6.2. Combating Climate Change

GHG emissions management is part of the Gazprom Group’s corporate strategy on environmental protection and climate change prevention.

The reduction of specific GHG emissions is the main driver behind the improvement of the environmental friendliness of production processes. The innovative development programs of PJSC Gazprom, PJSC Gazprom Neft, and Gazprom Energoholding LLC set respective key performance indicators (KPIs) until 2025. The Roadmap of Greenhouse Gases Emissions Management establishes the estimated indicators of specific GHG emissions until 2030 proceeding from different development scenarios.

2019 saw work start on developing sustainable development scenarios for PJSC Gazprom through 2050, taking into account the global shift to a low-carbon economy, with respective climate goals to be set.

PJSC Gazprom contributes significantly to the low-carbon economy development in Russia and the countries that import Russian gas thanks to gas infrastructure expansion and conversion of various vehicles to natural gas, thus helping reduce emissions made by energy consumers.

In 2019, GHG emissions of the Gazprom Group’s facilities amounted to 236.5 mmt of СО₂ equivalent, 14% of them were methane emissions.

All companies of the Gazprom Group carry out control and accounting of GHG emissions. Since 2016, all Group subsidiaries regardless of their business activities have been monitoring and calculating the quantity of GHG emissions according to a uniform procedure described in the Methodological Guidance on the Quantification of Greenhouse Gas Emissions by Entities engaging in Business and other Activities in the Russian FederationApproved by Order of the Russian Ministry of Natural Resources and Environment No. 300 dated June 30, 2015..

In 2019, absolute GHG emissions across the Gazprom Group reduced by 1.5% as compared to 2018, which corresponds to the criteria of climate targets under the SBT initiative within the CDP.

The gas business reported a reduction in specific GHG emissions from 0.275 tons of CO₂ equivalent per ton of oil equivalent in 2014 to 0.259 tons of CO₂ equivalent per ton of oil equivalent in 2019, which was made possible thanks to the implementation of the Gazprom Group GHG Emissions Management Roadmap in the long term until 2030 and the Energy Saving and Energy Efficiency Program.

To keep stakeholders updated on emissions along the entire production chain, PJSC Gazprom discloses its indirect GHG emissions. These are GHG emissions from the generation of purchased or acquired electricity or heating consumed by an organization.

In 2019, the Gazprom Neft Group’s indirect (Scope 2) GHG emissions within the perimeter of Russian subsidiaries amounted to 5.22 million tons of СО₂ equivalent (in 2018: 4.38 million tons of СО₂ equivalent). The growth in indirect GHG emissions in the reporting year is attributable to the fact that Gazprom Neft is expanding its geography of operations through prospecting for and evaluation of hydrocarbon reserves and is building up its infrastructure needed to produce and treat hydrocarbons and transport them to key customers, which results in more facilities generating additional GHG emissions.

Indirect (Scope 2) GHG emissions by PJSC Gazprom, PJSC Gazprom Neft, Gazprom Energoholding LLC, and Gazprom Neftekhim Salavat LLC stood at 13.8 million tons of СО₂ equivalent.

2019 was the first year the Gazprom Group assessed indirect (Scope 3) GHG emissions resulting from the use of products as fuels or feedstock both in Russia and abroad. The calculation included GHG emissions from all types of products sold — natural gas, oil and gas condensate, automotive gasoline, diesel and jet fuel, LPG, and fuel oilTo account for all possible emissions when using Gazprom Group products, emission factors were applied in accordance with the Methodological Guidance on the Quantification of Greenhouse Gas Emissions by Entities engaging in Business and other Activities in the Russian Federation approved by Order No. 300 of the Ministry of Natural Resources and Environment of the Russian Federation dated June 30, 2015..

The Company does not use ozone-depleting substances on an industrial scale.

The reduction in APG flaring plays a significant role in decreasing emissions of pollutants and greenhouse gases and saving resources. The Gazprom Group is implementing APG utilization investment projects at its fields with the aim of achieving an APG utilization level of at least 95%As per Resolution No. 1148 of the Government of the Russian Federation dated November 8, 2012..

In 2019, APG utilization was 98.5% at the fields of PJSC Gazprom’s gas production subsidiaries (including OJSC Tomskgazprom), 89.0% at the Gazprom Neft Group, 98.0% at Sakhalin Energy.

