НАК „НАФТОГАЗ УКРАЇНИ“. Річний звіт англійською (2018 рік) - 7

105

104

2018

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

Аndriy Kobolyev 

Chief executive officer 

Sergiy Pereloma 

First deputy chief executive officer 

Sergiy Konovets

Deputy chief executive officer  

(chief financial officer) 

Yuriy Kolbushkin 

Executive board member

Oleg Prokhorenko

Executive board member 

(Ukrgasvydobuvannya CEO until  

15 March 2019) 

Mykola Havrylenko  

Executive board member 

Head of the Oil Unit

Other top executives

Naftogaz executive board members

Andriy Kobolyev 

286,5

Sergiy Pereloma 

27,5

Sergiy Konovets 

22,7

Yuriy Kolbushkin 

17,3

Oleg Prokhorenko** 

20,6

Mykola Havrylenko** 

14,7

Total 

389,3

Rremuneration of the management team in 2018* 

In 2018 and 2017, the management team included six executive board members 

and nine directors. The compensation for the management team, which is part of 

other operating costs, included salaries and additional current bonuses, making up  

UAH 717 mn (UAH 214 mn in 2017).

Remuneration of executive board members (including unified social tax), UAH mn.
* Including the bonus for winning the Stockholm arbitration. For more detail see pages 106-107.
** Oleg Prokhorenko and Mykola Havrylenko are not rewarded as executive board members.

Yuriy Vitrenko 

Naftogaz group executive officer

Chairman of Ukrnafta supervisory 

board since 11 April 2019 

Andrew Favorov

Head of the Integrated  

Gas Business Unit

Paweł Stańczak

Ukrtransgaz vice-president

Orest Logunov

Naftogaz group chief  

procurement officer

Andriy Khomenko 

Head of the Technical  

Business Enabling Unit

Margarita Korotkova

Naftogaz group personnel management  

and social policy director

Maryna Kvashnina

IT director

Yaroslav Teklyuk 

Director for legal affairs 

Vitaliy Shcherbenko 

Director for administrative  

activity and energy efficiency

Aliona Osmolovska 

Corporate communications director

Oleg Didenko

Naftogaz group director for corporate 

debt workout, gas distribution systems 

and retail gas supply

KEY MANAGERS AND THEIR 

REMUNERATION

107

106

2018

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

USD 

20.7

 mn

Winning the biggest ever commercial arbitration: achievements and remuneration

bonus actually paid to 41 team-members*

USD 130.8

 bn

Ukraine’s GDP in 2018

Instead won  

USD 

4.6

 

bn

THE STOCK

HOLM

ARB

IT

RA

TION

   2014-2018

could have been

lost if we had failed**

USD 

81.4 

bn

The supervisory board decided to remunerate 41 team-members with a bonus equal to 1% of the recovered amount. 
USD 2.1 billion has been recovered so far, which enabled Naftogaz to pay UAH 56 billion in taxes and dividends 
to the state budget. USD 20.7 million was paid as of the date of the report.

* 

The amount includes all actual pecuniary claims by Gazprom under the take-or-pay clause in 2012-2016; the effect of applying the take-or-pay clause in 
2017-2019; the effect of applying the initial contract gas price in April 2017-2019 instead of the price revised by the tribunal; and the payment for volumes 
delivered in the first half of 2014 but not paid upon the offtake, according to the evaluation as of the date of the final award in the transit case rendered 
on 28 February 2018. 

** 

109

108

RISK MANAGEMENT

ANNUAL REPORT 2018

2018

Naftogaz group risk structure and their assessment

20

25

15

10

RISK ASSESSMENT

FOR THE GROUP:

 

 LOW

 MEDIUM

 HIGH

16

ENVIRONMENTAL,

HEALTH

AND SAFETY

 
 

123

OPERATIONAL

24

REGULATORY

25

 

LEGAL

51

STRATEGIC

24

FINANCIAL

2

 

COMPLIANCE

RISK MANAGEMENT
AT NAFTOGAZ GROUP

During 2018, the group continued 

developing an efficient, comprehensive 

risk management system and the 

coordination of risk management 

processes at Naftogaz group. In July 

2018, the supervisory board approved 

the Risk Appetite Statement of Naftogaz 

Group.

 

This document involves the world`s best 

practices and outlines the company`s 

risk appetite, i.e. level and extent of risk 

that Naftogaz is ready to be exposed 

to, given its financial and operational 

potential, and still be able to achieve its 

strategic and operational goals. The Risk 

Appetite Statement provides restrictions 

not only for the existing risks identified in 

particular during annual risk assessment, 

but also potentially for areas that have 

significant influence on achieving the 

Corporate Strategy of Naftogaz.

Naftogaz has become the first state 

company of Ukraine to have developed 

and approved the Risk Appetite 

Statement. 

