Russia’s transition to a low-carbon economy requires a further boost to natural gas vehicle (NGV) fuel production and improvements in the infrastructure for users. Natural gas is the most efficient, environmentally friendly and safe kind of fuel.Its use as vehicle fuel is associated with a number of positive effects for society in general.
Economic effect. Domestic natural gas prices in Russia make it possible to reduce fuel costs by up to 60%, which makes the transport and logistics chain more efficient and Russian products more competitive.
Environmental effect. The use of methane as vehicle fuel improves the urban environment and the standards of living. Vehicles are a major source of discharges into the environment, accounting for about 40% of aggregate air emissions (80–90% in big cities) and about 10% of GHG emissions.
Social effect. The use of natural gas in certain transport segments will contribute to social solutions such as capping municipal passenger fares and consumer prices for everyday goods, as well as cutting fuel costs for low-income families as a result of switching to methane.
PJSC Gazprom is working together with authorities towards the successful development of the NGV fuel market in Russia. At the initiative of PJSC Gazprom, the government took measures to support this market segment, including subsidies for the construction of gas refilling facilities. Other key measures of government support include tax incentives, with the transport tax reduced or slashed to zero for NGVs in 25 constituent entities of the Russian Federation.
As a result of joint efforts of PJSC Gazprom and the Ministry of Energy of the Russian Federation, the Energy Sector Development Program of the Russian Federation was supplemented with the NGV Fuel Market Development Subprogram aimed at boosting the use of natural gas as vehicle fuel, developing the gas refilling infrastructure, and increasing the number of NGVs. The targets are to boost the use of natural gas in the transport sector by almost four times to 2.7 bcm per year by 2024 and to expand the stationary methane refill station network to 1,273 units. RUB 19.29 billion has been allocated for the NGV Fuel Market Development Subprogram.
In order to facilitate the projects aimed at creating the LNG production and marketing infrastructure, PJSC Gazprom has prepared proposals for the Russian government’s draft resolution On Approval of the Rules for Granting Subsidies from the Federal Budget to Legal Entities for Partial Reimbursement of Expenses on Investment Projects to Build LNG Production and Fuelling Infrastructure Facilities, which will improve the financial and economic aspects of LNG projects for investors.
The Russian NGV fuel market development is strategically important for PJSC Gazprom. However, there are growth constraints for this market such as underdeveloped fuelling and service infrastructure, a limited number of NGVs, high costs associated with converting vehicles from conventional fuels, and low public awareness of the benefits of natural gas as a vehicle fuel.
There are a total of 447 gas filling stations currently operating in Russia, of which 326 are owned by the Gazprom Group and Gazprom Gazomotornoye Toplivo LLCGazprom Gazomotornoye Toplivo LLC is not included in the IFRS consolidated statements of PJSC Gazprom. Gazprom Gazomotornoye Toplivo LLC is a single operator for the development of the NGV fuel market and has been included in the Report because the Development of the NGV Fuel Market was recognized as a material topic. CNG sales at filling stations increased by 30% to 779 mcm in 2019. The overall capacity of the refill stations network reached 2.45 bcm of natural gas per year. In the reporting year, Gazprom Gazomotornoye Toplivo LLC invested RUB 6,247 million in the development of gas filling infrastructure facilities, and built 28 new gas filling stationsAs part of the investment program run by Gazprom Gazomotornoye Toplivo LLC.
As of the end of December 2019, the Gazprom Group and Gazprom Gazomotornoye Toplivo LLC operated their CNG filling stations in 63 constituent entities of the Russian Federation. Fast-track pilot NGV market development projects were underway in five regions (St. Petersburg, as well as the Belgorod, Kaliningrad, Leningrad and Rostov Regions). PJSC Gazprom continued converting its vehicles to natural gas under the Program for the construction of gas filling infrastructure at the industrial sites of Gazprom subsidiaries. From 2014 through 2019, the number of NGVs in the Company’s vehicle fleet reached 12,300 units — more than 50% of all vehicles suitable conversion to natural gas — generating RUB 4.8 billion in savings and reducing pollutant emissions by more than 108,600 tons.
Furthermore, PJSC Gazprom is expanding its LNG sales. LNG refilling services were offered in the Sverdlovsk, Kaliningrad and Kemerovo Regions. A cryo unit at the Moscow Gas Processing Plant provided LNG to 25 semi-trailer trucks owned by Avtomobilnaya Kompaniya — Mostrans LLC.
Turning to foreign markets, the Gazprom Group sold 13.8 mcm of natural gas as a vehicle fuel through its own stations in Germany, the Czech Republic, Serbia and Poland in 2019, which is 7% more than in 2018. As of the end of December 2019, the Gazprom Group operated 68 CNG filling stations in Europe. In FSU states, with 39 CNG filling stations operated by the Gazprom Group, CNG sales totalled 55.4 mcm, which is 30.9% more than in 2018.
No incidents of non-compliance with the NGV fuel quality regulations concerning the health and safety impacts of products and services resulting in a fine or penalty were recorded in 2019. The quality of CNG for internal combustion engines is controlled daily, with certain physical and chemical characteristics checked against GOST 27577-2000.
During the reporting period, Gazprom Gazomotornoye Toplivo LLC launched a Hot Line, which received 7,162 queries, including:
- 2,898 information queries;
- 2,838 queries to the commercial divisions of branches;
- 1,210 complaints;
- 211 customer support queries;
- 5 construction proposals.
The quality of natural gas sold in foreign markets at the Gazprom Group’s CNG filling stations is guaranteed by gas network operators. No complaints about natural gas quality were received from customers.
PJSC Gazprom uses a variety of tools to enhance consumer awareness about NGV fuel. Special web sites feature information about the existing CNG filling station network, help customers map their route in such a way as to be able to use the stations, or show the NGV model range. The EcoGas brand has been developed for natural gas offered at PJSC Gazprom’s CNG filling stations. As a result of marketing programs, 10,296 vehicles were converted to natural gas in 2019. Another tool to promote NGV fuel is motor rallies held in Russia and abroad.
In 2019, the Gazprom Group and Germany’s Uniper sponsored the Blue Corridor — Gas into Engines rally. The route symbolically connected the starting and ending points of the TurkStream and Nord Stream 2 gas pipelines, spanning Turkey, Bulgaria, Serbia, Croatia, Slovenia, Italy, Belgium, Austria, Germany, and Russia. The participants covered over 8,000 km. The race featured more than 20 cars, trucks and passenger vehicles powered by CNG and LNG. The NGVs proved they are highly reliable and demonstrated the efficiency of natural gas as a vehicle fuel. During the Russian part of the rally, the natural gas refuelling costs were 2–3.5 times lower than those for conventional fuels.
In the regions, the implementation of the federal subsidies program for investment into the NGV market will be continued. To enhance and streamline the procedures aimed at receiving the government support, it is planned to establish interaction with the authorities in the regions that are home to the cities participating in the Clean Air federal project under the Environment national project. This should provide additional co-funding from the government for the construction and reconstruction of CNG filling stations with the use of public-private partnership agreements.
In order to fulfil its plans for the creation of NGV fuel corridors, PJSC Gazprom will continue building gas refilling infrastructure along key long-distance federal highways.