Uniform Procurement Rules

In 2015, the Company enacted a uniform PJSC TATNEFT’s Goods Procurement Standard, which replaced the regulatory framework for procurement consisting of 18 Standards, Regulations and Procedures. The Goods Procurement Standard of PJSC TATNEFT is designed to eliminate regular failures, contributing to transparency and clear definition of responsibility areas in the procurement system.

New mechanisms and terms were introduced in the procurement activities:

  1. ABC-categorization of purchases by groups of goods.
  2. Tender boards’ verticals of the Ist and the IInd levels.
  3. Market research.
  4. Working Groups. Procurement procedure as a process.
  5. Procurement program. Accreditation does not limit participants any more.
  6. Refusal to apply traditional marketing assessment of the Contractor’s materials. Price limit book.
  7. Reporting. Procurement information support. New role of the trade and procurement platform.

Logistics Support of Structural Divisions, Subsidiaries and Service Companies

In 2015, the structural divisions of PJSC TATNEFT purchased equipment and materials in the amount of RUB 7,760 million, in 2014 – RUB 6,458 million.

Sales to the subsidiaries and service companies to carry out the orders of PJSC TATNEFT amounted to RUB 20,500 million RUB (RUB 21,804 mln. in 2014).

Equipment and materials delivered under the contracts concluded with independent oil companies amounted in terms of money to RUB 290 million (RUB 86 mln. in 2014).

Consignment Procurement

Supplies under the consignment terms are provided through 63 consignment warehouses. The materials sales volume amounted to RUB 2,420 million in 2015 (RUB 2,658 mln. in 2014).

The volume of goods and materials stored at UTNS remaining the property of the consignee until the goods sale to a structural unit amounted to RUB 216 mln. (RUB 227 million in 2014), which prevented diversion of the working capital for creation and storage of the Company’s own reserves for this amount.

Long-Term Framework Goods Supply Contracts

In the previous years, there were purchases under one-time contracts dominating in the structure of materials and equipment purchases, and only a minor proportion of purchases was made under consignment schemes and long-term contracts.

Starting 2014, UMTO (Logistics Department) expanded the practice of long-term supply contracts for key items of materials and resources, which allowed accelerating goods’ design and delivery stages with facilitation of forecasting the future cost of the facilities under construction and planning of the expense budget.

Along with the typical long-term contracts there are framework agreements concluded using formula based pricing. This allows avoiding overpayment for the goods purchased in the event of price reduction and at the same time in case of the steel value growth in the market to avoid becoming an unprofitable client for suppliers, whose requests will be satisfied on the leftover basis.

In total there were 267 long-term and 168 framework agreements signed, which cover about 80 thousand commodity items. The volume of orders in 2015 amounted to RUB 18 billion (RUB 8 billion in 2014).

Electronic Trading Platform

An important place in the procurement organization belongs to the Electronic Trading Platform of our Company considered not only as a procurement mechanism, but also as a way of working with suppliers. There is suppliers’ accreditation organized and the suppliers’ information data base is maintained. Documents from the participants of the tender procedures are collected in the electronic form, using the Internet resources.

There are 15.4 thousand supplier companies (11.5 thousand companies as of December 2014) registered at the ETP as part of building the electronic trading system of material and technical resources procurement for the entities of the TATNEFT Group of Companies.

All in all UMTO (Logistics Department) conducted 1,438 two-stage procurement procedures totaling RUB 23,417 million without VAT during 2015 (RUB 15,400 mln in 2014). The first stage was the invitation to tender with the request for quotation, while the second stage was a reversed auction among the participants, who had priced the whole lot. 940 reversed auctions for the amount of RUB 6,626 million were held successfully (985 reversed auctions for the amount of RUB 5.57 billion in 2014) with the additional savings from the price determined in the first stage amounting to RUB 485 million (RUB 524 million in 2014).

Structural divisions independently conducted 1,599 procedures for the amount of RUB 3,943 mln. (RUB 1,036 million in 2014). There were 1,041 reversed auctions successfully held for the amount of RUB 2,115 million (334 reversed auctions in 2014 for the amount of RUB 840.8 million) with the additional savings over the price determined in the first stage amounting to RUB 180.4 million rubles (RUB 53 million in 2014).

For the purpose of developing the electronic trading platform they attract subsidiaries, third-party companies and independent oil companies, which held 3,562 purchasing procedures in the amount of RUB 11,433 million (RUB 6,037 million in 2014).

Centralized Shipment

The inventory worth RUB 22.5 billion (RUB 19.4 billion in 2014) was shipped from the bases of "Tatneftesnab" Administration under the centralized delivery scheme in 2015, which demonstrated the growth of 16 %.

The share of the transportation costs for centralized delivery in the total cost of the goods decreased and amounted to 0.99% (1.01% in 2014).