During 2018, the group was extensively 

developing a functional vertically 

integrated risk management system 

at Naftogaz group. While introducing 

risk management practice into the 

group’s business culture, internal 

risk management documents have 

been approved at all Naftogaz group 

companies. 

Also in 2018, the group developed a 

number of internal documents that 

outline the management procedure 

for specific risks, in particular: Financial 

Risk Management Methodology and 

Rules, Tax Risk Management Rules, 

Information Security Risk Management 

Policy. Among other things, to manage 

a target approach to the company`s 

natural gas procurements with strong 

involvement of the risk management 

office, a gas balance optimization model 

was developed. This model aims to 

bring the company to a new level of gas 

procurement planning and  

balancing.

During 2018, not only the company`s 

risks were subject to annual assessment, 

but also those of Naftogaz group 

companies.  Following assessment, 

consolidated risks register for Naftogaz 

group was created. It includes 265 risks. 

Among the key risks identified during 

2018 at Naftogaz group, the following 

should be emphasized:

Strategic

Decreased/ceased transit through 

Ukraine due to the launch of Turkish 

Stream and Nord Stream 2

The construction of the new bypass 

gas pipelines (Turkish Stream and Nord 

Stream 2) is still one of the key strategic 

risks facing Naftogaz group, since it will 

result in a significantly decreased/ceased 

transit through Ukraine and the loss of a 

significant portion of income of Naftogaz 

group. 

During 2018, Gazprom obtained from 

the Turkish government all the required 

permits and completed the construction 

of the offshore section of the Turkish 

Stream gas pipeline. As of the date 

of report preparation, the situation is 

still unclear with regards to the legal 

framework of the Nord Stream 2 project, 

in particular with the application of the 

Third Energy Package requirements. 

Additional information on the company`s 

actions regarding this risk is provided in 

the report section "The European Natural 

Gas Market".

Extension of validity of provisions 

on imposing special obligations 

(PSO) on unfavorable terms for 

the company, and continued gas 

sales through regional suppliers 

(“oblgazzbut”) and municipal heat 

generating entities (MHE)

On 19 October 2018, the Ukrainian 

government approved new provisions 

imposing PSO regulations on the 

company until May 2020. According to 

these provisions, minimal settlements of 

municipal heat generating entities (MHE) 

with the company decreased from 90% 

to 78%, which results in the accumulation 

of bad debts for supplied natural gas. 

As of 31 December 2018, MHE`s  

debt to Naftogaz was about  

UAH 30 billion, the debt of regional  

gas supply companies (RSC) was about 

UAH 19 billion. This level of debt 

significantly affects the company`s 

liquidity, as described below.

Additional information on the PSO impact 

on the group`s operations is provided in 

the report section “Important Regulatory 

Changes in 2018-2019”.

Strategic

•  Natural gas transmission unbundling  

and implementation of optimal  
UGS use model

•  Corporate governance reform

•  Ensuring the company’s control over  

the Naftogaz group companies

•  Ensuring the uninterrupted  

transit of natural gas

•  Ensuring the required natural  

gas production in 2018

•  Ensuring the required sufficient level of natural gas  

reserves for the implementation of PSO Regulations

Compliance

•  Compliance with the Code of Corporate Ethics,  

prevention of conflict of interest, manifestations  
of corruption, application of sanctions

Financial

•  Ensuring performance of obligations  

under loan agreements  
with financial institutions

•  Ensuring sufficient level of liquidity  

to finance key expenditure items

•  Adherence of target exposure  

to currency risk

Operational

• Volumes of natural gas sold by the  
company to industrial consumers in 2018

•  Ensuring reliable IT infrastructure  

within Naftogaz group

•  Recruiting and retaining  

of skilled employees

•  Creation of succession pool for key positions within  

the company and Naftogaz group companies

•  Establishment of generic policy  

and HR management principles  
within Naftogaz group

•  Ensuring the required  

success rate of new  
UGV wells

• Production and exploration works

•  Ensuring of the requirements  

of existing and new licenses  
for extraction and trade of natural gas

Regulatory

•  Prevention of any discrimination in labor rights

•  Prevention of use of child labor

•  Providing/disclosing information  

about the company, including  
providing personal data of its employees

•  Compliance with requirements of state  

authorities and local self-government bodies

Reputational

• Responses to threats of reputation deterioration

Safety, health and environmental

•  Provision of occupational health and safety,  

environmental safety

Risk Appetite

Zero 

Low Moderate High

Risk Appetite Statement of Naftogaz group

111

110

RISK MANAGEMENT

ANNUAL REPORT 2018

2018

Financial

Liquidity risk

Liquidity risk exposure is predetermined 

by a number of interrelated factors, 

including:

•  seasonal nature of income and 

expenses: revenues from natural gas 

sale and transmission are generated 

during the heating season. Over the 

summer period, sales volumes are 

significantly less and the group incurs 

significant expenses related to the 

financing of natural gas injection into 

underground storage facilities for the 

next heating season;

•  payment of dividends as scheduled 

by the resolutions of the Cabinet 

of Ministers of Ukraine, with no 

consideration of whether the group has 

funds available;

•  fixed due dates of loans in national and 

foreign banks attracted to buy natural 

gas in preparation for the heating 

season;

•  accumulation of bad debts by MHEs 

and RSCs for natural gas supplied.