The actual APG utilization at the operating facilities of the Gazprom Neft Group reached 89.0% in 2019, i.e. increased by 10.6% versus 2018, with an actual rise in APG production amounting to 2.242 bcm (up 15.6%). An upward trend in APG utilization is attributable to the commissioning of facilities under the Gas program of Gazprom Neft and organizational and technological activities at the assets with well-developed gas infrastructure.

The Gazprom Neft Group is aiming to ensure the required level of APG utilization along with the start of commercial development of new fields and an increase in oil and gas production volumes. Pursuant to the resolution of the Board of Directors of Gazprom Neft, APG utilization level of 95% is to be ensured at the assets with well-developed gas infrastructure in 2020 and throughout Gazprom Neft in general, including new assets, in 2022. To achieve the approved goals, the APG Utilization and Efficiency Program was developed that provides for the implementation of investment projects to build gas infrastructure.

2019 saw changes to the energy conversion formulae as per Rosstat Order No. 713 dated November 28, 2019 which introduced the requirement to use reference fuel units: “For all types of fuel, physical units shall be converted into units of reference fuel typically using their actual calorific values determined as the ratio of the net calorific value of fuel in an as-received condition to the calorific value of 1 kg of reference fuel, i.e. 7,000 kcal/kg”.

To provide a proper basis for comparison, fuel and energy consumption data for previous years used in the 2019 report were recalculated as per the abovementioned Rosstat Order.

PJSC Gazprom reduced its consumption of natural gas by 4.8% and that of electric power by 1.6% on the back of lower energy consumption in gas transportation as gas transportation volumes declined by 1.4% and energy intensity dropped by 3.2%.

Heat consumption rose by 0.3% due to higher heat utilization in gas condensate processing at the plants of Gazprom Pererabotka LLC caused by an 8.5% increase in volumes of unstable gas condensate processed.

Gazprom Neft generated a total of 28.2 MWh of energy from renewable sources (solar energy).

Gazprom Neft generated a total of 28.2MWh of energy from renewable sources (solar energy).

In 2019, Gazprom Energoholding’s energy consumption for internal needs totalled 4.8 million tons of reference fuel (140.85 million GJ).

In 2019, Gazprom Energoholding’s fuel consumption from non-renewable resources totalled 51.6 million tons of reference fuel (1,511.85 million GJ).

In 2019, Gazprom Neftekhim Salavat’s energy consumption for internal needs totalled 66.251 million GJ.

In 2019, total energy consumption by Gazprom Neftekhim Salavat LLC amounted to 81.27 million GJ.

Gazprom Energoholding sells electric power produced by its generating companies — PJSC Mosenergo, PJSC OGK-2, and PJSC TGC-1. In 2019, it sold a total of 152,833.80 million kWh.

PJSC OGK-2 tends to lower its electric power generation and sales, which is mainly caused by the fact that energy prices are growing faster than selling prices for electricity.

At Gazprom Neft, the Downstream and Upstream Divisions’ energy saving and energy efficiency programs helped save 4.1 million GJ of energy and 1.2 million GJ of electric power, respectively, in 2019.

In 2019, Gazprom Energoholding’s energy saving programs helped save fuel and energy resources in the amount of 1.61 million tons of reference fuel (47.33 million GJ):

• fuel savings: 1,375.6 thousand tons of reference fuel, including 1,172.9 mcm of natural gas;
• electric power savings: 670.8 million kWh;
• heat savings: 297.2 thousand Gcal.

The cost of energy resources saved is RUB 7,391 million.

In 2019, Gazprom Neftekhim Salavat’s energy saving programs helped save fuel and energy resources in the amount of 55,199 thousand tons of reference fuel (1.6 million GJ):

• natural gas savings: 43.5 mcm;
• electric power savings: 1.3 million kWh;
• heat savings: 35.6 thousand Gcal.

In all of its business activities, PJSC Gazprom implements energy saving program initiatives aimed at enhancing (maintaining) energy efficiency and reducing fuel and energy consumption, including energy losses. Measures being taken under corporate energy saving programs seek to save natural gas, electric power and heat.

Gazprom Neft’s Downstream Division was implementing energy saving and energy efficiency programs for 2019–2021 aiming to save 619 million kWh of electric power in the reporting year. In 2019, the Upstream Division met its targets set for specific electric power consumption — namely, 24.57 kWh per ton of liquid, and also exceeded the targets under its Energy Efficiency Program by 39%, and achieved energy savings of 330 million kWh (versus the set target of 236 million kWh) across the Division. The values achieved in terms of specific electric power consumption per ton of produced liquid were 2.2% below the target level and amounted to 24.78 kWh (versus the target level of 25.34 kWh).

