atthe signing ceremony.

“Gazprom Neft’s bitumen business israpidly developing”, remarked Alexander Dyukov, Chairman ofthe Management Board ofGazprom Neft. “Last year alone, the company increased its share ofthe Russian market to30%. Gazprom Neft isalso the largest Russian supplier ofpolymer-modified bitumen binders, which inmany respects are animprovement onconventional bitumens. Inthe long term, weexpect tobecome adomestic market leader interms ofproduction technology, adhering tothe best Russian and international practices. This year, together with the French company Total, weare launching innovative products for road construction, which have noanalogues inthe Russian market atthe moment.”

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Avtodor was founded in2009. The company aims todevelop anetwork ofhigh-speed toll roads, toattract privateinvestment, and todevelop roadside service infrastructure.

Among the assets managed byAvtodor are the M1 ’Belarus’ (450km), the M4 ’Don’ (1,716km), and the M3 ’Ukraine’ (432km) highways. The company iscarrying out acomprehensive reconstruction ofthese roads.

Bythe end of2013, the total length ofroads under the management ofAvtodor had reached 2,733.6km. Ofthis, 1,705.5km isclassified inthe top category ofroads, 24% more than atthe end of2010 (1,372km).

Avtodor isthe contractor responsible for the construction ofthe high-speed motorway between Moscow and St. Petersburg and the Central Ring Road (TsKAD) inMoscow Region.

Avtodor uses apublic—private partnership (PPP) mechanism for all major projects.

In2013, an18km stretch ofhighway was commissioned for the M1 ’Belarus’ road, bypassing Odintsovo (Moscow Region). This isthe first road project inRussia tobeimplemented inthe form ofaconcession agreement, inwhich the state company acts asthe concession granter.

Construction projects for two sections ofthe new M11 Moscow—St. Petersburg highway— kilometres 15–58 and kilometres 543–684 — are already being implemented under concession agreements. Arange ofprojects are being implemented using other PPP mechanisms.

Gazprom Neft iscurrently the leading seller ofbitumen products inRussia, with a30% share ofthe domestic market. In2013, sales increased by20% compared with 2012, reaching 1.8 million tonnes.

The company’s main bitumen production facilities are located inMoscow; Omsk, Yaroslavl, and Ryazan regions; and inSerbia and Kazakhstan. Road, construction, and roof bitumens, aswell aspolymer-modified bitumen binders and bitumen emulsions, are produced atGazprom Neft’s oil refineries.

In2014, together with the French company Total S.A. —one ofthe world’s leading manufacturers ofinnovative bitumen products— the company plans tostart production ofpremium class polymer-modified bitumen binders inMoscow under the brand name G-Way Styrelf.