To minimize this risk, Naftogaz takes 

all the required measures to extend 

deadlines for loan liabilities to national 

and foreign banks, obtain a shareholder`s 

permit to pay dividends in parts and one 

from the National Bank of Ukraine to sell 

transit revenues for these purposes. 

Regulatory

Failure to obtain  

new licenses

1

 

As part of implementation of the 

Strategy 20/20 by Ukrgasvydobuvannya 

regarding maintaining and further 

increasing Ukrainian gas production, 

the entity takes certain efforts to obtain 

new licenses. However, since 2016, 

Ukrgasvydobuvannya has been denied in 

over 105 applications for licenses for new 

fields and extensions of existing licenses, 

as well as for the Black Sea and Azov Sea 

offshore gas developments. 

This situation changed for the better in 

4Q 2018, after the Cabinet of Ministers 

approved the Resolution “On the 

Implementation of a Pilot Project on the 

Launch of Auctions for the Sale of Special 

Permits for the Use of Subsoil Through 

Electronic Auctions”. The introduction of 

a system of online auctions for license 

sales through electronic auctions will 

ensure transparency of administrative 

services to entities.

Expropriation (loss)  

of licenses for gas extraction

The license-bearing fields of Naftogaz 

and Ukrgasvydobuvannya where gas 

exploration and extraction can take place 

are partially located within or close to 

the temporarily occupied territories in 

eastern Ukraine. As such, their wells are 

not being operated. This may result in 

deviation from the approved Extraction 

Program at the existing wells or violation 

of specific environmental, health and 

safety requirements.

Environmental, health 

and safety 

Within its operational activities, Naftogaz 

group companies face the risk of serious 

accidents that may result in harm to 

people`s health and the environment, 

loss of production facilities, and 

suspension of operating activities. The 

situation is complicated by the presence 

of outdated production equipment in the 

group`s drilling fleet and a high level of 

human factor impact.

To mitigate this risk, Naftogaz group 

companies provide for personnel 

training on a regular basis to adhere 

to the requirements of national and 

international standards and labor safety 

practices. In addition to the above, 

Naftogaz group invests extensively in 

modernization of the existing production 

facilities and introduction of the world`s 

best practices for exploitation and 

diagnostics in this area.

Operational

Risk of lost access to buffer  

gas in underground gas  

storage facilities resulting  

from their inappropriate  

unbundling from Naftogaz  

of Ukraine

In order to achieve natural gas market 

liberalization according to the EU Third 

Energy Package, Ukraine has undertaken 

to provide unbundling – to separate the 

gas transmission system from Naftogaz 

as a standalone company. To begin 

this process, Resolution #801 of the 

Cabinet of Ministers dd. 9 November 

2016 established the company “Main 

Gas Pipelines of Ukraine”, and later, by 

shareholder`s decision #218 dated 1 

November 2018, a separate branch was 

established within the GTS operator, 

Ukrtransgaz, to be in charge of gas 

transmission. As part of implementing 

the next stage of the Roadmap for GTS 

operator separation, on 29 January 

2019, a new company was established: 

“Gas Transmission System Operator of 

Ukraine”, 100% owned by Ukrtransgaz.

According to the Naftogaz of Ukraine 

restructuring plan approved by the 

Ukrainian government, functions 

relating to natural gas storage (injection, 

withdrawal) should also be separated. 

Inappropriate unbundling of the 

underground gas storage facilities from 

Naftogaz group creates a high risk of 

losing access to the buffer gas in those 

underground gas storage facilities, which 

will bring considerable financial losses to 

Naftogaz group.

The company, with the involvement of 

international experts, is now developing 

and approving a new restructuring plan, 

which would ensure that the natural gas 

storage activities are not unbundled from 

Naftogaz group.

Legal

Risk of unclear legal framework  

for natural gas procurements 

without tenders after transition  

to daily-basis balancing

Starting 1 March 2019, one of the key 

energy sector reforms – gas market 

transition from monthly- to daily-basis 

balancing – has become effective. 

Meanwhile, natural gas procurements 

are still subject to the Law of Ukraine 

“On Public Procurement”, which means 

natural gas should be procured by 

tender. To avoid this risk, the appropriate 

amendments should be introduced to the 

Law of Ukraine “On Public Procurement”.

1

 Until 2018, this risk fell within Operational risks. In 2018, as 

part of the company`s annual risk assessment, the category 

of this risk was updated.