Gazprom Energoholding uses specific consumption in terms of reference fuel for power generation as an industry energy-efficiency metric. In 2016–2019, the overall reduction in specific consumption in terms of reference fuel for power generation across Gazprom Energoholding amounted to 10.9 g/kWh, or 3.6%.

Over the same period, specific consumption in terms of reference fuel for heat generation rose by 0.3 kg/Gcal, or 0.2%.

The total fuel savings due to changes in specific consumption in terms of reference fuel were driven by the launch of facilities under capacity supply agreements (CSAs), as well as by other measures taken, including the decommissioning of inefficient equipment, shifting of thermal capacity from boiler houses to power plants, and implementation of energy saving technologies.

The measures provided for by energy saving programs aim to reduce the consumption of fuel and energy resources, including fuel, electric power, heat, water, etc.

Gazprom Neftekhim Salavat achieved the following results through its energy saving and energy efficiency improvement initiatives.

PJSC Gazprom assesses the energy intensity of its process operations through specific energy consumption, which is defined as the ratio of total energy resources consumption converted into reference fuel (tons of reference fuel) to the work being performed. Since production processes vary significantly across PJSC Gazprom subsidiaries involved in gas production, transportation, underground storage, processing, and distribution, as well as the Gazprom Group companies, each business activity requires an individual approach when setting energy intensity indicators, making it impossible to consolidate them into a single indicator either for PJSC Gazprom or the Gazprom Group.

Energy intensity in gas production, transportation, and underground storage is measured using natural gas and electric power consumption for internal process needs, while in gas and liquid hydrocarbons processing it factors in consumption of gas, electric power and heat energy.

The output is expressed in volumes of gas produced (thousand m³) in gas production, volumes of gas transported (mcm•km) in gas transportation, total volumes of gas withdrawn and injected (thousand m³) in underground gas storage, volumes of gaseous and liquid hydrocarbons processed (tons of reference fuel) in gas processing.

In gas transportation, specific energy consumption went down by 3.2% as a result of a 1.4% reduction in the volumes of gas transported, as well as due to the measures taken under the energy saving program. In underground gas storage, specific energy consumption increased due to the fluctuations in natural gas demand that required utilization of energy-consuming equipment and a higher consumption of fuel gas. In natural gas production, energy intensity rose on the back of a higher consumption of gas as an energy source at the fields in the Nadym-Pur-Taz Region. Production volumes started falling across the majority of the region’s fields, resulting in a higher energy consumption for subsequent natural gas compressing.

Energy intensity is calculated on the basis of the energy consumption within PJSC Gazprom.

Gazprom Neft’s Downstream Division achieved an energy intensity ratio of 134 kg of reference fuel per ton in relation to its goods (energy used per unit of goods).

In 2019, Gazprom Energoholding’s energy intensity was 1.67.

The energy intensity of Gazprom Energoholding’s companies is defined as the ratio of fuel consumption at power plants and boiler houses of the subsidiaries, heat energy supplied to the subsidiaries’ networks by third parties, electric power consumed at boiler houses and heat networks facilities of the subsidiaries to the total busbar output of the power plants and heat energy supply to end customers (all intragroup balances of heat energy are excluded).

The energy intensity of HPPs is defined as the ratio of electric power generated multiplied by the average efficiency ratio of hydroturbine units (assumed at 0.9) to HPP busbar output.

Gazprom Neftekhim Salavat does not calculate energy intensity ratio.

The Gazprom Group relies on alternative energy sources wherever it is economically and technically feasible, particularly in remote or technologically isolated areas.

The Gazprom Group uses renewable energy resources and secondary energy resources to generate energy for internal needs and for sale to third-party consumers. Solar and wind generators, as well as gas flow heat and energy power converters are widely used at production facilities, gas trunkline facilities, and gas distribution networks for ensuring, inter alia, routine power supply to telemetry systems, electrochemical protection of pipelines, lighting, etc.

Depending on energy consumption modes, standalone complete renewable energy resources-based power units can be effectively used to supply power to various process facilities of PJSC Gazprom. These include automatic environmental monitoring stations, rust protection systems, warning lighting at communications towers and power line supports, lighting systems of helicopter pads, block valve stations, communications equipment, small-scale gas distribution stations, etc.

