Gazprom Neft supports the Paris Agreement on climate change and complies with national legislation on measuring
The company’s priorities in climate management
- Reduction of GHG emissions and increased APG utilisation
- Increasing the share of low-carbon projects
- Launching new renewable energy sources (RES)
The company continues to implement its Development Strategy to 2030 approved by the Board of Directors, which envisages developing infrastructure at production assets and upgrading refineries with energy-efficient technology, a move that will reduce resource consumption and GHG emissions.
Furthermore, Gazprom Neft aims to increase the share of natural gas production projects in total hydrocarbon production to 45% in 2024–2026. Developing gas projects will reduce the carbon intensity of company products.
Climate-related risks and opportunities
Gazprom Neft identifies several key climate-related risks and opportunities The company accounts for both physical risks associated with extreme weather conditions or irreversible changes to the environment, as well as for transition risks (market, reputational, technology, political,
Physical risksPhysical risks are risks related to natural phenomena caused by climate change.
These risks are related to sudden events, including extreme weather phenomena, such as cyclones, hurricanes and floods.
Chronic risks to the company are related to possible long-term and mostly irreversible changes in the environment. The thawing of permafrost is one of the most important chronic risks to the company.
To minimise systemic physical risks to the company, Gazprom Neft particularly focuses on solutions for construction projects for the permafrost (preventing permafrost degradation, thermal stabilisation of permafrost soils, etc.).
The company has also implemented a long-term technology development programme, which guides a continuous cycle of identification, evaluation and application of new and effective technical solutions for field facility construction.
Transition risksTransition risks are risks related to the transition to a low-carbon economy.
Policy and legal risks
The applicable Russian laws set strict requirements to achieve targets for atmospheric impacts. Failure to comply with these requirements carries the risk of having additional charges levied by the Government.
Specific mechanisms for governmental regulation of GHG emissions are yet to be set, but the company is reviewing potential risks related to a federal law regulating GHG emissions, which is currently under development.
The company also participates in developing a climate impact strategy, defining a target vision and GHG emission reduction metrics at the governmental level.
Technology risks are risks of the company losing its market share because its competitors leverage technologies that allow similar or better products to be produced with much lower GHG emissions.
In order to minimise technology risks, the company continually implements advanced innovative technologies to improve efficiency.
In particular, the company is commissioning facilities that utilise APG without flaring by either piping it to a gas processing plant (GPP), or reinjecting it to maintain formation pressure or for underground storage.
The company’s refineries run upgrade programmes to reduce emissions.
Market risks are determined by current and future changes in supply and demand for specific products, driven by the global push for low-carbon development.
The company is preparing a new agenda to reduce market risks related to product sale on international markets.
One metric in the new agenda is the carbon footprint of the entire supply chain, from feedstocks through intermediates to final products. This information is a prerequisite to entering into sale contracts on international markets (for example, paraxylene sale contracts).
Reputation risks depend on whether the company is perceived as responsible and responding to climate challenges or otherwise.
Reputation risks are under constant scrutiny due to the priority given to climate impact and management.
Opportunities related to climate change
Increasing the gas component
Natural gas burnt to generate electricity produces almost 50% less greenhouse gases than coal. It will therefore play a key role in the global energy transformation. Gas production at Gazprom Neft grew to 41 bcm in 2019 from 30 bcm in 2015.
The share of gas in company production may exceed 50% by 2030. With OPEC+ production restrictions, gas production becomes the main opportunity for business growth.
The company expects to earn extra operational income from the sale of APG and the products of APG processing.
Gas infrastructure development and long-term gas-supply contracts will stimulate this process to achieve higher APG utilisation.
Efficient use of resources
The company expects that more efficient production and distribution processes will reduce its operating costs through:
- lower energy consumption by main and auxiliary equipment with given/planned output;
- lower losses in electric equipment and transmission grids;
- better performance of heat exchanger networks and cooling systems;
- lower heat consumption;
- lower hydrocarbon losses and APG flaring.
Alternative energy sources will provide additional generation for company assets, utilise previously unused spaces, and make processes more energy efficient and environmentally friendly.
Additional opportunities can arise from reputational benefits, resulting in higher demand for company products, as well as lower electricity procurement costs.
In 2020, company management continued its efforts towards building the company’s approach to climate change by reviewing the assessment and management of climate-related risks and opportunities, and drafting an action plan to build an environment and climate management system at the company.
Targets for specific GHG emissions were set for the company’s subsidiaries, reflecting the profile of their respective operating regions.
Strategy sensitivity to various climate scenarios
The key factors that may impact future scenarios include changes in the climate policy and the decarbonisation of global energy. The company uses a scenario approach in its Development Strategy to 2030.
Strategic scenarios considered by Gazprom Neft include the New World scenario, which assumes harmonised international environmental policy and intensive decarbonisation of both the energy industry and transport all across the world.