113

112

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

2018

HUMAN RESOURCES MANAGEMENT

HR management priority areas in 2018:

  support for group transformation project;
  reforming the remuneration scheme existing at group enterprises, unification of approaches to forming incentive plans 

for group personnel, gradual introduction of remuneration system based on goal-oriented performance appraisal;

  implementation of training projects in order to provide skilled personnel to group companies; 
  implementation of social policy at group enterprises aimed at maintaining and increasing personnel involvement, 

creating work-life balance, protecting investments in human capital;

  continuation of forming a group managerial personnel reserve within the MBA program, provision of the first online 

programs for employee training;

  improvement of HR processes in group companies, implementation of pilot projects for personnel evaluation;  
  digitalization of HR functions.

The personnel of Naftogaz group - quantitative and qualitative profile

Employee remuneration

Naftogaz group personnel structure, 2018

21.6

 

% — women

 

68 386 

Employees total

47 056

Qualified and other workers

78.4

 

% — men

 

284

Technical staff

7 990 

Managers

13 056

 Professionals and specialists

As of 31 December 2018, the number of 

full-time employees at Naftogaz group 

enterprises was 68,386 employees.

In 2018, the total number of full-time 

employees included 7,990 managers of 

all levels (11.7%), 13,056 professionals 

and specialists (19.1%), 284 technical 

staff (0.4%), 47,056 qualified and other 

workers (68.8%). 

The gender structure of group 

enterprises is dominated by men, which 

is related to the specifics of operations: 

55,939 men (78%) and 15,942 women 

(22%).

Most Naftogaz group personnel or 40 694 

persons (59.5%) are from 30 to 50 years 

old. The share of employees under the 

age of 30 is 6 809 persons (10%); 18 750 

persons (27.4%) are more than 50 years 

old; 2 133 persons (3.1%) are old age 

pensioners.

93.5% of staff work in key enterpris-

es of Naftogaz Group: JSC Ukrnafta 

(22 050 persons); JSC Ukrgasvydobuvan-

nya (19 459 persons); JSC Ukrtransgaz 

(18 674 persons) and JSC Ukrtransnafta 

(3 742 persons). 21.5% of employees are 

employed directly in gas and oil production, 

while 35.5% in gas and oil transportation.

The personnel turnover rate at Naftogaz 

group was 3.9% in 2018 (with an average 

of 19% across Ukraine according to 

sector-wide surveys by EY).

To create a transparent remuneration 

system, the enterprises of Naftogaz 

group continued introducing a grade 

remuneration scheme (covering 95% of 

Group employees) in 2018. 

Important steps have been taken 

to unify the approaches to forming 

systems of material incentives for group 

employees. The introduction of a variable 

remuneration system continued, which 

links the results of enterprises with the 

performance of specific employees.

According to the results of 2018, the 

average employee wages across Naftogaz 

group increased by 20% compared to 

2017 and amounted to UAH 16 042 

(according to Ernst & Young review, 

this indicator for Ukraine as a whole 

was 16%). Wage growth is one of the 

measures taken by the company in 

response to a shortage of labor force, 

labor migration of skilled production 

personnel abroad, inflation, rising cost of 

living, etc. 

In order to attract, retain and motivate 

managers possessing the necessary 

skills, knowledge and competencies, 

to achieve the objectives defined 

by the group’s Corporate Strategy, 

and to establish common principles 

determining manager remuneration, a 

remuneration policy was devised and 

implemented in 2018 (including the 

size of base remuneration) for company 

board members and managers of the 

joint stock companies of Naftogaz 

group (collectively, the “managers”). 

Additionally, a management system for 

variable remuneration of managers, 

including bonuses for achieving goals 

and key results, was implemented. Goals 

were set for executives in 2018 and 2019. 

This goal-setting system has been fully 

implemented and operated for 2 years in 

Ukrgasvydobuvannya and Ukrtransnafta.

Personnel breakdown by Naftogaz group enterprises in 2018

22 050

19 459

18 674

3 742

3.9 % 

2 719

19.0 %

Personnel turnover at Naftogaz group in 2018  

at Naftogaz group

in Ukraine

PERSONNEL TURNOVER

115

114

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

2018

The average monthly wage at Naftogaz group companies, UAH

13 374

2017

2018

16 042

Social security

Staff evaluation

Personnel training and development

Naftogaz group social policy is an im-

portant tool for attracting, retaining, and 

socially protecting skilled workers whose 

professional skills are currently unique and 

critical. To a large extend, it affects the 

creation of a positive motivation climate 

and is a real competitive advantage for the 

enterprise in the modern labor market. 

Social development and the social activi-

ties of Naftogaz group enterprises include 

voluntary health insurance and employee 

healthcare, accident insurance, health 

promotion and recreation of workers and 

their family members, maintenance of 

social infrastructure assets, and material 

assistance payments. 

As part of implementation of the strategy 

for retaining employees through non-

material motivation and organization 

of cultural leisure for those who do 

not have access to such services, a 

cooperation project between Naftogaz 

group enterprises and the Kyiv Academic 

Drama Theater on Podil was launched. 