In terms of heat and power generation, secondary energy resources have a huge energy-saving potential as their use helps reduce the consumption of primary energy resources.

In 2019, PJSC TGC-1 (Gazprom Energoholding) and Nugush Hydroengineering Complex LLC (Gazprom Neftekhim Salavat) produced 11.70 billion kWh of electric power by means of hydrogenation. The HPPs of PJSC TGC-1 account for the bulk of power generation and contribute significantly to the green energy of the Northwestern Federal District of Russia.

The development of the NGV fuel market in Russia is one of the most important sustainable development projects run by PJSC Gazprom. Thanks to the environmental friendliness of methane, the use of natural gas as a motor fuel instead of gasoline and diesel fuel offers a number of positive effects on the quality of life.

Conversion of vehicles to natural gas helps significantly reduce emissions both during the utilization of fuel and along the entire production chain. From production to refilling, CNG generates four times less GHG emissions than conventional petroleum motor fuels. According to the estimates, if 50% of vehicles are converted to natural gas, GHG emissions will go down by 65 mmt of СO₂ per year.

Most importantly, natural gas does not generate emissions of solid soot particulates that are extremely detrimental to human health. Thus, the use of methane as a motor fuel improves the urban environment and has a positive effect on the health condition of the population.

PJSC Gazprom pursues the long-term goals of the NGV fuel market development in Russia in cooperation with other market players and industry NGOs such as the National Gas Vehicle Association which brings together over 120 participants of the Russian NGV fuel market with a view to promoting the use of natural gas as motor fuel and shaping a consolidated position on its development.

In 2019, the Gazprom Group’s representatives took an active part in events related to the NGV fuel market. The Group also helped establish discussion platforms dedicated to proactively addressing the most urgent market issues.

In accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), PJSC Gazprom voluntarily identifies and evaluates climate-related risks in two key areas:

• risks related to the transition to a low-carbon development scenario (transition risks);
• risks related to physical changes in the environment due to climate changes (physical risks).

Risk assessment covers three time periods: short-term (up to 1 year), medium-term (from 1 to 3 years), and long-term (from 3 to 10 years and more). Risk assessment is performed at the level of both the Company in general and its subsidiaries. Information is published on the CDP platform, in environmental reports and sustainable development reports. The scenario analysis also recommended by the TCFD relies on simulations to assess the impact of various climate factors on the future financial performance.

In 2019, the Group developed the draft Program for adaptation of PJSC Gazprom’s operational activities to changing climatic and geocryological conditions taking into account probable scenarios of climate changes in the areas where Company’s facilities are located. Risk assessment was performed in cooperation with the institutions of the Russian Academy of Sciences (RAS), such as the Institute of Environmental Geoscience of RAS, the Institute of Petroleum Geology and Geophysics of RAS, etc. The results of this work are based on the analysis of accumulated and new data obtained using hi-tech tools. They helped to identify regularities in natural and industrial evolution of the permafrost soils, classify territories according to geocryological hazards, and optimize the design of structures and costs of their engineering protection. Moreover, coupled thermo-mechanical calculation methods at different levels of synthesis were developed. The geotechnical monitoring system was improved with the help of the national instrumental base. The conducted investigations contributed to the development of comprehensive measures on adapting Gazprom’s operating activities to changing climatic and geocryological conditions, including regulatory, methodological, technological, informational and administrative aspects.

The Gazprom Group companies implement a set of measures to minimize the negative climate change consequences for its production activities, including:

• climate change assessment in the areas where the Group’s process facilities are located;
• regular monitoring of machinery and equipment, as well as predictability assessment of the production processes in the areas susceptible to climate change impacts;
• use of extra-durable pipe products in the areas susceptible to climate change impacts;
• construction of sheltered compressor shops in the areas with adverse weather and climate conditions;
• construction of backup power supply plants at the gas production facilities located in the permafrost areas;
• development of projects for the construction of gas production facilities with due consideration of weather and climate conditions;
• laying pipelines deeper into the ground at their landfall sections to ensure protection of their offshore segments;
• management of geocryological conditions within the construction area during the pre-development of fields in the Yamal Peninsula to ensure reliability of foundations and base structures using advanced temperature-stabilizing technical aids for permafrost soils, with adjustment made for perennial warming;
• development of comprehensive insurance schemes covering the Group’s environmental risks, including compensation for environmental damage.