Since the future of energy is extremely uncertain, the company uses a proprietary methodology to monitor and assess the situation for various signs of different scenarios playing out. The results of this analysis are taken into account in the annual update of the company’s strategic project portfolio, ensuring its sustainability under any external environment development scenario.
Accounting for greenhouse gas emissions
The energy sector is considered one of the main sources of GHG emissions, including СН4 and СО2. The assessment of GHG emissions is a key element of the climate risk management system in place across the company. For this purpose, Gazprom Neft has adopted a Corporate Standard on GHG Emission Monitoring and Accounting aligned with applicable Russian laws and international guidelines.
The approaches used in the Corporate Standard are fully aligned with the GHG Protocol Corporate Standard of the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI), and ISO 14064-1:2006 (GOST R ISO 14064-1-2007), which are widely recognised in the industry and consistent with Russian legislation. This methodology also takes into account additional recommendations included in the IPIECA/API/OGP Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions, as well as Global Reporting Initiative (GRI) standards.
|Type of emission||2018||2019||2020|
|Direct (Scope 1) GHG emissions, mt of СО2 equivalent||20.0||22.0||21.7|
|Energy indirect (Scope 2) GHG emissions, mt of СО2 equivalent||4.5||6.9||4.4|
|Specific GHG emissions (Scope 1 + Scope 2)|
|Upstream Division, mt of СО2 equivalent/mtoe||0.219||0.270||0.233|
|Downstream Division, mt of СО2 equivalent/mtoe||0.196||0.207||0.231|
|Type of emission||2016||2017||2018In 2020, energy emissions (Scope 2) were recalculated with amended regional factors. Recalculation included comparable data for 2018 and 2019. The factor change had no material impact on earlier periods.||2019In 2020, energy emissions (Scope 2) were recalculated with amended regional factors. Recalculation included comparable data for 2018 and 2019. The factor change had no material impact on earlier periods.||2020In 2020, energy emissions (Scope 2) were recalculated with amended regional factors. Recalculation included comparable data for 2018 and 2019. The factor change had no material impact on earlier periods.|
|GHG emissions (Scope 1 + Scope 2)||23.8||22.8||24.5||28.9||26.1|
|Direct emissions (Scope 1)||15.4||16.2||20.0||22.0||21.7|
|Indirect emissions (Scope 2)||8.4||6.6||4.5||6.9||4.4|
Projects to reduce GHG emissions
The company is constantly searching for technically feasible and economically viable tools to reduce GHG emissions, principally by implementing projects to increase APG utilisation.
Gazprom Neft aims to ramp up its APG utilisation, despite the planned increase in hydrocarbon production.
Gazprom Neft endorses the key provisions and goals of the Zero Routine Flaring by 2030 initiative, which aims to completely eliminate routine APG flaring by 2030.
In 2020, the APG utilisation rate of the company subsidiaries in Russia stood at 91.1% (up 2.1% year-on-year). If low-depleted fields (some of which showed 5.4% growth year-on-year) are excluded, the APG utilisation rate reached 95.1% through gas infrastructure construction projects and gas infrastructure reliability improvement programmes.
These achievements came on the back of a high on-stream factor for company facilities (over 96%) and ramp-up to full production of new gas infrastructure at a number of fields. The company is pushing ahead with investments into new equipment that improves gas utilisation at producing assets.
The company’s Board of Directors has set the ambition of achieving an APG utilisation rate (including new assets) of at least 95%Within the Russian Federation, excluding the assets of Gazpromneft-Zapolyarye. by 2022 despite growing production.
Driving energy efficiency
Energy efficiency is one of the key tools to reduce greenhouse gas emissions and climate impact.
Gazprom Neft’s Energy Policy is in place to improve energy efficiency. Certified to ISO 50001, it underpins the company’s energy management system (EMS). The EMS is successfully operated at the Gazprom Neft Corporate Centre
Key organisational energy-saving initiatives include energy audits, an energy-efficiency monitoring system, optimising the cost of electricity from external grids, replacing diesel power plants with gas-turbine power plants, IT projects aimed at energy saving, and certification/recertification.
Gazprom Neft develops renewable energy generation.
The Omsk Refinery completed the first phase pilot operation of a 1 MW solar power plant. The first power plant in the region covers an area of 2.5 ha and comprises 2,700 solar panels, including panels made by the Russian manufacturer Hevel. This power plant generated more than 1.1 million kWh of electricity in 2020, providing green electricity for 98% of the energy needs at the Omsk Refinery’s accommodation complex (houses up to 2,500 people) and reducing CO2 emissions by 455 tonnes. The plant’s capacity is expected to grow to 20 MW in 2021 through regional renewable energy support measures.
In 2020, Gazprom Neft commissioned its first solar-powered filling station, located in the Yaroslavl Oblast. In sunlight, the solar power plant is used as the main source of electricity.