In 2018, 560 employees of the State 

Enterprise Shebelynkagazvydobuvannya, 

DD Ukrburgaz, UGV-Service, 

Ukrgazspetsbudmontazh Construction 

and Assembly Division became the first 

spectators of the theatrical performance 

“One Hundred Thousand”. 

UAH 2.4 billion was spent on social 

protection and personnel development in 

2018, which is by 26% more than in 2017. 

In the course of the development and 

implementation of programs and policies 

of human resources management and 

social policy, the group became the 

founder and active participant of Kyiv 

City Organization of Employers of the 

Oil and Gas Industry (KCOEOGI) and 

Ivano-Frankivsk Regional Organization 

of Employers of the Oil and Gas Industry 

(IFROOGI), which are the founders of 

the All-Ukrainian branch association 

Federation of Employers of the Oil and 

Gas Industry (FEOGI). 

Naftogaz group enterprises are actively 

involved in working groups on the 

implementation of educational and other 

projects, negotiations on amendments 

to the Sectoral Agreement, and other 

social dialogue events. In particular, 

under the auspices of KCOEOGI, IFROOGI 

and FEOGI, representatives of Naftogaz 

group enterprises discuss changes in 

the pay system and social protection of 

employees, meetings of managers of HR 

management services, and measures 

taken to create safe working  

conditions. 

The past year saw the development of the 

concept of group social policy, together 

with a social measures implementation 

plan to maintain and increase staff 

involvement.

In 2018, work on implementing staff evaluation at Naftogaz group 

enterprises continued:

Ukrgasvydobuvannya

Ukrgasvydobuvannya developed a system of staff evaluation based 

on a model of competencies, and carried out evaluation of manag-

ers at two management levels. This evaluation of executives made 

it possible to identify potential and determine areas of professional 

development, leading to a number of personnel decisions. 

Work was also continued on setting individual annual goals and key 

performance indicators.

Ukrtransgaz

An evaluation of company staff took place in November 2018 in 

order to plan careers and the promotion of employees from the per-

sonnel reserve of the company, determine the training and develop-

ment needs of staff, and review remuneration. About 1,000 execu-

tives from all levels of Ukrtransgaz branches underwent training to 

use the evaluation methodologies developed by the company. The 

target audience of the assessment was the workers and engineering 

and technical staff of the structural units of the company’s branches. 

In total, 14,370 people underwent evaluation.

Ukrnafta

In 2018, a performance management system was introduced for all 

categories of employees of the management and engineering staff 

of Ukrnafta. Key performance indicators for the year were set and 

half-yearly performance evaluations conducted. Performance for 

2018 is in the process of evaluation. Bonuses are payable based on 

the results of employee performance evaluation according to rules 

fixed in the company’s collective bargaining agreement.

Ukrtransnafta

Regular work on the evaluation of employees took place in the com-

pany’s territorial offices and production departments.

2 406.3

The expenses of the Naftogaz group companies for social security of employees in 2018, UAH million

49.9

HOUSING FOR
EMPLOYEES/
LOANS

     

      Total in 2018

40.9

HEALTHCARE

UKRGASVYDOBUVANNYA

UKRTRANSGAZ

UKRNAFTA

UKRTRANSNAFTA

OTHER ENTERPRISES

684.6

BONUSES 

580.6

FINANCIAL 

ASSISTANCE

465.0

OTHER SOCIAL

 SECURITY

PAYMENTS

421.0

MAINTENANCE OF

 SOCIAL

FACILITIE

164.3

REHABILITATION
OF EMPLOYEES AND
THEIR FAMILIES/
RECREATION TOURS

By Naftogaz group companies

592.7

939.8

531.7

182.8 159.3

In 2018, work on implementing modern IT solutions in the 

HR sphere at group enterprises continued: 

  detailed analysis of the software market for HR processes 

automation has been conducted;

  development of the statute of the Talent Management 

System project followed by its implementation in Naftogaz 

group in 2019 was initiated;

  Ukrgasvydobuvannya conducted setup and preparatory 

work for implementation of IS-PRO HR Process Automation 

system in test mode (launch) for the automation of personnel 

recruitment and salary calculation in Q4 of 2018; 

  Ukrgasvydobuvannya implemented the first stage of a distance 

learning system: the company created educational video content 

on geology, drilling and development of non-specialized, career-

critical skills (soft skills) of new employees;

  Ukrnafta developed and implemented an automated 

application in the ERP system to implement KPIs setting 

processes and evaluate the work of managers together with 

engineering and technical workers;

  Ukrtransgaz launched into industrial operation the business 

processes of personnel administration and organizational 

management, and integrated a grade remuneration scheme 

into SAP.

Digital HR:

One of the priority areas is the development 

and training of personnel together with the 

improvement of the necessary professional 

qualifications of workers, which meets 

the needs of production that is constantly 

modernized and upgraded. By investing in 

the training and development of workers, 

company and group enterprises materially 

reduce risks and protect significant 

investments in modern equipment and 

advanced technologies through their 

reliable professional exploitation. Almost 

31% of the total number of managers, 

professionals and specialists, namely 

20 906 persons employed in Naftogaz 

group enterprises, have complete higher 

education, incomplete higher and basic 

higher education.

Ukrgasvydobuvannya is successfully 

implementing unprecedented programs, 

both in HSE (occupational safety, security 

and environment) and professional 

development of employees (drilling, 

geology, management accounting, 

auditing, project management, etc.).

The purpose of the HSE training program 

is to train the production staff of the 

company at all levels, from management 

to workers of job specialties, on the safe 

execution of their work. Thanks to the 

efforts of in-house coaches selected 

from among the best employees who 

were trained, passed examinations 

and received verification within the 

framework of the Train The Trainer 

program, 13 980 production workers 

were trained on “Risk assessment, 

safety in operation analysis and safe 

workplace” for workers of job specialties 

and “Leadership, safety behavior audit 

and risk assessment” for management. 

Practical examples and case studies have 

helped to better understand training and 

improve attitudes towards workplace 

safety. More than 1 500 employees 

have undergone practical day training 

“Working at heights in support-free 

environment”; more than 750 employees 

of the company have mastered the 

first premedical care course, which is 

extremely important at an enterprise 

with increased levels of physical  

danger.

117

116

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

2018

Naftogaz managerial staff breakdown by education level in 2018

20 906

168

52

PhDs

Naftogaz group employees with 

complete 

higher education, incomplete higher 

education and basic higher education

31

%

11

3

Doctors of

 Sciences

21

 associate professors

10

 senior scientists

6

 professors

0

20

40

60

80

100

120

140

160

180

0

2

4

6

8

10

12

Number of Naftogaz group employees who improved their skills in 2018, persons

1 673

12 000

4 680

13 980

208

70 950

342 314 274 876 878

0

5000

10000

15000

20000

25000

— Managers

— Middle managers and specialists

— Workers

36 616

personnel training and development

174 197

Naftogaz

Ukragasvydobuvannya

Ukrnafta

Ukrtransgaz

Ukrtransnafta

The start of collaboration with 

Schlumberger was a significant event for 

the company. Schlumberger provides 

a full range of personnel training and 

development services in the oil and 

gas industry, and is a leading global 

provider of technologies, integrated 

project management and information 

solutions for the oil and gas industry 

globally with the support of Network of 

Excellence in Training specialists (NExT), 

represented by three institutions: the 

Texas A & M University, the University 

of Oklahoma, and the University of 

Heriot-Watt. Modern educational 

opportunities combined with the 

experience of Schlumberger specialists 

allowed the company to introduce a 

comprehensive training program entitled 

“School of Drilling”, which consists 

of 15 courses. Training sessions took 

place both in Ukraine and at leading 

laboratories abroad. Highly qualified 

instructors shared their experience 

in drilling technology, drilling projects 

management and drilling risks, well 

control, cementation, etc.

To support transformation processes, Naf-

togaz group is implementing a long-term 

educational project for training high poten-

tial employees of group enterprises under 

the SOE MBA program of the Kyiv School 

of Economics. The program was launched 

by the Business School for public sector 

enterprises on the initiative of the Ministry 

of Economic Development and Trade of 

Ukraine and with support from the West-

ern NIS Enterprise Fund.

This is a unique program. The mission is to 

introduce modern management standards, 

change the corporate culture, and trans-

form public sector companies into efficient 

and competitive enterprises. Within the 

framework of the project, the training of 

two groups was completed and training of 

two new groups of Naftogaz group employ-

ees (total 98 persons) began.

A project (unique in its essence and scale) 

of initial training of specialists in modern 

International Education Standards for the 

needs of Naftogaz group and the oil and 

gas industry as a whole has been launched.

This is a joint project of the company to-

gether with the Southern Alberta Institute 

of Technology (SAIT), Canada, with the 

participation of the Kyiv City Organization 

of Employers of the Oil and Gas Industry 

(Organization of Employers) and Ukrainian 

higher educational institutions Kondratyuk 

Poltava National Technical University and 

Beketov Kharkiv National University of 

Urban Economics.

The objective of the project is to form in 

Ukraine, with participation of Naftogaz 

group, high-quality modern Bachelor’s edu-

cational programs that will make it possible 

to provide high quality labor resources for 

the oil and gas industry.

Within this project, Naftogaz group in the 

person of the Organization of Employers 

carries out a forecast of the need for spe-

cialists, formulates requirements for grad-

uates, provides upgrading of the material 

base with regard to laboratory equipment, 

and organizes on-the-job experience for 

students and employment of graduates.

SAIT is responsible for the program con-

tent, training of Ukrainian professors, and 

ensuring training of the first group under 

the program.

Universities provide a base for training 

while making provisions for accreditation 

and licensing of programs and professors 

in accordance with the requirements of 

Ukrainian legislation.

Within the framework of this project, new 

professional standards will also be formed, 

on which future employees of the oil and 

gas industry will be trained. Naftogaz group 

cooperates with educational institutions 

on other educational projects as well. In 

total, 17 higher education institutions and 

five secondary specialized educational 

institutions, leading business schools 

and training companies were involved 

in various forms of cooperation with 

group enterprises in 2018. Development 

of mutually beneficial relations with 

educational institutions that carry out 

training of specialists continued.

Priorities in cooperation with higher 

educational institutions (HEI) include:

•  training and advanced training of 

employees;

•  practical experience for HEI professors at 

enterprises; 

•  vocational guidance activities;

•  development and modernization of 

educational bases;

•  training of students in specialties relevant 

to group enterprises; 

•  implementation of dual education;

•  involvement in innovation activities;

•  practical training of students at group 

enterprises and employment of 

graduates.

Interaction with educational organizations

•  Extension of group best practices on the automation of HR 

functions to other enterprises of the group. Implementation of the 

management project “Talent Management System”. 

•  Completion of reform of the remuneration system and 

implementation of the grade remuneration system at all group 

enterprises. 

•  Transformation of group HR functions in line with the strategic 

controller model. Support for the transformation process. 

•  Creating an environment where the needs for recognition, 

communication, affiliation and recreation are realized through cultural 

activities within the group’s social policy.

•  Realization of the subsequent stages of the project for the initial 

training of specialists for the oil and gas industry.

•  Taking charge of the project for developing and concluding a redrafted 

sectoral agreement.

Plans for 2019: 

Internship of Ukrainian students at Naftogaz group in 2018

2500

Ukrnafta

Ukrtransgaz

Ukrgasvydobuvannya

0

200

400

600

800

1000

ХНУМГ

ХНУМГ

ХНУМГ

ПНТУ

ПНТУ

SAIT

KS

E

KSE



Інженерних

 мереж та екології міст 

Нафтогазової інженерії

Інженерної механіки

Інженерної механіки

Інженерної механіки









  

Менед

жмент

у

Гуманітар

ної підг

от

овки та дер

ж

авног

о управ

ління

Природничих    наук і туризму

Школа бізнесу

ШКОЛА БІЗНЕСУ

Школа будівництва



Школа гостинності та туризму

Бізнес

наф

та

НАФТ

А

наф

та

газ 

ГАЗ 

ГАЗ 

ХНУМГ

ГАЗ 

Ivano-Frankivsk National Technical University of Oil and Gas

737

Drohobych College of Oil and Gas

180

KNEU Romny college

143

SHEI Ukrainian State University of Chemical Technology

36

Kyiv Taras Shevchenko National University

3

315

179

with salaried placement

students

921

119

118

2018

CORPORATE GOVERNANCE AND CSR

ANNUAL REPORT 2018

HEALTH AND SAFETY

The priority of workers' lives and health, 

together with full responsibility of company 

managers for safe and healthy working con-

ditions, are the key principles of Naftogaz's 

policy in the field of health and safety.

In 2018, the enterprises of the group imple-

mented completely renewed approaches 

to prevent occupational injuries and pro-

mote the latest technologies in occupation-

al safety and health.

For the purposes of health and safety 

management at the enterprises of the 

group, a five-level control system is now 

in place, which includes production unit 

and workplace inspections. Issues re-

lated to health and safety are regularly 

considered at working meetings of group 

enterprises and general staff meetings. 

Occupational safety trainings are regu-

larly delivered to employees. Following 

these meetings and briefings, additional 

measures are identified to prevent oc-

cupational injuries and occupational 

diseases, and to improve the quality of 

occupational safety training.

During 2018, the Health and Safety Man-

agement System (HSMS) was implement-

ed in 15 departments of the company, 

while 24 information reports on signif-

icant accidents in the Naftogaz group 

were prepared, which were provided to 

the supervisory board.

In 2018, 24 inspections on occupational 

safety, environmental and industrial 

safety of the group's enterprises and 

their affiliates were conducted. The audit 

company Deloitte audited the production 

facilities of Ukrtransgaz, Ukrtransnafta 

and Ukrnafta to inspect occupational 

safety and environmental safety issues.

During 2018, 1338 workplaces were 

certified at the enterprises of the group. 

Following certification, measures were 

developed and implemented aiming to 

improve working conditions.

In order to increase preparedness for 

emergencies and strengthen civil protec-

tion, 40 comprehensive trainings (1 270 

persons were involved), 62 comprehen-

sive training exercises (2 480 persons par-

ticipated), 183 trainings for specialized 

services and civil protection units (3 313 

persons participated), 1 231 fire training 

courses (15 393 persons participated), 

1 967 emergency trainings (19 670 par-

ticipants took part) were held were held 

within the company in 2018.

The enterprises of the group also imple-

mented measures to ensure antiterrorist 

protection of important facilities. This 

includes equipment of facilities with 

technical and engineering means of 

protection, training of employees to 

counteract possible manifestations of 

terrorism, installation of means of sur-

veillance at the facilities of the group, 

strengthening control over access of 

users to information and telecommuni-

cation systems, etc.

In 2018, a number of important docu-

ments were developed and implemented 

at the enterprises of Naftogaz group 

aiming to improve safety and prevention 

of injuries:

•  The Occupational Health and Safety 

Plan for 2018 and the mandatory quar-

terly reporting monitoring the imple-

mentation of the Plan.

•  Objectives and tasks of NJSC Naftogaz 

of Ukraine in the field of occupational 

health and safety and measures for 

their achievement and implementation 

for 2018 -2019.

•  Guidelines on safe performance of 

works, assignments and provision of 

services by third parties at the facilities 

of Naftogaz of Ukraine.

•  Order "On work safety at the enterpris-

es of the National Joint Stock Company 

'Naftogaz of Ukraine'"

•  "Methodological recommendations to 

reduce the psychosocial risks (stress) in 

the workplaces of Naftogaz of Ukraine", 

which is a unique and unprecedented 

guide, as part of the implementation 

of the British standard PAS 1010: 2011 

"Psychosocial Risk Management Guide 

at Work". 

In 2018, 34 accidents occurred 

at Naftogaz group enterprises 

(Ukrgasvydobuvannya, Ukrtransgaz, 

Ukrnafta, Ukrtransnafta, Naftogaz, 

Kirovogradgaz) (297 in 2017), including 2 

group accidents (in 2017 – 4). As a result, 

36 people were injured (in 2017 – 35), 

including 3 deaths (in 2017 – 3). Falling 

was the main cause of injury to workers 

(accounting for 36% of those injured).

In 2018, the accident frequency rate

1 

at the enterprises of the Naftogaz 

group was equal to 0.519 (in 2017 – 

0.486), the severity rate

2

 amounted 

to 76.6 (in 2017 – 71.0). In 2018, the 

total loss of time at the enterprises 

of the group due to accidents 

related to the production process 

was 2 529 man-days (in 2017 –  

2 272), including 1 500 man-days at 

Ukrgasvydobuvannya, 864 man-days at 

Ukrnafta, 114 man-days at Ukrtransgaz, 

and 51 man-days at Ukrtransnafta

3

.

Investments of the group's enterprises 

in health and safety in 2018 increased by 

22% and amounted to UAH 264.3 million, 

compared to UAH 205.3 million in 2017. 

The funding of such measures at the 

production enterprises of the group on 

average amounted to 2.2% of the payroll 

budget of the enterprises for 2018, which 

exceeds the regulatory requirement (0.5%) 

established by the current legislation of 

Ukraine on health and safety.

In 2018, the largest share (45%) of total 

investments in health and safety was the 

cost of providing workers with personal 

and collective protection (overalls, special 

footwear, safety belts, protective helmets, 

protective goggles, respirators, silent 

headphones, protective gloves, etc.) of 

UAH 119.8 million (UAH 113.8 million in 

2017).

Health and safety initiatives and their effects in 2018

Investments in health and safety

Occupational injuries

205.3

2017

2018

UAH mn

264.3

UAH mn

Investments in health and safety, UAH million

Ukrgasvydobuvannya

Ukrnafta

Ukrtransgaz

Ukrtransnafta

0

20

40

60

80

100

120

2016
2017
2018

54.7

68.4 71.9

26.4

38.1

64.9

61.6

82.5

105.3

10.8 13.7

16.6

Funding of health and safety measures, % of payroll 

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

required share 0.5%

2018

Ukravtogaz

0.7%

Kirovogradgaz

1.0%

Ukrtransgaz

1.9%

Ukrgasvydobuvannya

2.2%

Ukrtransnafta

2.3%

Ukrspetstransgaz

3.4%

Ukrnafta

4.0%

Providing the employees of Naftogaz group with personal protection means, UAH million

0

10

20

30

40

50

60

119.8

UAH mn

56.8

29.8

22.8

8.4

1.0

0.7

0.3

Ukrnafta

Ukrtransgaz

Ukrgasvydobuvannya

Ukrtransnafta

Kirovogradgaz

Ukravtogaz

Ukrspetstransgaz

1

  The accident frequency rate (accidents resulted in death) is determined using the formula: AFR = N * 1000 / Av where N - the number of reported accidents at work in the reporting period 

with loss of ability to work for one or more days (resulting in death); Av - average number of employees for the reporting period. The rate is calculated per 1000 registered employees

2

  The severity rate is calculated using the formula: SR = D / N, where D - the number of working days of disability in all accidents, N - the total number of accidents.

3

  To calculate time losses, only work days are taken into account.